Archive - Jun 4, 2010 - Story

Earlier we reported that the Fed is now in the business of bailing out real estate companies, specifically Tishman Speyer. Little did we realize we are about to have another Stephen Friedman moment on our hands. It may, but probably won't, come as a surprise, that Jerry Speyer is on the Board of Directors of the very same Fed that approved the restructuring of his firm's loans in Chicago. We are confident Jerry recused himself of any deliberations that used taxpayer money to provide his firm with a couple hundred million in immediate funding. We just wonder if Tishman Speyer is also considering converting to a Bank Holding Company and accessing the Fed's Discount Window: after all, what's a few hundred billion in taxpayer capital between conflicted CEOs-slash-directors of companies that have no business in getting indulgences from the Fed? Oh yes, that would be just another example of the now perfectly accepted, legal and encouraged concept of conflict of interest, "less than arm's-length" dealings between kleptocrats and middle class money.

Update 2: Elizabeth Ivers, a spokeswoman for driller EOG Resources, said the well has been brought under control, just about 16 hours after it started spewing gas.Spadoni said no one was injured and there are no homes within a mile of the well.

Update: the gas well operator is EOG.

The Pittsburgh Channel reports that an explosion at a gas well in the Marcellus Shale, has forced a mile-wide evacuation in Clearfield County, PA. The irony of this event occurring even as CNBC shows some guy mopping up oil with hay from a bucket is beyond sublime. Also, so much for clear energy. There are no details as yet which company's well was responsible for the explosion, although there are is one junk-bond laden firm which comes to mind.

Some interesting tactical observations heading into the close via Goldman. Probably the most relevant is the divergence between the USDJPY and the 2 Year: whereas the two have traded on top for the past two years, in the past month we have seen a very notable divergence. Goldman's advice: short the USDJPY big at any level above 92, as the fair value based on the 2 Year is 88. On the other hand a 4 point drop in the USDJPY would cause a wipe out in stocks, due to its impact on the EURJPY, so in essence this is like saying short the market and go sell an overpriced 2 Year. Nonetheless, for recoupling chasers, this should be a pretty sold and profitable convergence trade. Another observation from GS: a close below 1,091 will lead to a retest of 1,036.6. This is now pretty much a given.

• U.K.-headquartered oil major BP continues to face operational challenges to stem and clean up the oil spill in the Gulf of Mexico.
• Prolongation of the spill raises the likely range of longer-term remedial costs and compensation claims relating to environmental damage.
• We are lowering our long-term rating on BP to 'AA-' from 'AA' and placing our long- and short-term corporate credit ratings on CreditWatch negative.
• The CreditWatch placement reflects our intention to reassess the longer-term impact on BP's business and financial risk profiles.

For all who think that the Fed has received the Ukrainian-cum-Marriott Garden Inn unlimited one-hour special giftset only from the TBTF banks, you are wrong: it appears the broke real-estate industry has also provided some favors to the FRBNY, and is now demanding, and receiving, preferential treatment. Tishman Speyer, whose 5.7 million sq. foot portfolio acquired from Blackstone in 2007, has been unable to renovate its insolvent properties as lenders have been unwilling to negotiate a restructuring. One of the lenders is none other than the Federal Reserve, which took over loan commitments by Bear Stearns. Crains New York reports that the FRBNY has finally relented and at what likely is a loss to taxpayers, has given Tishman $100 million to restructure its loans at preferential terms. Tishman's take on this development was pretty clear: "It's great for our tenants and it's great news for everybody we do business with,” said Casey Wold, Tishman senior managing director in Chicago. “We now have enough capital to improve the properties and lease up the entire portfolio to stabilization." Thank you taxpayers - you now have indirectly bailed out the following Chicago properties: Civic Opera Building, 10 & 30 S. Wacker Drive complex,1 N. Franklin St., 161 N. Clark St. and 30 N. LaSalle St.

Just because the LBMA/JPM can't juggle their top kill of both PMs and FX, we have another all time record.

