Capital Markets

Leo Kolivakis's picture

CalSTRS' shortfall grows to $56B

The pension system for California's teachers has $56 billion less than it needs to cover the benefits promised to its 852,000 members and their families, the fund reported Thursday, as big investment losses in 2008 continue to reverberate...


Tyler Durden's picture

NYSE, ICE Submit Joint Bid For NYSE AT $42,50; $3.8 Billion Debt Component (33% Of Deal) Puts Offer In Question

While it is admirable that the Nasdaq and ICE are doing their best to avoid going obsolete in a world in which exchanges no longer matter, the question of just how credible the market considers an offer which has a financing component accounting for 33% of the transaction funding ($3.8 billion), is very suspect. After all what prevents private equity firm XYZ to come up with a 100% debt funded overbiad thanks to a "highly confident" (also known as "highly conflicted") letter from Goldman that it can raise the debt. In this case we have debt underwriting "titans" Bank of America and Wells Fargo underwriting the $3.8 billion. In other words, this deal has the same probability of happening as the Fed has of sustaining the market without downticks for the next 3 months.


Tyler Durden's picture

Thoughts On Future Monetary Policy, As Rumors Kocherlakota Leaked Tomorrow's NFP Number Mount

Tomorrow's NFP number will be one of the most critical releases from the BLS: if on one hand the number is far greater than expected, it will effectively mean that QE3 will not begin immediately after the end of QE2, just like QE1 ended on March 31, 2010 only to see QE Lite implemented 4 months later. That the Fed is not willing to take a political gamble and send oil to $150 is conceivable, which is what would happen should Jon Hilsenrath start leaking QE3 rumors. On the other hand, the economy is once again turning lower as recent diffusion data (not to mention housing) has been indicating. Should the Fed implicitly tighten, by not loosening, the economic contraction will accelerate drastically, and capital markets will follow suit. And since as Hugh Hendry noted earlier, there is no China to pick up the slack, the stakes on the all in gamble in this bet that the virtuous cycle has picked up, will likely cost Bernanke his job if he ends up wrong and QE3 is needed anyway. Of course, as many believe, and as Bernanke himself has said, manipulating the market and stimulating inflation is and continues to be the Fed's only objective. Obviously, the waterfall effects in either direction here are huge. Which is why if tomorrow's NFP number is a beat and not just any beat but a massive one (read well over 250,000), it will be an attempt by the administration to cement the idea that the economy is now recovering. Anything at or below consensus will merely push the decision one month forward, however it will be too late to prepare the political landscape for QE3 in May, just two months ahead of the end of QE2. So tomorrow is likely D-Day on QE3 (or at least a direct continuation of POMO past the June 30 expiration date).


Tyler Durden's picture

Japan Considers Extending Evacuation Radius After IAEA Finds Excessive Radiation 40 km Away From Fukushima

The IAEA which is quickly outstaying its Japanese welcome by disclosing actual facts about the radioactive fallout around the power plant, has just announced that it has found excessive radioactivity in a village 40 km from Fukushima. While the news will not be a surprise to anyone watching the grand lie unfold over the past three weeks, it may hopefully force the Japanese government to finally relent and extend the evacuation perimeter from the existing 20 km, thereby actually preventing the needless loss of life in the long run. From Reuters: "Radiation measured at a village 40 km from Japan's crippled nuclear plant exceeded a criterion for evacuation, the U.N. nuclear watchdog said on Wednesday, the latest sign of widening consequences from the crisis. Criticized for weak leadership during Japan's worst crisis since World War Two, Prime Minister Naoto Kan has said he is considering enlarging the evacuation area to force 130,000 people to move, in addition to 70,000 already displaced."The first assessment indicates that one of the IAEA operational criteria for evacuation is exceeded in Iitate village," Denis Flory, a deputy director general of the International Atomic Energy Agency (IAEA), said.  "We have advised (Japan) to carefully assess the situation and they have indicated that it is already under assessment," he told a news conference." Hopefully our Japanese readers who have been following our coverage of this tragedy, which many have at times called "hysteric" even if always based on facts, have already evacuated long ago. Ultimately, it is one thing for the government to lie with just the Russell 2000's closing level being at stake. It is something totally different when people's mutagenic skills and/or life expectancy is at stake. When this is all said and done, Kan will likely be forced into exile for his tragic botching of an operationg whose only downside to disclosing the truth would have been a few hundred points in the Nikkei/S&P. Well, those losses will still come eventually, but at least thousands of lives would not have been put needlessly at risk in the meantime.


