First Philadelphia, now San Francisco, and all in the same day. Fasten your seatbelts ladies, the muni maul is going mainstream. Per Moody's: "The downgrade primarily reflects the city's very narrow financial position and the minimal prospect of material improvement in the near term. The city ended fiscal 2009 with a balance sheet that was weaker than at any time in the prior ten years and extremely weak by comparison with other similarly rated local governments. Its fiscal 2010 and 2011 budgets both relied heavily on one-time solutions, including draws on reserves, to close sizable projected budget gaps, suggesting that final audited results will show little balance sheet improvement. The lackluster economy cannot be expected to provide substantial relief in the near term. Recent reports from the state confirm that its fiscal challenges continue to loom large, which in turn injects revenue risk into the city's current and next year budgets. The defeat in the election earlier this month of a local pension and health care cost control measure suggests that little near-term fiscal improvement is likely to result from external political pressure."
This is getting boring. The only question is whether we can hit 2011 with no inflows... 2012? 2020? $86 billion in outflows this year, means mutual funds are hanging by a thread on asset values continuing to go up, as they have no dry powder left whasoever.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 17/11/10
From Knight Research: "The simple story is this: We believe the structural and cyclical terms of global trade have finally reached their tipping point. This will catalyze a wholesale change in sentiment and a historic repositioning of risk assets. The emerging market global growth story is over...Although such cataclysmic shocks rarely result in rhythmic, straight line fractures, the chain of price adjustments should be relatively clear. Accordingly, we expect a shockingly powerful rally in the dollar, broadbased weakness across the commodity sector, a dramatic widening of emerging market credit spreads, and what could prove to be a stampede of hot fund flows out of the emerging markets. We appreciate both the gravity and the brevity of this note; but then again, the story is simple.
NetApp (NTAP) is halted after a 10% drop circuit breaker has been triggered, following a Bloomberg TV guidance update which gives a weaker outlook than expected. First switches (CSCO), now cloud computing... How much more can the tech bubble take?
Nobel Peace Prize Recipient To Award Old Hypocrite Medal Of Freedom For Most Successful Circle Jerk Execution In HistorySubmitted by Tyler Durden on 11/17/2010 - 14:39
Yes, it's official. The whole has gone crazy. The rape and pillage of the middle class is now awarded with prizes and medals. "President Barack Obama will name Warren Buffet as one of fifteen winners of the 2010 Medal of Freedom, a White House official said on Wednesday."
In a letter written by republicans bashing the Fed's QE2, the four congressmen and senators amusingly insist "that monetary policy decisions by the U.S. Federal Reserve must be free and independent from political pressures." It is not that we disagree. But even a blind monkey may see the irony of a political group telling the Fed to do something. The only way the Fed will be independent is if it is terminated. Why is it so difficult for these politicians to grasp this. And no, removing the maximum employment mandate won't do jack - the only thing that will happen is more papers from various Fed professors will be published explaining how, suddenly, they have discovered that printing massive loads of money is in fact deflationary.
Following the roughly two-year overdue rout of municipal securities, which somehow has caught market "professionals" by surprise, there are increasing calls that the Socialist States of America should bail out all the insolvent cities and states that back these securities post haste. Judging by the approach to risk (or lack thereof) so far by supreme chancellor Bernanke and his impotent fiscal policy determining brethren, this will certainly happen within the next 12 months. But the government may be smart to leave some money on the sidelines: another far more prominent bankruptcy is coming - that of the US Postal Service itself, which in tried and true fashion, continues to raise compensation even as net income plummets, and the organization can no longer be deemed to be long-term viable. John Lohman explains.
Once upon a time, making partner at Goldman was the pre-transsubstantiated equivalent of admission to paradise on earth: no more worries about money, caviar, cristal, hookers, coke, lawsuits, or any of the other things that mere peasants have to bother with on a daily basis. Goldman's pronouncement: "These appointments recognise some of the firm's most valued senior professionals and acknowledge their leadership and contribution to the firm's culture of excellence." Translation: congratulations, you are now all social pariahs, and will forever be perceived as those who rape and pillage their fellow man only so the firm can create a (monopoly) market in any and every weapon of mass financial destruction, and conspire with its biggest clients to rape those other clients who do not quite generate $100MM+ in commissions per year. Which is why it gives us great pleasure to post the list of the 110 brand new appointed Goldman partners for 2010. It is unclear as of yet how many Goldmanites may have suffered the ultimate indignity - being de-partnered, also known as growing a conscience.
