Archive - Jul 28, 2009 - Story

GE Commercial Finance, Stamford Connecticut:

On behalf of the Zero Hedge staff, I want to take a minute to apologize for our filtering your 439 packets today at our firewall.

~120 minutes of PTJ goodness. (Torrent file attached). We hear from the Zero Hedge Legal Team that we've been contacted by Agents of Mr. Paul Tudor Jones, who has asked us to remove the content we are not actually in possession of.

Certain anonymous bloggers have made odd allegations about the quality content of our recent piece The End Of The End Of The Recession (which for some odd reason has been lumped into the category of a "housing analysis"). It would behoove said blogger to realize there are numerous other components to a holistic report (and the economy) than merely housing (i.e., consumer, business, manufacturing and industry, and many, many more).

Spreads were broadly wider in the US (for the first time in over a week) as all the indices deteriorated. Indices typically underperformed single-names (but IG and HY both made wider tights and wider wides than yesterday) with skews widening in general as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.

Been a while since we looked at the Citi Arb chart (7.29x common - 1 Pfd): looks like the pummeling for the HFs who hold the arb is again reaching VOW max pain proportions, and with one billion shares traded to the upside today, the game theory among the fund managers who are still involved is about to get quite "defective" in a big hurry.

Fitch has released a comprehensive study on derivatives held by various corporations and has come out with some disturbing results: as Zero Hedge's recent disclosure of data from the Office of the Comptroller of the Currency confirmed, the bulk of the derivative risk is concentrated not merely in the "financial company" category (99.7%) but in a subset of just five companies, which account for an "overwhelming majority" of derivative assets and liabilities.

Impressive how much more informative Joe can be when he is not caught avoiding the book pitches of assorted blonde HFT "specialists" on CNBC.

Stupid robots

During our research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, we discovered multiple anomalies which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates. Taken together, these anomalies are cause for concern, and we suggest that more capable teams conduct further research into these issues, as they effect price discovery within the precious metals market, as these ETF shares are being used for settlement and possibly pricesuppression on the COMEX.

If these problems are caused by accounting errors, they are disturbing and perhaps profoundly incompetent, and we suggest both these funds should have their senior management replaced.

In our opinions, the only way for all of these anomalies to occur together as noted in this paper, is via systemic fraud or gross accounting error bordering on jaw-dropping incompetence.

The selloff across the bond curve picks up, with the 10 Year about to go red for the day, even as equities have fooled the T-800 army to bid stocks up amongst each other.

In summation, credit needs to flow or the beast will starve:

"Although my message is that you should plan for the worst and exercise caution, I want to stress that it is also critical that you continue to make loans to creditworthy borrowers. The profits that quality loans generate will serve you well as you safeguard capital. They are the core earning assets that will power bank profitability as we head out of this recession. And, of course, the credit provided by prudent, well-functioning depository institutions will play an important role in supporting the broader economic recovery that now seems to be on the horizon.

One would think that if anyone had an interest in painting an overly optimistic picture for the economy in general, and commercial real estate in particular, the Chairman of office uber-REIT Boston Properties would be it. Nope.

The relationship between the 10 Year and the 30 Year Mortgage spread and the actual level of the 30 Year Mortgage has broken down in the last week. Did the (mortgage) vigilantes pull a fast one?

And readers say Zero Hedge is pessimistic. Don't read this if you don't want to break out of your MSM-induced happiness daze. Compliments of Matterhorn Asset Management. Snippet:

All the money committed so far has only achieved two things: Firstly it has created some short term hope which together with totally illusionary sightings of green shoots have generated a small stock market correction (which we forecast in our January Newsletter) and some belief that the crisis is ending. Secondly, all the funds printed so far to save the system have gone to Wall Street but has done nothing whatsoever for the real economy. And what is the government doing about it. They are doing the only thing they know which is to print more money.

This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?

If that were the case we could all go home and write out pieces of paper or use Monopoly money to spend in the shops or repay our debts.

Sheila Bair's favorite math equation these days: 

where n = bank failures and x = tax rate