Freddie 30 Year Fixed At 5.14%, 4 Month High, As 30 Year-1 Year ARM Spread Hits Another Absolute RecordSubmitted by Tyler Durden on 12/31/2009 12:55 -0500
A week ago Zero Hedge discussed the spread between the Freddie 1 Year ARM and the 30 Year fixed, concluding that the recent record spread is indicative that the Fed will do all it can to become the new subprime lender of any resort, even if it means creating exponentially more roll risk, as it seeks to lend money regardless of the probability of ultimate payback. Today Bloomberg points out that the Freddie 30 Year has just hit a 4 month high of 5.14%, a level last seen at the end of August. What is notable is that in less than two weeks the 30 Year Freddie Fixed has jumped by 20 bps. At this rate we will overtake the 2009 high of 5.59% within a month. However, our original observation is that even as the 30 Year Fixed has finally started to move in line with the 10 Year Treasury, which just can't find a floor in the past week, the 30 Year Fixed - 1 Year ARM spread has simply exploded: when we looked at its last it was 60 bps, a week later, it is now at 81 bps. The Fed is now literally throwing money away in the form of Adjustable Rate Mortgages.
- China Central Bank Zhou says 2010 is crucial for 'defeating' crisis (Bloomberg) in the meantime his subordinated are learning the intricacies of Treasury collateralized $19.95/pop reverse repos, in advance of withdrawing trillions in excess liquidity
- Lawmakers want probe into aid for Fannie and Freddie - we'll spare you the Dan Brown suspense - the answer is the Federal Reserve in the 85 Broad lobby with a money printer
- FDIC moves to seize slice of bank stock rallies (WSJ) - paging the worthless Mary Schapiro - when will the insider trading in New York Community Bancorp finally be investigated?
- Speaking of worthless, regulatory-captured windbags, Wall Street waits as SEC fails to bring Madoff-inspired reforms (Bloomberg)
- The end of Uncle Ben's unlimited piggybank means no more gains for those who benefited from taxpayer generosity to deadbeat homeowners (Bloomberg)
- Do we need a new reserve currency? (Emirates Business)
- So much for Wall Street sobering up (Fortune)
Some recapitulating thoughts on High Frequency Trading, in the year in which HFT probably became the primary market dynamic, courtesy of Themis Trading's Joe Saluzzi. "A NYSE study done recently indicates that spreads shrunk and liquidity was increased in large cap names, but in the small to mid-cap names it is just the opposite: liquidity has shrunk and volatility has increased because now you have predatory action." Yet with everyone trading just a few key stock purely on momentum trends, and everything else rising or falling on the beta wave, nobody will care until, again, it is too late.
The SEC sure has a sense of humor. With everyone screaming for the agency's blood unless it does something to curb rampant and blatantly speculative high frequency trading, as well as to tighten insider trading regulation, what does the Mary Schapiro-lead circus do? Just the opposite. And even as the commission is weeping that its $1 billion budget is woefully inadequate, the agency decides to reduce its own projected revenue in the form of Section 31 fees, to benefit the High Frequency Scalping brigade. The schizophrenic, sociopathic, deranged lunatics have certainly taken over the asylum at 100 F Street, NW Washington. And as if that wasn't enough, the SEC is now slowly pushing to repeal Reg FD in order to make REIT follow-ons a daily occurrence.
Ken Lewis may think everyone has forgotten about him... But we haven't. Tomorrow's hearing before the House Oversight Committee will see the SEC's Robert Khuzami field questions about BofA's "criminal" acquisition of Merrill, which according to Dennis Kucinich represented an "egregious violation of securities laws." Consider it an appetizer ahead of the full blown jury trial before one Judge Jed Rakoff, coming soon to a publicly accessible courtroom near you.
It is a well documented fact that a few big American banks have long fostered and enjoyed close relationships with U.S. regulators and agencies such as the Federal Reserve Board and the U.S. Treasury. History is also replete with Goldman Sachs executives attaining government postings such as the Secretary of the Treasury; including Robert Rubin and Hank Paulson of recent decades. These relationships of trust are developed and nurtured over time to the point where advice is sought and information exchanged regarding situations on a strictly confidential basis. It is difficult for Long Wave Analytics to believe, for example, that the Federal Reserve didn’t send up a trial balloon last February musing about the prospect of initiating a quantitative easing program involving new Treasury bond issues. How else could Goldman amass $27 billion (U.S.) in trading profits in the first nine months of the year. A 50 basis point move in yield on a 10-year maturity, for example, translates into a price change of $4.20 per $1,000 bond. On a long position of $1 billion (U.S.) of a 10-year Treasury bond, this means a capital gain of $42 million (U.S.).
