Archive - 2012

The world can't get enough Greek Government Bonds (now trading above 50% of face! on 5-notch S&P upgrade and ECB collateral news), Italian and Spanish government bonds (at nine-month low spreads with the biggest one-week drop in risk in over three-months and tighter by 25bps this week alone), Euros (EURUSD at 8 month highs with a 430 pip ramp in the last week), and Italian and Spanish stocks (at nine-month highs and up 3% this week). Technical breakouts every you look in Europe as the almost unprecedented rally of the last week - amid huge and escalating volumes in stocks - goes on. The only thing we would add is that for the first time in a week, European stocks, bonds, and the EUR are closing the European day-session off their highs. Apart from that - everything is golden, problem solved.

Just as we predicted, the Republicans effort to vote on 'Plan B' and throw the blame back to Obama's Democrats for a failed Fiscal Cliff resolution has halted discussions (which no matter how it is spun is not a positive!!!)...

• *WHITE HOUSE SAYS TALKS HALTED ON BOEHNER'S 'PLAN B': POLITICO
• *WHITE HOUSE SAYS 'PLAN B' MAKES DEAL LESS LIKELY: POLITICO

Of course, the market does not care... why would it?

Meanwhile in the always efficient crude oil markets... another asset class joins the inverse-Baumgartner crowd... Daniel Day-Lewis would be proud of this gusher...

What’s worse than unjust and ineffective laws like the failed War on Drugs and the failed sanctions on Iran? Unjust and ineffective laws that apply to ordinary folks, but not to banksters. Once a certain segment of society becomes protected from criminal liability, that society has travelled a long way down the road to feudalism, to a caste system, to serfdom.

Earlier we presented the person that Time's editors thought is worthy of the title "Person of the Year" 2012. Below, we show a slightly different version of utopic leaders, this time showcasing the person of the year however as elected by Time's readers (and yes, we were just as shocked there are any left). And the winner is...

This is one of the most revealing graphs we have posted. This Great Graphic comes from the Washington Post's Wonk blog. First, it shows that a step toward fiscal adjustment is coming to the US. The difference between Obama's plan and Boehner's is how the burden of the adjustment should be distributed. Second, chest thumping and the hand wringing that has surround the negotiations seems dramatically out of proportion on the differences. This is a case of the hubris of small differences.

Presented with little comment - but it's that time of the day again...

A $1.5bn fine. Sounds like a lot but in relation to the trillion dollar derivative markets hanging on every tick and reset from this now-proven-to-be-entirely-false market, it seems a fine is too easy. Just as with Barclays, the UBS traders (who combined their LIBOR submission and proprietary trading units from 2005 to 2009) used hints and suggestions and requests for "market color" to ensure fixes were exactly where they needed them up and down the curve. The quotes and hubris are entirely damning and also show a totally willful disregard for capture (especially following a discussion of the mainstream media noting 'odd' LIBOR quotes during the crisis). This went from top to bottom in the organization, summed up perfectly in this one exchange: "...It is highly advisable to err on the low side with fixings for the time being to protect our franchise in these sensitive markets. Fixing risk and PNL thereof is secondary priority for now."

There was little excitement in today's November housing starts and permits numbers, the first of which missed expectations of 872K modestly, and was down from 894K to 861K on a seasonally adjusted, annualized basis (64.6K unadjusted, non-annualized, the lowest since March; the Northeast unadjusted print was 25% lower than a year ago!). The prior two months were also revised lower from from 863K and 894K to 843K and 888K. On the other hand, permits which are nothing more than an opportunity cost fee for an application filed with the local housing office, rose from 868K to 899K. Curiously enough, this was the one series that was supposed to benefit from Sandy, as builders would step up reconstruction efforts in the hurricane impact areas. Alas, that did not happen, in the impacted Northeast Region, as both Starts (73K) and Permits (76K) came at multi month lows (in the case of permits, this was the lowest print of all of 2012). What did drive housing starts and permits? The "South" where both categories saw the respective data prints jump to the highest since 2008. The same south which was promptly featured in our "Interactive Guide to the Housing Recovery." The housing bubble is back in full force.

A few days after divesting its stake in the firm that started it all, AIG, and at a profit at that (ignoring that the risk has merely been onboarded by the Fed whose DV01 is now $2+ billion as a result), the US Treasury continues to divest of all its bailout stake, this time proceeding to GM, where the channel stuffing firm just announced it would buyback 200MM shares from the US government at a price of $27.50. More importantly, the "Treasury said it intends to sell its other remaining 300.1 million shares through various means in an orderly fashion within the next 12-15 months, subject to market conditions. Treasury intends to begin its disposition of those 300.1 million common shares as soon as January 2013 pursuant to a pre-arranged written trading plan. The manner, amount, and timing of the sales under the plan are dependent upon a number of factors." Assuming a price in the $27.50 range, this implies a nearly 50% loss on the government's breakeven price of $54. So much for the "profit" spin. One hopes all those Union votes were well worth the now booked $40+ billion cost to all taxpayers.

For those curious why many people are scratching their heads how the market cap of Bank of America has nearly doubled in the past year, here it is: "Bank of America Corp. has amassed $64 billion of mortgages that are at least six months delinquent and have yet to enter foreclosure, more than twice the amount held by its four largest competitors combined." $64 billion is more than half the market cap of Bank of America as of this moment. 

• Republicans put squeeze on Obama in "fiscal cliff" talks (Reuters)
• Inquiry harshly criticizes State Department over Benghazi attack (Reuters)
• Banks See Biggest Returns Since ’03 as Employees Suffer (BBG)
• Italy president urges election be held on time (Reuters)
• Bank of England Says Sterling Hurting Economy (WSJ) - there's an app for that, it's called a Goldman BOE chairman
• China slowdown hits Indonesian farmers (FT)
• China dispute hits Japanese exports (FT)
• Market to get even more monopolized by the HFT king: Getco wins Knight with $2 bln sweetened offer (Reuters)
• MF Global Cases Focus on 'Letters' (WSJ)
• UBS fined $1.5 billion in growing Libor scandal (Reuters)
• Spotlight swings to interdealer brokers (FT)
• China Widens Access to Capital Markets (WSJ)
• With Instagram, Facebook Spars With Twitter (WSJ)

Those curious why the EUR is back to highs not seen since April, it appears the reason is because Europe's currency is once again directly collateralized by such money good assets as Greek Sovereign bonds. At least the farce that is the "temporary" indirect bailout of Greece via the ELA can finally end.