Archive - Nov 27, 2009 - Story

Mark Pittman, the Loeb Award-winning Bloomberg journalist, a personal friend, a legendary financial reporter and the first person to sue the Fed (in conjunction with Bloomberg News) and win, passed away on Wednesday. He was 52. Our thoughts are with his family.

The Federal Reserve's balance sheet hit a new all time record of $2.2 Trillion in assets, after an $11 billion spike in MBS and Agency purchases week over week.

A quick look at debts and creditors for today's most popular Bloomberg search term.

Ex-Paulson & Co. subprime trade brain Paolo Pellegrini hits it out of the ballpark with an 80.8% gross return year to date, and 176% from inception. Also, an amusing tidbit from Pellegrini's non-compete: "Please note that PSQR will not be open to investors in funds managed by Paulson & Co. Inc. until January 1, 2010."

Spreads (rather unsurprisingly) ended wider from Wednesday's close as HY broke above 700bps for the first time since Nov 7th and underperformed IG. Volumes were pretty decent for a holiday half-day and while we ended off the wides, having tracked stocks most of the day, the close was generally weak.

Is another Deutsche Bank (ex) prop group about to blow up on Dubai World? First, of course, we had Boaz Weinstein who lost so much money on the basis trade implosion last year, the DB accountants are still unsure how to quantify the P (not so much) & L, and now QVT Financial, originally also a prop trading group at DB until 2003, seems to have lost a boatload on the Dubai fiasco. The WSJ reports that QVT, headed by one Angelo Moskov, is "spearheading efforts to rally holders in bonds in Dubai World subsidiary Nakheel, including hedge funds and other money managers in New York and London... About 15 or 20 investors in bonds of Dubai World's real-estate subsidiary have come together in an effort to explore their options, after suffering huge losses."

As traditionally those most exposed within any given committee are presented the privilege to "head" such ad hoc initiatives, we are fairly certain that the QVT gentlemen have absorbed the lion's share of said "huge losses." And as the bonds have dropped from 110 to 40 in two days, and are trading below such liquidating names as Nortel, with other credits fully on the government's bailout/subsidiary payroll, this could easily be the single worst performing issue of 2009. Thus not one year seem to pass without what seemingly is yet another major Deutsche Bank legacy blow up.

Bank of America has provided an extended analysis of foreign exposure to Dubai World and Dubai sovereign. As BofAML points out "the basics of the discussion are threefold in our view: who owes how much to whom, when do they pay, and what happens if they do not? As there are no official debt data on both emirates and federal level, we used the outstanding loan and bond information on the SDC debt database and Bloomberg to estimate Dubai and UAE’s debt burden. We estimate that UAE’s total debt amounts to US$184bn as on end 2009, US$88bn of which belongs to Dubai. Abu Dhabi accounts for US$90bn and the other emirates hold the remaining US$5.6bn. Note that the debt service will be higher as our numbers only include the principal payments." The expectation is that Abu Dhabi will bail out Dubai as moral hazard becomes a sovereign issue. We don't think this is too likely: we believe the "saviour" will likely emerge from a bank that has access to the Fed's or the BOE's money printing machine either directly or indirectly as the Bernanke cartel does not care if his policy to bail any and all risk exposure remains domestic or finally has that much deserved and anticipated world tour.

Normally, discussion of the "Surveillance State" touches on Zero Hedge's core focus (finance) only tangentially. But every once in a while something significant bounces us radar returns in this sector. This definitely qualifies.

"When the crisis was in full bloom last year, there was much talk of banks “de-leveraging” their balance sheets back down to more appropriate levels. Traditionally, banks would “de-lever” by selling portions of their loan portfolios to other banks, but in 2008 there were no buyers for financial assets at any price. Over the course of the last twelve months, however, many people have assumed that the banks were steadily improving their leverage levels from those of 2008. After all – the bank stocks have all rallied dramatically since March. They must be in better shape, right? Closer inspection reveals that they’ve achieved very little in the way of de-leveraging thus far, and have merely been propped up by various forms of government liquidity injections, guarantees, out-right share purchases and support from existing shareholders." - Eric Sprott

First of I apologize for the radio silence the past week as I was traveling. For those of you in the US I hope you and your families had a very happy Thanksgiving. Now straight to the markets, the obvious question is whether black Friday this year will take a different meaning than just a shopping holiday. Obviously if you stuffed your Turkey with Dubai bonds this year you are risking a serious indigestion. A lot more on the follies of that market later. For now here are a few indicators I would look at in order to confirm this move has more legs than what we have seen so far, or whether it is to be faded. - Nic Lenoir

The chicken or the egg problem revisited, as the market stages an amazing if all too expected comeback: the last thing US consumers need at the start of the all too critical holiday shopping season is their 401(k)'s down by 2%. Yen is getting pounded as all "strong" currencies stage an impressive intraday rally: those rate hikes at the ECB are getting so priced in, Greece default be damned.

...please disperse....

NYSE invokes Rule 48, last used the day Jamie Dimon acquired Bear Stearns for pocket change. Wishes everyone good luck in case the 33 Liberty Street trading desk is unable to hold the market together.

RANsquawk 27th November Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 27th November Morning Briefing - Stocks, Bonds, FX etc. (Dubai Special)