Archive - Apr 20, 2010 - Story

From the call. The firm also points out that its total losses on Abacus were in fact over $100 million, not $90 million as previously noted. And it still hammers home the idea that it had "skin in the game" - how about the whole AIG bailout that resulted as a function of Goldman hedging its general CDO exposure with the insurer via CDS?

The hedge fund which was in the Paulson long-equity, short-everything else position with Merrill on many other Abacus comparable CDO transactions speaks out, defends itself from what will likely be a flurry of SEC action in the immediate future: "Our Mortgage CDO investment strategy was based on a market neutral statistical framework which specifically did not incorporate a fundamental view regarding the direction of the housing or subprime mortgage markets." - Magnetar

• An economy of liars (WSJ)
• Goldman Sachs alum receive threatening phone calls from their Alma Mater (Huffington Post)
• Sack Goldmans! UK Ministers urged to bar bank from government contracts (Independent)
• Another case of quant espionage: ex-Soc Gen trader accused of stealing code (Bloomberg)
• Goldman taps ex-White House counsel for help (Reuters)
• Goldman's London unit face formal UK probe (Bloomberg)
• Roger Altman: Obama's disastrous debt is Obama's biggest test (FT)
• Fannie and Freddie amnesia (WSJ)

From the conference call, according to Lloyd Blankfein, Goldman is just a glorified Craig's List. Seeing how there is a slight valuation mismatch between the two, we believe a Long CL Short GS pair trade is in order.

GOLDMAN'S BLANKFEIN: ROLE JUST TO BRING TOGETHER MKT PARTCPNTS
GOLDMAN'S BLANKFEIN: WOULD NEVER CONDONE INAPPROP BEHAVIOR
GOLDMAN'S BLANKFEIN: WOULD NEVER INTENTIONALLY MISLEAD ANYONE

Also, the firm refuses to disclose if there are other Wells Notices outstanding. We are keeping a close eye on Mr. Jonathan Egol's Finra record: we were amused that the U-4 of Jonathan Tourre was finally updated.

Greece today managed to place €1.95 billion in 13 month Bills, slightly more than the €1.5 billion planned. The number is trivial as today Greece sees an outflow of €8.22 billion in bond redemptions to be promptly followed by €1.585 billion in Bill redemptions on the 23rd. What is non-trivial is the interest rate this 3 month Bill came at, which was at 3.65%, more than double the 1.67% yield when the country issued 3 month Bills last on January 19. Compare that with Germany's 3.11% rate on the 10 Year. The bid to cover on the latest auction was 4.61 due to the ridiculously high interest rate. The Greek PDMA debt chief Petros Christodoulou told Market News that he is "very pleased indeed" about the auction. We will see how pleased he is when he has to raise something more than a 6 month tenor.

• Asian stocks rebound on SEC's split vote on Goldman, Economy.
• Saudis tightening Chinese energy ties to move away from dependence on US.
• UK inflation rate rises to 3.4%
• Yen falls versus higher-yielding currencies on recovery signs.
• Amylin reported a narrowed Q1 loss of $38.2M as costs dropped. Revs fell 3.5% to $174.1M.
• Arch Coal sees metallurgical-coal sales tripling on demand from steelmakers.
• BofA-Merrill rank first on Credit Suisse's tally for CDO `Litigation Risk'

RANsquawk 20th April European Morning Briefing - Stocks, Bonds, FX

RANsquawk Morning Briefing - Stocks, Bonds, FX etc.: 20/04/10

RANsquawk 20th April Morning Briefing - Stocks, Bonds, FX etc.

One of the take home lessons from the Lehman Repo 105 scam is that Primary Dealers will do everything in their power to dispose of assets in any way possible at end of quarter time in order to make their leverage ratios palatable to investors and rating agencies. A week ago, taking a hint from the WSJ, we observed how for the week ended March 31, total Primary Dealer assets plunged by $34 billion in just one week: from March 24 to March 31. For this EOQ asset window dressing hypothesis to be confirmed, we needed to see a corresponding spike in asset in the week immediately following March 31. Sure enough, using Treasury data of Primary Dealer holdings, we observe precisely that, and then some. In the week ended April 7, total Primary Dealer assets exploded by $53 billion to the highest level seen in 2010, or $300 billion, a stunning 21% increase in total assets in just one week! This is also the highest total level of PD asset holdings since June 10, 2009. What do primary dealers do with these assets? They either repo them out back to the Fed directly, or via the Tri-Party Repo System, or via some other off balance sheet conduit, using the cash proceeds to go elbow deep in risky assets and purchase every stock imaginable (having given the impression the week before that they are all prudent fiduciaries who don't "gamble" with other people's money). If you were wondering where the surge in buying interest came from in the first few days of April, wonder no more. Furthermore, as PDs would be careful about negative carry on the repo rates, it would be expected that the one security they would buy the most of, would be T-Bills with their next to nothing interest rates... Which is exactly what happened: PD T-Bill holdings surged from a mere $12.6 billion at March 31 to $44.4 billion on April 7. PDs no longer need Repo 105 - they do all their EOQ window dressing directly in the open market.