Archive - Feb 2010 - Story

Reuters reports that hopes of a Nakheel pay down in whole or in part are getting increasingly illusory. The $980 million Nakheel issue maturing on May 13, which had initially been rumored to be paid off in full (at about the time PIMCO was selling it after buying it up in the sub 50 cent range), then at 60, now seems will not get any consideration at all. Reuters quotes a source as saying "It is very unlikely that the bond will be paid off. Incredibly unlikely." Of course, now that M&A rumors don't exist per se, as it is all really just SEC-endorsed insider trading, the rumor mongering has focused on Dubai and Greece, which leads us to believe that this is simply some Nakheel short talking up (or down, as the case may be) their book.

Full press release from Goldman Sachs giving the company's perspective on the recent topic du jour about its arrangement of numerous Greek currency swaps. One wonders why pour more gas on the pr nightmare fire, if indeed everything was according to the books. One also wonders just how many of the "European member states with foreign debt outstanding" that performed comparable transactions will be presented as a shocker to Eurostat, which at last check was only 7 years behind the curve.

Following the money - taxpayers give money to BofA to keep it alive, BofA pays SEC/shareholders in revised wrist slap. Sure seems like one way to keep keep the velocity of money above 1. One hopes that Cuomo won't follow next and throw in the towel in his civil suit against Ken Lewis. A seemingly unhappy with this outcome Rakoff had this to say: "So should the court approve the proposed settlement as being fair, reasonable, adequate and in the public interest? If the court were deciding that question sole on the merits - de novo, as the lawyers say - the court would reject the settlement as inadequate and misguided. But as both parties never hesitate to remind the court, the law requires the court to give substantial deference to the SEC as a regulatory body having primary responsibility for policing the securities markets, especially with respect to matter of transparency." We have gotten to the point where the SEC's cronyism is even impairing the judicial system.

Dax futures have bounce to our 5,740/5,725 target zone. This corresponds to the 100dma, formerly key support and now resistance, the highs of Jan 22 and Feb 3 and the 50% retracement of the sell-off from the tops. If the Jan 11 highs are indeed a major intermediate top, the market should hold resistance here and trade down to test 5,626/5,600, which if broken will confirm further downside towards 5,300, 5,040, and finally 4,570/4,590 which is next major support. On the upside we would use a daily close above 5,780 as a stop. Major focus will be on 5,626/5,600 in the short-term. - Nic Lenoir

As we noted in Friday’s Comments, some traders thought the surprise Discount Rate hike by the Fed may have been a pre-emptive strike at inflation expectations and the bond vigilantes. The Fed has said over and over again that inflation “expectations” are a primary concern of theirs. By the time actual inflation breaks out, the Fed would be behind the curve, so it is expectations they monitor. Thursday morning the PPI spiked sharply. That, some thought, may have inspired the surprising Discount Rate hike in the late afternoon. If so, the Fed might have fired too soon. Friday morning, the CPI was downright deflationary. The core CPI fell 0.1%. The last time we had a negative reading in the core CPI was way back in 1982. That’s 28 years ago. And, that was when Paul Volcker had interest rates at double digits trying to drive inflation out of the system. Traders speculated that the jump in PPI and the dip in CPI might be a function of management. Companies could be absorbing the higher prices in raw materials (global demand); to keep finished products lower for their clients. It’s an interesting hypothesis. - Art Cashin

The following chart from Stateline will be quite critical to evaluate going forward as states increasingly ponder just how to tweak their revenue formulas in order to not only get away from the precipice of insolvency, but to pay back the tens of billions borrowed from the Federal government to fund unemployment pay.

Thank goodness the SEC doesn't care about pursuing, well, anything, as its 1-man enforcement team would be horribly torn in trying to find just who the leaks, and the various benefactors, in the ongoing barrage of Greek realted, totally unjustified rumor mongering are. Earlier today European Commission spokesperson for economic and monetary affairs
Amadeu Altafaj Tardio stated "there is no Eurozone plan to bail out Greece" refuting a story that appeared over the weekend in Der Spiegel, claiming a €25 billion fund to bailout Greece was in the making. Furthermore, he noted that Eurostat, which has requested details on all swap agreements done by Greece over the past decade or so, has not gotten all the needed information, due to, wait for it, a 4 day strike at the Greek finance ministry.

• The deflationist: a profile of Paul Krugman (New Yorker)
• China new village makes Chanos see Dubai times 1,000 (Bloomberg)
• Goldman cranks up p.r. engine to turn sinner into saint (Post)
• Hey recovery.gov, The "stimulus" actually raised unemployment (IBD)
• Another one jumps on the bandwagon - Nathaniel Rotschild calls for ban on sovereign CDS (Les Echos (in french), via DealBook)
• Euro worst to come as Greece hammerlocks ECB on rates (Bloomberg)

• Asian stocks, oil advance as US interest rate concern eases; Yen weakens.
• China mustn't "bow before external pressures" on trade policy: Chinese Trade Ministry.
• China received $8.13B in foreign direct investment in January, up about 7.8%.
• Crude oil rises above $80 on speculation economic recovery to spur demand.
• U.S. consumer prices rose 0.2% in January, less than economists forecast
• World markets recover from drop following Fed move
• Yuan strengthened the most in 11 months on speculation govt will allow more flexibility.
• Aramco and Total said to hire bankers to sell Sukuk for Saudi Jubail refinery

RANsquawk 22nd February Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 22nd February Morning Briefing - Stocks, Bonds, FX etc.

And with that Japan joins the competitive devaluation currency race, in which both the SNB and Federal Reserve have a substantial head start (the euro and the fat Brussels bureaucrats are in a ouzo daze, with no clue what the hell is going on). Speaking before lawmakers BOJ governor Masaaki Shirakawa, who recently said Japan was powerless to fight deflation on its own, has changed his tune, and today said that Japan will print the kitchen sink if it has to to beat "stubborn deflation." In a speech before the Lower House Budget Committee Shirakawa said that not only will Japan continue monetizing its debt (at least unlike Bernanke, he admits it), but that they will happily accelerate this action if it means killing the Yen and creating a glimmer of hope for inflation. Carry traders everywhere rejoice.

It's good that the rest of the economy is humming along, and the whole record unemployment thing is under control, cause we were wondering when the president would refocus his efforts on such mission critical things as having the government determine health insurance rates. Apparently the answer to the last question is tomorrow. According to the NYT, "Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation’s health care system, White House officials said."

You read about it here a week ago. Now read about it in the Wall Street Journal.

There should be no shock here- you know the deal. Toyota, big, popular and profitable... And Japanese. Congress is investigating- it was just a matter of days before they found something juicy.