White House

Don't Read This ... It's Totally Irrelevant, Old News, Who Cares, Americans Are Above the Law, We're Exceptional (and Anyone Who Criticizes anything our Government Does is a Commie Fascist Turruristicalist Moooooslim)

"Preservation of Capital" must be the watchword in this market; in all markets. Any mistake made is now magnified by our very low interest rates so that any error is compounded by the ability to make back the loss. In America we are facing our national elections. In Europe we are facing a hardening of positions where the divisions between the North and the South, with France lining up with the Socialist South, are edging closer to some nation or another refusing to fund. The scheme of diversion can last only so long as real decisions with real consequences are about to be forced upon the Continent as funding must come or not come.

Schmitt ? Strauss ? University of Chicago ? Neocons, Obama  ? Banzai!!!

Ladies and Gentlemen, hedgefund managers, boys and girls...here comes Chia...

With less than 20 days to go to the election, the Presidential race has tightened following Romney's performances in the debates, as the Republican challenger has overtaken the president in the national averages for the first time this year (and RealClearPolitics has him with an edge in the electoral college also). But ever the fair-and-balance bank, Citi believes that Obama's advantages remain substantial, as an incumbent president in an improving economic environment. In this broad discussion, the Pandit-less bank addresses 'the data' driving their Obama call, what would have to happen for a Romney win, the Senate and House split, The Tea Party (and other unusual events), and the 'bungee jump'-causing headline risk of the pending Fiscal Cliff debate. Everything you need to know about the election-critical states, players, and events (and who would win in a fist-fight), but were afraid to ask Wolf Blitzer.

A month ago every single bank was delighted when Bernanke proudly announced QEternity. What they did not realize is that by doing so, and by "getting to work" as Chuck Schumer had previously requested of the Chairsatan, Congress suddenly has no impetus to do anything over the fiscal cliff, i.e., to lose face with the electorate by compromising over difficult fiscal issues, because, guess what, Bernanke is on top of it. After all look at the market - no risk is allowed ever again. Because since the Fed is now in charge the market, and of fiscal policy, why bother with protection or Plan B. The banks, however, know better, and know that without hundreds of billions in continued stimulus from D.C., the musical chairs game is about to end and the market will implode. Which is why the warnings of Mutual Assured Destruction (M.A.D.) were only a matter of time. Sure enough, here comes JPM with the first of many official GDP revisions (don't worry - JPM's Mike Feroli will promptly revise everything much higher if a fiscal cliff deal is done... some time in March long after the S&P has tumbled by 20% in a replay of August 2011), in which he sees the fiscal cliff now reducing 2013 GDP growth by 1%, up from the previous estimate of 0.5%, and specifically sees Q1 and Q2 GDP of 1.0% and 1.5%. And it's all downhill from there...

On this day (+1) in 1987 (that's 25 years ago, if you are burdened with a graduate degree), the NYSE had one of its most dramatic trading days in its 220 year history.  It suffered its largest single day percentage loss (22%) and its largest one day point loss up until that day (508 points). No one who was on the floor that day will ever forget it. While it was an unforgettable single day, there were months of events that went intoits making. The first two-thirds of 1987 were nothing other than spectacular on Wall Street. From New Year to shortly before Labor Day, the Dow rallied a rather stunning 43%.  Fear seemed to disappear. Junior traders laughed at their cautious elders and told each other to "buy strength" rather than sell it, as each rally leg was soon followed by another. One thing that also helped banish fear was a new process called "portfolio insurance". It involved use of the newly expanded S&P futures. Somewhat counterintuitively, it involved selling when prices turned down.

With 20 days left to the big day and the candidates seemingly in a tighter race than many expected it seems appropriate to look at how the equity market is and will be positioned for a potential changing of the guard if Mitt Romney wins or if incumbent Barack Obama remains in charge. Credit Suisse has created a comprehensive 'cheat-sheet' outlining key issues for the election for each candidate, the sector impact of an Obama or Romney victory, and the extent to which that impact is already factored into current market prices. Everything you wanted to know about gaming the outcome of the election but were afraid to ask.

