STOCK MARKET WATCH, Monday April 19

[ozymandius]

Source: du

STOCK MARKET WATCH, Monday April 19, 2010

AT THE CLOSING BELL ON April 16, 2010

Dow... 11,018.66 -125.91 (-1.14%)
Nasdaq... 2,481.26 -34.43 (-1.37%)
S&P 500... 1,192.13 -19.54 (-1.61%)
Gold future... 1,126 -10.40 (-0.92%)
10-Yr Bond... 3.76 -0.07 (-1.83%)
30-Year Bond 4.67 -0.05 (-1.02%)

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Market Conditions During Trading Hours

Euro, Yen, Loonie, Silver and Gold

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Handy Links - Market Data and News:Economic Calendar    Marketwatch Data    Bloomberg Economic News    Yahoo! Finance    Google Finance    Bank Tracker    
Credit Union Tracker    Daily Job Cuts

Handy Links - Economic Blogs:
The Big Picture    Financial Sense    Calculated Risk    Naked Capitalism    Credit Writedowns
Brad DeLong      Bonddad    Atrios    goldmansachs666    The Stand-Up Economist

Handy Links - Government Issues:
LegitGov    Open Government    Earmark Database    USA spending.gov

Handy Links - Videos:
The Coming Collapse of the Middle Class    Charlie Rose talks with Roubini    Charlie Rose talks with Krugman
    William Black: This Economic Disaster    Bill Moyers with Kevin Drum and David Corn

Bush Administration Officials Convicted = 2
Names: David Safavian, James Fondren

Bush Administration Officials Charged = 1
Name(s): Richard Lopez Razo

Financial Sector Officials Convicted since 1/20/09 = 11

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This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.

Read more: du

[ozymandius]

1. Today's Report

10:00 Leading Indicators Mar
Briefing.com 1.0%
Consensus 1.0%
Prior 0.1%

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

[ozymandius]

2. Oil plunges below $82 on volcano, Goldman jitters

SINGAPORE – Oil prices plunged below $82 a barrel Monday in Asia, extending big losses on expectations that disruption to air travel from the Icelandic volcano will undermine the global economic recovery and crude demand. ....

A huge cloud of volcanic ash has shut down air traffic in most of Europe for four days — stranding passengers and scuttling travel plans and freight services that could end up costing billions of dollars. ....

Oil fell $2.27 to settle at $83.24 a barrel on Friday after the Securities and Exchange Commission said Goldman Sachs & Co. defrauded investors by failing to disclose key information about mortgage investments it sold as the housing market was collapsing in 2008.

Investors speculated that Goldman may have to liquidate some positions in crude to pay for penalties if found liable. ....

In other Nymex trading in May contracts, heating oil fell 4.83 cents to $2.1686 a gallon, and gasoline dropped 3.91 cents to $2.2771 a gallon. Natural gas was steady at $4.038 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

[Demeter]

6. Yeah, I Didn't Think a Volcano Could Affect Oil Prices

But Goldman liquidating for lawyers fees--that's totally believable.

Think how the greenhouse warming trend will be stopped dead--with no contrails and all that particulate matter to shade the earth and stimulate rains...

The time, they are a-changing.

[ozymandius]

10. Good morning, Demeter.

:donut: :donut: :donut:
We know that Goldman has been churning the petrol markets with speculative activities. But now it looks like they're about to get hit with a double whammy of Uncle Sam and Mother Nature. I didn't see that coming either.

[Tansy_Gold]

37. Good morning, Ozy, Demeter, UIA, and all

Talk about "I didn't see that coming. . . . "

I've been mostly lurking the past week or so while trying to catch up on dozens of projects, not to mention the day job. Just when I thought I was beginning to see light at the end of the tunnel. . . . one of my dogs got bitten by a very large rattler on the back porch yesterday morning. Emergency vet bill is horrendous, as you may imagine, but it looks like she's going to pull through in good shape. BF dispatched the snake, so he's earned a reprieve from some of my criticisms.

As a result, I'll probably be taking on some extra work to pay for her hospital stay and everything else, which means less time for SMW. But I will always be reading, reading, reading, with the occasional drive-by snark. :evilgrin:


Tansy Gold

[Demeter]

40. Goodness! Stay Out of Range, Please!

We've never had a candidate for higher office killed by a snake, and now is not the time to start.

[hamerfan]

51. Here's hoping for the best for your dog, Tansy!

I can believe the vet bill size, too.

[tclambert]

55. Your dog needs a pet mongoose!

Holy crap, you get rattlesnakes on your back porch? Here in Michigan, we elect them mayor. Hah! A Kwame Kilpatrick joke! (They're talking about him on the news again. He may have to go back to jail for probation violations.)

Seriously, I sure hope your dog is OK.

[Tansy_Gold]

57. Update

Miss Mattie is home now, a bit groggy probably from pain medication but otherwise doing okay. Her muzzle and lower jaw are still swollen and this could take a week or more to go down completely, so I was prepared for that.

The final vet bill was actually less than the estimate, but still very very hefty. :-(

The main thing now is just to keep an eye on her for complications, let her rest and heal.

I lived 20 years in the desert "suburbs" west of Phoenix and saw only two very small rattlesnakes anywhere near the house. In four years here in the East Valley, we've had two large ones on the back porch and possibly three others out in the yard -- meaning, snakes were seen but not positively identified as rattlers.

Now I have to get caught up on the day job. Ugh.


Tansy Gold

[DemReadingDU]

61. Poor doggie

Best wishes for a speedy recovery

[ozymandius]

62. Oh Tansy! I'm so sorry for the girl.

Of course, your absence will be felt but well understood. Life happens to us all.

Loving kindness to you all.

ozy :hug:

[Tansy_Gold]

63. I love my computer. That's where all my best friends live.

:grouphug: a thousand times over for the affection shown here in SMW.

Now, let's go out there and Get Goldman!!!




TG

[Dr.Phool]

64. I hope she recovers quickly and fully.

She looks just like our beloved Stoli, we had for 13 years until 3 years ago. She taught The Fudd everything he knew.

The other day, we (Me and Sara) saw a snake in the back yard, slithering away. She wanted to chase it, but I got her stopped. I don't know what it was. We have a lot of black racers around, and I leave them alone. This one didn't look black, and I thought it had a V-shaped head, but I couldn't tell for sure. When I got Sara stopped, and tried to look for it again, it was gone.

I think our region has every variety of poisonous snake in North America.

[Tansy_Gold]

65. yes, Florida has some nasty ones. You keep Sara away from 'em!

Mattie slept here in my office most of the afternoon, which is what she's supposed to do. Home-care instructions are to keep her quiet and restrict activity at least until the swelling starts to subside, which it hasn't and probably won't for at least several days.

But she ate her supper and drank lots of water and went outside to potty and now she's getting restless again. I'm hoping that the pain pill she gets in an hour will quiet her down. The fact that she wants to get out with the other dogs is a good sign, I think.

And now the day job calls, even if it is nighttime.


Everybody, give your doggies and kitties an extra hug tonight.



TG

[ozymandius]

3. Fraud charge deals big blow to Goldman's image

NEW YORK – While Goldman Sachs contends with the government's civil fraud charges, an equally serious problem looms: a damaged reputation that may cost it clients.

The Securities and Exchange Commission's bombshell civil fraud charge against Goldman has tarnished the Wall Street bank's already bruised image, analysts say. It could also hurt its ability to do business in an industry based largely on trust.

