Archive - Oct 8, 2010 - Story

Guest Post: Wonder Auto’s Wonderless Acquisition

The research firm OLP Global came out with an excellent research report on Wonder Auto Technology, Inc. (WATG) last week, which I’ve attached here. The report examines a $15 million acquisition that the company made in July 2010, and raises serious questions about whether the acquisition was legitimate.

Guest Post: Is A Currency War Coming?

For different reasons, the Federal Reserve and the Bank of Japan are trying to weaken their respective currencies. China is allowing its currency, the yuan, to strengthen, but not quickly enough for the U.S. This amounts to a two-fer for central banks in that they can accomplish two seemingly diverse tasks. It reminds me of an old spoof television commercial showing a couple fighting over whether a product was a floor wax or a dessert topping–”It’s a stimulus program. No, it’s currency manipulation. No kids, it’s both.”

Soc Gen On The Art Of Hedging (Tail) Risk

This week, Soc Gen's Stephen Antzak delivered the definitive presentation to a sell out (no pun intended) crowd of bankers and hedge funders, on how to hedge [idiosyncratic|market|correlation|macro] but most importantly, fat tail risk: the biggest bogey man in day and age when commodities open limit up, and when any day the ES can open limit down. What are the cheapest hedging strategies? What are the best pair trades? How should one be positioned in this environment of unprecedented correlation? All these and many more questions are answered by Antzak in this all encompassing presentation which we are happy to bring exclusively to our readers.

850,000 Or 530,000: What Is The Real Number Of Jobs Created In 2010?

Now that the impact of census hirings is presumably over, one would think it is fair to say that the whole private versus non-private distinction can go away. Because with the census program now netting itself out, as census hirings and firings offsetting, the only thing that matters is private and non-census government hiring. And to say that non-census government hiring is irrelevant, when it is precisely the government's hiring that has been the only category that is flat or positive for the duration of the second great depression, would be about the equivalent of calling the Hiroshima bomb a modest gust of wind. Which of course has not prevent Obama to completely strip out the government impact on jobs in 2010, when in a speech earlier he told an adoring audience that he has created 850,000 jobs in 2010 (for those who care the clip can be seen here). Which is in essence completely ignoring the impact of the millions, or, as some would say, billions, of non-census government jobs in the economy. What's more, Obama conveniently forgot to mention that the BLS just revised its trailing 12 month NFP number by 366 earlier today, taking a major Birth/Death biased haircut out of the propaganda numbers. Which is why when adding all YTD NFP numbers (excluding census), and excluding the now revised impact of the 366,000 on a monthly basis (30.5K from from the January-March numbers), one gets a number of 530K jobs, which is about 62% of the number boasted by Obama earlier.

Janet Tavakoli On The "Biggest Fraud In The History Of Capital Markets"

In the following interview with the WaPo's Ezra Klein, Janet Tavakoli shares some more information on why every bank is about to shut down all foreclosures, in what she calls the "biggest fraud in the history of capital markets." Not very surprisingly, we are, so far, spot on in our 29th September projected timeline at this point: "We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy."

Equities Go Full Retard As Rates Run For Cover

To see the prevailing schizophrenia gripping the two different sets of mindsets in the market right now, look no further than than the surging divergence between equity vol and implied correlation (VIX, JCJ) and credit vol (via swaptions: USSV011). The chart below shows that even as equity traders are going full retard into QE2, and expecting the Fed's Brian Sack to expense their purchases of such staples as hookers, booze and heroin next, rate guys are running for cove (guess what, the fact that going forward Americans will not pay mortgages again, likely for many months if not years, is not good news).

Refuting The SEC's Lies At The Core Of The "Flash Crash" Analysis

It is time for the SEC to reissue their flash crash report, and to reconsider their Waddell and Reed scapegoating campaign. Why? Because apparently Schapiro's pawns never realized that the market is sufficiently intelligent to do a complete forensic analysis on W&R's trade into the flash crash, and to take the "regulator's" word for less than face value (after the Madoff catastrophe, what other option is there). We now have prima facie evidence that the SEC is lying. We wonder: just how many pieces of silver did it cost the HFT lobby to bribe Schapiro and her Princeton physicist (what is it about this university and the caliber of "talent" it generates?) Gregg Berman to skew the data so much it is beyond laughable. In our ongoing expose of what really happened on May 6, Zero Hedge is happy to have collaborated with both W&R and Nanex to bring our readers the full truth behind the flash crash. Here it is...

September's Hedge Fund Winners And Losers

The latest HSBC report is out. As we speculated in the beginning of September, the bulk of funds went "all in" on the beta rally and of the 40 most prominent funds, only 4 lost money during the month. What is troubling is that this is confirmation very few are chasing alpha, and everyone is all in on the beta trade. Which is great when the Fed can push the market higher, but even the Brian Sack trade has now hit its diminishing returns stage.

It All Starts And Ends With The USD

There is basically nothing new to add to the picture. Maybe that is why the only thing going on right now is an unabated selling of volatility in both Fixed Income and Equities. The NFP number was slightly disappointing though not horrendous, just enough to convince people we do get QE 2.0 in November and not bad enough to send people into panic. Meanwhile we did get confirmation that 2009 employment figures were in fact worse than reported... in typical BLS tradition one might add. And I thought econometrics models were supposed to have an average deviation of 0 to the series they track! I guess you don't need a statistical backgroup to work at the Bureau of Labor Statistics. - Nic Lenoir

S&P Projects 60% Of All Countries Will Be Junk-Rated By 2060, Sees Increasing "Tests To Social Cohesion"

When even S&P tells you that within 5 decades, nearly two-thirds of the world will be junk rated, you know it is time to close the history books on the current system. In a long-overdue analysis on the impact of demographics, titled, "Global Aging 2010: An Irreversible Truth", S&P analyst Marko Mrsnik, who made Greece's shitlist earlier this year for being the first to downgrade the country and set off the European scramble to launch a $1 trillion rescue package for the European dominoes, has come up with the first report that acknowledges that not only is the US and UK AAA rating not set in stone, but, far more surprisingly, is the admission that the current system is set on an unsustainable course. To wit:as the chart below suggests, S&P now expects that the number of countries rated "spec grade" to increase from 18% currently in a hypothetical sovereign ratings distribution, to over 60% by the late 2040s as deficit spending (and debt funding) explodes. Additionally, in a world attached to reality, the credit matrix would make the AAA sovereign rating history by 2030. Of course, this being S&P, the rating agency is terrified of actually confirming what everyone knows, and qualifies this as follows: "The hypothetical ratings should be regarded more appropriately as an illustration of the credit dimension and profile of the demographic challenge that governments face and not as an indication of expected credit performance." Alas, the real, non-hypothetical outcome will be far worse: As Mrsnik himself says later, "The challenges ahead are daunting for the vast majority of sovereigns covered in this survey, particularly in cases where market pressures are pushing policy makers to embrace budgetary consolidation simultaneously with structural reforms of pension and health-care systems. For some sovereigns, this may put the relationship between the state and electorate under strain and severely test social cohesion." Translation: war.