November 3rd, 2011
When it comes to the almighty corporation, employees are naturally expendable. Sure enough AMD is all too aware of this, per AP: "Advanced Micro Devices says it is cutting 10 percent of its workforce amid weak PC market. The chip-maker made the announcement Thursday after the market closed. Advanced Micro Devices Inc. says the cuts should help the company save $10 million in the fourth quarter and $118 million next year. The layoffs are expected to be finished by the end of the first quarter of 2012." From the company's 10K: "As of December 25, 2010, we had approximately 11,100 employees." Of course, in Banana America, this means tomorrow's NFP number will be a massive beat.
While Athens' political parties are recreating a mediocre episode of gossip girl, with accusations of blackmail this, and traitor that, and somehow everyone (not only in Greece but in Europe) has gotten their period at the same time, G-Pap is currently holding his second address to Parliament (view here) in which he is seriously rambling like a deranged lunatic but where he just had the following eerily most anti-prescient statement ever:
- PAPANDREOU SAYS `NOT ATTACHED TO ANY POST'
Below is an artist's rendering of the post in question.
SEC Opens Investigation Into MF Global Insider Trading, Ignores Glaring Evidence Of Client Capital ComminglingSubmitted by Tyler Durden on 11/03/2011 15:57 -0400
After reading the following just released announcement from Bloomberg stating that "the U.S. SEC is reviewing trades in MF Global Holdings Ltd. convertible bonds to determine whether some investors sold the debt based on confidential information before the firm’s demise, two people with direct knowledge of the matter told Bloomberg’s Joshua Gallu and Shannon D.Harrington" we are quite stunned: how on earth will the SEC, which is the official depository of the dumbest and most corrupt people on earth, go about doing this? And what about what is an already confirmed act of gross fiduciary duty breach in the form of commingling client accounts: is that one too complicated for the SEC, so it has to proceed with this ridiculous diversion and pretend it is doing something when the biggest criminal is right there starting everyone, especially those from New Jersey, in the face?
"Nothing has changed and absolutely nothing has been accomplished. There is no “solution” to the crisis that will not result in massive pain, confusion and wealth decimation. The reason is patently obvious. At least half the continent is completely and helplessly bankrupt. There are only two outcomes to the entire situation. Either the sovereign debts are written off aggressively and the banking system declared insolvent and restructured or the ECB decides to turn on those printing presses to the tune of trillions and destroys the purchasing power of the union in Zimbabwe-like fashion. People will read this and think I am exaggerating . The phrase “it takes 5 minutes” keeps running through my head because all it takes is a small amount of time to see the situation for what it is. I am not that smart. This is obvious. The scary thing is that it is abundantly clear that the vast majority of U.S. investors have not bothered to take the 5 minutes necessary to understand how extreme and binary the outcomes to all this is. Their clients will suffer massively in the months and years ahead as a result of their laziness and lack of macro curiosity. " - Mike Krieger
As we have been claiming for months now, Italian banks will have no choice but to raise capital to prevent their undercapitalized status from stirring the insolvent bank vigilantes and making them into the next MF, or Lehman, or pick your favorite bankrupt bank metaphor. Today we get confirmation of this, after Reuters reported that Italy's UniCredit will proceed with a €4 to €7 billion capital raise. So far so good. Where it gets somewhat entertaining is the disclosure of who it is that will be "advising" UniCredit on its capital raise. Per Reuters, "Mediobanca and Bank of America-Merrill Lynch are advising Italy's UniCredit on a capital increase seen in a range of between 4 billion and 7 billion euros, although no formal mandate has been given yet to form a consortium for the operation, sources close to the matter said on Thursday. The sources said a decision on the size of the capital hike depended on a series of factors, including whether UniCredit would be allowed to calculate convertible notes worth some 3 billion euros as core capital." Did they just say Mediobanca and Bank of America advising another bank on... a capital raise? Uh, pardon our ignorance, but shouldn't Mediobanca and Bank of America be focusing on their own capitalization first before advising someone else? Does this mean that Bernie Madoff has somehow magically made his way to the Treasury Borrowing Advisory Committee and is now advising Tim Geithner on how to raise debt? Or that Jon Corzine is running for US Attorney General? Frankly, nothing would surprise us any more... Presenting the YTD performance of all three banks.
We noted, in September, that corporate bond downgrades were outpacing upgrades very notably and today we get the other side of that with Moody's noting that in Q3, Muni downgrades outweighed upgrades by the most since the financial crisis began. At 5.3 to 1, the third quarter of 2011 had the highest downgrade-to-upgrade ratio of any quarter for the U.S. public finance sector since the onset of the financial crisis in 2008.
"A rapid deterioration in credit metrics led to a higher-than-average 14 multi-notch downgrades."
That today democracy died in Greece is no surprise to anyone (see note from Greek reader below). What may be unexpected, however, is that despite expectations that any talk of a Referendum is over and done with, this is hardly the case. In essence, what G-Pap said in parliament today is that there will be no referendum if and only if there is an agreement from the main opposition party. Alas, as the following headlines from Reuters indicate, this now appears to be a non-starter.
