Bank Of America Prepares To Launch Credit Bubble v2.0, Organizes First US Securitization Research ConferenceSubmitted by Tyler Durden on 04/17/2010 - 18:21
Bank of America Merrill Lynch is looking forward to your participation in the first annual US Securitization Research Conference. The conference will feature panel discussions, presentations, and breakout sessions. This conference is by invitation only. Clients interested in attending the conference should contact their BAML representative.
The Pandora's box of the SEC's action against Goldman, which if validated in court will effectively make the issuance of every hybrid CDO product quasi-illegal, will lead to an explosion of lawsuits against virtually any bank that was active in the structured finance space during the housing boom, adding to a fresh round of "non-recurring" charges to bank income statements. Case in point - Welt am Sonntag reports that the German government is considering suing Goldman Sachs, and has asked the SEC for information in its fraud case against the firm. According to the WSJ a spokesman for Angel Merkel said earlier: "First we must ask for the documents, then evaluate [them] and then decide about legal steps." The action stems from the SEC's disclosure the German IKB may have been illegally "taken advantage of" through Abacus, and probably other CDO transactions, leading to losses of $150 million. In 2007 IKB had to be bailed out by the German government, in what some claim was the preamble to banking crisis that is now enveloping Europe (not sure if the sovereign catastrophe facing the EMU can also be blamed on Goldman's CDO transactions, although Goldman will surely also be sued for that sooner or later). We have seen how eager Europe has been to scapegoat "speculators" and other Wall Street actors. We are positive that Germany will surely pursue action against Goldman as it will now provide a vent to pent up popular hatred of how the government has handled the crisis. At the end of the day, even if the SEC's overture is nothing but a pr stunt cleverly orchestrated by Emmanuel Rahm, the unexpected fallout may well be where the real action is.
Since I haven't been able to get you or anyone from Goldman Sachs to appear on my show in months, perhaps we can just try corresponding in writing. Thank you for your press release. I have submitted my follow-up questions in bold...
By Dylan Ratigan
Did Goldman And Tourre Break FINRA Regulations By Not Reporting "Fab Fabrice's" Wells Notice Receipt?Submitted by Tyler Durden on 04/17/2010 - 12:09
Yesterday we praised two NYT reporters for having uncovered the mess of the Goldman CDO scandal first, and we concluded, erroneously now it seems, that the SEC merely piggybacked on their disclosure to file charges against Goldman. However, as Reuters' Matt Goldstein reports, Goldman had received a Wells Notice from the SEC as far back as "six months ago", which predates the Morgenson and Story December 24 story. And as the SEC case would likely have taken at least one year to build up, we are confident that the SEC began their investigation into Goldman and Paulson well prior, likely in 2008 if not earlier. For those unfamiliar, a Wells is basically an advance warning that the recipient will be a target of an SEC investigation. We do not anticipate that anyone aside from Tourre (who, being just 27 at the time of the alleged transactions, in no imaginable way acted alone) and Goldman's legal counsel was aware of this development, although with allegations that Goldman was dumping various security holdings in advance of the announcement one can never be certain. One key line of questioning has emerged as a result of this disclosure: why was there no official notice anywhere in the public record of this Wells Notice receipt? The precedent is murky when it comes to corporations responsibility to report Wells Notice receipts: certainly, Goldman had no mention of this even in its March 1 10-K. What is however without question, is that Fabrice Tourre, who as we reported yesterday, is a registered broker dealer, has a responsibilty to modify his/her U-4 within 30 days of the Wells Notice receipt, yet as of yesterday there was still "no disclosure of any event about this broker." Assuming Goldman received the Wells 31 days ago or more, it begs the question did the firm, by allowing Tourre not to report the Wells Notice, break Finra regulations, and just why it believes it has the facility to do this?
