New Home Sales Up a Whopping 27% In March, November BZH Call Rips 59%, Stock Testing Resistance, Beazer Downgraded To Hold By Citigroup Citing Valuation

Someone positioned well buying those 3,000 BZH 7.50 Calls on Thursday for $0.63 before this release.  On Friday it closed up 59% to $1.0 (chart below) with positive volatility from the new home sales release and BZH rip.  The trader also sold the $5 BZH puts.  Watch daily option activity at crimsonmind.com.  Here is the new home sales release from census.gov.  *Update: It appears that Citigroup downgraded Beazer Homes on 4/22 to "hold" (from buy) citing valuation. It reached Citi's price target of $6.25. For proof I embedded the update from Market News Video.

Speech By Kiyohiko Nishimura on Japan's Economy, Monetary Policy (Bank of Japan, 4/21/2010)

Below is a speech on 4/21/2010 made by Kiyohiko Nishimura, Bank of Japan's Deputy Governor on Japan's economy and monetary policy.  It was a meeting with business leaders in Miyagi.  I quoted below the paragraph on recent price developments but find his outlook on current economic conditions in the PDF.
"Price Developments in Japan

I will now talk about price developments.

The year-on-year rate of change in consumer prices has been declining, while the pace has been moderating since last August to around -1 percent recently.

We hear from firms that it is difficult to raise sales prices as consumers are sensitive to prices due to their tight purse strings, and as competition is harsh among firms. The Tankan showed that output prices have not risen, compared with the improvement in business sentiment and the rise in input prices.


Nevertheless, it can be said that some beams of light are starting to break through a thick cloud of deflation.

First, there is a subtle change in firms' price-setting behavior and consumers' purchase behavior. With your cooperation, the Bank conducted a survey on firms' price-setting behavior at the beginning of this year. The results, which were published in our January Regional Economic Report, showed that there were signs in some firms to avoid endless price competition and try to differentiate in aspects other than prices. The impression obtained through various surveys and interviews is that there are subtle and gradual signs on the consumers' front to purchase quality products by paying reasonable prices.

Lionsgate vs. Icahn, Video of Live 13D War On CNBC, Icahn Owns 19%, Mark Cuban Owns 5.4% and Technical Analysis ($LGF, $IEP)

It's been an interesting few months for Carl Icahn and Lions Gate Entertainment. The televised 13D war on CNBC made history. 13Ds must be filed with the SEC within 10 days of owning 5% or more of a company. Carl is trying to buy Lionsgate for $7 and remove management but there's a poison pill potentially blocking him. The Icahn entities own about 19% of the company. You know what else is interesting, Mark Cuban just scooped up a 5.4% position and sold 20,000 puts to counterparties at $7.50 expiring January 2011 (he'll buy 2 million shares if they exercise). For more information on poison pills see the recent Stock Wars episode (7 minutes in). Enjoy the Icahn fight vs. Michael Burns below on CNBC and the LGF chart.  Along with chart break outs and option activity, 13Ds, takeovers and value plays are also interesting to watch. If you didn't already know, "Lionsgate is the leading next generation studio with a major presence in the production and distribution of motion pictures, television programming, home entertainment, family entertainment, video-on-demand and digitally delivered content." (Lionsgate).

Lions Gate to allow Icahn vote on poison pill - April 23, 2010/Reuters
Icahn Lifts Lions Gate Bid to $7, Says Management Should Go - April 15, 2010/Bloomberg
Lions Gate drops out of bidding for MGM - March 25, 2010/LA Times
Lions Gate drops bid for MGM: report - March 25, 2010/MarketWatch
Lions Gate Exec Michael Burns vs. Carl Icahn March 24, 2010/CNBC

Pimco's El-Erian On Greece Debt Contagion Risk (CNBC Video)

Pimco's El-Erian thinks the Greek debt / Euro Zone crisis could mimic the sub-prime mortgage crisis in the US.  He said there's contagion risk, meaning credit/interest rate risk could spread into other European credits.  See my previous post showing charts of Greek CDS, 10 Year Yield, Greek equities and the Euro.  Watch them.

