Archive - Feb 24, 2014

The MSM won't touch this topic, nor will the Fed. But it caused 2008 and it hasn't been fixed.

"If you like your bailout, you can keep your bailout," is the message from the latest Troika mission to Greece; but there is one (or two) big 'but's... As ekathimerini reports, Greece is "very close" to a deal with the Troika for the next EUR8.8 billion with negotiations hanging on a few final things including... the troika wants Greece to extend the shelf life of fresh milk! Maybe they should just rename it 'greek yoghurt'.

Having sold his 7-bedroom NY mansion, the CEO of Virtu Financial (the high-frequency-trading firm that accounts for 5% of US equity trading volume) appears to believe investors are ripe for him to IPO his firm. As The FT reports, New York-based Virtu is aiming to raise between $250-$350m from a listing that would make it the first electronic trading business that trades with its own funds to launch an IPO. The question, of course, is, will Virtu be the top-ticking, greater-fool-finding IPO of this bubble that Blackstone was for the last one?

It would indeed be supremely ironic if the "strong" foreign law bond indenture would be tested, and breached, not by Greek bonds, as so many expected in late 2011 and early 2012, but by one of the last contries in Europe which is still AAA-rated. We would find it less ironic if the next leg of the global financial crisis was once again unleashed by an Austrian bank: after all history does rhyme...

Debt is the great palliative that has enabled the US and other major economies to escape reality, at least for a time. Ayn Rand described such behavior:

You can avoid reality, but you cannot avoid the consequences of avoiding reality.

It is possible to steal from tomorrow to improve today but only at the cost of having less of a future. That is what both nations and citizens have been doing. The ability to continue doing so has about run its course.

Russia represents over 25% of Ukraine's exports and is the divided nation's largest trade partner. As Ukraine remains deep in its self-described "pre-default" state, the economy languishes vainly in the hopes of a trade deal with 'someone' and a bailout from 'someone' else. However, the IMF's first move to bail the nation out has now been met by a subtle punch to the country's kidneys as Interfax reports that Russia threatens to limit food imports on the basis of "veterinary and phytosanitary risks."

A 65-mile stretch of the Mississippi near New Orleans remained closed Monday after two vessels collided and caused an oil spill on Saturday in foggy conditions about 30 miles west of New Orleans. As NBC news reports, the Lindsay Ann Erickson crashed with the Hannah C. Settoon, which was pushing two barges carrying barrels of light crude oil that spilled into the river. Clean-up efforts are underway.

The usual interventionists in the US have long meddled in the internal affairs of Ukraine. In 2004 it was US government money that helped finance the Orange Revolution, as US-funded NGOs favoring one political group over the other were able to change the regime. These same people have not given up on Ukraine. They keep pushing their own agenda for Ukraine behind the scenes, even as they ridicule anyone who claims US involvement. If you asked most Americans how they feel, my bet is that you would discover they are sick and tired of the US government getting involved in every crisis that arises. And I bet if we asked the Ukrainians, a vast majority of them would prefer that the US — and Russia and the European Union — stay out their affairs and respect their sovereignty. So let’s keep our hands off of Ukraine and let them solve their own problems!

This is a headwind we shouldn't ignore.

As we have repeatedly pointed out, the one surest way to generate profits in these manipulated, broken markets is to take advantage of the one legacy trade that makes zero sense in a world in which the global central banks are the ultimate providers of downside risk protection: i.e., going long the most shorted names. We did just this most recently past Friday, when we listed the latest hedge fund long hotel, as well as the names most shorted by the "sophisticated" investors, saying "anyone going long these names is virtually assured to outperform the market over the next year." One day later and this "strategy" is already generating outsized alpha, with the most shorted names solidly outperforming the market. And as the case may, this latest bout of "most shorted" outperformance is set to continue for one main reason. As the CFTC reported last friday, institutional investors using Standard & Poor’s 500 Index futures turned bearish this month for the first time since September 2012.

The Russians had dangled their multi-billion euro carrot - then swiftly removed it pending further details of who is really running the show (demanding a crackdown on the extremists who are trying to establish power). The Europeans have promised an even bigger carrot - predicated on, we presume, total abdication of sovereignty. But now the Americans are jumping in - Treasury Secretary Jack Lew "urged" Ukraine's interim leader Yatsenyuk to start talks with the IMF as he and Lagarde agreed the fund would be the best foundation for advice and financing (if sought by a fully established Ukrainian government). And the winner is...

• *UKRAINE'S KUBIV PLANS TO INVITE IMF MISSION, UNIAN SAYS

Which means only thing - Russia is locked out and gas prices are about to take off.

When Arthur Levitt's SEC adopted Rule 2a-7 in 1998, it handed the TBTF banks and GSEs a mortgage monopoly on a silver platter.  

Many are confused this morning at the exuberance in US equities after dismal data and a bond market that is barely budging. Of course, the answer lies deep in the fun-durr-mentals of the JPY carry trade... but this time it's different as it would appear a note from BofA proclaiming "it's time to buy AUD" coincided perfectly with a ramp in AUDJPY and thus - new all-time highs in stocks...

This is about as funny as it gets, and certainly no commentary needed.

We are sure the President knows best as he addresses the National Governors Association this morning. Having explained to them all that he wants to "partner" with each governor, his week of action continues... “If there’s one thing in common in the moments like these, it’s that our cooperation is vital to make sure that we’re doing right by the American people,” Obama said. “That of course will require that we collectively take action on what matters to them — jobs and opportunity.”