Archive - Feb 8, 2011
Presenting Obama's Plan To Bail Out The (Otherwise Perfectly Solvent) States
Submitted by Tyler Durden on 02/08/2011 22:57 -0500We all know by now that Meredith is a witch: an unpatriotic, racist bitch, who eats kittens for breakfast, who deserves to be grilled by Joe McCarthy's exhumated corpse for telling communist truths, pardon, lies (just a Freudian slip dear Department of Central Planning and Internet supervision), and who will soon be accused of having unprotected (yet arguably consensual) sex with a Swedish man. But just in case she is on to something, here comes the president's plan to bail out the (otherwise perfectly solvent and all, we promise) states. The NYT reports that "President Obama is proposing to ride to the rescue of states that have borrowed billions of dollars from the federal government to continue paying unemployment benefits during the economic downturn. His plan would give the states a two-year breather before automatic tax increases would hit employers, and before states would have to start paying interest on the loans." But where are the details you may ask? Patience grasshopper: they will be included in the latest budget proposal which has been delayed for nearly half a year now as the printer ran out of zeroes. "The proposal, which administration officials said would be included in
the 2012 budget that the president is scheduled to unveil next week, was
greeted coolly by Republicans on Capitol Hill, who warned that the plan
would ultimately force many states to raise their unemployment taxes in
the years to come." Ah yes, the Republicans - those paragons of sound financial judgment and sounder virtue. After all who can forget whole "Tea Party thing" which did so much to prevent the incurrence of a few hundred billion in additional debt over the next decade to pay for the latest Russell 2000 at 36,000 hairbrained ponzi scheme concocted by Rudolph von Bernankestein.
Failed Danish Bank Makes History With First Senior Bondholder/Depositor Impairments To The Tune Of 41% Of Total
Submitted by Tyler Durden on 02/08/2011 22:28 -0500Danish bank Amagerbanken A/S has just made history. The bank (which together with all other Danish, and not to mention Irish banks passed last year's European stress farce test) failed yesterday, this time for good, after its previous near death experience in the summer of 2010, when it only continued to exist in a zombi state courtesy of $2 billion in financial guarantees by the government. That guarantee, which was subject to "Amagerbanken strengthening its
capital base and solvency by 750 million crowns in the form of
equity or subordinated loan capital by Sept. 15" has ultimately been wiped out and on Monday, the Danish equivalent of the FDIC, the Finansiel Stabilitet A/S, announced that administrators would close the bank. And while the failure itself is not surprising (it was roughly the same size as the
mid-2008 collapse of Roskilde Bank, previously the biggest
Danish bank failure), nor is the reason for the failure, the bank said fourth-quarter writedowns wiped out its
equity, attributing a large part to failed property investors (but we thought European real estate was doing so much better?), what is unique about this failure is that it is the first one to proceed according to new new regulations designed to ensure
senior bondholders suffer losses in a bailout. And suffer they will. According to Bloomberg, bondholders of senior debt, including bonds formerly guaranteed by the government, will face write-offs of about 41%. "The bank estimates its assets
amount to about 59 percent of liabilities." Another loser: depositors, who just happen to be pari passu with senior bondholders. To put this failure in context, recall that every Failure Friday the FDIC bail outs numerous banks, with the tab in most cases running up into the hundreds of millions if not billions. What Europe has done, is instead of getting a deposit insurer to guarantee the loses (at the expense of more taxpayer capital), is it has allowed bond bondholders and depositors to be impaired to the point where pro forma assets equal liabilities. Something, which in bankruptcy is known as Fresh Start, and is the most apt way to make sure that in addition to unlimited upside, bank bondholders actually also incur risk. Which is why this brilliant approach to zombi bank resurrection with NEVER materialize in the US. After all, how can we possibly ask the banksters to dare accept the possibility of loss on even one penny of their investments...
Bankster Vs Deadbeat
Submitted by Tyler Durden on 02/08/2011 21:37 -0500
Still confused about some of the key, shall we say, "dynamics" and "motives" prevalent during the build up phase to the housing bubble peak? The latest xtranormal cartoon explains it all.
CalPERS Accuses Lehman of Fraud
Submitted by Leo Kolivakis on 02/08/2011 21:12 -0500The largest US public pension fund accused Lehman Bros. Holdings Inc., its former top executives and numerous bond underwriters of fraud and making materially false statements about losses from mortgage-backed securities during the financial crisis of 2007 and 2008...
