Fed Appeals Decision To Disclose Recipients Of Bailout Loans, Threatens With "Run By Depositors"
by Zero Hedge - September 30th, 2009 2:18 pm
Courtesy of Tyler Durden
It has been about a month since the Fed last threatened with mass extinction events if it were forced to disclose whose crony interests it had been propping with taxpayer money, as it was ordered to do in the Bloomberg (Mark Pittman) v Federal Reserve case (08-cv-9595) on August 24. Today, the Chairman is out, guns blazing, and is appealing the decision.
From Bloomberg:
The Federal Reserve is appealing a judge’s order requiring the central bank to identify the financial institutions that benefited from its emergency loans, according to a lawyer representing Bloomberg LP.
The central bank refused to divulge details about the companies participating in its 10 remaining lending programs, saying that doing so might set off a run by depositors. The Fed had until today to seek a reversal of the Aug. 24 decision by Manhattan Chief U.S. District Judge Loretta Preska, who ruled the Fed must release the identities, as well as disclose loan amounts and the assets put up as collateral.
And as the second circuit already showed its true colors in the Chrysler fiasco some months ago, it is likely that this case will once again reach the Supreme Court, probably about a month from now. October will thus likely be a very critical month for the Chairman, who will be besieged on two front – the legislative and the judicial, as Congress will be pushing for passage of HR 1207 at about the same time that the Supreme Court does it best to pretend that it is the last bastion of non-corrupted, Wall Street uninfiltrated interests, yet, as is always the case, only to show its true colors at the end of the day, once again confirming just which firms run the United States of America.
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DiggAnother Defense Of HFT, Promptly Refuted By New York Fed
by Zero Hedge - September 30th, 2009 1:59 pm
Courtesy of Tyler Durden
An article today in Time magazine with the unassuming title “The Truth About High Frequency Trading” is the latest in the spin campaign defending High Frequency Trading. The story is well known- liquidity, and innocent market makers who only care about their spread without positional exposure or underlying bias.
Marketmaking explains why high-frequency trading accounts for over half of all U.S. stock volume: Every transaction begins with a trader offering to buy or sell. These days, more often than not, that trader is a high-frequency marketmaker.
Yes, high-frequency marketmakers profit from the bid-ask spread, and yes, other traders will benefit from being able to get in and out of the market more easily, but what about those who are not actively trading? Most of us aren’t concerned with having a tight bid-ask spread at every moment, since we are longer-term investors interested in holding a portfolio — not continually trading.
While some assumptions in the article are naively assumed to be facts, the key flaw is that market makers simply provide liquidity with no regard for the underlying direction of the stock they make a market in. And, as author Ari Officer explains, these very market makers are almost exclusively computers who have taken over ultra fast liquidity provisioning.
Ironically, Exhibit A refuting Ari’s argument comes not from a place like Zero Hedge, but from a much more “objective” and traditional venue: the New York Fed itself:
Exhibit A
A staff report paper released a week prior to the Time article titled “Are market makers uninformed and passive? Signing trades in the absence of quotes” comes to a conclusion which debunks Mr. Officer’s Utopic conclusions about naive and uninterested market makers. And we quote:
When we look at the cross-section of market makers and relate the extent to which their initiated trades are inventory increasing to their profits from trading, we find a significant and positive relation. Our results provide evidence against the market maker being just an uninformed liquidity supplier. On the contrary, he seems to actively speculate on private information signals.
Not only that but the following:
We therefore conclude that for locals and duals on announcements days there indeed is
…
Equities Back To Tracking The Zombie Dollar Tick For Tick
by Zero Hedge - September 30th, 2009 1:26 pm
Courtesy of Tyler Durden
A day after several failed attempts at killing the dollar did not work, what is a Fed chairman to do but try, try again. The market now tracking the JPY-EUR carry trade tick for tick.
