Archive - Jan 2013

Manhattan: 2770 Broadway NYPD reporting a a Robbery at the Bank Of America same perp that robbed HSBC at 2681 Broadway few. moments ago.

— NY Scanner (@NYScanner) January 23, 2013

Much was made of the first two days of this year as indicative of the great 'meme' that every sell-side rep and commission-taking asset manager has pumped investors full of - the 'great rotation' is here. Finally, rates were rising, growth was here, money on the sidelines was moving, and the supposedly 'dumb money' was rotating from bonds to stocks. However, that is not what happened now is it? 10Y yields are now practically unchanged on the year - even as stocks continue to be bid - with the major divergence beginning on January 11th. There is, however, an alternate 'great rotation' that appears just as powerful - that of covering idiosyncratic AAPL longs and rotating into systemic long equity positions (or covering AAPL-hedging short equity index positions). We suspect, given the volume shifts below, that much of the mysterious buying power in S&P 500 futures is indeed beta-hedge unwinds from massively over-exposed AAPL longs unwinding. With AAPL's earnings due tonight, perhaps this 'rotation' will be over.

While we know that most of the world's billionaires are currently holed up in Davos, Bloomberg has created a visual extravaganza for tracking the great and good of our fair world. The real-time billionaire tracker maps the world's richest people to their country of citizenship, industry, gender, age, and source of wealth. We assume this is the new deal target for our administration - how long before we see these headshots on the back of a set of playing cards?

Hey there Breuer, who you jiving with that cosmic banksta debris?

Hell hath no fury... After an extensive 24,500 word hearing, it would appear we are not really any closer to knowing who knew what when and why we weren't told. However, while the invisible hand of the word-cloud fairy found it useful to highlight the words 'People', 'Think', and 'Know', perhaps it was Hilary's infuriated outburst (clip below) when pressed on what happened that sums it all up in her eyes: "What Difference Does It Make?" It seems that once again 'they' know what is best for us to know and not know... But perhaps the only relevant statement in the entire theatrical presentation was the following: "we don't have assets of any significance right now on the African continent. We're only building that up," which perhaps has something to do with this...

Two days ago we presented the complete hedge fund performance for 2012, in which it was clear that David Einhorn's Greenlight had a Q4 that did not go quite as expected, primarily as a result of AAPL plunging in the quarter, and his hated GMCR soaring, leaving his fund with a 8% return for the year (and -5% for the quarter), well below the general market and some of his far more vocal hedge fund peers. Those curious just what it is that caused this underperformance, here is the complete Greenlight Q4 letter discussing not only why Einhorn is doubling down in AAPL, why he still likes Marvell, Computer Sciences and Vodafone, as well as his continuing negative outlook on Iron ore, and the Yen. He closed out positions in WLP, MCO, DIA, ITX and PBI. In summary: "At quarter end, the largest disclosed long positions in the Partnerships were Apple, Cigna, General Motors, gold and Vodafone Group. The Partnerships had an average exposure of 114% long and 70% short."

As we reported previously, the stock of the oldest bank in the world, Italy's venerable Banca Monte Dei Paschi of Siena, was halted in early trade after plunging on news that the bank had engaged in not only the previously reported secret derivative transaction with Deustche Bank to hide losses before a prior government bailout, but yet another derivative transaction, this time with Nomura, signed three years ago and whose intention, ironically, was to reduce 2012 earnings by some €220 million.What the ultimate purpose of these deals was is still unclear and will likely become apparent eventually, however it will likely require the former Chairman of the bank, Giuseppe Mussari, who served as Chair from 2006 until April 2012, and who officially quit his post as Italy's top banking lobbyist after today's revelations, to testify. One person whom he may testify against is none other than current ECB head Mario Draghi, who just happened to be the head of the Bank of Italy from 2006 to 2011, or the entire period when Monte Paschi was engaging in what increasingly appears to have been fraudulent activity.But don't worry: just like in the US, nobody of signfiicance is about to go down for this "glitch" which is about to be blamed on some poor mid-level shmuck, and which nobody in the senior level management had any idea about, and certainly not the person who ultimately would have had to give the green light: the current head of the ECB.

