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
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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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
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."
Of the three great financial truths that have been left unspoken for the past four years out of sheer dread, lest their mere mention collapse our economy, let's start with the most obvious: if the Federal Reserve and Federal government ever crimped the dripline of "easing" and bailouts, America's financial sector would promptly roll over and expire. Does this strike you as a robust, flexible, transparent system? Of course not. Rather, it is a "hothouse" financial sector, one that needs constant injections and a carefully controlled environment just to keep it alive. And since the U.S. economy has been fully financialized, it is now dependent on financial machinations and skimming for its "growth," profits and the debt expansion that fuels everything else, including the metastasizing Savior State, a gargantuan aggregation of an unaccountable National Security State with crony-capitalist cartels and a dependency-inducing Welfare State. Without the debt conjured into existence by the Fed, Treasury and the financial sector, even the mighty multi-tenacled Savior State would quickly starve. As a result of our dependence on financialization and exponential debt, our entire economy has become a weak, sickly "hothouse" economy which can only survive in a narrow band of temperature, debt injections and opaque manipulations of data and what's left of the nation's shriveled markets.
Follow the latest developments in Greece live from Sky News which is providing the best live coverage for the time being.
One of the consequences of MF Global and the whole PSI in Europe is that investors are less trusting about what "net" is. The "gross" positions are about 2.6 billion. That is across Europe. If they are long and short all sorts of German and French government bonds in their role as market market, that wouldn't be much of a concern. If that is the bulk of the gross position, then the market has clearly over-reacted. I would like to see gross and net by instrument. So bonds as one line item. CDS as another. Futures as another. I would like to see gross and net on a notional basis, and DV01 basis. It would also be helpful to know a jump to default number. I would want sovereign exposure and European bank exposure. Basically I would want the data that I would have on my own positions.
Welcome To The Deja Vu Circle Of Hell: Greek Referendum Has Been Scrapped (This Time Maybe For Real)Submitted by Tyler Durden on 11/03/2011 - 10:46
This time from AP:
- GREECE BAILOUT REFERENDUM HAS BEEN SCRAPPED
- Officials close to Greek prime minister tell Associated Press bailout referendum has been scrapped
How close? And are they closer to their Forex frontrunning trading platform?
Seriously - No more... Please... We give up.
Jefferies, which two days ago denied, denied, denied, has been forced to release another statement, 48 short hours later. As usual, the excuse used is the "Net exposure" is just $38 million compared to gross of $2.7 billion, a generic claim which was summarily debunked in our previous post.
Bloomberg's consumer comfort index once again confirms what so many know, despite the day to day 3-4% swings in equity markets, that broad-based sentiment is desperately weak. Retail metrics also confirmed retail sales starting to disappoint - as perhaps burning through savings is starting to reach its tipping point - and so perhaps all those charts we have been so vociferous about pointing to the disconnect between spending/growth and sentiment will converge sooner than many suspect. Specifically the State of the Economy index is only fractionally above its record lows from Feb09 - about as bad as it can get!!
UPDATE 3: JEF halted again
UPDATE 2: JEF resumes trading, dead cat bounce
UPDATE: -20% now, halted
Presented without comment suffice to say that while everyone is focusing on Europe, the US may be about to have its second failed Primary Dealer in a week (and to note the cockroach reference from yesterday):