Loans Versus Bonds Relative Value: Week of July 16
Submitted by Tyler Durden on 07/20/2009 - 08:59
The divergence in loan and bonds trends has picked up marginally, with the bond universe wider by 8 bps to 968 bps and loans tighter by 22 to 471 bps. Mostly noise in the subset of 30 companies, except for the traditional yoyo TRW whose bonds and loans both screamed tighter by 410 bps and 130 bps, respectively. Is there any fundamental reason for this? Of course not.
Daily Highlights: 7.20.09
Submitted by Tyler Durden on 07/20/2009 - 08:13Is Goldman Starting To Offload Prop Positions?
Submitted by Tyler Durden on 07/20/2009 - 08:07Abby Joseph Cohen must have threatened with retirement and David Kostin is here to pick up the Olympic torch. Goldman Sachs just raised its 2009 year end S&P target to 1060, "13% above the current level" meaning Goldman prop positions are full and the great offloading to marginal buyers has begun. The justification: "After trading in a 10% band for the past three months, our “Pop, Stall, & Sustained recovery” framework, sequential improvement in ex-Financials EPS, stabilization in profit margins, and higher forward EPS guidance all point to a rising market through 2009." More specifically, 85 Broad is raising its 2009 EPS to $52 from $40, and 2010 EPS to a patently absurd $75 from $63, a 45% increase in bottom line earnings, and almost 100% from the old $40 estimate. And just so it seems more credible, "measured on a pre-provision and pre-write-down basis our estimates are $69 and $81. S&P 500 trades at 12.5x our 2010 operating and 11.6x our pre-provision EPS." In other words, pure rose-colored glasses halcyon.
Frontrunning: July 20
Submitted by Tyler Durden on 07/20/2009 - 07:23CIT: L+1000 Bridge Financing
Submitted by Tyler Durden on 07/19/2009 - 21:55Sunday night edition of America's favorite game: kick the can down the street, better known as "someone else's problem."
State Street On Electronic Trading And The Liquidity Hazard
Submitted by Tyler Durden on 07/19/2009 - 19:38Continuing the series of State Street presentations on relevant market topics, the latest piece "What are the Implications of the Growing Use of Electronic Trading" focuses on the nuanced difference between "real liquidity" and "liquidity hazard", depending on whether one is a price taker or market maker. Yet based on limited available public disclosure, non-premium clients of the NYSE and other PT-espousing exchanges have no visibility of who and under what conditions any given broker/dealer and quant become one or the other. And while merely a few years ago HFT was less than half of traded stock volume, recent data indicates high frequency trading now accounts for over 70% of US volume, and thus it is important to reasses what is the relevant set of data disclosure by dominating broker/dealers. The risk is palpable - as State Street itself notes, there is "equity capital at risk."
The Truth About Asia
Submitted by Tyler Durden on 07/19/2009 - 15:53The most recent report out of CLSA is out: easily the best and most comprehensive overview piece of all that is happening in Asia, but provides extensive Western insight as well. Here is the link direct from the Company's website.
Sunday Reading
Submitted by Tyler Durden on 07/19/2009 - 15:10The Dangers Of High Frequency Trading... As Predicted By Lawrence H. Summers
Submitted by Tyler Durden on 07/19/2009 - 11:52When discussing high-frequency trading, Zero Hedge recently asked
"As Goldman is becoming the primary conduit of trading
(whether principal or agency) in virtually all markets, the risk of a
massive liquidity drain becomes exponentially larger, and the risk of
an exogenous event approaches LTCM and Lehman levels. It is this key risk driver that regulators should be focusing on,
instead of chasing and attempting to punish the perpetrators of the
most recent market crash (we are not saying they should not, but they
should prioritize and now should focus on what is
most critical to maintaining a functioning market topology). " It seems we were wrong about authoritarian figures never predicting the implicit risk of this subset of program
trading - ironically, it was well over 20 years ago and none other than
the future Chairman of the Federal Reserve Larry Summers who had some
prophetic words of caution. In a paper titled "Commentary on 'Policies to Curb Stock Market Volatility" in which Larry was discussing the cause and effect of Black Monday (about which he is quite wrong that nobody had seen coming), he lays out some oddly forward looking observations about program trading, or positive-feedback trading as high frequency trading was yet to become a staple market diet.
Jones Day's Chrysler Charge To Taxpayers: $12,702,190.19
Submitted by Tyler Durden on 07/19/2009 - 11:01Chrysler's little parade in bankruptcy court to make sure a few hundred thousand unionized workers retain their jobs for another year or two is finished. And here is the bill to you, dear taxpayer (or rather the first of many): Jones Day's invoice is in the mail. Everyone take out their wallets and please split the $12,702,190.19 equally. After all, now that we are allbenefiting form having a much leaner, much more competitive Chrysler around, we should all be happy to pay each and every lawyer who made it possible.
Unemployment Rate By State: June Update
Submitted by Tyler Durden on 07/19/2009 - 09:04
The most recent BLS State unemployment data is out. At this rate of job loss, Michigan will see 100% unemployment in about one year (give or take). Otherwise, state by state unemployment increased by 2.8% on average (unweighted) from May until June.
Radio Zero: Third Time Is The Charm
Submitted by Marla Singer on 07/18/2009 - 21:09Since I'm moving and have to pack up all my seized collateral audio equipment, Radio Zero will be on hiatus for a time. Figuring you might want to send it off in style, we'll host it again tonight, around 11:45 eastern (woops) for a special midnight(ish) run. As usual, URL to follow on http://www.zerohedge.com 15 before and I tend to be late.
Listen here: http://cdo.zerohedge.com:8000/listen.pls
Evening Fun With Maps And Dark Fiber Latencies
Submitted by Tyler Durden on 07/18/2009 - 19:33
Maybe the attention is on the wrong building...
Relative Central Bank Balance Sheets And Currency Races To The Bottom
Submitted by Tyler Durden on 07/18/2009 - 17:57Zero Hedge posts a weekly update of the Federal Reserve's bloated balance sheet as we believe it is critical to visualize the spiraling debt burden at our "central bank" especially since any day now the Fed will begin purchasing treasury securities outright in defiance of Geithner's lies to the contrary (China can't sell its planned Bills: at 0.925 Bid-To-Cover does anyone honestly think they will instead prefer to buy dollar denominated toiler paper and not roll out their own QE version momentarily?). As Cornelius pointed out earlier the dollar can't find a floor these days: rerisking is rampant the argument goes and that kills the greenback. However, the circular logic also holds: create dollar pain (by whatever means possible) and thus stimulate the market, Larry Summer's all time wet dream (would anyone like to wager that when hedge fund positional disclosure become mandatory DE Shaw will fight until the bitter end). And in this simplistic trilateral world (have fun gaming the yuan), the strength of any one of the trio in the dollar-yen-euro triangle results in implicit weakness of the other two. And vice versa. Yet aside from major broker-dealers who are axed in a given equity direction and thus have all the incentive to impact underlying currencies, is it possible that specific governments may manipulate currency strength via central bank positioning? Why yes.
Site Policy Updates
Submitted by Marla Singer on 07/18/2009 - 16:33We've updated our disclaimer, our privacy policy and our (non)policy on conflicts / full disclosure. You should take a look. Also, if you like knowing whenever we make changes, you can subscribe to those listings.