Mad Hedge Fund Trader’s Global Market Comments
by ilene - September 30th, 2009 1:01 pm
Here’s MadHedge’s diary entry from yesterday – everything you want from technology, to cars, to baseball. But I’m not quite sure if MadHedge is shorting BofA or Cubs supporters. – Ilene
Mad Hedge Fund Trader’s Global Market Comments
Courtesy of the Mad Hedge Fund Trader
Featured Trades: (RADA), (BAC), (SCHW), (V), (CVX)
1) When a retired Israeli Air Force general calls me up in the middle of the night and tells me there’s a company I should look into, I sit up and take notice. Privately owned Spider Technologies Security Ltd (click here for their website) has achieved a quantum leap forward in seismic based detection technology. It has pioneered a set of algorithms, code named “Tarantula,” that can analyze ground vibrations to create virtual fences along national borders, or around military bases and high value targets, like energy infrastructure. A portable version can be used by a squad of soldiers on the move to detect approaching enemies at night, on or under the ground, in all weather, and can tell the difference between a car, a man, or a mouse. Now this is where the story get’s interesting. Spidertech has just inked a joint marketing and production deal with NASDAQ listed RADA Electronic Industries (RADA), an established supplier of hardware and software for unmanned aerial vehicles (click here for their website at http://www.rada.com/). This gives Spidertech access to Rada’s rolodex of a who’s who in the international arms bazaar, and catapult the technology into the global limelight. Experts in the field tell me the potential market is in the billions. Of course the big fish is the US military, and the technology is already being field tested by the US Navy for Homeland Security. If you want to check out the details of this fascinating technology, go to the international arms publication Defense News by clicking here at http://www.defensenews.com/story.php?i=4296898&c=FEA&s=TEC . In the meantime, check out RADA’s stock, which has drifted up from 60 cents to $3 since March. A few key orders and it could be off to the races. Israel has long blended advanced American technologies with its own to create better and cheaper weapons, which are then sold to emerging markets. The difficulty has always been to find a tradable instrument…
BusinessWeek Cover: “Why The Market Will Keep Going Up”
by ilene - September 30th, 2009 11:53 am
BusinessWeek Cover: "Why The Market Will Keep Going Up"
See Also: The Death Of Equities
Peter Thiel: It’s A Fake Rally!
More Pain For Humiliated SEC After Disclosure It Ignored Moody's Whistleblower Warnings
by Zero Hedge - September 30th, 2009 11:35 am
Courtesy of Tyler Durden
As if the SEC could be humiliated any more, another piece of disclosure now highlights that Mary Schapiro’s useless organization was unresponsive to whistleblower overtures by former Moody’s employees attempting to warn the regulator “about Moody’s weak compliance department and ratings process.”
From Reuters:
A congressional panel will expand its examination of credit rating agencies to look at why U.S. securities regulators ignored warnings from former Moody’s Corp executives about the company’s weak compliance department and ratings process.
“We want to look at the fact that the Securities and Exchange Commission did not respond” to concerns from Moody’s former head of compliance, Rep. Edolphus Towns, chairman of the House Oversight and Government Reform Committee, told CNBC television on Wednesday.
Towns’ panel held a hearing on Wednesday to probe allegations from two Moody’s whistleblowers that company managers favored revenues over ratings quality.
And here is how the SEC’s worthelessness from the Madoff affair has ported over into comparable situations, with the regulator apparently having learned absolutely nothing from the its humiliating episode yet.
Scott McCleskey, a former Moody’s senior vice president of compliance, sent the SEC a letter in March 2009 alleging that he was routinely ignored when he warned that the firm was not properly monitoring municipal bond ratings.
Eric Kolchinsky, a recently suspended managing director at Moody’s, will tell Congress that analysts are “bullied” by managers who override their decisions to generate revenue.
“Kolchinsky tried to tell the SEC about his concerns but his calls were not returned,” according to a memo prepared by Republican members of the committee and obtained by Reuters.
Judging by the SEC’s extremely time consuming attempt to cover up for Ken Lewis all throughout the year, we are confident that all parties involved fully understand and sympathize with Mary Schapiro on this one.
And yet the question of whether the SEC, or Moody’s for that matter, is needed in any formal capacity going forward remains unanswered:
An SEC spokesman has said the agency has established an examination program for credit rating agencies that includes reviews of disclosures, policies, and procedures regarding municipal securities ratings.
“We are focusing carefully on the tips
…
Latest DTCC CDS Update (Week Of September 30)
by Zero Hedge - September 30th, 2009 11:10 am
Courtesy of Tyler Durden
A week after the roll into new indices (HY13 and IG13) there was quite notable action in CDS land. Net notional change across all sectors was substantially negative to the tune of $282 billion, which however consisted primarily of matured transactions accounting for $330 billion of this number, implying the adjusted number was around positive $50 billion and a notable derisking. There likely has been a corresponding netting out on the New Transaction side over the past month as accounts were rolling existing positions.
Total gross outstanding have been relatively flat over the past month at $26.7 trillion, with $15.3 trillion in Single Names, $8.5 trillion in Indices and $2.8 trillion in Tranches, a material unwind from the beginning of the month when there was about $3.4 trillion in this category. This likely means a major index fund was unwinding tranches over the past month, likely leading to reverberations across all asset classes.
In single name action, the leader in the derisking category was Danone with $933 million in net change leaving last week (on $14.7 billion gross notional). Another notable name was Goldman Sachs at #4, with $175 million in net long CDS positions purchased. Some other notable deriskers were British American Tobacco, Ford Motor, Eastman Kodak, Safeway, FDC, Time Warner, VNU and Autozone.
