Archive - Feb 2011 - Story

The purpose of this paper is to draw particular attention to the recent disparity in crude oil prices – namely the difference between two benchmarks - West Texas Intermediate [WTI] and Brent [North Sea] Crude. Historically the price of WTI trades at a premium to lesser quality Brent North Sea Crude. This paper lays out the case that the extreme, existing, observable price discrepancies is likely the result of engineered and arbitrary market manipulations – to be discussed below. Such arbitrary price manipulations in the oil markets impact negatively on the oil exporting economies and show favor to oil importing economies.

"In mid-December, we published a lengthy article on why Netflix was our largest bearish bet at the time. With the stock up nearly 25% since then, one might assume that we’d think it’s an even better short today, but in fact we have closed out our position because we are no longer confident that our investment thesis is correct." Whitney Tilson

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 10/02/11

Wonder where the 3 million strong crowd is going? Wonder no more. It is going here...

In the meantime, it begins:

EGYPT SECURITY HQ IN RAFAH ATTACKED BY ROCKET PROPELLED GRENADE

In the meantime, for those who remember what happened to Romania in 1989, get ready to for a Bucharest rerun in Cairo. CL is very cheap here as the march to the presidential palace begins.

Mubarak announces he will not step down. 3 million very angry protesters coming up next.

Well, they threaten to sell our crap, we punish them for pegging to the world's most manipulated currency. Quid pro quo Clarice.

This is an almost identical replica table to the one we posted three months ago when CSCO experienced its most recent plunge, which however paled in comaprison to today's. Following yesterday's abysmal results, here are the biggest losers now that CSCO is trading at the lowest price since July 14, 2009. The usual biggest loser suspects are not surprising. Neither is #16 Goldman Sachs Asset Management with $142 million in losses in one day in one stock.Way to go GSAM: reputation well-deserved.

The Treasury has released its monthly deficit numbers, and while revenues this January came at a robust $226.6 billion (compared to $205.2 billion a year earlier), the outlays exploded to $276.3 billion compared to just $247.9 billion a year ago. The net result was a deficit of $49.8 billion in January, $7.2 billion more than a year earlier. And the number that all are watching (increasingly more irrelevantly by the way, as the Fed now owns almost 15% of marketable debt) - interest on debt securities, was $21.1 billion, or 7.6% of all outlays. Since the Fed's holdings will never be reduced, and in fact will continue growing with QE3, 4, and so forth, soon all the interest on marketable debt will be paid to Ben Bernanke, who will promptly remit it back to the Treasury in the epitome of the biggest ponzi scheme ever conceived by man.

The New York Fed has just released its latest POMO schedule for the upcoming month, and it may make some market members unhappy. Unlike the previous several monthly monetization dockets, this one will only see the Fed pump $97 billion in the market consisting of $80 billion in USTs from the QE2 mandate, and $17 billion in Treasurys due to MBS putback issues per QE Lite. This is $15 billion less than the last POMO schedule which saw $112 billion scheduled to be monetized. The schedule runs through March 9, and the next schedule will be presented on March 10 and 2 pm. There are no double POMO days in the current schedule. Of course, with $195 billion in incremental liquidity from the SFP program winddown, the Fed likely does not need to drown everything in its relentless liquidity.

From Stratfor, citing BBC Arabic: "Egyptian President Hosni Mubarak has reportedly already left the country, and his speech scheduled for the night of Feb. 10 has been pre-recorded, BBC Arabic reported. Some reports indicate Mubarak will speak within two hours, while other unconfirmed reports say he left the country as early as yesterday."

Add one more pill to the daily Oxycodone consumption by the Chair Central Planner. In what is about to become the latest headache for Bernanke, popular Chinese economist Lu Zhengwei, a senior economist at China's Industrial Bank Co., has advised that China should promptly sell its GSE holdings on concerns that continued "blank check" writing by Congress to the GSEs will be "almost impossible" as well as fears that as soon as QE2 ends, the entire US bond complex will see a major sell off. In other words welcome to the world of game theory defection: he who sells first, loses the least.

Unlike yesterday's earthshattering and very perplexing 10 Year auction, today's 30 year auction of $16 billion in bonds was a dud. The bond priced at a high yield of 4.75%, 2 bps wide of the when issued, and just 2 basis points of the highest rates seen in the past several years, specifically the 4.77% seen in the April 2010 auction (not surprisingly, today the 30 Year Fixed Cash Mortgage printed at the highest rate since April of 2010 as well when the market topped last, as we pointed out previously). The Bid To Cover was a subpar 2.51 compared to the 12 month average of 2.67. Direct Bidders, who completely disappeared yesterday were here, taking down 8%, Indirects accounted for 43.1% and the Primary Dealing flippers bought 48.9% (a 73% hit rate). In other news, the interest in the long end is leaking, and the bulk of the fireworks continue to be in the belly, with major interest dropping in the 3-5 Year side, and a major pick up in Indirect interest in the 10 Year. Look for this trend to persist.

Ron Paul has just stepped up his war of rhetoric with his nemesis the Archchairsatan Rudolf Vissarionovich von Bernankestein (because never before have we had a genocidal central planner hell bent on printing the world's fate out of a deflationary collapse), and in an interview with Larry Kudlow said what everyone who is watching the day after day melt up (and wondering what comes next) openly thinks: that when all is said and done, and there is no incremental vapor and no incremental HFT levitation effect, that the US collapse will be comparable only to that of the Soviet Union. Needless to say, we are confident he is optimistic. Some economic observations from Paul: "We have so much unemployment, it is so undercounted. The free market economists report that there is probably 22% of unemployment. They pumped in $4 trillion, they should have added a lot of jobs, but how much did it cost us, and that of course is the price inflation that will come. We are moving into another 30 year period where we are going to see a reversal of interest rates, and we are going to see a crashing of the bonds like we saw 30 years ago and it's going to last a long, long time. The Fed deserves the blame for the inflation, and for the unemployment." On the amount of damage done by the Fed: "I think it's unimaginable, it could be so devastating, and could bring a strong, worldwide run on the dollar. We are in uncharted territories. I think we will see changes in our economy and our country almost equivalent to the change that occurred in the Soviet system. I think it will bring down our empire, we won't be able to afford our welfare state, and we won't be able to afford taking care of the world." And as Zero Hedge suggested previously, Ron Paul believes that the Fed's policies will actually lead to a spike in unemployment when all is said and done. Lastly, on Ron Paul view of Bernanke's central planning:"One time when Greenspan was before the committee, I told him if you can make this fiat system work as if it is the market system working, you have repealed economic law. It is positively baffling that we as a country have accepted that one individual can control the economy."

While the confusion rages over whether Mubarak [will|will not] step down, after Reuters just reported that according to Egypt's information minister Mubarak is not stepping down, suddenly concern about the Suez Canal has flared up again. Luckily, the Egypt armed forces have now secured it, so all is well.