Archive - Jul 2012 - Story
July 31st
JPM To Be Subpoenaed Over Defunct PFG's Missing Segregated Money
Submitted by Tyler Durden on 07/31/2012 22:35 -0500The blunt trauma that JPMorgan was implicated in the missing millions from segregated accounts in Jon Corzine's bankrupt MF Global may have passed but the memory lingers, especially for all those whose cash is still locked up somewhere in vapor space. Yet one event that may tear the scab that patiently was healing, courtesy of a Copperfield market full of distractions such as JPM's CIO fiasco, Lieborgate, oh and, Europe, right off is the recent bankruptcy of Peregrine Financial, aka PFG, whose story we first broke, and which just as we suspected, has promptly become the second coming of MF Global, as at least $200 million has "evaporated." It is thus with little surprise that we find that the first party of interest is none other than JPMorgan, which together with various other banks, will be the target of a subpoena by the PFG trustee. How shocking will it be to find that Dimon's company is once again implicated in this particular episode of monetary vaporization.
Why Another Major China Stimulus Package Is Not Coming
Submitted by Tyler Durden on 07/31/2012 21:33 -0500
Some market participants seem to be eagerly anticipating or hoping for another stimulus in China, and each day that has passed without a big policy announcement seems to have depressed the Chinese market further. While the Chinese government has been very concerned about the economic slowdown and has taken policies to support growth, UBS' Tao Wang suggests investors not be holding their breath for another big stimulus. The previous stimulus in 2008-09 did lift growth much higher than otherwise would have been, but the excessive credit expansion also worsened the imbalance in the economy and left serious negative consequences which are still been dealt with today. The Chinese government has clearly recognized this and is keen to avoid making a similar mistake this time. This is not to say that the government has done little or will do little to support growth; but the ride, of course, may not be pretty.
Guest Post: The Most Often Forgotten Survival Preparations
Submitted by Tyler Durden on 07/31/2012 20:50 -0500
I think it’s safe to say with some conviction that in the year of 2012 the concept of survival prepping is NOT an alien one to most Americans. When National Geographic decides there is a viable market for a prepper TV show (no matter how misrepresentative of true preppers it may be), when Walmart starts stocking shelves with long term emergency food storage kits, when survivalism in general becomes one of the few growing business markets in the midst of an otherwise disintegrating economy; you know that the methodology has gone “mainstream”. There is a noticeable and expanding concern amongst Americans that we are, indeed, on the verge of something new and unfortunate. Is it the big bad hoodoo of the soon to expire Mayan Calendar? For a few, maybe, but for the majority of us, no. That jazz is a carnival sideshow designed to make the prepping culture appear ridiculous. We don’t need to believe in magical prophecies to know that there is a catastrophic road ahead; all we have to do is look at the stark realities of our current circumstances. It does not take much awareness anymore to notice looming fiscal volatility, social unrest, the potential for unrestrained war, and the totalitarian boldness of our government. I’ll take the wrath of Quetzalcoatl any day over the manure storm that is approaching us currently.
China PMI Misses And Prints Lowest In 8 Months With 10 Of 11 Sub-Indices Contracting
Submitted by Tyler Durden on 07/31/2012 20:29 -0500
UPDATE: China's HSBC PMI came at 49.3 (slightly below the Flash print) but up from last month
The seemingly exuberant levels of the China Manufacturing PMI data when compared to HSBC's Manufacturing PMI have largely disappeared now as the two are the closest together in 9 months. As China's PMI drops to its lowest print in 8 months at 50.1 (less than the expected 50.5), we note that 10 of the 11 sub-indices (including employment and new orders) are all lower and now in contraction mode. Only the Output sub-index remains above 50 (in the if-we-build-it-they-will-come period). New Export Orders also fell notably. Of course having learned their lesson with the unintended consequences of their last major stimulus effort, we suspect the PBoC will be a little more careful with the method to resuscitate this time.
Jeremy Grantham: "I, For One, Wish That The World Would Get On With Whatever Is Coming Next"
Submitted by Tyler Durden on 07/31/2012 18:35 -0500"The economic environment seems to be stuck in a rather unpleasant perpetual loop. Greece is always about to default; the latest bailout is always about to save the day and yet never seems to; China is always about to collapse but instead teases us by inching down; and I swear the Financial Times is beginning to recycle its reports! In the U.S., the fiscal cliff looms along with debt limits and the usual election uncertainties. The dysfunctional U.S. Congress continues for the time being in its intractable ways. The stock market rises and falls and rises and falls again. It is getting difficult to find anything new to say at client meetings. I, for one, wish that the world would get on with whatever is coming next."
Guest Post: The European Tinder Box
Submitted by Tyler Durden on 07/31/2012 18:26 -0500
We wonder if harsh economic realities could transcend generally accepted logic. The common perception of unravelling events relies, by and large, on politicians remaining in close control of events and in particular in tight control of their societies. There are more than 18 million people unemployed in Europe today and, for as long Europe’s political class stays on its current course, that unemployed rate will climb and climb. That’s a really bad state of affairs; indeed, it’s life-threatening. Eventually, we judge that the smouldering European tinder box will burst forth in to flame and thence on to conflagration. It's this 'direct action' by angry citizens that would scupper the controlled, totalitarian formation of a European superstate. Europe is on the verge of being raped and our own politicians don’t know where to look, still less what to do.
