With everyone focused on whether or not the Build America Bond program will be extended (it appears it won't, and is the main reason for the market weakness today), after rumors earlier that the program may not be part of the negotiated extension (and why not? It's not like republicans are suddenly pretending to be fiscally prudent, after pushing the latest addition to the welfare state that will cost $5 trillion in future debt) we now learn that pathological nest of infinite criminality better known as Bank of America has again settled a new SEC fraud charge, this time relating to its municipal securities program. According to Reuters headlines, the SEC has sued Bank of America Securities with fraud in connection with allegations of improper bidding practices involving municipal securities. But heaven forbid the SEC would settle on anything more than a, well, settlement: just as the charge was announced, so was the settlement, and we learn that BofA has agreed to pay more than $36MM in disgorgement, and that is and affiliates to pay another $101MM to Federal and state authorities. SEC wristslap... and the bank can go bank to stealing.
Following last night's sale of Citi Treasury shares, we have learned that S&P will increase the float factor of Citigroup in the S&P after the close from 88% to 100%. As a trading desk reports: "We estimate S&P index funds have up to 374 mln shares to buy today (~89% of ADV), assuming no offer participation. S&P 500 indexers have a large funding trade to fund the C buy ($1.7 bln SPX for sale)." In other words, expect some substantial fireworks, especially if State Street joins in the fray once again and make the stock HTB at tactical times during the day.
White House Says Tax Deal "Does Not Worsen The Medium- And Long-Term Deficit" Even Though Full Cost Will Be Over $5 TrillionSubmitted by Tyler Durden on 12/07/2010 - 11:52
Perhaps for the best demonstration of what cutting education budgets in the US means for our nation's current and future mathematical capabilities, look no further than the White House's Propaganda, pardon Fact Sheet on the tax extensions. The only notable item is the following (which is stunningly added as an accomplishment): "The plan has three key accomplishments: Does not worsen the medium- and long-term deficit.
These are responsible, temporary measures to support our economy that
will not add costs by the middle of the decade. The President does not
believe it is affordable to make the high-income tax cuts permanent and
will continue to have that debate in the years ahead." Alas, that is a flat out lie. According to the Congressional Research Service, the cost of keeping the tax cuts will be just over $5 trillion over the next 10 years. And it will be at least 10 years: after Obama loses the 2012 presidential election, Republicans will have a carte blanche to make the Bush tax cuts permanent, and will likely do so. And, furthermore, this figure does not include the cost of the Unemployment Insurance extension.
Following the below link to watch a live webcast of the Irish budget discussion, whose passage at this point seems a fait accompli after the votes of two critical Independent PMs were captured yesterday as Zero Hedge reported.
PirateBay Joins Cantona, Seeks Vendetta On PayPal As International Hacker Community Vow Revenge On BankersSubmitted by Tyler Durden on 12/07/2010 - 10:46
Piratebay.org, the site that is a global hub for hackers and "free film" aficionados everywhere has officially joined the Eric Cantona plea for a bank run, which Zero Hedge first broke over three weeks ago, however compounding the initial premise with that of PayPal lock out. The reason: suddenly Assange has become the martyr saint of the global hacking community, which in the past 24 hours has manage such exploits as crashing the web site of the Swiss bank that supposedly froze Assange's account. And if there is one thing worse than a (now arrested) Australian with a lot of deep throat sources, it is the global hacker community which has just made the international banking system its number one enemy. Expect to see many DDOS attacks on your "favorite" bank portals, coupled with substantial downtime in your neighborhood ATM.
It was just this Sunday that Jan Hatzius was apologizing for this hike in 2011 GDP to 2.7%. It appears that once respected economist has now joined the legions of momentum chasers and will "revise" his forecast going forward every time there is an event. To wit: following last night's complete abdication of fiscal prudence by both democrats and republicans, Goldman now says it's 2011 GDP will likely be boosted from 2.7% to 3.7%. In the all out defense of the ponzi, old-school concepts such as even remote credibility are getting thrown out with the bathwater. Wall Street needs one more year of record bonuses or else the MAD card will be played. And of course, who cares about the costs... Perhaps one should play a simple thought experiment at this point: why not just issue one quadrillion in debt and fix the economy once and for all. After all why worry: rates will be forever at zero, Bernanke will buy all deficit funding bonds ever, and nobody will ever sell their rates holdings.
The JOLTS survey, which looks back two months, and is thus completely useless when trying to game the NFP/Initial Claims number came at 3.362 million job openings for October, an increase of over 350k from September's revised 3,011. Then again with November NFP data being a massive disappointment, one can see why this data tends to have about as much market impact as the iconoclastic ABC Consumer Confidence index, which continues to print at near all time lows. Furthermore, as has been disclosed previously, employers continue to fill all open positions predominantly with temporary positions, which, paying $20k per month, do miracles for the recovery.
