Archive - Jan 2011 - Story

The most repeated words are "people," "years", "new", "jobs" and "make." Sounds about right. "Debt" is not even in the top 50.

"Mr. Speaker, Mr. Vice President, Members of Congress, distinguished guests, and fellow Americans"...

Earlier, Marc Faber appeared on Bloomberg TV, in what may go down in history as his most scandalous interview ever. When asked, in advance of the SOTU address, what he thinks of the president, Faber, who appears to have had enough with all the bullshit, propaganda, and lies, replies: "I think he's done a horrible job and I think that will continue, I think he is a dishonest person, and nothing has changed... Some politicians are more honest than others. I don't think that I have a very high regard for politicians, I have a high regard for businessmen and for people who work, and not for people who abuse the system continuously. And in comparison to other politicians, I think he came in on a platform as a president that would want to change the government in Washington, and actually he's made it worse... We foreigners, we just laugh at someone like Mr. Obama. I was very critical of Mr. Bush, but at least he had one line and he stuck to that line, and at least he set out to do a thing and he was relatively straight on the thing that he did. He may have been wrong, but at least he didn't change his mind continuously, and didn't prostitute himself." If nothing else, how many other people do you know who will compare, in front of a live Bloomberg audience, the president of the formerly greatest country in the world to a whore?

Earlier we reported that according to rumors, Gamal Mubarak, together with his family, had left Egypt and were spotted in the UK. We now have confirmation from the Examiner, that indeed, the Egyptian president, Hosni's, son has left his battered country and had relocated to London indefinitely. What is unclear is how much gold, and other inedible commodities, the president-in-waiting had stowed away in his 97 pieces of luggage. Then again, with Egypt holding (having held?) 75.6 tonnes of gold to Tunisia now 5.7, 97 sounds about right...

Here's what you need to know... about what is rapidly becoming the funniest market ever.

When it comes to AIG's liquidity crisis, Wall Street's conventional wisdom absolves Goldman from blame. Goldman's people, so the story goes, were smart and therefore prescient about the declining values of CDOs. So their demands for cash margin from AIG, which insured billions of toxic CDOs for Goldman's benefit, were legitimate. By contrast, AIG's people, the poster boys for financial incompetence, kept flailing about because they were in denial until everything reached a crisis point in September 2008. Yes Goldman was smart, and yes, the people at AIG were clueless, which is why Goldman could pull off such an audacious scam. Goldman's demands for margin were made in bad faith, and possibly under fraudulent pretenses. The conventional wisdom overlooks a critical point: The legal documents had no teeth and might have been impossible to enforce. The problems with the documents, in the context of the overall business deal, require a bit of explanation. But it's worthwhile to remember that all these deals are governed by two truisms: First, if you skip a step in analyzing a structured deal, you probably end up with the wrong answer. And second, almost everything about CDOs is kept secret in order to protect the guilty.

Since last week the ratio of selling to buying was #Ref!, it could really only go up. And it has. In the week ending January 21, the S&P 500 saw 2 insider buys (Tiffany and Fastenal for a total of $131,227) and 60 insider sales, worth $373 million, for a total insider sell-to-buy ratio of 2,842x. The biggest selling occurred in Discovery Communications ($101 million), Tiffany (where the $54 million just modestly offset the $119,259 in buying), Apollo Group ($44.8 million), McKesson ($40 million), and Hewlett-Packard ($25 million). So just like the government's definition of inflation, where if you strip away everything you have deflation, absent all the selling in the last year, which now amount to about $20 billion, there has been nothing but insider buying.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 25/01/11

