CDS

CDS

Nic Lenoir On Why The Euro Is About To Crash And Burn, And Why His Concern For The "New Normal" Is Not Slow Growth But Civil War

Today 6 countries in Europe were the theater of riots. I highlighted in the past that voting turn-out has been on the rise in the past 8 years after a steady decline the 3 previous decades. During the credit boom fat and happy citizens had no time to vote, too busy producing or even more so consuming. Now with unemployment through the ceiling and poor economic perspectives people have started voting again. The next step is that they realize that no one in the political spectrum currently has any guts or brain and therefore no one offers a real credible fair solution, at least for now. When they do they burn things up. Because things are a little worse in Europe economically, and because the people there actually do realize the people in power are monkeys, they have now reached that stage of realization where burning things up is the logical response. Don't think the US will remain immune to this symptom of the new normal (unlike El Erian I have not revised up my forecast, and my concern is not slow growth but civil war).

One Minute Macro Update

A summary of all the key events overnight that are shaping market today. Of note, a particularly weak 3M €500 million Bill auction in Portugal which came at 3.403%, up 159 from prior, with a lower bid to cover: 1.9x vs 2.2x before.

Ron Paul, Head Of Monetary Policy Subcommittee: "Yes I Would End The Fed"

In what is increasingly shaping up to be a showdown of epic proportions, the brand new chair of the Monetary Policy Subcommittee, Ron Paul, whose sole purpose in life for the past 20 years has been putting the Federal Reserve out to pasture, and returning to the gold standard, will soon spar with none other, than his, and every middle-class American's nemesis, the Chairman. And it could soon get even messier. In an interview with Fortune magazine's Nin-Hai Tseng, not only does the Texas doctor make it all too clear that he once again has presidential ambitions, but when asked whether he wants to end the Fed, gives the following brilliant reply: "Well, I don't expect to. The Fed's going to end itself when they destroy the system. So yes I would end the Fed but I would do it gradually and have a transition." Good luck Ron. However, there will be no gradual transition. If anything, it will be protracted, very much involuntary, and quite likely violent, as it would mark the end of a century-long scheme to transfer countless ounces (no pun intended) of tangible wealth to the ruling oligarchy in exchange for worthless and infinitely dilutable linen.

David Rosenberg On Perception Versus Reality

We have already broadly discussed the recent euphoria in the market which especially in the Nasdaq has hit 5 year+ extremes. And as always in times of such irrational exuberance, the disconnect between perception and reality is truly astounding. David Rosenberg presents his views on the latest developments in the market's ongoing fight with manic-depressive disorder.

Last Week The ECB Bought A Whopping €2.7 Billion In Sovereign Bonds

When we announced last Monday that in the week ended December 6 the ECB bought €2 billion in bonds via its SMP program, we expected that the current week would see yet another major surge in bond purchases, due to last settlements. Sure enough, according to just released ECB data, in the last week when bond turmoil was already supposedly contained, the ECB bought nearly €2.7 billion in Irish, Portuguese and possibly Spanish and Belgian bonds: this is the highest amount since the first 2 weeks of the SMP program's inception and the highest by far in the past half year. As Zero Hedge reported last week, the only buyer of sovereign debt, via its MS proxy, is now the ECB. How long this centrally planned floor on prices persists will be up to bond vigilantes. Today, peripheral yields in both cash and CDS have once again started leaking wider, which can only mean one thing: many, many more purchases coming.

After Six Hours Of Deliberations, Sergey Aleynikov Found Guilty

Score one for the farce team. That scourge to market efficiency, fairness and integrity, Sergey Aleynikov, about whom we have written tomes, has been found guilty. The HFT code in question, that can "manipulate markets" is safe and sound, back with its true master, Goldman Sachs, which firm promises its malicious attempt to squeeze CDS traders in 2007 is completely irrelevant, and the sheeple once again don't understand that the firm's intentions were nothing but pristine.

Daily Highlights: 12.10.2010

  • Asian stock markets were mostly lower Friday, on rate hike fears from China.
  • China regulators warn of risk linked to real-estate trusts.
  • China's trade surplus sharply narrowed in November to $22.9B from $27.1B in Oct.
  • India’s factory output grows 10.8%, fastest pace in three months.
  • Italy's Draghi warns of risks in ECB bond buying.
  • Oil rises to near $89 in Asia as traders eye OPEC crude output policy at meeting.
  • US cos held $1.93 trillion in cash and short-term assets at the end of Q3.

Goldman Implicated In CDS Price Manipulation Scandal

One of the recurring topics on Zero Hedge since inception has been that Goldman's flow/prop operations, simply by dint of their massive, monopolistic size, allow the firm to manipulate various securities, among which equities, structured products, and especially CDS. And while the firm has migrated to a more wholesale market manipulation paradigm when it comes to equities due to the far smaller bid/ask spreads, requiring the need for Goldman to become either an SLP on the NYSE, or to create market manipulating algorithms, such as that it is currently accusing Sergey Aleynikov of stealing, where the firm has always excelled has been in the far thinner, and far more profitable, courtesy of wide bid/ask margins, CDS market. Today, we get confirmation from Senator Carl Levin, to whom it appears Goldman has the same trophy value as SAC to the New York District Attorney and Federal Task Force, that Goldman was engaged in precisely the kind of CDS manipulation we have previously alleged the company was involved with.

Market Recap: 12.9.2010

A recap of the most important events in equities, corporates, rates, vol and FX.

Treasury Bond Volatility Hits Highest Since Flash Crash, First European Bankruptcy

The MOVE index measuring bond volatility has hit 112, a 2010 peak second only to the turbulent days following the flash crash and the first European bankruptcy. And speaking of European bankruptcy, CDS on Italy is back on the upward sliding track, last seen at over 200 bps, over 10 bps move on the day. And since there is no volatility left in a levitating market, the only market that vol hunters are now pursuing is the sovereign bond and FX markets. If and when intraday gyrations in the 10 year approach the equivalent of a stock VIX of 20+, then Bernanke will have finally achieved his goal of complete subjugation of the Banana States of America.