Archive - Mar 2011 - Story

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 18/03/11

The man who singlehandedly almost stole Goldman's algorithm that could "manipulate markets" (p 8, lines 4-7) is now the person with the biggest prison sentence to come out of the entire financial crisis. Sergey Aleynikov has just gotten a 97 month sentence for doing absolutely nothing but copying some Goldman code that would likely never be recreated by anyone. In the meantime the bank execs who should be in jail, are currently benefiting from their coopted Fed to allow them to collect taxpayer-funded dividend payments. Justice may be blind, but not in America, where its eyes have been unfortunately poked out. On the other hand, at least Aleynikov did not get the gas chamber...

That our politicians are unbearable hypocrites without borders is no secret. After all, Gaddafi himself was among Europe's best arms clients for a long time having to recycle billions of petrodollars into something tangible. It is these very same politicians (wink wink Bunga Bunga) that are now blasting him, and offering their airbases to launch offensive campaigns from. One person who however never misses an opportunity to expose each and every form of hypocrisy is Nigel Farage who takes Gollum-lookalike and European Council president Herman van Rompuy to the toolshed and anihilates him for his sycophantic attempts to appear larger than life by pandering to none other than now uber-despised dictator Colonel Gaddafi. And naturally he does it in his own very inimitable and always highly entertaining and humiliating style. We can't wait to see what haiku the Gollumite will tweet out in response...

Goldman appears to be in full freak out mode today. After the bank had been positioned for a smooth, low-vol economic reflation mode, complete with long stock and short bond exposure, the recent volatility has blown up Goldman's trades right in its face. Earlier we noted that the FX desk advised on a long EURUSD trade with a 1.50 target following the surge in FX vole. And while it is unclear if the jump in vol across all risk assets is enough to cripple the bank like it did in May 2010 when Goldman disclosed massive trading losses on its variance swap trade, the bank appears to have suffered some major damage on its treasury curve exposure following the recent tightening. As a result Francesco Garzarelli has just released a trade update, advising clients to go short the 5 Year at 1.936% with a 2.30% target and a stop at 1.80%. As usual, since that would mean Goldman is now accumulating 5 Year inventory, it appears we will soon have a rather dramatic duel between the two biggest Wall Street titans: PIMCO and Goldman, at least as pertains to their outlook on rates.

The Daily Mail has released a dramatic picture showing the emotional exhaustion of TEPCO managing director Akio Komori who is openly weeping as he leaves a conference to brief journalists on the true situation at Fukushima, following his acknowledgment that the radiation spewing from the over-heating reactors and fuel rods was enough to kill some citizens. "A senior Japanese minister also admitted that the country was overwhelmed by the scale of the tsunami and nuclear crisis. He said officials should have admitted earlier how serious the radiation leaks were. Chief Cabinet Secretary Yukio Edano said: 'The unprecedented scale of the earthquake and tsunami that struck Japan, frankly speaking, were among many things that happened that had not been anticipated under our disaster management contingency plans." This is precisely as Zero Hedge had expected would happen all along, following our recurring allegations of a massive cover up by the Japanese government. And furthermore as we predicted a week ago when we said that continued government lies and subversions would make the situation untenable once the population loses faith in the government, this is precisely what has happened.

The glorious president who has taken some time off from his extremely busy Ipanema tour schedule, is addressing the nation over the latest developments in Libya. Watch the prepared remarks being teleprompted live here.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 18/03/11

The DXY has just breached the support from 2010 lows. Ben Bernanke's stealth plan to inflate the debt is working. In other news, the dollar is now one lap ahead of everyone in the devaluation race. On a real, not nominal, basis the S&P is now down 2.3% expressed in constant dollar purchasing power terms.

The good old old green 75% cotton/25% linen combination formerly known as the reserve currency continues shocking everybody with just how worthless it is, because even as the dollar jumped against the Yen, it plunged against the euro, and in the DXY basket the Euro weighting is about 4 times greater than the Yen. Meaning today the dollar will likely take out 2010 lows, and after that 2009, 2008 and so forth. Furthermore, the DXY has plunged in the past two days, just in time to completely neutralize any nominal increase in stocks values. In the meantime, that other hated metal, gold has risen by $30 in the past two days, reminding once again that until the Fed build an alchemist annex it will continue to be the only true store of wealth (and, yes, only true currency).

According to a recent report from the Nuclear Regulatory Commission the California Diablo Canyon nuclear power plant (built in proximity to the San Andreas fault) which everyone always points to as the biggest earthquake risk in the US, is actually ranked 9th in the US in terms of earthquake risk (we somehow really doubt this). The top one? The same we wrote about yesterday as having had a leaking seal for the past 18 years according to the Union of Concerned Scientists - Indian Point in Buchanan, NY. Of course its proximity to New York City has immediately stirred cries of concern from the world's most banksterous city and demands for a shutdown by Andrew Cuomo. It has also prompted Reuters to release an evacuation map of the surroundings should "something" go wrong with Indian Point, an event which will likely only further instill a sense of soothing calmness and a "tranquility effect" in the New Yorker community.

