Archive - Nov 25, 2009 - Story

An expanded look at the prospects for the Hedge Fund industry. Not many surprises: the hedge fund boom is expected to resume courtesy of the bubble building that made billionaires out of some of the most pro-cyclical, unimaginative permabulls in existence. With the concept of a free-market out of the picture as a result of direct intervention by the Fed for years to come, hedge fund inflows are coming back with a vengeance (FoF's, not so much). Yet it appears that in the future, the generous fee and lock up structures that were prevalent in the last bubble, will be increasingly more difficult to replicate.

You'll find the ever widening CDS on the fast-growing Hellenic debt. Rather frightening considering that CDS are revisiting march levels (remember: markets were scared by the slump in eastern Europe economies and numerous rumours on the blast of the euro were flourishing).

Today it seems that those fears are materialising: Ukraine is in a deep syncope (borders have been closed for two months due to the H1N1 pandemic) and Greece could be deeply impacted by the unwinding of the liquidity-driven ponzi on the Hellenic market. While this piece of news could be harmless for HFT or robot traders, it is also completely put aside by fat portfolio managers happy to eat up low priced turkeys for thanksgiving (-30%!!!). The EURUSD is flirting with recent highs (like a turkey dazzled by the headlights of the euphoria-maniac rally car).

In an interview with Le Figaro, Dominique Strauss-Kahn shares his thoughts on a variety of economic subjects. Notable is his desire for central banks to begin soaking up the "water" which was used to put out the "1929-style" fire. Then again, as the Chairman has said, there is no threat that the Fed will ever end its risky assets Blue Light special, at least not under His watch (still, his December 3 confirmation hearing should be on everyone's TiVo schedule). Furthermore, this will certainly not happen so long as China keeps funding burgeoning US budget deficits, US importers be damned. And that won't happen as long as China needs the disappearing and maxed out credit consumer. Yet the various themes are starting to converge to a point in the future of maximum instability. Their resolution should be quite spectacular. Which is why by then all Goldman Sachs newly minted MD's hope to be far away, on a beach, collecting zero percent, courtesy of their gold holdings.

Trader commentary:

The widening of CDS spreads on Greek Sovereign debt has caught some attention and now Dubai CDS spreads are on the move: Commentary on Dubai from the EM guys...Dubai in focus as they do another $5b local tranche in the $20b Abu Dhabi program, then ask for extension in Nakheel maturities for 5 months. Very strange. Thought whole point of issuing the bonds was to pay for the Nakheel debt. Dubai CDS +130bps from o'night level of 318 ... seems to be hitting the European markets now.

Sequential popping of bubbles to commence shortly.

• Jobless claims drop to 466,000 as everyone moves to emergency benefits (Bloomberg)
• Consumers maxing out credit cards as spending outpaces incomes (Bloomberg)
• Durable goods orders fall (Bloomberg)
• The other side of the bubble: China banks prepare to raise capital - tens of billions needed after lending spree (FT)
• Connecticut AG Blumenthal joins Ohio in suit against rating agencies (Bloomberg)
• Farmers not benefiting from stock market move as Deere reports subpar 2010 forecast (Bloomberg)
• Vietnam devalues currency by more than 5%, after claiming repeatedly it will not devalue currency - sound familiar? (FT)

• Asian stocks rise as Australian Central Bank fuels growth hopes.
• Banks earn $2.8B in 3Q; FDIC says dangers persist -
• Consumer confidence in US unexpectedly gains, easing spending concerns.
• Dollar weakens on global optimism; Aussie gains on RBA's 'upswing' remarks.
• Fed officials say zero interest rates may be fueling undue risk in markets
• Japan property shares fall after developer Anabuki files bankruptcy with $1.58B in debt.
• Japanese exports fall by least in a year as global stimulus boosts demand.

...and... BEGIN!

Today's Morning Briefing from RAN Squawk.