Archive - Mar 23, 2012 - Story

UPDATE: Bloomberg TV news of the 'smoking gun' added

The only thing that could top today's epic market insanity and hilarity, would be that Corzine is himself about to be Corzined. Just released from Bloomberg:

MF GLOBAL'S CORZINE ORDERED FUNDS MOVED TO JPMORGAN, MEMO SAYS
CORZINE'S `DIRECT INSTRUCTIONS' CITED BY CONGRESSIONAL PANEL
MF GLOBAL TRANSFER WAS USED TO COVER OVERDRAFT, PANEL SAYS
MF GLOBAL FINDINGS CITED IN MEMO OBTAINED BY BLOOMBERG NEWS

And so we can now add perjury to felony embezzlement. Which means we now have to wait to find just which MF'er (and JPM'er) will be given a promise of untold millions if they only get Fab Tourred for a few years, and spend 5-7 in minimum security state prison instead of brave Jonny.

In a somewhat sad and shocking slap of reality to the face of our 'recovery' and 'freedom-based-debt-holdings', today's press-release-of-the-day (since we still haven't heard from BATS) goes to Sturm, Ruger (the 4th largest gun-maker in the US) who after receiving orders for over one million units in Q1 has temporarily suspended the acceptance of new orders.

While stocks staged an 'interesting' recovery this afternoon, it was not enough to save them from a fate-worse-than-death - a red-weekly-close! The only (and therefore) largest drop in the S&P 500 of the year (after GS long stocks call) was dominated (beta-adjusted) by the largest 30Y Treasury yield improvement of the year (after GS said get short Treasury futures). It seemed we reverted to good-is-good, but bad-is-better trading this afternoon (though technically we perfectly filled the ES day-session gap from Wednesday), as dismal global macro data spurred a surge in commodities, rally in stocks (carried by the QE-high-beta faves Energy/Materials/Financials but not Industrials notably), compression in Treasury yields, a drop in the USD as QE-hope was back on (and Lockhart helped a little in the last hour with some punchbowl temptations). Futures volume was below average but not dramatic though cash (NYSE) volumes were on the weaker side. The small drop in the USD was dwarfed by the pop in commodities as Silver outperformed but only Gold managed to get back into the green for the week. Oil popped $2-3 around the US open but remains down on the week. Treasuries are 15-20bps lower in yield from their Tuesday highs and 2s10s30s has dropped modestly on the week. AUD reverted from yesterday's late lows and rallied (mildly supportive of the equity move) but JPY kept on rallying (with a small selloff this afternoon) leaving the USD (DXY) in that same very narrow range for the week ending the week down 0.55%. Broadly speaking risk assets did not participate as positively as stocks this afternoon as HY (and HYG) underperformed stocks once again though VIX managed to end under 15% again as the TVIX compressed back down close to its NAV and VXX closed at new lows as the term-structure flattened a little more. Oh yeah, and BATS and AAPL flash-crashed...

The caped crusader will not save the day:

• BATS WITHDRAWS IPO

Sheer humiliation for SkyNet (and all those momos who had hoped to flip their BATS shares, but were bailed out by a bidless HFT market once again) which just blew its own foot off.

In part driven by the 'regime uncertainty' of "authorities having dispensed with the rulebook in trying to shore up the tottering edifice of Western finance" and in part "a defensive response" to the crushing liquidity suck out of the credit crisis, as Sean Corrigan notes this week, money is distinct by virtue of the fact that 'it flows' and this transmission mechanism is clearly broken. US non-financial corporates hoarding of a $630bn mountain of money in 2.5 years (or 85% of retained earnings) have retarded the most incendiary effects of the Fed's extraordinary actions. The key issues will be whether these same corporates will begin to spend this cash, or whether they will simply rediscover an appetite for alternative, non-money assets (and the Fed should certainly take the opportunity to trim its swollen security portfolio by helping satisfy this reawakened urge, should it arise) and then, if they do, what those to whom they redirect the funds will do with them in their place. If the upshot is that there is a sizable remobilization of this money, things could quickly get very hot on the inflationary front if the transition is not managed well.

