Archive - Apr 29, 2010 - Story

Moody's analyst Sarah Carlson, who by no means is a disgrace to her job, and is fully justified in keeping an A- rating on a country whose 2 Year debt was trading north of 20% until yesterday, when Europe decided to use US tapxayer money to bail out its own, finally finished the special olympics marathon (no pun intended), only a couple of years late. We wonder if any of the Moody's analyst corps will be offered as a (not so virgin) sacrifice to placate the angry gods of Berkshirehathawaya. We hear Buffett has a soft spot for the XX (chromosomes), even if it derives from companies in which he has already decided to liquidate his entire stock position (but slowly... slowly... don't forget uncle Warren is just the nicest guy in the world and would never take advantage of the market's stupidity).

Jan Hatzius, who along with Erik Nielsen, knows what the DOL and the IMF will announce and do about two weeks before the respective agencies do, has come out with his most recent preliminary NFP number. The verdict: +175,000, consisting of 125,000 from the Census. The unemployment rate will remain at 9.7%, unchanged from March's hilarious 9.749% (the gov't just like goldman rounds down the nearest trillion). Still, a bit off from VP Biden's prophecy of half a million jobs created each month "very soon."

The leaders of our industry have poured gasoline on the banking crisis and accelerated it completely out of control. It has gotten to the point where legislators and regulators seem to be doing their best to burn the industry down to the ground to rid it of the evils that caused the crisis in the first place. I put this squarely at the feet of our industry's leaders. They ignored common sense, signs, hints, nudges and flat out requests to curb their risk taking to the point where governments now are proposing rules that not only will force institutional break-ups and hurt our industry, but that very well may cripple the capital formulation engine Main Street needs to generate jobs. Talk about cutting off our proverbial nose to spite our face. All that our industry leaders needed to do was come together, highlight the major gaps that led to the subprime crisis and come up with a solution to solve the most egregious issues. Yes -- in order to keep the industry whole and the world sane, some profitable business would need to be eliminated, sacred cows slaughtered and sacrifices made to appease government leaders and stop the gathering hordes from marching down the Street with torches and pitchforks. - Larry Tabb, founder and CEO, TABB Group

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 29/04/10

Once again, the algospasms have turned many funds into dust as those attempting to short brokerage stocks, REITs, etc. in front of the European implosion are getting killed. Clearly, investors are voting that U.S. commercial real estate is the last bastion of safety, and the primary growth industry in 2011 will be stock trading.

Zero Hedge updates over the next 12 hours will be sporadic as we temporarily shift operations to Europe for closer coverage of the European bailout over the next week or two. We hope to conduct on the ground reporting from Central Europe and at least a few of the PIIGS countries, with Greece certainly playing a prominent role in the itinerary.Once situated, we will resume coverage of relevant events as usual. If readers have any specific focal issues that should be covered (Goldman-led Hedge Fund delegations trying to evaluate the fourth-lien value of the Parthenon, etc.) we are happy to consider and incorporate into our agenda. In the meantime enjoy the taxpayer subsidized, risk-free meltup.

Last week Barry Ritholtz had an excellent post 10 Things You Don’t Know (or were misinformed) About the GS Case in which Barry noted that 99% of the mainstream media commentary regarding the strength of the SEC’s case is, of course, completely uninformed conjecture. I sat down with Barry, who is a lawyer with experience in securities law, to get an insightful take on the SEC’s case against Goldman Sachs.

A chart comparing the UK "Spread of Spreads" (i.e., UK CDS - Germany CDS compared to Gilts over Bunds), indicates that the spread is now near record levels, and that the island nation may soon be dragged into the same vortex as the rest of the soon to be bailed out Club Med farm animals. As a reminder, this is comparable to the action seen before the cataclysm in Greece, and the blow outs in Portuguese and Spanish credit spreads. Also, as we pointed out on Tuesday (sorry can't find link right now and we are not big on slideshows), CDS traders moved to the UK en masse, with the country seeing the largest amount of derisking by a material amount. Add a historic election in the offing, and the risk for the UK may just supplant that of the much more manageable "2.7% of European GDP" Greece. Alas, the same excuse will not work with the UK.

Senators Brown and Kaufman, who as we previously noted presented a "Too Big To Fail" amendment to the finreg bill, have now officially filed this proposal, whose primary purpose is to cap the size of the massive banking monoliths. It will be interesting to see who votes for and against this amendment to see just how far the long hand of Wall Street reached. Below is an FAQ on the proposed Size and Leverage Limits as proposed by the senators.

1. Precious metal stocks are the most volatile asset class in the world because there is a community that thinks gold is functionally useless and a relic (governments and bankers) and a community that thinks only gold is money and money is gold (the gold bugs and 3 billion Asian peasants). Both are right.
2. The key to trading gold stocks is the same as successful risk/reward management: knowing the 60/40 end of a winning proposition, money management and knowing thyself.
3. Regular Technical Analysis will not work in the gold stocks market. In order to survive the market, you must learn which strength to sell and which weakness to buy.
4. The precious metals complex goes up a set of stairs and comes down an elevator.
5. One of the beauties of the gold market is you do not have to wait long to find out if you are trading the market right or wrong.

and much more

With no risk left on the table and no incentive to sell anymore, the autopilot "lift every offer on no volume" algo is rampaging. Compare today's volume to the past two days. The meltup will continue until the banks run out of repoable securities to pledge to each other and raise now-riskfree equities to 36,000 and much higher.

The TimesOnline notes that the Governor of the Bank of England has issued a warning that whichever leader wins the election next week will be kicked out of power for decades because of the severity of budget cuts they will have to instigate. Our own administration would be wise to pay attention to his words as America is undoubtedly next on the austerity bandwagon.

Now that moral hazard has been adopted everywhere, and the fate of the entire western world is determined by the successful issuance of hundreds of billions of dollars each and every month (we have gotten to the Maginot line where even a hint of a failed US auction would immediately blow up the global capital markets), it is prudent to take a detailed look into a topic that few have covered previously, namely what does the auction demand curve imply. We refer to the distribution of the Low-Mid-High yield break points in each and every treasury auction and whether they can provide some addition insight into the demand picture behind US sovereign debt.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 29/04/10

"Last year I wrote about how the leaders in America were essentially fiddling as Rome burned. This fiddling has become an all out dance party and many investors have been dragged onto the floor one more time due to money printing, an inherent desire to be optimistic, a plethora of propaganda and rising asset prices. However, this is the last dance folks. Our corporate and political leaders have destroyed us. Chuck Prince would be proud." Mike Krieger