Archive - Mar 21, 2011 - Story

When two weeks ago it was disclosed that AIG is willing to pay $15.7 billion for the same toxic securities that two years ago caused AIG to sell 92% of itself to an involuntary taxpayer, and currently make up Maiden Lane II (which is marked on the Fed's books by BlackRock at $15.9 billion) we asked why this process is not open up to broader public auction. After all these are taxpayer assets and should receive an arms-length treatment in recouping best returns for the taxpayer. It seems that other bidders are now starting to appear. The FT reports: "Barclays is among a group of investors weighing a rival bid for a portfolio of mortgage-backed securities that has already drawn a $15.7bn offer from AIG, people familiar with the matter said. AIG, which wants to buy back the assets to reduce its obligations to the government while finding a higher-yielding use for its cash, went public with its bid earlier this month after the New York Fed did not respond to a preliminary offer made in December."

While Japanese futures briefly flirted with another advance, they subsequently dropped by 1% to 9,450, even despite the BOJ's latest injection of 2 trillion yen, which if it continues at this rate will surpass 100 trillion yen in injections within two weeks: an unprecedented feat, even by the Federal Reserve's standards. Of particular note weighing on the markets has been the news from Kyodo that, in confirmation of our fears that zones "Under Survey" are nothing but hotbeds of unprecedented radiation, reported radiation levels are 1,600 times higher than normal 20 kilometers from the power plant. Recall that the first evacuation radius was just 10 km. Assuming a power rate of declining fall out strength, means that the radiation within the 20 km diameter circle centered on Fukushina is currently hundreds of thousands to millions of time higher than normal.

Radioactive Xenon 133 (5.243 day half life) has now reached the entire Eastern seaboard, and soon will likely cover the entire world.

Today the majority of the world was celebrating the fact that TEPCO managed to restore the power supply to the radioactive power plant. And in an attempt to present the next straw man nuclear experts the world over began to focus on such secondary aspects of the explosion as rain and sea water concentrations of radioactivity, ignoring on purpose the elephant in the room. In the same time, those whose attention span is just a little longer than the average headline, put two and two together and realized that the key problem at hand has not been fixed at all. Not even close. According to New York Daily News: "Cooling pumps at one of Japan's crippled nuclear reactors are damaged
beyond repair and will need to be replaced, officials learned Monday. The revelation dashed hopes for a quick resolution to the ongoing nuclear catastrophe at the leaking Fukushima Dai-ichi plant. An emergency order has been placed for new pumps for Unit 2 at the
plant, but it's unclear how quickly they would arrive, officials said." And as readers will recall, and as the below satellite photo will confirm, reactor 2 is the only one of the critical 4 which did not in fact suffer massive explosive damage. So if that one is beyond repair, what happens to the other three? And just what will this much praised power supply at Fukushima actually be connected to? We really urge some journalist to actually ask questions that have a semblance of relevance at the next TEPCO presser, instead of continuing to fill the air with the same kind of fluff that accompanies every single Obama press conference.

Since the apocalypse is obviously priced in the Russell 2000, the market should be able to digest the latest piece roasted glow in the dark swan with barely a hiccup.

• ISRAELI WARPLANES HIT HAMAS MILITARY SITE IN GAZA, XINHUA SAYS
• ISRAELI GAZA ATTACKS INJURE FIVE PEOPLE, AL-ARABIYA REPORTS
• ISRAELI WARPLANES FLYING OVER GAZA, AL-ARABIYA REPORTS

That said, courtesy of the biggest case of headline fatigue in history, at this point absent NASA announcing the imminent destruction of the earth by an asteroid, or a Proxima Centauri supernova (and even that will be bullish as there is precisely 4.2 years of stock market Zimbabwefication before the earth is annihilated), there appears to be nothing that can possibly prevent the Chairsatan from reverse exercising his Russell 2000 put at 36,000.

A week ago when we summarized the most recent round of inbound humiliation by one alleged bucket shop known as Global Hunter Securities, which basically has a buy recommendation on every single reverse merger ever to come to the US, even the acknowledged frauds such as in that particular case CCME, we said:"Oh well - at least we can be certain next week's non
seasonally adjusted initial claims number will be at a minimum one (The
Seasonally Adjusted can well be negative - it is from the BLS after
all)." We were referring of course to the imminent termination of the sellside analyst covering CCME Ping Luo. You can therefore pardon our lack of astonishment when we read, literally minutes ago, the following release from Global Hunter: "We are discontinuing coverage of the following companies: AMCN,CCME, CHLN, CRTP, CVVT, HRBN, and SDTH. We are discontinuing coverage of these companies due to the departure of our analyst and due to a shift in our resources to other areas in the China space." Well, since we predicted the former, it was more or less expected, but we wonder what "other areas" in the China space has Global Hunter morphed to: will they soon be covering an as yet untought of pyramid scheme with a Turbo Buy? Or do by other areas do they actually mean perform due diligence instead of stamping everything that promises a coverage fee with a Buy rating. Which brings us to the topic of this post. Since Gobal Hunter's advisory reputation is smoldering in the sewer, we believe it is time to voice our own unsolicited advice, and tell readers to short every single company on Global Hunter's buy list. If today's example of DEER is any indication, the profit will be at least 20% in the span of a few weeks.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 21/03/11

