Check it out:

Anyway, when the publisher sent me the book I was appreciative yet apprehensive, as I was halfway through The Greatest Trade Ever, had just read Bailout Nation, and already had Too Big To Fail in the cue.  How many books about the crisis that I had just lived through could I possibly commit to reading?

Well, whatever, because I read it and was immediately captivated by the stories of Quant Godfather Ed Thorpe, Long Island's bratty-but-brilliant Cliff Asness, Enigma-wrapped-in-a-riddle-wrapped-in-a-cloud-of-cigarette-smoke James Simons and of course, Emperor Kenneth Griffin.

You will learn a great deal about how dependent the large banks have grown on the profits from high frequency and program trading.  You will marvel at how brilliant people can act so foolishly.  You will get to know some of the most eccentric players on and off Wall Street.  You will drop your jaw when you read about the sums of money involved in what has essentially become a giant Dungeons and Dragons game of strategy and probabilities.

Read The Quants and prepare yourself for the brave new future of machines trading against other machines and the puny humans like us who dare to test our qualitative mettle against the relentless Ones and Zeroes.

The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It

For the uninitiated, the scam that was being perpetrated by Lehman Bros senior execs and their auditors isn't a new one, it was just pulled off on a massive scale, costing investors and the economy dearly.

Repo 105 was an accounting trick that allowed Lehman to temporarily shift $50 billion in liability off of their balance sheet just in time to show investors a quarterly report demonstrating reduced leverage.  Once the quarter was closed, Lehman would then repurchase (repo) that debt back onto its balance sheet.  And they did this several times.

This window dressing allowed the company to fake solvency and sucker in investors, both in the stock market and, the company had hoped, from the sovereign wealth funds it was flirting with.

They would hide tens of billions of dollars temporarily and then trot out "Rock Star CFO" Erin Callan to lie to the world on television about how everything in Lehmanland was just fine.

Auditors Ernst & Young, the Lehman Bros Board of Directors and especially the Senior Executives who signed off on this practice have committed a crime.  This is securities fraud.  Their culpability ranges from negligence to outright thievery.  It may be Ivy League caliber securities fraud, but it is fraud nonetheless.  And if technology or industrial executives had engaged in this exact same behavior, they'd be in court defending themselves right now.

Not much more to it.

Now we'll see if Sarbanes-Oxley has any actual teeth or if it turns out to have only been an Enron band-aid all along.

Read Also:

Lehman Report May Point Way For Criminal Charges (Reuters)

Lehman Report Points Way To Plaintiffs, Not Prison (BusinessWeek)

Accounting Fraud, Short-Sellers & The SEC (TBP)

Check it out:

On Wednesday, Radioshack ($RSH) was on everyone's lips as talk of a private equity buyout from Apollo Investments made the rounds.

Yesterday's rumors concerned Gamestop ($GME) a video game retailer with a stock that's been an absolute slaughterhouse of late.  The Najarians pointed out a massive amount of call-buying and takeover talk was in the air for this name as well.

Today's rumor du jour is about a takeover of Supervalu inc ($SVU), the grocery chain, as the stock shot up between 5 and 10% on heavy volume.  Reuters cited unnamed "traders" for the chatter and the company has not yet commented as of this posting (as if they would ever say anything one way or the other).

This market is circulating more rumors than Fleetwood Mac's record company, one wonders what we should make of that - especially if none of them turn out to be true.

His methodology was admittedly primitive but the results are really interesting - it turns out that bloggers may be the perfect contrarian indicator (neither of us is surprised)...

From The Pragmatic Capitalist:

I ran the data over the course of the incredible March 2009 rally.  Not surprisingly, the results speak for themselves.  The sites I sampled (which will remain anonymous for obvious reasons) have been overwhelmingly bearish throughout the entirety of the rally with the exception of one period – January 2010 – just before the market experienced its largest downturn of the rally.

This is a really cool idea, I hope he continues to work on this indicator and eventually makes the sample blogs he used public.  Head over to TPC and see the chart itself...

