Florida

Over two years ago, on November 5, 2010, weeks before news broke out that the SEC had caught hedge funds in a massive insider trading scheme involving expert networks, and before the phrase expert network was even mentioned in places away from hedge funds, we wrote an article, titled "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" that predicted everything that has transpired with SAC since then: we said expert networks would be exposed as the root of virtually all "information arbitrage" alpha by Steve Cohen, more importantly, we exposed various biotech stock trading patterns, where the informational benefits from easily bribable doctors would result in immediate profits courtesy of advance knowledge of Phase 2, 3 and NDA results. Today, we discover not just how deep the SAC insider trading schemes went, but that the profit from such information abuse amounted to hundreds of millions in standalone cases. Adding these together and one can see why Steve Cohen - whose knowledge of these epic inside trading scheme is of course never implied by us: after all, that's what the DOJ, the SEC and the various DA offices are for - was generating 20% returns year after year and able to pocket 3% and 50%.

• Israel Ready to Invade Gaza If Cease-Fire Efforts Fail (Bloomberg)
• Petraeus: A Phony Hero for a Phony War (NYT)
• IMF'S Lagarde says Greek deal should be "rooted in reality" (Reuters) "rooted" or "roofied"? And where was it until now?
• ECB's Asmussen says Greece to need aid beyond 2014 (AP)
• EU makes budget plans without (FT)
• Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
• Shanghai Composite Dips Below, Regains 2,000 Level (Bloomberg)
• Bond investor takes big punt on Ireland (FT)
• Noda defends BoJ’s independence (FT) Indewhatnow?
• Inaba Says BOJ Could Ease More If Government Reins in Debt (Bloomberg) Actually it's the other way around
• Miles Says Bank of England Can Do More If U.K. Slump Persists (Bloomberg) So much for the end of QE
• US tax breaks worth $150bn face axe (FT)

Secession:  Exploding Movement, Tempest In a Teapot … Or Something Else?

It depends. 

A six state silver lining..

This morning no one is marching in the streets, no coup is underway and the election process functioned. For that much at least; we give thanks. We will have twenty-fours hours of afterglow and self-congratulation and then we will return to a Democratic President with a Democratic Senate that will confront a Republican Congress and America’s fiscal cliff. The popular vote provides no mandate and the United States remains a deeply divided country. Just as our election on November 6 provided an end to a very long road so will the empty till of Athens and the severely declining revenues of Spain. Decisions will now have to be made. In both Greece and Spain it is a high stakes game of Risk where the “streets are alive” and not with “the sound of music.”

Congratulations on the four more years, Mr. President. To celebrate, Goldman starts by cutting the Q4 GDP forecast from 1.9% to 1.5% (and let's not forget that the same Goldman is predicting a 15% drop in the S&P in the next two months to get the Fiscal Cliff deadlock to break).

NBC news just announced that it projects a victory for Obama in Ohio. Which means the Florida vote is now moot, and which means Barack Obams has been relected as president of the US.

Rampant Evidence of Electronic Vote Tampering

T minus 7 hours. That is how long until both all important Florida and Ohio polls close. As previously explained, whoever gets these two states will almost certainly carry the election, which means that by 8pm Eastern, the marginal votes will be in, and shortly thereafter one after another media organization and network will begin calling both these two states, and the election, for either the Democrats or the GOP (at which point the litigation and recount demands can begin). The complete guide to the closing times of the polls in assorted East to West states, together with their respective seats in the electoral college, is shown below, although it is likely that long before California polling is even concluded the next president will already be known.

We have discussed in detail the potential ramifications of a 'close' vote (here, here, and here), and only yesterday UBS Art Cashin opined on the potential for an 'embarrassing victory'. Today, the wizened market participant turns the rhetoric dial to 11 (and rightly so) as he warns "pray it's not close" for fear of the polarization of the populace that could occur. If Florida 2000 was a horror, a close election this year could present six or seven Floridas.

Forget Florida. This election it is all about Ohio: without Ohio, Romney's winning chances plummet (as can be observed at the following interactive chart), even if one ignores history which is that since 1862 no Republican has won the presidency without winning Ohio. This is a fact well-known to the Obama administration, which explains why the incumbent has spent so much time in the ravaged state, where he has spent so much time ruminating on the the Ohio "unemployment rate miracle." Sure enough, in September, the Ohio unemployment dipped to 7.0%, the lowest since September 2008! On the surface, a tremendous metric and great improvement for a state that would have certainly been firmly in the pro-GOP camp had Obama not been able to hammer on this statistic time and time again. Yet, as always, the unemployment rate is only part of the story. The bigger question is whether or not another data set is being fudged to make the Ohio jobs situation appear better than it is in real life. The answer is, predictably, yes.

Ahead of today's presidential and congressional elections, Goldman provides some brief thoughts on various election-night (and beyond) events. From a viewer's guide to the poll-closing times to a discussion of the apparent 'closeness' of the race and post-election market performance, they note that equity performance post 'tight' races has been better than in elections where the winner is more clear-cut. This election has a twist though in that it will be immediately followed by debate on the fiscal cliff, and thus resolution of the election will reduce, but not eliminate policy uncertainty.

Less than impressive macro data from the Eurozone failed to depress investor sentiment and as such, equity markets in Europe traded higher as market participants looked forward to US elections. Heading into the North American open, all ten equity sectors are seen in the green, with technology and financial stocks leading the pack. Still, despite the choppy price action and lack of progress on the much desired Spanish bailout, peripheral bond yield spreads are tighter, with SP/GE and IT/GE tighter by c. 6bps. EUR/USD failed to break below 1.2750 barrier level earlier in the session and since then stages an impressive recovery, partly helped by weaker macro data from the UK.

Over the last few weeks we have looked at where the two candidates stand, the implications of a Romney win on the economy, how investors are positioning in equity and bond portfolios for each candidate's potential victory, what gold will do, what stocks will do, and the fact that either way; the easy-money days are over. The last market to look at is the largest - the foreign exchange market - and Citi's Steve Englander provides a succinct explanation of how the various asset-class shifts post-election will impact flows in the FX market. Most specifically, how sensitive various safe-haven and risk-sensitive FX crosses will be to House composition. He also notes the potential for knee-jerk reactions as timing issues across various state poll closings offers exit poll information - especially as a Romney win is very much not priced in.