That troubled battery-maker A123 has just filed for bankruptcy (and no, in this case bankruptcy is not equal with deleveraging) should not be news to anyone who has followed the US government subsidized trainwreck of a company (especially since as we updated yesterday it was known it would miss its bond payment today). Well actually we take that back. The bankruptcy may come as a surprise to the president. Recall that Obama called A123 Chief Executive Officer David Vieau and then-Michigan Governor Jennifer Granholm during a September 2010 event celebrating the opening of the plant in Livonia, Michigan, that the company received the U.S. grant to help build. Surprise and epic humiliation that is. "This is about the birth of an entire new industry in America -- an industry that’s going to be central to the next generation of cars," Obama said in the phone call, according to a transcript provided by the White House. "When folks lift up their hoods on the cars of the future, I want them to see engines and batteries that are stamped: Made in America." Needless to say if the car is a flaming Fisker Karma or Chevy Volt, the hoods may be too hot to lift but that's another story. Most importantly, it will come as a big loss to the firm's equity holders (who have already lost their entire investment so hardly a surprise) creditors, who will likely be wiped out almost entirely (listed below), but most importantly US taxpayers, who funded the firm not on one occasion as conventional wisdom will have it, but with four distinct Federal and State agency grants, as is highlighted in the first day motion affidavit by David Pyrstash in support of the Chapter 11 petition.

Military Officers and Code Breakers Speak Out ... On Camera

With the market seemingly oblivious to the dismal reality of the fiscal-cliff (from a priced-in perspective) in the same way as equities trade at four-year highs while earnings are at three-year lows; it is perhaps useful to get a grasp of the maelstrom that awaits congress as they begin to tackle the fiscal-cliff on November 12. As we discussed here, the downside potential is considerable with complacency high and just as Goldman expects no real progress to be made until December (at the earliest), the market (i.e. a correction) may be the only lever to move our political elite from their respective higher ground. While talk will be of 'grand bargains', we, like Goldman, remain skeptical that any broad reform package will be completed and instead some short-term extension may be achieved. The following Q&A explains how that sausage could be made in all its gory detail. (e.g. Q: Can Congress actually put together a "grand bargain" fiscal agreement in the short time available? A: It is difficult to see how.)

Confirming a move that will surprise exactly no one, the firm which is best known in the world for two things: i) arbitraging the gullibility of its clients, and ii) flipflopping faster than anyone when the narrative demands it, the WSJ reports that Goldman Sachs has mutated from Obama's biggest financial backer 4 years ago on Wall Street, to one of the most stingiest firms. "Employees at Goldman donated more than $1 million to Mr. Obama when he first ran for president. This election, they have given the president's campaign $136,000—less than Mr. Obama has collected from employees of the State Department. The employees have contributed nothing to the leading Democratic super PAC supporting his re-election. By contrast, Goldman employees have given Mr. Romney's campaign $900,000, plus another $900,000 to the super PAC founded to help him." In other words Goldman has just voted with their wallets, and the bottom line is "Strong Sell" with price target One Term.

The majority of Americans seem OK with just waddling through life, accepting the lies and misinformation blasted from the boob tube and their various iGadgets by their owners, gorging themselves to death on Twinkies and Cheetos, paying 15% interest on their $10,000 rolling credit card balance, and growing ever more dependent on the welfare/warfare state to provide and protect them from accepting personal responsibility for their lives. A minority of critical thinking people have chosen to question everything they see and hear being spewed at us by the propagandist mainstream media. What do 'we, the people' want? As it seems the entitlement “free shit” mentality permeates our culture. The question is whether we will stand idly by, fiddling with our gadgets, tweeting about Honey Boo Boo, or will we regain our sense of duty to the future generations of this country.

Even if both the Bush tax cuts and emergency unemployment insurance are extended, the 'sequester' is mostly postponed, and the fresh fiscal drag is confined to the expiration of the payroll tax cut and the new taxes to pay for Obamacare, Goldman estimates suggest that fiscal policy would shave nearly 1.5% from real GDP growth in early 2013. While it seems the 'market' believes that some compromise will be enough to lift the market to new stratospheric heights; we believe, as does Goldman, that the risks are almost exclusively on the downside of this 'not so good' fiscal scenario.

Certainly the White House would never interfere in unemployment data critical to their re-election hopes