Brainstorming Tuesday

1. Yesterday was strange one in some respects as volatility was sold down agressively and in emerging market terms has even reached just before crash levels - it is amazing though that the Bloomberg article claims the opposite that those levels signals no black swan which is as pathetic as it gets. Whenever such reluctance levels are reached the opposite is the case and we are back at July 2007 levels - rings a bell I guess.

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Options Show No Black Swan in Emerging-Market Stocks

The MSCI Emerging Markets Index’s historic volatility, a gauge of price swings during the past three months, fell to 12.1 last week, the lowest level since July 2007

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1M-3M Volatility Term Structure Plunges To Steepest In Years (VIX/VXV)

Submitted by Tyler Durden on 10/11/2010 14:54 -0500

• Market Crash
• Risk Premium
• Volatility

The ratio between VIX (implied vol as determined by 1 month out SPX options) and VXV (3 month Implied Vol) has just dropped to the lowest it has been since the end of 2006. After hitting a post-Lehman high of just under 1.3, VIX/VXV has plunged to 0.7917, a steep drop of 0.07 in just one day, as near-term equity vol is being aggressively sold, even as forward implied vol remains resistant to day to day changes in the market. Whether or not this is predicated by the QE2 event occurring somewhere inbetween the 2 term points is unknown, and irrelevant, but traders certainly seem to be far more comfortable with 1 month volatility and are selling much more of it than its longer-dated cousin. However, as Chris Cole pointed out earlier, this could be a very dangerous underestimation of the possibility for an exponential jump in near-term vol, in a time when correlations are near all time highs.

Here is the chart of VIX/VXV:

2. NUKEs found in Japan deployed by N.-Korea is a news we never get to see on MSM but the implications are big to say the least.

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Six North Korean atomic bombs located in Japan, five have been seized by the police

Posted by benjamin

October 11, 2010

The North Korean government smuggled six nuclear weapons into Japan to use as blackmail against the Japanese government, according to a senior Japanese public security police source. Five of the bombs have been seized by Japanese authorities but the sixth is located in the basement of the headquarters of the General Association of Korean Residents in Japan (Chosen Soren) and police have been warned it will be set off if they try to seize it. The discovery of the bombs by Japanese authorities confirms the original warning about the North Korean plot to attack with Japan that from a KGB agent who claimed to report directly to Russian Prime Minister Putin. The nuclear blackmail is linked to a failed Federal Reserve Board crime syndicate plot to start World War 3 on the Korean peninsula in a bid to stave off bankruptcy.

part 2

3. The inflation fraud has reached a level where its hard to deny as the official numbers are so far out of reality that everyone knows the emperor is naked but people have developed an attitude which will only benefit the wrong momenetum until we are all in WW3 very soon. Giving the tea-party right wing your vote is not the answer as it is an overall trend seems to indicate. Democracy does not end with the vote it rather starts with it - democracy also means to take full responsibility as the people in power are the people in theory but the system has been perverted as DC has become a self fullfilling entity who just needs to spend some money to get the vote it wants. Only that they have driven the system to a point of no return mess and the only way out is another world war. Hyperinflation is around the corner as predicted as a result of the banksters default and the FEDs bailout policy of printing money which has no worth - this is just the beginning and Obama is part of this fraud as his promise of transperancy was actually turned into the biggest government lies ever probably about the real economic state of affairs. not that McCain would have done any better but the reason why people gave obama their vote was his promise to do bettern than the disastrous Bush admin. but turned out to be even worse as he had the chance to make a fresh start instead hired all the Clinton people who produced this mess to begin with.

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Corn Crunch Means Costliest Beef in Quarter Century

By Whitney McFerron and Elizabeth Campbell

Oct. 11 (Bloomberg) -- Meat prices are poised to extend a 14 percent rally this year that drove U.S. retail costs to the highest levels since the 1980s as surging corn futures prevent livestock producers from expanding their herds.

The U.S. cattle herd in July was the smallest since 1973 and the number of breeding hogs last month was near the lowest ever, government data show. Corn futures jumped to a two-year high today and the price of the main feed ingredient is more than 70 percent above the 10-year average.

U.S. per-capita beef supplies next year will be the lowest since 1952 and pork the smallest since 1976, industry researcher CattleFax said. Hog futures will rise 14 percent by July and cattle may gain 3.6 percent by April, according to a Bloomberg survey of analysts. Wendy’s/Arby’s Group Inc., the maker of the 1,360-calorie Baconator Triple burger, and CKE Restaurants Inc., owner of the Hardee’s chain, have warned investors they are contending with higher commodity costs.