With the topic of shorting real estate once again all the rage, we take this opportunity to remind readers that the next substantial event in real estate (in addition to the multi-trillion CRE maturity roll) will be in the continuously worsening Prime RMBS data. To capitalize on this inflection point MarkIt recently introduced the Prime ABX index (which we initially discussed in July 2009) which will "allow investors to synthetically gain exposure to Prime RMBS collateral." A brief summary of the key index features according to MarkIt: "In addition to creating sub-indices by vintage and collateral, Markit will create and administer an aggregate ABX.PRIME index combining all 6 sub-indices; ABX.PRIME.AGG will trade via CDS contract and will serve as a macro indicator for the entire asset class; Each relative sub-index will be equally weighted in the aggregate, sub-weighting will be applied in the same manner." As we reported recently, the lack of any cash offers in corporate loans is forcing the investment community to seek derivative exposure for yield chasing. We expect Prime securitization to explode soon as the Fed still continues to rule over capital markets with an iron fist and guarantee all sub-5% returns, cutting marginal loss risk by about 50%. The question is now that banks are doing reverse inquiry into Prime ABX participation, which hedge funds, allegedly like Magnetar and Paulson, are creating Prime portfolio structures that will be hedged by this new index? Inquisitive investigative reporters - take it away
The latest update from EuroControl confirms that ongoing European air travel closures will likely have dramatic economic consequences. According to today's update from the flight control agency expects approximately 5,000 flights to take place today in European airspace. Normally, 22,000 are expected. (17k cancelled). Airspace restrictions have impacted most Northern and Central europe, including: Austria, Belgium, Croatia, the Czech Republic, Denmark, Estonia, Finland, most of France, most of Germany, Hungary, Ireland, northern Italy, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Slovakia, Sweden, Switzerland, Ukraine and the UK. EuroControl also notes that approximately 600 trans-Atlantic flights still take place each day, 300 in each direction. 73 flights arrived in Europe this morning. We are confident economists around the world are working furiously to estimate the GDP impact on the Eurozone as a result of this material outlier. First Easter, next Cesar Chavez day, now it is only logical that natural earth processes will be used to blame for the failings of Keynesianism.
Here is the latest lay of the land according to Goldman as we head into a week that sees 128 firms report. "Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down
EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 39% increase in 2010 to $78, and a 20% increase in 2011 to $95." We admire the fortitude of Goldman for having a Buy rating on companies such as Amazon (50.6x NTM PE), Textron (45.1x), which will both report on April 22. Oh, and just because the lustre of the whole BRIC concept has disappeared and been taken over by fancier acronyms such as PIIGS and STUPIDs, Goldman is holidng an "Inaugural Goldman Sachs BRICs Conference. Goldman Sachs will host its first BRICs conference in London on May 11-12, 2010. Companies across
industry sectors from Brazil, Russia, India, and China will join leading developed market multi-nationals that Goldman Sachs believes are best positioned to profit from the increasing importance of the BRIC economies." Goldman's response to any weakness anywhere in the world: "BRIC." Nothing has changed for the past decade. However, just like the only Goldman investment thesis from 2005 to 2008 was to short any housing or derivative thereof (in the trading realm this meant using counterparties that have heavy housing exposure, short firms like Merrill and Lehman that have small rolodexes and can't offload their housing exposure), we wonder just how heavily Goldman is shorting anything having to do with Brazil, China, India and Russia...
We expected Dylan to explode during today's show. We were disappointed as he somehow managed to contain it, and did a pretty good recap of the Goldman affair (if a little too many matchbox cars on the show for our taste). The notable take home for us was that CT AG Blumenthal said that "criminal charges have to be pursued against Goldman." We are sure Cuomo is not too far from this line of thinking. And we would be remiss if we did not point out that credit has to be given where it is due: Gretchen Morgenson (whom half the blogosphere was bashing a month ago over semantics) and Louise Story broke the entire story 4 months ago, and the SEC complaint reads verbatim from the authors' December 24 article.
As Wall Street bombshells go, the lawsuit that the Securities and Exchange Commission filed against Goldman Sachs Group Inc. is about as big as it gets. Who knew the folks at the SEC still had it in them to accuse a major Wall Street bank of fraud? And who could have guessed that Goldman’s canned explanation for its behavior during the subprime mortgage bubble -- that it simply was serving clients’ needs -- could come so unglued so quickly?- Jonathan Weil
Can someone please explain to us what the nature of this post is: “Zero Edge” — Rebutting Faulty Tax Analysis" which appeared today on Barry Rithholtz' blog. We are confused by the whole premise of some guy called called Matt Trivisonno taking offense at our unadjusted and unredacted tax withholdings data, and saying we are misrepresenting something or another. What is more confusing to us is that we have never read anything by Mr. Trivisonno before. Matt, not sure what the problem is - we are merely showing that the Treasury is collecting less money in taxes than it did in 2009. And as for contrarians, we were focusing on the puppets of the government such as Steve Liesman who were making these false claims (at least on an actual cash flow basis - I am sure your adjustments will lead you to whatever conclusion you desire). Period. I am happy to share the primary data with you or anybody else: it is all public and anybody can grab the data directly from the Treasury. If Matt wishes to challenge what the raw data is showing, we are happy to open a forum to him on Zero Hedge. We will post an update on the ongoing deterioration in gross tax withholdings (actual, unrecasted, unmodified or seasonally adjusted) shortly.
