Archive - 2009 - Story

Prepared By: "Brunswick Group, LLP" for your afternoon reading pleasure.

Don't say the market is unkind to Goldman. First the firm's employees are about to rake in all time record bonuses. Then, courtesy of of a rocking bear market rally, top-tick Goldman is about to get the hell out of dodge in another GS Capital Partners LBO, Adesa, basically a vehicle auction firm, which the firm bought in conjunction with Kelso in 2006. And who gets to pocket the underwriting fee? Why, Goldman. No way is the squid going to let any capital leave the firm. As for the company: prepare to own a 10x EV/EBITDA Craigslist knock off which will spew $100 million in free cash flow on a good year (and with consumers waiting for Cash for Clunkers 2 thru 100, don't expect a whole lot of car auction activity any time soon).

Apparently someone in the world cares about Dick Bove's prophetic effluvium. Either that, or the worst contraindicator in the stock market (buy Lehman, 'nuf said) believes that nowadays, (following in the footsteps of other financial pundits), it is much better to be famous for being famous, than for being right, or in Dick Bove's case, wrong. Either way, for those who actually seem to derive stock trading advice out of intellectual titans like Bove et al, your lives are above to get much more difficult, as Bove is about to go RIAA on your ass. Whatever happened to Bove's threat that he would be providing instanalysis much less (and many hoped, not at all) after his disastrous read of Wells results earlier got him in hot water following a CNBC appearance. For an even playing field, it only makes sense that Dick Bove no longer publishes or "analyzes" anything anymore, period.

It doesn't take much to panic markets when it comes to Iran. Case in point: Just about 45 minutes ago.

With the recent development of stocks no longer following every tick of the DXY, it appears the algos have been now reprogrammed to speculate much more aggressively in gold. As Zero Hedge first speculated over a month ago, the Fed's excess liquidity is no longer making its way into the broken stock market, and instead is reorienting toward smaller speculative markets such as gold. As the chart attached demonstrates, the inverse correlation from any dollar weakness is magnified in gold, while stocks continue drifting aimlessly. Then again this is merely an intraday snapshot. Look for the algos to be tweaked promptly as traditional correlations seek to get reestablished.

A follow-on interview by Dylan Ratigan of Senator Sanders confirms what everyone knows, that Bernanke is "part of the problem. The middle class in America is collapsing. We've seen incredible greed and recklessness and illegal behavior on Wall Street. This guy was running the ship and he didn't see it, and he allowed it to happen. Bernanke served in the Bush administration as Chairman of his economic advisors in 2005. The people last year voted for change and it makes no sense to me that President Obama is reappointing somebody who was appointed by Bush, who is a conservative republican, who missed the boat on the most significant economic crisis since the Great Depression. We need a whole new direction in the Fed and in our economic policies. A direction that stands up for change not for the rich, not for the top 1%, not for the giant financial institutions, but for the working class and the middle class of this country, and nobody, but nobody thinks that Ben Bernanke is that person."

Fred Joseph, former Drexel head, avid bowhunter and (not least) personal friend and colleague to some of us at Zero Hedge, has died at 72.

With Citigroup's latest Chief Economist addition in the face of one Willem Buiter who earlier ironically had said that "Citigroup [was] a conglomeration of worst-practice from across the financial spectrum" now facing much more pro-cyclical scrutiny, it is not surprising that earlier he promptly picked up the party line and stated in a Bloomberg TV interview that Dubai is "not systemically significant." The jury is still out on what the full fallout of the massive CRE collapse in the middle east, which is basically what Dubai was a levered play on, will cost the developed world. Nonetheless, one does get flashbacks to many other short-sighted pundits (some long since gone from the public arena, others who are about to be renominated for Fed Chairman positions) who claimed that subprime was also comparably contained. Time and a few hundred billions in additiona bailouts will determine if Citi's new macro brain is proven right.

The chart below, courtesy of CreditTrader, demonstrates that the sovereign credit spread between BRICs and PIIGS (Portugal, Italy, Ireland, Greece and Spain: the Eurozone's weakest legacy links) continues converging. The market is now fully expecting the next risk flaring event to occur deep within the bowels of Europe. And with the ECB's head stuck firmly up its rear end, and in fact threatening it is preparing to raise rates, the Stardust has started a line on the number of months before the break up of the European Union experiment becomes a fact.

After the first repo test was a complete failure, the FRBNY has decided to try one more time. However, unlike the large test conducted before, this time the Liberty 33 "plan to conduct a series of small-scale, real-value transactions with primary dealers." Anything coming from the New York Fed that has the "real value" stigmata attached to it makes one wonder if April 1 came late this year. We can not wait to report on the near-certain failure that this particular round of repo tests will once again be proven to be, as banks simple can not wait to onboard the toxic filth they so graciously have handed to US taxpayers over the past six months.

"Bad loans = big losses" Golaman's most recent quantification of bank losses begins objectively enough, yet promptly devolves into yet another cheer fest for the financial system. GS promptly rehashes its estimate of "only" $2.1-2.6 trillion in bank losses, slighty adjusting the composition of loans it believes will go bad, while completely ignoring the onboarding of off-balance sheet liabilities (FAS 166-167) as well as any and all potential losses in the derivative realm, where Goldman itself is on the hook for tens of trillions in gross notional. The only thing missing from this fluff piece is a Conviction Buy rating on Goldman itself (but the Conviction Buy on toxic credit card and real estate debt laden BAC, JPM and COF is certainly present).

RANsquawk 30th November US Morning Briefing - Stocks, Bonds, FX etc.

Looking at the mudslinging campaign going among economic strategists, one would think the presidential elections are early (and for once we may just elect someone who understands something...anything... about the economy). First we had Rogers and Roubini, and now it appears that the Bull-Bear combo of Saut-Rosenberg is next to take center stage.

Always searching for a positive inflection point to upgrade the living daylights out of, Goldman now sees major upside in steel stocks, with X making the Conviction Buy (aka GS Prop Desk Conviction Sell) list.

• Dubai World's debt not guaranteed by government (Bloomberg)
• Taxing Wall Street today wins support for Keynes idea of 1936 (Bloomberg)
• How many FSB chimps does it take to make a Systemic Risk candidates list: where the hell is Citi? (FT)
• Ferguson: An empire at risk (Newsweek)
• How Fannie and Freddie sank in the subprime quicksand (IBD)
• Bernanke starts Fed debate early (WSJ)