Archive - 2010 - Story

First flash, now naked access. While we are certain those whole livelihood depends on scalping and manipulating markets and finding loopholes from regulation will scream bloody murder (look at the industry response to suggestions that HFT is "evil") will provide some very vocal public comments, at least the SEC implicitly acknowledges that naked access is not quite the boon to investors that Goldman et al would like to make it seem.

It should come as no surprise that Zero Hedge has long been warning against the dangers of sponsored access. Some broad background on the topic can be found here and here.

For once we applaud the SEC in this endeavor. Of course, once the SEC ends the public comment solicitation period with "no action", or a ruling that does nothing at all to change the actual naked access process, we will resume our daily calls for Mary Schapiro's immediate resignation.

With all the recent outrage over the AIG fiasco focusing on Tim Geithner, is the anger misplaced? Is the real culprit in this situation Goldman Sachs, which allegedly sold its $2.5 billion in extremely profitable AIG CDS prior to March 15, when the full disclosure of the government's measure to preserve AIG became first known; a time in which Goldman, by implication, may well have been in possession of material, non-public information?

Watch the Financial Crisis Inquiry Commission's grilling of Blankfein, Dimon, Mack and Moynihan live and turbofan enginge commercial free at the FCIC's website here.

• Must read: Bring back Glass-Steagall - Banks that behave like hedge funds (and "trade ahead" of their clients) don't deserve guarantees (WSJ)
• And speaking of Goldman hypocricy - The subsidy that won't die (Slate)
• Friedman: Is China the next Enron? (WSJ)
• Bernanke challenged on rates role in bust (WSJ)
• German economy shrinks 5% in 2009, more than expected (Bloomberg)
• Moody's says Greece, Portugal may face "slow death" (Bloomberg)

• Asian stock markets lower Wednesday, weighed by Wall Street's decline and Chinese central bank's move to rein in excessive credit creation.
• China’s stocks declined the most in 3 weeks, after a shift by central bank to restrain lending.
• China's central bank said it will raise the % of deposits that banks must keep in reserve.
• Indonesia plans to renegotiate a trade pact between SE Asia, China that took effect this month.
• Japanese corp. bankruptcies fell for the first time in 4 yrs in 2009 led by export-led recovery.
• More problems in Greece, weak US corporate earnings and China's curb on lending sends European stocks lower.

RANsquawk 13th January Morning Briefing - Stocks, Bonds, FX etc.

Since the 1991 collapse of the USSR, foreign investors have looked at the former Soviet space as a land rich in underdeveloped resources waiting for Western technology and finance to bring to the world market. Gold from Kyrgyzstan, uranium and oil from Kazakhstan, oil and natural gas from Azerbaijan – all have begun to make their way to the global market, generating rich profits for both their owners and developers.

In the five former Soviet countries stretching eastwards from the Caspian to the western Chinese border – Turkmenistan, Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan there is a resource both more limited and valuable than even the region’s fabled hydrocarbon resources, water. The arid region has a surfeit of it, what there is is unevenly distributed, and more than 70 years of Soviet industrialization have left an ecological wasteland facing increased demands on its limited hydrological resources.

The ABC Consumer Confidence index plummeted last week, falling from -41 to -47, sustaining "one of its steepest one-week drops in the last quarter century, following last week’s troubling jobs report with an all-hands retreat from what had been a tentative positive trend in consumer attitudes." At -47 the index is essentially at the average 2009 level of -48, and far below the average since 1985 of -12. As far as the US consumer is concerned, this recession is far from over.

A summary rundown of some quick thoughts

One of our favorite strategists, SocGen's Dylan Grice is out with a masterful in its simplicity analysis, looking at the possibility of a funding crisis enveloping the governments of the developed world, and originating in the place where ever more people see brewing trouble: Japan. The full presentation can be found here, and while we recommend a full read, for those strapped on time, here are the cliff notes.

A central feature buttressing myriad defenses to the more opaque practices implicit in Federal Reserve secrecy has always been the importance of maintaining "the independence of the Federal Reserve". Recent developments, with respect to the Federal Reserve's "clandestine service directorate" now give us cause to respond to this rationale with a resounding: "Shenanigans!"

Update: Would it surprise you to discover that the Fed is resisting additional disclosures? Probably not. The method of their concealment is quite interesting, however.

A terrific list of questions that the FCIC should ask banker executives, conceived by the trio of Eliot Spitzer, William Black and Frank Portnoy.

Matt Goldstein at Reuters is on a roll: after pointing out the SEC's complicit role in the AIG disclosure fiasco, today he highlights the list and details of securities that was purposefully and willfully redacted by the same SEC that today filed a second lawsuit against BofA, after Rakoff yesterday told the queen of corrupt and incompetent regulators to shove it. The list of redacted CUSIPs contained in the Schedule A to the AIG Shortfall Agreement with the Fed's Maiden Lane III (aka Taxpayer-to-Goldman Money Transfer Special Purpose Vehicle) indicates all the underlying securities which ended up being repaid to the nationalized insurers' counterparties at 100 cents on a dollar, when in fact their market value was well over 50% lower.

Leading groups were slammed hard. Typical and usual Options Expiration Racketeering. Anything in an uptrend where massive call buying was taking place was smoked. Tomorrow, they will probably vaporize some puts.

Last month, acting on behalf of institutional investors of some note, Grant & Eisenhofer filed suit challenging Goldman's bonus policy. Now, it seems, suits like this might say something about what is in store for Goldman (and its stock price) in the years to come.