Archive - Mar 2009 - Story

• Must read: The silent coup d'etat by the finance industry (Simon Johnson, former IMF, The Altantic)
• So now he loves them?
  

• Alles ist gut in China, except for those pesky missing profits (Bloomberg)
• ...While its central bank governor says Chinese recession recovery greatest thing since slided bread (Bloomberg)
• Top Swiss banks execs banned
  

Another perfectly normal day in the market, marked by the totally logical run up in stocks, bonds, commodities... and the USD. Why is the USD stronger? Some of the commentary suggests this is due to risk aversion trades – but US equities are higher, oil is higher and many point to this week’s economic data as suggestive of economic stability. So in the search of more satisfying explanations:

In a move to avert the next crisis, Geithner & Co. are seizing the political initiative and populist momentum to call for "New Rules of the Game"; i.e. more regulation. Looking past the rhetoric, it's interesting to assess each leg of the proposal independently.

When I wrote about the implications of Geithner's upcoming stress test, I observed that the institutions that have the lowest metrics in the "tangible common plus reserves plus pre-provision earnings less cumulative losses as a percentage of assets" ratio are the companies most at risk for test failure and nationalization of conservatorship.

Or so reports the WSJ. The attorney general has proven to be quite successful at getting whatever information he wants (especially with public lynching as a negotiating tool), so the entire credit community is drooling in anticipation to find out just how scary the real picture at AIG FP's global operations truly is (ZH is quite curious what the DV01 on AIG's entire portfolio is).

As we have noted before in part 1 of the carry trade series, the carry trade is essentially a negatively skewed asset class as carry traders smooth out the typical fluctuations until liquidity concerns and/or risk appetite decreases and everyone heads for the door at the same time. Below, we have the AUD/JPY spot since 2005:

In a stark demonstration of how U.S. banks can potentially circumvent the FDIC's TLGP program and the agency's hopes of raising DIF reserves by charging new and higher fees, JP Morgan today successfully raised 2 billion euros in 5 year unsecured paper. The bonds priced at 375 over LIBOR. This was only the first debt issue for a U.S. bank outside of the TLGP program since the Lehman default in September, and a third for financial issuers, with the only other two examples being GS' 10 year bond pricing January 29 and a 30 year GECC bond pricing January 6, both due to term-paper demand.

According to data from TrimTabs, the first half of March (March 2- March 13) saw $15.78 billion in new short positions opened in the Russell 3000, resulting in aggregate short interest of 14.28 billion shares or a total of $227 billion in short positions (2.92% of Russell 3000 market cap) at March 13, from 12.84 billion shares or $203 billion on February 27. This has been the largest increase in short interest since June 2008.

According to data from TrimTabs, the first half of March (March 2- March 13) saw $15.78 billion in new short positions opened in the Russell 3000, resulting in aggregate short interest of 14.28 billion shares or a total of $227 billion in short positions (2.92% of Russell 3000 market cap) at March 13, from 12.84 billion shares or $203 billion on February 27. This has been the largest increase in short interest since June 2008.

Another schizophrenic and momentum driven day. Heading into the close, equities were off 1-1.5% with tech and energy leading, with an odd surge in financials in the last 20 minutes of trading lifting the DJIA by 200 points. Oil was off over a dollar but easily holding over the $50 bbl line. Gold tracking higher up $12 to $936.

As Zero Hedge has already discussed, last month's housing numbers are hardly something to cheer about. Nouriel & Co. are cautiously optimistic - not outright calling a bottom but definitely seeing a glimmer of hope.

You know the US is screwed when China is lecturing us on capitalism.