Archive - Oct 2009 - Story

Canwest Media, Canada's largest media company, which reaches "20 million Canadians who turn to [it] every week as their source of news, information and entertainment," just announced that its Canwest, CMI, Canwest Television Limited Partnership (including Global Television, MovieTime, DejaView and Fox Sports World) as well as The National Post Company units have filed for creditor protection (read Bankruptcy, or technically Chapter 15, and specifically, 09-15994, U.S. Bankruptcy Court, Southern District of New York), as part of a plan to refinance its excessive debt load. Interestingly, so confident is Canwest in investors' willingness to throw their money at anything, including bankrupt companies, that is bankruptcy plan contemplates an up to $65 million new equity raise, which apparently has still not been formalized. This plan has been, brought to you by the company's legal team from Bracewell & Giuliani, headed by Evan Flaschen.

Everyone who grew up watching James Bond must have had a kick reading the news last night or this morning, and finding out about secret meetings between China, Russia, Gulf countries, France, and Brazil, plotting to organize the demise of the US dollar. Unlike in Goldfinger, the villains this time weren't planning to plant a bomb in Fort Knox, but rather stop using the greenback, and instead price currencies against a basket of currencies composed of (drums please): the yuan, the ruble, a newly created Arab currency, the euro, the yen, and gold. I don't remember reading the Brazilian real but we could throw it in there so we don't hurt anybody's feelings.

[T]he Treasury Department said that any review of [patently misleading and false] announcements last year “must be considered in light of the unprecedented circumstances in which they were made.”

"You requested that we verify in writing that the equity trades you place in your Fidelity brokerage accounts are never subject to "Flash orders." I have reviewed your request and determined that we are unable to verify this information, since flash orders involve the activity of stock exchanges to which orders are routed, not the brokerage firms which receive the orders from their clients." - Fidelity Investments

If so, that would explain the significant more lower in the stock intraday (see previous post) as well as the drift wider in CDS, which opened 100/105, rose to 103/108 and jumped to 107/112 on the rumor. (Ignore the stock's move higher over the past few minutes. That's just computers responding to the stock bouncing off of the closing VWAP).

Dow Jones reporting that a select group of CIT bondholders, led by Little Bear Investments, will hold a 4:30 pm call with the company to discuss preferential terms to the proposed exchange offer which would result in a "leaner and meaner" Club CIT. The issue: long-dated creditors are getting a rather unpleasant deal in that even while they will not beoffered to roll their debt holdings, what they will get is a "small amount of preferred shares in the restructured entity."

Still surprised the only market volume is always to the downside? Talk to the machines.

"In November 2008, Chinese banks said they would no longer play by our rules. Top tier banks (Bank of China and Industrial and Commercial Bank of China) reneged on derivatives contracts. They failed to come up with billions in collateral on dollar/yen FX trades, which were out of the money after the yen’s October appreciation. This should have been headline news in every financial newspaper, but it wasn’t." - Janet Tavakoli

• Yields 1.445% vs. Exp. 1.441%
• Bid-To-Cover 2.76 vs. Avg. 2.80 (Prev. 3.02)
• Indirect Bid-To-Cover 1.34
• Indirects 49.1% vs. Avg. 50.45% (Prev. 54.23%)
• Allotted at high 61.96%
• Direct bidders at a sturdy 11%: money market guarantee expiration? Do directs prefer Treasuries over equities?

"Meanwhile, every 20 milliseconds "HFT-Quants" are taking another "too-dumb-to-stop-trading" little investor trapped in the illusion that Fannie, Freddie and AIG will "be worth something, someday." "HFT-Quants" don't think long term. Their algorithms think in milliseconds, just enough time to skim more money from all the 'dumb money' out there." Paul Farrell, MarketWatch

The currency markets continue to allow cheap financing of the carry trade, with the dollar index now seemingly headed back for new lows. We will find consolation in that we offered a decent level of entry to attempt buying the USD, but from where we stand now it seems hard to conceive DXY will not make new lows in relatively short order. 76.21 was the 76.4% retracement which we are still hovering around keeping an ounce of hope, but I am afraid it is just that. Gold is screaming higher fueled by rumors of secrete meetings between a bunch of anti-dollar villains. I will have a lot more to say on that later.

Two formerly confidential memos from the Carter administration highlight the dangers posed by shifting from dollar to SDR denominated oil, to the US economy, and its primary driving force: the US middle class. Arguably the worst president in US history, Jimmy Carter, managed to avoid this transition. The question now is whether the current administration fails where even President Carter succeeded, and what the cost to the US economy, and world trade, ultimately will be as the dollar is sacrificed at the Wall Street altar.

Lots of speculation today about the upcoming death of the U.S. currency, middle class, and by implication, its entire economy, as gold hits all time highs. Max Keiser joins the fray: "This is just another step to the US economy collapsing, and the US, as a major power, collapsing." One thing is certain: Listen, and understand. That Chairman is out there. He can't be bargained with. He can't be reasoned with. He doesn't feel pity, or remorse, or fear. And He absolutely will not stop, ever, until the dollar is dead.

"For years investors laughed at any attempt on my part to draw comparisons between the
inflating bubble in the US and the Japanese experience. For most in the West, Japan might as
well have been on another planet, its post-bubble experience held so little relevance. They’re
not laughing so much now. Yet we hear an increasing chorus that the extreme policy response
will safeguard the West against a repeat of Japan’s lost decade. I remain skeptical." - Albert Edwards

NY Fed President, in prepared remarks to the Fordham Corporate Law Center, presents a surprisingly objective overview of the economy, and highlights the main threats to the economy, from the Fed's point of view:

1. The increasing savings rate and the number of people postponing their retirement

2. The waning of the fiscal stimulus impact

3. Ongoing bank balance sheet deterioration, due primarily to CRE holdings and cap rates increasing from 5% to 8%, as well as CRE debt rollover risk

4. Ongoing and increasing pain for small business borrowers

5. Significant excess resources