“If grain prices go up, then meat prices are going to have to move up,” said Mark Greenwood, a vice president at AgStar Financial Services Inc. in Mankato, Minnesota, who oversees $1 billion in loans and leases to the hog industry. Corn costs “tempered any enthusiasm there was on expansion,” he said.

Livestock prices failed to keep pace with third-quarter rallies of as much as 40 percent for corn and wheat, as too much rain and heat eroded U.S. yields and drought hurt crops in Russia and Europe. Cattle futures rose 11 percent in the period and hogs dropped 8.3 percent.

Corn soared the 45-cent maximum limit allowed by the Chicago Board of Trade today to $5.7325 a bushel, the highest price since September 2008, after the U.S. Department of Agriculture on Oct. 8 cut its harvest forecast for the second time in two months. The December corn futures contract was up 43.25 cents, or 8.2 percent, at $5.715 a bushel at 10:51 a.m. in London. Wheat, soybean, rice and oat futures also rose.

Cattle Feedlots

U.S. cattle feedlots that didn’t lock-in corn costs faced losses in the third quarter, said Ron Plain, an economist at the University of Missouri in Columbia. Feedlots made money in the first half after two years of unprofitable markets from surging feed costs and the global recession, he said.

“Normally, six months of profit will get you to the early stage of herd expansion,” Plain said. Costlier corn “slows expansion plans,” he said.

Farmers may earn $5.46 per hog in the first seven months of 2011, according to Steve Meyer, president of Paragon Economics in Des Moines, Iowa. That’s down from his July forecast of $19. Cattle feedlots lost about $17 a head last month, compared with profit of $42 in the first half of 2010, Plain said.

Price Forecasts

Hog futures will advance to 84 cents a pound on the Chicago Mercantile Exchange by July, up from 73.85 cents on Oct. 8, according to the average estimate of seven analysts surveyed by Bloomberg. The top estimates were 90 cents, which would be the highest level since 1996.

Cattle futures will rise to $1.024 a pound by April, from 98.875 cents on Oct. 8, according to the survey. Goldman Sachs Group Inc. last month predicted $1.05 as early as December, which would be the highest since September 2008.

4. Sentiment has risen substantially to the bullish side without reaching an extreme though but we are ready for an correction now starting today with a higher weekly opening.

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MONDAY, OCTOBER 11, 2010
INVESTOR SENTIMENT READINGS High bullish readings in the Consensus stock index or in the Market Vane stock index usually are signs of Market tops; low ones, market bottoms. Last Week 2 Weeks Ago. 3 Weeks Ago Consensus Index Consensus Bullish Sentiment 56% 63% 58% Source: Consensus Inc., P.O. Box 520526,Independence, Mo. Historical data available at (800) 383-1441. editor@consensus-inc.com AAII Index Bullish 49.0% 42.5% 45.0% Bearish 27.7 31.6 25.4 Neutral 23.2 25.9 29.6 Source: American Association of Individual Investors, 625 N. Michigan Ave., Chicago, Ill. 60611 (312) 280-0170. Market Vane Bullish Consensus 54% 54% 53% Source: Market Vane, P.O. Box 90490, Pasadena, CA 91109 (626) 395-7436. FC Market Sentiment Indicator 54.5% 55.9% 55.5% Source: First Coverage 260 Franklin St., Suite 900 Boston, MA 02110-3112 (617) 303-0180. info@firstcoverage.com FC Market Sentiment is a proprietary indicator derived from actionable sell-side trade ideas sent by the sell-side to their buy-side clients over the First Coverage platform. Over 1,000 institutional sales people at more than 250 firms participate on the First Coverage platform and have contributed hundreds of thousands of ideas since inception. Each Idea is associated with a ticker or sector and is tagged bullish or bearish by the creator. This data is aggregated at the sector, industry and market level. The FC Market Sentiment score ranges from 0-100 (0=most bearish, 50=neutral, and 100=most bullish) and represents a completely objective, real-time view into what advice the sell-side is providing to their buy-side clients Citigroup Panic/Euphoria Model

Brainstorming Monday - part 1

1. Ironically the foreclosure fraud is pushed on taypayers behalf by DC entities - hence no surprise the congress pushed quietly a criminal law which would have helped the process but Obama had to veto it since it became public - DC s involvement in all the bankster criminal enterprises has been obvious for quite some time now - we only dropped to a new level of insane corruption and the robbery of the people has taken up some speed.

