Archive - Apr 15, 2011

Nobody could have seen this coming: "With most of the news on first-quarter growth now in, the GDP “bean count” looks even softer than it did a couple of weeks ago. The most recent disappointments have come on the export side—with trade now set to subtract significantly from growth in the quarter—and from inventories. Consequently, we are downgrading our real GDP growth estimate to 1¾% (annualized), from 2½% previously (and from 3½% not too long ago)." Some other things nobody will be able to predict: Hatzius dropping full year GDP from 4% to 2.25%; Goldman's downgrade of precious metals, Kostin's 2011 S&P 500 price target reduction by 20%, and Goldman getting its New York Fed branch to commence monetizing $1.5 trillion in debt some time in October.

The same theme of the last few days remains in place with vol and CDS being derisked for lower quality names and relatively rerisked for higher quality names. Stocks were a much more mixed bag today with crossover names outperforming the high and low quality names on average. Financials (monolines aside) were the only sector in which equity and credit deteriorated together on average while equity outperformed credit in all the others (aside from Telecoms which saw slightly more spread compression than the equity moves would have assumed).

Everybody spins. Including Nobel economists.

After all, who really needs an IPO of The Onion...

What happened?

• On April 18, 2011, the Chicago Mercantile Exchange launched six Euro-denominated oil contracts - one Brent crude oil and five gasoil.
• Pricing, margining and treasury for exchange-cleared oil price management can be fully executed in Euros.

On the surface, this appears to be a reasonable product suite offer from the CME.  These contracts are financially-settled and rely on the US dollar oil contracts that trade on ICE, the Intercontinental Exchange.  These contracts should make certain trading functions more streamlined for oil exporters to and oil consumers in the Euro-zone.  For some users, no need to buy US dollars to effect oil trades.  Seems like a nothing-to-see-here moment….

It seems like only yesterday that silver took out $42. Oh wait... Luckily, it did not succeed in moving a full buck today. Instead it closed, per the Bloomberg feed, at $44.9913. Other feeds that price based on the offer, however, may see $43.0163. For the shorts, neither will be much of a consolation.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 15/04/11

You want to protect the unborn? Read this ...

While we may be running out of adjectives for "Volume is ______" headlines, that does not change the fact that the reality red shift of the universe that CNBC exists in (Bartiromo: "market volume is above average today") is approaching burgundy. On one hand you have CNBC's... one can't really even call it "spin"... On the other you have reality, if only for the time being. We hear the Fed is willing to fund a reverse merger between bizarro and the real world.

And people made fun of Hank Paulson for threatening with eternal damnation if congress didn't stamp his multi-trillion blank check to bail out his former co-workers from Goldman. In a step that makes the Kashkari-Paulson threat seem like amateur hour, the teleprompter just received its latest high frequency directive from the Wall Street superiors, promptly delivering the latest MAD message to what continues to be perceived as an idiot audience: "Failure by Congress to raise the U.S. debt limit "could plunge the world economy back into recession," President Barack Obama declared Friday, and he acknowledged that he must compromise on spending with Republicans who control the House to avoid such a crisis. Obama urged swift action, saying he doesn't want the United States to get close to a deadline that would destabilize financial markets. He said he was confident Congress ultimately would raise the limit. "We always have. We will do it again," said Obama, who voted against raising the debt limit as a freshman senator from Illinois." The statement merely underscores that the president is now in contention for the Nobel Prize in hypocrisy: after all compare this statement to Obama's now supremely ironic remark from March 20, 2006: "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." They sure do. And in order to replace the current failed leadership, they will gladly start with a new president.

There are many ways this can end badly and only a few it can end well.

The dark side of giving babies full discretionary stock/CDS/option HFT-eligible trading accounts.

From the bears who explained quantitative easing so that even CNBC anchors now know what POMO is, comes the follow up: Inflation explained. So easy that no Ivy League Ph.D. is guaranteed to understand it.

Lately we have heard of occasional documented cases of ear canal bleeding exhibited by people who have been listening too long to morons on TV (and in print) saying that the Japanese economic slow down and supply chain collapse won't have an impact on the US Economy, and will, in fact, be beneficial (it's not pronounced Döuche Bengk). To our immense satisfaction we have confirmed this latest outbreak of bacillus idioticus is localized (to below Canal street), is so far not airborne, and is merely contained to the water supply on Wall Street. In a note just released by a far more credible source of analytic information than anything coming out from Wall Street in the past 3 years: Stone McCarthy, we discover just why the cut to Q1 GDP is about to be magnified for Q2 (and quite possibly for the rest of the year). From SMRA: "According to Automotive News, Japan's big seven automakers have lost more than half a million units of domestic production. The most affected automaker is Toyota, which lost 260,000 units since the March 11 earthquake. How about the U.S.? Will U.S. economic output be affected by the supply disruptions to the Japanese auto manufacturers? The answer is unequivocally yes and the economic impact will be quite severe in April and for Q2 as a whole." There, it wasn't that difficult to admit the truth now, was it.

FROM PAGE 3 OF THE INTERAGENCY REPORT: "The reviews also showed that servicers possessed original notes and mortgages."