$3 Million Jacked From Detroit Pension Funds (Fire, Police and General Retirement)

Updates on more financial shadiness in the D. Three Detroit Pension Funds (Fire, Police and General Retirement funds according to Detroit News) had $3 million jacked by private equity firm Onyx Capital Advisors with help from friend Mike Farr.  Below is part of the SEC press release and a few local articles.

Mike Farr, firm accused of bilking local pension funds - Detroit News
Ex-Lion, money manager stole $3M from Detroit, Pontiac pensions, U.S. says - Detroit Free Press
Asset freeze ordered in pension fund case - Detroit News
SEC: Former Lion Mike Farr, partner stole more than $3M from Detroit-area pension funds - MLive

SEC Charges Private Equity Firm and Money Manager for Defrauding Detroit-Area Public Pension Funds

Washington, D.C., April 22, 2010 — The Securities and Exchange Commission today charged a private equity firm, a money manager and his friend with participating in a fraudulent scheme through which they stole more than $3 million invested by three Detroit-area public pension funds.

Abacus 2007 CDO Pitch Book Referenced Securities One Notch Above Junk Four Months Before Two Bear Stearns Credit Funds Blew Up

Look at the securities or reference entities in the Abacus 2007-ACI $2 Billion Synthetic CDO. Every underlying residential mortgage-backed security in the CDO was rated Baa2 by Moody's or one notch above junk (high yield status) at the time. The mortgages were securitized in 2006 to early 2007 (see initial reference entities on page 56-57). You have to admit this was an amazing trade by Paulson & Co, shorting a pool of RMBS one notch above junk four months before two Bear Stearns credit funds blew up! These subprime RMBS and CDOs trading over-the-counter were ultimately backed by......Confessions of a Former Mortgage Broker: What We Did Was Criminal - Tech Ticker. Not that it matters now, but I find it funny that there's still zero price transparency with OTC debt securities and derivatives after what happened.

U.S. Housing Data Spurs Late Gains in Oil Prices after Mixed Week (Oil Market Summary) - Guest Post

Guest post by Darrell Delamaide originally for oilprice.com.

U.S. Housing Data Spurs Late Gains in Oil Prices after Mixed Week

OilPrice.com Oil Market Summary for 04/19/2010 to 04/23/2010

After languishing most of the week, crude oil prices galloped to the finish line on Friday, tacking on 1.7% and recouping most of last week’s losses as positive new-housing sale data spurred most markets forward.

The decision by the Greek government on Friday to activate a bailout plan from the European Union and the International Monetary Fund eased pressure on the euro, contributing to oil price gains as the dollar slipped against the joint European currency.

The benchmark West Texas Intermediate contract gained $1.42 Friday to end the week at $85.12 a barrel, compared with the benchmark’s finish of $83.24 in the previous week.

Moody's Downgrades Greece, 10Y Bond Yield 8.84%, CDS 633bps, Greek Shares Testing February Low, Euro Needs Help (Charts)

Moody's downgraded Greece's credit rating to A3 from A2 on higher debt servicing costs and the revised budget deficit. They need to refinance an $8.5 billion bond by May 19.  Hard money bridge loan?  Read these articles:
Greece’s Credit Rating Lowered One Step by Moody’s - BusinessWeek
Greece May Seek Bridge Loan as Bond Redemption Looms - Bloomberg
Greece seen with little choice other than to activate aid plan - MarketWatch
Moody's cuts Greece's sovereign ratings to 'A3' - MarketWatch
Greece faces tight timeline before May debt crunch - Reuters
Greece Problems Spreading on Credit-Risk Selloff, El-Erian Says - Bloomberg
The Greek 10-Year Bond yield hit a new high of 8.84% and 5-Year Greek CDS (credit default swaps or default insurance) on Greek debt hit 633 basis points according to CMA Datavision.  Remember my post from January [Pricing of Greek CDS, 10Y Bond Yields Sense Risk (CDS 399bps, 10Y 6.85%)].  You can see how important this data is.  In 2.5 months the Greek 10-Year yield is up 200 basis points (2%) and CDS is up 234 basis points (2.34%).  Market participants are pricing the risk of default.  The ultimate bailout event or default risk reversal will be interesting to watch.

