Team Hedge Fund

Archive for the ‘Implode’ Category

“Two years after the collapse of Lehman Brothers Holdings Inc., investors still aren’t willing to pay more than liquidation value for banks in developed nations.”
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“Rather than announcing massive bond purchases with a finite end, as they did in 2009 to shock the U.S. financial system back to life, Fed officials are weighing a more open-ended, smaller-scale program that they could adjust as the recovery unfolds.”
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More details on Fed POMO market interventions, referred to in the last post: “Here’s a nice chart from Olivier Jakob at Petromatrix, who is taking an increasingly broad view of market goings-on in his bid to interpret the energy complex — oil, gas, the lot — on a daily basis… It shows, as he notes, the scale and increased frequency of the Federal Reserve’s permanent open market operations (POMO).”
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CNBC (the infinitely more credible European edition) has run a stunning interview with Cazenove technical strategist Robin Griffiths in which the banker discusses such taboo items as the Plunge Protection Team’s intervention in the market for the month of September in a last ditch effort to keep stocks from tumbling following the horrendous August performance … “One of the reasons [for the surge] is POMO: what happens is the Fed buys Treasurys off the banks, the banks put the money into the market…That amount of money turns the algorithms up, then all the algo trading hits the market. Real life investment managers are not doing this buying. They know that equities are for losers.” And the stunner: “The S&P is being effectively goosed up by the Plunge Protection Team”…

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“As a reminder, QE1, when completed, resulted in the repurchase of roughly $1.7 trillion in Treasury and MBS/Agency securities. It is thus safe to assume that the Fed’s QE2 will likely amount to roughly $1.5 trillion in outright security purchases. However, as we will demonstrate, this is far from the whole story, and the actual marginal purchasing impact will be substantially greater… What is very important to note, is that as Bank of America’s Jeffrey Rosenberg highlights, a material drop in rates, which is now practically inevitable, is certain to cause a surge in mortgage prepayments of agency securities: “Our mortgage team highlights a 100 basis point decline in rates would raise the agency universe of mortgages refinanciability from currently about half to over 90%.” ”
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“For all those who thought last week’s “dramatic” improvement in the ratio of insider selling to buying from 650:1 to “just” 290:1 was a sign things are turning and insiders may soon be selling only 100 or so times more stock per week than buying, we have some bad news. According to Bloomberg, the latest ratio of insider selling to buying was 1,411 to 1.”
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“As part of positioning for the Presidential election of 2012, a bill to audit America’s gold could play havoc with the Federal Reserve. The bill will not be seen as an audit of the FED’s operations in general – only an audit of America’s gold, which has been justified by the FED in its supposed capacity as a trustee. It is the issue of the FED as trustee, not the FED as a lender, that will be the heart of the audit… Any attempt by the Federal Reserve to argue that it must not allow the United States Congress to see if there is really any gold in its vaults is going to be a very difficult public relations exercise. ”
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“After watching the movie, I realized why the right-wing Rupert Murdoch could be comfortable enough releasing the latest from the nominally left-wing Oliver Stone… Now, Stone sees greed everywhere, and there ain’t much we can do about it. ”
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“Wall Street created fake demand for their hottest product – mortgage-backed securities called collateralized debt obligations [2] – in the two years before the financial meltdown. Their activity increased banker bonuses but ultimately made the crisis worse… we found 85 instances during 2006 and 2007 where two CDOs bought pieces of each other’s unsold inventory. These trades, which involved $107 billion worth of CDOs, approximately a fifth of the market, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other.”
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“The biggest part of that strategy is for Treasury to begin converting its $49 billion preferred stake into common stock for sales by the first half of next year, said the people, who declined to be identified because the negotiations are private.”
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