Archive - Oct 2009 - Story

• Watch for another 2009 market high today with no market volume
• Sunoco, Valero shut refineries as winter no match for fuel glut (Bloomberg) even as oil goes higher (Reuters)
• Iceland shrinks 8% as prices increase 11% in deepest recession (Bloomberg)
• Writedowns on mortgage servicing make even JPMorgan vulnerable (Bloomberg, h/t Paul)
• A path to downward mobility (WaPo)
• Mating in London means 4,000 people meet over price for metals (Bloomberg)

• Asian stock markets mixed on Monday before a string of US earnings reports this week.
• Australia to expand lifeline for residential mortgage-backed securities by $7.2B.
• British PM Gordon Brown to announce sell-off of public assets.
• Central banks flush with record reserves are snubbing dollars in favor of euros, yen.
• China shares mixed on profit-taking and pressure of IPOs.
• Crude oil rises for third day as demand may increase on economic recovery.
• Oil rises above $72 as investors eye US company earnings this week.
• Derivatives regulation proposals in US House move closer to Obama's plan.

Go long Gannett at your own peril (although the short squeeze has a little more to play out so you are probably cool for a few more days). According to the Minneapolis Star Tribune, in a memo submitted to staff on Friday, "USA Today publisher David Hunke said the average circulation at the Gannett Co.-owned newspaper was 1.88 million from April through September. That marks a loss of 398,000 copies, or 17 percent, from the same period the year before at the newspaper, which is printed on weekdays only." The reason for this unprecedented drop, which will put the paper in second position behind a growing Wall Street Journal, is the "growth of online news and the slump in travel pummel the newspaper."

First Steve Jobs and now Bruce Wasserstein? The head of Apple has had his share of disclosure issues regarding his health, which recently culminated with an (accelerated) liver transplant. It appears the CEO of Lazard could be next up on the health rumor pole. According to Bloomberg, Wasserstein "is in a “serious” condition after being hospitalized for an irregular heartbeat." The investment bank has added that it would "not be providing additional updates at this time." Could this confirm rumors from over 3 years ago that all is not as good with its CEO as Lazard would like to make it seem?

Like him or hate him, the author of The Black Swan does provide a unique and interesting perspective. Here is his entire presentation to the Long Now foundation from early 2008, a few short months before everything starting collapsing, and, in many ways some would say, proving him right. Of particular note: Taleb's personal disdain for "experts" of all sorts, is second only to that of Buffett and Munger.

The cremation of the dollar is spreading as other Central Banks realize what a nifty trick currency devaluation is. The BBC notes that tomorrow the CEBR (Centre for Economics and Business Research) will present a new forecast which calls for the BOE rate to remain at 0.5% until 2011, and to hit 2% in 2014 at the earliest. Furthermore, the pound will be the next carry currency, as it is now expected to drop to $1.40, and below €1. The culprit is the same as in the US: out of control budgets, which will be "moderated" by tax rises (precisely the thing Goldman was warning against earlier) and spending cuts. And, lastly, the CEBR sees the UK's QE program increasing by nearly 50% from £175 billion to £250.

This weekend’s WSJ interview with Lloyd Blankfein of Goldman Sachs by Holman W. Jenkins, Jr. is worthy of commentary by both sides of the Goldman fence: those that subscribe to the theory that Goldman is the Matt Taibbi coined “..great vampire squid..” or those that have taken Mr. Blankfein’s recent public apology to heart and have accepted his words that “…Goldman wants to be a force for good…”.

The last part of the Max Keiser interview with Janet Tavakoli. All relevant topics covered.

