Archive - May 2011 - Story

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.

"Just about anything you buy, rather than paper, is better. You’re bound to come out ahead, in the long pull. If you don’t like gold, use silver, or diamonds or copper, but something. Any damn fool can run a printing press." - Nelson Bunker Hunt

First we had this: JPM's Mortgage Unit Sued To Disclose Loan Quality Data, Following Allegations It Misrepresented Over 70% Of Loan Portfolio

then this: JP Morgan Sold Investors MBS Covered By "SACK OF SHIT" Loans... Then Shorted All Those With Exposure: A Goldman-AIG Redux

and lastly, this: Here Comes Abacus V 2011: Former Head Of JPM's Structured Products Desk To Be Charged With Securities Fraud For CDO Transactions

All of which combined or seperately lead to this:

• JPMORGAN SAID TO BE SUBPOENAED BY SEC FOR MORTGAGE DEBT RECORDS

As for questions of whether there will be any prison sentences to come out of any of this, save them for comedy hour. At best, we will get another Credit Suisse disclose-and-settle standby case.

At this rate, tomorrow, for the first time, we will see a 32 handle in Comex registered silver ounces, where apparently despite the massive drubbing in paper silver, demand for physical inexplicably persists.Speculators to be blamed for this in 5...4...3...

Some believe the recent general commodities pullback was triggered by the series of CME margin hikes on silver within the past week, after the recent exponential run-up in silver prices. Whether or not that is true, holders of leveraged long commodities positions should have warily watched the action in the silver market. Some silver speculators may not have seen the margin hike as a constraint on lending, but it should have been a red flag for any speculator with a leveraged long position. Moreover, after silver markets closed, silver prices were getting “banged” lower in what looked like suspicious market manipulation.

"I feel completely blessed to be alive right now. To be a witness and participant in a moment in human history that will be written about and passed down in tales for as long as humanity remains on this planet. We are currently observing the evaporation of what Nazis referred to as “The Big Lie.” In very basic terms the concept of The Big Lie is that if you are going to lie you may as well lie big. So big in fact that the majority of well meaning citizenry could never imagine anyone lying on such a grand scale (particularly not their government “officials”) so that they don’t even question the basis of their own reality. In the case of the United States the Big Lie is that we have a free market capitalist economy. Instead we have a corporatist/fascist economy that enriches three main groups. Wall street financiers, the military industrial complex and large multi-national corporations that don’t pay taxes. So that begs the question, how can the American people be so brainwashed into thinking they live in this false reality? It’s very easy. It’s all about the money." Mike Krieger

The administration which is unable to release a photo of the biggest "success" in the fight on terrorism, could not contain its excitement in releasing more info that will certainly get US society to get even more Kafka-fied. As ABC reports: "An early read of the materials seized from Osama bin Laden's compound has not yet produced evidence of a specific, imminent terror plot against the U.S., but does show the group continues to have murderous aspirations, according to U.S. officials and to documents obtained by ABC News." And yes, we are confident we will get full blueprints of this particular data set imminently: after all America needs its daily diversion.

As part of today's subpoena of Credit Suisse over mortgages (which is yet another reason why when this is all said and done MBIA CDS will be back to trading spread from points), we encountered the following stunner. We won't bore you with details, so here is the gist: in a series of emails, represented below, we discover the beyond ridiculous story of a Charlotte stripper who had a Stated Income Loan with Credit Suisse, and when the Swiss bank decided to start backing into her actual income, which goalseeked to $12,000 a month (read the analysis on how this was achieved), which apparently raised some internal flags, and demanded that the loan be investigated, the broker claimed that the stripper's never formally disclosed income is credible and her loan should remain Stated. The last email in the thread: "Someone needs to go to jail on this one." And yet, nobody, not even Angelo Mozillo has, courtesy of the SEC. If there is one email thread that encapsulates all the excesses in the housing bubble, this is it. As for the rhetorical question at the end, we are confident that absolutely nobody will ever go to jail "on this one" or any other one for that matter.

As the market enjoys (and we use the term loosely) this brief lapse back into deflation, which given the economic contraction, so long anticipated at least by Zero Hedge, has finally materialized and put the ball straight back into Bernanke's monetary policy court, here is a brief reminder of reality: i) total debt subject to the ceiling increased by $2 billion overnight to $14,282,174, less than $12 billion away from a breach, and ii) more importantly, total securities held by the Fed increased by $27.3 billion in the past week to $2.5 trillion, an all time record. And yes, i) and ii) go hand in hand. Especially once the $2 trillion debt ceiling hike is announced.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 05/05/11

And to complete this highly surreal day, we now learn that Bank of America (yes, Bank of America, the place where D-grade traders go to wither away and die and where insolvent banks go to get bailed out), posted a perfect trading record in Q1. Unreal.