Beyond the Greek Crisis: Will Capitalism Survive?
by Zero Hedge - April 30th, 2010 12:55 am
Courtesy of Leo Kolivakis
Please take the time to read my latest entry and post your comments here:
http://pensionpulse.blogspot.com/2010/04/beyond-greek-crisis-will-capitalism.html
Thank you,
Leo Kolivakis
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DiggThere is only one trade right now, and that is “Risk On.”
by Zero Hedge - April 30th, 2010 12:27 am
Courtesy of madhedgefundtrader
I noticed that I have had trouble composing my newsletter lately because in thumbnail form, all charts now look the same, a lot like a 1952 Mercedes 300SL with its “gull wing” doors open.
Looking at the long list of positions that I have recommended this year, including dollar/yen and dollar/euro, municipal, junk, and corporate bonds, emerging market ETF’s, Toyota, the US, Australian, and Canadian dollars against the euro and the yen, silver, platinum, palladium, oil, and commodities, I am stunned to see all of them working, some quite dramatically so. I can assure you this is not because I suddenly acquired the touch of Midas or the wisdom of Croesus.
All assets are going up, period. Fundamental research has become an irrelevance. Earnings and GDP forecasts are being ratcheted up by the day. The S&P 500 has gone up for 400 days now without a 10% pullback and we have seen the fourth strongest stock market rally in a century. There is vastly more risk in the market than there was 13 months ago.
Of course, I blame zero interest rates for everything, and the Fed’s need to inflate new bubbles to rescue us from the old ones. It also helps that Obama turned out to be a moderate in liberal clothing. How else can one explain an 82% gain in the S&P 500 in 13 months? Despite the largest borrowing binge in human history, long term interest rates are levitating just above all time lows.
If everything is moving up in unison, you can expect them to go down the same way when the premise for their prosperity disappears. You have already been tipped off twice on how this movie is going to end, once on the day when the sushi hit the fan on Goldman Sachs (GS), and again when Greek debt was downgraded. Those were days when everything moved down in lockstep, and hedges proved worthless.
If you are looking for another reason not to sleep at night, I’ll give you one. Investor sentiment is now 54% bullish, the highest since December, 2007. In the meantime, the Chinese stock market is rolling over like the Bismark, with the Shanghai Index’s ($SSEC) down a worrisome 10.8% YTD. You can blame the Chinese central bank’s efforts to cool down real estate speculation, which is throwing cold water on the rest…
Daily Market Commentary: Is the Bounce Done?
by Chart School - April 30th, 2010 12:24 am
Daily Market Commentary: Is the Bounce Done?
Courtesy of Fallond Stock Picks
Big gains on low volume retraced much of Tuesday’s losses. But the question now is whether there is the impetus on the part of bulls to push markets higher?
The S&P regained the 20-day MA although technicals remain weak. Watch for retest of former support turned resistance. If this is the case there is still plenty of scope for gains – even if the net effect is bearish.
via StockCharts.com
The Nasdaq went a step further and recorded an accumulation day on strong volume. The only catch is the proximity of former support turned resistance is to current price; this rally hasn’t much room to run before it encounters supply.
($COMPQ)
via StockCharts.com
Small Caps enjoyed a more traditional bounce given it finished its period of weakness on support.
($RUT)
via StockCharts.com
The same was true for the Nasdaq 100
via StockCharts.com
Today was the easy day for bulls, tomorrow is a coin toss. Watch for a non-event day perhaps finishing with a narrow range doji or spinning top.
PHYSICAL Gold is a Reasonable Investment Right Now
by Zero Hedge - April 30th, 2010 12:14 am
Courtesy of George Washington
I believe that physical gold is a reasonable investment right now based on the following factors: 1) sovereign defaults; 2) shortages of physical deposits; 3) the dollar; 4) central banks; 5) declining production; 6) inflation; 7) deflation; 
uncertainty and distrust in government; and 9) flight to safety.
Sovereign Defaults
Iceland, Dubai, Greece, Portugal, Spain …
The list of potential sovereign defaults just keeps growing.
