Archive - Nov 11, 2009 - Story

In my capacity as a casual comment viewer on Zero Hedge I have found myself of late issuing an unduly expansive number of warnings for bad behavior in print.  One hates to use the heavy hand of moderation on a site dedicated to transparency and throwing sunlight on the cipher-laden world of finance, but I need to make something absolutely clear:

Anyone directly advocating violence against any individual, group of individuals, institution or organization is going to feel the sting of the lash from here on out.

This kind of psychotic noise gives us a bad name (kill the messenger, you know), tends to attract the attention of authorities, particularly in the United States (which is already predisposed to wonder after our subversive criticism of The One and the National Security™ risk we present to Bailout Nation) and more importantly, is antithetical to the goals and purposes of Zero Hedge.

To be even more specific:

Zero Hedge and the legal team here will vigorously oppose thorough all the legal means at our disposal any attempt to obtain, coerce or outright steal data from our offshore servers.  This probably won't take much effort since we keep very sparse logs in the first place.  However, it is not impossible to imagine that we would entertain a very narrow exception if asked to cooperate with authorities.  To wit:

The credible threat of future violence.

There is no moral position we are willing to entertain that would permit us to stand idly by and ignore cases like these.

Let me provide some examples so there will be no misunderstanding:

• "Let's throw [all the bankers/banker x/that loser currently on trial] in jail."  [Stupid on a truly Henry VIesque level, even forgetting for the moment that you probably only know as much about any particular case as you have read that afternoon in the New York Post - but borderline - seems to suggest due process (of a sort) at least]
• "Let's kill all the bankers."  [Stupid on a truly Henry VIesque level, and also infringing - violence]
• "The next time you meet a Goldman employee, crack a fucking bottle over their skull."  [Beyond stupid.  Intensely infringing]
• "I'm going to slit [hedge fund manager's throat] when I next see her at L'escale in Greenwich."  [So mercifully free of the ravages of intelligence so as to be mistaken for a mineral.  Infringing to the level that causes serious and animated debate among the Senior Staff at Zero Hedge over the wisdom of proactively reporting this potential conduct to the authorities]

Hey.  How about you do yourself and all of us a favor?  Just because it's borderline and we appear to be tolerant, don't just defecate all over the whole of due process jurisprudence (due process IS in the Constitution of the United States, you know.  You don't hate the Constitution.  Do you, my outraged patriot friend?) as well as immediately brand yourself as a reactionary, populist tool who differs with Barney Frank only in the degree to which you tolerate violence by calling for hanging some random douchebag banker.

Following up on our earlier disclosure about potential insider trading in 3Com stock, we have uncovered something interesting. Did Goldman (in)advertently tip off clients that 3Com was potentially in strategic negotiations? 3Com was previously supposed to present at Goldman's Data Center Techtonics Conference today at the Sheraton Hotel in New York (Agenda below). In a limited distribution note, Goldman yesterday advised selected clients that 3Com had withdrawn at the last minute from the Conference. As those in the industry are well aware, any last minute switches of this kind are indicative of imminent good or bad news dissemination, and more often than not are associated with some strategic announcement.

If we added up all the gold ever mined on the planet, its total value would equal no more than $5 trillion at today’s prices. Yet, look at how this compares to the debt and bailouts and other monetary mischief of current governments. The U.S. government has thrown over twice as much at the economy in the past 12 months. The U.S. debt is more than double this amount so far this year. Total global government bailouts are almost four times larger (and this is a conservative figure; one estimate puts it at $24 trillion). I intended to include annual gold production as one of the comparisons, but the chart isn’t big enough and neither is your monitor: 2008’s global gold production equaled about $73 billion, and to make that figure discernable on the chart would require the Global Bailouts bar to hit the ceiling above your head. That’s how small the gold market is.

With a half-day in credit yesterday, and the usual meltup in equities on no volume (free money, straight from the Fed, come get your free money: just buy a stock, any stock: since you can't get money anywhere else, buy, buy, buy into the stock bubble), yesterday CDS painted a gloomier picture. As the image below demonstrates, wideners outpaced tighteners. Asonly a few increasingly more powerless computers trade equities these days, we, as usually , warn readers to keep track of developments in the credit arena, and we are hopeful that the regulators will consider our proposition to gradually allow retail trading in CDS products (after the minimum notional is reduced substantially).

3Com's acquisition by Hewlett Packard for $7.90/share after the close today came as a surprise to many, but not all. Because someone bought 3 times the open interest in November $5 calls and 15 times the open interest of the December calls. In summary: 3,961 Nov $5 calls were purchased today (964 open interest) for $0.65, as were 3,269 December $5 Calls (210 open interest) for $0.85. The profit, assuming the insider action was by one entity, is about $870,000 on the Novembers and $650,000 on the December strikes, for a not too shabby illegal daily P&L of $1.5 million. This is so blatant it is sufficiently stupid that even the SEC will presumably catch the perpetrator. Here's to hoping the trader ends up being Galleon's Raj Raj buying options from his E-Trade account while on bail. Of course, we fully expect any prosecution case against the perpetrator to fall apart at the seams courtesy of a completely inept legal team at the SEC and the Justice Department.

