"Participants also differed in their assessments of the likely benefits and costs associated with a program of purchasing additional longer-term securities in an effort to provide additional monetary stimulus, though most saw the benefits as exceeding the costs in current circumstances. Most participants judged that a program of purchasing additional longer-term securities would put downward pressure on longer-term interest rates and boost asset prices; some observed that it could also lead to a reduction in the foreign exchange value of the dollar. Most expected these changes in financial conditions to help promote a somewhat stronger recovery in output and employment while also helping return inflation, over time, to levels consistent with the Committee’s mandate."
Channel Checker Confirms On TV That All Wall Street Does Is Traffic In Borderline (And Often Blatant) Inside InformationSubmitted by Tyler Durden on 11/23/2010 - 13:48
Channel checking firm Broadband Research CEO John Kunnican was on CNBC earlier and summarized in a few simple sentences the whole topology of precisely how Wall Street works: "It's impossible to be an analyst on Wall Street unless you have an expert network. I know that my contacts at these private companies are having lunch on a regular basis with analysts from Jefferies and Morgan Stanley and Goldman Sachs and what not and I get forwarded the research reports from these banks, and frankly it's a little bit intimidating. I say- geez, i thought i had pretty good contacts but I can't compete." And there you have it - a quid pro quo world, in which inside information (in some case blatant such as when dealing with Phase 1,2,3 trials, or borderline, such as aggregating channel check launch data contemporaneously from all Apple stores) is bartered among the "informational arbitrage" elite on Wall Street, and in which the retail investor has zero chance of competing on a fair basis. And this does not even touch on any of the much more discussed "high barrier to entry" topics such as High Frequency Trading. If after all the disclosures on Zero Hedge over the past two years (which eventually tend to be picked up by the MSM no matter how crazy at first they sound) investors still believe they have a chance to make an honest dollar, when everything is stacked against them, even and especially the regulators, they sure have our blessings and condolences. As for John, good luck finding a new career. Hopefully the clients to whom you showed such exemplary allegiance will put you on their payroll for at least a few months. Furthermore, now that the expert network business model is finally in the open, expect ultra low margin Indian companies to outsource the rolodex offshore, where it is even less regulated, providing their consultants even greater commission, and putting all existing "expert networks" out of a job. That is, of course, unless the SEC, the FBI, or the DA do so first.
The biggest idiots in the world come out swinging:
- U.S. regional bank Regions Financial Corp.'s financial performance in recent quarters has lagged our expectations. Furthermore, we think the company's financial flexibility has been somewhat reduced.
- We lowered our counterparty credit ratings on Regions and its primary bank subsidiary, Regions Bank. The outlooks on their long-term ratings remain negative.
- We expect net losses to persist at Regions in the near term, largely due to unfavorable loan and geographic concentrations. We think net losses could continue to modestly pressure capital ratios in the near term.
Weak 5 Year Auction Prices At 1.41% High Yield, Lowest Bid To Cover In 6 Months As Foreign Investors FleeSubmitted by Tyler Durden on 11/23/2010 - 13:12
With today's $35 billion 5 year auction pricing at 1.41%, we continue to see confirmation that the recent strength in the belly of the curve is quickly turning into pronounced weakness. The Bid To Cover was 2.65, the lowest since June or 2.58, but most notably those mysterious Directs came and took down a record 15.6% of the auction: the largest in history. Offsetting this was the complete collapse in Indirect interest, as foreign institutions took only 31.5% of the auction, the lowest Indirect take down since April 2009. The result was that Primary Dealers got stuck with saving the auction as usual, taking down more than half, or 52.9% to be precise, the highest since June. That foreign interest in the bond was so low is not surprising to us: as we highlighted yesterday, the Fed is now the largest holder of US Treasury debt. At this point the divergence will accelerate, as PDs and the Fed end up owning ever more of each and every auction (and subsequent monetization), while China et al is increasingly relegated to stand by status.
Not just hedge funds any more. Insider trading probe moves to mutual funds.
And yes, hedge and mutual funds are perfectly happy to pay $1,000/hour for information that is completely public and totally accessible to everyone...
"In the currency markets one of the best indicators of stress is EUR/CHF as the crossrate reflects money from the Eurozone flowing in and out of Switzerland. The cycles argued the crossrate would strengthen into next week before peaking and that it could trade as high as 1.3725, but the upmove reversed on Monday. Although the short cycles call for weakness, if the upmove remains intact, it will hold above the support at 1.3380 and will make a final upmove into the middle of next week. It now appears the resistance at 1.3650 will hold and if risk does survive here, this level should be a good place to sell as the crossrate should then turn lower and begin a downtrend lasting into May. A close below 1.3380 signals it is headed lower into the middle of December and our initial target will become 1.3100 and the 1.2000 area could be seen by May. " FX Concepts
After it became fashionable to say one was short the dollar at cocktail parties, the net result was a surge in CFTC-reported spec USD gross short positions and a plunge in net USD exposure. And since options traders are nothing but momentum chasing lemmings the theater is now fully on fire. Granted, while some of the recent spike in short interest has been covered, there are still just over a whopping 7.5k contract shorts that need to be covered before a reversion to the recent trendline. This is why we are currently seeing a massive unwind in the dollar short carry trade, and why once again rumors that macro funds are slowly and quietly receiving billions in margin calls behind the scenes.
