King Report: Thanks for the bailout; here’s your lovely parting gift
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The WSJ: Wall Street Pay Approaches 2007’s Records Will Ben, Hank, Little Timmy and Congressional leaders explain to the American people how it is possible for Wall Street to have near record remuneration AFTER the US taxpayers were put on the hook for about $12 trillion of guarantees to The Street? And will they explain to Americans that while Street insiders ‘earn’ record pay they must suffer a severe recession or depression, possibly record future inflation, collapsing home values, job losses and an income contraction?
Zero Hedge: NYSE Halts Transparency, Feels Goldman Program Trading Disclosure Is Unnecessary. The Exchange has filed with the SEC to implement the decommissioning of the DPTR requirement following the July 10, 2009 trade date…
From the memo: The New York Stock Exchange LLC (“NYSE”) will be decommissioning the
requirement to report program trading activity via the Daily Program Trading Report (“DPTR”), which was previously approved by the Securities and Exchange Commission (the “Commission”).1The last trade date for which member organizations will be required to file the DPTR with the Exchange will be July 10, 2009 and therefore the last required date to submit the DPTR will be July 14, 2009.
Anyone think that Goldman put pressure on the NYSE to halt embarrassing disclosures?
More from Zero Hedge on Government Sachs: Is Goldman Legally Frontrunning Its Clients?
Everyone who is anyone on Wall Street has at some point used the Goldman 360 portal whether for research, news, keeping a track of prime brokerage portfolio or, disturbingly, for trading, via the REDI Plus 9.0 platform (now loaded with enhanced algo trading features to make life for you, dear soon to be frontran Goldman client, so much easier). A second widely accepted Wall Street concept is that a disclaimer is the last thing that anyone reads, if ever. Yet after taking a close look at the Goldman disclaimer for the 360 portal, which is an umbrella waiver or all downstream websites, including REDI, one discovers the following gem:
Monitoring by GS: Your use of the products and services on this Web site may be monitored by GS, and that the resultant information may be used by GS for its internal business purposes or in accordance with the rules of any applicable regulatory or self-regulatory organization.
One second: by using Goldman 360 a client voluntarily allows Goldman to provide keystroke by keystroke data of everything the client does, even if that includes launching trades via REDI, to Goldman for the internal business purposes. The third thing everyone on Wall Street agrees on is that “internal business purposes” usually (and in Goldman’s case, almost exclusively) means proprietary trading.
Bloomberg News: JP Morgan Raises Credit Card Monthly Minimum Payments [Thanks for the bailout; here’s your lovely parting gift, Mr. & Ms. Taxpayer.] Citibank has already hiked credit card rates. The cost of credit is increasing for consumers. Is this how recoveries start? Is this a sign that the worst is over?
Stocks rallied on Wednesday because 16 of the past 19 years stocks rallied on July 1; and SF Fed Prez Yellen said she fears inflation will be too low. Traders quickly surmised that Yellen’s comment(s) suggest there will be no Fed rate hikes for the foreseeable future; and the Fed wants asset to inflate.
Yellen’s comments also imply the economy will struggle or worsen for the foreseeable future. But traders and the Street are living on hope and hype so Yellen provided them the excuse to pour into stocks. Ms. Yellen’s comments include: “The predominant risk is that inflation will be too low, not too high, over the next several years.”
- “With unemployment already substantial and likely to rise further, the downward pressure on wages and prices should continue and could intensify.”
- “The evidence is clear that the economy has substantial slack and we are far from the kinds of unemployment rates that would make inflation a danger.”
- “If the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation. Worse still, if deflation were to intensify, we could find ourselves in a devastating spiral in which prices fall at an ever-faster pace and economic activity sinks more and more.”
China becomes very unhappy when Fed officials bray dovish. Its response to Ms. Yellen’s dovish comments was swift and clear. China requests reserve currency debate at G8 – sources. The dollar tanked; gold and stocks surged after the China headline hit the tape.
After the morning stock surge, traders and investors refocused on economic fundamentals, which took another hit when ADP reported its June data as a decline of 473k jobs. -394k was expected.
The ISM at 44.8 was 0.1 worse than expected; and Prices Paid at 50 was 3 points worse than
expected…Construction spending in May declined 0.9%; -0.6% was expected.
The ugly economic data and lack of ‘real’ stock buying cut stock gains by half in the afternoon.
Reuters: GM tells judge that asset sale is its “only option” — General Motors Corp has no choice but to sell its assets to a group led by the U.S. government if it is to survive, a lawyer for the bankrupt carmaker argued in bankruptcy court in Manhattan on Wednesday.
Some pundits, analysts and fin media types reported that June US auto sales suggest the worst is over.
Here’s the year/year data; you decide:
GM June sales -33.6%; May is -29% (GM says June is 10% than May m/m)
Toyota June Sales -32%
Chrysler June Sales -42%
Ford June Sales -11% (will increase Q3 production to 485k vehicles)
Daimler June Sales -26.5%
BN: U.S. Auto Sales Slide as GM, Toyota Miss Estimates. The WSJ: Car Makers See End to Sales Slide The three biggest car makers in America called a bottom to the long decline in U.S. auto sales as the industry reported its smallest monthly sales drop this year.
WSJ: New-vehicle sales in June fell 28% from a year earlier to 860,000 cars and light trucks, according to the market-research firm Autodata Corp. That would be the smallest decline in any month this year.
We made an analogy many weeks ago but we feel compelled to use it again. If a person has a sudden severe injury and quickly loses 3 quarters of blood, the remaining two quarters will be lost at a slower rate– a positive second derivative. But it does not signal recovery, let alone a return to normalcy.