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Assume there is a home that has a $250,000 mortgage and the loan is in default. Now assume that the owner of that mortgage wants to sell it. Assume further that the mortgage is bundled up with a bunch of other busted mortgages and sold at a deep discount from par. Say the price of the loan package is 40 cents on the dollar. Now finally assume that the property can be sold at an auction level price of $175,000.

If you add up all my assumptions you get a situation where the mortgage is purchased for $100k (250*.4) and the actual value of the assets securing the mortgage is worth $175k. That 75k for a “flip” is big money if there is a lot of them to be done. And as Realtytrac says it is a million or so a year.

If you’re reeling from all those “assume this” crap I was selling don’t be. What I describe is happening in very big numbers. Busted whole mortgage loans are being packaged and sold to investors to the tune of at least $10b a month. Some of the biggest players on Wall Street are in the game of arbing the sellers. Packages are regularly being put together and sold. Who are these sellers? A lot of the banks. The big ones have sold large amounts, the smaller banks have sold regional portfolios at distressed prices. But by far and away the biggest sellers that have created the “profit window” all reside in D.C. A big seller has been the FDIC. Fannie, Freddie and FHA have also been steady sellers.

I have no idea how much abuse there has been when secondary market purchasers of mortgages push through foreclosures and auction off homes to make a big profit. But the answer is it is not zero. What if only 10% of foreclosures were the result of some outfit or the other pushing to make some fast cash? What if they were doing it on the cheap. Say $10k a pop. Well that comes to a billion a year. And for that much money people will pull all matter of strings. They will buy lawyers and document processors who will gladly take the dough. When you have nine-figure money and a short time window of opportunity you press it as hard and fast as you can. That is how it works.

Two possible headlines we may see:

In an effort minimize losses Federal Agencies relied on improperly documented foreclosure procedures.

Thousands may be affected. FHFA to issue apology.

Or it could look like this:

Federal Agencies Sold Loans to Scheisters

Improper payments made to foreclosure agents. Billions of profits at stake. Hundreds of thousands lining up for class action suit.

2. Another sample of how rotten the system is but also how much they even do not care anymore about being bribed publically for anyone to see. Obama is a perfect president creation for them as his pattern is to attack them as an media event but in real terms he lets them get away even with perks as he did for Wallstreet.

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Feinberg Firm Paid More Than $2.5 Million by BP in 3 1/2 Months

Kenneth Feinberg and his law firm have been paid more than $2.5 million in 3 1/2 months to administer the $20 billion fund set up by BP Plc to compensate victims of its oil spill in the Gulf of Mexico.

The London-based oil company agreed to pay Feinberg Rozen LLP in Washington a fee of $850,000 a month from mid-June, when Feinberg agreed to run the claims facility, through Oct. 1, according to a report today on the compensation by former U.S. Attorney General Michael Mukasey.

Feinberg, 64, who ran the fund for victims of the 9/11 attacks and was special U.S. master for executive pay, was chosen by BP and President Barack Obama to compensate those affected by the largest U.S. oil spill. Feinberg Rozen retained Mukasey and his firm, Debevoise & Plimpton LLP, to evaluate the package. Mukasey said the payment was reasonable for demanding work under scrutiny by residents, public officials and BP.

Saturday brainstorming

1. The week closed almost at the high for US markets on the Venus going retrogade in an excellent angle to the US sun which should mark a temporary high for a decent pullback. Monday should start higher but reverse latest by Tuesday for a sharp correction of 5-8 percent over 2 weeks before resuming the current uptrend as stated in earlier posts. The overall bull manipulation has another leg to go but big trouble is ahead once we reach those levels but that we will consider once we reach those insane levels in 4-6 weeks.

2. Lets start with the funny part of the problem - this will be another bonanza for lawyers since the investment banks who sold this toxic stuff are liable for misrepresentation etc. and the foreclosed ones can screw with the banks who screwed with them. Might solve the job market problem though as the country will need a few mio new lawyers to handle all the cases but the banks will now be officially bankrupt due to the fees and settlements after they were already broke but accounting fraud sponsored by DC and a lifeline of zero interest rate financing with some free ride trading profits by the FED kept the dead man walking.