Did WikiLeaks Confirm "Peak Oil"? Saudi Said To Have Overstated Crude Oil Reserves By 300 Billion Barrels (40%)
Submitted by Tyler Durden on 02/08/2011 20:41 -0500
In what can be the "Holy Grail" moment for the peak oil movement, Wikileaks has just released 4 cables that may confirm that as broadly speculated by the peak oil "fringe", the theories about an imminent crude crunch may be in fact true. As the Guardian reports on 4 just declassified cables, "The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show. The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%." Could the OPEC cartel's capacity for virtually unlimited supply expansion to keep up with demand have been nothing but a bluff? That is the case according to Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, who met with the US consul general in Riyadh in November 2007 and "told the US diplomat that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached." And yes, that conspiracy concept of peak oil is specifically referenced: "According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as "peak oil"." And it gets worse: "Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap." Look for Saudi Arabia to go into full damage control mode, alleging that these cables reference nothing but lies. In the meantime, look for China to continue quietly stockpiling the one asset which as was just pointed out is the key one to hold, for both bulls and bears, according to Marc Faber.
Why Another Financial Crash is Certain
Submitted by ilene on 02/08/2011 20:11 -0500Banking without rules is more profitable, so industry leaders and lobbyists have tried to block the efforts at reform.
Marc Faber And Nassim Taleb On Risk, And The One Asset To Own Whether One Is Bearish Or Bullish
Submitted by Tyler Durden on 02/08/2011 20:09 -0500
Last year's Russia Forum was one of the must see events of the year, pitting such high powered independent thinkers as Marc Faber, Hugh Hendry, Nassim Taleb in a free for all. While the cliffhanger back then was the suggestion by Hendry that he had recreated the Paulson ABX trade with "1.5% downside and 75% upside" (which has since not been fully revealed aside from some occasional snippets in the periodic letters that it is a synthetic China short trade), the true brilliance was in the debate between the Treasury skeptics and the fan (Hendry). That said, with the entire curve surging wider, we hope Hendry took profits on his short as we are now virtually exactly where we were a year ago. This year's forum was just as entertaining, and while it didn't have quite a distinguished audience, it did feature Marc Faber and Nassim Taleb in a discussion of whether Russia is the best or worst BRIC. That said, trust both Faber and Taleb not to stick to the script and go off on wild tangents. Sure enough, the line of the night as usual belonged to Faber: "We have a big debate in the world whether we will have a deflationary collapse or an inflationary boom...usually after a period of very heavy money printing war follows." That is the philosophical gist of it. As for Faber's recommendation, it is precisely the asset which has become a short-seller's nightmare in the current geopolitically fragile environment: oil. "Whether you are very bullish or very bearish you should invest in oil."
And Some Bad News For David Einhorn...
Submitted by Tyler Durden on 02/08/2011 18:58 -0500The St. Joe Company has just announced it has engaged Morgan Stanley to pursue "strategic alternatives to enhance shareholder value." Of course, since every bank has a bankruptcy advisory team as well, there is a very off chance this could be good news for the Greenlighter. However judging by the 10k $32.88 print in AH, we are leaning toward the former. As we warned back in October when Einhorn was recirculating his noted short thesis for the second time after a 3 year hiatus (which everyone somehow had forgotten), there is a very high probability that the short thesis, which was merely a regurgitation of the original one, could end up crashing and burning. To all who followed Einhorn into what, with 27 million shares short, is about to become a massive short covering squeeze inferno (not to say that Greenlight has not had its share of good ideas over the year), our condolences.
Gleacher Market Commentary
Submitted by Tyler Durden on 02/08/2011 17:38 -0500I have tried hard to not have strong views in market recently given what seems to be possible tectonic shifts. Despite this, I feel as though there was alot of pent up energy at recent range lows and is now being released, to say the least. We had weeks of very defined range that broke and the damn broke. After a tepid 3yr auction, I think players extrapolate the increased level of difficulty of having to increase the DV01 of a 10yr and 30yr to follow, particularly in light of trying to repair wounds from December rinsing, November rinsing.......Adult swim.
