Andrew Horowitz Interview With Matt Taibbi

Andrew Horowitz of the Disciplined Investor conducts a very informative interview with the (in)famous Matt Taibbi, touching on such broad topics as the economy, CIT's bankruptcy, earnings, program trading and of course Goldman Sachs. A much better way to spend 45 minutes instead of watching the high-pitched talkings heads in the octobox.

Interview link (and also check out Andrew's website: he has many other great interviews with the likes of Mish Shedlock, Kevin Depew, Dennis Gartman, Brett Steenbarger and many others).

Loans Versus Bonds Relative Value: Week of July 16

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.

Is Goldman Starting To Offload Prop Positions?

Abby 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.

CIT: L+1000 Bridge Financing

Sunday night edition of America's favorite game: kick the can down the street, better known as "someone else's problem."

The Truth About Asia

The 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.

The Dangers Of High Frequency Trading... As Predicted By Lawrence H. Summers

When 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.

Unemployment Rate By State: June Update

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.