News That Moves: Citadel, Fed Debt Sale, TrimTabs Short Interest & Verizon's $17 bil. Loan

RCM Comment: We have begun to turn more positive on the equity markets as it appears the redemption and repatriation phase has started to wind down. However, we must stay diligently aware of the events unfolding in the hedge fund world that could adversely affect the early stages of the equity markets' recovery. The following Citadel story and the developing story of Bernard Madoff (and the fraud that could cost individual investors and hedge funds $50 billion) are the real stories that could affect the markets.
Citadel is facing the prospect of a dismal December - NY Post
NY Post reports Ken Griffin thought November was bad. The embattled head of Citadel Investment Group, whose flagship funds declined 12% last month, is facing the prospect of a dismal December. Though we're only 10 days into the month, sources said a drop in the value of leveraged loans might further pinch Griffin's hedge fund, whose Kensington and Wellington flagships have shed $10 billion year-to-date - nearly half their value. On Wall Street, both Griffin's friends and foes are closely watching the health of the firm. The worry is that an escalating crisis might trigger another tidal wave of trouble for the market, given the hedge fund's size and scope.

RCM Comment: Interesting development. Our analysis of this important event awaits further definition.
Fed weighs debt sales of its own - WSJ
The Wall Street Journal reports the Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets. Government debt issuance is largely the province of the Treasury Dept., and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools. Fed officials have approached Congress about the concept, which could include issuing bills or some other form of debt, according to people familiar with the matter. It isn't known whether these preliminary discussions will result in a formal proposal or Fed action. One hurdle: The Federal Reserve Act doesn't explicitly permit the Fed to issue notes beyond currency.

RCM Comment: We have begun to take a more bullish stance for a number of reasons. Technically, it would appear that the US$ and Treasury bonds are forming a top that has coincided with strength in Gold and a possible bottoming in Oil. These developments suggest the ebbing has begun in the tide of redemption and repatriation. The following stories shed some more light on this emerging positive story:

TrimTabs reports net short selling of $11.9 billion in 2nd half of November
TrimTabs reports that US equity traders opened $11.9 billion in new short positions in the second half of November (November 15-28), driving the aggregate short interest on the Russell 3000 stocks to a six-week high of $236 billion. Short interest increased in eight of the ten major sectors with Financials and Industrials receiving the largest short interest inflows of $6.3 billion and $2.9 billion, respectively. The only two sectors with net short covering were Consumer Staples and Energy, in which traders covered $1.7 billion and $1.5 billion, respectively.


VZ Verizon: Verizon Wireless in $17 bln loan - FT (32.74 ) -Update-
FT reports the moribund market for corporate finance received a boost on Wednesday when Verizon Wireless, a joint venture between Verizon Communications and Vodafone Group (VOD), closed a $17 bln syndicated loan, the largest in the US this year. The deal, arranged by Morgan Stanley, Bank of America and Citigroup, will enable Verizon Wireless to refinance the debt it took on in June when it bought Alltel, a regional telecoms group, for $28.1 bln from TPG and Goldman Sachs. The one-year loan, which was syndicated to a dozen US and foreign financial institutions, is a rare sign of life in a market that has been paralyzed by banks' unwillingness to extend financing at a time of extreme financial turmoil. Bankers said the decision by Morgan Stanley, BofA and Citi to arrange the loan underlined the fact that many financial groups remained open to lending to their best customers and at the right price. People close to the situation said the loan would pay an interest rate of around 3% above the London interbank offered rate.