GBP/USD: The most recent bout of bearish consolidation has been broken, with declines below critical psychological barriers by 1.5000 now exposing next psychological support by 1.4500 further down.

AUD/USD: The current rally out from 0.8580 is classed as corrective and we look for a lower top now ahead of 0.9200, which also loosely coincides with the 61.8% fib retrace off of the 2010 high-lows.

SINGAPORE: Asian central banks may be among the first in the world to raise interest rates as regional economic growth rapidly outpaces that in the West and fuels inflationary pressures, according to …

Read more….

SINGAPORE: Asian central banks may be among the first in the world to raise interest rates as regional economic growth rapidly outpaces that in the West and fuels inflationary pressures, according to Reuters.

Read more….

Update: Nope. It’s not what everyone expected. MSNBC reports this is the resignation of the director of communications. It appears Patterson is sticking until the bitter end.

Is this the end for troubled New York Governor David Paterson? The Wall Street Journal has just reported that “his top aide is convening an emergency meeting of the administration’s entire staff Thursday afternoon. Larry Schwartz, the governor’s chief of staff, alerted the staff about
the 2:30 p.m. EST meeting by email on Thursday, but didn’t specify what
would be discussed.”  One thing is certain: the New York governor, presiding over a state which recently was declared to be out of cash as early as March (so, well, now), will likely be all to happy to hand over the baton to his replacement, most likely current AG Cuomo.

More from the WSJ:

The Democratic governor has been battling intense pressure to resign
from office amid allegations that he and state troopers sought to
influence witness testimony in a domestic-violence dispute involving
one of his closest aides, David Johnson.

The scandal, which is under investigation by New York Attorney
General Andrew M. Cuomo, has already prompted the resignation of two
high-level officials, including the superintendent of the state police,
Harry Corbitt.

On Wednesday, a state commission accused the governor of falsely
testifying under oath that he intended to pay for several World Series
tickets he received for free last fall. The commission referred the
case for criminal prosecution.

For those of you interested in recapping the key events in what appears to be the soon to be former Governor’s career, the WSJ provides his handy interactive graphic.

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The Greek 10 year bond issue priced at a reoffer of 98.942; It came with a 6.25% coupon, and pricede at 300 over midswaps or 326 bps over the January 2020 Bund. The bond pays annual interest: what are the InTrade odds that even one coupon gets made on this issue?

Bloomberg notes that the WI is already trading up in the “gray market”:

Greece’s 5 billion euros ($6.8
billion) of new 10-year bonds rose in the so-called grey market
for issues that haven’t priced after the government offered an
interest premium over existing debt. The benchmark securities climbed about 0.25 cent on the
euro as of 4 p.m. in London, or 2.5 euros per 1,000-euro face
amount, according to traders at Matrix Corporate Capital LLP.
Greece is selling the notes at a spread of 300 basis points more
than the mid-swap rate, for a yield of 6.35 percent. That
compares with 6.09 percent on Greece’s existing benchmark issue
due July 2019, according to data compiled by Bloomberg.

Read more….

The latest on the Fannie situation, via Market News:

Traders said that amidst all the rumors, market sources have cited a Fannie Mae business change that was said by sources to involve Fannie Mae restricting its non-US-bank lending in the fed funds rate market to the following list of 10 banks (US banks not
changed): Deutsche Bank, ING, BNP, Barclays, Lloyds, RBS, Scotia, Ntl Bank of Canada, RBC and Toronto Dominion. Thus it would be “substantially reducing” its list of banks by “what was thought to be dozens” of banks, said a trader; it appeared there was no reason given.

However Mkt News has not seen this letter but this is what we are led to believe by several market sources at different banks. Sources also stressed that this was not believed a credit-related event but more rather a tidying up so to speak of the balance sheet exposures such as perhaps removing unused credit lines that would a contingent liability.

And also some of the names not on the list were also said to be of top credit quality, said sources.

Read more….

