Bloomberg:
- Credit Markets in Europe Snap 3-Day Drop as Optimism Improves. Credit markets in Europe rallied the most this year after German investor confidence rose and Goldman Sachs Group Inc.’s profit beat estimates. Credit-default swaps on the Markit iTraxx Crossover Index of 50 companies with mostly junk ratings fell 19 basis points to 409 as of 5:10 p.m. in London, according to Markit Group Ltd. The drop was the biggest since Dec. 31, according to CMA DataVision, and signalled improving perceptions of credit quality.
- Goldman Donations to Obama Campaign Totaled Nearly $1 Million. U.S. Senate candidate Alexi Giannoulias pushed his Republican opponent in Illinois to give back donations from Goldman Sachs Group Inc. without saying whether President Barack Obama should return almost $1 million that bank employees contributed to his White House bid. Obama, a political mentor and basketball buddy to Giannoulias, received the money from employees and their family members, making Goldman Sachs second only to the University of California as his biggest single source for donors in 2007 and 2008, according to the Center for Responsive Politics. The Securities and Exchange Commission’s fraud lawsuit against Goldman Sachs has politicians gauging the fallout from taking donations from the bank. “This would be a lot more interesting if Wall Street banks, joined by Mark Kirk, weren’t fighting tooth and nail against the needed reforms the administration is advocating for,” Hari Sevugan, Democratic National Committee spokesman, said in a statement. Sevugan didn’t respond to an e-mail query when asked whether Obama plans to return money from Goldman Sachs employees. Goldman Sachs and its employees and family members gave $5.9 million to candidates in the 2007-2008 election cycle, according to the Washington-based Center for Responsive Politics. Three-quarters of that went to Democrats, the non- partisan group said. Wall Street provided three of Obama’s seven biggest sources of contributors for his presidential bid. In 2007 and 2008, Goldman Sachs employees and family members gave him $994,795, Citigroup Inc. $701,290, and JPMorgan Chase & Co. $695,132. Kathleen Strand, a Giannoulias spokeswoman, declined to provide a yes or no response when asked whether Obama should give money back to Goldman employees.
- Goldman Profit Beats Estimates as Firm Battles SEC. Goldman Sachs Group Inc., facing a fraud lawsuit from U.S. regulators, reported first-quarter earnings that surpassed analysts’ estimates on record fixed- income trading revenue. Net income almost doubled to $3.46 billion, or $5.59 a share, from $1.81 billion, or $3.39, a year earlier, the New York-based bank said today in a statement. The average estimate of 23 analysts surveyed by Bloomberg was for $4.14 per share. Predictions ranged from $3.33 to $5.97. “Goldman is continuing to take market share, and I think that’s the key move for them coming out of the financial crisis,” Jason Tyler, senior vice president at Ariel Investment LLC, which manages $5 billion, said in a Bloomberg Television interview. “Goldman is a clear winner as people are trying to figure out who they are going to do business with.” Equities-trading revenue rose 18 percent to $2.35 billion from $2 billion a year earlier, Goldman Sachs said. Gains from principal investments, which includes the company’s stakes in Industrial & Commercial Bank of China Ltd. as well as real estate and other companies, were $510 million compared with a net loss of $1.41 billion in the first quarter of 2009. Investment-banking revenue climbed 44 percent to $1.18 billion from $823 million last year. Within that, fees from financial advice fell 12 percent to $464 million from $527 million and equity-underwriting revenue surged to $371 million from $48 million. Debt underwriting generated $349 million compared with $248 million a year earlier. Compensation and benefits, the firm’s biggest expense, increased 17 percent to $5.49 billion in the quarter, or 43 percent of the firm’s overall revenue. The cost compared with $4.71 billion in the first quarter of 2009, when the firm set aside 50 percent of revenue.
- Oil Rises From Three-Week Low on Forecast for U.S. Supply Drop.
- IMF Said to Propose G-20 Bank Tax to Pay for Bailouts. The International Monetary Fund will recommend levies on financial companies’ non-deposit liabilities or on profits and compensation to pay for bailouts, said officials with knowledge of the proposal to Group of 20 nations.
