Archive - Jan 29, 2010 - Story

The funnest news of the day comes from LoanConnector, that follows up on the story of a previously scheduled $126 MM cash loan OWIC due today at 3pm, which was supposed to take place today. The reason for the cancellation: the trader running the auction is out sick. Of course, the dramatic market reversal has nothing to do with it.

"The GDP number today represented not just a rare but an unprecedented event, and as such, we are willing to treat the report with an entire saltshaker — a few grains won’t do." David Rosenberg

Asset correlations are high, which is never a good sign for a market as psychotic as this one. Stock weakness translating into UST and dollarstrength almost tick for tick. Curiously, the 7 yr that saw such a vigorous reception yesterday is being sold off the heaviest on a duration adjusted basis. The Yen is surging with the traditional carry pairs dropping. Cable about to break 1.60, and the euro is now below 1.39: dollar just pushed back to highest levels since July.

The man on a book mission, who just incidentally destroyed America with his failed "bazooka threat" containment policy, is out with some new truly brilliant revelations, like for example that the consequences of Lehman's collapse were exacerbated due to the unanticipated actions of PriceWaterhouse Coopers, Lehman's receiver in the U.K., whose freezing of accounts is considered by Hank as the precipitating factor that nearly destroyed the money market system. Hank tops it off by saying that Lehman's $50 billion in impaired CRE loans posed a more substantial threat to the Federal Reserve than the $300+ billion in currently delinquent mortgages on the GSEs' books, which explains why he bailed out one and not the other.

Following the crowd, and going long the Brazilian Real while shorting the Yen has had some disastrous results for carry traders: starting off 2010 with a 9.2% loss is never a good thing to show your boss.

If anyone is confused why the market surged like a stung dog at 9:42 Eastern, don't be: that is the moment when the January Chicago PMI number, which came out at 61.5 (vs expectations of 57.2) compared to 58.7 in December (which of course was downward revised from 60), became available to paying subs. The mere, non-paying morts saw the number for the first at 9:45, when the bulk of the move higher was already completed. And just in case you think we forgot, here is a loving glance at the IOIA shennanigans happening behind the scenes. Guess who is the primary actor at precisely 9:42. Ah, the good ole' microgunning technique - gets 'em every time.

To: Lloyd Blankfein

Re: Winning the Public Relations War

Six months ago, with what I mistakenly took to be your tacit approval, I attempted to address ordinary Americans, almost as equals.

They envied and resented our firm; I sought merely to correct their misunderstandings about Goldman Sachs and send them on their way, so that they might more briskly resume their quest for gainful employment.

In hindsight, I misjudged their ability to see the reality of their situation, and of ours. At the time I accepted your strong suggestion that I never again try to speak directly to mortals -- or, as you referred to them, “The Morts.”

This is how the cold war will look like in the post-Lehman era (when all the debt risk is held on the public balance sheet): one country urging another to sell a third's bonds. According to Hank Paulson's soon to be released memoir, Russia had urged China to sell its GSE holdings in August 2008 "in a bid to force a bailout of the largest U.S. mortgage-finance companies." China refused... That time. Of course, what has transpired since is that China, through the Fed custodial account, has rotated a vast majority of its GSE holdings into Treasuries, in essence doing just what Pimco's Bill Gross has been doing since the beginning of 2009: offloading hundreds of billions of Fannie and Freddie bonds straight to the Federal Reserve. Alas, the Fed is 93% done with MBS QE... What happens when residual selling of bonds finally hits the public market, and the bottom falls out?

• Goldman not only monopolizes FICC, now has best (read fastest) equity desk; And this is why prop can never be seperated from flow at Goldman (Bloomberg)
• Conflicting Greek stories: EU has no Greek "plan B", Finance Chief pledges cuts (Bloomberg), EU reluctantly plans Greece bail out (FT)
• Funds flee Greece as Germany warns warns "fatal" eurozone crisis (Telegraph)
• Geithner's AIG bailout (The Nation)
• Fed chief on shaky footing after confirmation fight; Tough calls ahead on rates (WSJ)
• Stiglitz: Obama's banking proposals are a good first step (LA Times)

RANsquawk 29th January US Morning Briefing - Stocks, Bonds, FX etc.

The increase in real GDP in the fourth quarter primarily reflected positive contributions from
private inventory investment, exports, and personal consumption expenditures (PCE). Imports, which
are a subtraction in the calculation of GDP, increased...
The acceleration in real GDP in the fourth quarter primarily reflected an acceleration in private
inventory investment, a deceleration in imports, and an upturn in nonresidential fixed investment that
were partly offset by decelerations in federal government spending and in PCE...
Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
6.4 percent, or $221.3 billion, in the fourth quarter to a level of $14,463.4 billion. In the third quarter,
current-dollar GDP increased 2.6 percent, or $90.9 billion.

• Asian stock markets were trading sharply lower Friday after Wall Street's losses.
• Bernanke confirmed by Senate for second term as Fed Chairman in 70-30 vote.
• China's economic planning agency sees crude oil at average $80 a barrel this year.
• Euro trades at almost 9-mt low versus Yen on Greece's budget turmoil.
• European January inflation accelerates to fastest in 11 months
• India raises bank reserve rate by 75 bps, more than expected; Keeps key interest rates.
• Japan Consumer Prices fall 1.3% in December - the 10th monthly decline.

RANsquawk 29th January Morning Briefing - Stocks, Bonds, FX etc.

We mean, if you simply had to pick....