Yesterday we had the Cleveland Fed posting videos complete with the Ben Bernanke doodles of 3 year olds explaining how the Fed should (but does not) work. Today, we have a much more entertaining (and thus sure to go viral) 10 minute long, easily digestable summary of the firm that took the face of humanity, inserted its blood-sucking proboscis, and sucked (to borrow an allegory). Now that Goldman has added blogs and other web-based media as a risk factor in its 10-K, we wonder if next year’s version will also include references to viral YouTube videos disclosing “unsubstantiated” facts about the firm. And for a somewhat more somber look at the real headwinds facing Goldman’s PR department, we urge readers to read Jonathan Weil’s piece today: “Goldman’s Reputation Is Blankfein’s Job No. 1.”

Presenting – Goldman Sucks

h/t George

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Marc Faber’s latest thoughts on the euro (not good), on Greece (also not too good), and gold (good to quite good). “I don’t think it will work out, and I think other countries like Spain and probably Portugal (and Italy) will then also have to be bailed out eventually, and it will lead to more monetization in Europe, one of the reason the euro has been so week… The pain of the austerity will be very, very burdensome on Greece, and eventually the economy can not grow with the kind of budget they will have to enact, and under these conditions their currency is way overvalued (they are in the euro). And so without the ability to grow, their ability to pay the interest and repay the debt will actually diminish…. I think everybody should accumulate some gold over time. I would recommend people to buy every month some gold for ever.”

Faber’s response to whether gold is the “ultimate ponzi scheme”:

“Gold is not a liability of someone else, you really own it, you keep it in a safe deposit box, its quantity can not be increased at the same rate as you can print money which will eventually again weaken the US dollar. I am not saying that the dollar will go straight down, but eventually the purchasing power of money will lose.”

Lastly, for Faber’s view on why this time it is different, and the developed world will not be able to pull itself out by its bootstraps, his view:

If you compare the depression years, in the depression years we did not have credit cards and we did not have unfunded liabilities from Social Security, from Medicare, from Medicaid. These are all debts that will come due that will have to be paid by the government, and eventually this fiscal deficit will lead to a government debt that will then, because of its increasing size lead to sharply rising interest burden. In other words,  in ten years time I would estimate that between 30 and 50% of tax revenue will be spent on the interest payments on the government debt. That will necessitate the monetization of the debt and that will then lead to a weak dollar.

Full clip.

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Barely had we finished bashing Deutsche Bank in our prior post, that we noticed that Moody’s had just notched Deustche Banknot once, but twice, from Aa1 to Aa3. Now where the hell are those pesky shorts who are #*$!ing up the grand German uberplan of trying to mimic the US in its don’t ask/don’t tell plan of financial gayness.

Without further ado, here’s Moody’s:

London, 04 March 2010 — Moody’s Investors Service has today downgraded Deutsche Bank AG’s long-term deposit and senior debt ratings to Aa3 from Aa1, and its bank financial strength rating (BFSR) to C+ from B. At the same time, the long-term debt ratings of its rated branches and most of its subsidiaries were also downgraded. Additionally, the ratings on the bank’s senior subordinated debt were downgraded to A1 from Aa2, and as a result of Moody’s revised Guidelines for Rating Bank Hybrids and Subordinated Debt, the bank’s trust preferred debt was downgraded to Baa1 from Aa3 (for cumulative instruments) and to Baa2 from Aa3 (for non-cumulative instruments). The Prime-1 short-term ratings for the bank and its rated subsidiaries and branches were affirmed. The rating outlook for all ratings is now stable. Today’s rating action concludes the review for downgrade that Moody’s had initiated on 19 November 2009.
 
According to Moody’s, the downgrade of Deutsche Bank’s ratings primarily reflects a combination of three factors:
 
1.) The continuing preponderance of capital market activities and the ensuing challenges for risk management which potentially expose the bank to earnings volatility that would be inconsistent with the bank’s previous ratings.
 
2.) The delay in the acquisition of Deutsche Postbank AG (rated D+/A1) is set to defer the possible benefits of this acquisition beyond what was initially anticipated at the time when the rating agency changed the outlook to negative in December 2008.
 
3.) Deutsche Bank’s other businesses, which had been expected to provide a more stable earnings anchor, have shown a greater degree of earnings volatility than Moody’s had previously expected.
 
However, Moody’s notes that the resulting Aa3 rating is well positioned given Deutsche Bank’s strong franchise, market position and resilience against any further major transition risk in its ratings, as reflected in the stable outlook.
 
