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Wall Street Sees Analysts Snagged by Political Intelligence Bill
By Phil Mattingly and Robert Schmidt
Feb 7, 2012 12:01 AM ETA U.S. Senate measure that would place restrictions on people who gather and sell government information to hedge funds may entangle bank research analysts and others on Wall Street, according to lawyers and lobbyists. (The others are the conduits to the trading desks of the TBTF banks – Jesse)
The Securities Industry and Financial Markets Association, which represents firms including Goldman Sachs Group Inc. and JPMorgan Chase & Co., held a rare weekend call for members on Feb. 4 to discuss the measure, according to two people with direct knowledge of the
The insiders are selling heavily
by ilene - February 10th, 2012 2:01 am
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Corporate insiders are now selling their companies’ stock at a rate not seen since late last July.
That’s a scary parallel indeed, since that late-July spike in selling came just days before one of the more painful two-week periods in the stock market in years.
In early August, as you may recall, the U.S. government lost its triple-A credit rating, and the bottom dropped out of the stock market. Between the last week of July and the second week of August, the Dow Jones Industrial Average DJIA +0.05% dropped 2,000 points.
Keep reading here: The insiders are selling heavily – Mark Hulbert – MarketWatch.
Wired’s Embarrassing Whitewash of Foxconn
by ilene - February 9th, 2012 10:08 pm
Courtesy of Yves Smith of Naked Capitalism
Wired’s Joel Johnson has written a stunning bit of PR for Foxconn, now-controversial supplier to the consumer electronics industry, duly wrapped in credibility-enhancing guilt over Western materialism.
The article, “1 Million Workers. 90 Million iPhones. 17 Suicides. Who’s to Blame?” pretends to be about Foxconn’s factories. But Johnson admits he’s a tech toy writer who apparently has no knowledge of manufacturing (I know I’ve had only limited contact with manufacturing, yet reading his piece, I’d bet serious money that I’ve seen more manufacturing operations than he has by dint of being a coated paper brat and doing due diligence on some oddball tech deals over the years, as well as visiting a motherboard maker back in the stone ages when motherboards were made in the US). Yet he’s remarkably uninhibited in using his fantasies and abject ignorance as a basis for making sweeping generalizations about the Taiwanese powerhouse. For instance:
In the part of our minds where Americans hold an image of what an Asian factory may be, there are two competing visions: fluorescent fields of chittering machines attended by clean-suited technicians, or barefoot laborers bent over long wooden tables in sweltering rooms hazed by a fog of soldering fumes.
When we buy a new electronic device, we imagine the former factory. Our little glass, metal, and plastic marvel is the height of modern technological progress; it must have been made by worker-robots (with hands like surgeon-robots)—or failing that, extremely competent human beings.
But when we think “Chinese factory,” we often imagine the latter. Some in the US—and here I should probably stop speaking in generalities and simply refer to myself—harbor a guilty suspicion that the products we buy from China, even those made for American companies, come to us at the expense of underpaid and oppressed laborers.
Huh? Is he serious about this? Anyone who has been following China even slightly would imagine Chinese factories aren’t like Japanese car-makers, heavy on robotics, but are mainly labor intensive (with the exception of some sparkling new capital intensive factories where China is trying to go up the value added chain), and if they are in the Pearl River Delta, makers of watches, clothing and toys (hence not much soldering). And if higher tech, the operations HAVE to be pretty to very clean. But no, everyone in the Wired readership is assumed
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Treasury Market Panic Reversal Due To Little Known Forces Called Supply and Demand
by ilene - February 9th, 2012 8:35 pm
Treasury Market Panic Reversal Due To Little Known Forces Called Supply and Demand
Courtesy of Lee Adler of the Wall Street Examiner
The Treasury market panic saw a bit of a reversal this week, partly due to an unexpected, large increase in supply because of a sharp drop in Federal tax revenues over the past couple of weeks, and partly due to the market misunderstanding of Thursday morning’s news. The “better than expected” weekly unemployment claims data was one thing. Some piling on the “risk on” trade as a result of news of a deal for another Greek bailout, was another. But we are more interested in the more esoteric and little known drivers of prices, such as “supply” and “demand.”
The short term knee-jerk reactions of hedge fund traders to news “don’t impress me much.” For one thing, today’s news has a shelf life of about 20 seconds. Likewise, traders are prone to misinterpreting “news” depending on their currently predominant position.