Greek equities are testing the February low.  If Greek shares don't hold support here I don't see support until the early 2009 bottom (see chart below).  The Euro Index is also testing lows.  Judgment day is near but someone will bail them out. Click charts for larger view.

President Obama's Speech On Wall Street Reform (Video, Cooper Union)

I'm going to find the full financial reform bill and also look at the "Large Trader" proposal by the SEC. Below is Obama's speech on Wall Street reform at Cooper Union (New York).
"The President speaks at Cooper Union in New York City, where he spoke on the need for reform two years earlier, and tells Wall Street and Republicans to support these common sense reforms to end bailouts, close loopholes and protect consumers." [Whitehouse.gov]

Options Active In Homebuilders $XHB, $BZH, $HOV, Existing Home Sales Up 6.8% In March, Inventories At 8-Months

Options were active in XHB (Homebuilders ETF), BZH (Beazer Homes) and HOV (Hovnanian) today. This comes a day after hedge fund manager John Paulson said in a conference call that home prices will increase 8-10% in 2011.  His $30 billion hedge has been involved in distressed real estate since early 2009 (or earlier) through a real estate recovery fund.  His firm was also bidding on bankrupt TOUSA land in February (Reuters). If you can scoop up decent bankrupt land for 20 cents and sell it to a homebuilder for 40 cents it's a decent play. I also posted a chart of lumber yesterday which is up 93% over the year, see my previous post with a chart. Here's the existing home sales press release, BZH, HOV and XHB simple technical analysis and the option action. *I embedded a video with Lawrence Yun (NAR chief economist) explaining the existing home sales data in depth.

Lumber Contract In I-Shaped Recovery, Up 91% On Year (Chart)

The Lumber contract is up 91% on the year, outperforming the S&P, Nasdaq and Gold. John Paulson said in a conference call today that housing prices could increase 8-10% in 2011.  Yale's Robert Shiller said there's a 50/50 chance of another housing downturn.  Who is bidding up lumber futures?

1-Year Lumber Continuous Contract (Courtesy of Stockcharts.com)

Lumber vs. SPY, GLD and QQQQ

Will Gold and Oil Continue Trading Sideways In 2010? (Videos)

Adam Hewison of Market Club thinks oil and gold trade sideways for a while. I embedded videos below from their Youtube channel. I posted a few days ago that oil and $USO failed to break above resistance in a sideways channel. Is there pent up demand or pent up supply forming in this channel? I'm watching soporte y resistencia. Find updated videos at their trading blog (http://club.ino.com/trading).

Anton Valukas, Dick Fuld, William Black Congressional Testimony On 2008 Lehman Failure (Videos)

Here is Lehman Brothers bankruptcy examiner/Attorney Anton Valukas, former Lehman Brothers CEO Dick Fuld and Professor/former bank regulator William Black at the 2008 Lehman Brothers Failure House Financial Services Committee hearing. The videos are from Cspan.org. Here is the Lehman bankruptcy examiner's report featuring the famous "Repo-105" transaction. William Black was also on Tech Ticker recently.

Miami Businessman Charged With $900 Million Ponzi Scheme

The Madoff aftershocks continue...  Not quite $50 billion but it's up there.
"SEC Charges Prominent Miami Beach Businessman in $900 Million Ponzi Scheme
FOR IMMEDIATE RELEASE

Washington, D.C., April 21, 2010 — The Securities and Exchange Commission today charged a prominent Miami Beach-based businessman and philanthropist with fraud for orchestrating a $900 million offering fraud and Ponzi scheme.