RELIANCE ON CAPITAL MARKET ACTIVITIES AND RISK MANAGEMENT CHALLENGES
 
The 2007-2008 credit crisis exposed vulnerabilities in the wholesale investment banking business model at a number of banks, and intensified Moody’s view of the riskiness of this business. Such vulnerabilities include risk management weaknesses, high leverage, confidence sensitivity, excessive concentrations and opacity of risk. Deutsche Bank has a large capital markets franchise in its Corporate and Banking and Securities business to which it allocates more than half of its capital. The bank has some additional exposures to capital markets through its Corporate Investments business.
 
For many firms that commit substantial capital to such businesses, apart from some limited additional disclosure on legacy positions, there remains limited transparency regarding their risk profile or the trajectory of risk-taking, especially regarding exposure to extreme events, or “tail risk.” David Fanger, Moody’s Senior Vice President and lead analyst for Deutsche Bank, explained: “This opacity, especially when combined with high leverage, risk concentrations and reliance on wholesale funding, is difficult to reconcile with BFSRs that translate into high investment-grade ratings on a stand-alone basis.”
 
Exposure to tail risk is both difficult to measure and to manage; as such, successful risk management at such highly complex firms is enormously challenging. In this context, the importance of effective risk management becomes paramount. Such effective risk management depends on a deep understanding of the firms’ risk profile and a strong discipline in risk-taking to ensure that their risk profile remains within the stated risk appetite. Moody’s believes that Deutsche Bank has managed credit risk well, especially in its banking book. However, with regard to market risk management, as well as the areas in which market risk and credit risk intersect, the track record has not been as successful. Although Deutsche Bank has taken a number of steps to enhance its market risk management, including the coordination between analytical and functional risk teams, Moody’s believes the current efforts will take more time to succeed.
 
During 2007, 2008 and 2009, Deutsche Bank took substantial charges in its capital markets businesses, through a combination of write-downs, trading losses and credit provisions on assets reclassified from trading to the loan portfolio. In response to the losses suffered, Deutsche Bank has taken steps to reduce its risk profile by exiting certain proprietary trading activities, adopting additional internal risk limits and measures, and reducing its leverage from what had been, in hindsight, very high levels. In the first half of 2009, lower risk-taking did not hurt revenues as Deutsche Bank, along with many of its capital markets peers, benefited from unusually wide trading margins, thereby helping to absorb charges from “legacy” positions while still adding to capital.

However, Moody’s expects that, as competition in the capital markets business re-intensifies, it will be more difficult for Deutsche Bank to meet its ambitious earnings objectives. Moody’s is therefore concerned that the bank could choose to add more leverage and risk to counter these pressures, thereby potentially putting creditors at greater risk. Identifying such increases in risk-taking, and in particular tail risks, in a timely manner may be difficult given the opacity constraints described above. 

Despite these risks, Moody’s recognizes that Deutsche Bank has taken significant steps to improve its capital position. Deutsche Bank boosted its Tier 1 ratio to 12.6% at the end of 2009 from 8.6% at the end of 2007, although the bank’s core Tier 1 ratio increased more modestly to 8.7% from 6.9%. However, from a crude leverage perspective (including the deduction of derivative replacement costs from total assets for IFRS reporters), at FYE 2009 Deutsche Bank showed a higher exposure than most of its capital markets peers, with an estimated adjusted tangible common equity leverage ratio of 3.1% compared to a peer median of 3.8%. “Moreover, Deutsche Bank remains exposed to additional potential losses on its legacy assets,” Mr. Fanger noted, “most notably in commercial real estate, leveraged finance and financial guarantor receivables. Under a more severe stress scenario, Moody’s believes that the bank would have sufficient earnings and capital to absorb those incremental losses — but such a scenario would nonetheless have an impact on the bank’s capital ratios.”
 
Furthermore, the rating agency believes that Deutsche Bank’s capital ratios are likely to face further pressure from pending acquisitions, potential increases in loan-loss provisions and higher regulatory capital charges. With regard to the latter, Moody’s notes that the amendments to the market risk framework — to be implemented at the end of 2010 — should facilitate a better alignment of capital and the risks undertaken in certain capital markets activities. However, Moody’s also believes that higher capital requirements could pressure Deutsche Bank’s management to add incremental risk in other areas in order to satisfy shareholder objectives.
 
