Other News

Bloomberg reports that the big Swiss Bank, UBS,  paid $160mm for (surprise-surprise) bid rigging in the muni market. I'm shocked.


The SEC has got the bit in its mouth on this one. From the head of the antitrust division, Christine Varney:

“The investigation is active and ongoing.”

The words 'active' and 'ongoing' has some folks crapping in their pants. How far will the SEC take this?

“When every municipality that has been victimized by this conspiracy receives restitution, we will conclude.”

Oh boy! A no stones unturned approach. My favorite. So who else is involved?

In November, James Hertz, a former JPMorgan Chase & Co. (JPM) banker also admitted involvement, and agreed to cooperate.

Three former employees of a General Electric Co. (GE) unit are fighting charges in the case.

This story is actually as old as the hills. The muni market has always been fast and loose. I expect we will see a bunch of big names get snared. Couldn't happen to a nicer bunch of boys…




Terrible news for Greece all day. I can't imagine that the charade can go on much longer. I think the EU/ECB "Plan B" is soon to be announced.

It's not at all surprising to see that CDS spreads went on a tear given the headlines. Greek spreads widened by a solid 4.9%. Spanish CDS was up a very hefty 6.6%. But for me, the very concerning price move on the day was Italy. Spreads widened by (a scary) 7.9%.

IMHO Italy should not have been whacked as it was. I consider Italy to be a core country. Yes, they have a lot of debt, but there is very little of it outside the country. It does not matter a damn what I think. What's important is what the market thinks.

Even after today's pounding Italian spreads are still very low. But this may be a developing story. One to watch out for. I don't think Italy having an "issue" is at all priced into the global markets. If the market decides that Italy is in fact an “issue” there are going to be some very big price adjustments in currencies, bonds and stocks. Stay tuned.





Housing and Urban Development (HUD) had some positive news today. They completed their one-millionth home under the HOME program.

This is a nice story. The single Mom (and her three kids) have a (nice) roof over there head at a price she can afford. Even I can't be critical of this outcome. One thing did catch my eye in the press release:

Each dollar of HOME funds leverages nearly $4 million in other public and private investment with a combined $78 billion over the life of the program.

One dollar leverages $4mm??? Not even the geniuses down on Wall Street could dream up that kind of debt to equity ratio. Yet the head of HUD, Shaun Donovan, brags about it.

The bottom line is that this good result is really about borrowed money. It would be nice if we did some good things, and paid for it once in a while.


The CBO reports that the deficit in the first seven moths of fiscal 11' was $871b. That's $70b more than the deficit was for the same period in 2010.

Of interest is that total federal receipts are up by $110b over the comparable 10' period (+70b of increased income taxes). So spending has gone up by $180b YoY.

The total intake by the Feds comes to $1.3 Trillion. Spending was therefore $2.2T. If one annualized this spending number it would come to $3.8T. Well above the projected 3.6T. My conclusion(s):

-We are going to exceed the projected deficit by ~$150b.

-Federal spending in the next five months will slow down from the current pace and with it will come a weaker economy.


Unbelievable day (again) in the crude market. Brent is up 6% on the day. The President is blaming speculators. I think the specs are being beaten to a pulp. What I see is a market that is illiquid. A 15% drop in a week followed by a very hot Monday is not a good sign.

This level of instability in a commodity that is consumed to the tune of $3.5 Trillion a year means one thing. The price to end consumers has to stay high. They are the ones who are paying the price for the big spike in Vol. To me, this is just another risk premium the oil market has to pay. Oil used to trade higher based on instability in Nigeria or Iran. Now it is trading higher on instability in the futures pits. Fast markets are going to cost us.




I was on radio out of New Orleans today. The talk down there is the rising Mississippi. One of the many problems this is causing is a (potential) shutdown of the big gulf refiners. About 15% of refined product consumed in the US comes from the area. How much this may impact supply is not clear.

Over the weekend I heard/read that the big drop in crude would lead to a drop at the pump. I think that is bunk. The greater risk is that it goes up to $5 rather than the chance it falls to $3.

Gulf delivery for sweet crude is back to $118. The US is paying Brent ++ for crude.