Archive - Feb 28, 2011

And there was a time when people thought Obama was out to get the bankers...

It's not quite a triple forward (or inverse) ETF on gold just yet, but it's a start. Capitalizing on the surge in volatility in the commodity space, which together with FX has become the go to arena for day traders seeking volatility, which has been completely eradicated from stocks courtesy of the Bernanke Put, the CBOE and CFE have "announced plans to launch futures and options on the CBOE Gold ETF Volatility Index (Ticker - GVZ). Pending regulatory approval, CBOE Futures Exchange (CFE) will begin trading GVZ futures on Friday, March 25, and CBOE will introduce GVZ options a few weeks later." The reason for this product to be pushed on investors is that after peaking near 25 in December, the ^GVZ has plunged to one year lows as gold has steadily remained just off its all time highs. So if the first volatility derivative isn't generating the much needed commission broker P&L, it is time to break out 2nd and further vol derivatives. We expect a triple or more-leveraged ETF on gold and silver to arrive shortly, then followed by an ETF which tracks the theta in the first ETF , and so forth, until the entire market is dominated by "synthetic CDO-like" derivatives and nobody cares about the actual underlying, just so traders have something to keep them occupied. After all diversion, is half the battle.

Even Bernie Madoff agrees ...

Even Bernie Madoff is disgusted by the nonsense going on in the stock markets as he tells New York Magazine this weekend that the entire Government-run stock market is nothing more than a giant Ponzi scheme.

It's 1:30 pm, the close of trading on the COMEX pit: do you know who is banging the close in your silver? Silver pits close at 1:25 pm, just as the flood in silver peaked. Gold followed suit, with its 1:30 pm close. This blatant attempt to dump PMs into the pit close and have silver and gold end trading on the books near the lows of the day merely confirms that "someone" is truly desperate to avoid an avalanche of margin calls. Of course, this uber-cheap trick works at best for a day or two.

Now that the Fed is by far the biggest institutional holder of US debt, it is time to conduct a periodic review of what, how and when Brian Sack has been monetizing in the past two years. As a reminder, as part of QE1, the Fed purchased $300 billion worth of Treasurys, the balance going to MBS and agency securities. QE Lite and 2 have, so far, focused only on USTs: as Morgan Stanley summarizes, as of today, the NY Fed has purchased a total of $456bn Treasuries / TIPS since August 10, or the announcement of QE Lite. Since additional LSAPs were announced in November (or QE 2 proper), the Fed has purchased $380bn. As the Fed is now roughly half completed with QE2, here is where we stand.

This request for the REAL THING is what brought down Lehman and Bear, and this is what is knocking on the door of B of A. Fear not BoomBustBloggers and other mathematically inclined investors, the righteous return of the fundamentals is nigh upon us!!! Rejoice in unison...

Who believes this stuff?

Today's 13 and 26 week bill auctions have been updated on the US Bond Auction...

There’s major shift occurring right now in financial markets. Sure, the food and freedom riots that are spreading across the globe are a major indicator that civil unrest follows very closely behind resource shortages and economic turmoil… but there’s something else that I’ve noticed recently– it’s a sea change in the financial system. In the past, major crises normally caused investors to seek safe haven assets, and everything else equal, the dollar would rise. They call it a ‘flight to safety’, and investors would flock towards the perceived stability of US Treasury securities. Fast forward to today. Mubarak. Gaddafi. Khalifa. Al Said. Ben Ali. Etc. There is no shortage of turmoil right now… yet we are seeing the dollar get clobbered while gold, silver, and smaller currencies like the Swiss franc rise. This represents a major shift in the way that the market views risk. Ironically, this makes precious metals among the most attractive safe haven alternatives– the fact that they have no real functional value is a net positive. In other words, $20 wheat means blood in the streets. $2,000 gold only makes for pithy headlines, and its significance is easily dismissed when highly regarded sages like Warren Buffet dispute the notion of holding precious metals (nevermind he bought oodles of silver in the late 90s).

If CNBC is wondering whom to invite to its highly objective and oh so critical news dissemination service, they should take a long hard look at Oppenheimer's Brian Belski.

Feb. 28, 2010 (Bloomberg) -- “Rising oil prices simply do not have the shock value they once possessed” for U.S. consumers, according to Brian Belski, chief investment strategist at Oppenheimer & Co.

After all, Belsky has an impeccable oracular record.

Nov. 8, 2007 (Bloomberg) -- The decline in technology stocks today is an "overreaction'' and investors should buy shares of technology companies because they are undervalued, Merrill Lynch& Co.'s U.S. sector strategist Brian Belski said.

We look forward to Belski's appearance on nanosecond Fast Money.

“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.”

While Ford, GM, and Chrysler were getting bailed out by the Government, BMW spent a Billion dollars to expand a plant in South Carolina. It's non-union.

Who said the CME can only hike margin rates? Today, the Chicago Merc announced that is "unveiled a
cross-margining plan that would help customers trading both interest
rate and Treasury futures, as the world's largest derivatives exchange
prepares for more competition." The step is a preemption of a comparable product to be offered by its recently sold competitor, the NYSE Borse. "The New York Stock Exchange parent expects in March to launch NYSE Liffe U.S., a rate futures market, at the same time as its partly owned New York Portfolio Clearing (NYPC) clearinghouse for the products." In addition to confirming that this step pretty much puts an end to persistent rumors that the CME may overbid the DB for the NYSE, what it also shows is that the exchange is perfectly willing to do anything it wishes when it comes to margin rules as suits it. "CME's new membership class -- called Financial
Instruments Clearing Membership (FICM) -- would provide margin benefits
of up to 65 percent between interest rate futures and Treasury
securities, it said." While we have yet to see a practical example of what this means, we predict that the implication is a major drop in margin requirements when trading products determined to be a national interest such as Treasurys.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 28/02/11