De Minimis POMO Ends As Sack Buys $1.6 Billion In TIPS; PDs Found Lacking In Cash As $210 Million Of November TIPS Auction Put BackSubmitted by Tyler Durden on 11/23/2010 - 11:15
Today's viagra-deficient POMO is now over, monetizing just $1.6 billion in TIPS. The Submitted to Accepted ratio is 5.3x, indicating cash shortage at the PDs who are now stuck with useless paper. Most notably, someone wanted to dump $210 million of CUSIP 912828NM8 which was the 9 year 8 month TIPS auction from November 4: so much for inflation "protection." Surprisingly, the MY3 4.5 year CUSIP which is the legendary October TIPS auction which closed at a negative high yield saw no interest in monetization. If we had to guess, investors, contrary to all expectations, are happy with an inflationary bet through the 5 year horizon, then expect deflation after (thus the putback to the FRBNY). How that makes sense is beyond us.
Even as economics has taken to back seat a geopolitics and a market uncharacteristically lacking in euphoria, Rosie once again provides the daily dose of must read economic summary sans the Kool Aid.
European Bloodbath Intensifies As Spanish Bond Yield Hits All Time Highs, EURUSD On Verge Of Going BidlessSubmitted by Tyler Durden on 11/23/2010 - 10:30
As we speculated two weeks ago, the key word that will be regurgitated by all pundits through the end of the year is "contagion". Sure enough, the bond vigilantes who are now fully awake and stretching have brought a mauling to Spanish bonds, where 10 Year yields are now at lifetime highs. The chart below shows what will happen to US bond prices sooner or later. Should the 10 Year experience such a move in a comparable time frame, the Federal Reserve's $56.3 billion in total capital will be exhausted about 4 times over, and Ben Bernanke will be presiding over an insolvent central bank, begging for intelligent life from Proxima Centauri to have departed about 4.27 years ago in direction earth, bringing with it an extra $1 quadrillion in Terra backstop capital.
While CNBC (well, Erin Burnett) is looking at the Kospi and is amazed how the index did not move after it had closed before the military exchange last night, the latest from Yonhap is that the tension in Korea is far from diffused: "North Korea threatened to continue "merciless" strikes on South Korea on Tuesday after the communist state launched a deadly artillery attack across their western sea border. In a statement carried by the official Korean Central News Agency, the North's top military command accused the South Korean military of initiating the exchange by shooting toward its side." Of course, South Korea refuses to demonstrate that it continues to be utterly toothless and issues the following statement: "President Lee Myung-bak ordered his military Tuesday to strike North
Korea's missile base around its coastline artillery positions if it
shows signs of additional provocation, his spokeswoman said." Luckily, Jim Cramer is now expecting both Koreas to sit down for a friendly turkey dinner in a few days in the mine field in the middle of the DMZ, and diffuse the situation.
Some may recall how the very contentious topic of Greek deposit bank runs was arguably the key catalyst to push Greece (and its banks) to accept a bailout from Europe, after the country realized it had little cash left (and the associated SNAFU in which RBS proved it really has no clue about anything). Well, it is now Ireland turn, and as the below chart shows, the Irish bank run has already commenced, with locals not even bothering to wait until the December 7 coordinated "pull your money" pan-European D (for default)-Day. Bank of America brings attention to this issue, which will likely be the last liquidity event before not only a full bailout of Ireland has to be implemented, full terms be damned, but becomes the catalyst for ongoing CHF strength as European deposits once again rush to the relative safety of the last remaining relatively stable European currency (and of course gold). The result will be an ongoing squeeze in Switzerland, which we now believe may be one of the first countries from the core to feel the vigilantes' wrath shortly after Spain is bailed out, some time in Q1 2011.
- Goodbye reserve currency: Yuan begins trading against the rouble (China Daily) this is big news
- US has no good options over North Korean clash (FT)
- South Korea Prepared to Implement Market-Stability Measures After Shelling (Bloomberg)
- Focus Shifts to China as North Korea Tensions Escalate (Reuters)
- China Inflation `Volcano' May Prove Too Hot for Controls After Cash Surge (Bloomberg)
- Growth in Thailand, Malaysia Slows, Heralding Caution in Asian Rate Moves (Bloomberg)
- Irish PM Defiant as Coalition Cracks (FT)
- IMF urges cuts in Irish minimum wage and dole payments (Irish Times)