Damage from the case could hit other big banks as well. The SEC charges are expected to help the Obama administration as it seeks to more tightly police lucrative investment banking activities. ....

The charges could result in fines and restitution of more than $700 million, predicted Brad Hintz, an analyst at Sanford Bernstein. Yet, even if Goldman beats the charge, the hit to its reputation could carry a greater cost. ....

So far, no Goldman clients have publicly condemned the bank's alleged actions. But the negative publicity and regulatory scrutiny could cause some to distance themselves, said Mark T. Williams, a professor of finance and economics at Boston University.

http://news.yahoo.com/s/ap/20100418/ap_on_bi_ge/us_goldman_sachs_reputation

[ozymandius]

4. Wall Street beware: the lawyers are coming

The US Congress will debate new financial legislation this week, but the real action in financial reform started last Friday with the fraud lawsuit filed by the Securities and Exchange Commission against Goldman, Sachs & Co. That case opens the litigation floodgates for more suits based on subprime mortgage fraud, and smart investors know it. Goldman’s market value fell $12bn during trading on Friday, more than 10 times the losses alleged in the case. Shares of other major banks, such as Bank of America, Citigroup and Morgan Stanley, lost more than 5 per cent. JPMorgan Chase was also hammered last week and announced a $2.3bn increase in its reserve for litigation expenses.

These declines reflect two important consequences of the Goldman case. First, it shows how fraud allegations about complex subprime mortgage deals can be made simple. Although the SEC focused on an arcane synthetic collateralised debt obligation known as Abacus 2007-AC1, its complaint is a spare 22 pages. The heart of the document is one straightforward claim: that Goldman misrepresented the role played by Paulson & Co, a hedge fund. Goldman allegedly told investors that Paulson was investing in the deal, when instead Paulson bet against it. Goldman also allegedly hid from investors Paulson’s significant role in selecting the subprime mortgage securities referenced in the trade. Thus, the SEC cast a supposedly incomprehensible derivatives trade as a morality tale: the investors were gingerbread boys who weren’t told about the fox. ....

Regulators will never keep pace with financial innovation, and bankers run circles around even the best-intentioned rules, especially in derivatives. More fundamentally, Wall Street interprets detailed rules as a shield from liability. ....

In contrast, the case demonstrates a more effective way to police bankers, because Wall Street cannot outrun a judge. That simple point has been part of Anglo-American common law jurisprudence for centuries. The US judge Oliver Wendell Holmes advised that the law was a prediction about what a judge would do. If bankers consider only whether they are complying with specific legal rules, they will create “alegal” transactions – deals that fit the letter of the law but violate its spirit. But they cannot be certain about how a judge might assess their conduct. That worry, not a rule, is what will make bankers tell clients about the presence of a fox.

http://www.ft.com/cms/s/0/d2af9178-4b1f-11df-a7ff-00144feab49a.html

[ozymandius]

5. How Should Traders and Investors Weight the Goldman Sachs Fraud Case...

How Should Traders and Investors Weight the Goldman Sachs Fraud Case for their Investment and Trading Decisions?

Investors and traders can overreact or underreact to the Goldman Sachs fraud case depending on the government’s intent and political will. If the government intent is simply to save face and improve its sorely lacking credibility with the public, this case will be limited to a few firms and a few individuals, and the rest of the world will go about their lives knowing nothing substantial has been done to insure the public against socializing future losses of these predatory institutions. The risk in this situation is that the tightly coupled too big to fail myth will fail miserably so yet again. The prescription for this situation is to simply ride the next wave of looting until the whole edifice is on the brink of another ginormous failure.

If however, the government were to acknowledge this looting has been a direct result of the failure of the whole system, then real change will occur. The risk for traders and investors in this situation will be a dramatic housecleaning. This may be painful for many investors in the short run, but the long term benefits would be substantial. ....

To date, the history of predatory and looting financial system over the past thirty years has proved Yves Smith’s dictum in the final chapter of her book “that the more things change, the more things stay the same.”

Yes, some sort of financial reform is eventually going to pass, but in its present format, this will be a victory for the financial industry, not Main Street. This will virtually guarantee another financial crisis will coming to a theater near us in the not too distant future.

more at link...

[Demeter]

8. I don't Think the Government Will Be Able to Control the Whirlwind

that Goldman and its confrères have reaped...

which is good, because not only will the financial world be cleansed, so too will the federal government, and not just ours.

[ozymandius]

7. WHAT DOES THE GOLDMAN FALLOUT MEAN FOR STOCKS?

It’s looking like the banks perp walks couldn’t have started at a much worse time for Wall Street. In mid-January financial reform discussions sparked a swift 10% bank decline, but as reform looked increasingly less likely the banks rallied and they rallied big. Since the February bottom the banks surged 26%. It was the largest rally without a 10% decline since last Summer. How much of that rally was due to lax bank reform could play into the next move for bank stocks and with the way things are looking it wouldn’t be shocking if much of that rally was erased in the coming months. Banks and the general market have been strenuously overbought for several weeks now, sentiment is wildly bullish and many of the positive catalysts (primarily earnings, an improving economy and lax financial regulation) have been priced into shares. ....

Perhaps most alarming with regards to the Goldman news is the level of uncertainty it will create. At first glance the reaction to the Goldman news looks excessive, but this could have widespread ramifications. First, this lawsuit looks like a carefully crafted political move that will make financial reform far more stringent than bank investors had been expecting. President Obama was out Friday saying that he will veto any bill that does not contain derivatives reform. JP Morgan CEO Jamie Dimon has previously mentioned that this portion of the bill would cost the bank between $500MM – $700MM. The Goldman lawsuit appears to make derivatives reform a slam dunk. This would likely shave billions in easy profits from total S&P 500 earnings. The President has also expressed a willingness to drop the $50B bailout fund. Mr. Obama is flexing his muscles now and looking to slam thru his second big bill in a matter of months. That’s good news for Main Street. Harsh reform is necessary to protect us all from ever allowing these firms to put us in this position again. Unfortunately, what’s good for Main Street is not always good for Wall Street. I wouldn’t be surprised if bank stock puke all over themselves for several weeks until the dust settles.

In addition, there is severe risk of more perp walks. This is eerily reminiscent of the Wall Street research perp walks following the many business scandals of the dotcom bubble. In April of 2002 the market appeared to be stabilizing and had rallied 20%+ off its 2001 lows. But then came the Sheriff of Wall Street. Eliot Spitzer unleashed hell on the Wall Street banks when he sued several of the largest firms for conspiring to drive up prices. Over the ensuing 5 months equities lost 25%. The Goldman news is the first of what will likely be several perp walks. .....

Making matters worse, this isn’t the last lawsuit. The private lawsuits are likely to begin pouring in as small investors sue over potential negligence. But it won’t stop there. Several leaders including Connecticut Attorney General Blumenthal have said they are looking into any malicious actions. The SEC also said that this is not the last of their investigations...

http://pragcap.com/what-does-the-goldman-fallout-means-for-stocks

[Hugin]

9. This may prove to be an interesting week...

I'll check in later. :hi:

[ozymandius]

12. Exactly!

Uncertainty is the bane of Wall Street's existence.

[Demeter]

11. It's Called Reality. Get Used to It

And about time, don't you think?

Well, Ozy, I hope you realize that in some measure, you have contributed to this great movement for Justice with the capital J, and I thank you yet again for your efforts to bring real news and analysis to public attention. I know I have personally benefited, as have the families in my condo association, as well as those members of my family that still talk to me despite my monomania with this topic...

