DOJ Antitrust Division Considering Launching Investigation Into Silver Market Manipulation By JPM
by ilene - May 1st, 2010 9:36 am
Courtesy of Tyler Durden
Eric King reports the breaking news that in a letter obtained by Ted Butler, the DOJ’s Antitrust department is considering launching an investigation into silver market manipulation by JP Morgan. Should an announcement of a full formal probe of manipulation by JPM follow, it would be tantamount to a confirmation of what numerous individuals have been claiming over the years, that JP Morgan, the LBMA, the CFTC, various banks, and even that kindly old grandpa who was so much against derivatives except when he was about to lose money as a result of regulation that he is spending the whole weekend telling his investors in Omaha to run, not walk, to Borsheim’s, and buy all their massively overpriced trinkets (you can’t be a quadrillionaire without first being a trillionaire), are nothing but a borderline criminal cabal that traffics in wealth extraction courtesy of a few monopolist players. As Eric King discloses in its letter the Anti-Trust division announces that "it will carefully consider the issue of silver market manipulation by JP Morgan and other traders. Generally the CFTC investigates these types of market manipulations. However, the suggestion that JPMorgan Chase may be signaling other traders, warrants further analysis. The DOJ will carefully consider the issue you raise, and you can be assured that if we conclude that silver traders have engaged in anti-competitive conduct, we will take appropriate enforcement action."
Ted Butler, always cutting to the point, says: "It’s about time a major government organization stepped up to end what has been a very serious crime in progress that has basically covered two decades…[JP Morgan's] level of concentration only exists in the silver markets. Concentration is the hallmark of manipulation or a monopoly. Our markets are supposed to be free markets, they are not supposed to be controlled by anybody. Right now the silver market is a monopoly, the chief monopolist is JP Morgan, and the only entity that can step up to JPM is the Antitrust division of the DOJ…If you want to put it into perspective, more important and more serious than what is currently happening with Goldman Sachs. This is a crime in progress, this is an allegation of current market manipulation. This is as serious as you get. You don’t get bigger than market manipulation."
And, as a scheduled daily reminder to Christine Varney: if you are evaluating JP Morgan…
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PIMCO: Don’t Expect A Housing Recovery Anytime Soon
by ilene - April 12th, 2010 12:45 pm
PIMCO: Don’t Expect A Housing Recovery Anytime Soon
Courtesy of Vincent Fernando, CFA at Clusterstock
PIMCO has completed an excellent Q&A with Scott Simon, the head of their mortgage and asset-backed securities team.
Mr. Simon addresses the housing outlook now that the federal reserves historic mortgage-backed security (MBS) buying program (which had been used to provide liquidity and support market prices during the crisis) has ended.
Overall, he presents a mixed outlook.
Firstly, he thinks the MBS market can hold up on its own now and doesn’t need the Fed’s buying support, and in fact hasn’t needed the Fed’s support for many months now:
Simon: We are unlikely to see a significant market disruption in the Agency market stemming from the Fed’s retreat. First, the retreat had been well advertised for months before the event. Investors knew exactly when the program was going to end and how much the Fed was buying. So it’s not as if anybody woke up and was surprised by the fact that the Fed had stopped buying.
Second, private buyers are in a much better position today than they had been before the Fed started buying. The private balance sheet was seriously impaired by the financial crisis at the time the Fed stepped in with its public balance sheet. But by October 2009 or so, the private balance sheet had improved. The Fed probably could have stopped buying at that point with about $850 billion in completed purchases, but it felt compelled to reach the previously announced total of $1.25 trillion, and so the next $400 billion in MBS drove prices higher.
Yet secondly, he thinks MBS prices are looking pricey, driven up by fed buying that went on for too long, as mentioned in the excerpt above.
Q: What are your views on MBS prices today?
Simon: Agency MBS look expensive vs. 10-year Treasuries but cheaper compared to…
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So, How Are Stock Prices Now That We’re Back At DOW 11,000? They’re 30% Overvalued
by ilene - April 11th, 2010 11:36 pm
So, How Are Stock Prices Now That We’re Back At DOW 11,000? They’re 30% Overvalued
Courtesy of Henry Blodget at Clusterstock/Business Insider
So, how do stock values look now that the DOW is back to 11,000?
Not outrageous. But certainly not cheap.
Measured using our favorite valuation technique, Professor Shiller’s cyclically adjusted PE analysis, the S&P 500 has a PE of 22X. The long-term average (1880-2010) is about 16X. The current level is actually close to the big bull market peaks of the past--with the exception of the gigantic one that peaked in 2000.
Check out the chart below, from Professor Shiller’s web site. The blue line is the cyclically adjusted PE ratio for the last 130 years. (The cyclically adjusted PE mutes the impact of the business cycle by averaging 10 years worth of earnings. This reduces the misleadingly low PEs you get at peak profit margins, like the ones in 2007, and the misleadingly high ones at trough profit margins, such as the ones we had last year).