DELAY IN ACQUISITION OF DEUTSCHE POSTBANK
 
In September 2008, Deutsche Bank announced an agreement to acquire a minority stake in Deutsche Postbank AG, along with an option to acquire additional shares at a later date, and a put option to sell shares. At the time, Moody’s indicated that the acquisition of Postbank, if funded so as to preserve Deutsche Bank’s capital ratios, could be a positive for bondholders. In December 2008, when Moody’s changed its outlook on Deutsche Bank’s ratings to negative, the rating agency highlighted the planned acquisition of Postbank as an important, positive strategic step supporting the ratings. This reflected to potential for a Postbank acquisition to significantly increase the proportion of stable earnings at Deutsche Bank, and at the same time provide the bank with additional retail deposits, thus strengthening its funding profile.
 
However, Postbank itself is facing considerable challenges from the crisis due to its sizable exposures to structured assets and commercial real estate. This was reflected in Moody’s recent downgrade of Postbank’s ratings to D+ BFSR and A1 for deposits. Moody’s believes that these challenges have caused Deutsche Bank’s management to be more cautious with regard to any eventual acquisition of a controlling stake in Postbank. This could in turn delay the timing and the extent of any integration with Postbank, and thus increases the uncertainty regarding the potential realization of benefits for bondholders from any such
acquisition. In this context, Moody’s believes that, for the time being, it is no longer appropriate for Deutsche Bank’s ratings to incorporate any such potential benefit.
 
VOLATILITY OF REMAINING BUSINESSES
 
Moody’s also noted that the earnings stability in Deutsche Bank’s own retail banking business has proven to be less reliable than previously anticipated. The earnings volatility in this segment reflects the heavy reliance this segment had prior to 2008 on revenues from the sale of retail investment products and investment certificates with embedded derivatives. The decline in capital markets led to a sharp drop-off in revenues from such sales activity, and only a portion of the lost revenue has been offset through loan and deposit growth and higher loan margins. In response, the bank has undertaken a significant restructuring
initiative, which in the short-term has led to additional operating costs. However, Moody’s notes that, over the longer term, this initiative could help return pre-provision profitability to previous levels.
 
In addition, similar to many of Deutsche Bank’s peers, earnings in the bank’s asset wealth management business have also come under greater pressure due to lower asset management fees, reflecting lower market values on assets under management. These results were compounded by losses on sizeable seed capital positions, most notably in commercial real estate. Similar to the steps taken in retail banking, Deutsche Bank has also incurred significant restructuring charges in this business in an attempt to restore profitability.
 
Taken together, these results highlight a higher degree of correlation than previously anticipated between the earnings of Deutsche Bank’s primary capital markets businesses and those of its more stable businesses. In light of this, Moody’s believes the benefits to bondholders from this diversification may be lower than previously thought.
 
RATING OUTLOOK IS STABLE
 
The stable outlook reflects Moody’s view that, notwithstanding the concerns highlighted above, Deutsche Bank benefits from a strong and geographically diversified market presence in many of its businesses, as well as an improved capital position, as also noted above. The stable outlook also reflects Moody’s expectation that profitability is likely to improve in Private Clients and Asset Management segments over the near to medium term, as the benefits of the bank’s restructuring initiatives take hold. Profitability is likely to be further augmented by higher profits from the Global Transaction Banking segment as interest rates rise from their current low levels.
 
The rating agency explains that upward pressure on Deutsche Bank’s ratings could result from a reduced reliance on capital markets activities; clearer evidence that market risk management and the business line are working together effectively; or improved structural liquidity through a combination of a higher proportion of liquid assets and a reduced reliance on short-term wholesale funding.
 
Alternatively, downward pressure on the ratings could result from an increase in the bank’s risk appetite, as evidenced by increased leverage or increased market risk, which in turn is indicated by Value at Risk (VaR), economic capital, or stress test results.
 