The influence of your little thread is many thousands of times what it looks like. It is like water dripping on the stony hearts of Crony Capitalism.

It is true freedom of the press.

[ozymandius]

14. That's quite a compliment, Demeter.

Thank you!

It seems only fitting to extend credit to those who really made the analysis flash and burst into a roaring fire. Namely: Yves Smith of Naked Capitalism and the recently feted Propublica. Honestly - bloggers like Yves Smith and the Zero Hedge team deserve a Pulitzer for their demonstrated level of insight and tenacity.

[Demeter]

15. I Agree

Wouldn't surprise me if Yves Smith becomes better known than Warren Buffett and as revered as Woodward and Bernstein.

[Dr.Phool]

27. This is going to get very interesting.

I find it very interesting that this is coming down now. Mitch McConnell and John Boner just went "all in" with Wall Street. It's starting to resemble an episode of "Soap". It's going to make for some good theater during the mid-terms.

I'll try to spend as much time as I can, but, I'll be pretty scarce for the next couple of weeks, helping my Dad make the transition, and get settled in.

[AnneD]

47. I would like to add my thanks too......

Ozy, and everyone on the thread. The information I get here is vital to my making wise financial decisions for my self and my family. The links are well chosen and very helpful.

In the truest sense of karma-I hope things get so bad for these crooks on WS, esp Goldman Sucks, they WISH Eliott Spitzer was the AG again.

Congrats to the thread:fistbump:

[Demeter]

13. SHAMELESSLY STOLEN: The Kiss of Death

http://whitecollarfraud.blogspot.com/2010/04/did-clever-sec-bait-goldman-sachs-into.html

In filing its lawsuit against Goldman Sachs (NYSE: GS) on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had gone packing for the weekend.

When a company or individual receives a surprise subpoena on a Friday from the SEC, it is usually designed to ruin their weekend plans. Yes, the SEC can get personal in its own way.

Usually, corporate lawyers are unavailable on short notice to work weekends. When a company or individual receives a subpoena or lawsuit on a Friday, they are left to stew in anxiety over the weekend until Monday, before their lawyers can appropriately advice them on how to respond to the SEC...

The "kiss of death" message is deliberately sent on Fridays to chill the bones of criminals. Some criminals wait in anxiety during the weekend until Monday to consult with their attorneys about what to do next. Other criminals or SEC targets like Goldman Sachs don't want to wait until Monday. So they make rash decisions and major errors in prematurely reacting to the "kiss of death" message to their own peril and find themselves in legal quicksand.

Goldman Sachs chose not to wait until Monday and fully digest the implications of the SEC complaint. After a relatively short consultation with its attorneys, the company hastily issued a detailed press release later Friday afternoon that I believe will land it into deeper potential trouble. Before I discuss that issue, it's worth noting who the SEC selected to be its lead counsel in the lawsuit against Goldman Sachs.

SEC Lead Litigation Counsel: Richard E. Simpson the "Pit bull"

The SEC chose top gun Richard E. Simpson as its lead counsel in its lawsuit against Goldman Sachs and Fabrice Tourre. Coincidently, Richard E. Simpson was the same lead counsel for the SEC in its successful case against Crazy Eddie and the Antar family.

Simpson is a twenty year veteran at the SEC Enforcement Division. He could have easily made much more money in the private sector, but instead stayed at the SEC. As a former adversary who did battle against Simpson and later buckled under his pressure to cooperate with him, I found him to be very focused, knowledgeable about how criminals operate, and he knows how to bring them down.

In the Crazy Eddie days, Richard Simpson developed a reputation for turning pin stripe suits into orange prison jump suits. Simpson's investigation of the Antar family led to the capture of fugitive Eddie Antar in Israel, later imprisonment of Eddie and his brother Mitchell, and the impoverishment of other family members. Simpson won civil cases against against Sam M. Antar, Eddie's father, and other family members who were not indicted in the criminal case.

Simpson's relentless pursuit of the Antars earned him the nickname "Pit bull" from US Attorney Michael Chertoff's office, which prosecuted the Crazy criminal case. Over a fifteen year period Simpson was able to recover from the Antars more money than they made by selling Crazy Eddie stock to duped investors at inflated prices. The Antar family engaged in massive skimming before Crazy Eddie's became a public company and Simpson recovered a substantial amount of those funds from secret foreign bank accounts, safe deposit boxes, and even money hidden in Sam M. Antar's ceiling....

[ozymandius]

16. This is great!

Best of luck to Mr. Simpson. He certainly seems to be the right person for the job at hand.

And while we're here - I would like to extend wishes to Goldman Sachs for the worst of luck. Keep on keepin' on (making mistakes, that is).

[Hugin]

45. Today's must read ^

Very interesting and illuminating.

[Demeter]

17. Another Crusader, Mike "Mish" Shedlock, Goes After the Govt. Moles

http://globaleconomicanalysis.blogspot.com/2010/03/geithners-illegal-money-laundering.html

http://globaleconomicanalysis.blogspot.com

He needs to be more widely read. My I recommend him for a handy link? I think his work is about to become equally significant.

[ozymandius]

24. I do like Mish but have strenuously disagreed with him on major points.

He is a libertarian precious metals bug. He also vocally supports Republican candidates. Mish is a very smart guy and can make good calls when an entity, like Goldman Sachs, is up to misdeeds. However he is way too conservative and in favor of relaxing government regulations, abolishing labor unions, etc.

In sum, he spews much of which I find abhorrent. But in honesty, I can respect some of his positions because he does, IMO, occasionally make a good call.

[Change Happens]

18. Unhinged at CNBC this morning, please email them:

Tell them to stop defending Goldman Sacks, they are out in full force saying the public is uninformed, there is no case, GS did nothing wrong?

email: [e-mail]

[ozymandius]

19. Other Major Banks Did Deals Similar to Goldman’s

(This was posted at the WEE on Friday.)

...According to the SEC, Goldman Sachs knew about the hedge fund’s bets, knew it played a significant role in choosing the assets in the portfolio, and yet did not tell investors about it. (Goldman Sachs has called the SEC’s accusations “completely unfounded in law and fact.” And in another more detailed statement, it said it “did not structure a portfolio that was designed to lose money.”)

As we reported at ProPublica last week, many other major investment banks were doing a similar thing.

Investment banks including JPMorgan Chase, Merrill Lynch (now part of Bank of America), Citigroup, Deutsche Bank and UBS also created CDOs that a hedge fund named Magnetar was both helping create and betting would fail. (Update 4/17: Magnetar denies it was making such bets.) Those investment banks marketed and sold the CDOs to investors without disclosing Magnetar’s role or the hedge fund’s interests. ....

We’ve called the major banks involved in Magnetar CDO deals to see if they were concerned about similar lawsuits. Thus far, Bank of America, Citigroup, Deutsche, Wells Fargo (which bought Wachovia) and UBS have responded and have all declined our requests for comment.

http://www.propublica.org/ion/blog/item/other-major-banks-did-deals-similar-to-goldmans

[Demeter]

23. (I don't remember that!)

There was so much coming down this weekend---

I will never get my inbox emptied at this rate. My only hope is that the stuff times out as issues get resolved or become moot.

As if that's going to happen. This is a Long Crisis, and we in it for the duration.

[ozymandius]

26. Seems that's where I read this story first

Of course I could be wrong. Definitely, it was here at DU.

[DemReadingDU]

28. I remember reading this somewhere too

just can't remember where, I'm still catching up from the weekend thread! Maybe this was in a separate thread?