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Jon Stewart On The Humor In The High Frequency Signing Scandal

Submitted by Tyler Durden on 10/08/2010 09:10 -0500

• Jon Stewart

Just because every radioactive cloud has a humorous lining, here is how the event that will take home prices another major leg lower is made funny, thanks to Jon Stewart.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Foreclosure Crisis
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity

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Janet Tavakoli On The "Biggest Fraud In The History Of Capital Markets"

Submitted by Tyler Durden on 10/08/2010 13:15 -0500

• Capital Markets
• Goldman Sachs
• Janet Tavakoli
• TARP

In the following interview with the WaPo's Ezra Klein, Janet Tavakoli shares some more information on why every bank is about to shut down all foreclosures, in what she calls the "biggest fraud in the history of capital markets. Not very surprisingly, we are, so far, spot on in our 29th September projected timeline at this point: "We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy."

Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?

Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security interest, and it’s not optional.

EK: And how much danger are the banks themselves in?

JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one.

EK: My understanding is that this now pits the banks against the investors they sold these products too. The investors are going to court to argue that the products were flawed and the banks need to take them back.

JT: Many investors now are waking up to the fact that they were defrauded. Even sophisticated investors. If you did your due diligence but material information was withheld, you can recover. It’ll be a case-by-by-case basis.

EK: Given that our financial system is still fragile, isn’t that a disaster for the economy? Will credit freeze again?

JT: I disagree. In order to make the financial system healthy, we need to recognize the extent of our losses and begin facing the fraud. Then the market will be trustworthy again and people will start to participate.

EK: It sounds almost like you’re saying we still need to go through the end of our financial crisis.

JT: Yes, but I wouldn’t say crisis. This can be done with a resolution trust corporation, the way we cleaned up the S&Ls. The system got back on its feet faster because we grappled with the problems. The shareholders would be wiped out and the debt holders would have to take a discount on their debt and they’d get a debt-for-equity swap. Instead we poured TARP money into a pit and meanwhile the banks are paying huge bonuses to some people who should be made accountable for fraud. The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on.

Brainstorming Wednesday - part 1

1. Markets have entered stage of insanity as the players still left in the game HF and HFT are betting things go bad for the economy BY BUYİNG STOCKS and the FED seems to be forced to go for a full blown QE 2 of another 1 tril. and keep pumping up the markets. All is rising at the same time bonds and stocks with commodities. The system has been perverted in a creating profits for banks system which Mainstreet has to pay for at the end even during the depression. The biggest robbery in mankind has already entered stage 4 or 5 - hard to count depends where you start. gold steep rise is the equivalent we also had in the early 30ies as Gold went from 20 to 500 in a few years and the only way it was brought down was by confiscation - another robbery. Denial of the depression was in the same state 2-3 years after the crash started like in Japan early 90ies which is the path been choosen with one difference as Japan triggered a 2 decade deflation still counting. The current version seems to be a mix as gold rises again but markets never were allowed to drop to a level off real value as back then markets turned around below a PE of 7. None of the toxic investments have been divested - well the FED boıught them at inflated prices partly - and the yield curve reached Japan levels but we remember what happened to stock prices over the next 2 decades still close to the lows in Japan.

2. The robbery of the middle class keeps going on all fronts one little sample is paying middlemen to find investment funds by pension funds. they have highly paid investment-managers who have to find investment opportunities and where are no secret funds out there who need to be detected by specially skilled people who deserve finders fees. actually all fundsare pitching for pension funds money themselves. This criminal actions are just an indications how rotten the system is. Those millions are just tiny pieces compared to the robbery the government does right now with faked low inflation numbers and interest rates close to zero along the yield curve. They steal around 5 percent interest from the savings of all investors and help corporations to do the same that are trillions of Dollars every year.

Millions Squandered on Middlemen?

Posted by: Leo Kolivakis

Post date: 10/06/2010 - 22:41

Florida's public pension has invested about $2 billion in two dozen private funds since December. Rather than approach the pension's staff directly, half the funds used middlemen to get in the door. They paid these well-connected placement agents millions of dollars for making introductions and setting up meetings. Average finder's fee: about $1.5 million.

Dow weekly update

Elliot Wave works the best way looking back if your not really into it. we had a clear 5 wave up count to 11250 I thought - the price pattern do confirm - and the flash crash was a perfect impulsive wave down was my assumption. Today I think we can see an adjusted wave count as we have entered wave 5 up after an unusual long wave 4 correction. We are challenging the 200 week MA which turned markets down around the top and what you can not see on this chart the death cross has be reversed back into a golden cross - the funny thing about those crosses is around the occurrence you happen to have quite often a counter-trend move. around the 8th Oct markets should turn down and make a correction of at least 5 percent down as with a plus close today the Dow should count an 11 on TDM COMBO. That would leave us 1-2 higher closes from an interim top after the NDX made that count already yesterday and the comp needs 1 higher close. after the correction we can expect a retest of the 11250 levels but that we discuss as the action unfolds for now we need 2 higher closes for the Dow including today hence we might test the 11000 within 48h. Targets to the downside are at least 10500 and 10200 very likely. The insane market manipulation by the FED and their puppet masters with big help from DC makes this a harder game as they did also back in 2007 extending the inevitable crash with plenty PPT and FED manipulation.