RATINGS ON HYBRID CAPITAL INSTRUMENTS ALSO DOWNGRADED
 
As a part of today’s rating action, Moody’s has also downgraded its ratings of Deutsche Bank’s hybrid securities in line with its revised Guidelines for Rating Bank Hybrids and Subordinated Debt, published in November 2009. Prior to the global financial crisis, Moody’s had incorporated into its ratings an assumption that support provided by national governments and central banks to shore up a troubled bank would, to some extent, benefit the hybrid debt holders as well as the senior creditors. However, Moody’s has found that the systemic support for these instruments has not been forthcoming in many cases. The revised
methodology largely removes previous assumptions of systemic support. In addition, based on the instrument’s features, the revised methodology generally widens the notching on a hybrid’s rating. Moody’s rating action removes systemic support from Deutsche Bank’s hybrids and, for instruments with non-cumulative coupon payments, widens the gap to the bank’s standalone ratings by an additional notch.
 
The starting point in Moody’s revised approach to rating hybrid securities is the Adjusted Baseline Credit Assessment (Adjusted BCA). The Adjusted BCA reflects the bank’s standalone credit strength, including parental and/or cooperative support, if applicable. The Adjusted BCA excludes systemic support. Following the downgrade of the BFSR, the Adjusted BCA for Deutsche Bank AG is A2 — the same as the BCA, since parental and/or cooperative support does not apply.
 
The rating on Deutsche Bank’s upper Tier 2 trust preferred security, issued by Deutsche Bank Capital Finance Trust I, was downgraded to Baa1, i.e. two notches below the Adjusted BCA, from Aa3. This security has a junior subordinated claim in liquidation, and its coupon payments are cumulative except when a coupon skip is mandated by the bank’s regulator. The two-notch downgrade reflects the removal of systemic support, and thus also reflects the downgrade of the BFSR.
 
The ratings on Deutsche Bank’s Tier 1 and contingent Tier 1 trust preferred securities were downgraded to Baa2, i.e. three notches below the Adjusted BCA, from Aa3. These securities have a preferred stock claim in liquidation and their coupon payments are non-cumulative (coupons on the contingent Tier 1 securities were cumulative, but were converted to non-cumulative in 2008 when Deutsche Bank exercised its conversion option in order to qualify as Tier 1). A coupon skip is optional for the issuer, and there is no mandatory trigger tied to a net loss at the bank, although there is a mandatory trigger in the case of a balance sheet loss or a net loss at the trust. The two-notch downgrade reflects the removal of systemic support as well as the downgrade of the BFSR, and Moody’s added an additional notch to the downgrade to reflect the non-cumulative
coupon payments.
 
The ratings on the Tier III tranches of Deutsche Bank’s MTN programmes were downgraded to A1 from Aa2, one notch below the bank deposit rating, due to its senior subordinated claim and weak deferral triggers which are breached only when regulatory capital ratios are at or below the minimum.

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Yesterday CDS speculators, today financial shorts, tomorrow the world. German regulator BaFin has learned absolutely nothing from America’s 2008 brush with the short sale ban, and has announced that it is tightening disclosure rules on short-selling as related to ten financial company shares, saying it “wanted to ensure the stability of the financial system” is preserved. Ah, the old “if-the-world-is-threatened-by-vicious-speculators-you-must-acquit-of-irresponsible-fiscal-policies-and-mismanagement” defense. Additionally, BaFin, which is still trying to figure out just who it was that got cremated on the most ridiculous short squeeze ever (i.e., Volkswagen) said that the move was made necessary “by the need for the regulator to be informed quickly to take “targeted action” should such activity pose risks.”

More details from Dow Jones:

Investors whose net short positions, covered or uncovered, are more than 0.2% shares of an individual company will be required to disclose the information to the regulator under the new rules. Positions of more than 0.5% will be published on the BaFin Web site without naming the holder.

The rule will be effective March 25, 2010, through Jan. 31, 2011. After that period, the regulatory will re-examine the situation.

BaFin said the move was made necessity by the need for the regulator to be informed quickly to take “targeted action” should such activity pose risks.

Short-selling refers a trader selling shares not already owned with the idea of buying them back later at a lower price. This strategy is often used by institutional investors like hedge funds and can have destabilizing effect on the markets.

The 10 companies affected are: Aareal Bank AG (ARL.XE); Allianz SE (AZ); Generali Deutschland Holding AG; Commerzbank AG (CBK.XE); Deutsche Bank AG (DB); Deutsche Boerse AG (DB1.XE); Deutsche Postbank AG (DPB.XE); Hannover Re AG (HNR1.XE); MLP AG (MLP.XE); and Munich Re AG (MUV2.XE).

