And There Goes The Dollar As Weimar Rally Resumes 

Submitted by Tyler Durden on 05/03/2011 11:47 -0400

The dollar managed to stage another faux-rally to the just above abysmal level of 73.30... for about 3 hours. At last check, the dollar is plunging and everything else is once again surging, meaning all those hoping for some miraculous spike in the USD on expectations that there will be a time when the USD will once again be a flight to safety will have to put their dreams on hold yet again. Remember: state healthcare benefits are 5% funded, so the Weimar rally (in stocks, if not so much the dollar), has to go on or else pensioners will realize there is 5 cents on every benefits dollar owed to them. 

 

 

 

White House Changes Story Of How bin Laden Was Taken Down 

Submitted by Tyler Durden on 05/03/2011 08:52 -0400

Remember all those stories about bin Laden posing an armed threat and hiding behind a woman leaving the SEALs no other choice but to shoot him? Turns out they were not quite correct. Politico reports: "The White House backed away Monday evening from key details in its narrative about the raid that killed Osama bin Laden, including claims by senior U.S. officials that the Al Qaeda leader had a weapon and may have fired it during a gun battle with U.S. forces.
Officials also retreated from claims that one of bin Laden’s wives was killed in the raid and that bin Laden was using her as a human shield before she was shot by U.S. forces...During a background, off-camera briefing for television reporters later Monday, a senior White House official said bin Laden was not armed when he was killed, apparently by the U.S. raid team." At this point one wonders, as noted yesterday, just how much of the official story spun by the administration will continue to unravel.

New bin Laden Death Photo "Released" 

Submitted by Tyler Durden on 05/03/2011 12:02 -0400

... Supposedly this is a real one. Considering the administration's photoshop skills are rather rudimentary we hope readers will determine if this is a fake within minutes. 

 

 

 

 

 

 

Bill Gross: "The Treasury Market Is On A Collision Course With Financial Repression" 

Submitted by Tyler Durden on 05/03/2011 09:12 -0400

In his latest just released monthly letter, Bill Gross continues to explain why those expecting a cover of PIMCO's short treasury exposure will be disappointed for at least one more month: "Although we have warned for several years of the deteriorating creditworthiness of America’s AAA rating, our de minimis Treasury positions had less to do with much more immediate issues than America’s balance sheet prospects. We are highly sensitive to the pocket-picking policies that governments in general deploy to right the ship." This time the symbol for the US (and global) economy, and specifically artificially low interest rates is a "tanker" analogy: " While the global financial tanker was on automatic pilot, we had changed course well in advance and it has been relatively smooth sailing since." Needless to say, Gross is convinced said ship is on a collision course. Ergo the title of this month's piece: "The Caine Mutiny." As usual, it is the 'Treserve' that is at fault for doing everything in its power (selling treasury puts?) to keep rates artificially low, a move which Pimco not surprisingly not in favor of: "holding Treasuries at these yield levels for an extended period of time represents an abdication of responsibility." Yet Gross does not advocate an outright mutiny, but renewed vigilance: "PIMCO advocates not so much a mutiny but a renewed vigilance on this new ship, stressing bond market “safe spread” alternatives available globally, including developing/emerging market debt at higher yields denominated in non-dollar currencies." Bottom line: "The Treasury market is on a collision course with financial repression and it is time to adjust your rudder to starboard to get home safely." Undoubtedly the usual response will be that Gross is just being unjustly alarmist. That is, until he is proven 100% correct.

 

 

 

"Flip That Bond" - 80% Of Today's POMO Is In Form Of 7 Year Bond Auctioned Off 3 Days Ago 

Submitted by Tyler Durden on 05/03/2011 11:30 -0400

While it is unclear if the 7 Year bond auctioned off last week (our commentary on that partcularly weak auction rescued by Primary Dealers is here) Cusip: 912828QG8 has even settled yet (it certainly is not on the Daily Treasury Statement as of Friday), what is clear is that as part of today's POMO which closed 30 minutes earlier, that very issue accounted for a whopping 78.5%, or $6 billion, of the entire operation. As a reminder, Primary Dealers bought $15.4 billion of the auction on Thursday, and just as we predicted, couldn't wait to flip it back to the Fed. Indeed, 39% of the entire allocation has now been flipped right back to Brian Sack. And people wonder why Bill Gross is paranoid that in the absence of the Fed this thoroughly fake bid will no longer be there. And with PDs actually forced to hold the bonds they quote-unquote bid for, one wonders: what clearing price will be appropriate, once the flip game ends?

From $6 To $1 In Milliseconds: AMBO Is First Flash Crash Du Jour 

Submitted by Tyler Durden on 05/03/2011 10:55 -0400

The Johnny Fived and persistently broken market continues to remind about itself, 3 days ahead of the May 6 flash crash anniversary. Today's first victim: anyone who had 20% or greater stop loss triggers in Ambow Education Holding. The stock plunged from over $6 to just over $1 in millisecond. Courtesy of Nanex, we bring you the chart of yet another algo gone apeshit which in 3 seconds traded a few thousands shares on both the Nasdaq and Pacific Exchange. 