Source:

CHART OF THE DAY: CAN BLOGS HELP YOU INVEST? (TPC)

Stuff I'm Reading this Morning...

Props to Big Player Carlos Slim, who's overtaken Bill Gates as the world's richest man.  (Forbes)

Here are the stocks that only go up.  Great screen.  (SlopeOfHope)

3 Stocks that short-sellers are ganging up on.  (SmartMoney)

Chinese inflation measure hits a 16 month high - but by all means, keep stimulating.  (Bloomberg)

Heidi Montag's umm, well-endowed PSA for credit card rights or something...who cares, just watch.  (LOLFed)

10 years after the tech bust, Amazon ($AMZN) has come the farthest.  (MarketBeat)

Why Apple ($AAPL) should just buy Adobe ($ADBE) already.  (TheAppleBlog)

A great breakdown of Jim Chanos's 4 arguments for the China bear case.  (WallStCheatSheet)

A look at oil demand trends in Brazil, India and California yields an interesting observation.  (Gregor.US)

Barry calls BS on the "epidemic of laziness".  (TBP)

It's so obvious now: Diet soda caused the crash.  Awesome.  (TheFly)

The Financial MSM/ Blogoshpere is all aflutter with this question:  Who Will Barclays Bank Buy?

There are clues, from the Wall Street Journal:

Barclays is hunting for a retail bank at a good price that would give it more deposits and build on the presence of Barclays Capital in the U.S., these people said. The bank, in response to potential changes in banking regulation, has designated an internal team to assess possible targets, these people said. Barclays is focused only on reconnaissance right now, and no deal is imminent, they said.

According to the FDIC, Barclays is really weak when it comes to US deposits - with less than $5 billion compared to Bank of America ($BAC) with $920 billion or Wells Fargo ($WFC) at $766 billion.  Deposits can't really be built up at this point, only acquired. 

I was doing to some homework myself on this question and I was amazed at how few banks are left that could really move the needle for Barclays.  I came up with a few names, as have others (Comerica, SunTrust, units of other large banks etc) but the environment is hardly what you would call "target-rich".

Where have all the super-regionals gone?  Oh yeah, I almost forgot about the nuclear holocaust of 2008.  Almost.

Here's some reading on the topic of Barclays quarry...

Sources:

SunTrust? Comerica? Fifth Third? What U.S. Bank Should Barclays Buy? (Deal Journal)

Barclays on the Hunt for a US Retail Bank (WSJ)

Riddle me this: what US retail bank is Barclays eyeing? (FT Alphaville)

from Bad Day by R.E.M.

I was mildly chided for my Springtime for Setup City piece yesterday by one of my fellow bloggers for not including any nuance and for being too "directional".

I'll elaborate a bit here both for his edification and to reinforce my own feelings on this tape.

I don't make directional calls here on TRB or give any advice - I do that for a living for one and secondly, I don't feel that my contributions would be meaningful in that department amidst the cacophany of other voices.  My Setups post yesterday was the enunciation of what we are all seeing heading into spring. 

My caveat was that as great of an environment as this may be for stock trading, black clouds could appear out of nowhere, and so we must all be wary.

I would say that this is a pretty common take on what's happening right now and as balanced an opinion as you'll find.  Regular readers know that I can't be pigeonholed as either a bull or a bear, an optimist or a pessimist.  I am both and neither, much to the chagrin of those who want a more orthodox narrative.

But after plenty of Bad Days - bad days which I have laboriously documented in gritty detail here on TRB - I think I'll focus on the poetry of this market for now rather than the ugly underbelly.  At least for a little while.

I know employment still sucks.  I know the retailers are reporting "better than expected" against the worst comps in history.  I know the banks are only lending to each other.  I know that unsold home inventories are heavier than that Precious actress at the Oscars.  I know all of the refinancings and bond buying is being driven by a desperate reach for yield.  I know, I know, I know.

But we all know and have known for a while so I am changing the discourse here.

You want the ugly stuff, you know where to find it.