Note a few things:
- The long-term average for the cyclically adjusted PE is about 16X.
- Stocks have spent vast periods above the average and vast periods below it, usually in multi-decade cycles
- We’ve just descended from the longest period of extreme overvaluation in history, suggesting (to us, anyway) that the next multi-decade cycle is likely to be below average
…
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New NYSE Options Pricing Pyramid Promotes Derivative Driven Market Melt-Up
by ilene - April 6th, 2010 10:47 pm
Last New NYSE Options Pricing Pyramid Promotes Derivative Driven Market Melt-Up
Courtesy of Chopshop at Fibozachi
Monday, Tyler Durden of Zero Hedge noted that the ISE had instituted special rebates for specific option liquidity providers in an attempt to bolster volumes and capture market share ~ "Let The Churn in QQQQ, Citi and Bank of America Hit Infinity…." And the NYSE didn’t miss a beat; responding in kind with an extremely aggressive option pyramid pricing scheme.
NYSE Euronext’s U.S. Options Exchanges Announce New Pricing and Fee
New York, April 5, 2010 – NYSE Euronext’s U.S. options exchanges, NYSE Arca and NYSE Amex options, announced new rate changes for each market center that became effective April 1, 2010. NYSE Arca options is introducing higher posting credits in premium tier products, tiered customer rebates in non-premium penny pilot issues and a reduction in the LMM rights fees. NYSE Amex options is introducing a reduced electronic broker dealer rate, a reduced electronic firm rate, tiered pricing for firm proprietary manual trades and the implementation of the Professional Customer designation.
In an effort to dredge a moat around market share for Amex & Arca, the NYSE has implemented a new Penny Pilot "Premium Tier" pricing schedule for the options of 15 specific issues. Liquidity providers transacting serious size across these anointed sticker symbols … AAPL, BAC, C, DIA, EEM, FAZ, GDX, GE, GLD, IWM, QQQQ, SPY, UNG, USO & XLF … will (yet again) enjoy additional rebates as the NYSE attempts to [1] stave off competition from other options exchanges and [2] further buoy an anemic equity market, which continues to plow forward on phantom volume at 3 am on Sunday night (like the accelerator of a Toyota Camry beneath a sleep-driving Ambien junkie approaching a raised drawbridge with both eyes closed shut, one hand on the wheel and the other on his sixth bear claw).
NYSE Arca Fee Changes
NYSE Amex Fee Changes
For a complete explanation of the new NYSE Arca options rates and fees: http://www.nyse.com/futuresoptions/nysearcaoptions/1159439190411.html
For a complete explanation of the new NYSE Amex options rates and fees: http://www.nyse.com/futuresoptions/nyseamex/1228420271739.html
An explanatory webinar with Q&A was scheduled for 4:30 –…
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David Rosenberg: The Stars Are Aligning For “Something Really Big To Happen”
by ilene - March 27th, 2010 4:14 pm
David Rosenberg: The Stars Are Aligning For "Something Really Big To Happen"
Courtesy of Joe Weisenthal at Clusterstock
This was from one of David Rosenberg’s daily notes earlier in the week. (Thanks to PragCap for reminding us to run it)
—--
A good friend, and long-time reader, was kind enough to pass along these thoughts yesterday. Basically, the stars are starting to align for something really big to happen.
First, the Shanghai index peaked in August 2009 and had a secondary top in December 2009 (global demand slowing?). Many emerging markets are all negative year to date.
Second, gold peaked in the first week of December 2009 (and now breaking down) while the U.S. dollar index (the DXY) is breaking higher (Greece has not been resolved).
Third, TIPs (ETF) peaked the first week of December 2009 (and just broke to a new four month low).
Fourth, commodity prices peaked in the first week of January and appear to be rolling over. Head-and-shoulders top from October 2009 peak?
Fifth, could we be in for a March peak in equities? The NYSE new high list peaked six trading days ago. Recall that a market correction followed in October of last year and January of 2010 following similar peak in new highs.
Sixth, despite signs of economic cooling in Q1 (around 2.5% growth and half the Q4 pace) and lower inflation expectations, the 10-year Treasury note yield is ratcheting up (in a destabilizing fashion) and devoid of any bearish economic data (for a range of technical/fund flow reasons as was the case in the summer of 2007 — we never said at the Grant’s conference in New York that it was going to be a straight line down). But in technical lingo, it does look as though the yield is breaking out from a triangle since the December 31, 2009 yield peak — go back to that period in December and January, 3.85% on the 10-year Treasury- note served at least three times to be major technical support — a break of that this time around would mean some serious near-term trouble (the nearby high closing level was 3.98% back on June 10,2009).