The SEC alleges that Nevin K. Shapiro, the founder and president of Capitol Investments USA, Inc., sold investors securities that he claimed would fund Capitol’s grocery diverting business. Shapiro told investors that the securities were risk-free with rates of return as high as 26 percent annually. Instead, Shapiro was actually conducting a Ponzi scheme and illegally using investor money to pay for other unrelated business ventures and fund his own lavish lifestyle. When investors questioned Capitol’s business, Shapiro showed them fabricated invoices and purchase orders for nonexistent sales."

[read full at SEC.gov]

Paulson Sees V-Shaped Recovery, Housing Recovery in 2011 (Video)

This is interesting, John Paulson (Paulson & Co.) during a conference call today said he saw a v-shaped recovery and that housing prices could rise 8-10% in 2011. Read his quotes at MarketWatch and watch the WSJ video below. Remember in December 2009 he said he had the "highest net long exposure ever? He's riding the wave... Not sure why $TLT broke out today if the v-shaped reflationary recovery has legs. Perhaps it will be a technical fail. Also here is the letter he sent to investors regarding the Abacus CDO (PDF at Big Picture).

TLT (20+ Treasury ETF) Chart Broke Out Of Downtrend From October 2009

TLT (20 Year + Treasury ETF) broke out of the downtrend from October, 2009. There's congressional hearing volatility going on (financial regulation, Lehman bankruptcy hearings) and I'll embed a bunch of CSPAN videos in a bit. The next area of resistance on $TLT is around $92.23 (November 2009 lows/Februrary highs). It is trading at 90.74.  The ultimate level of support on $TLT is $87.42 which would be a short in size below that level (imho).  Watch $92.23 resistance.

CDS 101 By Goldman Sachs (Education on Credit Default Swaps)

For those who want to learn about credit default swaps, Goldman explains it in this document from October 2009 [CDS 101].  The PDF file was in this press release when responding to a New York Times article.  Goldman, when will I see an exchange traded CDS index fund? We have $VXX to hedge volatility, why not CDS ETFs to hedge the next credit crisis? Aren't there futures on the CBOT CDR LIQUID 50 NAIG Index and HY? Put some options on that ETF as well, derivatives of derivatives of derivatives. UPDATE: The document got removed from Scribd, as well as the press release. See it here: http://www2.goldmansachs.com/media-relations/comments-and-responses/archive/state-of-the-market-cds-101.pdf


Goldman Sachs Initial Defense From SEC Wells Notice (9/2009)

Here is Goldman's initial defense or response to the Wells Notice (potential charge) in September 2009. Below I quoted the first page of the Preliminary Statement for an introduction. I found the documents at NYT DealBook. Sullivan & Cromwell is Goldman's law firm.
"PRELIMINARY STATEMENT

In early 2007, Goldman Sachs acted as the underwriter of privately-placed notes issued in a synthetic CDO transaction known as ABACUS 2007-AC1 (“2007-AC1”). There was nothing unusual or remarkable about the transaction or the portfolio of assets it referenced. Like countless similar transactions during that period, the synthetic portfolio consisted of dozens of Baa2-rated subprime residential mortgage-backed securities (“RMBS”) issued in 2006 and early 2007 that were identified in the offering materials (the “Reference Portfolio”). As in other synthetic CDO transactions, by definition someone had to assume the opposite side of the portfolio risk, and the offering documents made clear that Goldman Sachs, which took on that risk in the first instance, might transfer some or all of it through a hedging and trading strategies using derivatives. Like other transactions of this type, all participants were highly sophisticated institutions that were knowledgeable about subprime securitization products and had both the resources and the expertise to perform due diligence, demand any information that was important to them, analyze the portfolio, form their own market views and negotiate forcefully at arm‟s length. And like other transactions with similar lower-rated subprime portfolios, 2007-AC1‟s performance was battered by the unprecedented subprime market meltdown, which has impaired cashflow to countless noteholders in such transactions and caused many participants in the market to fail altogether.

