Archive - Apr 14, 2012

Remember the look on one's face when one hears there is no Santa Claus, or tooth fairy? That, more or less, is what the visage on everyone's favorite CNBC anchors Becky Quick, Joe Kernen and Andrew Ross Sorkin was, when Chris Whalen matter of fact (because it is a fact) let a rare glimpse of reality on the NBC Universal distraction and entertainment show, when he said "There is no Chinese Wall. Please. Come on. This is Wall Street." Awkward silence follows. And why not: if the banks officially call frontrunning an "Asymmetric Information Initiative" to mask the simple illegality from the idiot regulators, why not call a spade a spade, and expose one more aspect of the lies and crime that is shoved down investors' throats every single day.

God himself could not sink this ship.--Unknown Titanic crew member to embarking passenger

Two months ago we explained very diligently, why courtesy of the strategic Russian Naval base in Tartus, Syria, the Russian regime will never, repeat never, let the Syrian government be replaced by various insurgent forces (very much like in other parts of MENA, which now are suffering from an absolute political vacuum and even greater corruption in the aftermath of the Arabian Spring). Subsequently there were various reports of Russian troops arriving in Tartus, both confirmed and denied by Russia, which were promptly forgotten: after all distractions from other, far greater problems can not become too repetitive or else the general audience will habituate. But all that was a month ago, and attention spans these days are short, so it is time to once again escalate, and sure enough yesterday the AP reported that Obama has approved an aid package to the Syrian rebels. Naturally, since this whole theater is all about severing strategic Russian national interests in the Mediterranean, and thus, into the Suez, Arabian Gulf, and ultimately Persian Gulf, German Spiegel reports of the immediate tat to America's tit (not to be confused with the Colombian legal prostitution tit, where it now appears whoregate is about to become a national pastime courtesy of upcoming congressional hearings involving the 12 men from Obama's staff who were Secretly Serviced on taxpayer dimes), as apparently yet another Russian-chartered, German ship has been intercepted carrying military equipment and munitions into Syria.

A peaceful and stable Pakistan is integral to western efforts to pacify Afghanistan, but Islamabad’s obsessions with its giant eastern neighbor may render such issues moot.
Since partition in 1947, Pakistan and India have fought four armed conflicts, in 1947, 1965, 1971 (which led to the establishment of Bangladesh, formerly East Pakistan) and the 1999 Kargil clash.  With the exception of the 1971 conflict, which involved rising tensions in East Pakistan, the others have all involved issues arising from control of Kashmir. But now a rising new element of discord threatens to precipitate a new armed clash between southern Asia’s two nuclear powers – water.

Herb Stein’s Law is in full alert: "If it isn’t sustainable, it will end."

George Soros has been a busy man the last few days. Appearing at the INET Conference a number of times and penning detailed articles for the FT (and here at Project Syndicate) describing the terrible situation in which Europe finds itself - and furthermore offering a potential solution. Critically, he opines, the European crisis is complex since it is a vicious circle of competing crises: sovereign debt, balance of payments, banking, competitiveness, and structurally defective non-optimal currency union. The fact is 'we are very far from equilibrium...of the Maastricht criteria' with his very clear insight that the massive gap, or cognitive dissonance, between the 'official authorities' hope and the outside world who see how abnormal the situation is, is troublesome at best. Analogizing the periphery countries as third-world countries that are heavily indebted in a foreign currency (that they cannot print), his initial conclusion ends with the blunt statement that "the euro has really broken down" and the ensuing discussion of just what this means from both an economic and socially devastating perspective: the destruction of the common market and the European Union and how this will end in acrimonious recriminations with worse conflicts between European states than before.

From Morgan Stanley: "In our mind, many of the approaches to algorithmic execution were developed in an environment that is substantially, structurally different from today’s environment. In particular, the early part of the last decade saw households as significant natural liquidity providers as they sold their single stock positions over time to exchange them for institutionally managed products... While the time horizon over which liquidity is provided can range from microseconds to months, it is particularly shorter-term liquidity provisioning that has become more common." Translation: as retail investors retrench more and more, which they will due to previously discussed secular themes as well as demographics, and HFT becomes and ever more dominant force, which it has no choice but to, liquidity and investment horizons will get ever shorter and shorter and shorter, until eventually by simple limit expansion, they hit zero, or some investing singularity, for those who are thought experiment inclined. That is when the currently unsustainable course of market de-evolution will, to use a symbolic 100 year anniversary allegory, finally hit the iceberg head one one final time.

Of the twenty-five largest banks in the world there is only one that does not need to raise additional capital to de-lever to a 20x leverage and a 5% of Tangible Capital Ratio and that is Citigroup which has a current leverage of just 13 times and I also point out that Wells Fargo with a 14 times leverage needs a minor amount of capital to accomplish these goals. At the far other end of this scale is Deutsche Bank which is levered 62 times and would need a massive amount of new capital and tremendous shrinkage to accomplish these goals. The assets of DB are also equivalent to the entire GDP of Germany so that the bank could devour the country if Deutsche Bank were to hit the wall. Then the most leverage can be found at Credit Agricole at 66 times which would also swamp France, given its size, if asset values continue to decline or if Spain or Italy need to be bailed out and the contagion worsens.

Volatility is back. The S&P moved more than 1% on 4 of the 5 days, had the biggest down day of the year, and even the least volatile day was a 0.7% move.

Another CEO made the news headline for alledgedly having "inappropriate relationship" with a female employee.