Who’s in charge? We believe it to be the big American and European banks because, after all, they are the owners of the U.S. Federal Reserve.
"We will continue to use all tools at our disposal to aggressively pursue illegal market manipulation by high frequency traders and others." Mary Schapiro
But we thought manipulation by HFT only existed in the deranged brains of certain fringe websites. How is that possible?
As we speculated on Friday, whoever bought those 7,500 calls on inside information ahead of the NYB assumption of massive taxpayer subsidies in the form of the AmTrust's $2 billion "failed bank" consideration via the FDIC, is now much richer. And we demand a full investigation into who and why i) leaked this information and ii) profited from it. With the stock up 9%, any inactivity by Mary Schapiro is equivalent to her spitting in the face of anyone still caring about a free and fair market.
Mary Schapiro Must Immediately Investigate The FDIC's Confidential Information Leak In Another Blatant Insider Trading Case, Then ResignSubmitted by Tyler Durden on 12/04/2009 20:39 -0500
The degree of insider trading in this market is getting ridiculous. And the strangest thing is those who are executing on blatantly obvious material, non-public insider information, are no longer concerned the least bit about getting caught as they realize that the "mighty" SEC will do nothing against them, courtesy of the example the SEC has set by finding absolutely nobody "responsible" (except, of course, the regulator's own future employers who thus get immunity from prosecution) for the greatest market heist in history in which over $5 trillion has been transferred from the middle class to the Wall Street oligarchy (future providers of paychecks for SEC staffers).
Today's grotesque example of the SEC's futility to act as even a modest deterrent to insider trading activity: New York Community Bancorp (which, just so happens, is a $602 million recipient of TLGP debt), whose stock surged in the final minutes of trading for reasons (then) unknown. As reader QevolveQ pointed out at 5:30 pm, the activity in both the stock and the calls of the company was many standard deviations away from average and raised major red flags. Those questions were quickly put to rest when it became known at 6:33 pm that NYB would in fact receive FDIC subsidies to acquire newly failed AmTrust Bank in a transaction that would be "immediately accretive to earnings."
Total Lunacy: Mary Schapiro Made $3.3 Million In 2008, Perks Also Include Car Service, Club Fees And Full Expense CompSubmitted by Tyler Durden on 12/04/2009 15:51 -0500
We will post this without much commentary as the probability we would otherwise be sued for grossly indecent language in a public venue as well as libel and slander is very, very high.
In the aftermath of Galleon, the SEC is aggressively ramping up its enforcement techniques, and while we all know that the regulators, in "joint venture" with the Justice Department, are likely eavesdropping on every single telephonic conversation originating or terminating in a financial firm, it is likely that Mary Schapiro has finally realized that some time in the 90's a thing called instant messenger became quite popular and that the bulk of traders and analysts converse not so much via phone but by Bloomberg MSG and IM blasts, as well as via all sorts of other discrete electronic communication tools. And this may be precisely what Robert Khuzami is targeting now as the Galleon net continues to expand ever wider to even what were formerly considered untouchable stalwarts of the hedge fund community.
Sen. Kaufman Urges SEC To Work Quickly On Uncovering Possible High Frequency Market Manipulation And Systemic RiskSubmitted by Tyler Durden on 11/20/2009 16:18 -0500
Sen. Kaufman admirably takes on the windmills again, this time sending a much more sternly worded letter to Mary Schapiro to finally step away from the game of taxpayer funded Solitaire, and instead of waiting for twitters and bloggers to hand her agency cases of insider trading on a silver platter, to finally do something proactive, before her thoroughly discredited agency comprising of what are apparently some of the most inept government workers in existence, is responsible for not only the biggest ponzi blow up (done and done) but for the greatest market collapse courtesy of a few unsupervised Atari consoles.
"A former Pequot Capital Management Inc. employee told his psychologist he was fired after he stopped supplying the hedge fund with insider information, according to a letter that two U.S. Senators sent to the Securities and Exchange Commission."
NYSE Going After "Algos Gone Wild", In Other News Joe Francis Thinking Of NC-17 Monetization Schemes Involving Underage AlgosSubmitted by Tyler Durden on 11/02/2009 12:23 -0500
High Frequency Trading coming to a Joe Francis-produced, soft-porn torrent near you.
"As many of you know, we are already moving forward on our market structure initiative. In recent weeks, we have proposed rules that would address the inequities of flash orders and dark pools of liquidity. Both of these undermine the integrity of the market by providing valuable pricing information to select market participants — information that is not widely available to the public. This in turn creates a risk of private markets and two-tiered access to information." - Mary Schapiro, SEC
"The investing community (especially retail) has benefitted from the evolving market structure" - Goldman Sachs