"Over the full ten-year period, we now see the deficit cumulating to $10½trn, up from $9trn previously." - Goldman Sachs

• Russia economy to shrink 7.5% in 2009 according to President Medvedev (BBC)
• Medvedev: Slump deeper than forecast (WSJ)
• Andy Xie: Why one bubble burst deserves another (Caijing)
• Paranoid theories can't take the shine off gold (FT)
• US States face "unbelievable" revenue shortages (Reuters)
• October surprise from bank earnings? (MarketWatch)
• Employers have fewer jobs to offer (WSJ)

Radio Zero: "We watched 'they live,' last night.  Felt like the comment section on Daily Kos."

Listen here: http://cdo.zerohedge.com:8000/listen.pls

Or pick up our West Coast Mirror (with 1000 slots) here: http://216.218.252.88:8000/listen.pls thanks to the mind-blowing generosity of EGI Hosting.

Chat up the DJ (send your .mp3 files) here: radiozh.

Or... #radiozh on EFNet (for the real chat nerds).

In January, Zero Hedge wrote about the bankruptcy of paperboard and packaging company Smurfit Stone Container Corp. As this occurred at the peak of the post Lehman crunch it was not very surprising. However, what is somewhat surprising is our recent encounter with a case study of the Jefferson Smurfit Group LBO by Morgan Stanley, in which Madison Dearborn acquired JSG for €2.3 billion, and subsequently spun off SSCC to the public. What caught our attention was the fees and expenses that the advisors charged MDP to facilitate a deal which ultimately cashed out the investor group by spinning off the eventual toxic assets of SSCC to a hapless public: Deutsche Bank and Merrill Lynch pocketed a whopping €248.5 million (yes, that's Euros). And for what: presumably for M&A fees, Loan fees, HY Bridge and Bond Fees and FX/Hedging Revenues. What they missed to point out is the primary reason for MD's generosity: extracting all the relevant assets out of a formerly stable and growing, operation, spinning off all the shitty ones (eventually attempting to arrange restructuring fees and/or DIP financing on the remaining SSCC husk), leveraging the company with a massive debt load, and subsequently IPOing into the next bull market.

Genius or madman, at least his thoughts are getting prominence. (Also, another example of stretching a $0 marketing and advertising budget.)

It is no secret that Julian Robertson is not a huge fan of long-dated bonds. In his recent CNBC interview he had some downright nasty words about the back-end of the UST curve, especially if the "downside contingency" case of foreign purchases ceasing, were to pass. However, while many have known about his propensity for the bond steepener trade, his latest trade position is the so called Constant Maturity Swap trade. Moving away from an outright steepener makes sense as it can now only profit from a tail end widening, since the front end of the curve is at zero. Unless Bernanke follows Sweden into negative rates territory, the steepener upside potential has just been mechanically limited by 50%. As for his current preferred iteration of expressing Treasury bearishness, CMS, here is some recent commentary from JR on the topic:

"The insurance policy I would buy is called a CMS Rate Cap, which is the equivalent of buying puts on long-term
Treasuries. If inflation happens the way it could, long-term Treasuries
are just going to explode. Less than 30 years ago, long-term interest
rates got to 20%. I can envision that seeming like a very low interest
rate compared to what might occur in the future."

No surprise then, that Morgan Stanley's Govvy desk has started pimping this trade (including some hedged and Knock Out variants) to anyone who wants to immitate that original Tiger.

Merrill Lynch (excuse me, BofA/ML as they like to put on the lead left side of REIT prospectuses), presents its case for why optimism dominates and all theories voices by perma-bears "have little founding in economic theory or history." What is notable from the below multi-pronged perspective on the definition of the term "recession" is that BofA/ML's entire argument rests on the premise of a fiat currency as taken for granted. Eliminate that, and the construct of imminent recovery from any and every economic cataclysm becomes immediately flawed. Ironically, the only reason there is no mass violence and civil uprisings right now (which would have been the case had RBS and HBOS gone under, an event which according to Bloomberg was mere hours away), is because printing presses the world over went into overdrive with wanton monopoly money (or nightcrawlers as they have been penned elsewhere in the blogosphere) creation (or destruction, depending on your perspective).