Bloomberg: As many as one in five U.S. hotel loans may default through 2010 as the recession means companies are spending less on travel and perks, according to University of California economist Kenneth Rosen.
Today should be a snooze after the early activity flurry that will be driven by the June Employment Report. As we often note, it is imperative to scrutinize the details of the report to glean a more accurate employment picture. The Birth/Death Model, seasonal adjustments, the U6 and workweek are important metrics to examine.
Expected economic data: NFP -365k, rate 9.6%, manufacturing -150k, wages 0.1%, workweek 33.1; Initial Jobless Claims 615k, Continuing Claims 6.74m; Factory Orders 0.9%
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A happy and safe 4th to all!
July 2nd, 2009 at 8:24 am
A lot of information, I particularly like the auto sales comparison. I am not an economic genius, but I can help with a couple of typo’s I spotted:
“quickly loses 3 quarters of blood, the remaining two quarters will” – might be looking for “quarts”
Also, the paragraph starting with “One second: by using Goldman 360 a client voluntarily…” I don’t think was supposed to be in a quote block.
July 2nd, 2009 at 10:39 am
Mr King: please leave erroneous reporting to the likes of ZeroHedge and Karl Denninger – you have your facts wrong on the NYSE’s program trading statistics. The report is not going away – they are just going to get the data from the order type which is coded upon order entry, rather than relying on the firms to submit the nightly DPTR.
This will INCREASE transparency, not decrease it. it’s a simple utilization of technology to improve accuracy.
July 2nd, 2009 at 10:41 am
I find it incredibly frustrating and bothersome that G_S operates with such impunity.
And the the BS Obama administration is allowing it to happen.
What no one seems willing to admit is they are killing the NYSE.
Maybe that’s what they want. Everyone to move to offshore markets.
What computer programs are going to trade back and forth is a zero sum game? Oops the feds are providing liquidity.
This is some kind of sick. Kind of like watching lions chase christians around the coliseum.
July 2nd, 2009 at 10:55 am
Goldman Suchs.
July 2nd, 2009 at 10:58 am
It’s the last big payday before the lights go off, don’t worry.
July 2nd, 2009 at 1:32 pm
Just read “THE GREAT AMERICAN BUBBLE MACHINE” By Matt Taibbi, current Rolling Stone Magazine. Except for the expletives (NOT deleted), it looks to be an intelligent, well researched historical expose on the operations at GS. No?
The US gov’t was set up with checks and balances between the three main branches of gov’t. The Founding Fathers (esp. Thomas Jefferson) were aware of the dark side of private banks, and fiat currencies, and were strongly opposed to both. Article 1, section 8 of the US Constitution gives Congress power to “coin money, and regulate the value thereof.” No one else.
Following the Great Depression, aka GS Bubble 1, which soon followed the creation of the Fed, there were many good regulations imposed on Wall St. in order to help prevent GD-type events from re-occurring (or at least minimize their scope, and magnitude), and they largely functioned as planned.
We now find ourselves in the midst of Credit Recession II, which is the result of addition of the Fed, removal of the aforementioned regulations, and the Revolving Door policy/all-too-cozy relationships between our gov’t, and private industry (i.e.: Wall St./GS).
Basically the firewall between Wall St., and gov’t has been torn down, to the detriment of almost all Americans. Since we KNOW what the cause is, and the cure is simple, why can’t we muster enough political will to do it?
According to Taibbi, each time GS was repremanded for fraud, etc., the penalty was way too lenient – read slap on the wrist. It seems to me that when fraud/illegal activity is proved in a court of law, ALL profits should be forfeit – using same standards for illegal drug trafficking, for example. There are no teeth in the regulations, penalties are to weak. Lax regulation, and enforcement. It’s deja vu all over again.
We may be on our last bubble (Taibbi’s bubble #6) -I say this as now that taxpayer funds are in play in the current bubble (#5 – Rigging the Bailout), and so there’s really nothing left for GS to go after in the US. We’ve now been sucked dry. Kind of reminds me of “Star Trek – The Next Generation” and The Borg who went around the known universe absorbing civilizations at will in amoeba-like fashion. Look out world, you’re next. Resistance is futile. You will be assimilated.
BTW, since this is a credit recession (vs. inventory), AND the bad debts have not been written down/defaulted – think toxic paper, level 3 assets, etc. – but have rather been simply transferred to the Fed’s (taxpayer’s) balance sheet, how do we expect to start growing again? Japan’s lost decade, here we come, I think.
July 3rd, 2009 at 11:18 am
Wall Street still doesn’t get it. The party is over. I’ve been prattling on about this on Barry’s blog and my blog for years. And, every macro event I have talked about is in some level of playing out except for the fall of gold. Goldman Sachs is either going out of business or will have the most severe crisis in its history. Karma is a bitch and the macro factors are lining up for a terrible implosion in New York City, on Wall Street and for Goldman Sachs. Their business model is completely broken. Btw, I said the exact same thing about Merrill when no one was looking. Impending doom dead ahead for Goldman Sachs.
And, the hubris, corruption and utter stupidity of its CEO is leading the company right down the path of death. Keep paying out those bonuses. At some point in the future, Lloyd is going to realize he should have kept that cash as retained earnings to deal with his impending crisis.
It’s ironic that Goldman was supposedly telling clients to bet against California. I, for one, bet California wins the race between the two entities. California doesn’t need Wall Street to recover its economy. Everything California needs is within its borders. Including an ability to raise capital without Wall Street. And, you can bet when all of the states figure this out, they will remember the arrogance and corruption on Wall Street that cost the state’s people so dearly.
Wall Street can kiss its ass good bye.
July 3rd, 2009 at 11:22 am
Clarification. Corruption of Wall Street. Not Blankfein. I have no idea what Lloyd personally has his fingers in.