 

 

 

Pew Finds $1.26 Trillion State Retirement Shortfall, Says States Only Have $31 Billion In Assets To Pay For $635 Billion In Liabilities 

Submitted by Tyler Durden on 05/03/2011 10:38 -0400

For those wondering why the Fed's third mandate is so critical, and is arguably about more than padding the brokerage accounts of those top 400 US "taxpayers" who account for 10% of capital gains, the Pew center brings what could be the main reason. Which is that even while factoring an 8% discount rate (for most states, some are probably higher), in other words expecting 8% gains in their assets, "the gap between the promises states made for employees’ retirement benefits and the money they set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009, resulting in a 26 percent increase in one year." The difference is broken down as follows: "State pension plans represented slightly more than half of this shortfall, with $2.28 trillion stowed away to cover $2.94 trillion in long-term liabilities—leaving about a $660 billion gap, according to an analysis by the Pew Center on the States. Retiree health care and other benefits accounted for the remaining $604 billion, with assets totaling $31 billion to pay for $635 billion in liabilities." In other words, states have roughly 5 cents for every dollars in health benefits obligations. Good luck with funding that absent America becoming Weimar. 

Mortgage Fraud Lawsuit Filed Against Deutsche Bank 

Wall Street's worst kept secret is now out. From Reuters: "The United States sued Deutsche Bank AG, accusing the German bank and its MortgageIT Inc unit of repeatedly lying to be included in a federal program to select mortgages to be insured by the government." And so, 2011 continues being a carbon copy of 2010, with only Deutsche Bank taking the place of Goldman this time around. Oh yes, Greg Lipmmann we hardly knew ye (and we didn't even short your house). 

 

 

 

Due To "Triple Damages" Under False Claims Act, Deutsche Bank Damages May Total More Than $1 Billion - Full Lawsuit Attached 

Submitted by Tyler Durden on 05/03/2011 10:47 -0400

Step aside Goldman Sachs, welcome Deutsche Bank: "This is a civil mortgage fraud lawsuit brought by the United States against Deutsche Bank and MortgageIT. As set forth below, Deutsche Bank and MortgageIT repeatedly lied to be included in a Government program to select mortgages for insurance by the Government. Once in that program, they recklessly selected mortgages that violated program rules in blatant disregard of whether borrowers could make mortgage payments. While Deutsche Bank and MortgageIT profited from the resale of these Government-insured mortgages, thousands of America homeowners have faced default and eviction, and the Government has paid hundreds of millions of dollars in insurance claims, with hundreds of millions of dollars more expected to be paid in the future... Deutsche Bank and MortgageIT had powerful financial incentives to invest resources into generating as many FHA-insured mortgages as quickly as possible for resale to investors... DB and MortgageIT repeatedly lied to HUD to obtain and maintain MortgageIT's Direct Endorsement Lender status.... Their violations of HUD rules were egregious." And what investors are focused on: "In this suit, the United States seeks treble damages and penalties under the False Claims act and compensatory and punitive damages under the common law theories of breach of fiduciary duty, gross negligence, negligence, and indemnification for the insurance claims already paid by HUD for mortgages wrongfully endorsed by MortgageIT. In addition, the United States seeks compensatory and punitive damages." And what is also notable is that this fraud persisted well past the housing crunch, continuing well into 2009 according to the lawsuit.

Stocks See Brief Pop On Beat In Factory Orders, Durable Goods Revision Even As Numbers Impact Q1 Economic Data 

Submitted by Tyler Durden on 05/03/2011 10:12 -0400

March Factory Orders came out at a stronger than expected 3.0%, on expectations of 2.0%, while the previous number was revised to 0.7% from -0.1%. More importantly Durable Goods were revised from 2.5% to 2.9%, with Durables ex-transportation revised from 1.3% to 1.8%. Yet one wonders how March data is all that critical considering April has already passed and according to diffusion indices the economy is already seeing a modest contraction. At best this number will result in a hike to Q1 GDP from already a painfully low 1.8% as reported last week. Needless to say, the Japanese weakness was not to be expected in March and will only affect the economy in April and onward. Look for car sales data for the first true indication of how the Japan effect is impacting US production. 

 

 

 

 

Sterling Tumbles As UK Double Dip Comes Back With A Vengeance After PMI Misse, Comes Lowest In 7 Months 

Submitted by Tyler Durden on 05/03/2011 07:15 -0400

After a few less than negative pieces of economic data out of the UK came out recently leading some to believe that the UK appreciation is a safe bet in advance of what seems an imminent BOE hike, today all the GBP bulls got another cold dose of reality after the PMI came at 7 month lows. From Reuters: "Manufacturing activity grew more weakly than expected in April, at its slowest pace in 7 months, and a sharp slowdown in new orders cast a cloud over a sector that has been a rare bright spot in the UK economy. The Markit/CIPS manufacturing PMI headline index, published on Tuesday, fell to 54.6 in April, its lowest since September, from a downwardly revised 56.7 in the previous month and well below the 56.9 consensus forecast in a Reuters poll on Friday." So to update: Japan slashes growth forecasts, Europe is overheating and due for a major monetary tightening, China already is (although the PBoC it pushed the parity to just above 6.50 last night so as not to seem too desperate), and the UK is in shambles. And somehow reverse decoupling is still expected to work? Judging by the now traditional futures levitation each and every morning the answer is a resounding yes.