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THE GREAT DISCONNECT: Stocks 30% Overvalued And Still Going Up… And Housing Rolling Over
by ilene - March 25th, 2010 10:32 am
THE GREAT DISCONNECT: Stocks 30% Overvalued And Still Going Up… And Housing Rolling Over
Courtesy of Henry Blodget at Clusterstock/The Business Insider
We don’t mean to rain on the stockmarket parade (we’re enjoying it, too), but we’ll confess to being astonished by it.
We understand that the world’s governments are pumping money into their economies. We understand that that money has to go somewhere. We understand that, right now, that somewhere is often stocks.
We also recognize that the stock market is "forward looking," meaning that stock investors couldn’t care less about 10% unemployment and other depressing facts about the economy. As far as stocks are concerned, as long as the situation is improving, it doesn’t matter how bad the present is.
But we’re looking forward, too, and here’s what we’re seeing:
The housing market, a huge engine of the U.S. economy via both direct spending and the wealth effect, is rolling over and heading for a double-dip. This despite the fact that the government is still spending money hand over foot to keep house prices propped up.
In a week or so, the Fed is supposed to begin withdrawing some of this housing subsidy by winding up its mortgage-buying program. The Fed may or may not actually do this, but if it does, this move could further depress the housing market. And that, in turn, could put more pressure on strapped consumers who can no longer borrow from home-equity lines to fund current spending, no longer feel rich, don’t have much borrowing capacity, and, often, no longer have jobs. (And consumers still account for more than 70% of spending in the economy).
A falling housing market will also likely lead to more underwater homeowners, more "shadow" inventory, more foreclosures, more pressure on house prices, and, possibly, more bank write-offs. The more banks are worried about future write-offs, the less likely they are to lend, and bank lending has already fallen off a cliff.
So, basically, we think the apparent double-dip in the housing market is a big deal, and we’re surprised that the market is whistling Dixie in the face of it.
If stocks were cheap, we wouldn’t worry about it. We would…
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China’s Housing Bubble Is Inflating Faster Than Ever
by ilene - March 10th, 2010 9:54 am
China’s Housing Bubble Is Inflating Faster Than Ever
Courtesy of John Carney at Clusterstock/Business Insider
The latest report on the property market in China is truly frightening. Despite measures taken by authorities to reign in the price explosion in Chinese real estate, prices rose at the fastest clip in nearly two years in February.
Unless you have faith in the ability of China’s central planners to perfectly negotiate a soft landing, you should be preparing for a rough crash.
From the official Chinese news agency:
China’s property market grew at the fastest pace in 20 months in February, with housing prices rising at a double digit rate, despite the government’s cooling-down moves, according to data released Wednesday by the National Bureau of Statistics (NBS).
Housing prices in China’s 70 large and medium-sized cities increased 10.7 percent in February from a year earlier, and were up 0.9 percent compared to the previous month, said the NBS.
Prices of new homes in February rose 13 percent year on year, up 1.3 percent from January, and were mainly pushed up by soaring home prices in Hainan Province as the state government decided to build the island into an international tourist resort in December.
Haikou, capital city of Hainan, ranked first among other major cities in new home price growth, which soared 58.4 percent year on year in February. Sanya, the second largest city in Hainan, saw its new home prices up 56.1 percent.
Prices of second-hand homes climbed 8.5 percent in February from the same time last year, up 0.5 percent from the previous month, according to…
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Rick Bookstaber: Hedge Funds Are Pumping The Gold Bubble And Luring Investors Off A Cliff
by ilene - March 9th, 2010 4:13 pm
Rick Bookstaber: Hedge Funds Are Pumping The Gold Bubble And Luring Investors Off A Cliff
Courtesy of Gus Lubin at Clusterstock/Business Insider
The SEC’s Rick Bookstaber can hardly watch as sheep-like investors chase the gold bubble straight off a cliff.
Although his employer doesn’t give market advice, the SEC’s senior policy adviser shows his personal frustration in a post on Roubini Global Economics. First, he drops this great line about how people don’t even pretend that gold isn’t a bubble:
Even if a guy is just after sex, he at least has the decency to act like there is some substance behind his interest.
Second, Bookstaber thinks hedge funds managers like John Paulson have a pump and dump scheme on gold.
RGE:
Given that “hedge fund” and “highly secretive” are usually said in the same breath, don’t you get suspicious when so many of the top managers are so vocally out there about their gold investments? And when their positions are structured in a way that make them open to view? Paulson and Soros have huge positions in gold ETFs. We know that, because if you buy ETFs, they show up in your 13-F filing. Granted, with an equity investment you can’t help putting that information out into the market, but with an asset there are plenty of ways to take the position without signaling it.
