Archive - 2011 - Story

Just a headline for now, but the last time Bernanke was "very concerned" about something, the presses were already in motion.

• SENATOR HATCH SAYS BERNANKE `VERY CONCERNED' ABOUT EUROPE - BBG

And the kickers:

• BERNANKE TELLS SENATORS NO FED RESCUE OF EUROPE BANKS: GRAHAM - BBG
• BERNANKE `VERY CLEAR' FED HAS NO EUROPE BANK AID PLANS: CORKER - BBG

Unless, of course, he has no other choice...

Much has been said about the National Defense Authorization Act (NDAA), a bill which, as many are aware, permits the indefinite detention of Americans suspected of terrorist affiliations. As a reminder from the AP, "Congress is pressing ahead with a massive $662 billion defense bill that requires military custody for terrorism suspects linked to al-Qaida, including those captured within the U.S., with lawmakers hoping their last-minute revisions will mollify President Barack Obama and eliminate a veto threat. Leaders of the House and Senate Armed Services Committees announced late Monday that they had reached agreement on the policy-setting legislation that had gotten caught up in an escalating fight on whether to treat suspected terrorists as prisoners of war or criminals in the civilian justice system. Responding to personal appeals from Obama and his national security team, the lawmakers added language on national security waivers and other changes that they hoped would ensure administration support for the overall bill. “I assured the president that we were working on additional assurances, that the concerns were not accurate,” Senate Armed Services Committee Chairman Carl Levin, D-Mich., who spoke to Obama last week, told reporters at a news conference. “That we’d do everything we could to make sure they were allayed, and met.” White House officials said Tuesday they were reviewing the bill. It was unclear whether they would hold firm on the veto threat." Unfortunately, the usurpation of America by the Big Brother state (more here) is no surprise to anyone, and this is merely the latest milestone. Regardless, those who wish to watch the moot debate on the topic as our elected individuals sell yet another remaining individual liberty to the corporate octopus, as well as the vote on the act due at 3:30 PM Eastern, can do so here.

The earlier bomb scare at Credit Suisse's 1 Madison Avenue HQ may have been a hoax (or, considering this news, a diversion) but the sneaky announcement that the Swiss bank is preparing to fire 49 employees, once again courtesy of the DOL's appropriately named WARN website, is all too real. And since we are now deep in (lack of) bonus season, expect banking layoff announcements to start popping up daily if not hourly. As for the Unmagnificent 49: goodbye 1, welcome 99.

Since the market isn't able to price real estate, risk or credit transparently, then prudent investors would be forced to shun the market: how can you invest wisely when assets, debt and risk can't be priced by the market? Prudent lenders would withdraw from such a rigged, risky market, which is precisely what has happened. Literally 99% of the mortgage market is now guaranteed by the Federal fiefdoms, all of which are losing tens of billions of dollars and require monumental taxpayer bailouts to keep underwriting the banking sectors' private profits. The only way to restore trust and clear the market of uncollectable debt is to let the market transparently price, risk and credit--precisely what the Fed's policies are designed to stop. The Fed's knees are chafed from kow-towing to their banker masters, and worshipping the "magic" of their Keynesian Cargo Cult and Lenin ("destroying capitalism from within" should be stenciled on the Fed letterhead). Separate risk from gain, obliterate transparency and choke the market with zero interest rates, and you've not only destroyed capitalism, you've also destroyed the economy by rewarding the most venal, corrupt, fraudulent and capital-destroying players while stranding the prudent on an island of opacity where the true price of assets, credit and risk cannot be discovered.

The scramble to Uncle Sam's paper of last resort continues, when in the aftermath of yesterday's Triple Double (second Highest Bid To Cover and Indirect take down, and second lowest Yield ever), we saw a Bid To Cover of 3.04 for today's 29 Year 11 month reopening, which was the highest since 2000, and a record low yield of 2.925%, 3 bps inside of the When Issued. The only rain in this parade was the Indirect Bidder take down which was a modest 32.5%, compared to an LTM average of 36%, while Dealers took down 46.3% and the remainder, or a sizable 21.2% going to Directs. Considering the pervasive sell off in risk and all liquid assets, it is not surprising that cash had to parked somewhere, and today it was in the place where the monetization circuitry still works. When Europe finally tumbles and the bond vigilantes have no other targets left, we may have to revisit, but today the world's cash strapped investors have just one place to park their cash equivalents: congressional pork, because naturally the auction result gives Congress a green light to do lots of future fiscal stupidity.

Big Oops out of Bloomberg:

• GREEK CREDITOR COMMITTEE SAID TO BE NEAR HIRING BLACKSTONE
• GREEK CREDITORS SAID TO WORK WITH WHITE & CASE, ALLEN & OVERY
• GREEK CREDITOR COMMITTEE MAY FORMALLY HIRE BLACKSTONE THIS WEEK

Is that how it begins - with an involuntary filing of bankruptcy by an ad hoc committee of creditors?

With speculation building up all morning that the French AAA rating will be momentarily gone, following a statement by France's Juppe that the loss of AAA would not be "cataclysmic", it was up to the S&P itself to leak the rumor which unleaked the previous rumor, and told the WSJ that it has not informed the French government of its rating intentions. The result: EURUSD soars by 40 pips on this absolute non-news, which does nothing but buy at best a 24 hours respite from the inevitable. Furthermore, the S&P has no statement at all if and how many Congressmen, and Nancy Pelosi of course, do know what S&P's intentions are and are already trading appropriately. We expect this momentary bump in risk to be unwound in seconds.

