Archive - May 2011

European sovereign and contagiously financial risk was the major underperformer of May but the clear preference for IG credit over all and risk aversion towards high yield credit remains worrisome. Up-in-quality and up-in-capital structure along with the new-issue/curve steepener/basis trade in IG are solid themes but the last few days have seen a mad scramble for high beta equities into month-end salvage an otherwise dismal month.

May surveys had the largest ‘negative surprise’ since Bloomberg started tracking consensus estimates in 1998. In addition, several of the reports have shown some of the largest two and three month rates of decline on record. Whether this is indicative of a mid-cycle slowdown, or something more serious, a continuation of the recent deterioration could well set the table for QE3... Oh, and tomorrow's ISM will likely be a bloodbath, which in continuation of today's bizarro market (and world) will mean the S&P closes at least 2% higher.

Financial power is to achieve what military conquest had done in times past.

This evening's latest NYT Story-Morgenson Joint Venture story about Goldman beats a well-beaten drum: the question, which has been discussed extensively on Zero Hedge and elsewhere before, of just how ridiculous and ludicrous is the notion, used by Goldman in both Congress and before the SEC, that Fabrice Tourre, then a midlevel 28 year old whose story has been told millions of times, worked completely and entirely alone when perpetrating the Abacus CDO "transgression" (for which Goldman neither admitted nor denied guilt). Obviously this is such BS that nobody but an entity as entitled (and for the implications of perceived infinite self-entitlement look no further than DSK or David Sokol) as Goldman (and hence the SEC which needs Goldman for future employment prospects) could possibly believe it. There is however, a link in the story that is so weak, that it raises extensive questions about either the credibility of the entire narrative, or the complete worthlessness of Goldman's IT security and VPN firewall, two possibilities that demand further inquiry.

CalPERS just hired a seasoned veteran to oversee their private equity program...

Okay Zero Hedge, this "FIX" can not be passed. This can not be the framework for things to come. Spread the word! Email it, facebook it, digg it, stumble it, tweet it, repost it, etc. This is absolutely unacceptable...

The European banks are slowly but surely, through a tactic of Financial Arbitrage, moving more and more sovereign debt to the ECB and EU. Someone must pay for this debt and that will eventually be the entire European taxpayer base. That is the goal. In the initial stages of the Euro dream everyone was benefiting. Like an initial user of drugs the early stage is euphoric before the issues associated with the addiction surface. This stage fostered tremendous growth in debt - never ending Corniche housing villas in Spain and Portugal, embarrassing pensions and social benefits in Greece, tax advantages for off shoring corporations in Ireland or unjustifiable and hidden local government spending in Italy. It has been a captive market for the Asian Mercantile Strategy and a financial retail market boon for US financial instruments created from the never ending supply of freshly minted US fiat paper...Be aware that the mercantile financiers are so opposed to risk that operating as the secured bond holders of the banks they make the profit from the banks - not the shareholders. The financiers get first distribution of profits and are always kept whole. The public typically attacks the bank owners, not those who insidiously control and profit from its operations - the senior secured bond holders. It is the senior secured bond holders who must take the Greek 'haircut' but as part of the strategy they have their political mouthpieces vehemently opposing it...Forcing the Greeks to sell all that's left of the family jewels is now seen as a key part of the political solution. But who will want to buy them when there is every possibility of Greece leaving the euro? Capital is already fleeing Greece as fast as it can; what's the chance of attracting it for Greek assets? Someone is going to get real fire sale prices.

Update: As expected, debt ceiling does not pass.  Final vote:

• Nay (Republicans 236, Democrats 82), total: 318
  
• Yea (Republicans 0, Democrats 97), total: 97
  
• Not Voting (Republicans 3; Democrats 6); 9
  

As we reported first today, any minute now the Congress will pretend to vote on HR1954, a clean debt ceiling increase of $2.4 trillion to $16.7 trillion. This will not pass. Why Congress is doing this bullshit, and why the US debt ceiling is now nothing but a farce, is a question voters should ask themselves next time they vote for their representatives. Watch the tragicomedy live at C-Span below.

The description of the Greek bailout plan in the NYT has just one salient paragraph. Here it is: "With great reluctance, European governments have come to the conclusion that an additional €60 billion now, while politically unappealing, would be less costly than the unquantifiable public funds that would be needed if a restructuring of Greece’s debt produced a Lehman Brothers-like contagion that spread not just to Portugal and Ireland but possibly Spain and the financial system as a whole." Ah yes, with "great reluctance" European governments, bought and purchased by bankers, have decided to bail out their sources of capital. As for the conclusion, the only thing that matters is how long before European taxpayers realize that once again they are the mark in this latest pathetic attempt to ignore reality, which incidentally for those who are clueless, is the following: "“Greece’s G.D.P. is already declining and now the government will need to cut another €7 billion in spending,” said Jason Manolopoulos, who manages a hedge fund based in Athens and Geneva and is the author of “Greece’s ‘Odious’ Debt: The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community.” “That is only going to make the debt to G.D.P. figures worse,” he said. “There is no getting around it: Greece is insolvent.”" So while the bankester cartel is dead set on bleeding the last drop of hemoglobin from the petrifying Greek corpse, here, courtesy of the WSJ is what will soon be purchased by special purpose entities controlled by the same banks that are just now getting bailed out.

The Mainstream Media has completely failed to make sense of the global financial crisis. By "make sense" I mean a framework of interpretation that properly attributes responsibility to the causes and players and which explains the key dynamics in common language. A framework of interpretation doesn't disappear in the next news cycle: it is constantly reinforced by additional interpretation and illumination. The news cycle now lasts at best the length of a playoff series. Mr. bin Laden's news cycle didn't even last as long as an NBA playoff; the demise of the "most dangerous man in the world" was shoved into the ashbin of history within a few days, with little interpretation beyond fist-pumping and a few fusty pontifications by the usual suspects, i.e. the "experts" trotted out during "big events" to explain it all away. The full quote from Macbeth (Act V, Scene V): It is a tale told by an idiot, full of sound and fury, signifying nothing. Every "news event" is terribly important, until a few hours later it is unimportant. This is a form of madness, a madness which goes unrecognized in the crazed, turbulent flood of "news."

For all Zero Hedge readers who have long waited for their chance to ask Mr. Scott Alvarez of "Have The Federal Reserve Or Prime Brokers Ever Tried To Manipulate The Stock Market?" fame a question about life, the universe or why the CME decides to hike ES margins in an environment of rising realized vol, here it is. Tomorrow, at 2PM, Ron Paul will lead a hearing by the Financial Services Committee, which will luckily be carried by C-SPAN meaning one will be actually able to hear the dialog (alas, the House continues to believe that investing in microphones for their internal webcasts is a bad idea), titled: "Federal Reserve Lending Disclosure: FOIA, Dodd-Frank, and the Data Dump." The witnesses will be Mr. Thomas C. Baxter, Jr., General Counsel, Federal Reserve Bank of New York, and the one and only Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System. While the usual heeming and hawing will follow each and every question, what is unique about this session is that the FSC actually allows anyone to submit questions for the honorable lawyers. The link to submit questions is here: we urge Zero Hedge readers to take advantage of this opportunity and have Mr. Paul read their questions to the two general counsels, even if no legible answers will be (ever) forthcoming.

The Secret Weapon: Dance!!!!

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 31/05/11

If you feel like - oh, man, EVERYTHING turns out to cause cancer - I can relate. But - unlike all the shenanigans which the powers-that-be are pulling - this is something we're doing to ourselves ...

Speechless. Just.... speechless.