Gold investors tend to focus overwhelmingly on the relationship between the US dollar and gold, citing that a lower dollar leads to higher gold prices in US dollars. Whilst this may be generally true, there is another relationship that does not get as much attention as we believe it deserves, and that is the relationship gold has with US real interest rates. For the first few years of this gold bull market, it was sufficient simply to acknowledge the USD down, therefore gold up dynamic, but now things have changed. Over the past couple of years gold has rallied when the greenback has been making gains, as well as when it was weakening, therefore investors must now take note of the inverse relationship between US real interest rates and gold, which has been observed consistently over the last couple of years.
JPM's cornering of the copper market must be proceeding successfully, as the firm has apparently developed a sense of self-confidence that it can now move from banging the silver close to banging the commodity right at the open (even when there is no OpEx on the horizon). A straight line $10 drop in which every bid is taken out is precisely the same activity that ex-Moore trader Chris Pia got in trouble for some time ago. Of course, when HSBC and JPM do it, it is perfectly acceptable. In the meantime, China, which is now practically openly buying up gold in the open market, thanks Blythe for this $10 dip in the country's cost basis. Lastly, we continue to await news of how the $1 trillion+ in incremental debt is going to monetize itself.
"WikiLeaks coined a new type of journalism: scientific journalism. We work with other media outlets to bring people the news, but also to prove it is true. Scientific journalism allows you to read a news story, then to click online to see the original document it is based on. That way you can judge for yourself: Is the story true? Did the journalist report it accurately? Democratic societies need a strong media and WikiLeaks is part of that media. The media helps keep government honest. WikiLeaks has revealed some hard truths about the Iraq and Afghan wars, and broken stories about corporate corruption." Julian Assange, The Australian Op-Ed
With recent revelations of the fraudclosure scandal, and a spike in interest toward all things REO, we decided to go back to basics and present some "appendices" over why this process of excess bank inventory clearance is so important and what its implications are, especially in a world in which foreclosing has suddenly become legally impossible.
Those who are about to spend another 20% of their paychecks to cover the cost of surging food and gas prices, salute the wealth effect. For everyone else, there is the discount window. WTI Crude has just passed $90.57 (and at last check was at the highest it has been since mid-2008). We hope Ben Bernanke has plans how to deal with oil passing $100 (to the upside) - at today's rate of dollar devaluation, that target should be taken out by the end of the month. And in addition to supermarkets, next up one can safely cross out all companies that use petroleum distillates in the COGS. In fact, everything that worked in the spring of 2008 as the bubble was on the verge of blowing up last time, should work all too well. And back then we didn't even have a daily POMO...
Now that risk assets once again are trading purely on monetary stimulus vapors, and broad dollar weakness, we expect that precious metals will continue generating better beta than the S&P. Sure enough, this morning silver is up nearly 2%, with gold spot also just passing an all time high of 1,428.85. At this point every uptick in stocks is offset by a grater loss in purchasing power, and after various commodities opened limit up earlier, it is only a matter of time before the hot topic of mid-November: margin collapse, is back on the radar screen. But, as always, at least the wealthiest 1% of America which has the bulk of its net worth in the stock market, and recently, in gold, is making off like a bandit.
- Draconian Budget Set to Pass After Lowry Gives His Backing (Irish Times)
- Euro Collapse 'Possible' Amid Deepening Divisions Over Bail-out (Telegraph)
- China Outstrips Fed With Liquidity Risking 2011 Inflation Spike (Bloomberg)
- Deal Struck on Tax Package (WSJ)
- Dublin Woos MPs Ahead of Budget Vote (FT)
- China Buys Most Korean Bonds in 6 Months as Won Falls (Bloomberg)
- EU Rules Out Immediate Aid Boost, Banks on ECB to Fight Crisis (Bloomberg)
- The theatrical farce continues: Obama Summons CEOs to White House for Talks Amid Change (Bloomberg)
- Technologies AG, maker of grinding tools, for about $448M.
- Advantest Corp. makes a buyout proposal to Verigy Ltd. worth nearly $730M.
- Autoliv has $1B for Japan acquisitions as car production rebounds.
- AutoZone's Nov. net income rises from $143M to $172M.
- Bio-Rad announces pricing of public offering of $425M senior notes; to repay old debt.
- BP said to weigh sale of some North Sea assets to fund Gulf spill clean-up.
- Dollar General's Q3 net jumped 69% to $128.1M helped by 10% rise in sales to $3.22B.