Archive - Mar 15, 2010 - Story

While the cynics tell us that the foreign exchange market is an ugly contest, with the best currency being the least ugly. None are beautiful. That seemed to be a fair description during the crisis, but it is less apt now. Instead, it seems that the race in the foreign exchange market is who can close the output gap fastest. The economic contraction created a large gap between actual output and potential GDP. As the gap is closed, real interest rates will likely rise and may help boost earnings. Those countries that grow relatively faster should have relatively stronger currencies. - Brown Brothers

Developing story

Hey y'all. Some more headlines on that completely resolved (thanks Mario Draghi) Greek situation.

11:53 03/15 DUTCH FINMIN: NO BAILOUT FOR GREECE
11:55 03/15 DUTCH FINMIN:COULD BE SOME GREECE SUPPORT, BUT NOT BAILOUT
11:57 03/15 DUTCH FINMIN: ANY GREEK AID WOULD HAVE STRICT CONDITIONALITY
11:57 03/15 DUTCH FINMIN:WON'T SPECULATE ON WHETHER GREEK DECISION TONIGHT
11:56 03/15 DUTCH FINMIN: LOAN GURANTEES, BILATERAL LOANS UNDER DISCUSSION

We have been bearish on the Shanghai composite ever since the index rejected the 50-dma around 3,100. Overnight we tested and so far held the 61.8% retracement of the rally since 02/03/2010 at 2,971, and we have the support of a possible triangle formation at 2,947. Long term I remain bearish on China for reasons I will detail a bit more lower. However this potential triangle support need to be invalidated by a break to the downside. Indeed, triangles are almost exclusively continuation patterns within a trend, and in the case of an horizontal triangle it is always the case. Triangles however need 3 touch on one side and 2 on the other to be validated technically, so it is not a forgone conclusion that it is what the market is doing. This is why it is key break to the downside here, if not expect 3 months of consolidation between 3,000 and 3,240 (yawn). - Nic Lenoir

A former president of a privately-held New York bank, Park Avenue Bank, was arrested Monday on charges including bank bribery, embezzlement and fraud, a federal prosecutor said.
A source familiar with the case identified the banker as Charles Antonucci, who was president of the bank from June 2004 to October 2009.
On Friday, state regulators closed Park Avenue Bank, which had assets of $520.1 million and deposits of $494.5 million at the end of 2009, according to the Federal Deposit Insurance Corp.
The charges against the former bank president include self-dealing, bank bribery, embezzlement and fraud on the New York state banking department, FDIC and the Troubled Asset Relief Program (TARP), the statement by Manhattan U.S. Attorney Preet Bharara said.
His office said U.S. officials were to disclose more details at a press conference at 1 p.m. (1700 GMT) on Monday.
In November the bank applied for a bailout of less than $12 million under the TARP program but withdrew its application over concerns about restrictions on banks that receive taxpayer money, bank chairman Donald Glascoff said on March 10.

The smoothed ECRI leading economic index for the U.S. fell last week for the 12th week in a row, to stand at its lowest level since July 2009. Something tells us a slowdown is about to start. With a week to go before the debate with the legendary Jim Grant at the Plaza in New York, we seem to recall that this was the index he was using several months ago to predict that nominal GDP growth was set to accelerate to a double-digit annual rate. We seem to have stopped well short of that mark. - David Rosenberg

The game is on the table. We’ll watch to see if the bulls can break out from the January levels and excite sideline money. Or, will the bears have a goal-line stand and force a double top. Friday did not give us a clear answer. Stay tuned! - Art Cashin

Some have asked us what is the reason for the earlier poll asking who is more trustworthy: Liesman or Santelli. The following clip from earlier this morning should explain it. First Liesman points out "there is a point in time when ignorance goes from being amusing to being dangerous, and I think Rick's crossed that point long ago" Next, all hell break loose.

The first just released TIC data, post the latest major annual revision, indicates that the two biggest holders of US Treasury securities continue to pare their holdings. We will present a more granular look shortly as the revision has made all historical numbers irrelevant, however the consolidated picture demonstrates that China sold $6 billion in USTs going into January, with Japan paring just slightly, at $1 billion. This was more than compensated by accumulation by the three other major players: the UK, Oil Exporter countries, and Caribbean banking centers, a proxy for hedge funds, whose holdings grew by a substantial $28 billion, $11 billion and $15 billion, respectively. The UK, which is most certainly a proxy for China, has seen its holdings grow by $100 billion in 4 months, from $106 billion in October to $206 billion most recently.

In this two-part special on CBS's 60 minutes, Michael Lewis continues on his crusade of exposing Wall Street's massive delusion that it provides a service of value to society. "The incentives for people on Wall Street got so screwed up, that the
people who worked there became blinded to their own long term
interests. And because the short term interests were so overpowering.
And so they behaved in ways that were antithetical to their own long
term interests." His observations and conclusions are, as always, spot on.

• Ah, the benefits of monopolies: Goldman Sachs Demands Derivatives Collateral It Won’t Dish Out (Bloomberg)
• FASB hypocricy: banks face mark-to-market hypocricy (WSJ)
• Rising money market rates hint Treasury losses amid Fed exit (Bloomberg)
• EU to discuss Greek aid, Germany skeptical (Reuters)
• Stocks decline in China economy concern; pound, euro weaken (Bloomberg)
• Paul Murphy: The truth about speculators - they are doing God's work (FT)
• Could Lehman be E&Y's Enron (Reuters)

RANsquawk 15th March Morning Briefing - Stocks, Bonds, FX etc.

• Asia stocks, commodities fall on China tightening speculation.
• China’s stocks decline to five-week low on tightening concern.
• Debate brewing in OPEC over what its post-recession production might look like.
• EU finance chiefs to weigh Greek rescue as ministers seek to avoid bailout.
• Euro near 5-week high versus Yen on Greece bailout, BOJ policy.
• Consumer tax hikes hit Greece as EU to discuss debt crisis.
• The Federal Aviation Administration ordered airlines to perform an emergency inspection of some 600 Boeing 737 airplanes.

RANsquawk 15th March Morning Briefing - Stocks, Bonds, FX etc.

The rating agency, whose "objectivity" was recently fully exposed after it has been persistently the one rater who refuses to downgrade Greece, even after its peers S&P and Fitch have made Greek bond eligibility for ECB collateral contingent purely on Moody's lack of conscience, is pretending that it has some credibility after all, by doing a little extra posturing, and grumbling that if things get much worse, it may, just may, consider dropping the US AAA rating. This, of course, despite Tim Geithner's promise that the US would only be downgraded over his dead body, or something like that. Furthermore, as we have recently learned, the FRBNY has a "proactive" influence in rating agency decisions. To assume that Mr. Brian Peters of the New York Fed would return a Moody's call and say "yes, we agree with your assumption that the US is not really AAA-worthy, please go ahead and downgrade us" requires copious amount of prior consumption of LSD and other hallucinogenics. Yet for those who still care about what output Moody's produces, here is the full relevant text discussing the outlook for the United States.