[Ghost Dog]

29. Who is Next in the SEC’s Crosshairs? A universe of possible miscreants.

Who is Next in the SEC’s Crosshairs? Some Possible (and Heretofore Overlooked) Suspects

By Yves Smith and Tom Adams, an attorney and former monoline executive

Both the traditional media and the blogosphere have taken an almost obsessive interest in the suit the SEC filed against Goldman last week with regard to one of its synthetic real estate related CDOs, Abacus 2007 AC1. Goldman’s shares and the stock market in general traded down, presumably seeing this suit as a turn in the tide, an end of the US government’s supine stance on questionable practices in the financial service sector.

Although the Wall Street Journal is reporting that the SEC is widening its investigation, so far it appears to be going only after very low hanging fruit. While the Journal notes that the SEC is looking into specific CDOs issued by Merrill, UBS, and Deutsche Bank, in all the examples mentioned, there is an existing private lawsuit against the investment bank. As we discuss in detail below, we think this initial salvo falls well short of the universe of possible miscreants.

...

Assuming that the Goldman suit is the first step in a bigger initiative, where might the SEC and private claimants go next? There would seem to be at least three obvious channels: other John Paulson-related CDOs; non-Paulson Goldman Abacus trades; synthetic CDO programs like Abacus, apparently for the banks’ own accounts (the most notable example being Deutsche Bank’s Start program) and the Magnetar CDOs, which were structurally different than the Paulson program but appear to have been designed with the same intent, namely using a CDO to gain access to credit default swaps on particularly drecky subprime debt at cheap price (since the use of a CDO lured some counterparties into accepting AAA prices for at best BBB risk).

Greg Zuckerman’s book The Greatest Trade Ever discusses the origin of the synthetic CDO, and depicts Paulson as the moving force behind them, attributing $5 billion of CDOs to him. According to Zuckerman, Paulson approached Goldman, Deutshce Bank, and Bear Stearns in 2006 about launching synthetic CDOs that he would sponsor in return for taking down the ENTIRE short side (as in all of the CDS used to provide the cash flow for the CDO). Bear Stearns found the idea to be unethical (!) while Goldman and Deutsche went ahead.

Various commentors, including this blog (and later in an extensively researched New York Times story) have observed that Goldman’s Abacus program (25 deals, totaling over $10 billion) appeared to be designed to serve Goldman’s desire to put on a short position, yet presented to customers as no different than other CDOs. Deutsche Bank’s less widely discussed Start program appears to be along the same lines.

Although one of Magnetar’s deals is also on the list of cases the SEC is probing, this CDO (Norma) has been in the press since 2007, when it was the focus of one of the very first stories on dodgy CDOs, this one published by the Wall Street Journal. Magnetar’s program was far and away the largest of all the subprime short strategies that used synthetic or heavily synthetic CDOs as a major component. Our tally of the trades (more complete than ProPublica’s) puts the total at 29 transactions with a total par value of over $37 billion.

We’ve sorted the deals by banker, since the winks and nods that might have occurred between the dealer and the hedgie sponsoring the deal could have operated across multiple transactions. The list shows that some major CDO players have not yet received much critical scrutiny for their role in working with CDO sponsors who appear likely to have designed the deals to fail, namely Calyon, Mizuho, Citigroup, Lehman, and Wachovia. We’ve also put Calyon and Mizhuo together on our spreadsheet, since the team at Calyon decamped to Mizhuo (while any legal action would presumably target the bank-issuer, plaintiffs might want to examine the conduct of the professionals at both firms).

In other words, there is a lot of dirt if the SEC chooses to dig. And it is far too early to tell whether they have the Administration support and the bloodymindedness to do so.

/... http://www.nakedcapitalism.com/2010/04/who-is-next-in-the-secs-crosshairs-some-possible-and-heretofore-overlookedsuspects.html

[Demeter]

31. I Expect It Will Be a Form of Lifelong Job Security

and a growth industry for recently graduated lawyers. It's better than bankruptcy cases, IMO.

[Demeter]

20. Broke Cities (including this one)

http://www.sandiegoreader.com/news/2010/apr/07/city-light-1/

Those euro-zone countries get everything backward — working to live instead of living to work. That’s what we smug Americans think. Take Greece. It has promised too much too soon to its pensioners, whose average retirement age is 61. And there’s excessive generosity in other financially ailing European countries known by the snotty acronym PIIGS, standing for Portugal, Italy, Ireland, Greece, and Spain. Actually, even the so-called stable countries of Europe, such as France, are too indulgent.

But let’s not get too overconfident in our own country, as the New York Times pointed out in a March 12 story. Jagadeesh Gokhale, economist with the Cato Institute, noted in that story that officially Greece’s debt is 113 percent of its total annual economic output. But if its pension obligations were included, Greece’s debt would be 875 percent of output. Bad, huh? Yes. But the comparable ratio for France would be 549 percent and Germany 418 percent. The United States? About 500 percent, says Gokhale, who includes Medicare, Medicaid, and Social Security obligations in his figures.

The Pew Center on the States says there is a $1 trillion gap between what the 50 states have promised workers in retirement benefits and what they have set aside. Some economists say phew to Pew. As noted in the March 15 cover story of Barron’s, finance professors Robert Novy-Marx at the University of Chicago and Joshua Rauh of Northwestern say that the funding gap for state pension plans alone might be more than $3 trillion. Take a deep breath: these professors say that state pension funds as presently set up have only a 1 in 20 chance of paying their obligations 15 years from now, according to Barron’s.

In California, State Treasurer Bill Lockyer says that past pension guarantees are legally cast in cement. The City of Vallejo, in the Bay Area, filed for Chapter 9 bankruptcy two years ago because its employees’ pay and pensions ate up a staggering 90 percent of its budget, according to Barron’s. Vallejo has slashed employment. There have been so many cuts in police that the crime rate has risen sharply. But the root problem — excessive pension promises — has not been touched.

Over the last several decades, government pay and fringes have soared while private sector remuneration sagged. Economist Chris Edwards of the Cato Institute, using figures from the U.S. Bureau of Labor Statistics, points out that the average salary of state and local government workers is $26.01 per hour, compared with $19.39 in the private sector. And there is a yawning gap in benefits: state and local government workers get $13.65 an hour, private sector workers $8.02. If you have been keeping track of this on your calculators, you see that total compensation (wages plus benefits) is $39.66 an hour for state and local government workers and $27.41 in the private sector.

Of those benefits, government workers get $4.34 an hour in health insurance, more than double the $1.99 of folks in the private sector. Government workers rake in $2.85 an hour in defined benefit pensions versus a mere 41 cents in the private sector. (In a defined benefit plan, retirees get a set amount each month, no matter what happens to the fund’s investments. In a defined contribution plan, employees plunk money in monthly, but their pots go up and down with the markets.)

Here’s the punch line: a whopping 80 percent of government workers get that guaranteed defined benefit pension. Only 21 percent of workers in the private sector have defined benefit plans, according to the Bureau of Labor Statistics.

The stark truth is that, increasingly, governments know they can’t meet future obligations. But fearing that they can’t break pension promises, they punish the citizenry by raising taxes and fees and slashing services, maintenance, and urgently necessary infrastructural spending....