Tyler Durden's picture

MENA Snapshot Update - Is Al Qaedistan Forming In Yemen?

With all the recent excitement in Japan, some may have forgotten that the entire MENA region is currently experiencing a historic, and in many cases very violent, revolution. Conveniently, Emad Mostaquew of Religãre Capital Market has shared an extended overview of the current snapshot in the Middle East and North Africa region. Of particular note is the section on Yemen. As was disclosed yesterday it now appears that the US is directly funding "flickers" of Al Qaeda in Libya, and possibly will be arming such factions in the future, it now appears that Yemen's internal response to instability will also gravitate around the Al Qaeda strawman: "After several prominent defections following the death of 52 protestors at the hands of government snipers, President Saleh began negotiations to step down. This appears to have been a ruse to gauge opposition strength and once he was offered a host of concessions to leave, he withdrew his offer, using the time to solidify ties with key tribes. Saleh’s key tactic has been to emphasize the chaos that would follow his departure, with Al Qaeda in the Arabian Peninsula (AQAP) central to US and Saudi concerns. To play on these fears, security forces have been pulled from key governorates, which are now no longer under government control and have been releasing rebel leaders." Then again, perhaps judging by recent developments in Libya, the US may not be all that concerned about Al Qaeda after all. Much more in the full report below.


Reggie Middleton's picture

It Looks Like Ireland Is About To Get Those Leprechaun Clippers Ready – Haircuts, Here We Come!

One can be rest assured those Irish haircuts are coming. Will the other indebted EU nations just sit back as Ireland clips its debt without following suit? Doubtful! Remember, I have been warning of this event for over a year, and the daisy chain effect is still being ignored.


Tyler Durden's picture

And Like Clockwork, CME Hikes Silver Margins Halting Surge

In tried and true fashion, just as Silver was about to viciously destabilize the global capital markets as it surged to new 31 year highs, the CME stepped in and did its usual 3-6 half life intervention by hiking initial and maintenance margins on silver futures from $11,138 and $8,250 to $11,745 and $8,700 respectively. This is merely the latest margin hike in what appears to be a neverneding series designed to reduce speculative "fervor" courtesy of endless liquidity. What it will do is merely provide a better entry point for those who by now realize that silver's next stop in the fiat endgame is $40, then $50, and so forth. Naturally, the price drop in silver caused gold to sell off too. And now that the CME accepts gold as collateral, we can't even visualize the reflexive loops that develop once the metal that is also a collateral currency becomes more and less valuable at the same time.


Tyler Durden's picture

LCH Clearnet Hikes Irish Bond Margins To 35%

Two days ago we demonstrated that the the charts of Irish bonds, which has now joined Greece, and soon Portugal, in being locked out of capital markets, looked like, as Citigroup put it, a Nightmare on Kildare Street. Today in an attempt to normalize the market, yet which will only remove even more marginal (pardon the pun) liquidity, LCH once again hiked Irish bond margins, from 30% to 35%. And just as the case is with precious metals, soon no margin will be allowed and 100% cash (or gold) collateral will be demanded. In the meantime, look for bid/ask spreads to surge, the ECB buying to be the only buying in all peripheral markets, and CDS traders to once again start being demonized following the starting EU summit which will achieve nothing, but spread further confusion, and even more doubt about the viability of the euro.


Tyler Durden's picture

David Rosenberg Pulls A NYT, Will Start Charging For Content, Still Believes No QE3 Imminent

No more copy paste from the world's biggest bond deflationist. A day after the NYT announced it will soon see its traffic plunge courtesy of a paywall, David Rosenberg says he is going the premium route as well. "Since first publishing Breakfast with Dave when I started with Gluskin Sheff + Associates back in May 2009, we had always notified our readership that the report was going to be made available on a free trial basis. For clients of our firm, the report is still going to be made available for free. But for non-clients, the free trial period will finish by the end of March. At that time, the Breakfast (and other meals) with Dave will become a paid subscription service with an annual fee of CAD $1,000." Sad - no more copy paste from one of the smarter macroeconomists out there.