The WGC has released its complete Third Quarter gold market outlook. To summarize: major demand is seen out of China and India, whose surging populations will buy ever more PM due to "rising income levels, high savings rates and strong economic growth." Demand is seen coming from the jewelry sector, as well as from institutions, including central banks, and a jump in industrial demand "on the back of renewed growth in the electronics industry, due to the majority of semi-conductors being wired by gold." Nonetheless, even as demand continues growing, supply is rising as well: "On the supply side, we reiterate our projection that total mine supply is likely to trend higher. This is due to mine project expansions, a ramping up of production to meet the recovery in gold demand and the diminishing scope for producer de-hedging in 2010. Higher supply is also expected to come from China, Australia and US, although this may be partially offset by lower output from countries such as South Africa and Peru due to declining ore grades and rising costs." Ultimately, the only important question is whether QE will ever end. Anything less than a Yes answer, means there is virtually no upside limit to gold, absent an occasional correction.
As we reported earlier, today's $10 billion (lack of) Revenue Anticipation Notes to be issued by California has been delayed. It turns out there is more than meets the eye: namely a lawsuit, which has been disclosed only post-facto. From Dow Jones: "Lockyer issued a notice for the deal's preliminary official statement on Wednesday that said a taxpayer lawsuit was filed in state court on Tuesday seeking to block the sale of 11 state building. If the sale is not completed by June 30, fiscal year 2011 state revenue would be reduced by $1.2 billion, the notice said." In other words, there will be much less revenue to be "anticipated." As for the actual auction, unlike GM which according to Government Motors star employee of the millennium Phil Lebeau is oversubscribed so many times one needs an abacus to figure it out, only 59% of the Cali RAN was presold. In the meantime, the muni mauling continues with extra vigor and finding bid pockets has become tougher than discovering an honest banker.
Possibly the most incendiary moment of yesterday's fraudclosure hearing in which Bank of America and JP Morgan representatives saw no evil and heard no evil, even as Chris Dodd wanted it over so he can buy no evil with the years of accumulated lobby booty from said banks after his long overdue reign of corruption finally ends, was when the CEO of the Neighborhood Assistance Corporation of America, Bruce Marks, realized he has had enough of the endless lies and goes postal at the appropriately named JPM henchman David Lowman, CEO of Chase Home Lending. After Lowman says that "Chase strongly prefers to work with borrowers to reach a solution that lets them keep their homes" Lowman flips out. Watch the hilarious results here. This video is merely a harbinger of what happens when pent up anger at banker lies overflows. Luckily, this time everything ended peacefully, and to the banks' credit, the voice was promptly silenced. Next time, it won't be so easy...
Another day, another POMO. Today Brian Sack bought up $8.2 billion in various CUSIPs maturing between 2018 and 2020, with the issue accepted the most ($2.3 billion) being 10Y LJ7, issued last September. As all of the recently auctioned off 10 Years are now trading at lower prices than where auctioned, not surprisingly neither the NT3 nor the ND8 had any buyback submissions as PDs would be underwater on the buyback. The total submitted to accepted ratio was 3.7x, lower than median and generally indicative of spare dry powder at the primary dealers. And so the PDs make another few hundred million courtesy of commissions and par-market differentials. Aside from that, nothing else to see. Market focused on closing tick to see if POMO has now become a curse instead of a blessing.
Over the past day, some have gotten concerned that the reappearance of HR3808 on the floor of the House may be another shadow attempt to override the president's veto which could, if passed, ameliorate the fraudclosure situation (yet which if Diana Olick's report about an imminent settlement is correct, may be moot as is). Courtesy of a highly ranked political advisor, we present an alternative view, stating that HR3808 is not about enforcing banker interests, but more about delineating the separation of powers between the president and congress. Either way, the bill's attempted passage can be watched live here.