[Demeter]

21. China’s March Trade Deficit — What Does It Mean?

http://chovanec.wordpress.com/2010/04/10/chinas-march-trade-deficit-what-does-it-mean/

...about China’s latest announcement that it ran a $7.2 billion trade deficit for the month of March — its first in six years. This is essentially what I had to say:

Today’s news must strike people as surprising, given all they’ve heard about China running chronic trade surpluses. But you need to put it in context. China’s exports every year are highly seasonal — they peak in the fall, when Christmas orders are being shipped, and drop in the spring. So China’s trade surplus usually declines in the spring, and it’s not unprecedented for it to run a one-month deficit even in a year when it ends up running a sizeable trade surplus. The last deficit took place in April 2004, a year in which China went on to rack up a then-record $32 billion surplus.

What tipped this month’s figure from a marginal surplus to a deficit was a surge in imports, up 66% from last year. But it going to be important to drill down and take a closer look at exactly what’s making up those imports. If they are finished consumer goods, then it could be a sign of rising consumption in China and a shift towards more balanced trade. But if they consist mainly of raw materials, as many economists suspect, it could indicate that Chinese manufacturers are gearing up for a surge in exports later this year (a phenomenon compounded by rising commodity prices for inputs like iron ore and crude oil, in part due to rising Chinese demand).

The key question is, is this a trend or a cycle? Is it a trend towards higher domestic consumption and more balanced trade, or part of a production cycle that leads right back to where we started? I’m not convinced yet this is a trend.

There’s a lot of speculation that China may use news of this month’s trade deficit to fend off US pressure to strengthen the RMB, arguing that it is making progress in restructuring its economy and boosting domestic demand. But if this is part of a cycle, as many suspect, and China goes right back to running trade surpluses in a month or so, that argument’s not going to have much staying power. That’s probably why even Chen Deming, China’s Minister of Commerce (who has been very vocal these past few weeks about the damage a stronger RMB could do to exporters) is being careful not to overplay the news, describing the March trade deficit as “a blip on the radar screen” that may soon be reversed.

[fasttense]

32. Funny how pensioners have now become our new Welfare Queens.

When welfare was deemed to be too generous and helped the poor too much and too often, the RepubliCONS trotted out the Welfare Queen lie. They made the welfare recipient out to be a lazy, fat person making money off the government dole.

Now it's time for the Pensioner Sponge. A lazy old person making money off the government dole, oh wait, these pensioners put in 20 to 50 years working for the government. They actually did a job and many people would say they actually earned their retirement pensions. Just because the private sector is screwing the elderly, it should be a signal that the government should screw them too?

A look at the numbers indicates it's not the pension costs that are overboard but government, including states, continually spending more than they have on the budget. Also, pension expense increases are lower than welfare expense increase and total spending increases.

By cutting out the pensions these elderly people have worked for, the government will simply be moving them from a pension cost to a welfare cost. The poor elderly have got to eat and pay for heat. If they don't get it in a pension, they will have to get it by applying for welfare.

The reason pensions are so high is because of Ronnie Rayguns and Greenspans changed Social Security. Now you have to be 70 years old to qualify for full benefits. If, like most people, your health prevents you from throwing boxes up into the age of 70, then you must take a 20 to 50% cut in your social security so you can retire "early".

Here is a cool site with all the numbers:

http://www.usgovernmentspending.com/downchart_gs.php?year=1980_2015&view=1&expand=&units=b&fy=fy11&chart=40-total_00-total_30-total_F0-total&bar=1&stack=1&size=m&title=&state=US&color=c&local=s

[DemReadingDU]

38. My brain remembers reading that when SS was started for the elderly

The age of lifespan was 65, or thereabouts. So an elderly person who got social security wasn't going to live very long to receive benefits. Lifespan is now 80, and since people are living longer, they receive SS benefits longer. I can see why the government would raise the age to 70 for full SS.

Spouse turned 62 last year and elected to get SS early, but reduced payments. He figures if he is already receiving SS, chances are it won't be taken away. I seem to recall reading many people have recently signed up early for this same reasoning.

Edit: Cool website, thanks!

[JDPriestly]

50. Problem with the argument about the average life span being

shorter back in the 1930s is that, even though we now live longer, a) there are far too few jobs for younger people, much less for older folks; b) we still age. We live longer, but we still become slow, forgetful and nervous. That's why employers are unwilling to hire us. We are very dependable and "wise," but slow. In today's workplace, slow means unprofitable.

Tough, but true.

[DemReadingDU]

53. years ago, on 60 minutes

a story was done on a company, that only hired people who received Social Security. It was a smallish company, and the work was detailed and tedious. But the owner was very pleased, his workers were very dependable, arriving on-time every morning. The older people liked the social interaction with people of their own age.

and I found the link, truly amazing. there should be more companies like this
8/10/03 Morley Safer Talks To People Who Just Can't Retire
http://www.cbsnews.com/stories/2003/08/08/60minutes/main567331.shtml

[JDPriestly]

59. In my field, an older person is fine if they keep their job.

But if they lose their job and have to find another one, there are just too many young, attractive people out there competing for the few available jobs.

[DemReadingDU]

60. Oh, I know. Been there

and my son-in-law is only mid-30s, and can't get a decent job. It's bleak.

:(

[Demeter]

39. We Have Become a Nation Run By Evil Overlords

FRSP

[Tansy_Gold]

42. Ditto. n/t

[tclambert]

56. Well, now, when you become an Overlord, there are a lot of temptations to do evil.

It's tough to be a kind, considerate Overlord. And really, the kind, considerate people don't tend to have much ambition to seek an Overlord position. And, according to my reading of Faulkner, an inclination for evil helps the ambitious in their schemes to achieve Overlordship. Now I'm depressing myself, since it seems evil is the only flavor Overlords come in.

[JDPriestly]

48. Demeter. Are the figures comparing private and public salaries comparing similar work?

Your quote:

Over the last several decades, government pay and fringes have soared while private sector remuneration sagged. Economist Chris Edwards of the Cato Institute, using figures from the U.S. Bureau of Labor Statistics, points out that the average salary of state and local government workers is $26.01 per hour, compared with $19.39 in the private sector. And there is a yawning gap in benefits: state and local government workers get $13.65 an hour, private sector workers $8.02. If you have been keeping track of this on your calculators, you see that total compensation (wages plus benefits) is $39.66 an hour for state and local government workers and $27.41 in the private sector.

Clearly, the highest paid workers in private industry are paid far more than the highest paid government workers. I don't need a cite to know that for a fact. Think about Goldman Sachs bonuses. A lawyer, for example, who works for a private law firm will receive a higher salary than a lawyer who works in your city attorney's office at a comparable level of responsibility.

Is the reason for the discrepancy in wages due to the fact that government workers in general tend (with a few exceptions) to be professionals and better educated and qualified than workers in private sector jobs. The government does not run retail stores or fast food restaurants. And nowadays in many places even school lunches are provided by private companies. Garbage collectors and some of the crews that clean public buildings may be relatively poorly educated. But police officers, clerks in courts, etc. must meet pretty high standards in terms of education just to qualify for those positions.

I think that the Cato Institute is comparing apples and oranges. The Cato Institute is paid to sell the idea that government is bad. Sorry. I'm not buying.

[JDPriestly]

49. Demeter, I also have to add that California has not really raised

taxes, in fact cannot really raise taxes by much.

Further, anyone who has a 401(K) rather than a government pension fund knows that it is quite likely that we who worked in the private sector all our lives or did not qualify for a government pension will most likely also end up on the dole. That is because the majority of Americans who earn ordinary salaries and do not receive pensions either private or public cannot possibly, even under the best of circumstances, save enough money during their working lives to fund even a modest retirement.

That is why so many elderly Americans end up living their sunset moments in miserable nursing homes at government expense.

