Archive - Oct 5, 2009

Unlike those employees at Simmons who lost their jobs, private equity pension fund managers and the GPs they invest and co-invest with are sleeping easy, counting the millions they collect in bonuses and fees as they profit by loading up the debt of companies they acquire.

The SSTF shortfall for September came to $4.13 billion. A $10 billion swing from 2007. This is the third month in a row of this red ink.The day of reckoning is coming sooner than is forecast. Japan is in trouble over the same problem. We are following them down the same path.

The Independent has released information that Arab States, along with China, Russia, Japan and France are about to end the dollar's hegemony. While snippets like this have been previously discussed, usually accompanied by lots of posturing, nothing firm had evermaterialized. If the latest overture turns out to be real, that would be a dramatic hit to Ben Bernanke's attempt to inflate trillions of debt on the back of a rapidly devaluing reserve currency. Ironically, the end of the dollar's pain may now become Bernanke's new sad reality as with the loss of its reserve status, perpetual dollar devaluation will now become a moot point. Oh, and a side effect, first oil, and soon all other commodities, will soon stop being priced in USDs.

What we do know is this: compressed prices can lead to explosive moves in either direction.

Spreads were tighter in the US today as all the indices improved (amid low volume and small intraday ranges as HY outperformed IG notably) with single-names generally following the indices lead (and performing in line with their weightings except AIG/ILFC which modestly outperformed). IG remained wide of Thursday's tightest levels while HY is now trading tighter than those tights as we note HY ebullience since the gap weaker open on Friday seems very blinkered (SPY is +2.3%, IG +0.65%, and HY +3.9% from that open).

"The Board’s interests in secrecy are, in fact, aligned with the banks’ interests and are contrary to the public interest. The Board wishes to continue to lend trillions of dollars of public money without oversight or accountability, and the banks wish to continue to reap the benefits of their access to public money without their depositors or shareholders – or the public at large – knowing anything about it...the public has a manifest interest in understanding and evaluating the government’s response to the recent economic crisis, in safeguarding its money, and in knowing whether its government is doling out its money to private entities imprudently." - Bloomberg L.P.

"There is a sense when one reads sufficiently educated publications that a lot of people feel betrayed by financial and economic forecasts. One can argue whether some analysts foresaw what was about to unfold as early as 2006, but fact is most people had it completely wrong." - Nic Lenoir

"Has the era of the dark pool come to an end?" Thus begins the Traders Magazine cover article "End of the Line? SEC Targets Dark Pools and Off-Board Trading", which deconstructs all the incipient issues, criticisms and concerns facing the utterly discredited Mary Schapiro who is hell bent on getting at least one thing right during her career at the SEC, before she is brushed off as even less effective than her arguably much worse predecessor Chris Cox.

The final tally is in: the economy was driven higher exclusively courtesy of government spending and imports: a staple diet for any truly growing, central-planning economy.

Anyone see 60 Minutes last night? The story about the animal migration across the Mara River in Kenya? All the Wall Street particpants were there. And this morning they were stampeding back into the "inflation" and "re-risking" trade once again.

The New York Fed, concerned about what happens when it can no longer monetize treasuries, has decided to adjust its TALF fall back plan which so far has seen virtually no use, compliments of a free-liquidity guzzling equity market. So Messrs Bill Dudley et al are taking appropriate steps for the next part of the move higher, and have just issued an announcement, changing the "procedures for evaluating asset-backed securities pledged to the TALF." The reason: to "enhance the Federal Reserve's ability to ensure that TALF collateral complies with its existing high standards for credit quality, transparency, and simplicity of structure." It is refreshing that the NY Fed actually cares about lending taxpayer money where the collateral will presumably cover losses, courtesy of the upcoming CRE crunch.

The man who made billions shorting subprime shares his latest observations.

Yet another listless day with no volume participation, as trading turgidity has set in and programs are back in control. Expect the market to taper off somewhere around Thursday's closing VWAP (red line) unless some real volume shows up which as the past 6 months have shown, is practically always to the downside.

Update: and thru VWAP now. Computers keep on humming.

The CEO of TrimTabs, Charles Biderman, continues his crusade against the Bureau Of Labor Statistics. "These [BLS] numbers are a joke." Indeed.

According to Joseph Stiglitz, "the weakness in the economy has helped the equity markets" which are now "irrationally exuberant."