Archive - Sep 2009 - Story

After spending much time in the Middle East I have come to appreciate the politics of the region as well as its geography. I am taking some analysis done by Project Mayhem a bit further to offer my interpretation of the events to come as I believe we have only scratched the surface of what I believe is coming. I would also like to include ZH’s ship report as further evidence that my analysis may not be too far off.

Trying to sell this market has been a recipe for disaster, but one of my favorite indicators does not believe the creep up in stocks. Here comes the VIX again.

On September 25, 2007, the President's Working Group on Financial Markets, better known as the Plunge Protection Team, announced the formation of two private sector committees, one comprising of Asset Managers and the other, of Investors. It is the first one that is more interesting, as the committee is chaired by one Eric Mindich, best known for his Goldman Sachs wunderkind status, who at 27, was the youngest Goldmanite ever to be promoted to partner. In 2004, Eric split off from Goldman, nonetheless maintaining a favorable relationship with the mothership through its "Fund of Funds" division (we jest), and its various Prime Brokerage client platforms, by starting Eton Park, which with its starting capital of $3 billion, is still likely a record of highest AUM at a fund's inception.

According to the BBC, the issue of the Tobin Tax, which as we reported previously, had garnered some vocal proponents recently, but was never expected to be anything than mere discussion points, has gotten a firm G-20 supporter in the face of French president Nicolas Sasrkozy. And while the opposition of the US is a certainty, the recent overtures by FSA Chairman Adair Turner in which he announced he would consider a Tobin tax implementation, means the US could be all alone in its disapproval of this form of taxation.

The Fed now has $15 billion in purchasing power left under the Treasury component of QE. Of the $1,250 billion in MBS projected to be bought by the end of the year, the Fed was already purchased $840 billion, leaving $410 billion in budgeted purchases over the next three and a half months: about $125 billion per month.

Troubled rating agency Moody's, in its most recent Resi Landscape publication, has provided some very brutal projections for the housing market turnaround, which, if true, will promptly make any V-shaped recovery conversation moot. And for all homeowners who are holding on to underwater mortgages hoping for a quick bubble #2 inspired turnaround, you may want to reevaluate: quote Moody's "It will take more than a decade to completely recover from the 40% peak-to-trough decline in national home prices."

Looks like Flash Orders are getting the ax.  We're looking forward to the sound of the blood splatter, in fact.  And the sound of Radio Zero.  So, after some mic checks, and general audio antics starting... oh... now, we'll go live around 10:00 ET.  Then... with a little luck... our special audio guest (who must remain nameless because his label- like most labels- frowns on the use of his name for performances they did not arrange and therefore are not getting a cut of) will join us after-hours. And I mean REAL after-hours.

Pick up our West Coast Mirror (with 1000 slots) here: http://216.218.252.88:8000/listen.pls thanks to the mind-blowing generosity of EGI Hosting.

Chat up the DJ (send your .mp3 files) here: radiozh.

Or... #radiozh on EFNet (for the real chat nerds).

Don't forget, Irene is merely the messenger... for very conflicted market participants who want nothing more than to perpetuate the current system. Yet her book is, presumably, her own product, in which, if one were to actually read it, one would likely find some discussion of Flash. Keep in mind this particular messenger was never heard or seen before Flash became the hot topic de jour. One wonders why this specialist on fair "computerized daytrading" never pointed out her misgivings about Flash before her suddenly numerous TV appearances. Do remember: keep your messengers closer.

The IMF's unprecedented sale of one eighth of its total gold holdings is sure to incite a moderate revolution among gold fans.

"One thing people completely missed is that last year's USD sharp rally was as much a function of flight to quality, as it was a function of the lack of liquidity. Everybody was short, many businesses or traders borrowed USD to fund their various activities, and when things froze the USD strength was exacerbated by those people scrambling to buy USD to cover their funding. If you need proof just wonder why the Fed established $600Bn worth of currency swaps with other central banks... Specifically to avoid all the USD shorts to go completely bust."

The stuff just got serious folks. "The FBI involvement opens up the possibility of criminal charges, although the scope and possible outcome of the probe remain unclear."

And this occurs even after he so correctly called the end of the recession... Life is so unfair. Yet it must go on. Our candidate for the new 8 pm spot: Amanda Drury, doing an overdub of the Porn Special. Over and over.

Frequent Zero Hedge readers are aware of our fascination by the ethically pure and intellectually honest legacy rating agencies (read S&P and Moody's), whose primary goal in life is to provide readers of its reports with unconflicted, unbiased research, without regard for the top and bottom line of key Wall Street firms, which purely by accident happen to be the biggest sources of revenue to these same NRSRO via structured products which are spun off from the banks' balance sheets and sold to highly sophisticated, erutide yet unfortunately bankrupt island nations (which luckily have a monopoly on geysers and 6 foot tall women to feed their GDP). The complete transparency that shrouds the work of these rating agencies, and the integrity of its professionals is beyond reproach, and where, contrary to litigation disclosure, the phrase "let's hope we are all wealthy and retired by the time this house of cards falters", was massively taken out of context and was simply referring to an intern's attempt at recreating the Sistine Chapel using nothing but 10 decks of Bicycle cards.

It is good that the long discussed on Zero Hedge topic of prop versus flow trading at Goldman is finally starting to gain some attention. Today, it comes courtesy of former CEA Chair and Nobel prize winner Joseph Stiglitz: "The main problem that Goldman raises is a question of size: 'too big to fail.' In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information. That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk... If you're going to trade on behalf of others, if you're going to be a commercial bank, you can't engage in certain kinds of risk-taking behavior."

"As the risk of catastrophic failure of the financial system has receded, the need for some of the emergency programs put in place during the most acute phase of the crisis has receded as well. The Guarantee Program for Money Market Funds served its purpose of adding stability to the money market mutual fund industry during market disruptions last fall and ultimately delivered a healthy return to taxpayers."