Archive - 2009 - Story

"Last week I was a participant in the Wall Street Journal's Future of Finance Initiative in England. WSJ has written a summary of the conference highlights, and missed some key points. Allow me to fill in the blanks." - Janet Tavakoli

"Below we highlight President Obama’s weekly address, in which he blames the big bad banks for luring borrowers into the myriad of products during the credit bubble, a bubble that in our view was promulgated by the nation’s policymakers.

When things go awry, however, it is very easy for those in Washington to point the fingers at somebody else. What did Congress, the SEC, the Fed, and the White House think in that 2002-07 bubble period except that excess credit was creating jobs; in turn, those jobs were creating prosperity and that prosperity led to votes. Now the borrowers, who signed contracts, and as adults should also be held accountable, are being treated as “victims” by politicians and the media." - David Rosenberg

RANsquawk 14th December US Morning Briefing - Stocks, Bonds, FX etc.

The big guns in LA are out swinging, with news emerging that Jeff Gundlach will get funding and a minority investment from of bond giant and other major TCW defector, Oaktree. Howard Marks' firm is now set to eat TCW's municipal lunch. And all the disciples of Robert Day had to do was promote the guy. Also, futures in the "Battle of the Attanasios"(Paul and Mark) just surged majorly in favor of the House creator.

It is good to see who is back in charge. Obama is patiently sitting in the conference room playing Brick Breaker on his Bbery. This probably means that private jets are finally back. Also, not a good endorsement of the Acela train.

"Executives from Goldman Sachs Group Inc. (GS), Morgan Stanley (MS) and Citigroup Inc. (C) are delayed as they try to make it to a meeting Monday with President Barack Obama at the White House, Fox Business Network reports. Flights for Goldman Chief Executive Lloyd Blankfein, Morgan Stanley CEI John Mack and Citigroup Chairman Richard Parsons are being delayed by fog."

David Paterson speaks on CNBC. Not good news for New York inhabitants, or NY CDS shorts. Or not... NY State CDS hit an all time wide of 357 bps in December. They are now around 140. Any escalation of NY's fiscal crisis may simply imply more and more taxpayer bailouts. Swaption time.

We start the outlook for the week outlining Gold and EURUSD. Gold exhibits a lot of divergence on the hourly chart and has seen almost down to the dollar the Elliott extension for the 5th leg of the bearish impulse from the highs at 1,113.2. We expect a retracement towards 1,165/1,170 which corresponds to the 50% retracement from the highs and a move back to the wave 4 of lower order. If that zone holds on the upside we expect the market will then dip to 1,070 which is the next key support on the downside. Similarly, EURUSD shows divergence on the hourly and 3-hour charts. In terms of sub-structure we cannot exclude a final push to 1.4565, but overall we think the market should bounce this week to retest the 50-day moving average resistance at 1.4880. The slope of the 50-dma is in the process of flattening, and the daily MACD is now negative. This could indicate a much deeper correction is in the works on the bigger picture. This remains our view. We would recommend selling a bounce in the 1.4880 area if we do get there.

As more and more of the broad public figures out what this thing called sovereign CDS is, the next logical question (especially for algos and correlation desks) is whether or not sovereign leveraged levels can be gamed, or is there any specific correlation that can be arbed as the dominos start to fall (not everyone has the luxury of printing limitless amount of the world's reserve currency). Below we present a chart correlating the CDS with the Debt to GDP ratios of various indicative countries. The chart excludes the outliers of Argentina, Venezuela and the Ukraine, which even though having less than 100% Debt-to-GDP are all trading 1000 bps and wider.

Is there a correlation here? You decide. The R2 is 0.5143, which probably means that algos will gradually start to flatline the correlation as more and more sovereign CDS-trading players emerge.

Today at 7pm, Greek Prime Minister George Papandreou will address “the economy, the productive model, the credibility of the state mechanism, the confidence of our European partners and, above all, the daily life and prospects of Greeks." The reason for this extraordinary measure (keep in mind this is Greece, not D.C., where the president provides hourly updates on the latest BLS releases) is the recent plunge in Greek stocks and government bonds, and culminating with several rating agencies either downgrading the country (Fitch) or putting it on downgrade review (S&P). Most recently, the yield on Greek 10 years hit 5.295% on concerns the country's fiscal deficit of 12.7% will makes its already extreme leverage even more unmanageable. And the biggest wildcard: the massive reliance of Greek banks on ECB repos backed by potentially soon to be much lass valuable government debt.

• The bank with the worst balance sheet remembers it is bonus time, systemic risk be screwed, pays back TARP (Bloomberg)
• Matt Taibbi takes on... Steve Liesman in a blast from the past (The Nation)
• And all is good again: Nakheel bonds double from 51 to 109.5 (Bloomberg)
• Exxon to buy XTO energy for $31 billion in stock, not a single dollar in cash (Bloomberg)
• Goldman fueled AIG gamles (WSJ)
• Tullett Prebon will help brokers move out of U.K. (Bloomberg)

RANsquawk 14th December Morning Briefing - Stocks, Bonds, FX etc. (Dubai Bailout Special)

• Asian markets rebounded Monday after Dubai received $10B in financing from Abu Dhabi.
• China launches landmark natural gas pipeline tapping into Central Asia's vast reserves.
• Dubai gets $10B in financing from Abu Dhabi, part to be used to pay down Dubai World debt.
• Euro gains after Dubai gets $10 billion of aid from Abu Dhabi.
• France's Sarkozy to unveil details of euro35B plan to spur investment in universities.
• Germany's budget sees a record of $125B in new borrowing next year, spending rise of 10.5%.

RANsquawk 14th December Morning Briefing - Stocks, Bonds, FX etc.

The government of Abu Dhabi and the Central Bank of the United Arab Emirates agreed to provide $10 billion to the Dubai Financial Support Fund, allowing Dubai World to repay $4.1 billion of Islamic sukuk bonds that are due today, the government of Dubai said in an e-mailed statement. Statement from Dubai Supreme Fiscal Committee attached.

Lately there has been much back and forth over the definitions of (un)employment, of improving (deteriorating) trends therein, and of just what is going on with the labor pool in the U.S. Due to the lack of a definitive data series that tracks comprehensive unemployment over time, the possibility for loose interpretation exists and is (ab)used by many. In order to hopefully mitigate a lot of the debate on the margin, here is probably one of the more comprehensive charts available, which tracks Initial Claims, Continuing Claims and Emergency Unemployment Compensation (the last being somewhat notorious lately, and a datapoint that has to be considered due to the skyrocketing exhaustion rate) since 1967. The result does not need much commentary.