As Marc Faber said in February:
The governments of every developed economy will eventually default on their sovereign debts, so the one thing he will never do in his life is ‘sell my gold.’
Potential defaulter include the US, the UK and Western Europe.
Speaking to CNBC in a live interview via telephone, Faber said: “In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due.”
“These unfunded liabilities are so huge that eventually these governments will all have to print money before they default,” he added.
Similarly, Nouriel Roubini said today that sovereign defaults could lead to inflation:
Nouriel Roubini, the New York University professor who forecast the U.S. recession more than a year before it began, said sovereign debt from the U.S. to Japan and Greece will lead to higher inflation or government defaults.
As discussed below, inflation is usually considered bullish for gold prices. And defaults would lead to uncertainty and increased distrust in government, which are bullish as well.
Shortage of Physical Deposits
As whistleblower Andrew Maguire – a London metals trader formerly of Goldman Sachs – says, gold and silver bullion markets are rigged (and see this).
Omnis’ Jim Rickards, GATA’s Adrian Douglas and others have demonstrated that the big bullion dealers and ETFs don’t have nearly as much as physical bullion as they claim.
Should a substantial portion of investors in these vehicles demand physical delivery at the same time, it could cause a panic in the gold market which would cause a huge run up in gold prices.
The Dollar
Rickards argues that the dollar will eventually be devalued to half of its current value, so that America can afford…
Napa Vineyards Tank
by Zero Hedge - April 30th, 2010 12:01 am
Courtesy of Econophile
From The Daily Capitalist
I just saw an offering of the famous Screaming Eagle 1997 cab for $52,000 for the case, or minimum 3-bottle offering at $13,000. Parker gave it 100 points. I passed. I don’t think anyone told the purveyors that the market has loosened up a bit. My guess is that the offering (32 cases--1996, 1997, 1999--of the Eagle) may have been sprung loose by the economy. Some hedge fund guy blew up and … Maybe Paulson and Kovner fought over it.
For the rest of us, the great unwashed, bargains are awaiting. Here’s an article from Bloomberg reciting a sad tale.
In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands.
As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.”
“We have 250 vintner clients saying this downturn is the worst in 20 years,”Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”
Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson, principal at International Wine Associates, a consulting and financing firm in Healdsburg, California. The decline makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan.
Napa winery and vineyard loan defaults rose fourfold to 18 in the year through January, according to San Diego-based research firm MDA DataQuick. In the survey by Silicon Valley Bank, whose clients are mostly high-end West Coast wineries, 71 percent of respondents said credit is harder to get.
The recession has set in motion a “secular change,” with budget-conscious consumers trading down to less expensive wines, said Peter Kaufman, managing partner at Pleasanton, California- based Bacchus Capital Management LLC, a private-equity fund that provides mezzanine financing to wineries.
Personally, as a consumer…
Release the Kraken: Silver Market Price Rebounds After Sharp Price Drop for Options Expiration
by ilene - April 30th, 2010 12:01 am
Release the Kraken: Silver Market Price Rebounds After Sharp Price Drop for Options Expiration
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The silver market is rallying strongly today, after the recent dip in price below $18 with respect to the options expiration and delivery dates for the May contract earlier this week. When futures options are filled, one is not paid in cash, but instead they receive active futures contracts at the strike price.
The market game is to either get the front month price below the key strike prices before the expiry to make the options worthless, or to take the price down below the strikes the day after to run the stops of the contract holders. The market makers can see the relative levels of holdings in market in near real time, privileged information not permitted to the average investor.
Three or four banks are short more silver on the COMEX than can easily be attributed to legitimate forward sales or hedging for all the miners in the entire world, for years of production. Granted, it is hard to determine what the truth is because they are allowed to hide their actual positions and collateral, so as to be able to make their leverage and risk difficult to determine. It’s the obsessive secrecy for improbable positions and returns that is the tell in most market manipulation and schemes such as Madoff’s ponzi investments.
