Weekly Credit Summary: August 7
Submitted by Tyler Durden on 08/07/2009 - 17:36Spreads were mostly tighter this week with ExHVOL the only index that widened (thanks to HVOL's significant outperformance) as HY outperformed IG (While corporates were mostly tighter, Major Sovereign CDS were notably weaker on the week). Indices typically underperformed single-names (but intrinsics had been leading indices tighter all week) with skews mostly narrower as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL's skew widened as it underperformed, XO underperformed but compressed the skew, and HY's skew widened as it underperformed.
SEC's Director Of Enforcement Jokes About HFT, Front Running, Algos, Calculus, A Black Box and Other... Stuff
Submitted by Tyler Durden on 08/07/2009 - 17:12"All that being said, I'm pretty proud of my own 100-day accomplishments. So how have things changed? Before I joined the Division in March, the Dow was struggling around 6500 points. Now the Dow is over 9200. So am I really responsible for a 41% increase in the Dow? I am, and I'd explain it, but it's very complicated. It involves algorithms, and calculus, and a black box and other … stuff. Now, when I ran this speech by my wife, she looked (kind of like some of you out there) a little incredulous. She said, "you're not claiming credit for the stock market, are you? While you're at it, are you also taking credit for the mild hurricane season or the sharp decrease in lethal shark attacks world-wide." Well I am, and I'd explain it, but it's very complicated. It involves algorithms, and calculus, and a black box and other … stuff." - Robert Khuzami, Director Of Enforcement, SEC.
Is Quantitative Easing About To End?
Submitted by Tyler Durden on 08/07/2009 - 16:22After having purchased over $243 billion in treasuries to date via a the QE bond buyback program announced in March, in some cases buying the bonds form primary dealers just days after an auction's completion, the Fed is now expected to wind down its $300 billion Treasury-buying program. As Bloomberg reported recently, "The FOMC “is unlikely to extend the life of these
programs, unless, of course, either the economy or the financial
markets take a significant turn for the worse,” Meyer, vice
chairman of St. Louis-based Macroeconomic Advisers LLC, wrote in
a report released yesterday. “We therefore expect the FOMC to
announce at its upcoming meeting that it will allow the Treasury
purchase program to expire in mid-September."
Consumer Credit Falls At Double Expected Rate, $70 Billion Decline YoY
Submitted by Tyler Durden on 08/07/2009 - 14:44Consumer credit (revolving and non-revolving) dropped at a 4.9% annualized rate in June, double the expected pace, indicating consumers continue retrenching and saving, especially after May was expected to be an inflection month, declining by "just" -2.6%.Total outstanding consumer credit in June was $2,485billion, $70 billion less than the $2,556 billion in June of 2008.
Colonial BankGroup Faces Federal Investigation, FDIC To Be Appointed Receiver Shortly
Submitted by Tyler Durden on 08/07/2009 - 13:47A cursory glance at Colonial's most recent balance sheet indicates $26.4 billion in assets, and $20.2 billion in total deposits. There goes the FDIC's Deposit Insurance Fund. But at least the 247,000 people who are no longer employed are buying up any and all related stocks.
38.2% Retracement On Declining Volume
Submitted by Tyler Durden on 08/07/2009 - 13:14
Some afternoon technicals
The Truth Behind Today's BLS Report
Submitted by Tyler Durden on 08/07/2009 - 12:36The confidence game in turbo boost mode. The market is oblivious of the underlying data behind today's "better than expected" BLS computer model output. Yet for the few remaining who do care about the increasingly irrelevant fundamentals, we provide some observations.
Mortgage Spread To Treasuries Hits 100 Bps Again
Submitted by Tyler Durden on 08/07/2009 - 11:57
Wait, didn't the Fed just buy $160 billion in agencies in the last two weeks?
Answer - yes.
Guest Post: Cash For Clunkers Vs. The Big Three's 0% Financing In October 2001
Submitted by Tyler Durden on 08/07/2009 - 11:44The June 1 ISM to June 5 NFP high to higher high was +10. The idea was that the Aug 3 ISM to Aug 7 NFP higher high would be roughly +10. If so, it would target 1013. That is precisely what has happened. Notably, the stock market sold off 32 points by the following Monday June 8 before setting a retrace high on Thursday June 11’s retail sales report that were goosed by automaker incentives of $6900 in rebates. Expecting July retail sales to be goosed by similar cash for clunker incentives, we expect the stock market to rally into Thursday’s Aug 13 retail sales report. In short, a rolling top similar to June’s is expected in the first half of August.
Paul Tudor Jones: "Bear Market Rally"
Submitted by Tyler Durden on 08/07/2009 - 11:39"Tudor said the 47 percent gain in the Standard & Poor’s 500 Index of the largest U.S. companies since March 9, when it fell to a 12-year low, is a “bear-market rally.” The index topped 1,000 for the first time in nine months this week after companies reported better-than-expected profits."
Last Week's Insiders Transactions: 5 Buys For $13.4 Million, 145 Sells For Over $1 Billion
Submitted by Tyler Durden on 08/07/2009 - 10:35Courtesy of Finviz, the ratio of insider buying to selling transactions is 5 to 145. Total transaction value: Buys: $13.4 million; Sells: $1,042 million. At least insiders are feeling the new bull market.
Treasury Free Fall
Submitted by Tyler Durden on 08/07/2009 - 09:54
One entertaining side effect of soon paying $4.00 for gas again while housing prices keep crashing is that bond prices will soon be very amusing. But no worries, at least that paper profit in the 401(k) which the baby boomers will soon need to start extracting is up for the day - Bernanke's Friday mission - accomplised. In the meantime, better get a whole lot of those OMO actions ready on deck.
Goldman Sachs On The State Of The Market
Submitted by Tyler Durden on 08/07/2009 - 09:18From Goldman Sachs:
- Residential housing market continues to weaken
- Commercial real estate beginning to take center stage
- CRE equity may have further to fall or be completely wiped out
- Equity valuations driven by the consumer, with the cryptic proviso that "equity value might have downside" - no kidding
- And the best - REIT equity prices have risen... but property values continue to fall
Federal Reserve Balance Sheet Update: Week Of August 5
Submitted by Tyler Durden on 08/07/2009 - 08:53
Foreign holdings of USTs and Agencies increased by $23.5 billion monthly to $2,810 billion from $2,787 billion in the prior month. This is now less than 20% of the comparable increase in Securities Held Outright by the Federal Reserve, implying foreign purchasers are starting to fall far behind in their purchases of US securities relative to the Fed's monetization rate.
Frontrunning: August 7
Submitted by Tyler Durden on 08/07/2009 - 07:56- Nonfarm payrolls down 247,000, right on top of Goldman's whisper estimate, unemployment rate now 9.4%, bonds yields explode (BLS, AP)
- Insider trading probe at SocGen cost former IB chief his job, TCW co-founder Robert Day also under investigation (Bloomberg)
- Australian workers cut work hours instead of firing (Bloomberg, h/t Aditiya)
- Jonathan Weil: Blowing up your company gets raised to art form (Bloomberg)
- It's not all golden at Goldman (Reuters)
- Goldman Sachs is (not) ripping you off (Ritholtz)