- GREEK OPPOSITION LEADER ASKS PM TO RESIGN
- GREEK OPPOSITION LEADER SAYS PM MUST QUIT, ELECTIONS MUST BE HELD
But most importantly,
- GREEK OPPOSITION LEADER SAYS RESIGNATION IS A CONDITION FOR TALKS
And so back to square one, as G-Pap's bluffing blows up in his face and any agreement is now contingent on his departure, something he has said will not happen.
While attempting to assign news/rumor to each dip and rip in today's market is a waste, we note that while markets ended considerably higher (from both yesterday's close and intraday lows), there was some less-than-compelling evidence that traders remain unconvinced. Another referendum-on / referendum-off day saw equities very notably outperform credit markets, it was investment grade credit that outperformed as financial credit lagged the rest of the market. Combine that with the strength in gold and perhaps there was a little more safe-haven demand than a rip-snorting 40pt rally in ES would suggest. The EUR action dominated FX markets (as JPY stagnated) as vol was aggressively bid up around the open (much more so in macro protection than micro) but has ebbed lower as the day has worn on. US equities remain notably expensive relative to broad risk assets, especially noteworthy given the convergence to 'fair-value' overnight from an expensive close last night.
Final Tally - Outgoing Freddie CEO Gets $4 Million Bonus To Receive $21 Billion In Bailouts After Massive Q3 LossSubmitted by Tyler Durden on 11/03/2011 13:09 -0400
When last week we reported about the scandal of outgoing Freddie Mac CEO Ed Haldeman receiving at least $3.9 million as a reward for his two year tenure at the top of the insolvent and nationalized housing entity, we said: "As the chart below demonstrates, the total "draws" received under Haldeman's tenure amounts to $14.5 billion. This excludes the Q3 number which will be made clear next week. Something tells us with this abrupt departure, the number may be higher to quite higher than expected." As usual: when in doubt, be cynical, and be skeptical, and you will be right. Today, Freddie just reported that its Q3 draw, or required quarterly bailout amount from the Treasury, was $6 billion: the highest since Q1 2010, as a result of a massive loss of $4.4 billion. This means that during his tenure which ended just after the completin of Q3, Freddie has been "rewarded" with $20.5 billion in taxpayer capital merely to keep the zombie entity in operation! And for this, Ed gets $4 milliom. And this is why people in America are very, very pissed.
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Is The Entire Global Banking Industry Carrying Naked, RISKY, Unhedged "Risk Free" Sovereign Debt? Quick Answer: Probably!Submitted by Reggie Middleton on 11/03/2011 12:59 -0400
Here I discuss the chances of Goldman Sachs succumbing to an MF Global/Lehman/Bear Stearns style bank run. Impossible, you say? Don't bet the farm on that one, son!
Japan’s six reactor Fukushima Daichi nuclear complex has inadvertently become the world’s bell-weather poster child for the inherent risks of nuclear power ever since the 11 March Tohoku offshore earthquake, measuring 9.0 on the Richter scale, triggered a devastating tsunami that effectively destroyed the complex. Ever since, specialists have wrangled about how damaging the consequences of the earthquake and subsequent tsunami actually were, not only for the facility but the rest of the world. The Fukushima Daichi complex was one of the 25 largest nuclear power stations in the world and the Fukushima I reactor was the first GE designed nuclear plant to be constructed and run entirely by the Tokyo Electric Power Company, or TEPCO. Needless to say, in the aftermath of the disaster, both TEPCO and the Japanese government were at pains to minimize the disaster’s consequences, hardly surprising given the country’s densely populated regions. But now, an independent study has effectively demolished TEPCO and the Japanese government’s carefully constructed minimalist scenario. Mainichi news agency reported that France’s l’Institut de Radioprotection et de Surete Nucleaire (Institute for Radiological Protection and Nuclear Safety, or IRSN) has issued a recent report stating that the amount of radioactive cesium-137 that entered the Pacific after 11 March was probably nearly 30 times the amount stated by Tokyo Electric Power Co. in May.
Here Comes The Politicization Of MF Global: Former Goldmanite Gensler Says MF Failure Example Of "Freedom To Fail"Submitted by Tyler Durden on 11/03/2011 12:33 -0400
We find it supremely ironic that one former Goldmanite, in this case the CFTC's Gary Gensler, takes credit (doing the people's work this time?) for allowing the failure of what is now a documented criminal enterprise, MF Global, run by another former Goldmanite, Jon Corzine, and claiming this was nothing less than an example of "Freedom To Fail". The NYT quotes Gensler: "This was an example of a financial institution having the freedom to fail,” he said in response to questioning from Senator Carl Levin, the Michigan Democrat who chairs the Permanent Subcommittee on Investigations. “I don’t think there’s any taxpayer money behind this.”" No, Gary, there is just client money behind this. Anywhere between $700 million and $1.5 billion. Money that was stolen, and had MF global been bailed out, you, the CFTC and the US Government would have been complicit in a prima facie felony. So please - no need for the pathetic pandering to the lowest common denominator that only years of Goldman tenure can hone to this level of perfection. The only question is whether the CFTC, together with that other corrupt regulator which oddly enough is not yet run by a third Goldman alum, has the "freedom to jail."