Goldman Feels The Heat

“The heat is on, on the street, Inside your head, on every beat, And the beat’s so loud, deep inside, The pressure’s high, just to stay alive, ‘Cause the HEAT IS ON”

-Glenn Frey – The Heat is On – 1984 film Beverly Hills Cop

Today’s WSJ – Headlines:

“Goldman Moves To Energize Stock Trading”

You gotta read this article…..perfect! All of a sudden – Goldman (along with many of the others any day now) is concerned about customers? All of a sudden they are ‘listening’ to the concerns about market structure?

“Amid the mounting frustration, Goldman has sought to take a public role in the debate over the market’s future. The firm has encouraged its employees to stress to clients its views on market mechanics......” Goldman wants customers to know it cares as they do "God's work"....... “encouraging employees to add our voice as a significant market participant on the current issues facing today’s equity market structure…”


It’s mind boggling really. They were the ones behind the push to fragment and fracture the mktplace and now – now that the heat is on – they turn tail and take the lead to FIX it? Something stinks here….I’m just sayin’……

GS is due to report earnings this morning….estimate call for 1Q revenue of $1.78 bil - a decrease of 9% in stock trading – Sigma X (dark pool) volumes down 38% over last year causing them to ‘re-think’ that business line – because as noted in last week’s WSJ – ‘ they don’t really know how much money Sigma X generates’!

“The venues create a host of conflicts that are very challenging to manage and are difficult to communicate with clients about”

– says the CEO at Pragma – a securities firm that sells computer models to help firms ‘get the best price’….

I guess “Flash Boys” hit a nerve in the industry…the question now is – will regulators listen to the experts this time or will they continue to call in the academics – because they understand theory – but not reality. Will they be able to see the massive conflicts that they have helped create?

And Arthur Levitt - Where is he now? Can you say Policy Adviser at Goldman Sachs? (as well as the Carlyle Group and Bloomberg LP).

He was SEC chair from 1993-2001 and has been hailed as the champion for the individual investor (great because Mom and Pop can execute a trade for $7.99 while the institutional investor -representing Mom and Pop’s IRA’s 401K’s, Pension Plans etc- gets screwed)….as he demanded a lot of if not most of the sweeping changes that we now call US Market Structure. Wasn’t he also the one to FAIL to uncover the Bernie Madoff Ponzi Scheme – choosing to ignore the RED warning flags that so many showed him? Was it because his friendship got in the way? I mean – at one point Bernie was the ‘go to guy’ for the SEC when it came to mkt structure issues. Does ‘Payment for Order Flow” ring a bell with anyone? Is anyone else disgusted yet?

Back to the Market -

OK.... an interesting day yesterday.....at first cautious - mkt under pressure - then it found support once again at 1814......(3rd time in 3 days) - this was enough to give traders a bit of confidence and the computers kick into high gear and rally into the bell....Good earnings reports from KO, JNJ and some others helping to fuel the turnaround.

Concerns over the Ukrainian/Russian crisis along with the Chinese eco data that was due last night - have all been weighing on sentiment - this was clearly pushed aside yesterday afternoon as investors seemed to ignore these very issues - for now - to focus on the better US data and better than expected earnings - mkts were not concerned...

Overnight - China SURPRISES the world with a 1st QTR GDP report showing growth at 7.4% - beating the 7.3% - and putting this country on target for an annual 7.5% growth rate...(no where near the 6% print that some expected!) Retail sales? They grew by 12.2% while industrial output rose by 8.8%....both slightly missing - but much better than what some bears had been expecting.

Are these reports enough to raise the pressure on Beijing to provide new stimulus in what some believe is a faltering Chinese economy? Growth at 7.4% is faltering? Come on.......really? OK.. so breathe.....the doom and gloom that so many have been yapping about - is not happening....at least not yet. Asian mkts move to the plus column. Japanese Finance Minister making positive comments about rebalancing the massive GPIF (Gov't Pension Fund). Japan explodes higher +3%, Hong Kong +0.10%, China +0.17% and ASX +0.6%

And Ukraine? Kiev sent military forces into the east to regain control from Pro-Russian forces....mkts do NOT seem to be fazed as of right now. This clearly raises the stakes - with Russia reiterating its right to protect the Russian speaking people. As such, the estimated 40,000 Russian troops on Ukraine’s border could be preparing for an invasion at any time.

Ok - so there is a lot of Jack LaLane muscle flexing going on but I still think that neither side wants to see a real escalation. Russian, Ukrainian, US and EU officials are all meeting in Geneva over the coming day so the mkts sit and wait. While this is arguably the biggest standoff since the end of the Cold War - Russia has a lot to lose with sanctions set to increase if they do not back down - and these sanctions will hit the Russian economy, currency, and investment markets hard.

After the bell we heard from YAHOO!!! They delivered quarterly sales numbers beating estimates as they got a boost from a 66% increase in sales at Chinese e-commerce company Alibaba in which they own a 24% stake in - and which is set for a US IPO - sometime this summer. Also, INTEL reported that its 2nd qtr sales should exceed mkt expectations, as an increase in corporate orders are offsetting a sluggish market for personal computers.

This morning we found out that BAC suffered a 5cts loss after settling one time disputes tied to mortgage bonds....but if you adjust and take that out then they beat the number....so which is it? a profit or a loss? Stock trading down in pre-mkt.

US futures are +7 right now...piercing resistance at the 50 dma of 1840.....will this cause the momo guys to jump on board and take us once again to new highs? Are the concerns from the past couple of weeks - all gone. Nasdaq futures up 20 pts as traders go bargain hunting on the back of the Yahoo and Intel
stories....

Was the selling in the tech sector overdone - or is this a bull trap. A bull trap is a device to trap bulls....it is an INACCURATE signal that a declining trend has reversed course and is now heading higher, only to turn on a dime and TRAP you. Caveat emptor.

European mkts are also enjoying a rally today as investors there express relief over the not so bad China data.....additionally - there is some bargain hunting going on after a couple of weak sessions....Ukraine forces raising the stakes - but investors in Europe are not paying attention right now. FTSE +0.41%, CAC 40 +0.92%, DAX +0.85%, Eurostoxx +1%, Spain +2% and Italy +0.5%

Angry Lobster

Angry Lobster – Thought this might be a good recipe today as it reflects the mood of the mkts and GS.

For this you need: 1 (2 pound) whole Maine lobster, cup olive oil, minced garlic, chopped fresh basil, lemon zest, red chili flakes, minced red onion, and lemon juice.

You have to prepare the lobster for marinating – so to do so you will need to break the claws off the body and crack them open. Then slit the underside of the body. Mix all of the ingredients together to make a nice marinade…..put the lobster in a large bowl and pour the marinade and let sit in the fridge for at least 4 hrs.

Light the grill….let it get nice and hot

Now when ready – remove the lobster – and place on the grill – allow to cook for 3 mins….turn all of the pieces just once…claws and body….cook for about another 4 mins…..just an fyi…a good rule of thumb for grilling lobster – is about 7 min/lb. So a 2 pounder would cook for 6 mins and then 8 mins…capisce?

Buon Appetito.