Archive - Dec 7, 2009 - Story

In what is the start of the biggest uphill battle in D.C., arguably even bigger than deposing the printing press leprechaun, five democrats are proposing an amendment to reinstate Glass-Steagal, whose repeal, through the Larry Summers orchestrated Gramm-Leach-Bliley Act, in 1999 set the economy on the collision course that culminated with the implosion of every single Goldman Sachs FICC competitor in 2008. The five Democrats who have undertaken thesisyphean task of taking on both Wall Street and their direct boss, are Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts.

Merrill is convinced inflation is a-coming. As such, here are RateLab's proposed top trades, some of which are rather esoteric, others which make intuitive sense (of course, assuming one agrees that inflation trumps deflation: a bold assumption keeping in mind the endless consumer credit collapse). Some of the ideas: i) Sell OTM Payer Skews, ii) GNMA Reverse Mortgage Floaters, iii) Sell MBS/Buy Treasury Strips, iv) Buy CMBX 3 AAA /Sell CMBX 3 A, v) Buy FN 4.5/Sell half of FN 4 and 5 each, vi) Buy August 2025 vs USH0 Basis, and lastly some encouraging words on Agencies. As Zero Hedge is firmly convinced that the entire mortgage market is firmly gamed courtesy of endless Fed intervention which is the defacto buyer of first, middle and last resort, we urge readers to be very careful with any andall MBS/Agency trades.

With the full frontal we have been doing lately of Team Jan and Team Jim, we have ignored some of the other more prominent strategists at Goldman, which is why today we shift our focus on Chief European Strategist Peter Oppeneimer. We present his most recent comprehensive outlook report titled, not surprisingly, "From hope to growth." Don't expect anything tooearth-shattering or against the party line of the government sponsored hedge fund. You will, however at the very least, find out where some of the catchier slogans in the administration come from.

A report by Bloomberg finally recaps the flagrantly obvious insider trading in NYB stocks and options, presented first here on Zero Hedge.

Traders were sitting at their desks watching listless action on the NYSE today. What do you do if you are a restless and bored hedge fund manager with billions under management? You do like Tiger Woods does. Go find some cheap $8/hr. waitresses to chase.

Total borrowings declined by 3.5 billion to a total of $2,482.9 billion, with revolving credit declining by $6.9 billion while non-revolving increased by $3.5 billion. As non-revolving credit is directly linked to auto purchases, the seasonal spike in this segment is not surprising as consumers rushed to get financing for all those CfC subsidized Toyotas (and to a lesser extent, domestic cars). Notable is that the LTV increased to a skyhigh 93%, while the average amount financed has hit a record of $32.3k, a jump of over 6% MoM. The expected total decline was $9.4 billion, with economists likely ignoring the consumer need to finance even much cheaper auto purchases.

A new white paper out of Themis Trading analyses the impact of predatory algos comprising various HFT strategies. In Themis' view: predatory HFT generates $1.5-$3 billion in profit. Themis concludes with the following three market integrity questions:

1. Instead of belittling the impact of latency arbitrage, and representing it as a gloriously naive $0.01-$0.02, does the regulators' thinking change if that impact is as high as $3 billion a year?

2. In a quid-pro-quo worlds, are market centers merely charging HFTs a higher fee in exchange for an advance look at the NBBO? Market centers should be protecting all participants equally.

3. The most critical question: "When a market center provides an HFT the ability to out-maneuver institutional orders, is not the exchange putting institutions and their brokers in breach of their fiduciary responsibilities, especially those institutions managing pension funds governed by ERISA?"

The weakness in leaders is spreading, with the chance of fried calamari by market close creeping higher by the minute. Watch out for those fishing boats.

An overview of where money is moving most recently, from Morgan Stanley. Overall a mixed picture, with anyone who has half a brain dumping as many MBS as the Fed will buy (i.e., all of it), coupled with a mildly declining interest in Treasurys.

The traditional market leaders, financials and tech, are nowhere to be seen, as sector rotation out of high beta names continues. Look for much more weakness ahead of fins, especially with market (and "free" world) proxy Goldman now actively taking on water.

All it took was for Chairman Ben to open his mouth. The rest is "lift every offer" history.

And you called us cynical for calling the Washington Post piece a public relations plant.

One last fitting tribute to the memory of Mark Pittman

The latest lunacy out of the Institute for International Economics notes that the dollar can and should go to negative territory courtesy of another roughly $6 trillion in Quantitative Easing. Enter Joseph Gagnon, who is obviously daring to boldly go where the Fed Chairman can only dream of going, and is set on ruining whatever is left of America's (and the world's) middle class.

One thing you might expect in the midst of a bank confidence crisis (aside from a spike in mattress sales) is a spike in currency demand.