Archive - May 6, 2011 - Story

• Goldman’s Blankfein Faces Investors Amid ‘Lingering Problems’ (Bloomberg)
• One Year After Stock Crash Regulators Still Vexed by Fragmentation (Bloomberg)
• Republicans Split Over Medicare Plan (FT)
• Workers Re-Enter Reactor Building for the First Time (WSJ)
• JPMorgan Is in ‘Advanced’ Negotiations to Resolve CDO Probe (Bloomberg)
• China Regulator Defends Internet Role (WSJ)
• Egypt Front-Runner Seeks Israel Reset (WSJ)

Following yesterday's news that Bank of America's D-grade traders eked out a perfect trading quarter in Q1, it would be a massive embarrassment to anyone who did not follow suit and also report of quarter of trading perfection. No such worries for JP Morgan, which just reported that it lost money on exactly zero days in Q1, averaged $112 million in daily trading revenue and had 7 days in which the firm had trading profits of "more" than $160 million, including 2 days unbounded by an upper limit range. Next, we expect Goldman and Citi to do the same. It is a good thing markets are not zero sum, or else someone may ask just who (or rather which taxpayer) is the loser to all these "trading perfection" days...

GoldCorp submits: "Gold and silver are tentatively higher after their 2% and 8% falls yesterday. In silver, speculators on the COMEX continue to liquidate en masse after margin was increased a massive 84% and various stop loss levels are hit, leading to further falls in the futures market. Absolutely nothing has changed regarding the fundamentals driving the gold and silver markets and this will likely be another correction in gold and another sharp correction in silver. Silver’s sell off has been vicious but value buyers continue to accumulate silver bullion. Jim Rogers, who arguably has a better track record than Soros in recent years, remains bullish on gold and silver and told CNBC, “if it goes down I hope I’m smart enough to buy more silver." Also, there are reports this morning from the Wall Street Journal and Mitsui that there was decent buying of silver from China at these price levels overnight."

The string of bad economic releases is consistent enough and bad enough that a weak NFP number tomorrow is risk off and USD positive. The published range has a central tendency of about 155k to 225k. The most forecasts with a May 5 timestamp have marked down payrolls somewhat, but they still range around 175k, so there is reaction but not a panic economic downgrade. Citi is already at 160k. A number below 140k is weak, even taking into account recent information and would reinforce concern that economic slowing is for real.

Goldman's David Greely, who for a long time was predicting and hoping for a crash in oil, only to see a margin-hike driven one in silver leading to a massive collapse in the commodity complex, is out commenting once again on his outlook on oil. Not surprisingly, the Goldman analyst's chief fear now is that a contracting economy (which Goldman's economists have largely failed to noticed so far) will lead to further commodity weakness. Yet, in typical Goldman fashion, the commodity pump machine has once again disclosed that in the long-term there is only one way for black gold to go: up. From the just released report: "We continue to see fundamentals tightening over the course of this year, likely pushing prices back to recent highs by next year. It is nevertheless important to reiterate that while we saw recent prices as having risen above the levels consistent with underlying near-term supply-demand fundamentals, we continue to believe that the oil supply-demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan  oil supplies remain off the market. Consequently, it is important to emphasize that even as oil prices are pulling back from their recent highs,  we expect them to return to or surpass the recent highs by next year."

Jobs, jobs, jobs. A miss will mean QE3 is certain and send the market flying. A beat means the economy is sturdy and will send the market flying.

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Following all the recent busts of former SAC and related portfolio managers, it was only a matter of time before prosecutors zeroed in on the guy at the top. The WSJ writes: Prosecutors are examining trades made in an account overseen by hedge-fund titan Steven Cohen that were suggested by two of his former fund managers who have pleaded guilty to insider trading. The development surfaced in court filings submitted in connection with a sweeping insider-trading investigation, which focuses on ways traders can receive nonpublic information from experts connected to industries or firms. At issue is trading in a $3 billion stock portfolio personally overseen by Mr. Cohen at SAC Capital Advisors and referred to by the government in the filings as the "Cohen Account" and internally at SAC as "The Big Book." SAC portfolio managers funnel their best trading ideas to Mr. Cohen for this account and are paid a bonus if they generate big returns for Mr. Cohen, according to people familiar with the matter." As a silo-based hedge fund, where every PM is given freedom to win or lose small amounts of money on their own, but make big amounts of money on the high conviction ideas, or, in other words, those in which the PM has a lot of inside information, it was only a matter of time before prosecutors realized that even teflon Stevie would eventually have commingled insider-information based trades. The only question now is how he weasles his way out. And unless the government totally screws up its case, it may be not that easy any more.