Tyler Durden's picture

Fed Confirms First FX Market Intervention In 11 Years As Effects Start To Fizzle

And just as the Fed confirms its first direct currency intervention since 2000 (who knew NYU interns could multi-task so well between stocks, bonds and FX, incidentally today's POMO is a lethargic $1-2 billoin monetization of TIPS), the USDJPY takes its first dip below 81 since the "Honda" Accord announcement last night. According to several sources the Fed spent 50 million in USDJPY purchases. Alas that will not be enough. And with the USDJPY continuing to leak lower, take back what we said about the multi-tasking efficiency of 25 year old FRBNY interns-cum-world tyrants in waiting. The attached charts shows why the Honda Accord (as it has now been tentatively named) will need many more steroid injections, which according to Nomura have already cost the ECB at least $5 billion.


Tyler Durden's picture

Eric Sprott Debunks The Gold Bubble Myth

Gold’s continuous ten-year rise hasn’t sheltered it from controversy. Despite producing consistent returns in virtually all currencies year after year, some market pundits still question its validity as an asset class. It’s true that gold doesn’t pay any interest, and it’s also true that much of the gold produced throughout history still exists in some form today. But these characteristics shouldn’t inhibit it from performing as a monetary asset. Cash, after all, doesn’t pay real interest either, and there is more fiat money in existence today than ever before. So why does gold still receive such harsh criticism?

We believe much of it stems from a widely held misconception that gold is forming a financial bubble. It’s a fairly straightforward view – that gold buyers are merely foolhardy speculators buying on a whim with no rationale other than to sell to the ‘greater fool’ at higher prices in the future. It’s a view that assumes that gold has no intrinsic value and is simply a speculative asset that has captured investors’ imaginations.

We don’t take these views on gold lightly. We’ve seen bubbles before and fully know how they end. We have no interest whatsoever in participating in some sort of speculative frenzy – that’s a recipe for disaster in the investment business. Thankfully, however, our gold investments present no such risk. As our analysis has revealed, gold is actually a surprisingly under-owned asset class – and one that has generated far more attention in the media than it probably deserves. While its exemplary performance since 2000 is certainly worthy of discussion, gold simply hasn’t commanded enough investment to warrant the bubble fears it seems to have aroused among market pundits and business commentators. The truth about gold is that most people simply don’t own it…yet.


Value Expectations's picture

If We Must Have a Corporate Tax, Let's Tax Gross Receipts

Taxes are always on the mind of the electorate, and while individual rates of taxation garner the greatest fraction of our attention, the way corporations are taxed is important too. A change in direction in this area could potentially free up a lot of capital, all the while reducing a great deal of waste.


Tyler Durden's picture

Guest Post: On Japan’s Bond Market And Its Economy

Reader Nick Ricciardi submits a rather controversial view on the future of Japan: "Over the past few weeks there has been a new round of articles and commentaries predicting doom for Japan’s economy. Yet, as usual, Japan’s bond markets have shrugged off these fears. Japan’s capital markets and its macro-economy are replete with confounding puzzles. But they are all rooted in two basic misconceptions that Japanese hold concerning their debt. Moreover they are understandable if analyzed from a perspective of both the public and private sectors. Doing so gives us insight into why Japan’s public debt offers the lowest yields of any nation when its debt/GDP ratio is the highest, why Japan’s corporate credit spreads are so narrow and its yield curve almost flat, why Japan’s bond prices are less volatile than those of other industrialized nations when its economy and stock market is “leveraged” to global growth, and why the yen tends to strengthen when Japan’s economy turns down."


Tyler Durden's picture

Uncle Pap Wants You! Greece Reaches Peak Desperation As It Tries To Sell "Diaspora Bonds" To Delay Bankruptcy

Just because Greece is now terminally locked out from regular capital markets, with its CDS trading points upfront, doesn't mean the country can't drink from the same Hopium trough as every other US investor. According to Reuters: "Greece has filed a shelf registration with securities regulators in the United States to be able to sell so-called diaspora bonds to retail investors, the head of the country's debt agency said on Wednesday." In other words, Uncle Pap wants YOU to bail out the country that even the ECB appears to have given up on. And if not for G-Pap, do it for Angela: because if the euro falls apart, the the DEM returns, how will Germany export its way in a non-eurozone environment, if the fair value of Germany's currency is realized and exports plunge? And to all US citizens who are jealous they are not the target source of funds for this last ditch attempt to stave off bankruptcy (again) fear not: pretty soon (if Uncle Bill is correct), Uncle TurboTax will give the very same opportunity to all 300+ million US hopium addicts.


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