Since the boat is loaded long Treasuries, any “good” economic news triggers a one day selloff. When those selloffs come within the bounds of a trading range, they’re nothing more than noise. To confirm a reversal in Treasuries we need a bona fide breakout. First, the 10 year yield needs to break 2.10, and then it needs to break 2.40. If that were to happen, it would signal a long term reversal. There are some signs that we’re headed there, but we’re not there yet. The jury is still considering the case.
In recent weeks the Treasury buying panic was helped by reduced supply triggered by a massive bulge in withholding taxes from late December to late January. That bulge has now subsided, and the Treasury suddenly appears to be running short of cash. It made a surprise announcement today that it would need to raise a quick $20 billion in a 64 day CMB to be auctioned next week. What had been the beneficial impact of reduced supply could reverse into greater than expected supply in the weeks ahead if tax revenues fall short of the government’s optimistic estimates. The daily withholding data shows those revenues dropping but then pausing over the last few days, so it’s not completely clear yet where that trend is headed. The data for the coming week should give us a better handle.
We’ll also keep an eye on the…
Economists Surprised Again By Unemployment Claims, Should Not Have Been
by ilene - February 9th, 2012 5:17 pm
Economists Surprised Again By Unemployment Claims, Should Not Have Been
Courtesy of Lee Adler of the Wall Street Examiner
The mainstream media proclaimed an unexpected "beat" of the first time unemployment claims number today. The fake, seasonally fudged number dropped to 358,000 in the week ended February 4. According to Bloomberg, the consensus of economists' expectations was for 370,000. Aside from the fact that whether economists get a forecast right or not seems to be completely random, two facts stand out. First, the number that they are looking at is made up and fictional. Second the trend of the actual weekly number has been unflinchingly within a couple of points of an annual rate of decline of 9-10% for the past 18 months.
As long as that trend is intact, there will be no reason to ever expect the weekly number to mean anything other than steady as she goes at the current rate. In fact, there's really little point to forecasting the number on a weekly basis, because typically a big change one way one week is reversed the following week. What counts is the trend, which is another reason why all the old guys on Wall Street are so fond of repeating, "The trend is your friend."
It's nice that the claims number is a weekly number, and that it is virtually real time with a lag of less than a week, therefore the first sign of a change in the trend of the economy may well come from this series. It is worth watching from that respect.
At this point there's no sign of a change in the trend. There's no sign of deterioration, and certainly no sign of improvement over what's been going on, so the fact that the number was a surprise to economists is neither here nor there. The number was completely consistent with the trend.
The actual number of first time claims last week was 397,810. This is based on the data on actual applications that each of the 50 states feed into the Federal Department of Labor's computers. It's not a survey or an estimate, unlike many government series. It's a real number, which the government reports, but which it also then manipulates into a smooth line for economists to wet their pants over. This number will be revised next week, but the week to week revisions are typically small and usually
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Japan Machine Orders Drop 7.1%, Exports Down 3 Consecutive Months; Predicted Growth or Predicted Mirage?
by ilene - February 9th, 2012 5:09 pm
Courtesy of Mish
Bloomberg reports Japan Machine Orders Fall More-Than-Estimated 7.1% as Yen Climbs
Japan’s machinery orders fell at the fastest pace in three months in December as a faltering global economy and gains by the yen dimmed the outlook for exporters.
Bookings, an indicator of capital spending, decreased 7.1 percent from the previous month, the Cabinet Office said in Tokyo today, after surging 15 percent in November. The median estimate of 29 economists surveyed by Bloomberg News was for a 5 percent decline.
Japan’s exports fell for three straight months through December as European leaders grappled with the debt crisis that is driving the euro region into a recession. Spending may rebound as earthquake reconstruction work kicks in and today’s report showed companies forecasting a 2.3 percent increase in orders this quarter.
Japan’s lower house of parliament on Feb. 3 approved Prime Minister Yoshihiko Noda’s 2.5 trillion yen ($32 billion) recovery package from the earthquake and tsunami, the fourth supplementary budget since the disaster. The government forecast in December that Japan’s economy will grow 2.2 percent in the year starting April after a projected 0.1 percent contraction this fiscal year.
The International Monetary Fund estimates that Japan’s economy will grow 1.7 percent this year, compared with a likely 1.8 percent expansion for the U.S. and an estimated 0.5 percent contraction for the euro area.
Predicted Growth or Predicted Mirage?
Spend enough money and you can get GDP to rise. But what about that deficit to the tune of 230% of GDP?
To solve the deficit problem, Japan proposes massive tax hikes. What would tax hikes do for consumer spending? If Japan does pass tax hikes, it could strengthen the Yen. What would a strengthening the Yen do to exports?