Things are so corrupt in China, that as soon as the new Government stated it would crack down on corruption, a fire sale of luxury properties began as corrupt officials sought to dump their illegal holdings.

No sooner had the House got its 212 votes to pass (with 109 Democrats voting against) the debt-ceiling extension "No Budget, No Pay" bill then Silver and US equities began to rise. At the same time, WTI started to crack lower. Now it is over to Harry Reid and the promised 'smooth sailing' through the Senate. As a reminder for all those ebullient Dow watchers, IBM's gains today account for 76 Dow points - which means the remaining 29 names of the Dow are -3 points! The brief risk-on rally is already fading...priced-in? or doesn't matter?

Define irony? Here is one, or rather two, tries. Back in the 1970s, it was none other than the US that armed the Taliban "freedom fighters" fighting against the USSR in the Soviet-Afghanistan war, only to see these same freedom fighters eventually and furiously turn against the same US that provided them with arms and money, with what ended up being very catastrophic consequences, culminating with September 11. Fast forward some 30 years and it is again the US which, under the guise of dreams and hopes of democracy and the end of a "dictatorial reign of terror", armed local insurgents in the Libyan war of "liberation" to overthrow the existing regime (and in the process liberate just a bit of Libya's oil) - the same Libya where shortly thereafter these same insurgents rose against their former sponsor, and killed the US ambassador in what has now become an epic foreign policy Snafu. But it doesn't end there as according to Russia, it is the same US weapons that were provided to these Libyan "freedom fighters" that are now being used in what is rapidly becoming a war in Mali, involving not only assorted French regiments, but extensive US flip flops and boots on the ground. "This will be a time bomb for decades ahead."

Those wondering if Steve Cohen is attending the most epic of "economic forum" boondoggles elsewhere known as Davos (where for some reason Derek Jeter is present and accounted for) was just to get a hot tip, or to interact with the Swiss branch of Gerson-Lehrman, the one where not every conversation is being recorded by the feds, the answer is neither. The man, whose fund as most by now have been made aware is one turned informant away from greeting the men in gray coats on its front porch at 72 Cummings Road, is in Davos to learn about... "Resilient Dynamism."

UPDATE: *HOUSE HAS ENOUGH VOTES FOR DEBT-LIMIT BILL; VOTE IS CONTINUING

The House is now debating the "No Budget, No Pay" Delay-and-Pray bill debt-ceiling-extension and is due to vote around 1230ET. As CSPAN notes, the deal would raise the government's current $16.4 trillion debt limit until May 19. In exchange, the House and Senate must pass a budget resolution by April 15 or place members' salaries in an escrow account until the chamber acts. The bluff-calling continues...

Since Alan Greenspan became the Fed chairman in 1987, there has been a policy consensus on the primary role and effectiveness of monetary policy in cushioning an economic downturn and kicking it back to growth. Fiscal policy, due to the political difficulties in making meaningful changes, was relegated to a minor role in economic management. Staving off crisis and reviving growth still dominate today's conversation. The prima facie evidence is that the experiment has failed. The dominant voice in policy discussions is advocating more of the same. When a medicine isn't working, it could be the wrong one or the dosage isn't sufficient. The world is trying the latter. But, if the medicine is really wrong, more and more of the same will kill the patient one day. The global economy was a debt bubble, functioning on China over-borrowing and investing and the West over-borrowing and consuming. The dynamic came to an end when the debt crises exposed debt levels in the West as too high. The last source of debt growth, the U.S. government, is coming to an end, too, as politics forces it to reduce the deficit. Trying to bring back yesterday through monetary growth will eventually bring inflation, not growth.

Uber-bullishness is the order of the day in the markets. Last week we noted that the DJIA has climbed to a new post-2007 high. And now, the “fear index” VIX is hitting lows (as we discussed in depth last night). This implies that the market has become dangerously euphoric, and that risk is being improperly priced. The last time VIX fell to an all-time low and market-confidence hit an all-time high, it presaged a financial crisis. This time may not be so different.

As the video denotes below, here we have big brother traded on an exchange