Over the past two days, Reuter's Matt Goldstein and Jennifer Ablan have been poring over a formerly confidential transcript of one Stevie (but don't call him that) Cohen, better known as the man who created "information arbitrage", the investor's "edge" and made expert networks very rich, if only briefly. For their extended series on the topic read here, here and here. And while they have done an admirable job of compiling the tasty morsels so far, there is far more here than meets the eye so we open it up to our extended and very much erudite financial audience to find that one slip which the various AGs and DAs have been unable to isolate in years of alleged 'investigatoring'. As Goldstein says: "there is plenty of great and illuminating stuff in the 242 pages of deposition testimony Reuters obtained through a court motion to unseal documents in the civil lawsuit. As we noted in our story, Cohen is pressed at great length for his views on insider trading—he thinks the laws are “vague”. And as we highlighted in our blog, there’s even an amusing little feud between the lawyers over how the SAC Capital founder should addressed. Still, it makes you wonder what was said by Cohen in the more than 400 pages of deposition transcript that wasn’t unsealed. And we’d love to see Cohen on videotape as sometimes body language can be revealing." Perhaps a key point of focus is whether Stevie has himself received tips from the likes of Hank Paulson in the past about future government policy - something we know has already happened albeit with people closer to his Goldman Diaspora, a ring the former Gruntal trader never felt too comfortable with. Because it appears there certainly are hints in that regard, and if indeed proven that SAC was among the "preferential" funds of the administration in its market moving ways, then there would be no surprise why any attempts to find wrongdoing at SAC have so far been duds.

If readers have the sense there has been a deluge of Kyle Bass reading (and viewing) materials on Zero Hedge in the past two weeks, it is because there has been: and why not - after all, unlike all other cheap talking heads, and know-nothing pundits who merely need a suit to make an appearance on one of the TV's financial comedy channels, Kyle has been consistent in the most important thing - telling the truth. Today, he took his resurgent popularity to CNBC which always knows which way the winds blow, and told David Faber more or less everything that Zero Hedge readers know already about Europe's collapse, on why the ECB will print but only after a default, and about the inevitable global debt restructuring. There was a twist: as most regulars here know, the key topic of the past week, of December, and potentially of 2011, is the limitless "fractional Prime Broker lending" of assets-cum-liabilities (and when it comes to the realization that one's gold itself may be rehypothecated, via GLD, it is no surprise why paper gold is plunging, with the expected delayed effect of slow comprehension) in an infinite loop of daisy chained counterparty exposure, also known as rehypothecation. Which is precisely what what Bass touches on 9 minutes 30 seconds into the interview when the discussion shifts to "shortening collateral chains." Must watch for everyone who enjoys not being lied to.

For the first time in while, Gluskin Sheff's David Rosenberg recounts his always informative chat session with Bob Farrell and shares Farrell's perspectives on the market ("his range on the S&P 500 is 1,350 to the high side and 1,000 to the low side. He was emphatic that there is more downside risk than upside potential from here. His big change of view is that we have entered a cyclical bear phase within this secular downtrend (he sees the P/E multiple trough at 8x). Rosie also looks at Europe and defines the term that we have been warning against since May of 2010: "implementation risk" namely the virtual impossibility of getting 17 Eurozone countries (and 27 broader European countries as the UK just demonstrated) on the same page when everyone has a different culture, language, history and religion... oh, and not to mention animosity to everyone else. So yes: Europe in its current format is finished, but what will it look like in its next reincarnation? And why does he think the European liquidity crisis will become a full blown solvency crisis in Q1 2012? Read on to find out.

12 trading days to the end of the year (and 7 until Christmas), and something, or someone is missing... Who is it? Here is an artist's rendering courtesy of William Banzai.

How much further might gold fall? Market momentum is a powerful force and therefore further weakness is quite possible.  Support is at the 200 day moving average at $1,619/oz. Below that is the psychological level of $1,600 per ounce and the 250 day moving average of $1,571/oz. Price resistance was seen at the $1,570/oz level between late April and July 2011 (see chart) and this level could become support as is often the case in bull markets. It is important to note that gold’s falls have been primarily dollar related and gold has fallen by a lot less in pound and in euro terms. Most analysts of the gold market remain of the view that this is another correction and that the medium and long term uptrend will continue due to significant investment, store of wealth and central bank demand due to geopolitical, macroeconomic, systemic and monetary risk. One analyst who appears to have a very different view regarding gold is world renowned economist Nouriel Roubini.  The Chairman of Roubini Global Economics has again taken to Twitter to engage in some name calling and to appear to question gold’s recent price action and whether gold may reach $2,000/oz.

As pointed out earlier, the short term USD-funding liquidity ruse instituted two weeks ago by the New York Fed has now all expired, which means global banks are progressively selling all residual winners left having dumping US safe haven securities (a big reason why the EUR has plunged is there is no more repatriation of USD-denominated assets by European, well, French banks). Enter the commodity space. As the following color-coded chart demonstrates, "stuff" is being offloaded by the boatload to procure cash in expectation of yet another day of "rip your face off" margin calls. Which naturally is to be expected - with collateral negligible, those who sell hard assets first sell best. Yet at the end of the day, all it does is provide an ever better entry point for those who have the means to institute hedges against the next step which will will occur shortly: yet another global liquidity tsunami courtesy of the central banks, because that is all they know and all they can.

With fundamentals, technicals, and now even headlines out of Europe largely irrelevant, it only leaves one market-moving thing: rumors. And yesterday was a terrific example of precisely this. Art Cashin does a "rumor by rumor" expose of the key "events", however unfactual, that moved stocks yesterday. If history is any indication, and it is, today will likely see the rumor brigade unleashed all over again shortly.