Tuesday Brainstorming - part 1

1. The theme for the next weeks and months is war - preparation for the real one and also business is a war field on all levels. Central banks are declaring war on currencies. Due to the insane success of AAPLE with the Iphone and Ipad a huge war in the tech field is about to start as Windows comes with mobile 7 and a price war should start soon for the holiday season. After all the losers are regular PC's as the consumer will switch to tablets and not replace PC's anymore or at a much slower rate which means MSFT has the most to loose as Android is a third very smooth working alternative at zero cost.
Also nature goes into war mode as it comes with extreme scenarios recently on all levels which will drive hyperinflation into full gear soon as food inflation will explode with crops being disastrous for many reasons.

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A close look at the code itself reveals that Stuxnet has a "kill date" of 24 June, 2012. This date is significant in astrology because it "is the date that Pluto in Capricorn squares off against Uranus in Aries", a so-called grand cross.

http://www.appleinsider.com/articles/10/10/05/microsoft_may_use_windows_phone_7_event_to_show_off_tablets.html

"Microsoft has been working closely with several un-named OEMs to produce a genuine answer to the iPad," the report said. "The software giant is concerned that iPad sales are slowly cannibalizing Windows sales and eating away at the recent boom in netbook sales."

http://rt.com/prime-time/2010-10-04/coldest-winter-emergency-measures.html

Coldest winter in 1,000 years on its way

EURO update

The EUR is about to reach the first big target around the 200 week MA at 1.39 which is also the 61.8% retracement of the last big wave down. A 13 count should kick in above 1.38 and a 5-8 cent correction will start with a 'coincidentally' 8 Oct Venus retrogade date. I do think though that til year-end we have much more to go as the upcoming QE 2 is not fully priced in and USA wants anyway a weaker Dollar to push the economy or rather the profits of the big companies. Longer term we will also see the 1.50 level challenged again but that is rather a subject for 2011. It is interesting though that around the lows the - not so much that the usual suspects declared the EURO dead - but the Chinese and Russian political leaders took the liberty to declare that the Euro was about to collapse.

NDX monthly update

A picture speaks a 1000 words is quite true most of the time. The US markets made a clear statement last month that an unfinished business needs closure. we need to go higher in order to make the monthly 13 counts - the only theoretical confusing part which I will not go into details now is if the 10 you see left hand is not even an 11 but that we can determine as we go higher. Do not get me wrong from current levels I see medium term -next 2-3 weeks - rather a downswing - but we very likely by early NOV markets will be higher. Remember we broke out of a triangle pattern which has a target of 2100 but the first leg up is about to finish any day now most likely early next week. yesterdays reversal was an indication but not the high yet. 2030-50 remains a strong resistance area short term and a pullback from the 2030 level to at least 1950 probably even 1900 is due the next 2-3 weeks.

EURTRY update

The EURTRY is in a complicated pattern but has broken above a triangle pattern heading for 2.05. It will be an uphill battle though as the EURUSD is about to top out medium term in the 1.38-40 region and make a severe correction after a 20 cent rally we can expect a minimum 5 cent up to 8 cent correction which will basically undermine a EURTRY advance on the other hand TRY always weakens than global stockmarkets do which is about to start within a few days and the frontrunner could be the Turkish stock market which has made an insane rally beyond any means as the referendum was one and the last quarter of GDP was announced to be growing around 10%. Well with real inflation of at least 20 % for Turkey no growth at all would be around to brag about but as Turkey has one of the deepest negative interest rates of around 12 % it is really amazing how this overvalued currency stays at this overpriced levels. ON the other hand as deception and manipulation has become the new global game in financial markets Turkey is a perfect place to play a fierce game. Coming back to the currency where are easier bets to make in currencies as betting against the TRY still carries negative carry and we are locked into a trading range of 1.95 - 2.05 for the next weeks. Rather short the EURUSD above 1.38 since no carry costs and take away the 5 cent.