Archive - Feb 2011

And so our bureau of central planning has once again made distressed investing a relic of the past. Famous distressed PM Bruce Karsh, who runs Oaktree's distressed investment fund, has just decided to return $3 billion of the fund's $10 billion previously raised from investors due to a lack of investing opportunities. Basically, in preventing failure for a select few, Bernanke made failure impossible for everyone (which begs the question: how long before the specialized restructuring boutiques of the world - the Houlihan Lokeys, the Miller Buckfires, and the Alix Partners, continue to exist, let alone sustain on IPO any time now hopes). So after Bernanke destroyed long/short, sometimes incorrectly called "value", investing, he has now eliminated another formerly profitable vertical of the market that rewarded spotting arbitrage opportunities. The only funds that will remain soon as the Long-onlies and the momos of the world - also known the dumbest money imaginable. And when this whole thing crashes, and only shorts would be able to make money, there will be no-one making money, as there will be no capital available to short strategies. Bernanke's plan of killing all the bears has succeeded. Next up: it's the bulls turn.

All the signs of a housing/credit bubble were there, but no one was looking...

After close today, Trian Fund Management, Nelson Peltz' asset management company, filed a 13D indicating the fund had amassed a 10 million (7.9%) share stake in FDO, and more importantly, expressed a vague, preliminary, non-binding and highly-contingent interest in acquiring discount retailer Family Dollar (closing regular hours at $44). As the proposed price indicated in the letter is $55-60, the shares are expectedly surging, meaning the letter alone resulted in nearly a 20% ($13) gain for Peltz 10 million share investment: $130 million for a few minutes worth of work: not bad. Yet is this anything more than a red herring? After all these kinds of fully contingent letters were all the rage during the bubble years, when funds would "express a purchase interest" with so many contingencies Arnold could drive his Hummer through all the "outs." As soon as the stock surged, the letter writer (and more often than not, the cabal of silent co-investors) would cash out, and slowly the buying interest would evaporate, with the price slowly dropping back to historical levels. In fact, for Trian this is not the first time - the company did an almost identical thing with Chemtura back in 2008, only to completely leave the company in March of 2009, months ahead of CEM's filing for bankruptcy (resulting in major losses for Trian). Which is why we urge readers to be very careful before chasing into FDO stock here: we are very concerned that this is nothing more than simply another attempt on behalf of Trian to stir up buying interest in which to sell its 10mm holdings with no real acquisition interest, since with all the non-binding clauses it is extremely difficult to take this letter seriously.

The "Youth of America" is dumber than rocks, especially in Math & Science...

Still hungover from Saturday to comprehend what happened with the Great Obama Budget presented yesterday? Then this video is for you. Using shot glasses of Jack Daniels it takes just under two minutes to lay out in layman's terms not only the essence of the proposed budget, as well as the "Draconian" cuts contemplated, but also insinuates heavily about the level of blood in the alcoholstream of those government workers who came up with the "50% rise in government revenues over 2 years" assumption.

Another frame up falls apart ...

In Britain, they call it "DADA." It means Decide. Announce. Defend. Abandon. In America we call it "NIMBY" - "not in my back yard." It applies to all kinds of infrastructure construction, from airports to roads. But it is electric and gas utilities that feel the brunt of local opposition. These localized forces of "no" have caused the buildup of a substantial backlog of infrastructure projects, not only for sexy green-energy technologies but also for the traditional needs of energy production and distribution - pipelines, power lines, replacement of aging equipment and the construction of new facilities to meet new loads and move the energy infrastructure into the 21st century. It also includes old-fashioned technology - meters, switches, transformers - to get new green electricity to the consumer. A new study, from a group advocating upgrading energy facilities, says the pent-up need for utilities to start these projects is so great that if the impediments can be dealt with, 250,000 jobs can be created almost immediately, without action from Congress or a raid on the federal treasury.

UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS CENTRAL DIVISION | CitiMortgage may not rely on the recorded assignment of the plaintiff’s
mortgage from MERS because it was never the holder of the note, and therefore lacked the right to assign it...

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 15/02/11

In what can only be described as some surreal witches coven, earlier we had Napoleon Dynamite, Dr. Hashimi, ProAm Golf wannabe Champion Kernen, and of course Russian recovery expert Liesman and Koolaid allergic Santelli all together, going at each other. And while the sideshow was the completely discredited former Fed governor Mishkin accusing Roubini about 10 times of being depressing, with Roubini taking an old adage and applying it to our times, saying that "the weather is the last refuge of scoundrels", the real soundbite was Rick Santelli telling Liesman (about 10 minutes into the video), that "Steve you fight like a girl." Soap opera time.

A great, great scam because we spend dollars we don't have, devaluing the Dollar, to prop up the EU and that strengthens the Euro - devaluing the Dollar again! It's a double hit on the Dollar in one morning.

Presented without comment

GEITHNER SAYS `LOTS OF UNFAIRNESS' IN U.S. TAX SYSTEM

Terrorists would have looked at an unguarded canal as the opportunity of a lifetime, now that Mubarak has left office and the military is in control this is out of the cards.

Now that we know that JPM had a statistically impossible 97% win track record in 2010, we can't help but drool in jealousy. However, we wouldn't be doing our journalistic duty if we didn't inquire just how much did JPM brush under the rug on their underwater gold and silver short exposure, and whether or not Blythe Masters' bank is even accounting under GAAP for the now documented price suppression scheme? After all, Blythe is the master brain behind such no margin "bearish exposure" products as CDS - it would be only logical that she discovered some way to make her massive paper silver short carried on the books at a minute fraction of gross notional exposure. Furthermore, it is no wonder that today Gary Gensler demanded a pound of flesh for his kickbacks to the banker lobby which allowed JPM to be grandfathered in with their huge short positions (claiming the CFTC would need to fire hundreds of worthless staffers if the corrupt agency's 2011 budget wasn't lifted, despite O'Malia's protest). We ask all this because despite all the unprecedented manipulation: the close banging, the paper shorts, the AM-PM session divergence, silver is now at $30.80, and is just 12 cents away from its post-Hunt Brothers record close, which was printed on New Year's Day at $30.92.

Bernanke is kidding himself, the House Budget Committee and the entire 60 Minutes audience when he says that he can raise interest rates in 15 minutes. He can raise rates but it would be the INSTANT end of the economy. I’ve read the book: “Temple of Secrets: How the Federal Reserve Runs the Country”, and a large portion of the book was dedicated to Paul Volcker’s 21.5% rate hike. The adverse effects on the economy were disastrous. Businesses stopped borrowing, or went broke borrowing, unemployment went through the roof, housing was crushed, large purchases of automobiles crumbled.