No more copy paste from the world's biggest bond deflationist. A day after the NYT announced it will soon see its traffic plunge courtesy of a paywall, David Rosenberg says he is going the premium route as well. "Since first publishing Breakfast with Dave when I started with Gluskin Sheff + Associates back in May 2009, we had always notified our readership that the report was going to be made available on a free trial basis. For clients of our firm, the report is still going to be made available for free. But for non-clients, the free trial period will finish by the end of March. At that time, the Breakfast (and other meals) with Dave will become a paid subscription service with an annual fee of CAD $1,000." Sad - no more copy paste from one of the smarter macroeconomists out there.

Following the clusterflock of black swans that has hit world markets in the past month, the Fed has realized it needs to act quick to distribute money to undercapitalized bank shareholders ahead of the upcoming bank sector bail out, which will naturally be funded by taxpayers all over again. According to the Fed, the 19 worst banks in America (in other words those that are allowed to issue dividends) are: Ally Financial Inc. (no, really, f/k/a GMAC is healthy), American Express Company, Bank of America Corporation, The Bank of New York Mellon Corporation, BB&T Corporation, Capital One Financial Corporation, Citigroup Inc., Fifth Third Bancorp, The Goldman Sachs Group, Inc., JPMorgan Chase & Co., Keycorp, MetLife, Inc., Morgan Stanley, The PNC Financial Services Group, Inc., Regions Financial Corporation, State Street Corporation, SunTrust Banks, Inc., U.S. Bancorp, and Wells Fargo & Company. The surge in share prices of the mentioned banks confirms that this is nothing but the latest round of Fed-endorsed taxpayer rape, which nobody can do anything against as the Fed is an "unsupervised" entity, DC is owned by Wall Street, and the peasantry is downloading porn on their iPad.

From Kyodo: "Mizuho Bank said Friday the number of unprocessed transactions as a result of its computer system malfunction since Tuesday stands at 910,000. The unprocessed transactions include salary transfers to customers of both Mizuho and other banks, according to the key arm of Mizuho Financial Group Inc. Mizuho is aiming to fix the system malfunction by the end of the three-day weekend on Monday, it said." It seems reasonable to suppose that Japanese financial workers will be happier once they get their money, considering the prevailing mood in the country (incidentally we are confident a UMichigan confidence read in Tokyo would come at an all time high right about now). And don't fotget - sellside analysts were expecting an unpaid salaries number of 910,200, so the beat is decisively bullish.

After travelling in the first class confines of the Gulf/Jetstream for the past 3 days, the Fukushima radiation has finally reached California. This happens just as The Hill reports Obama has oredered a full review of all US nuclear power plants. Look for the nuclear pair trade to become all the rage in the next week. From AP: "Very low concentrations of radioactive particles believed to have come from Japan's Fukushima nuclear power plant have been detected on the U.S. west coast, diplomatic sources said on Friday."

The one aspect of the Japanese crisis that has so far received little attention is the component parts crunch that is starting to create its own earthquake through the supply chain. From Kyodo: "Concern over a shortage of components for manufacturers is spreading globally as many Japanese companies have been forced to suspend production in the aftermath of last week's devastating earthquake. Some of the effects have already surfaced, with U.S. automaker General Motors Co. suspending operations at a plant in Louisiana, while Chinese companies that rely on Japan-made parts are rushing to buy semiconductors." And while none of this matters to markets still basking in the radioactive warmth of the Bernanke Put, some are already sensing the impact on everyone's darling stock - Apple. iSuppli reports that the Japan quake could create iPad and iPhone shortages, a meme that is already pushing AAPL stock down. "The aftermath of the Japanese earthquake may cause logistical disruptions and supply shortages in Apple Inc.’s iPad 2, which employs several components manufactured in the disaster-stricken country—including a hard-to-replace electronic compass, the battery and possibly the advanced technology glass in the display, IHS iSuppli research indicates. The IHS iSuppli teardown analysis of the iPad 2 so far has been able to identify five parts sourced from Japanese suppliers: NAND flash from Toshiba Corp., dynamic random access memory (DRAM) made by Elpida Memory Inc., an electronic compass from AKM Semiconductor, the touch screen overlay glass likely from Asahi Glass Co. and the system battery from Apple Japan Inc." And the last nail is that as more production scrambles to be pushed to other locations, margins will plunge for all tech companies, forcing a wave of preannouncements within 2-4 weeks and crushing bottom lines. Welcome to the re-depression.