Visualizing Today's Deja Vu Last Second 60,000 E-Mini Contract Wipe Out
Submitted by Tyler Durden on 07/31/2012 17:14 -0500
Today, three seconds before the close, someone was in a desperate hurry to dump 60,000 E-Mini contracts - the equivalent of $4.1 billion in underlying notional (ignoring the reflexive impact on various correlated assets and downstream synthetic instruments like ETFs and options). What happened next was a trade that was just shy of the size of the Waddell and Reed trade that the SEC said caused the flash crash. Luckily this time there was just 3 seconds of potential waterfall after-effects before the market closed. Had this happened at the May 6 blue light special time of 2:30 pm, the month end marks of US hedge funds and prop desks would have looked very different one day before the all too critical FOMC statement. The question remains: who waited to perform a reverse E-bay (inverse bid all in, in the last second of trading), and just what do/did they know? Below we present the complete 60,000 dump in its full visual glory courtesy of Nanex.
Is Third Time The Charm For Central Bank Intervention Prayers?
Submitted by Tyler Durden on 07/31/2012 16:20 -0500
Of course this time is different, right?
Equities Close Weak On Heavy Volume As Month Ends Up 1%
Submitted by Tyler Durden on 07/31/2012 15:26 -0500
Do you believe in miracles? Well, all those managers who were long the QE-sensitive darlings of Financials, Materials, and Consumer Discretionary into the month can breath a collective unchanged sigh of relief - thanks to last week's Draghi drag higher. The Energy sector managed a stupendous 4.9% gain on the month. The S&P 500, Dow, and Nasdaq all finished about 1-1.4% higher on the month (while Dow Transports ended -2.3%) as we came close to some Hindenberg Omens in the last few days. Today's market felt like the start of a sell-the-news day as we leaked back to the edge of the Friday cliff in S&P 500 e-mini futures (ES) - with an after-day-session-close snap down to catch-down to where risk-assets had broadly been biased all day - amid huge volume (leaving ES below its recent swing highs and Fibonacci levels). Commodities generally slid lower but WTI led the way ending down over 3% from Friday's close. Gold, Silver, and Copper all slid even as USD slid lower too. Treasury yields fell back retracing about half of the post-Draghi sell-off. VIX ended testing 19% into the close, up almost 1vol as the term-structure flattened ahead of the events of the next couple of days. The massive rip in volume at the close (and 5pt drop in ES) suggest plenty of short-term exits ahead of the fun-and-games of the next two days and certainly Treasuries were sending similar derisking signals.
Have $2,000 In Cash In Your Fidelity Account? Then You Too Can Qualify To Lose Money On The Manchester United IPO
Submitted by Tyler Durden on 07/31/2012 15:09 -0500Have $100,000 in "certain assets at Fidelity" and at least $2,000 in cash for close margin call encounters (you will need it)? Then you too are eligible to participate in the next IPO collapse, coming on August 9th in the form of the Manchester United public offering, which is going to be such an epic disaster it not only has middle market junk bond specialist Jefferies as lead left, that it has already opened itself up to retail participation by all the sub-underwriters, and as of this morning such reputable brokers as Fidelity are seeking indications of interest. Which simply means there is absolutely no interest at the institutional level. The last time this happened? FaceBerg, which went from $43 to $21 in about a month.
FOMC Preview - Rate Extension But No NEW QE
Submitted by Tyler Durden on 07/31/2012 14:56 -0500
The Hilsenrath-Haggle Federal Open Market Committee (FOMC) is likely to ease monetary policy at the July 31-August 1 meeting in response to the continued weakness of the economic data and the persistent downside risks from the crisis in Europe. While we expect nothing more exciting than an extension of the current “late 2014” interest rate guidance to "mid-2015", Goldman adds in their preview of the decision that although a new Fed asset purchase program is a possibility in the near term if the data continue to disappoint, their central expectation is for a return to QE in December or early 2013.
Your Taxpayer Dollars At Work
Submitted by Tyler Durden on 07/31/2012 14:39 -0500Not like anyone would expect anything more, technically, less, but it is always gratifying to know there is someone, somewhere willing to fight for the little guy. And lose.
- SEC LOSES LAWSUIT AGAINST EX-CITIGROUP OFFICIAL STOKER - BBG
- SEC SUED CITIGROUP'S BRIAN STOKER OVER CDO REPRESENTATIONS - BBG
Picturing The Turn In The Credit Cycle
Submitted by Tyler Durden on 07/31/2012 14:16 -0500
Despite record low coupon issuance and a net negative issuance that is enabling technical flow to dominate any sense of releveraging risk in favor of the 'safety' of corporate bonds, the credit cycle is deteriorating rather rapidly in both the US and Europe. As these charts of the upgrade/downgrade cycle from Barclays show, things are as bad as they have been since the crisis began in terms of ratings changes among investment grade and high-yield credit. Combine that with the historically dismal seasonals for credit in the next three months and we urge caution.
Guest Post: Have You Noticed This Type Of Inflation
Submitted by Tyler Durden on 07/31/2012 13:59 -0500Every summer, my colleagues and I invite young people from all over the world for an intensive 4-day workshop about freedom and entrepreneurship. This year’s workshop just concluded yesterday afternoon, and it was, without doubt, the best one ever. For the past several years, we have been conducting this event at a lovely resort in the Lithuanian countryside. It’s a pretty place– a nice, comfortable, relaxing environment away from all the noise and distraction of daily life. Now, I pay for the whole thing myself. I rent out the entire resort and pick up the total cost of food, lodging, entertainment, etc. For this year’s event, my staff was able to negotiate the same price as last year, and I was happy about this. But after the first two days, we began to notice something different: the resort was actually skimping out on our food portions! In other words, they kept the price the same as last year… but they were delivering less value than before. In this case, it was in the form of food portions that were at least 10% smaller!