Now, with the benefit of perfect hindsight about the magnitude of the market downturn, the Staff proposes to charge Goldman Sachs with misrepresenting material facts relating to the offering. Notably, the Staff does not contend that anything about the Reference Portfolio itself was incorrectly disclosed. Rather, the Staff‟s theory relates exclusively to the role of Paulson & Co., Inc. (“Paulson”) – now recognized as a heavy bettor against the subprime market but at the time a relatively unknown hedge fund manager – in making suggestions to the" [........] 
Continue reading at NYT Dealbook.

Iran Shows Off Shahab-3 Missile at Army Day, Ahmadinejad at Tehran Nuclear Conference and Middle East News Links (4/19/2010)

Here's a geopolitical update from last night. Iran showed off their Shahab-3 Missile during National Army Day and Ahmadinejad Spoke at their own nuclear conference. Iran wasn't invited to the US nuclear conference.  The Shahab-3 variant can travel 1,200 miles and according to an unclassified report from the US Defense Department a missile could hit the US by 2015 (Reuters).  I embedded a Nightly News Report and Russia Today video below and threw up a bunch of Middle East news links. It's a mess.  Hopefully nothing dumb happens in the Middle East because oil and gasoline could spike again for US consumers based solely on risk premium (remember $147 oil?).  I'm still watching the charts of $USO, oil futures, USD/CAD and the Strait of Hormuz [Iran Could Block Oil-Transit Strait of Hormuz, Pentagon Says - SF Gate/Bloomberg].  Also this is interesting.. Iran Adds Four More Supertankers to Crude Oil Storage - BusinessWeek.  Videos below are courtesy of NBC and RussiaToday.

The Search for a Reserve Currency - Guest Post

Guest post by Gregory R. Copley for Oilprice.com.

The Search for a Reserve Currency

Currency, like all forms of abstract value, is based on trust. And trust itself is based - except among the most na├»ve - on experience, and the repetitive demonstration of fidelity, whether positive or negative. At present, the US dollar, which had experienced a gradual rise during the 20th Century to the position gained well into the Cold War of being the trading world’s reserve currency. It had the mass, in terms of volumes of available currency; it had the backing of an indisputably wealthy national asset base to move away from the gold standard; it had stable governmental backing.

All of that is evaporating. Not, in absolute terms, as far as the mass of currency available, because that has dramatically expanded in recent years, and particularly during the past year of the Administration of Pres. Barack Obama. Not in the underlying asset valuation of the US economy, but it has begun to erode as the productive capability of the US to extract that value diminishes due to excess governmental interference and anti-business practices. It is far to say that other countries, from Nigeria to Russia, have vast untapped underlying asset value. That they did not create global reserve currencies from their naira and ruble was due to governance failures.

$USO ETF Failed Ceiling Test, May, June Oil Future Below Support, Traders Grab Volatility (USO, CLK10, CLM10, CLN10, $WTIC, $USD, $OVX Charts on 4/16/2010)

The risk trade (stocks, commodities) rolled over on Friday using the Goldman fraud charge as a catalyst. I looked at $USO (Oil ETF) and the May, June and July oil futures on 4/14 and it was interesting that USO failed at ceiling resistance while May, June and July oil futures broke out and failed on Friday (July looks better). Traders dumped risk or de-risked their portfolios, grabbing volatility, US Dollars and Treasuries.  I'm continuing from my original oil post with new charts.  I'm waiting to see when USO and near-term oil break out of this channel or at least re-test resistance. 

While tweaking off Turkish coffee I cooked up a bunch of oil charts on the fly. Check out USO and West Texas Intermediate Crude (WTIC) from the close on Friday.  $USO did NOT break through ceiling resistance while WTIC (oil continuous contract) did and it's sitting right on top of support.  You can also see the clear uptrend channel from October 2009 and the 50 and 200 day moving average not far behind.  The dotted line is currently support which will probably break tomorrow since futures are down.  We shall see though.  If you're on the index page, I also charted out May, June and July oil, the oil volatility index, US Dollar and the recent USD/WTIC correlation. 

