Archive - 2010 - Story

"Relative to oil, silver could surge 4x from here and it still wouldn’t match the prior high in this relationship over three decades ago. Considering the problems that plague every major currency in the world, from the U.S. dollar, to the Yen, to the Euro, to sterling, and knowing from the McKinsey report that the need to monetize the surge in public debt will be required to cushion the economic blow from what will likely be another 5-6 years of deleveraging in the private sector, and given the much more stable supply outlook for silver (all the low-cost shallow mines on the planet have already been gutted) and where it trades relative to gold, not to mention what little attention the metals grabs and how under-owned it still appears to be, exposure to silver, whether it be in bars, coins, ETFs or mining companies, is likely going to be prove to be a very attractive investment in coming years." - David Rosenberg

The SEC has opened up the public comment section for File No. S7-02-10 "Concept Release on Equity Market Structure" also known as the "Help us because the SEC is hopelessly lost when evaluating the impact of high frequency trading" proposal. As the SEC points out: "This release is intended to facilitate public comment by first giving a basic overview of the legal and factual elements of the current equity market structure and then presenting a wide range of issues for comment. The Commission cautions that it has not reached any final conclusions on the issues presented for comment. The discussion and questions in this release should not be interpreted as slanted in any particular way on any particular issue. The Commission intends to consider carefully all comments and to complete its review in a timely fashion. At that point, it will determine whether there are any problems that require a regulatory initiative and, if so, the nature of that initiative." Most relevantly for Zero Hedge readers, the SEC's response solicitation form is now open and can be found here.

In one week, Tim Geithner will testify before Congress on his involvement in the AIG disclosuregate scandal, which, in late 2008 sought to prevent material information about AIG counterparty make-whole arrangements from seeing the light of day. Of course, in March of 2009, following political pressure, AIG and the FBRNY caved and disclosed that $27 billion in taxpayer capital had been used to yield to the bankers' every whim and to take them out at par, while their underlying AIG CDOs were priced 50% lower, if not more. Zero Hedge previously wondered when will Goldman be approached by the SEC with questions on whether or not they sold their direct AIG protection in the form of CDS to parties under a "big boy" letter, or did Goldman transact on a $2.5 billion notional position while in possession of material, non-public information. This, of course, in addition to having absolutely no impairments on their actual CDOs, thereby providing the firm with material excess returns over and above what their total capital at risk would have been. With Goldman's Stephen Friedman accompanying Geithner in the hearings, he hope that someone in authority will finally ask the right questions. And while they are at it, and have both a Goldman and a New York Fed employee in tow, maybe they can ask why NY Fed Senior Vice President on AIG Relationship Monitoring Steven Manzari told former AIG Financial Services CFO Elias Habayeb to "stand down on all discussions with counterparties on tearing up/unwinding CDS trades on the CDO portfolio."

"Our research team notes that a Republican Senate win would increase the odds that healthcare reform efforts are thwarted, with managed care stocks likely to rally the most, followed by large-cap pharma. Within managed care, HUM, HS and UAM would likely see the strongest potential upside. By contrast, hospital stocks might come under pressure, as these companies have been broadly viewed as “net winners” under reform." - Goldman Sachs

• Japan airlines files for bankruptcy (FT)
• Goldman delays bonus decision (ABC)
• Citigroup posts $7.6 billion Q4 loss (Reuters)
• Democrats face loss of Kennedy's seat, vital healthcare vote (Bloomberg, FT)
• 10 reasons Obama is failing 95 million investors (MarketWatch)
• Credit Suisse cuts bonus pool by 5% to spread costs from U.K. taxes (Bloomberg)
• Brown raises prospect of global bank levy (FT)

• Asia stocks drop for second day on earnings as metals rise, Dollar weakens.
• China shares mixed on policy uncertainty; resources up on higher commodity prices.
• Crude Oil rises for first time in six days on weaker Dollar, China demand.
• EU expresses confidence Greece will resolve debt crisis, refuses to discuss bailout.
• Euro up slightly to $1.4402 as top eurozone official expresses confidence in Greece over debt.
• Florida farmers will sustain at least a 30% crop loss due to freezing temperatures.
• German investor confidence drops again in January amid expectations of slow recovery.

Bob Janjuah's latest in its full, unabridged and grammatically irreverent version. A must read for all non-conformists. A juicy morcel:
"The budget should be balanced, the Treasury should be filled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome be bankrupt. People must again learn to work, instead of living on public assistance. - Cicero, 55 BC... Brilliant....and u know how Rome got away with it for so long - they secretly reduced the silver content in the coins (aka DEBASED) more and more - until they were worthless....and then the Empire imploded, ushering in the Dark ages..."

RANsquawk 19th January Morning Briefing - Stocks, Bonds, FX etc.

Clearly there is a permanent bid in gold, because of the Fed's (and other central banks') aggressive monetary policies, both proactive and reactionary. But the complacency in markets, discounting a recovery, and increasing sovereign credit risk, make another round of QE anything but a foregone conclusion, as far as what is priced into the market. Until excess reserves are unsequestered (by ceasing interest payments on them for bailout recipients to collect a riskfree spread), there is no signal that the Fed is done with its printing. And from now until the next round of liquidity injection, there has to be an endogenous event to provoke reactionary response. Here's why.

The EUR/USD foretold the weak dollar-driven asset rally that characterized the post-dotcom crash 2000s, the inflationary energy bubble/crisis in late 2007 to summer 2008, the liquidity crisis in fall 2008 to spring 2009, and the liquidity rally since spring 2009. Could the strong reversal since December be forecasting a return to mean reversion and a rush to (dollar) liquidity?

With $13,636 million in total 2009 inflows, we present... Gold

There has been much discussion about the possibility of a dollar carry trade. Although I’ve resisted it, it seems pretty clear at this point I was wrong, and there is full-on dollar carry trade. This is bad, bad news for everything else, and I’ve nick-named it The Unwind.

It is the Unwind because the dollar shouldn’t be a carry currency: it is volatile anyway, and that combined with its reserve currency status makes it like playing with gasoline and matches. Wild swings in exchange rates followed by asset markets are often the result of an incremental leveraging and then a violent unwinding carry trade. Get ready for some dollar love that will burst many bubbles and illusions.

The Unwind will initiate the next iteration of debt-deflation. Don’t let the current optimism and propaganda dull your wits: optimism prevailed from 1929 to the spring of 1931.

Much hope had initially been placed in Obama's Home Affordable Modification Plan (HAMP) whose purpose was to keep millions of homeowners out of foreclosure. Yet a recent analysis by Moody's senior director Celia Chen demonstrates that out of the 3 to 4 million loans that the administration had hoped would benefit from HAMP, at most 1 million will experience a foreclosure benefit, and more realistically, this number would be a mere 400,000, less than 1% of all U.S. first mortgages.

Just because the regular US market is closed doesn't mean the ever vigilant futures traders are not HiFTing the living daylight out of the any and all nanopoint trends they can find. And already the market, in the complete absence (literal, not metaphoric) of any volume, has managed to recoup a major portion of Friday's "sell the JPM and INTC news" losses.

All the latest news about the accelerating deterioration in CMBS, courtesy of Barclays' Aaron Bryson.