Goldman Sachs was able to obtain the exemptions of a hedger in the markets through contrivance, for the purpose of their proprietary speculation. But if Goldman is the vampire squid, then J. P. Morgan is the kraken of the derivatives markets, having less leverage than the squid as a percentage of assets, but significantly more reach and nominal size, positions which seem almost impossible to manage competently against value at risk in the event of a very modest market dislocation. And of course the risk which a miscalculation presents could shake a continent of counterparties. These oversized positions appear to be integral to the misprision of legitimate price discovery that is at the heart of derivatives frauds in other markets.
The 4Q ’09 report from the Office of the Comptroller of the Currency reports that "The notional value of derivatives held by U.S. commercial banks increased $8.5 trillion in the fourth quarter, or 4.2%, to $212.8 trillion." J.P. Morgan alone has a total derivatives exposure…
Federal Prosecutors Conducting CRIMINAL Probe Of Goldman Sachs
by ilene - April 29th, 2010 11:04 pm
Federal Prosecutors Conducting CRIMINAL Probe Of Goldman Sachs
Courtesy of Joe Weisenthal at Clusterstock
Following the SEC’s fraud charges against the firm, prosecutors have opened up a criminal probe of Goldman Sachs (GS), the WSJ is reporting this evening.
There are several things to note here, particularly the fact that an initial probe is no guarantee that charges will actually filed. In fact, such initial probes are common after civil charges are brought.
Although the ramifications of such a case would be enormous, the significant weaknesses and ambiguities that have emerged in the SEC’s case may make prosecutors gun-shy.
Why else?
Notes WSJ:
But the Goldman probe presents a significant challenge for the government. Prosecutors in the Brooklyn office of the U.S. Attorney last year lost a high-profile fraud case against two former Bear Stearns Cos. executives, in the first major criminal case linked to the financial meltdown.
Prosecutors had accused the Bear Stearns employees of lying to investors in 2007 about the health of two funds that eventually collapsed. The case centered on what the government viewed as incriminating emails indicating the traders knew the mortgage market would fall but didn’t disclose that view to investors.
To bring any criminal charges in the Goldman matter, prosecutors would need to believe they had gathered evidence that showed that the firm or its employees knowingly committed fraud in their mortgage business. Proving such intent to break the law typically is the toughest hurdle for prosecutors to clear.
Prosecutors Should Investigate Goldman Sachs on Baidu Trading
by Zero Hedge - April 29th, 2010 10:37 pm
Courtesy of Static Chaos
In light of the fact that Baidu stock is now valued at $700 instead of $27 asserted by Goldman Sachs as the “fair value” (by the way, Goldman has never been so wrong on price targets.), and the fact that Goldman actively trades against its clients, it is now high time for the U.S. federal prosecutors probe into Goldman’s trading practice of Baidu IPOs as well.
Goldman was one of the underwriters of Baidu’s IPO in 2005. Goldman spent months promoting the Baidu stocks to investors; however, they did not understand the value of Baidu being the Google of China, and most likely betted against their client--Baidu.
The following is an updated version of my original article on Goldman and Baidu, which should lead to only one probable conclusion-- With Baidu IPOs being a phenomenal success, Goldman needed to orchestrate a public statement to quickly reverse their losing positions, and probably committed fraud in order to save their asses!
Much has been said about Goldman Sachs (GS) by articles like Mr. Matt Taibbi July 2, 2009 Rolling Stone “Inside the Great American Bubble Machine”. But most have not heard about Goldman Sachs’ involvement in the initial public offering (IPO) of Baidu (BIDU) and the subsequent BIDU share price movements back in 2005 and 2006.
Goldman Sachs and Piper Jaffray (PJC), along with Credit Suisse First Boston (CS), underwrote Baidu’s IPO. The IPO would be the first for a pure-play Chinese search engine company. Baidu American depositary shares (ADS) started trading on August 5, 2005. An initial 4.04 million ADSs were offered at $27 per ADS; opened at $66, more than double its $27 price, climbed, stabilized and then rallied anew before ending its historic opening day at $122.54.