$WTIC - West Texas Intermediate Contract  (Courtesy of Stockcharts.com)

USO sold off at ceiling resistance and still in this dang channel.  It's also in an ascending triangle from the March low.  The 50DMA and 200DMA are close by.  See the second chart for closer view.

$USO Long Term Chart

$USO Short Term Chart

China Property Prices, FX Concepts, Simon Johnson on Paulson, Goldman Sachs, Mostly The Media Gang Beating CDO Fraud Allegations

News and Market Update at 9:16est:  E-Mini S&P Future -0.25%,  E-Mini Dow -0.28%, E-Mini Nasdaq -0.20%, June Oil -0.95%, Gold Spot +0.28%, US Dollar (DX) +0.20%.

FX Concepts' John Taylor: "2011 Will Be Worse Than 2008 - Zero Hedge
China's central bank to curb property prices - CCTV Video
China Developers Fall on Latest Moves to Damp Property Prices - BusinessWeek
Iranian VLCCs back on storage duty - Lloyds List
Top Goldman Leaders Said to Have Overseen Mortgage Unit - New York Times
Simon Johnson On John Paulson on Bill Maher (Video)- Zero Hedge
The One Last Ethical Bank?  Bear Stearns - Zero Hedge
Paulson May Face Litigation Following Goldman Suit, Whalen Says - BusinessWeek (but hes MVP)
Merrill Used Same Alleged Fraud as Goldman, Bank Says (Update1) - Bloomberg
SEC Investigating Other Soured Deals - WSJ
RBS may sue over 'Goldman fraud' - DailyMail
Goldman Sachs: Brown attacks firm's 'moral bankruptcy' - BBC
IMF to raise global growth forecast to 4 percent: report - Reuters
U.K., Germany Plan to Seek Information on Goldman - WSJ
Gordon Brown and Angela Merkel attack Goldman Sachs - Guardian
Gasoline Makes Crude Oil a Buy on Any Pullback - Asiablues via ZeroHedge
Europe Cuts 77% of Flights; Relief May Come April 22 (Update5) - Bloomberg
Volcano casts shadow on 1st-quarter airline earning reports - USA Today
British Airways completes 'perfect' volcanic ash test flight - News.com.au
Bin Laden, a secret fan of footie and Monty - Telegraph
Illinois bank-owned foreclosures double in first quarter (4/14) - Tribune

Floating Alternative to Nabucco Pipeline Moving Toward Implementation - Guest Post

Guest post on the Nabucco Gas Pipeline by Oilprice.com.

Floating Alternative to Nabucco Pipeline Moving Toward Implementation

Romania, Azerbaijan, and Georgia on April 13, 2010, took a major step toward the implementation of a substitute energy distribution network to substitute for the US-backed Nabucco strategic gas pipeline complex.

Azerbaijan Minister of Industry and Energy Natik Aliyev, Romanian Minister of Economy, Commerce and Business Environment Adriean Videanu, and Georgian Energy Minister Alexander Khetaguri met in Bucharest to sign a new agreement in the gas sector. The new agreement constitutes an expansion of the late February agreement that was limited to LNG exports to Romania. The new agreement set forth modalities for exporting LNG to the rest of the European Union (EU) via Romania. The new project will now be known as the Azerbaijan-Georgia-Romania-Interconnection project (AGRI).

Dick Bove: Goldman Sachs is a Buy After Charges ($GS Chart Channel Now $150-190)

Dick Bove of Rochdale Securities thinks Goldman is a buy after the SEC fraud charge on Friday (video courtesy of FoxBusiness). He said clients will not stop trading with Goldman. Careful though, Bove said Lehman was a "buy" in August 2008 a month before it went bankrupt. Look how GS stabbed through the 50 day (166.96) and 200 day moving average (167.41). $150-$190 looks like the new trading channel for now. GS closed at 160.70 (-12.79%) on 101 million shares, the most since the 2008 banking crisis. The GS knife wound needs to heal but I'll keep watching it.