That they are taking a highly visible route to their positions suggests the game that is being played is one of leading the herd. The 13-F reports positions with a big lag, so no one will notice if they quietly slip out the side door while the party is still hopping. And how about when the view is backed up by none other than Goldman Sachs? Will they let everyone know when they think it has gone too far before they get out. Or before they go short? Maybe they already have.
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You Could Now Be Arrested, In America, Just For Mentioning Europe’s Problems Over Dinner
by ilene - March 3rd, 2010 1:42 am
You Could Now Be Arrested, In America, Just For Mentioning Europe’s Problems Over Dinner
Courtesy of Vincent Fernando at Clusterstock/Business Insider
You know a company/country/continent is in trouble when authorities start cracking down on short bets against it.
That’s why it’s so disturbing how much heat European currency and sovereign debt speculators are getting these days.
Even the U.S. has climbed aboard the bandwagon now.
Reports of a U.S. Justice Department investigation into Soros Fund Management, SAC, and Greenlight Capital short positions against the euro broke last week.
Yet now the speculator clamp down is evolving into something completely terrifying. Apparently, it could now be considered collusion if you simply share economic opinions over dinner:
The Journal article disclosed that the big euro bets were emerging amid gatherings including an "idea dinner" involving a number of hedge funds including SAC, Greenlight and Soros, where a trader argued that the euro is likely to fall to "parity," or equal to, against the dollar on an exchange basis. The euro currently trades at $1.3609. One of the questions investigators are likely to examine is whether such information-sharing constitutes collusion, the people say.
…
At one such gathering, a dinner on Feb. 8 at a Manhattan restaurant, an SAC portfolio manager said he believed the euro could fall to a level equal to that of the dollar and urged other traders to "short," or bet against, the euro as his firm had, according to people at the dinner. The size of the bets against the euro is unclear.
In a research note issued to hundreds of hedge-fund clients shortly after the dinner, the research boutique that hosted the event summed up the SAC manager’s argument without mentioning his name. [But attributing it to an unnamed third party source, 'a presenter', which is standard practice]
One of the most dangerous misconceptions used to restrict economic freedoms is that opinions have more weight than fundamentals. Should we arrest people for threatening ‘economic stability’ if they argue against a particular stimulus bill or government and then collectively vote against it?
Because that’s all euro-shorts are doing. Whoever thinks that euro speculators are pushing the euro to unfairly low levels has an opportunity to vote against them any day of the week in the currency markets. So let’s not forget that a truly viable currency can carry the weight of open criticism, just like a strong nation or value-system can. Else traders better brush up on…
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Saut: The “Selling Stampede” Is Over, Now It’s Time To Dance In The Rain
by ilene - March 2nd, 2010 9:26 am
Saut: The "Selling Stampede" Is Over, Now It’s Time To Dance In The Rain
Courtesy of Joe Weisenthal at Clusterstock
Prescient Raymond James strategist Jeff Saut says the "selling stampede" which is began calling for in early January is clearly over, but we’re not out of the woods yet:
For example, we entered 2010 in a pretty cautious mode, worried that the first few weeks of the new
year have historically been tricky. Subsequently, we determined the equity markets had fallen into a “selling stampede.” Knowingthat such stampedes tend to last 17 to 25 sessions we remained cautious, but continue to add stocks to our “watch list.” Following the climatic downside deluge of February 4th and 5th, we opined the stampede was abating and recommended tranching into (read:buying partial positions) some of the stocks on our various lists. We still feel that way.That positive view was reinforced last week when the 10-day exponential moving average (EMA) crossed above the 30-day EMA.Additionally, the 50-DMA is turning up and on February 5th the number of S&P 500 stocks above their respective 50-DMAs had shrunk from 92% to ~19%. While that oversold reading has been somewhat corrected by the ensuing rally, roughly 50% of the S&P 500 stocks still remain below their 50-DMAs.
Then there was this insight from Minyanville professor Tony Dwyer:“One indicator that has proven to be an excellent short and intermediate-term buy signal for the S&P 500 is when the percentage of NYSE issues trading above their 10-DMA drops below 10%. The most recent signal was (on) 2/18/10, which represents only the 8th unique instance (rapid multiple signals following the first signal were ignored) in the past 30 years. The average one month gain following the first signal was 5.4%, with amaximum gain of 11.2% and the worst case (and only) loss of 1.31% in 1991.”
Hence, we continue to believe the “selling stampede” is over. To us the question then becomes, will we extend the current rally off February’s “hammer lows,” or will the pattern resemble that of the 1978 and 1979 “October Ouches” whereby the DJIA lost between 10 – 12% in a few short weeks and then based for a month, or two, before giving investors a decent rally. Worth noting is that the DJIA never went decidedly below those “hammer lows,” as can be seen in
…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(