In the rerisking category, the dominant names were as expected, financials, with DB, BNP GECC and AIG comprising the top 4. How long this optimism for financials will persist, especially if there is a major drop in equities, is as always the main question.
Endgame Near For CIT
by ilene - September 30th, 2009 10:37 am
Endgame Near For CIT
Courtesy of Yael Bizouati at Clusterstock
*****
And don’t miss this, courtesy of Tyler Durden at ZH
Jim Cramer’s Recommendation On CIT From Yesterday: "Primed For Upside. I Would Buy"
One can only hope that at some point irresponsible, speculative and highly destructive stock calls like this would see some regulatory intervention.
Citi and CIT Are Primed for Upside, by Jim Cramer, 9/29/2009, 1:54 PM EDT
Citigroup’s on the move, so is CIT . I think that Citigroup will be the biggest beneficiary of the new plan to buy toxic assets, because it is basically running its SIV as discontinued operations and it could benefit from the new program. CIT is about the possible IndyMac link-up courtesy of John Paulson, a real smart guy who was negative about mortgages before it paid to be negative. Dan Freed on CIT CIT Surges on Report of IndyMac Deal I put both of these up there as examples of companies that won’t die, and because they won’t die, they live. I know that seems a little circular in reasoning, but because Citigroup never suffered a run like Wachovia and Washington Mutual did, it made it and as our flagship site mentioned, it is safe. If it is safe, it can go higher. Because no one forced CIT into bankruptcy, it can live to play again, and when I read in the New York Post that Paulson owns CIT debt, I realized that he’s powerful enough to save this company, particularly because he is one of the investors in IndyMac and knows his way around the bottom of the debt barrel. These two stocks represent lottery tickets that are no longer rip-ups because they have made it out of the "critical care" stage and are recovering. I would buy them both.
Chicago PMI Subscribers Drive Market Down After "Flash Look" At Bad Number
by Zero Hedge - September 30th, 2009 10:03 am
Courtesy of Tyler Durden
The market tanked after the Chicago PMI index took a big bath on the second derivative double somersault. After hitting a better than expected 50 in August, the September number was 46.1, much weaker than the expected “expansionary” 52. the PMI is a useful advance indicator on the overall ISM, which is out tomorrow, and has been responsible for much of the presumed economic pick up in the past 6 months. As John Bougearel pointed out yesterday, ISM fans may be set for a major disappointment.
As a reminder the Chicago PMI is:
An index released monthly on the last business day of the month to which it refers that indicates how vibrant regional manufacturing activity is. An index value of 50 or higher indicates increasing busi-ness activity; below that indicates decreasing activity. The index breaks out readings for production, new orders, order backlog, inventories, prices paid, employment, and supplier deliveries. The PMI is a timely look at the strength of manufacturing industry in the Chicago Federal Reserve regions, which comprise Illinois, Iowa, Indiana, Michigan, and Wisconsin. The new orders and orders backlog indices are useful in predicting future production activity.
And in case you were wondering why the market started tanking 3 minutes before the official release, it is because Chicago PMI subscribers get a 3 minute advance look on the number ahead of the general media. In other news, Flash Orders, Actionable IOIs and advance looks improve liquidity (and front running).
Swiss National Bank Accelerates Downside Currency Intervention, Raises To Bernanke
by Zero Hedge - September 30th, 2009 9:44 am
Courtesy of Tyler Durden
It was just a matter of time before the sensible banks (read, not some fossilized dinosaur out of Japan who apparently does not realize what a strong Yen means for his country’s trade surplus) told Bernanke: “basta.” The latest on the currency intervention front comes courtesy of Switzerland, where the Swiss National Bank has again sold a boatload of CHFs to prevent the United States from being the only country hell bent on destroying its own national currency.
From Bloomberg:
The Swiss franc declined against the euro amid speculation the central bank sold the currency to curb its advance.
The franc slid 0.5 percent to 1.5189 per euro as of 1:34 p.m. in Zurich, and fell as much as 0.6 percent earlier, the most since July 23.
“There is a very strong suspicion that they are intervening via a Swiss supra-national,” said Sebastien Galy, a senior currency strategist at BNP Paribas SA in New York.
The net result: a very strategic detour for Bernanke, who has somehow convinced his BOE and ECB counterparts that rising stock markets are much more important than trade and interest rates.
So the question becomes: once the global market hits its artificial high, driven exclusively by the ongoing devaluation of just one currency (the $US in case you were wondering), which has been the primary, and maybe sole, reason for global equity markets being where they are, and countries are forced to trade with each other once again, how fast will the dash for the currency devaluation bottom materialize? Be short the dollar at your own risk at that point.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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