Simply put, the estimated growth is a mirage, if it happens at all, and increased government spending is going to cause other problems.
For further discussion, please see Japan Faces Moment of Truth: First Annual Trade Deficit Since 1980; New Trend or Simply the Tsunami Effect?
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Merkel’s Official Denial “I will have no part in forcing Greece out of the euro”
by ilene - February 9th, 2012 4:53 pm
Merkel's Official Denial "I will have no part in forcing Greece out of the euro"; Schäuble Starts Salami Tactics on German Participation, Calls for Vote
Courtesy of Mish
Germany's "Official Denial"
If you seek confirmation that Germany is actively trying to force Greece out of the Eurozone, strong evidence appears in the form of an "Official Denial"
Please consider Merkel Says Won't Force Greece Out of Euro
German Chancellor Angela Merkel said on Tuesday she did not want to see Greece being forced out of the euro, warning that this would have "unforeseeable consequences."
"I will have no part in forcing Greece out of the euro," she said in response to a question from a Greek student at a meeting with young people in a Berlin museum.
"We don't do it to make things difficult for people, what would be our interest in doing that? But we want to reach a point where Greece can, with European help, live off its resources," said Merkel.
"Nobody wants to force reforms on them from outside," she said.
"Official Denial" Theory
For a discussion of the "official denial" theory, please see Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied)
Cede Budget Sovereignty Roadblock
Right in line with "official denial" theory, Germany started placing as many roadblocks as possible on Greece.
On January 27, Merkel demanded Greece to Cede Sovereignty to Eurozone "Budget Commissioner".
Unfortunately for Germany, French president Nicolas Sarkozy shot down the idea. However, Germany would not let it drop and two days ago Merkel floated a similar idea disguised as a Spaghetti-O.
Spaghetti-O Roadblock
For details of the Spaghetti-O loop proposal, please see New Merkozy Proposal "I will Give You Money If You Give It Right Back"; Mathematical Scam to Prevent CDS Triggers
Schäuble Starts Salami Tactics
In addition to the Spaghetti-O loop, Eurointelligence discusses the "Salami Roadblock".
According to Financial Times Deutschland, Wolfgang Schäuble now wants the Bundestag to vote only on a fraction of €30bn out of the total cost of the second Greek rescue package of €130bn. He is supported by the finance ministers of the Netherlands and Finland who met as part of the secret meeting AAA-rated ministers. The reason for this unexpected move is that the coalition has reason to fear that the general exasperation about
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On Banknotes
by ilene - February 9th, 2012 4:05 pm
There is a curious story in the Swiss press today. On the surface it appears innocuous.
Paper money has been in transition for the last ten years. Most of the big issuers of paper have updated their bills to minimize forgery. The US has spent a bundle on this effort, and it too has had problems and delays with issuing the new, more complicated money. So my first thought about the Swiss delay was that this is more of the same. Technical printing problems are to blame.
My second thought is that this is not a benign delay; something more than meets the eye is happening. There have been press reports in Switzerland that commercial banks are no longer able to meet client demand for safe deposit boxes. All of the boxes are apparently taken. As a result, people are renting safe deposit boxes in hotels. (Link)
From Le Temps 2/6/2012:
A distinguished lady had hidden 65,000 euros in the heels of her shoes and her bra.
A Labrador is trained to sniff out banknotes in Chiasso.
A motorist was caught in early February with more than 200,000 euros hidden at the bottom of his suitcase.
In a survey of "the great capital flight", the daily La Repubblica suggests a rise of 50% of receivers of property along the border with Switzerland in late 2011 over the summer.
Interesting. What in hell is going on here? Why are safe boxes so much in demand? What is in these boxes? Is it gold? Probably. Cut and uncut diamonds? Probably. I don’t think that all these boxes are being filled with deeds, wills and other important papers. The vault boxes are being used as a store of wealth.
So I ask, “Is there paper money in these boxes?” The answer is,“Of course there is”. Bigger questions are, “How much paper money is going to boxes? And who’s putting it in there?”
Sadly, I don’t have an answer – only an opinion and some thoughts. I think that these boxes are filled with:
A) Hot money from Swiss banks with customers whose names and accounts that are in the process of being revealed to host country taxing authorities and,
B) New money from Italian, French and German citizens who fear that…
Panic On Wall Street As Anti-Insider Trading Bill Spreads Wider Net Over Information Peddling
by ilene - February 9th, 2012 3:46 pm
Courtesy of Jesse's Cafe Americain
Senator Chuck Grassley put a clause back into the Senate's anti-insider trader law that requires financial analysts who meet with Congressmen and their staffs to register their meetings.
