Archive - Apr 2010 - Story

"Buy stocks, buy bonds, buy oil, buy gold, buy something, buy Ambac - Just throw your money at this market", the Primary Dealers beg you. They need to sell you stuff. They have lots of stuff to sell, at bargain basement prices. The bond market is so extatic about the equity melt up and the coming hyperinflation (as predicted by equities) that bond are being bought left and right as well. Everyone is buying something - no point in mentioning oil and gold: buy those too. Algos will scalp a few PIPs a few billion times today: computers have to feed their children too. Correlation across all asset classes is again one, as happens every time before the market goes up by 100%.

The government endorsed racket continues. First we bail them out, then the court says they have to disclose the bailout loans they received (courtesy of Mark Pittman's last great deed), and still they refuse to tell America just who and how received $2 trillion in rescue aid. The Clearing House Association of America, the very people who would not exist without taxpayer bailouts, and who are now pocketing hundreds of billions thanks to the same steep curve which results in $10 billion of new US debt every day, has threatened it will appeal every decision that forces it to disclose the details of the Fed's bailout, all the way to the Supreme Court, flipping off the very people who permitted the bankers to continue to steal and pillage every single day in the biggest government facilitated wealth transfer in the history of this country. We are now convinced that the animosity toward the banks is the primary reason why the Primary Dealers have decided to not allow even one downtick in the market (that and the hope that they will finally find greater idiots to sell all their massive paper holdings to): should there be one substantial correction, with liquidity about to be drained (2099 is one day closer today than it was yesterday), it will be followed by another, and another.... And then the public anger may finally come crashing on the heads of the megalomaniacs from the CHAA, both metaphorically and literally. By then, however, we are confident they will find a way to extract diplomatic immunity and/or renounce their US citizenship, from the administration that cost them so little to purchase.

And the winners of the liquidation of the Lehman options and futures book are Goldman Sachs, Barclays, DRW Trading, JPMorgan, and Citadel L.P.

RANsquawk 14th April US Afternoon Briefing covering Stocks, Bonds, FX etc.

A few days ago we highlighted Richard Koo's most recent media appearance here. Below we provide his most recent presentation extolling the virtues of unbridled Keynesianism. Keynes' ideas may have been an operable theory when the world was not leveraged 100% debt/GDP (and 400% total debt including assorted off balance sheet items). Now, it is not. And everyone who blindly pushes for endless stimuli will find out that the endplay to Keynes' fatally flawed economic theory is sovereign default. And yes, that certainly includes the default of the country which is pring the most paper.

The only primary driver to market movements, the carry trade, especially as visualized by the JPYEUR, just got poleaxed. Equities, which operate in a universe of their own when they so choose, are not following. Yet. Gold is rallying as all "carried" currencies suddenly feel weak.

According to the Defense Intelligence Chief, Iran could produce enough highly-enriched uranium for one nuclear bomb in as little as a year and has stated that all options to rein in Iran are on the table but military options are not preferable. This is happening as Iran has complained to the UN over a nuclear attack threat by the United States. According to Reuters, "Iran complained to the United Nations on Tuesday over what it called a U.S. threat to attack it with atomic weapons, accusing Washington of nuclear blackmail in violation of the U.N. charter." This ties in rather well, with our report from a week ago in which the Former Deputy Defense Minister of Israel said that Israel may have no option but to attack Israel (with nuclear weapons) by November. After yesterday's evacuation of Israeli citizens from the Sinai Peninsula, the Middle-East is once again heating up... Hopefully it does not reach 6 milllion Kelvin.

The National Federation of Independent Businesses (NFIB) issued its March survey Tuesday morning. Optimism in the small business community fell again. It dropped to a nine month low of 86.8. The last time it was at this level was April of 2009 (one month after the great March rally began).

Businesses of this size produce more than half the GDP and provide nearly 70% of the private sector jobs. To put the pessimism level in perspective, in the three prior recessions, the index always bottomed out above 90 (2000/2001 – 96.3; 1990/1991 – 91.4; and 1981/1982 – 94.4).

Virtually all of the component sectors fell – employment, job openings, wages, sales, capital expenditures, earnings and credit conditions. For every company planning to raise prices, three were cutting prices. Deflation, anyone?

Nothing to see here. Go back to buying stocks.

Click here for a webcast of the Joint Economic Committee's Q&A with Ben Bernanke live and commercial free. Note - there is no mention of "extended period" in Bernanke's prepared remarks. Watch for a discussion of just that, as well as questions on asset sales, debt levels, GSEs, inflation, and, of course, when interest rates will be raised. Full Bernanke testimony in which he sees a "moderate recovery."

Click here for a webcast of the Joint Economic Committee's Q&A with Ben Bernanke live and commercial free. Note - there is no mention of "extended period" in Bernanke's prepared remarks. Watch for a discussion of just that, as well as questions on asset sales, debt levels, GSEs, inflation, and, of course, when interest rates will be raised. Full Bernanke testimony in which the Chairman sees a "moderate recovery."

SocGen's Dylan Grice is out with another must read report summarizing the Greek situation: in short, so much time and effort is injected in preserving the Greek status quo (so far unsuccessfully, even after 4 rounds of bailouts) as it is small enough that it could, in theory at least, be helped. If it goes, the next countries to follow will be simply too big to be bailed out. Just recall the $500 billion expansion in the IMF's NAB. The world is slowly realizing the dominoes can not be stopped, and as much capital must be locked away as possible in advance of the next major risk flaring episode. Which is also why stocks are currently going to the moon: the resultant crash in the stock market once the reality of just how ugly the global mess is will lead to large double digit drop in the market. Which is why getting to the highest possible level from which to plunge makes all the sense in the world...

Have the problems at the troubled stock peddler just gotten too much for the existing management team? A better title for the job posting would have been "Will Trade EBITDA Adjustments For Food."

As we expected last night, G-Pap's latest round of commentary was certain to set off fireworks in today's bond arena. Sure enough, at last check the 10 Year spread to Bunds had blown out by 40 bps to almost 400 bps, this is approaching the record wides seen during the duration of the entire crisis. As usual, the collateral damage is a drop in the ASE which was about 2% lower for the day, as well as Greek banks, mostly in the red. The primary source for the weakness was Moody's (which is now about 4notches behind Fitch) statement that "there is a 50% chance that Greece's credit rating could receive another downgrade in the next 12 to 18 months if fiscal consolidation falls short of goals. If Athens falls short of perfection, the Greek rating will be downgraded, a Moody's spokesman said" as reported by the WSJ. Additionally, a new round of strike is once again paralyzing the country. And confirming our observations that the half-life of any good news out of Greece is now less than 24 hours is Brown Brothers Harriman, which sent out a note to clients saying: "The afterglow of yesterday's Greek T-bill auction has faded." Lastly, CDS are back over 400 bps. The "speculators" are closing in on the kill... or at least the formal announcement of the bailout mechanism's activation by G-Pap. The loaded fire extinguisher is about to become a loaded gun, to be used shortly in a fatal game of Greek roulette (Russian roulette variation, where all the chambers are loaded).