That said, we are very amused by Barry's distinction between his blog and ZH. To wit:
ZH is a blogger who covers Wall Street.
I am a Wall Streeter who blogs.
Barry is too kind, although since we cover Wall Street, and Barry considers himself a "Wall Streeter", does that mean we should be covering him as well? Thanks for the heads up!We are lucky that Barry points out what Wall Streeters do: "While he was typing, I was speaking to our clients, doing a Tech Ticker interview for Yahoo, a radio interview, and then making arrangements with NBC World News Tonite." So that's what Wall Streeting is? We will make a note.
Like A Swiss Watch, The Witchhunts Are Here: Blankfein, Fuld, Bernanke, Geithner, And Schapiro All To Testify Before Congress As Distraction Game...Submitted by Tyler Durden on 04/16/2010 - 17:55
In keeping with the tradition of bread and circuses, Obama has managed to channel the public anger at precisely the right time to deflect from the fact that today the US debt increased by $51 billion as seen below. This has many wondering if the whole SEC action against Goldman (which some have already pointed out is a rather weak case) is nothing but smoke and mirrors to distract the broader public for a few weeks until anger once again dies down while in the meantime the administration pushes this country deeper and deeper into insolvency. If it means sacrificing the SEC which, whose downfall is a given anywa, and will take a few years of legal wrangling and millions in legal fees charged to Goldman's shareholders, so be it. For those who care where the real news is, we direct your attention to today's Daily Treasury Statement, which disclosed that total US debt just jumped to $12.817 trillion, $51 billion higher on the day, $101 billion higher for the month of April, and $965 billion higher for the fiscal year beginning October 1, 2009 (so six months ago).
Oil prices were under selling pressure from the opening bell on Friday, having sold off in trading overnight. In the trading overnight in Asia and in Europe, oil prices were being sold in reaction to a lower equities and a stronger US dollar. This was in sharp contrast to the previous six out of seven days, or the period ended on Wednesday, during which fundamentals had played a leading role. For the first five days of that period, ending on Tuesday, oil prices had declined based on heavy inventory levels. On Wednesday, they rallied after this week’s DOE report showed a drawdown in crude oil stocks and a slightly larger-than-expected draw in gasoline inventories. Demand had also shown Oil prices were under selling pressure from the opening bell on Friday, having sold off in trading overnight. In the trading overnight in Asia and in Europe, oil prices were being sold in reaction to a lower equities and a stronger US dollar. This was in sharp contrast to the previous six out of seven days, or the period ended on Wednesday, during which fundamentals had played a leading role. For the first five days of that period, ending on Tuesday, oil prices had declined based on heavy inventory levels. On Wednesday, they rallied after this week’s DOE report showed a drawdown in crude oil stocks and a slightly larger-than-expected draw in gasoline inventories. Demand had also shown
Spreads widened dramatically today, closing at their wides, as overnight weakness from GOOG's miss combined with further contagious stress in European sovereigns and financials was slammed down following the SEC's charges against GS. IG widened the most close-to-close in over two months and HY underperformed as derisking, which started overnight, was clearly in play and perhaps the initial gappy nature suggest that this rally remains very fragile.
The just released CFTC Commitment of Traders indicates that the big banks increased their net short gold exposure to the highest since early 2010, hitting -292,244, a jump of -24,396, and an increase of -69,361 from two weeks prior. Also, in the week ended April 13, the outright Commercial short positions in Gold hit a 2010 record. Gold traders who observed this spike in commercial shorts, especially when combined with the surprising strong gold price action over the past two weeks, are concerned that the news about Goldman, and its ramifications on Paulson's holdings of GLD, may have leaked over the past 10 days to allow banks to front-run today's hit in the price of Gold. The question of whether or not Paulson's worries will materialize into an actual partial or full-scale liqudation will be an open ended question for some time: today many of the key Paulson positions, primarily in financials and commodities have gotten hit hard, leading many to believe that the market may force his hand.