The purpose of this clause is to bring transparency to the information peddling that represents a lucrative business for hedge funds and banks that trade on insider information from the Congressmen themselves.
There is also the selling of information obtained in private meetings with the Congress to hedge funds. And rumour has it that quite a bit of that information spreads its way through the halls of the august Wall Street banks as well who help to gather it as well.
Wall Street apparently went into full court lobbying mode when they found out that Grassley had resubmitted this clause after they had successfully had it removed.
The clause only requires analysts to register their contacts and to disclose how they might be using the information provided by the Congress.
Information is power, and private access to public power is one of the great strengths of the Wall Street monied interests.
This bill might curtail the ability of JP Morgan and Goldman Sachs to obtain private information from the Finance Committees. And they are upset about the loss of that privilege.
I am sure Mr. Obama, the great reformer who promised transparency, is solidly behind this move by the Republican Senator Grassley, right? Hard to tell right now.
Panic on Wall Street.
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Appetite For Diamond Foods Options Rises As Shares Tumble
by Option Review - February 9th, 2012 1:55 pm
Today’s tickers: DMND, MHS & TRIP
DMND - Diamond Foods, Inc. – Investors sent shares in the maker of Pop Secret and Emerald snack nuts sharply lower on Thursday after the Company said it will replace its top two executives and restate earnings for the past two years. The already hard-hit stock opened down more than 40.0% this morning to touch an intraday- and multi-year low of $21.44. Options on Diamond Foods attracted all kinds today, with some strategists nibbling at calls and selling puts, while others position for further downside in the name. Investors expecting shares to somewhat recover in the next six trading sessions picked up call options in the front month. Approximately 1,400 calls were purchased at the Feb. $25 strike for an average premium of $0.86 each. Call buyers may profit at expiration next Friday in the event that DMND’s shares rally 11.2% off the current price of $23.25 to top the average breakeven price of $25.86. Meanwhile, out-of-the-money put selling in the front month may mean some traders expect the stock is unlikely to tumble much further from here within the next week. Put sellers looked to the Feb. $20 strike, selling around 1,500 of the contracts to receive an average premium of $0.64 per contract. Traders keep the full amount of premium as long as shares in Diamond Foods exceed $20.00 through expiration. Options volume on the food products company today currently exceeds 95,000 contracts, an active day for the stock, which has 158,981 contracts comprising overall open interest.
MHS - Medco Health Solutions, Inc. – Shares in the pharmacy-benefits-manager (PBM) are off slightly this morning, down 0.20% at $60.70 as of 11:30 a.m. in New York, but options activity in the name suggests the stock…
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BOEasy Money Thursday – Greasing the Wheels
by Phil - February 9th, 2012 8:27 am
More free money!
That's the way we like to start the day as the BOE pumps another $75Bn into the mix and, best of all, their currency went UP on the news because "whisper numbers were for $100Bn." Now that we know the magic formula, we can start a rumor that the Fed will print $3Tn and then, when they ONLY print $2.5Tn – the Dollar will become much more valuable. See, I'm starting to think like a Central Banker!
Also in the "bad news must be good news" pile as Greek Finance Minister Evangelos Venizelos (wouldn't it suck to live in Greece with a name like Bob Smith?) heads to Brussels with NO DEAL. That's right there is still no deal on the Greek bailout that has boosted the markets by 22% since October. They do claim that the only remaining issue is pension cuts but all the Florida voters who picked Romney will soon find out how easy that is to accomplish.
Just last February, I was writing a Thursday post titled "Greece is the Word" where I warned that the 4.23% CDS rate hitting Greek bonds was unsustainable and that turned us bearish right at the top of the rally at S&P 1,344. Yesterday, the S&P was back to 1,349 and I wonder if Greece never happened – would I have continued to be bullish with the markets at this level?
On the whole, even WITH the snowballing Greek crisis, we "only" fell to 1,249 in March so, with Greece all fixed – maybe we can afford to be a bit more bullish. I'll be more comfortable with the upside once we see that Greece is not a "sell on the news" event but, as I noted yesterday, our last 10 bullish picks did quite well and a few of them are still playable and certainly there are still opportunities out there to pick up good stocks fairly cheaply.
Take DMND, for example. Last night, the stock fell from $37 to $20.50 as the beleaguered company will have to restate their last two years of earnings and that sent the CEO and two CFO's out the door and does, in fact, constitute a "material adverse change" that will allow PG to, at their discretion, terminate their deal to merge their Pringles division into DMND in exchange for a…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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