If you are like us, you just can't get enough of Bob. The only economist from RBS whose opinions are worth reading, who will never make any financial pundit lists (especially not ones that have Jim Cramer on them), due to his unpleasant habit of being too "truthy", shares 17 minutes of his latest perspectives in this CNBC Europe interview. Not surprisingly, Bob blasts the lunatic response of resolving debt problems with more debt. This time he also shares some additional political perspectives: “Having elected people who said everything would be all right, ultimately the US and UK had to elect Reagan and Thatcher to get us back on track” and eventually angry voters in the developed world will shift to the far right. Some more US-centric perspectives: “The US mid-terms will be crucial. We will see a shift to the right as the Tea Party movement demands change. "There are 220 million people in middle America who are angry and believe stimulus spending has been wasted on vested interest and the banks that they believe got us into this mess. For all the talk of positive growth in America, those outside of LA and New York are hurting and want cuts in government spending, not more borrowing and spending.”

Intervention fails. Next stop is the November 2005 low of 1.164.

RanSquawk report that according to "well-placed sources in Beijing" China is now buying EUR above 1.20 to stabilize the currency in advance of a G20 meeting later in June, per a previous agreement with the G20 members. This surely explains why the euro magically got vacuumed up by 60 pips in a manner of seconds as soon as a breach of 1.20 was imminent. Alas, as we pointed out previously, the half life of central bank interventions is now laughable: at some point interventions using fiat methods will have no impact whatsoever. On the other hand, all those who are short the market, and thus the euro, and in the process are facing the Fed, the ECB, the SNB (or not so much anymore), and now the PBoC, now have a whole new appreciation of the word "Sparta"

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 04/06/10

This is, of course, total BS. But the market is scrambling for any short-term upside catalysts. So here is the first stick-save attempt of the day. In keeping with the rumormill, the second one will likely be that Radioshack has decided to LBO the S&P 500. Lastly, if market hits -3% by EOD, we anticipate QE 2.0 rumors to be rampant into the weekend.

Yesterday, before the market close we urged riskfree tolerant readers to take a long hard look at the ES-EURJPY spread, i.e., sell ES and buy EURJPY, as the spread had blown out: "Selling ES and going long EURJPY is now pretty much risk free." Well, whoever did, congratulations: the spread is now back to zero. If you used unlimited leverage as suggested, your unlimited P&L should provide for a fun Ukraine-Hampton JV filled weekend. And with that our thesis that idiotic computers run the market and have no clue what signals or correlations to even look at eny more, is proven right for the second time this week.

If you owned a Hungarian bond here and you found a bid you would hit it wouldn't you? So should everybody, and then comes Romania with a recently failed auction, and then Ukraine which already received one round of bailout and will clearly need more. Then comes Western Europe, even Germany with its exposure to Eastern Europe, Japan... If dominos start falling it will be nearly impossible to stop them unless theree is enough private wealth left at one point to back specific sovereign entity. With the overall leverage in the system that could mean very few people, though Japan has proved resilient for that very reason despite a huge debt-to-GDP ratio. And even though 4 PMs in 4 years shows that public opinion is losing its discipline in the empire of the rising sun, their politicians still have the good taste of resigning. This is the kind of event that can be the spark of a global systemic crash that would leave very few standing if any. Any optionality in an investment portfolio should be to the downside and there is a good chance a lot of bets would not be honored under that scenario. Cash, Gold, and maybe guns seems sadly to be the answer. Many will say once again that I am not very cheerful and would not make for a very good guest at a dinner or a conference, but it is looking for short term good news at the expense of any critical thinking or hard work that got us there in the first place so that will only help me make my point. - Nic Lenoir

Goldman's Hatzius, whose +100,000 NFP revision to 600,000 yesterday, officially means he has lost the magic touch, offers his take on the NFP disaster. Ever the optimist, he still manages to find a silver lining. Alas, the market doesn't care, and instead is holding its breath to the joint Obama-Biden teleprompter conference praising the -215k adjusted NFP number.

Hilarious. Any time reality kicks in, the bankers (in this case Unicredit, whose CDS looks so fingerlicking good here) have no other recourse than to beg the money printing acolytes of Keynesianism to push things back to the fake trendline of the credit-driven expansion of the past 30 years. We wish them well. Alas, if the CHF is any indication, it is now too late.