Archive - Jan 2014

"Remember the Greenspan/Bernanke put?" BNP's Julia Coronoado asks, well "welcome to the Bernanke/Yellen collar." As some expected, Coronada notes that there was substantial discussion in the December FOMC minutes about concerns about financial stability stemming from QE, and the role it plays alongside progress on their dual mandates in making monetary policy decisions.This implies a shift in the Fed's reaction-function. Simply put - the Fed will react to falling asset values that destabilize economy "and" asset values that rise too far and too fast or are fueled by leverage that may put economy at risk.

The following poll results from Gallup may represent the most significant domestic news story in 2014 to-date. Gallup polling in 2013 showed that the highest number of Americans now identify as Independents since it starting asking the question 25 years ago. Specifically, 42% identify as Independents, versus 31% as Democrats and 25% as Republicans. Even more interesting, the trend accelerated as the year progressed.

2013 may have been a bad year for Bill Gross, but nobody had it worse than John Taylor. The former head of FX concepts saw his hedge fund - once an FX trading behemoth and the largest in the world with $14 billion in AUM in 2007 - crash, burn, and file for bankruptcy as we reported previously. But the cherry on top was the revelation that a year before its filing, Taylor personally guaranteed some $5 million of the FX Concepts' debt owed to Asset Management Finance, a unit of Credit Suisse. Surely, such a sequence of events would be enough to turn even the staunchest financial addict away from the markets for ever. But not John Taylor - the former FX guru has a message for all of you: he is not only back, but is launching a newsletter.... oh and he has a Bloomberg terminal too.

Pleased to announce that #Bitcoin is live at #Overstock.com! http://t.co/mx9TFc8KNQ

— Overstock.com (@Overstock) January 9, 2014

In the first step towards President Obama's income inequality fight, he is unveiling "Promise Zones" today... we can't wait to hear this one..."Promise Zones are a new way of doing business,” the administration official said. “They will be led by local community leadership working toward a common goal … supported by the federal government.” Participants will get priority for federal grants and help applying from an array of agencies. Wonderful, sounds great - how are we paying for that again?

It would seems Reuben Kressel nailed it. The retail investor perfectly top-ticked his 500-share sell order on 12/27 and since Twitter shares have tumbled 25% - with plenty of volatility in between. As the world waits breathlessly for the firm's first earnings call later this month, it seems 'taking profits' is the new norm as firm after firm shifts their buy-buy-buy reccomendations to 'hold' or 'sell'.

The Wolf of Wall Street would be proud. Mathew Martoma, the alleged SAC Capital trader at the center of the largest insider trading scheme ever, was, Dealbook reports, expelled from Harvard Law School in 1999 for a false transcript of his grades. While Mr. Martoma's lawyer tried to keep court papers under cover, a summary on the court docketing system shows the judge ordered them unsealed. "Veritas" indeed...

Japanese consumer sentiment tumbled once again in the last quarter of 2013. The BoJ survey - released quarterly - showed the second consecutive drop in both current conditions and the outlook. This is the largest two-quarter collapse in the outlook for the Japanese consumer since 2007 as it appears the initial exuberance of Abenomics is collapsing as fast as Abe's approval ratings. We fear, perhaps, this loss of belief (which can surely only set back his hopes for firms to raise wages) is merely stoking his nationalist militarist persuasion - as indicated by his move last night.

If yesterday's 10 Year auction was a little on the weak side, stopping through the When Issued by 0.2 bps, there were no such problems for today's last of the week 29-year 10-month reopening auction, which just priced $13 billion of the previously issued CUSIP RD2, at a high yield of 3.899%, through the 3.906% WI. The strength was not only in the pricing, but the Bid to Cover as well, which came at 2.57, above last month's 2.35, and also above the 12 month trailing average of 2.45. Finally, the internals were strong as well, with Dealers taking down 38.1%, the lowest since October's 35.5%, leaving 44.4% for Indirects, above the 38.6% average, if a tad below last month's 46.0%, and Directs holding 17.5% of the final allotment, up from 12.5%, and above the 15.9% TTM average. As a result of the strong auction, the kneejerk reaction in the Ultra was a 10 tick higher move from 137.07 to 137.17, and also helped push the entire jittery complex higher.

At $91.70, front-month WTI crude prices have dropped to a fresh 7-month-low this morning. The mainstream media is already crowing of what this means for gas prices and how that will be an implicit "tax-cut" - even though gas prices remain at or near record-high levels for this time of year. The issue with this thinking, of course, is Brent crude (which more closely correlates to US gasoline prices) remains stubbornly high at around $107 as the spread between WTI and Brent surges over $15.

Governor Christie says he is "doing a lot of soul-searching," over the "callous indifference" displayed by his former campaign manager Bill Stepien (since asked to leave) and Chief of Staff Bridget Kelly (since fired). He was "disturbed by the tone and behavior and attitude" of the emails he saw (following his workout). The "heartbroken", "not a bully", Governor accepted responsibility for his staff's actions and is embarrased and humiliated... but "it's crazy man" to think he would resign...

Mess with us, we'll mess with you. That is the message one can derive from JPMorgan's surprise announcement that it plans to "sell or wind down its business of issuing prepaid cards for corporate payrolls and government tax refunds and benefits." Which also includes the infamous Electronic Benefits Transfer, or foodstamps, card. According to Reuters, the product, which has been offered with cash and treasury services to companies and governments, "had become a headache of risks in operations and regulations, according to a person familiar with the matter who was not authorized to speak publicly." In other words, JPM just told the government which has been going after it relentless for the past year, forcing JPM to rack up some $25 billion in litigation reserves, you can find someone else to manage your wholesale welfare program for nearly 50 million Americans.

Please welcome the nation's new chief slumlord, Janet Yellen. The previous top slumlord, Ben Bernanke, has retired from the position of Chief Slumlord (i.e. chair of the Federal Reserve) to the accolades of those who benefited from his extraordinary transfer of wealth from the many to the few. Why is the chairperson of the Fed the nation's top slumlord? Allow us to explain... We only need to understand two facts to understand the Fed's role as Slumlord.

It’s NEVER to Protect Us From Bad Guys

Traditionally, hedge fund managers that go public with multi-page slideshows bashing this or that asset, usually end up in tears (see Bill Ackman) as long as said asset is not some microcap, illiquid stock. That, however, has not stopped David Salanic of Tortus Capital Management to not only mass distribute a presentation highlighting his latest and greatest short idea but to create a website that implicitly highlights his investment thesis. The site in question is called http://rehabilitatingportugal.com/, and the asset that Salanic is bearish to quite bearish on, are Portuguese bonds.