- Greek 3-Month Bill Yield Doubles on Default Concern. Greece’s borrowing costs more than doubled at an auction of 1.95 billion euros ($2.6 billion) of three-month bills amid concern the nation will default unless it taps a bailout package brokered by the European Union. Greece sold the 13-week securities today to yield 3.65 percent, compared with 1.67 percent at a sale of similar debt on Jan. 19, according to the Athens-based Public Debt Management Agency.
- IMF Says Government Debt Poses Biggest Risk to Growth. The International Monetary Fund cautioned that rising government debt has replaced financial industry stress as the biggest threat to the global economy and cut its estimate for asset writedowns by 19 percent. Governments need “credible, medium- term” plans to reduce deficits and some nations need to do more to revive the flow of credit and boost growth. “The deterioration of fiscal balances and the rapid accumulation of public debt have altered the global risk profile,” the IMF said. “Vulnerabilities now increasingly emanate from concerns over the sustainability of governments’ balance sheets.” “Greece is a wake-up call,” Jose Vinals, director of the IMF’s monetary and capital markets department, told reporters at a briefing in Washington yesterday. “In all the other countries, which fortunately are in a better situation, what we are saying is ‘do not let the financial situation get out of hand and undertake the necessary measures precisely to remain on the safe side.’”
- Web Traffic, Video Meetings Surge as Flights Grounded. Stranded flyers created a surge in demand for travel industry Web sites and remote conferencing services as a shutdown of many flights in Europe continued through a sixth day. Visits to aviation industry sites as a proportion of U.K. Internet traffic have doubled since Iceland’s Eyjafjallajökull volcano erupted April 14, according to Experian Plc.’s Hitwise Web-tracking service.
Wall Street Journal:
- Is China Recovery on the Bubble? The global economic recovery has drawn support from a swift rebound in China. Now, investors and economists wonder whether a bursting Chinese property bubble could put China's economy in a bind. Over the past week, China's cabinet has announced measures aimed at cracking down on property speculators, including tougher down-payment requirements for second and third homes. This comes after China reported an 11.7% rise in urban home prices last month from a year earlier, its fastest gain in five years. "This is the critical policy point that finally cracks the Chinese property market," declared Morgan Stanley China strategist Jerry Lou.
CNBC:
Fox News:
- Goldman(GS) Working Hard to Sway Regulatory-Reform Outcome. Both Goldman(GS) and JP Morgan Chase(JPM) have been at the forefront of the lobbying efforts to revise major parts of the bill, including its provisions to curb so-called proprietary trading and force firms to sell stakes in hedge funds and private equity funds. FOX Business has learned that JPMorgan has drawn up contingency plans to sell its massive hedge fund, Highbridge Capital, which it purchased in 2004 for about $1 billion. The fund manages some $21 billion in assets. JP Morgan also owns one of the largest private equity arms in the financial system that manages $15 billion in assets. It has contingency plans to sell that as well.
Business Insider:
- Hedge Fund Manager Bill Laggner: Why We're Still Short Goldman. Bearing Asset Management has been short Goldman Sachs since December and they're staying short. Goldman stock tanked on Friday in the aftermath of the SEC's fraud case against Goldman, but Bill Laggner stayed short and he's not budging anytime soon. Even though this morning, Goldman just utterly smashed earnings estimates. "We are short and we will stay short," he told us. "We are in the very early stages of tearing down the greatest fraud ever perpetrated on the American people." When more details emerge, he believes, potential Goldman clients will uncover more about Goldman's trading against and withholding valuable information from clients. In light of those new details, the stock price will go down. "Goldman is nothing more than a glorified hedge fund taking massive bets with taxpayer subsidies," he says. "As more market participants realize this conflict of interest the business should contract rapidly."
- Clearly, OPEC Lost Control of Oil in March. Non-OPEC global oil supply increased in March and is now expected to average 51.53 million barrels per day (mb/d) for 2010, which is a 0.50 mb/d increase over 2009 according to Hellenic Shipping News (HSN). It is also an increase of 0.10 mb/d to the 2010 forecast from just a month ago.