There is nothing the administration hates more than the anti-propaganda truth, especially the kind that discloses the pathetic situation of the economy. Which is why Larry Summers must be positively loathing the most recent report from the Pew Center On The States, entitled "Beyond California: States in Fiscal Peril", which, as the observant among you may surmise, discusses states in fiscal peril. In short, that would be all of them. A snippet: "California’s problems are in a league of their own. But the same pressures that drove it toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the entire country."

With the NY Composite and SPY hitting a "double top", the slide rule technicians operating the robots immediately sold stocks after the opening spike to "lock in profits". Now we have to use some forensics to see if another bear market is going to resume, or if this thing is going to keep going. Unfortunately for the bears, some favorite instruments of speculation were being dryhumped with a vengeance, showing no signs of weakness or distribution.

Let us bow our cephalopods:

Our Chairman,

Who Art At Goldman,

Blankfein Be Thy Name.

The Rally's Come. God's Work Be Done

On Earth As There's No Fear Of Correction.

Here we are approaching 2010 and we have not yet punished the thieves who caused the Greatest Heist in History. It’s one thing for justice to allude Osama bin Laden as he scurries through miles of mountainous terrain. It’s another when the assholes who screwed us are sitting in luxury high-rises going about their daily business in plain view.

In the latest attempt to prove that nobody ever learns anything from history, the Bank Of England is practically betting the Devonshire farm that by putting the UK's economy on nitrous, it will recapture all the lost output during the recession, and that it will be able to time the stimulus exit perfectly, thus avoiding hyperinflation, or so thinks Citigroup economist Michael Saunders. We are fairly confident that the Weimar Republic also did not have hyperinflation as a policy end goal. Saunders was quoted by Bloomberg, that “Policy has been set to produce a boom to close the output
gap in the next few years.”

CBS reports that the Justice department has submitted a subpoena request to Indymedia.us demanding the site turn over all reader visit details on June 25, 2008. Furthermore, the Justice Department had demanded that the site do so without even disclosing the existence of the subpoena. Without even bringing up the question of just how far into the "1984" rabbit hole our society has gone based on this development, this situation raises numerous questions about the anonymity of not onlyInternet browsing (at least that based in the US), but the transacting in visitor records behind the scenes. If this one case has made it to the public, one wonders how many other comparable gag order-cum-subpoeans the Justice Department has sent out to other websites?

With content about to become valuable once again, courtesy of Murdoch's initiative to make relevant information scarce (and Google inaccessible), M&A fever is gradually picking up in the media space. The latest development comes from The Wrap which reports that Hollywood Reporter and several other Nielsen Company publications are set to be sold to privately held News Communications (note: not Corp). Other publications on the block include Billboard, Backstage, Adweek, Brandweek, Mediaweek and Editor & Publisher. What is odd is that the entire package, which focuses on the B-to-B crowd, has seen a dramatic drop off in revenue and net income, courtesy of what once was branded a recession, and now is merely yet another Fed inflated omni-asset bubble. As such it is very unlikely that the Nielsen PE sponsors, which acquired the firm in 2006, will make much if any profit on the divestiture.

As we pointed out recently, excess reserves at banking institutions have hit yet another all time record over $1 trillion, courtesy not just of the Fed's burgeoning reliquification efforts via direct asset purchases, but also due to its strategy to wind down the SFP program, and keep the Federal debt level under the legal cap, thereby providing even more liquidity to banks, to the tune of$185 billion. Yet if you thought that this inability to pass liquidity over into the broader currency pool was something to be concerned about (you know, that whole lending to consumers thing), you were wrong. Or so claims Goldman Sachs in this extended expose on why central planning is in fact good for Communist America. Also, for anyone who still doesn't understand how modern Fed-subsidized cash hoarding works, this primer should explain it all.

The CRE crisis will hit a pinnacle when $500-700 billion of re-equitization becomes needed in a few years. Where that equity will come from is unknown as the US will need a lot of foreign investors to achieve this equity bubble reflation, and they are not there due to a foreigner-unfriendly investment regime.

And another one for the idiot anals of the Obama administration. After taking over the biggest nationalization in history (with the exception of the GSE's but those are a special case), and being paid to run a zombie bankrupt company instead of saving everyone a few dollars and packing it in, Robert Benmosche, who became CEO of AIG a mere three months ago, has threatened to quit in protest to stern governmental compensation oversight. At least Benmosche made some very powerful enemies during his short time in the hot seat, including the NY AG. Perhaps Ken Lewis will consider the corner office position once Mr. Benmosche returns to his palatial Croatian estate. Unless, of course, the lawsuit against the former BofA CEO does not go quite as well as expected. Ironically, running AIG out of jail cell would be the crowning achievement of what the current version of capitalism is all about.