ABC Consumer Comfort Index Plunges To Year Lows On Surging Gas Prices
Submitted by Tyler Durden on 02/08/2011 17:21 -0500
Once again the ABC Consumer Comfort index indicates that it is leaps and bounds more relevant than the ADP Private Payroll number. With increasingly less relevant confidence indicators out of UMichigan and the Conference Board, which lately only seem to "poll" 20 people with a $1MM+ Schwab trading account, it is worth noting what a true polling index says about the economy. And it isn't pretty: "Soaring gasoline prices slammed consumer sentiment into reverse this
week, threatening the slow recovery in economic views that’s been under
way. With gas now at record high for a February in Energy Department data
back to 1990, the weekly Consumer Comfort Index dropped by an unusually
steep 5 points to -46 on its scale of -100 to +100. It’s dropped that
far only 36 times in more than 1,300 weeks of ongoing polling since late
1985; this shift erases an equally unusual 5-point gain in early
January...After reaching -40 Jan. 9, the CCI is now at its low for the year, and
its lowest since Nov. 21. It averaged -46 in 2010 and -48 in 2009; those
compare with a lifetime average of -14 and a best-year +29 in 2000. Its
single best week was +38 in January 2000; its worst, -54 in December
2008 and again in January 2009." So strange: unlike with stocks, where inflation is somehow supposed to raise confidence, inflation for the people somehow leads to a near record plunge in confidence. But who are we to believe in this centrally planned economy when every single data point is now fit to be discarded as nothing more than evidence of propaganda.
The Truth Behind The Miraculous "Mutual Fund Mondays" Melt Up
Submitted by Tyler Durden on 02/08/2011 16:36 -0500
It has long been accepted that the stock market performs best on capital inflow days, such as the beginning of the month, or Mondays (also known as "merger" or "mutual fund" Mondays). Specifically, looking at market performance for just Monday's from the beginning of 2010, and comparing it to the cumulative "rest of the week" performance, shows a ridiculous outperformance of 16.7% (just for Mondays) to 1.3% (for the ROW) - a miracle anyone even pretends to trade on all non-Monday days. It is also well understood by now that on days in which there is a subpar trader participation, i.e., low volume, the market tends to miraculously levitate. Yet no one has combined these two studies. Sure enough, we don't think many will be surprised by what we have found. As some of the more jaded may expect, NYSE volume on Mondays should be well below the average. Indeed, that is precisely the case. As the chart below courtesy of John Lohman shows, the market, very counterintuitively considering the outperformance finding above, tends to have its lowest volume on Monday, with all other days of the week trending at around the average. Which begs the question: if everyone traded only on Monday, and the resultant volume increased five-fold, will Monday performance suddenly plunge? Is the only reason for the market's upside asymmetric performance the low-volume Monday-focused activity which leaves the HFT machines to be the marginal buyer, all the while collecting liquidity rebates and not losing money in the process? Is the entire stock market nothing than one Fed liquidity Fed, HFT-whisper volume levitating scam? Is it all really just for show, and the fewer the participants, the more money those who actually brave the ponzi make? We leave it up to readers to make their own conclusions. As usual, we leave with the question: if Madoff's investors knew his "fund" was a pyramid scheme, would they actually pull their capital?
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 08/02/11
Submitted by RANSquawk Video on 02/08/2011 16:23 -0500NYSE Volume: Lowest Of The Year
Submitted by Tyler Durden on 02/08/2011 16:16 -0500
And while the market grinds up for the 8th day in a row, the bad news for the brokers is getting acute. To wit: NYSE volume today was the lowest so far in 2011. With nearly half the quarter in the books, stock trading is persisting at the same Q4 levels that forced banks to announce a plunge in trading-related commissions. As we noted back in August, the only way for stock volume to surge is for a concerted selling event, which is the only time stock volume is beyond the good old vapor we have grown to love and expect each and every day there is an increasingly meaningless meltup in the stock market. And if we are correct about a transition from a QE2 surreality to an (in)visible hand free market occurring some time in April/May, stock volume will continue becoming progressively smaller until they finally spike in roughly three months.
Why The Fed's Policies Are Actually Hurting The Unemployment Rate
Submitted by Tyler Durden on 02/08/2011 15:53 -0500Some thoughts on why the Fed's monetary policy is, paradoxically, doing everything in its power to prevent the organic growth of the economy, and to hinder employment growth.
Tell Me, Which Asset Class Would YOU Rather Own?
Submitted by Phoenix Capital Research on 02/08/2011 15:30 -0500Occasionally I see an article written by some Guru claiming that Gold has no real investment value. They usually use points such as the fact that Gold has no cash flow or you can’t use Gold to buy goods or whatever. All of this stuff is outright moronic. Sure Gold doesn’t have cash flow… but then again Gold also, doesn’t engage in accounting fraud, doesn’t miss quarterly earnings, isn’t affected by Obama’s health care, doesn’t lie about its real balance sheet problems.






