Archive - Oct 2009 - Story

Billionare investor Carl Ichan offers ailing CIT Group a $6 Billion loan in a letter sent to the board of directors according to AP sources. The loan would save the New York-based lender to small and midsized businesses some $150 million in fees.

We are working a buy order for a customer of ours (it is not in the large cap top 100 names where HFT blesses us with their liquidity), and trying to float our bid in as the market is heavy. Essentially, we are bobbing and weaving, changing our trading venues, and pegging at times off the bid side of the NBBO. Some predatory proprietary algorithm keeps trying to join us on the bid on the ISE, so as to stop our pegged bid from further floating down, so that they can short our stock at inflated prices in our destination (without hitting the stock in the ISE).

The Fed sure loves those tri-party repos. From allowing bankrupt stocks as collateral when Lehman blew up, to extracting all the value out of insolvent companies when the time comesto extract liquidity (some time in 3000 AD), here is what the NY Fed thinks of the initial forray into liquidity management. With tri-partite repo counterparts apparently expanding to virtually all market players (just in case the Blessed 18 all are tied up with stocks trading at $0.01 or money markets) soon, watch for this development to impact the dollar adversely in our new banana economy. In other news, expect repos and MBS purchases to work side by side for the (un)foreseeable future. Guess who will win in toppling the dollar further.

Very little economic data whether it's in Europe or the US today. Recently that has been synonymous with more carry trade: short USD long anything that has high beta. Today seems to be no exception so far, though the USD is not getting beat up all that much by recent standards. Expect dismal volume and an attempt to run the market up.

Is JPMorgan in urgent need of gold replenishment? If one reads between the lines of today's surprising announcement out of the CME, that the Chicago exchange will allow the use of gold as collateral for margin requirements (for up to $200 million), with the actual physical gold to be stored at JPM's bank in London, that is one possible explanation.

"My view is that we are still in a secular bear market...My big concern is that the market has gotten ahead of the economy. The S&P is pricing in $85 dollar of operating earnings which would be a double from where we are right now, and it usually takes four to five years to double earnings off a recession low... The market has clearly overshot the fundamentals. The government should be promoting more of a savings culture...I have a tough believing time you can destroy $14 trillion of net worth in the U.S. - right now bank lending is contracting at 15% annual rate and who is filling the void: the Fed, the FHA, Fannie, Freddie..." - David Rosenberg

• Must read Abelson: A whiff of reality (Barron's)
• BB&T reports slumps as credit issues weigh (Reuters)
• Dutch DSB Bank bankrupt after sale failure (BBC)
• CIT's changes do little to enhance debt swap, according to CreditSights (Bloomberg)
• Gennett ad sales still dropping despite Q3 profit (AP)
• C'mon Ben - it's time to raise rates (Barron's)

• Asian currencies advance for a seventh week as growth, yields draws funds.
• Asian stocks fell as losses at Casio, Yaskawa Electric spook expectations of recovery.
• Business-Jet demand likely to skid before recovering: Honeywell Intl.
• China’s economy grew by over 7% in the first nine months of the year: Govt official.
• China's regulator urged 5 biggest state lenders to maintain a 'reasonable pace' of lending.
• China's growth exceeds 7 pct in January-September, will easily hit 8 percent target.

Rajmahal was just the beginning. The Sri Lankan, who just made the record books for spending a generous $100 million on bail and has even bigger digs in New York's Sutton Place complex (although not quite Richard Perry big), is just the proverbial appetizer. And if regulators have truly decided to start treating the hedge fund industry like the 21st century equivalent of organized crime (as previously disclosed by the US attorney), tonight many other wannabe billionaires are not sleeping too well (and even considering checking out Expedia for some sweet one-way trip deals). Because if they are not, they will be after reading the most recent take on their upcoming plight. From Bloomberg: "Federal investigators are gearing up to file charges against a wider array of insider-trading networks, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said." If nothing else, this will hopefully force many of them to reevaluate the nomenclature of what funds to allocate the hundreds of billions of dollars that have emerged from the "sidelines" recently: it would appear The Insider Trading Rapid Value Appreciation Offshore Fund, most recently developed at Shady Pickins Asset Management, may not be the best appellation after all.

The most convoluted monthly report issued by the US Treasury, that of Treasury International Capital (TIC) flows was released on Friday, and it disclosed some troubling data points. While foreigners overall continued purchasing domestic assets, their appetite continues to decline. In particular foreigners increased their purchases of Treasuries marginally, while they continued selling off corporate bonds and agencies, while buying corporate stocks. Yet, most troublingly, the Big 3 (China, Japan and the UK) purchased the least net total of Bonds and Billsyear to date: as the Fed now dominates the market for Treasuries, traditional buyers are becoming increasingly nervous.

A few years ago, if you wanted to get into a “green” or environmentally friendly car you had a limited lot to choose from and the premium you paid was considerable. And for what? To drive a lowly Prius? Or a heavy, clumsy Lexus 600h running in at well over six-figures? And was the premium really worth it? Meet the Mercedes-Benz of hybrids- the 2010 S400 BlueHybrid. This is not your typical green car. It’s a “blue” Mercedes-Benz- the first real production car in the world to use a lithium ion battery- a “mild hybrid” worthy of the Three-Pointed Star.

• The best unknown activist investment of 2009 (Greenbackd)
• Words from the wise (Financial Armageddon)
• CME in talks to buy CBOE for $5 billion (Bloomberg)
• UBS warned U.S. customers by registered mail their account details may be given to U.S. tax authorities (Reuters)
• Goldman can spare you a dime (NYT)
• The extinction of ethics in finance - The Fallout (Reality Arbiter)

A lone suicide bomber, on foot managing to catch unawares five "senior commanders" in Iraq where only the smartest and best organized insurgents are still alive to mount such action might be a three or four sigma event. A lone suicide bomber, on foot managing to catch unawares five "senior commanders" of Iran's Revolutionary Guard by waiting by the entrance of the complex where they were to meet local tribal leaders... that's a bit rarer still. Whisperings of Western involvement in the incident are... still just whisperings.

Yep, the yellow water has been falling on the floors of many of Wall Street's finest hedge funds. They're all glued to their toobs watching footage of the insider trading arrest of Raj Rajaratnam, founder of Galleon Group, a prominent New York-based fund firm that manages $3.7 billion. Raj, according to allegations published in the Wall Street Journal, played it fast and loose with insider trading rules by talking to prominent executives inside publicly traded companies and to executives who had specific information on pending deals and earnings at publics. Other hedges are probably not the only ones scared out of their minds. Other fearful parties likely include Gerson Lehrman Group, DeMatteo Monness, and the thousands of "consultants' who work for them. Who are these guys and why should they be afraid of what befell Raj?

Documents, files, backs of napkins? Too much to bear. Take an audio loan from our Discount Window instead.

And, it so happens, Studio Zero may be hosting an A-List headliner this evening, in our tradition of pulling into our little afterparty the city's visiting talent.  We can't promise, but... WOW, the possibilities.

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