February 15th, 2013
At Deutsche Bank, the job title “risk manager” might be more appropriately characterized as “campaign manager.” That is, Deutsche Bank is no more concerned with the active mitigation of risk than the unscrupulous politician is with actively avoiding extra marital affairs. Like campaign mangers then, risk managers at Deutsche Bank must accept the fact that occasionally (or perhaps quite often) messes will be made and spin campaigns will need to be devised and deployed in order to keep public opinion from turning sour and in order to keep the few regulators who aren’t on the payroll
Update: it missed.
It is only fitting that in the aftermath of the earlier meteor explosion above the Russian Urals, that the world's attention next shifts to yet another historic celestial event, this time of near-Earth asteroid 2012 DA14, which will make a historic flyby of the planet, missing Earth by some 17,500 miles. According to scientists at NASA's Jet Propulsion Labs, the asteroid, which is 150 feet in size, an object of this size makes a close approach like this every 40 years. The likelihood of a strike is every 1,200 years. Of course, the neo Keynesian among us would wish the latter number was much smaller: just think of the untapped GDP potential that would result from the epic destruction. And while a direct impact would not lead to any mass extinctions as was the case 65 million years ago, when the earth was hit by a meteor 6 miles across, this rock could still do immense damage if it struck given its 143,000-ton heft, releasing 2.4 megatons of energy and wiping out 750 square miles. The closest approach will take place at 2:25 pm Eastern, and NASA will be covering the event live below.
Taxpayer-funded bank rescues in the euro area so far already amount to €300 billion, and that is not counting what might be used to bail out Cypriot banks and what may still be required in Italy and Spain. A recent study by Ernst & Young has revealed that euro-land banks in the aggregate now hold € 918 billion ($1.23 trn.) in non-performing loans (7.6% of all loans outstanding). In light of such staggering numbers, the idea to use the ESM for direct bank recapitalization seems somewhat ambitious. This is especially so as the idea to employ the ESM to take over the costs of already bailed out banks is being pushed by a number of euro area members. But then again, whatever they say, we seem happy to believe for now...
Since late January, the February gold contract has been in backwardation. But today something more serious occurred .
We noted yesterday the apparent perfect (ill)-market-timing of increases in corporate buybacks and nowhere is this more evident than across Europe. The following chart might just make all those activist shareholder mom-and-pops, demanding CEOs 'use' their cash hordes, think twice... it appears the CEOs really don't have better crystal balls than the rest of us...
America and China are on a collision course and the battleground is Asia. The new Cold War will impact U.S.-China trade as well as intra-Asian trade.
Everyone recalls the slow motion trainwreck from the afternoon of January 25, when in an epic bitchfest, hedge fund titans Bill Ackman and Carl Icahn screamed at each other telephonically for about an hour on CNBC in what was nothing but one big pissing match. Just over two weeks later, Icahn forced a major squeeze in the stock when as we wrote previously and as we predicted, he disclosed a massive 13% stake, or some 14 million shares in the company built up through stock and calls (essentially costless thanks to Icahn's recent profits on Netflix). What many may not know however, is that for Icahn, the HLF stake was nothing more than a $500 million dollar impulse buy. Why? Because as the chart below, which breaks down the cumulative purchases of HLF stock by various Icahn's funds, shows, the billionaire only held some 1.7 million shares until the January 25 afternoon of his screamfest with Ackman. Then the Monday after the feud Icahn went ballistic, and proceeded to buy some 120,000 shares on Monday and 197,459 option-equivalent shares, after which he tapered off his stock purchases while ramping up the call buys, and buying an epic 10 million share-equivalent calls in the next two weeks, without pause, compassion or remorse, and with just one thought: crush, mangle and destroy Ackman!
A public service announcement...
It is perhaps no surprise that VIX has dropped to new six year lows today as the volatility of the underlying equity market has now been repressed to its lowest point is 17 years. Not since 1996 has short-term realized volatility been this low. The premium (between implied and realized volatility) continues to compress as options traders scalp the difference but increasingly that trade will feel like those nickels just ain't worth the impending steam-roller's wrath. As we noted last night, implied vol skews are as complacent to any downside risk as they have been since before the crisis was even being considered...
In a shining example of true form capitalism, Russian scammers opportunists took advantage of the cosmic fury at the ongoing G-20 meeting in Moscow expressed by an attempted bombardment via meteor (which allegedly left the hole shown in the picture below), and are already seeking to find the level of equilibrium demand for cosmic commodities and market clearing prices by offering pieces of the meteor for sale on local websites. From Moscow Times: "Enterprising businessmen in the Urals city of Chelyabinsk lost no time in finding a way to capitalize on the meteor strike that shook the city on Friday morning. By early afternoon, several websites were already selling "fragments of meteorite." Two-centimeter fragments of the celestial body that hospitalized dozens and injured hundreds more in the Urals early on Friday were being offered for 500 rubles a piece by 2 p.m. Moscow time."
The media appears to be gorging on the 2% drop today in Gold and 11% drop in the last 4 months. Gold's demise today appears triggered by JPY's dump at around 8amET - though longer-term, it appears gold and stocks are recoupling in the reflation trade from around the start of QE2. At $1600, gold is back at August 2012 levels but +134% from the 2008 Lehman 'event'.
An over-indebted, overcapacity economy cannot generate real expansion. It can only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral. For those seeking a summary, here is the global endgame in fourteen points.
Europe keeps banking on these two pillars holding the system up. But the pillars are cracking... it's only a matter of time before the whole thing comes crashing down.
With a week to go until the Italian elections, things are getting a little odd to say the least. The somewhat scandal prone Berlusconi, who self-declared himself leading in the polls just recently, has come out swinging in defense of his fellow business leaders' ethical egressions. The Bunga party banner-man defends bribery, "These are not crimes," he notes, as The FT reports, "bribes are a phenomenon that exists and it’s useless to deny the existence of these necessary situations..." This apparently on the heels of the Finmeccanica CEO's Indian helicopter deal bribes and Monte Paschi's derivative debacle. It would appear his argument lies somewhere betweeen, 'if everyone's doing it - then it's ok', and 'everyone's been doing it forever so why stop now?' One Italian paper, though, disgusted at the state of their nation, describes the entire political and elite establishment of 'guilty inertia' - calling for an end to what Berlusconi appears to be saying is corrupt business-as-usual. And yet we are to trust these technocrats when they say 'crisis over', all is well, recovery is here?
Rating Agencies DID NOT Fail During The Credit Bubble & Subsequent Bust Of 2008-2009, Here's What They Did DoSubmitted by Reggie Middleton on 02/15/2013 11:08 -0400
In the video clip below, I explain that the rating agencies DID NOT fail to do their jobs during the credit bubble and subsequent bust of 2008-2009, nor did they fail in the ongoing pan-European sovereign debt crisis. They succeeded wildly because they served their actual constituency --- the banks!