Archive - Apr 27, 2011

Sixty minutes cut to eleven. Only the "good" stuff

And so the cannibalism at the very top begins. According to a statement just released by Barry Wm. Levine, attorney of David Sokol (who was slated to be the next head of Berkshire... until Berkshire decided to sue him that is), none other than the Octogenarian (soon possibly the Outcast) of Omaha was in fact lying, and arguably committing 10(b)-5 fraud by not disclosing the full details of his and Sokol's involvement in the situation in the Lubrizol proxy. To wit: "Mr. Buffett was told twice, not once, about Mr. Sokol’s ownership of
Lubrizol stock before Mr. Buffett engaged in any discussions with
Lubrizol." And we personally can't wait for Munger to be the next fall guy: we are confident that Charlie will suck it in, like every other good citizen who benefited from the infinite taxpayer largesse. Grab the popcorn - it's dirty laundry "on the record" time.

Commemorating the first Federal Reserve Press Conference and the strong US Dollar...

After 10 A.M. the August 1600 Call buyer came back to the market. Between 10-11:00 am that option was bid and bought, but offers were not lifted as they has been previously. The buyer was patient today. Volatility stabilized and drifted higher. June Calls were still being sold and nothing else was aggressively traded. From there the market moved higher and skew changed dramatically to the calls. The August 1600 Call buyer stepped up his purchasing accordingly. At this point the option term structure became efficient and everything caught a bid on the call side...At about 4:00 the August 1800 Call caught a bid. Several hundred were sold by market makers and spread against the surrounding months...The difference between this month and other months that catch bids is that this is not from retail buying. There is an institutional player who wants to own options. We don’t know that he is going to sell them yet or at any point but regardless, yesterday’s near pin of 1500 was a gift from heaven for this buyer, as he got to accumulate at a discount.

One day to correct 10%, and one day to retrace 76.4%. The HFT robots appear to have really taken over. We can't wait to see what high frequency conversion of registered to eligible silver looks like. We expect a full loss retracement overnight.

A week ago we noted something peculiar: in one day, COMEX
depository Scotia Mocatta (one of five in the world) saw a 25% transfer of silver from "registered" (or deliverable physical) to "eligible" (or "undefined" - a distinction discussed previously, and also below). We said: "Canada's largest bullion depository (and one of five total) reclassified
a whopping 5.2 million ounces of silver from Registered to Eligible
status. In order to get a sense of how big this amount is, which amounts
to just under $238 million at today's fixing price, it represents just
over 25% of the total silver stored at Scotia Mocatta, and about 5% of
the total silver held across all depositories."  The reason then given was: "due to a reporting reclassification, 5,287,142 t oz was moved from Registered to Eligible." To our (lack of) surprise, a quick glance at today's silver holdings at the Comex confirms that the trend of reclassification is continuing unabated, and total "physical" silver across the entire Comex universe has now plunged by almost 20%, or from 41 million ounces to 33 million ounces, in the span of one week! And while last week it was Scotia Mocatta, today it is HSBC and the Delaware Depository, and the reason given: "Adjustments include reporting classifications of t oz that were moved from Registered to Eligible.  Please see Special Executive Report reference 5736 for additional information.  http://www.cmegroup.com/tools-information/advisorySearch.html#." And a further drill down reveals the following link. Many have speculated that there could well be a run on physical silver. But for those looking for a smoking gun, this is probably as close as you will get to one, short of JPM actually declaring "force majeure."

Stocks ended the day higher, though off their highs, handily outperforming the HY and IG credit markets as the FX and PM markets exploded in the afternoon around Bernanke’s press conference. Divergence between high and low quality credit and equity suggests releveraging is starting to be priced in.

The Supreme Court drastically limited class action lawsuits today. Two senators and a congressman are trying to roll back the decision ...

If you are confused why at one point every word the Chairman said was the equivalent of one pip lower for the DXY and 10 cents higher for gold, wonder no more. Here is Citi's Steven Englander asking, and explaining why the USD just hit a new cyclical low.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 27/04/11

"Mr. Chairman, first, thanks for doing this. This is a tremendous development." Steve Liesman

When I met Phil the other night, he was on fire, enraged by what he believes is the scam of the century that no one wants to talk about, because so many powerful people armed with legions of lawyers want unquestioning allegiance, and will sue you into silence.

BERKSHIRE SAYS COMMITTEE FOUND SOKOL LZ TRADING VIOLATED TERMS
BERKSHIRE SAYS SOKOL'S PURCHASES VIOLATED CO. POLICIES

And next, David Sokol takes down Charlie Munger.

There's your whopper of a YTD stock. Just don't try to buy anything with the proceeds from those booked (cause they are booked right?) gains.

All you need to know...