[Demeter]

22. Soros, Galbraith and Stiglitz on resisting inevitability in Greece

http://www.nakedcapitalism.com/2010/04/soros-galbraith-and-stiglitz-on-resisting-inevitability-in-greece.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

...But, in the main, market discipline is not where we are headed. Instead, it is all bailouts all the time. Brynjolfsson makes a lot of points near the end of his five minutes about the distortionary effects of bailouts that I have made in the past. The problem in Japan has been an unwillingness to take credit writedowns and to instead flood the system with easy money. This only props up marginal companies, misallocates resources and lowers productivity and the incentive to invest in capital (see Japan: stimulus without reform leads to a policy cul de sac).

Moreover, policy makers in the U.S. or Japan who are giving out the easy money are pushing on a string. Lenders won’t lend and borrowers won’t borrow in an balance sheet recovery. Instead, what happens in a global financial system without capital controls is that the money ends up blowing up asset bubbles that pop in a destabilizing way. This is exactly what we see happening right now, one reason I am less sanguine about commodities or China medium-term than is Brynjolfsson.

[Demeter]

25. Auerback: The Central Bank as “Dealer of the Last Resort”?

http://www.nakedcapitalism.com/2010/04/auerback-the-central-bank-as-%E2%80%9Cdealer-of-the-last-resort%E2%80%9D.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Over the last thirty years, we have steadily moved from a bank lending credit system, to one in which capital markets have become the primary form of credit intermediation. Unfortunately, our regulatory apparatus has not kept up. The result has been a series of improvisations: filling gaps in the regulatory framework via bailouts and the steady expansion of moral hazard.

This is important because, as one of the first of the speakers at the Institute of New Economic Thinking (INET) conference, Professor Perry Mehrling, noted, the ultimate backstop implied by repeated government rescues created a set of expectations on the part of capital market participants. For any given trade in the securitized markets, there arose an assumption that an institution or individual could readily find a counterparty willing to do a trade at a price near to the last quoted price. As Mehrling noted, when the system was working, that counterparty was typically an investment bank (like Bear or Lehman) acting as a swap dealer, taking the opposite side of your trade for a fee: “They were willing to do this in part because they were committed to supporting the CDO market more generally. But they were not crazy. Ultimately they were market makers, willing to buy or sell the index at a price, but quite careful about their own net exposure.”

This meant that sustained pressure on one side of the market would be met by falling prices, and that is exactly what happened in the early stages of the crisis. The freefall happened when the failure of Lehman and AIG took a key market maker, and the key ultimate seller of insurance, out of the system. Had someone else, perhaps the government, stepped in to do what Lehman and AIG had been doing, even at a high price, the freefall could likely have been stopped in its tracks and the extent of the subsequent global financial fallout considerably mitigated.

Mehrling’s ultimate conclusion: Have the central bank become “Dealer of the Last Resort”, in effect backstopping the system by being the ultimate market maker or “insurer of last resort”....

MORE AT LINK

[Demeter]

30. Poll: 4 out of 5 Americans don't trust Washington

http://news.yahoo.com/s/ap/20100419/ap_on_go_ot/us_government_distrust

Nor should they. This government has chosen to cater to the upper 20% and call it comprehensive--compared to W's catering to the top 1%, I suppose it might look that way. But it ain't.

[DemReadingDU]

33. "Rotten to the Core": Bill Black and Barry Ritholtz React to Goldman Fraud Charges

click link for video

4/16/10 "Rotten to the Core": Bill Black and Barry Ritholtz React to Goldman Fraud Charges
Posted Apr 16, 2010 04:26pm EDT by Aaron Task

The SEC's civil suit against Goldman Sachs rocked the market Friday and has potentially major ramifications for the firm as well as the debate in Washington D.C. regarding financial re-regulation.

In the accompanying video, I discuss the news with Barry Ritholtz, CEO of FusionIQ and author of Bailout Nation, and William Black, a top federal prosecutor during the S&L crisis and associate professor of economics and law at the University of Missouri-Kansas City.

Ritholtz and Black agree there is strong evidence of wrongdoing and that it's unlikely this was an isolated incident. Wall Street is "rotten to the core," Black says. "When Blankfein said ‘Goldman's doing God's work,' we didn't know that ‘doing God's work' involved blowing up your own customers."

The SEC charged Goldman with misleading its customers by withholding "vital information" about a synthetic collateralized debt obligation (CDO) named Abacus that was intentionally stuffed with the most toxic subprime mortgage-backed securities.

Wall Street is a "sharp-elbowed, bloodthirsty place to work" but "this makes the 'Vampire Squid' nomer look soft and cuddly," Ritholtz quips. "There's been rampant fraud on Wall Street -- all kinds of bad behavior that's gone unpunished."

Goldman vowed to fight the charges, which the firms says are "completely unfounded in law and fact," The New York Times reports.

The suit also names Goldman V.P. Fabrice Tourre who helped create and sell the investment vehicle. "This was deliberate, corporate policy," not the work of a rogue employee, Black says.

Famed hedge fund manager John Paulson, who helped structure the Abacus deal and then shorted it, was not cited in the SEC suit. But it's like "the guy who owns the hurricane insurance on house is helping use crappier lumber to build it. So he made it pretty wobbly and then he bet against it," Ritholtz says.

Adds Ritholtz on Paulson: "He did something that's kind of sleazy. But I don’t see it as technically illegal. He let Goldman do all the illegal stuff.”

That's probably true, Black says, but Paulson “should have seen the disclosures. So if he sees disclosure statements by Goldman Sachs that he knows to be false, and that he’s going to profit from, he has a serious danger of being viewed as a co-conspirator. Now the SEC hasn’t chosen to go that way. The only individual named is small fry. That’s the major question here. Why is the SEC aiming so low in terms of individuals?”

Stay tuned for continuing coverage of this scandal.

click link for video
http://finance.yahoo.com/tech-ticker/%22rotten-to-the-core%22-bill-black-and-barry-ritholtz-react-to-goldman-fraud-charges-469554.html?tickers=GS,JPM,C,XLF,BAC,^DJI,FAZ

[DemReadingDU]

34. The End of 'Government Sachs'? Fraud Charge Builds Momentum for Financial Reform, Ritholtz Says

click link for video

4/16/10 The End of 'Government Sachs'? Fraud Charge Builds Momentum for Financial Reform, Ritholtz Says
Posted Apr 16, 2010 05:53pm EDT by Peter Gorenstein

Timing is everything. With Washington putting renewed attention on regulation reform, the SEC's fraud charges against Goldman Sachs couldn't have come at a better time for supporters of the cause. "There is nothing in (the complaint) that would give comfort to people who are opposing more regulation on Wall Street," says Barry Ritholtz CEO of FusionIQ and author of Bailout Nation.

The focus comes later than some would have wanted, but as Ritholtz says, "the momentum is clearly moving in the direction of more regulation."

The SEC charged Goldman with misleading its customers by withholding "vital information" about a synthetic collateralized debt obligation (CDO) named Abacus that was intentionally stuffed with the most toxic subprime mortgage-backed securities. Goldman says the charges are "completely unfounded in law and fact."

Sen. Ted Kaufman of Delaware - one of the most outspoken supporters of reform - reacted to the charges with this statement:

"We can have only one justice system in this country for both the rich and powerful and those who are not. I'm not prejudging the merits of this action, but if we don't treat Wall Street firms that have allegedly defrauded investors of millions of dollars with the same gravity as we treat all others, why would our citizens have faith in the rule of law?"

