Archive - Mar 1, 2011

Guggenheim's Scott Minerd has released a somewhat controversial piece looking at several steps forward in case the MENA crisis escalates to the point where dominoes start toppling each other. His conclusion: "After all these dominoes fall, global investors will likely find themselves in a world that looks like this: the Middle East is highly unstable, emerging market economies are slowing, and the crisis in Europe has been exasperated by shrinking exports, leading to a decline in the value of the euro. Against this landscape, the U.S. economy and dollar-denominated financial assets will look increasingly attractive on a relative value basis." Needless to say we disagree with this rather simplistic assessment, or rather, with a very large caveat: in nominal terms, Minerd may well be right, but the resultant surge in oil to well over $200 (should his thesis pan out) will cripple the US economy, force the Treasury to turn on the afterburner on debt issuance, and ultimately result in the biggest bout of monetization ever, resulting in the death of the US dollar (and thus, the resurgence of the gold standard). That said, it is a good piece, if one takes the conclusion with a big piece of salt. In our opinion, the only clear winners from the domino collapse will be oil as we have claimed since early January... and the PM complex of course.

While GM has traded below its IPO price in the past, so far the most coddled IPO of 2010 has yet to close below its IPO price of $33. Indeed, while the special services of HFT powerhouse GETCO have been instrumental in allowing the car maker to continue diverging with its true price, courtesy of massive bouts of momentum buying every time the stock price appears to break with government regulation, today may be the day when gravity and reality finally wins. And considering that GM just released its February sales data, which confirmed that the company continues to engage in dealer inventory stuffing, with 517,000 cars held in dealer inventory, compared to 510,000 in January, and 420,000 a year ago, (and the second largest amount in history after the 536,000 in November), the veneer off the world's most overvalued carmaker is finally starting to come off.

"Dear Lord Blankfein, in the name of Martha Stewart and Bishop Ivan of Boesky, please spare us the self adulatory bull shit about how the Men of G are some kind of genetically superior pedigree of low life Wall Street scum bag!"

High speed in reverse. Only one possible outcome.

Which is as ridiculous as Gaddafi trying to blame the Libyan protests on Osama Bin Laden, or al-Maliki blaming Al Qaeda for the Iraqi protests ...

Reuters presents an interesting chart, which shows the historical correlation between oil (both Brent and Crude) and equities. After we had seen a positive correlation, either weak or strong, between the commodity and the risk asset for two and a half years, the correlation has finally flipped and gone negative. And while many debate whether or not the WTI is relevant at all any more with all the factors that have caused a record spread between it and Brent, one thing is obvious: the last time WTI to Stocks hit a correlation of -0.5 is just after the market peaked in late 2007, early 2008, as the market had started its decline which culminated with the global sell off of everything not nailed down, bringing the S&P to 666. The correlation between the two assets is again -0.5. If Brent confirms the WTI correlation, it may be time to run.

... for those who are lucky enough not to drive a gas consuming vehicle. Alas, with well over 254 million registered passenger vehicles in the US as of 2007, that's probably not that many. As for CNBC's claim that food inflation is somehow "taking care of itself" due to demand destruction, they may well be all too right: a few more revolutions, and resulting "disappearances" of protesters, and there will be far less organic demand for such a headline CPI nuisance as food.

We have suspended foreclosures until such time as we have substantially addressed the noted deficiencies in our processes.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 01/03/11

Counterfeit money exploits trust by presenting a facsimile of authenticity. A high-quality counterfeit bill (for example, the $100 bills exported by North Korea) are facsimiles of authentic paper notes which then gain the trust of users. A counterfeit gold bar is a piece of lead coated with a layer of authentic gold. The mechanism is the same: a veneer of integrity tricks the buyer into trusting the validity of the entire bar. The U.S. has a deeply counterfeit economy.

Following the insider dump of well over $1.3 billion in shares a fortnight ago, this week insiders sold "just" $503 million in shares of their companies, in 118 transactions. Alas, while the selling to buying ratio was a modest 61.4x at last check, the ongoing collapse in insider buying has once again reared its ugly head, and only $4 million worth of stock was purchased. The biggest insider purchases in the past week focused on CB Richard Ellis, Lorillard and Noble, with all at a million or less. On to selling, which is relentless: the top selling names were Sara Lee ($122 million), Franklin Resources ($51 million), and Intuit ($37) million. As for full month February, forget about it. Insiders sold a total of $5.4 billion and bought $128 million, a 41.6x ratio. In layman's terms: they can't wait to dump all they can, leading with Sensata insiders who sold $1.2 billion, followed by Microsoft selling $575 million and Molycorp $363 million.

After a two month delay, gold is about to take out it all time high, silver has just passed $34.50, and, shockingly, the dollar is down as the Chairsatan drones on.

The Securities and Exchange Commission today announced insider trading charges against a Westport, Conn.-based business consultant who has served on the boards of directors at Goldman Sachs and Procter & Gamble for illegally tipping Galleon Management founder and hedge fund manager Raj Rajaratnam with inside information about the quarterly earnings at both firms as well as an impending $5 billion investment by Berkshire Hathaway in Goldman.The SEC’s Division of Enforcement alleges that Rajat K. Gupta, a friend and business associate of Rajaratnam, provided him with confidential information learned during board calls and in other aspects of his duties on the Goldman and P&G boards. Rajaratnam used the inside information to trade on behalf of some of Galleon’s hedge funds, or shared the information with others at his firm who then traded on it ahead of public announcements by the firms. The insider trading by Rajaratnam and others generated more than $18 million in illicit profits and loss avoidance. Gupta was at the time a direct or indirect investor in at least some of these Galleon hedge funds, and had other potentially lucrative business interests with Rajaratnam.

Why choose to participate in a system that doesn’t work? A system that is designed to drain the people of wealth instead of enriching them and their lives? A system that is constructed upon irrational principles, faulty laws, and unstable values? A system on the verge of collapse? This is the question that the Alternative Market Movement (AMM) poses to the American citizen. Why continue living under an economic structure that is poised to erupt, threatening you, your family, and your ability to provide a meaningful future for them? Would anyone voluntarily choose to live under the barrel of a gun their entire lives?

This is the prototype for a set of silver coins commemorating the heroes of PONZI-USA...