- Dodd Financial Reform Bill: All Holes and No Cheese. In a letter last week to Senate majority leader Harry Reid and minority leader Mitch McConnell, former SEC Chief Accountant Lynn Turner, former Treasury Secretary Robert Reich, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, former Senate Banking Committee Chief Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and others pointed out that Dodd's proposed financial reform legislation wouldn't have prevented the current crisis ... and won't prevent the next crisis. Dodd himself has admitted that his bill "will not stop the next crisis from coming". In fact, the bill is wholly ineffective, failing to address the core things which need to be done to stabilize the economy. See this, this and this. Moreover, as Democratic Congressman Brad Sherman - a senior member of the House Financial Services Committee and a certified public accountant - points out: The Dodd bill has unlimited executive bailout authority. That’s something Wall Street desperately wants but doesn’t dare ask for. The bill contains permanent, unlimited bailout authority. And as Arthur Delaney notes, the bill is riddled with carve outs purchased by lobbyists: "Obtaining a carve-out isn't rocket science," said a Republican financial services lobbyist. "Just give Chairman Dodd [D-Conn.] and Chuck Schumer [D-N.Y.] a shitload of money."
- Greece Update: Another Day, Another Record: 10 Year Hits 484 BPS. Today's 13 week Bill auction has done exactly nothing to tame Greek default spirits: case in point, the 10 Year has just surged to another all time record high of 484 bps spread to Bunds. Notably, and as we expected, just as the Gold selloff last week was predicated on Paulson concerns, the hedge fund manager's major holding in GGBs may well be the reason for increased volatility in Greek bonds. G-Pap now has no choice but to activate the US taxpayer bailout. We are confident this will be spun favorably by the media. We only wonder if as soon-to-be DIP lenders, Americans will now have first dibs on the best rooms at Athens hotels.
Metal Bulletin:
- One Market Participant Holds Over 40% of LME Nickel Shorts. One market participant is holding more than 40% of the short positions in nickel futures on the London Metal Exchange, according to LME data. This follows the revelation late last month that another market participant is holding between 50% and 80% of LME stock warrants and cash contracts.
- Venture Funding Up 12% in First Quarter. Investors poured $4.7 billion into 597 financing deals, according to Dow Jones VentureSource. In Southern California, the number of deals stayed flat, but the value jumped 22% to $693 million.
- Obama's Wall Street Bill Lets Crooks Escape. Diamond, who has emerged as a major critic of the unregulated hedge fund industry, says he was not surprised that the Securities and Exchange Commission (SEC) named hedge fund short-seller John Paulson as a key player in the Goldman Sachs scheme to defraud investors but failed to indict him. Diamond says that Paulson is being let off the hook because he is a member of the most powerful special interest group working the corridors of power in Washington, D.C.--the Managed Funds Association (MFA). He says the major media are afraid of taking on the MFA, which calls itself "the voice of the global alternative investment industry," because of its tremendous financial clout. "The SEC charges against Goldman Sachs are a ruse, a ploy, and a smokescreen to get the Dodd financial reform passed," he said. The bill, he argues, fails to hold the multibillion dollar hedge fund short sellers accountable for their illegal market manipulations.
- Reserve Bank of India. The early stages of inflation, as Jens Parsson pointed out in “Dying of Money,” can be a really fun time. Money expands, stock markets boom and state spending rises as governments fund deficits without drama. People start to feel well off, amid generally stable prices. That happy place is where India has been for the past few months. Asia’s third-largest economy has delivered one of the world’s most balanced recoveries, spread evenly over consumption, investment and exports. But now, notes the Reserve Bank of India, an ominous transition is under way: “inflationary pressures” triggered by the weakest monsoon in almost 40 years, are developing into “a wider inflationary process”. The year-on-year rise in wholesale prices accelerated from 0.5 per cent in September to 9.9 per cent in March, well ahead of the bank’s baseline projection of 8.5 per cent.
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