It was less than 24 hours ago when we first suggested that the Fed's Supplementary Financing Program is about to end. In addition to providing a $200 billion debt ceiling buffer (which the government will fill up in about a month), we noted that the end of this program, which was previously introduced to gradually phase out the ridiculous (in Q1 2010) amounts of liquidity, would provide an additional $200 billion in excess liquidity over a two month period, or effectively doubling the impact of POMO, which monetizes roughly $110 billion in bonds per month. Specifically, we said: "We are confident the US Treasury will announce that beginning with the week of February 14, it will no longer roll maturing 56-Day Cash Management Bills, which means that for the ensuing 8 weeks, one on every single Thursday, there will be a total of $200 billion in incremental liquidity flooding the market, and probably sending stocks, commodities, and everything else that is not nailed down into the stratosphere all over again." Today, Bloomberg has a full story on just this topic, which discusses precisely the end of the program. It is safe to say that within 2-3 weeks, the SFP unwind will commence, and the market will price in another $200 billion in additional free liquidity, which in turn will lead to excess bank reserves surging to about $1.7 trillion in the next 4 months, 70% higher from where they are now. If you think the market is worried about inflation now, wait until June. And that excludes that virtually certain QE2+ announcement: there is no way that the Indirects can shoulder the burden of buying $3-4 trillion in US Treasuries over the next 2 years. The Fed will have no choice but to continue monetizing everything.

In Jeremy Grantham’s 4Q Letter, he summarizes what went well and not so well in 2010, then looks ahead to 2011, sharing what he believes to be critical issues for investors to focus on.He also continues his series of Letters to the Investment Committee with a piece called “On the Importance of Asset Class Bubbles for Value Investors and Why They Occur.” Must read.

It was only a matter of time before someone finally explained it for the masses.

1 minute 23 seconds into the clip below a solitary Egyptian protester stands up to a riot police water cannon in an attempted recreation of the Tiananmen Square tank hold up... And gets blasted squarely in the face. Cause that's how Egypt rolls. Plus, whatever happens in Egypt stays in Egypt right? In other news, the first casualty has been reported, after reports from Khaled Said claim Egyptian police in Suez opened fire live ammunition killing Mustafa Reda Mahmoud Abdelfattah, 20 years old.

Ever since Zero Hedge's advent just over two years ago, one of the most improper things we claimed happened routinely on Wall Street, was that the big banks' prop traders would consistently, and completely against regulations, populate their massive trading floors with both flow and prop traders, who often sat side by side, within earshot and front run the big clients' orders. Some may recall that point #8 of our follow up query to Goldman's Lucas van Praag in December 2009 was precisely a request to get the seating chart together with assigned responsibilities of all Goldman traders. To wit: "we are still hoping to get a seating chart of Goldman's trading floor (via legitimate channels) which clearly discloses flow and prop traders' seats in order to disclose to the general public that flow and prop traders do not share the same information flow, especially that emanating from core clients who tend to move markets the second they announce their trading axes to Goldman's flow traders." The reason we bring it up is that once again we seem to have been just a year ahead of the curve. In a just announced settlement, the SEC has fined Merrill, and supposedly its insolvent Bank of Calcutta taxpayer funded holdco, $10 million for doing precisely this! From Bloomberg: "The SEC found that Merrill operated a proprietary trading desk from 2003 to 2005 on the firm’s main equity-trading floor in New York, where market makers received and executed customer orders. While Merrill told clients their order information would be used on a need-to-know basis, proprietary traders got information and used it to place trades on Merrill’s behalf after executing the customer orders, according to the statement"...... So, does everyone finally understand how Goldman's (et al) prop group has no trading loss day (at near 50% margins) every single day year after year now?

Update: Alshaheed reports that Egyptian police in Suez has opened fire live ammunition killing Mustafa Reda Mahmoud Abdelfattah, 20 years old

The last time a scene like this happened in Greece, Waddell and Reed sold some futures. This time around, nobody even cares. In the meantime, riot police has now escalated to firing tear gas at protesters, as the riots have metastasized to Alexandria, the Nile Delta, and the cities of Mansura, Tanta, Aswan and Assiut (not without Hillary Clinton voicing her opinion, who has called the Egyptian government stable). But the most notable update is that according to reports, Jamal Mubarak has left Cairo to London while Husni Mubarak is fending off tiger sharks at the Sharm el Shekh. Unclear how much Egyptian gold either may have absconded with.

Who says QE2 is an abysmal failure at generating a "wealth effect" for the broader population (see today's less than stellar housing news)? Bloomberg reports that on Wall Street 56% of bankers received a larger bonus than last year. It is great that according to the BLS the average American is also making more money than in 2009. Oh wait. Additionally, fifty percent of U.S. respondents were satisfied with the payout, while 34 percent were dissatisfied and 16 percent were neither, according to the survey.