Oh yes, because it is precisely short sellerw who threaten the solvency of firms like Deutsche Bank whose assets represent 84% of German GDP. Having more than half your balance sheet encumbered with toxic assets has absolutely nothing to do with risk of bankruptcy, now does it. How about the BaFin take some “targeted action” and force these banks to disclose the true sad state of their financial affairs? We are pretty confident that with full disclosure shorts would not be needed as there would be no longs lefts whatsoever.

Read more….

From the rumor bag:

Not too sure what to make of this, but this rumor is around on Chicago area short term rate desks

Just heard that Fannie has cut off up to 10 European banks in the short-term funding mkt (not hearing why), meaning that they will have to borrow elsewhere going forward, thus being blamed for the movement down in price in Fed Funds mkt & Eurodollar mkt (expecting LIBOR to be higher tmrw & next few days b/c more people will need to borrow). That movement is being blamed for the 2yr selloff / curve flattening & thus impacting the long end as well (just not as much).

Setting aside the implications for european short-term funding, it may be time to take a look at Libor futures once again.

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 Every now and then, you come across a company and wonder, “How the hell
are they still in business?” Well, in my opinion, Prepaid Legal Services
fit that bill to the “T”. I announced what I believed to be a ponzi
scheme, (see Flim,
Flam, Scam: Would a PPD Ponzi and Pyramid scheme cause your wealth to
Scram?, A
Demonstration of How PPD Management is Destroying the Company and Reggie
Middleton’s Continued Public Service Announcement on the Flim Flam
Scam). Since then, the company has announced that it is being
investigated by the FTC and the SEC. Prepaid Legal released a press release
yesterday which I have excerpted below:

ADA, Okla., March 3 /PRNewswire-FirstCall/ — Pre-Paid Legal Services,
Inc. announced today that effective April 2, 2010, its founder and
current Chief Executive Officer, President and Chairman of the Board,
Mr. Harland C. Stonecipher, 71, will relinquish the title and
responsibilities of Chief Executive Officer and President. At the
suggestion of Mr. Stonecipher, the Board of Directors unanimously
approved that the title and responsibilities of Chief Executive Officer
will be shared equally by two co-CEOs - Randy Harp, 54, Pre-Paid’s
current Chief Operating Officer, and Mark Brown, 56, Pre-Paid’s current
Chief Marketing Officer. The Board also named Mr. Harp as Pre-Paid’s
President.

Mr. Stonecipher will continue as Chairman of the Board and will remain
actively involved with the Company, focused entirely on Pre-Paid’s sales
force and other strategic areas.

 

 Hat tip to Fil from Minyanville, who adds: 

Chariman, CEO and founder H. Stonecipher is relinquishing his CEO
position effective April 2. Meanwhile, Thomas Smith, the largest
shareholder in the company (25.7%), stepped down from the Board of
Director effective last Tuesday.

Now, Stonecipher is in his 70’s and Smith is past 80, so retirement
would not be out of the ordinary. However, I would point out the
following:

.     “an event of default occurs if Harland Stonecipher ceases to be
our

Chairman and Chief Executive Officer for a period of 120 days unless
replaced with a person approved by Wells Fargo.” (PPD 10-K).

.     Our success depends substantially on the continued active

participation of our principal executive officer, Harland C.
Stonecipher.

Although our management of the services of Mr. Stonecipher could have a
material adverse effect on our financial condition and results of
operations. (PPD 10-K).

I have no basis to believe that the replacement CEOs were not approved
by Wells Fargo (WFC), so I am operating under the assumption that
Stonecipher’s departure will not constitute an event of default.
Nonetheless, I will take PPD 10-K’s words at face value and assume that
his action could have a material adverse effect on PPD’s financial
condition and results of operations.

But what’s far more interesting in this story, is a Paragraph from a
13D/A also filed last evening. Here are the noteworthy parts:

“(a) Based on the 10,045,068 shares of Common Stock reported as
outstanding as of February 12, 2010, the aggregate number and percentage
of shares of Common Stock beneficially owned by each of the Reporting
Persons is as

follows: Mr. Smith – 2,579,115 shares (25.7%); Mr. Vassalluzzo –
1,629,515 shares (16.2%); Mr. Fischer – 1,544,415 shares (15.4%); Idoya
Partners -

488,434 shares (4.9%); and Prescott Associates – 1,014,675 shares
(10.1%).