Reform could hurt Goldman's profitability as well as what Ritholtz calls the firm's "golden boy" reputation in Washington. With former Goldman executives serving a variety of roles in recent administrations of both parties -- including Treasury Secretaries Robert Rubin and Hank Paulson -- the firm is often referred to as 'Government Sachs' by critics and admirers alike.

But the SEC's charges suggest the Obama administration is "no longer going to have a kid's glove approach to Goldman Sachs," Ritholtz predicts.

click link for video
http://finance.yahoo.com/tech-ticker/the-end-of-%27government-sachs%27-fraud-charge-builds-momentum-for-financial-reform-ritholtz-says-469693.html?tickers=gs,xlf,skf,^dji,^gspc,^IXIC,spy

[DemReadingDU]

36. “There's Never Just One Cockroach": Can Bulls Survive the Goldman Fraud Fallout?

click link for video

4/19/10 “There's Never Just One Cockroach": Can Bulls Survive the Goldman Fraud Fallout?
Posted Apr 19, 2010 07:30am EDT by Aaron Task

The aftershocks from Friday's fraud charges against Goldman Sachs reverberated around the world this weekend as European regulators considered related inquires and Asian stocks fell sharply overnight Sunday.

Beyond the specific ramifications for Goldman, the key question for market players is whether the SEC just put an end to the 13-month rally or merely provided an opportunity for traders to take profits.

"Is the economy expanding enough to overcome something like this?," wonders Barry Ritholtz, CEO of Fusion IQ and author of Bailout Nation. "It's a really challenging question."

Ritholtz, who turned bullish in March 2009 and has remained so inclined since, says he's been impressed with the recent economic data and the strength of earnings, citing results from UPS, specifically, and the tech sector, generally.

"Outside of finance, looks good," he says. But "the financial sector has clearly been a leading light . Now finance comes with a big asterisk." (As of Friday, FusionIQ was long Citigroup and Bank of America.)

Not usually at a loss for words - or opinions - Ritholtz admits it's "too soon to tell" what the ramifications of the Goldman charge will be for the broader market. "It's hard to draw conclusions where there's smoke there's fire...there's never just one cockroach," he says. "Do other big banks engage in this kind of behavior?"

For the record, Goldman has denied any wrongdoing, but already other banks are being accused of similar misdeeds: According to The WSJ, the SEC is investigating other mortgage deals similar to the one in the Goldman case, while Bloomberg reports Netherlands-based Rabobank is accusing Merrill Lynch of similar misdeeds.

When the accompanying video was taped Friday afternoon, Ritholtz suggested Goldman had downside risk to $140 and the Dow to the 10,500 area, "assuming nothing else bad comes out."

By Sunday evening, it looked safe to assume there will be more bad news coming; how the market handles it remains, of course, to be seen.

click link for video
http://finance.yahoo.com/tech-ticker/%E2%80%9Cthere%27s-never-just-one-cockroach%22-can-bulls-survive-the-goldman-fraud-fallout-470111.html?tickers=^DJI,^GSPC,C,GS,XLF,FAZ,BAC

[UpInArms]

35. dollar watch

http://quotes.ino.com/chart/?acs=NYBOT_DX&v=i

81.188 +0.271 (+0.35%)

US Dollar Likely to Rally Further if S&P 500 Continues Recent Decline

http://www.dailyfx.com/forex/fundamental/forecast/weekly/usd/2010-04-16-2356-US_Dollar_Likely_to_Rally.html

The US Dollar finished the week roughly unchanged against other G10 counterparts, but a key surge through Friday’s S&P 500 declines leaves short-term momentum in favor of further Dollar appreciation. An SEC complaint that Goldman Sachs failed to disclose clear conflicts of interest in Subprime Collateralized Debt Obligation offerings sent the financial titan’s stock down an impressive 12.8 percent through Friday alone. Such sharp declines elicited sympathetic moves in firms such as Morgan Stanley and Bank of America, forcing the S&P 500’s Financials sub-index 3.7 percent lower through the day’s close. Whether or not the allegations prove true may matter little in the court of public opinion, and the mere accusation greatly increases the probability that financial market regulation will pass both houses of the US legislature. What this means for financial market risk sentiment is, in this author’s opinion, relatively clear.

The US Dollar stands to appreciate further if the S&P 500 and other key financial market risk sentiment barometers head lower in the coming week of trade. This is especially true against currencies such as the recently high-flying Australian and Canadian Dollars. Recent CFTC Commitment of Traders data showed that Non-Commercial traders remained incredibly net-short US Dollars against both the AUD and CAD. The leverage that typically goes into these futures positions leaves them especially susceptible to unwinds as traders receive cash calls in other leveraged securities, and it will be critical to watch the trajectory of risky assets in the week ahead.

A comparatively empty week of economic event risk leaves the Greenback at the whims of broader financial market moves. The volatile situation surrounding Greece only adds to potential catalysts of market turmoil; as we saw this past week, the safe-haven US Dollar stands to gain on further deterioration in the Euro Zone’s dilemma. Possible exceptions may include Producer Price Index, Housing Price Index, Durable Goods Orders, and New Homes Sales reports. Nothing especially stands out as far as consensus forecasts are concerned, and it would be a stretch to claim that the US dollar would react to anything but the largest surprises in these indicators.

The all-important question remains whether we can expect further S&P 500 pullbacks. The S&P Volatility Index (VIX) saw its largest single-day advance since the sharp market corrections we saw in early February. Further deterioration in conditions and heightened fears of volatility could push the S&P 500 lower and the recently-resurgent US Dollar higher.



...more...

Daily Sound Bites 04.19

http://www.dailyfx.com/forex/fundamental/article/daily_sound_bites/2010-04-19-1046-Daily_Sound_Bites_04_19.html



...more...

[Demeter]

41. SURPIRSE PROFIT? Citigroup earns $4.4B in 1Q as trading rebounds

http://news.yahoo.com/s/ap/20100419/ap_on_bi_ge/us_earns_citigroup



NEW YORK – Citigroup Inc. provided more evidence that the nation's big banks may have turned a corner. The bank reported a surprise first-quarter profit Monday as trading revenue offset losses from failed loans.

Citigroup said it earned $4.4 billion after payment of preferred dividends, compared with a loss of $696 million a year earlier. That was the bank's biggest quarterly profit since the second quarter of 2007.

The company cited strong trading of bonds, stocks and other securities for its big profit. Citigroup, one of the hardest hit banks during the credit crisis and recession, said loan losses fell for the third consecutive quarter. The amount of money it set aside for loan losses also fell.

Citigroup earned 15 cents per share on revenue of $25.4 billion. That easily beat analysts expectations of a slight loss, according to Thomson Reuters.

Citigroup's strong showing follows similarly impressive results last week by Bank of America Corp. and JPMorgan Chase & Co. That has boosted hopes that the worst of the credit crisis has passed and banks may be entering a period of sustained profitiability.

Yet CEO Vikram Pandit sought to dampen short-term expectations for Citigroup, saying the bank remained cautious "given the uncertain economic recovery and high unemployment in the U.S."

"Realistically, we do not expect our performance to follow an invariable trend-line upward," he said. "Longer-term, however, the prospects for Citigroup are clear and bright."

Pandit sounded a little less upbeat about the economy than his counterparts at JPMorgan Chase and Bank of America. But Citigroup's recovery from the devastation of the financial markets has been more difficult.

The bank's stock rose about 1 percent in pre-opening trading. Other financial stocks extended a pullback in response to news that the government was charging Goldman Sachs Group Inc. with civil fraud for mortgage-related transactions.