To all the sophisticated technical and fundamental analysts out there, we have some simple time and money saving tips. When the volume in the market plunges like today, the market will surge. End of story, no more 'sophisticated' analysis needed. As the charts below show, after exploding in the beginning of last week, purely due to various mutual and hedge funds succumbing to the dreaded affliction known as "selling", volume has since plummeted allowing the HFTs to step right back in with the vapor melt up program on full tilt. Should volume spike again the robots will pull the fake bids and the market will plunge once again. And to all who continue to trade this exclusively headline driven market, where one wrong word can shut down the entire HFT churn/scalp crew, we once again express our condolences.

Days of inflatiory rage come to the US: "Police say a San Antonio Taco Bell customer enraged that the seven burritos he ordered had gone up in price fired an air gun at an employee and later fired an assault rifle at officers before barricading himself into a hotel room. Brian Tillerson, a manager at the Taco Bell/KFC restaurant, told the San Antonio Express-News that the man was angry the Beefy Crunch Burrito had gone from 99 cents to $1.49 each."

Thermal images from Fukushima have just been released. One is based on data from German Die Welt, the other one comes straight from NHK. THE picture from Die Welt, emphasizing Reactor 3 and confirming that previous lies that all temperatures at Reactors 1 through 4, were under 100 degrees Celsius, were nothing but. Note the area indicating 128 degrees Celsius. We would assume that is the reactor core area (which refutes the lie). If, instead, that is the spent fuel rod area, then we have some very big problems, even if TEPCO is telling the truth for once.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 21/03/11

After a two weeks ago we presented a report from Alfred Little research indicating just what a potential scam the latest alledged Chinese fraud DEER is, the stock manipulation derby that ensued to keep the price above $11 was beyond criminal. That said, we are happy to present the latest piece of evidence from Alfred Little chipping away at the facade of this latest Chinese company soon to be delisted by the Nasdaq. Look for the stock to follow every other Chinese scam on the road to oblivion. That said, be careful in buying puts: it is nearly a certainy that following a trading halt any and all puts will expire worthless even as the stock opens just shy of $0.00.

According to Kyodo, the Fukushima sea fallout is getting material enough to where the sea soon won't need a blacklight to glow in the dark:

• Kyodo says radioactive caesium found in sea water 24.8 times limit
• Kyodo says radioactive Iodine found in sea water 126.7 times limit

The only logical solution is for the Japanese ministry of deadly disinformation to raise the radioactive Cesium sea water limit by 25 times, and that of Iodine by 127 times. And all shall be well.

It's another day, which means the probability of a Mohamed El-Erian op-ed is 99%. However, while in the past we may have ridiculed these now almost daily missives which lead many an LP to wonder just which media double of the real El-Erian is managing Pimco's $1.4 trillion in AUM, this one is actually worth reading as it ties in the recent developments out of Japan, with the firm's previous insistence that there will be no QE3. Oddly, this party line still has not changed: "Some will undoubtedly call either for a QE3 or for the extension of QE2. Others will warn against this type of “active inertia” in policymaking, noting that the repeated use of such an instrument will likely shift further the balance of outcomes away from “benefits” and towards what Chairman Bernanke, in his Augst 2011 Jackson Hole speech, correctly labeled as “costs and risks”. And remember, these costs and risks – or what at PIMCO we have analysed as collateral damage and unintended consequences – have consequential economic, financial, and political elements that play out both domestically and abroad. Taking all this into account, our inclination is that the hurdle rate for introducing a QE3 will prove to be very high, and rightly so."

The United States Department of Justice delivered a very clear and unfortunate message on Friday: “Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism. While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country.” These remarks were released by the US Attorney’s office in the western district of North Carolina following the conviction of one Bernard von NotHaus, the creator of the ill-fated Liberty Dollar. Somehow, though, I doubt that Homeland Security chief Janet Napolitano or Attorney General Eric Holder will end up labeling Mr. Bernanke as a domestic terrorist.