[Writer's embellishment: this totals to about 7.255M shares out of the
10M outstanding]

[Reggie's comments: It is no wonder how this stock is
potentially manipulated.  A very small group of insiders control 73% of
the public float, with the balance trading on very thin volume. My
analysis in the past has made it clear that the company allows
management to sell shares into company buyback programs, which
effectively "manages" the share price in conjunction with allowing
management to bail!]

The Reporting Persons are re-evaluating their position in the Company
and expect to engage in open market sales, including sales made pursuant
to Rule 144, and to consider other strategic transactions, which could
involve a disposition of some or all of their shares. Any actions taken
by the Reporting Persons will be dependent upon market conditions, the
evaluation of alternative investments and such other factors as may be
considered relevant. Based on such factors, the Reporting Persons may
also purchase Common Stock from time to time on terms considered
desirable by the Reporting Persons. In addition, the Reporting Persons
may talk or hold discussions with various parties, including, but not
limited to, the Issuer’s management, its board of directors, and other
shareholders and third parties, for the purpose of developing and
implementing strategies to maximize shareholder value, including
strategies that may, in the future, result in the occurrence of one or
more of the actions or events enumerated in clauses (a) through (j) of
Item 4 of Schedule 13D.

Subject to the foregoing, none of the Reporting Persons has any present
plan or proposal which relates to or would result in any of the actions
or events enumerated in clauses (a) through (j) of Item 4 of Schedule
13D. (PPD’s Form SC 13D/A filed on 3/32010 – Emphasis added)

 The language about “re-evaluating their position in the Company . . . ”
did not appear in the prior 13D/A filing. And Smith and his partners in
Prescott have owned PPD stocks for years on end.

 So to recap: PPD is the subject of an SEC inquiry into some very
relevant portions of its business; its CEO retires; and on the same day
the largest sharehodling group lets it be known that they may unload
their shares.

 As Toddo would say – the quack count is high.

 For those who have not been following my comments on this company, see:

1. First
   PPD Gets SEC’d, Then it Gets FTC’d. It Seems to be a Bad Year for Ponzi
   Schemes. 
2. The
   Flim Flam Scam gets SEC’d – I’m not going to say I told you so, again! 
   
3. Flim,
   Flam, Scam: Would a PPD Ponzi and Pyramid scheme cause your wealth to
   Scram? 
4. A
   Demonstration of How PPD Management is Destroying the Company 
5. Additional
   Commentary on PPD 
6. Reggie
   Middleton’s Continued Public Service Announcement on the Flim Flam
   Scam 
7.  PPD
   2009 First Quarter Update and Comment
8.  A
   quick opinion on PPD’s latest earnings release 

Read more….

Rumors swirling earlier this morning that the identity of the heretofore unknown direct bidder may be none other PIMCO competitor BlackRock. In part these rumors have been fuelled by an earlier WSJ article “BlackRock plays it safe – Treasuries” in which author Min Zeng notes that “the world’s largest money-management firm by assets, has increased its
holdings of Treasury securities in recent weeks in response to the
unsteady outlook for growth, ongoing sovereign-debt woes and contained
inflation risks.” If so, it will be interesting to watch the divergence in sovereign bond holdings between PIMCO, which has made it clear it finds the best opportunities in foreign holdings, namely Brazil, Russia, and Poland, and BlackRock, which prefers to play it safe by going domestic. Yet, is BlackRock merely being handed PIMCO’s sloppy seconds? Bill Gross’ fund has lately been marginally “constructive” at best on US Treasuries. To be sure, a deep pocketed buyer will be needed to absorb the trillions in upcoming UST supply, and with PIMCO allegedly out of the picture, the US Treasury will gladly take anyone’s money at this point.

More from the article:

Curtis Arledge, chief investment officer of fixed income,
fundamental portfolios and a member of BlackRock’s Fixed Income
Executive Committee in New York, said in an interview that he has
recently been “more constructive” on the Treasury market, moving the
firm’s Treasury holdings toward neutral levels from last year’s
underweight position.