In an interview with Louis James, the inimitable Doug Casey throws cold water on those celebrating the economic recovery. "Get out your mower; it's time to cut down some green shoots again, and debunk a bit of the so-called recovery."

It's Friday afternoon. Given today's 'Epic Farce' of an equity-trading environment - It's 2pm, do you know where your sense-of-humor is? "Elmo has no idea what he is saying but Elmo hopes he is friendly."

Angela Merkel stepped up to mic, absent the blue face-paint and kilt and announced to world that debt is slavery. While William Wallace Mel Gibson told his 'overlords' that "They may take our lives, but they'll never take our FREEDOM!", it appears Ms. Merkel is telling her serfs that is exactly what she can do (remind us again how much more debt Greece just ended up actually owing after their restructuring?): Via Bloomberg: *MERKEL SAYS RUNNING UP DEBTS ROBS A NATION OF ANY FREEDOM; and at the same time she noted: *MERKEL SAYS TOO MANY GERMANY STATES ARE STILL SPENDING TO MUCH

In only three more years you're talking $20 trillion in public debt for the USA and a GDP going nowhere fast. Add to this that demographics are not encouraging and taxes of all sorts will have to rise. Cuts will be symbolic because the political pain will be unbearable. Without productive new investment, then debt service soon outstrips income growth and the economy enters a death spiral of declining productive investment, ever expanding debt and ever higher debt service costs.

Pulling no punches and as irreverent as we can imagine, Mr. Panos - the Greek 'Borat' - explains (with a somewhat shocking sense of reality) just what the European crisis - most specifically the Greek 'angle' - is all about. From taxes, tourists, shadow economies, war retribution, and german-union realities -  after watching this clip, everything about Greece will be henceforth clear...except perhaps whether Greece has higher exports of Potassium than Kazakhstan. Enjoy.

...of New One Family Homes for Sale (source) which at 150,000 is the lowest print... Ever. And no, "it can only go up from 300,000, 250,000, 200,000, 150,000... 0" does not work with us.

SkyNet is now sentient, and has commenced rebelling against its creator, following the BATS exchange announcement of self help against.... Itself.

• BATS BYX Exchange has declared self-help against BATS BZX
• March 23, 2012 11:07:25 ET

• BATS BYX Exchange has declared self-help against BATS BZX per Rule 611 of Regulation NMS. Routing to BATS BZX has been suspended as of 11:07:04 ET.

Having been on a two-week vacation from their Europe-wide buying spree of everything that is red for the day, it would appear that the ECB is back. As Italian bonds started to accelerate to the downside today, and the 10Y bond touched EUR99, suddenly the yield-rising trend reversed and nine (count them nine) gappy surges later, BTPs are in the green with their yields heading back towards the safety of 5% very rapidly. Perhaps reflecting on the points we have raised before on the CDS markets being a cleaner 'market-reflective' indication of risk is increasingly important as we note...drum roll please...10Y Italy CDS are +21bps at 382bps, near the wides of the day as 10Y bond spreads are now tighter by 2bps and 20bps off their worst levels of the day!

Presented with little comment - except the irony is simply too much to bear as BATS crashes from $15.75 to $0.038 in minutes...perhaps reflecting the WSJ article on HFT abuse and that BATS is being investigated for HFT abuse (ahem) on the day it goes public. We note that there were some trades executed at $0.00! The reason for the crash apparently is because BATS stock is ony trading on the BATS exchange, where apparently the APPL halt second before also happened. Pretty much tells us all we need to know about the stability of broken market structure. In other news, the stock, and exchange, have now been renamed BATShit - perhaps the VVIX can trade there next or something... And they wonder why nobody trades this farce of a market any more.