With a rise of 354%, Baidu’s first-day gain ranks 18th in history and ranks as the best performance ever by an overseas deal. At its IPO price of $27 a share, the company raised $109 million. Part of the big debut-day move from Baidu.com can be traced to the relatively small size of the deal.
With only 4.04 million shares in the IPO and strong indications of interest from both retail and institutional investors, demand had driven up the price throughout the process. The widely circulated rumor at the time that Google (GOOG) had attempted to buy the…
Congressman Miller Introduces Bill Breaking Up Big Banks
by Zero Hedge - April 29th, 2010 8:57 pm
Courtesy of George Washington
A friend on the Hill sent me the following internal letter being sent around the House to gather cosponsors.
Too Big to Fail is Too Big to Regulate
Cosponsor H.R. 5159 – The Safe, Accountable, Fair and Efficient Banking Act of 2010
April 29, 2010
Dear Colleague:
We’re writing to invite you to join us as cosponsors of legislation to restrict the leverage and size of the very largest banks and financial institutions in the United States.
The resolution powers in the financial regulatory reform bill that passed the House last year represent critical first-steps in addressing the problem of risk-taking by institutions that are “too big to fail.” But it has become increasingly clear that to make absolutely certain U.S. taxpayers are never again forced to rescue a giant financial institution, we must make sure that no market participant is so large that a failure would result in economic collapse.
The six largest U.S. banks today have total assets estimated to be in excess of 63 percent of our national GDP. The gigantic size of megabanks, and the perception in the marketplace that they are indeed too big for the government ever to permit them to fail, gives them a competitive advantage over smaller financial institutions that distorts the market and discourages competition. The lack of competition in the banking industry, in turn, leads to ever-higher levels of risk in the system.
There is no evidence that giant financial institutions perform any public service or market function that cannot be performed as well or better by smaller, and even substantially smaller, banks and financial institutions. To the contrary, all the evidence suggests that megabanks distort the market and impose substantial risk to the public. Further, the unprecedented size of the largest banks gives them enormous political power, including the ability to thwart appropriate financial regulation. As former Secretary of Labor Robert Reich correctly observed in a recent column, “the only competitive advantage to being a giant bank headquartered on Wall Street is to have the economic and political clout to get bailed out by American taxpayers when the next crisis hits.”
The SAFE Banking Act…
There’s no doubt about the health dangers of salt
by ilene - April 29th, 2010 8:25 pm
Regulate salt content, or not? This debate brings up the age-old dilemma of defining the proper role of government and deciding whether that role changes when we, as a tax-paying nation, are going to get stuck with the bills (i.e. health care). - Ilene
There’s no doubt about the health dangers of salt
By Franco Cappuccio and Simon Capewell, at New Scientist
SALT hidden in food kills millions of people worldwide. Reducing dietary salt is therefore important for public health; it is also one of the cheapest and easiest ways to save lives. So why are efforts to cut dietary salt being met with fierce resistance?
First the facts. Decreasing salt intake substantially reduces blood pressure, thus lowering the risk of heart attacks and strokes. An analysis of all the available evidence, published in 2007, suggested that reducing salt intake around the world by 15 per cent could prevent almost 9 million deaths by 2015. That is on par with the public health benefits of reducing cholesterol and stopping smoking (The Lancet, vol 370, p 2044).
Other analyses have concluded that cutting daily salt intake by 5 grams could reduce strokes by 23 per cent and cardiovascular disease by 14 per cent (BMJ, vol 339, p b4567; Journal of Human Hypertension,..).
The benefits of salt reduction may also extend further. Links have repeatedly been reported between high salt intake and chronic kidney damage, stomach cancer and osteoporosis.
There is no doubt that our salt intake is excessive…
…
This excess intake is not a matter of personal choice. Only about 15 per cent of the salt in our diets comes from our own salt shakers; the rest is added to foods before they are sold. Salt is added to make food more palatable, to increase the water content of meat products and to increase thirst. All generate profit for the food and drink industry.
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