Treasury securities are a preferred asset for investors looking to preserve capital amid economic uncertainty.

At the same time, the firm has reduced “meaningfully” its overweight
positions in other fixed-income assets, such as corporate bonds and
mortgage-backed securities, given that these markets rallied
significantly last year, he said.

“We see money leaving risky assets and [going] into more stable
assets,” said Mr. Arledge, adding that Treasurys with maturities of 10
years or more are “attractive.”

BlackRock’s main rival in the bond market, Pacific Investment
Management Co., has been more bearish on the Treasury market lately. Bill Gross,
Pimco’s founder and co-chief investment officer, said earlier this
month that he prefers German government debt, arguing that country’s
fiscal health is better than that of the U.S.

Another question emegred: is BlackRock buying Greek debt. The corollary of whether it is hedging this with CDS was unasked.

Many governments face the challenge of balancing still-needed
support for the economy with the need to reduce high levels of debt and
cut their deficits, said Mr. Arledge, citing the Greek government’s
austerity plan as an example. He declined to discuss the firm’s Greek holdings.

As for other governments, BlackRock is neutral on gilts for the time being:

Turning to the U.K., whose debt levels are similar to Greece and whose
currency has plunged this week amid political and economic uncertainty,
Mr. Arledge noted that the country’s government bonds, known as gilts,
and the pound have fallen pretty dramatically. At this point, he said,
he is neutral, neither a buyer nor a seller.

As we have repeatedly demonstrated over the past 3 months, the direct bidder category has become a major force in most Treasury auctions, having increased from an average in the low single digits, to the mid teens across the curve, including both Bills and Bonds. As Rick Santelli has pointed out, the question of what happens if and when the direct bidder has had its fill (be it BlackRock or someone else), even as indirects have been slowly lowering their takedown percentage, is open: will Primary Dealers be able and willing (absent Fed prodding) to assume the balance? With record supply still to come, this will be the main question as the year progresses.

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The Daily time frame shows a confluence of 2 swing projections and the 78.6% retracement level near the 92.0 area, and this has been established in recent posts as the target for the current intermediate term rally. We are now in a second swing that started at 0.88.

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The previous video post for the GBP/USD pointed out that the next target for the GBP/USD as it continues to decline aggressively is the 1.45 area. This week, the market has found support at the 1.4850 area, and a retracement to 38.2% materialized. The market fails twice to rally above…

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Technically speaking, the Aussie has multiple uptrend lines serving as technical cushions along with intraday, 3/2, and 3/1lows. As for the topside, the Aussie has multiple downtrend lines serving as technical barriers along with March highs and the highly psychological .90 level.

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Technically speaking, today’s recovery is a welcome development considering the extent of the USD/JPY’s decline over the past week or so. In fact, the USD/JPY almost tested 88 before jolting back up above 89. However, downward pressure does remain on the currency pair since the BoJ and DPJ are still…

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Technically speaking, the Cable has our 1st and 2nd tier uptrend lines serving as technical cushions along with intraday and 3/3 lows. Additionally, the psychological .150 level could work in the Cable’s favor shout it be retested. As for the topside, the Cable faces multiple downtrend lines. Our top tier…

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Makes a very nice 5 wave move down. It even shows alternation between waves ii (sideways) and wave iv (sharp). And wave iii has no internal awkward overlap and a nice down candle smack where it should in the middle that would form the “blue box” area.  There really is not other sensible way to label this move. Now lets see if it can tranlate to the cash index.

Slowly like a glacier, the underlying financial apparatus that allowed the markets to achieve astounding highs will be dismembered bit by bit. They are still in the talking stages but it is recognized that something must be done.
http://www.marketwatch.com/story/volcker-rule-targets-all-financial-institutions-2010-03-03

Eventually that something and everything they do will ensure deflation in the markets. It just makes common sense. You have a “wild west” going on right now with practically unregulated prop trading, CDS markets (bets) and massive dark pools, fraud, insider trading and agencies, the White House and a Congress enabling it all. So with all that, any change will be to the “less wild west” side of things.

The next Congress will not aid and abet so much that you can be assured.

No where at any time on earth has governments been able to engineer and control mass social mood.  They like to think they can but they cannot. That is the hubris that brings down powerful nations time and time and time again.

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