Archive - Feb 24, 2011

Oil production in Libya is expected to shut down completely and could be lost for a prolonged period of time, Bank of America Merrill Lynch said on Thursday.

Things are far less rosy as the headlines would have you believe...

Update: U.S. government has no reason to believe that Gaddafi is dead

Just a completely unfounded rumor for now. If it proves false, watch the vicious snapback...

The Bank for International Settlements called it 2008 ...

The last time we presented the silver backwardation chart, it was "only" $0.50 or so between the front month and the long end. In the week since then the difference has jumped to what we believe is a new record of $1.50 or so. Now that the CBOE is issuing CEBOs and allowing plain Jane investors to bet on imminent corporate bankruptcies, would it be so kind to issue a contract or two on the COMEX... Pretty please?

"The big news this week from Saudi Arabia is that upon his return to the Kingdom after a three month medical absence, King Abdullah has decided to implement a massive $36 billion payoff to his people to stem off any revolt. Amongst other things: “The measures include a 15 per cent salary rise for public employees to offset inflation, reprieves for imprisoned debtors, and financial aid for students and the unemployed” according to the Financial Times...So the payoffs have begun in earnest and the question is, when will banker puppet Obama will engage in similar tactics. My guess is very soon. More and more people are aware of the sham that is his presidency and as the people realize they have been sold out to make sure the financial oligarchs got their record Christmas bonuses and can fund his 2012 run he will need to give a pay raise to the 15% of Americans on food stamps." Mike Krieger

Unlike yesterday's weak 5 year bond auction, today's auction of $29 billion in 7 Years was completely unremarkable. The bond priced at 2.854%, in line with the When Issued, and came at a 2.86 Print To Cover, pretty much unchanged from the previous 2 auctions. Directs once again came weak at 4.48%, the lowest since October 2009, which is yet another confirmation of our view that February UK purchases will be drop, and whether that's China, Petrodollars or shadow Fed purchasing, the "UK" February total will barely budge. Indirects came in line with the average at 49.66%, while Primary Dealers were at 45.86%, the highest since November. But altogether considering some of the weirdness we have seen in the primary issuance market, this was a perfectly normal tip of the belly auction.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 24/02/11

Laszlo Birinyi, best known for his straight line extrapolation method applied to everything, except of course crude which would result in WTI hitting 10 trillion by the time the Hungarian says the S&P would approach 2,854 in three years, has released his list of Teflon Twenty companies that supposedly are immune to any news. Arguably these are the stocks that comply best with the ruler interpolation method of price prediction. These also happen to be the biggest momo names in the world. Once the market crack is confirmed, these are the names that will result in early retirement for those who STFD. On the other hand, it also means we will have many more years of Birinyi, and his attempts at 20+ kHz communication, on Comcast, coming up with totally insane predictions.

The NYSE has released its January margin debt data. Not surprisingly, total margin debt hit a peak of $290 billion, the highest since September 2008, but the one category that shows just how much purchasing is occurring on margin is total Free Credit less Total Margin Debt drops to the lowest since the all time credit bubble peak in July of 2007! At ($45.9 billion) this number is just below the ($52.8) billion last seen just before the August 2007 quant wipe out which blew up Goldman's quant desk, and arguably was the catalyst for the beginning of the end. In other words, as we have shown, everyone is now purchasing on margin and the level of investor net worth is the lowest in over 3 years. Which means that should the market decline from this week persist and the Fed be unable to stop it, the margin calls will start coming in fast and furious, and unwinds in otherwise stable products like gold and silver are increasingly possible as hedge funds proceed to outright liquidations.

A week after S&P announced it was converting its European ratings to unsolicited as was reported previously, the rating agency now proceeds to do the same to the world's most insolvent banana republic: "Standard & Poor's Ratings Services today said it converted its issuer and issue credit ratings on the U.S. federal government (AAA/Stable/A-1+) to "unsolicited." Unsolicited as in nobody wants it. In other words, following Europe, the US will now lock out S&P in providing the agency with information. "We are converting our issuer credit ratings on the U.S. government to "unsolicited," as we do not have a rating agreement with the sovereign. Standard & Poor's will nonetheless continue to rate the U.S. government and classify the ratings as unsolicited, as we believe that we have access to sufficient public information of reliable quality to support our analysis and ongoing surveillance, and because we believe there is significant market interest in the U.S. government rating." It is a good thing then that by now everyone knows just how relevant S&P's ongoing AAA/Stable rating on the US is.

What!!!???? You didn't get the memo?

Reuters reports that authorities have arrested a 20-year-old Saudi national on charges he tried to use a weapon of mass destruction and potentially targeted former President George W. Bush, the Justice Department said on Thursday. Khalid Ali-M Aldawsari, who was admitted into the United States in 2008 on a student visa, was arrested in Texas on Wednesday by FBI agents. He was accused of purchasing chemicals and equipment to make an improvised explosive device, the Justice Department said. Last time we weapons of imaginary destruction surfaced, Iraq got bombed back to the stoneage. It is so difficult to see where Obama is going with this...

While everyone and their mother brays on about stocks, something of far greater import is taking place in the US bond market. That “something” is the 30-year Treasury taking out MAJOR support...

Congratulations Centrally Planned Garbage Motors: GM slides to below its IPO price, hitting $32.75. And now we get to see if GETCO has been swimming with no bathing suit on the entire time.