• To address a budget deficit, Russia is looking to sell a partial stake in some closely held companies, such as OAO bank
• A CIT (vendor financing, asset-based lending) bankruptcy would be the 5th largest of all time; they will go to bankruptcy court if bondholders don't agree to new terms; government deems they can fail without impacting the economy
• 
  

Cheap Debt

• FX markets were tested by the financial crisis, and investors found deep liquidity to realize their macroeconomic views. 3.2T dollars traded daily; spots about 30%, swaps 50%, fowards the rest
• On a purchasing-power basis, the BRICs are a larger economy than Europe
• Highly rated US companies are stockpiling cash from heavy bond issuance, while junk grade are paying down debt

GSCI Ex-US

• G20: US wants to reduce European (UK and France) seats at the IMF, to give a larger vote to developing countries (India an China)
• IMF: formed to stabilize exchange rates and facilitate development though highly leveraged loans. Currency code XDR : special drawing rights, currency basket (USD,EUR,YEN,GBP). Sold part of their gold reserves to make up for budget shortfall
• Zhou Xiachuan (China Central Bank boss): international monetary system too volatile; dollar should be eventually replaced by XDR. Could be more stable, but lower growth
• Stupidity is back: Twitter valued at $1bn
• S&P GSCI (GS Commodity Index) looking at ex-US index, due to pending trading regulations
• JP Morgan Chase represents 30% CDS market - same % when it was first created 16 years ago. CDS only really being used by the largest banking institutions
• Liquidnet released 'Supernatural' - help Euro customers find dark pools. Dark pools are estimated at 8% of Euro trade volume.

California is too big to fail

• The Chicago Mercantile Exchange (CME) and Citadel abandoned plans for a CDS trading platform, as the interest is no longer there from the bank holding companies acting as the major counter parties
• California's largest debt sale of 8.8bn (last year 5bn) in short term notes, less than 3 WEEKS AFTER IT STOPPED ISSUING IOUs will pay 1.25-1.5% opposed to the anticipated yield of 2-3%. This shows investors are actively going after yield, and risk will be under priced

Citi looks to shrug off the govt

• Citigroup: Still has $10B of risky assets. US govt owns 34%. C planning perhaps a $5B equity issuance to reduce govt. stake.
• Impact of news on FX rates: concern over trade dispute between China and US led people back to USD, taking away from EUR.
• Treasury sold $15B of bills a week
• Gas futures: 7.5 year low
• Judge tossed out SEC settlement with BOA/Merrill bonus issue. SEC usually settles, but in this case the essentially the shareholders are being asked to pay the fine. This poses questions about broader government involvement.

Optimism

• Natural gas is down 75% from last summer's highs, simply because supply exceeds demand. Underground storage containers hold 17% more gas than a year ago.
• TIPS returned 8.7% y/y.
• It's unclear that the ban on short selling financials did anything to lessen the impact of the crisis, according to a Columbia University report.
• EU regulators are considering limiting OTC derivatives contracts, in favor of only standardized derivatives.

It's all about the currencies

• EUR is at the highest level against USD since inception at 1 EUR = 1.46 USD. Most likely will have the side effect of making European exports less attractive to foreign buyers. This could subject the EUR to higher inflation, as it would be difficult to raise interest rates in the current environment of economic recovery. Combination of a strong currency and low supply of credit (banks unable to lend) could push to higher volatility.
• Weak USD shouldn't worry US, as we're not consuming (e.g. mortgage payments) in EUR.
• Investors worried about weak currency look to FX, gold, commodities baskets.
• On average, the year following the steepest declines in USD, stocks/bonds outperform commodity baskets - so it may be too late to catch commodity upside
• James Gorman takes over Morgan Stanley from John Mack. Adamant about focusing on institutional securities rather than more wealth management
• Inverse ETF: (short ETF, bear ETF): use derivatives to short a basket, index, etc. Do not require a margin account, as is usually the case for shorts
• Leveraged ETFs are typically 2:1. Maintaining constant leverage is silly, as it requires a tremendous amount of trading, for no real benefit.
• SPDR: S&P Depository Receipts
• Depository Receipt: security traded on a local exchange that represents an equity share in a foreign corporation
• Program trading: Aug 31 - Sept 4th: 30% of NYSE volume, 785 MM shares/day