Citigroup said its total reserves to cover losses from bad loans fell 22 percent, or $2.4 billion, from the fourth quarter to its lowest level in two years. The company said its credit losses fell 15 percent to $8.4 billion from almost $10 billion in the fourth quarter. Citigroup reported improvement across nearly all its loan portfolios.

The company reported $8 billion in securities and banking operations, which includes its trading business. That was up $4.7 billion from the fourth quarter.

Bonds accounted for a big chunk of the trading gain. Like other companies' investment banking operations, Citigroup's benefited from very low interest rates that allowed it to borrow cheaply to buy higher-yielding investments.

Citigroup's stock has been rising lately following the government's announcement last month that it would start selling the 27 percent stake in the bank it acquired as part of its bailout of the bank during the credit crisis.

The sale by the government will end the last remaining ties Citigroup has to the Troubled Asset Relief Program. Citigroup received a total of $45 billion from the government during the credit crisis. It repaid $20 billion in December and the remaining $25 billion was converted into the minority stake the government is now selling.

"All of us at Citigroup recognize that we would not be where we are without the assistance of American taxpayers," Citigroup Pandit said.

[Tansy_Gold]

44. "trading revenue" does NOT = "earning"

Call it what it is -- skimming the profits off both sides of other (very rich) people's gambling bets.



"El ojo que ves no es ojo porque tú lo veas. Es ojo porque te ve."




Tansy Gold

[FarCenter]

43. Who were the morons at IKB Deutsche Industriebank AG and ABN Amro Bank NV that bought Abacus?

We know about the Fabulous Fab.

But on the other side of the deal were traders at IKB and ABN who actually bought the Abacus 2007- AC1 CDOs.

Note that Abacus was a "synthetic CDO", i.e. it is actually tranches of a bundle of Credit Default Swaps that verious other counterparties have written against tranches of Collaterialized Mortgage Obligations, themselves composed of bundles of mortgages.

So this is like betting on the trifecta at Aquaduct.

[Festivito]

46. Debt: 04/15/2010 12,874,618,766,079.29 (UP 51,126,329,864.18) (Thu)

(Up a lot. Good day to all.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,387,443,653,676.46 + 4,487,175,112,402.83
UP 39,328,943,525.65 + UP 11,797,386,338.53

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 13 seconds we net gain another American, so at the end of the workday of the report, there should be 309,074,947 people in America.
http://www.census.gov/population/www/popclockus.html ON 04/09/2010 15:49 -> 309,034,742
Currently, each of these Americans owe $41,655.33.
A family of three owes $124,965.99. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 31 days.
The average for the last 24 reports is 9,914,825,414.13.
The average for the last 30 days would be 7,931,860,331.31.
The average for the last 31 days would be 7,675,993,869.01.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 135 reports in 197 days of FY2010 averaging 7.15B$ per report, 4.90B$/day.
Above line should be okay

PROJECTION:
There are 1,011 days remaining in this Obama 1st term.
By that time the debt could be between 14.3 and 20.6T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/15/2010 12,874,618,766,079.29 BHO (UP 2,247,741,717,166.21 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,964,789,762,567.50 ------------* * * * * * * * * * * * * * * * * * * * * * * * BHO
Endof10 +1,787,554,636,229.12 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/26/2010 -000,521,947,711.23 ---
03/29/2010 -000,032,502,739.57 ---- Mon
03/30/2010 +000,146,146,107.03 ------------********
03/31/2010 +089,964,337,654.53 ------------**********
04/01/2010 +004,832,827,050.45 ------------*********
04/02/2010 -000,783,098,135.53 ---
04/05/2010 +021,628,544,775.26 ------------********** Mon
04/06/2010 +000,246,106,716.91 ------------********
04/07/2010 +000,926,408,143.83 ------------********
04/08/2010 +030,863,719,709.59 ------------**********
04/09/2010 -000,215,194,285.06 ---
04/12/2010 -000,193,173,374.30 --- Mon
04/13/2010 -000,086,542,536.22 ----
04/14/2010 +000,857,281,039.39 ------------********
04/15/2010 +039,328,943,525.65 ------------**********

186,961,855,940.73 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4345688&mesg_id=4345721

[Festivito]

52. Debt: 04/16/2010 12,877,714,305,798.84 (UP 3,095,539,719.55) (Fri)

(Down a little. Good day.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,387,322,253,562.56 + 4,490,392,052,236.28
DOWN 121,400,113.90 + UP 3,216,939,833.45

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 13 seconds we net gain another American, so at the end of the workday of the report, there should be 309,081,593 people in America.
http://www.census.gov/population/www/popclockus.html ON 04/09/2010 15:49 -> 309,034,742
Currently, each of these Americans owe $41,664.45.
A family of three owes $124,993.35. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 31 days.
The average for the last 24 reports is 9,750,537,636.22.
The average for the last 30 days would be 7,800,430,108.98.
The average for the last 31 days would be 7,548,803,331.27.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 136 reports in 198 days of FY2010 averaging 7.12B$ per report, 4.89B$/day.
Above line should be okay

PROJECTION:
There are 1,010 days remaining in this Obama 1st term.
By that time the debt could be between 14.3 and 20.5T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/16/2010 12,877,714,305,798.84 BHO (UP 2,250,837,256,885.76 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,967,885,302,287.10 ------------* * * * * * * * * * * * * * * * * * * * * * * * BHO
Endof10 +1,784,233,006,741.37 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/29/2010 -000,032,502,739.57 ---- Mon
03/30/2010 +000,146,146,107.03 ------------********
03/31/2010 +089,964,337,654.53 ------------**********
04/01/2010 +004,832,827,050.45 ------------*********
04/02/2010 -000,783,098,135.53 ---
04/05/2010 +021,628,544,775.26 ------------********** Mon
04/06/2010 +000,246,106,716.91 ------------********
04/07/2010 +000,926,408,143.83 ------------********
04/08/2010 +030,863,719,709.59 ------------**********
04/09/2010 -000,215,194,285.06 ---
04/12/2010 -000,193,173,374.30 --- Mon
04/13/2010 -000,086,542,536.22 ----
04/14/2010 +000,857,281,039.39 ------------********
04/15/2010 +039,328,943,525.65 ------------**********
04/16/2010 -000,121,400,113.90 ---

187,362,403,538.06 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4348733&mesg_id=4349051

[DemReadingDU]

54. Has anyone figured out what we go into debt for, 51 billion in one day!

It's an astronomical amount, what is is used for? Are we buying our own bonds to keep the economy from crashing?

[Festivito]

66. It is maddening, but reasonable.

I'm guessing that we'll borrow about 1800 billion dollars this fiscal year. That would be about 36 billion per week. I've noticed that this administration borrows heavily about one or two days a week and then the other days out of five work days a week are comparatively small amounts.

51 is a large amount, but not out of line. 11 of that came from Social Security which moves up and down depending on when businesses pay their taxes and at the beginning of the month when the checks are cashed.

If we want to lower the borrowing, we need to decide what things we want to cut from the budget, or raise taxes higher. But, before either of those will work, we need to fix the larger problems of the overall economy brought on by banking and a plethora of policy problems brought on by that previous administration under W**.

[DemReadingDU]

67. Thanks for the additional info

Appreciate that you keep these historical statistics. I don't see how we can continue to borrow such large amounts, forever. Eventually, something will hit the wall.

[RUMMYisFROSTED]

58. Everything is OK.