Archive - Oct 2009

"Indeed, this simultaneous underperformance of all our themes suggests to us that a disruption may have been (or still is) occurring in this space. This sobering thought has me searching for the appropriate words and so I find it necessary to turn to my truest and most reliable muse but I am still struggling to find the most appropriate reference. Is it best to paraphrase the opening of Side 1 of Darkness on The Edge of Town – that is the song, Badlands? Or is better to allude to the eerily appropriate last song of the vastly underrated and misunderstood Nebraska album – that is, Reason to Believe? Or still yet, is it the newest Springsteen song which world-premièred Wednesday night at the Meadowlands, where yours truly was privileged enough to be among the lucky people standing inches from the stage as The Boss belted out, for the first time, Wrecking Ball?" - Barclays Capital

For the first time since March, the stock market actually showed a little reaction to reality based information. As it turns out, even removing any hint of stimulus will cause the market to retreat. We already expected the cash for clunkers program was largely a gimmick with auto sales dropping like a stone in the last reading. Home sales are being artificially juiced by the $8,000 tax credit and the Federal Reserve keeping 30 year mortgages near historical lows. You can expect that if the Fed and the tax credit were removed we would see a similar reaction as the cash for clunkers program in the housing market. It is amazing that so much energy and focus is being put on bailouts, gimmicks, and transient market forces all the while ignoring one major component. Jobs.

It's funny cause it's so not true true

Want to know why the giant, insolvent banks aren't being broken up?

Here's why...

Inflation or deflation? Round 1 goes to ... deflation.

For one of the most insightful perspectives on long bonds, we present Bob Kessler's most recent, "Full economic recovery, U.S. inflation, and the Fed removing accommodation – still years away" masterpiece. Absolute must read.

Back in August, CPP Investment Board (CPPIB) announced that it has entered into a joint venture with Cyrela Commercial Properties S.A. Empreendimentos e Participações, GIC Real Estate, the real estate investment arm of the Government of Singapore Investment Corporation, to invest up to US$250 million for the development, acquisition and management of institutional-quality commercial properties in Brazil. That appears to have been a very wise decision.

Update: It is a celebration that we were long (waaaaay long) Brazilian pickpockets going into the week.  Accordingly, Radio Zero goes live 9:00(ish) ET.

Listen here: http://cdo.zerohedge.com:8000/listen.pls

Or pick up our West Coast Mirror (with 1000 slots) here: http://216.218.252.88:8000/listen.pls thanks to the mind-blowing generosity of EGI Hosting.

Chat up the DJ (send your .mp3 files) here: radiozh.

Or... #radiozh on EFNet (for the real chat nerds).

The banks are no longer making home equity loans. Therefore people aren't building an addition or making big improvements. The impact on the small contractors has been big. The impact to the illegal workers has been bigger. One story.

Rare earth elements (REEs) have been the mystery metals of the mining world for years. Now, suddenly, everyone’s heard about them. Before we delve into the reasons behind all the publicity, here’s the basic skinny on REEs: One, they are rare, at least sort of. Two, they are indispensable to modern technology. Three, the number of active, dedicated producers is tiny, with more than 90% of the world’s supply coming from China.

A dangerously snarky Rosie for a late Friday afternoon:

"We still marvel at the shills who believe that the market is fairly valued and that somehow it is not fair to compare how far the market has ballooned over the March lows since those lows were “artificial”. Excuse me. The 676 closing low on March 9th was any more of an egregiously oversold low than the October 9th/02 low of 776? Or the August 12th/82 low of 102 when the S&P 500 was trading at an 8x P/E multiple, a 6 1/2% dividend yield and below book value? It always appears to be an oversold low at the trough, with the benefit of perfect hindsight. But the stock market, at the lows, was merely pricing in reality, a -2.5 GDP growth trajectory which is exactly what we will see posted for 2009 when the books are closed for the year. The market was down 60% from the highs, but guess what? So were operating earnings. And reported “unscrubbed” profits tumbled 90%. To think we can have a 60% rally from the lows in six months and believe that somehow this is normal – please. By the time the market is up 60% from any low, it usually is up that amount in three years, not six months; and over 2 million jobs have been created. This is the first time the market has rallied this much with the economy shedding 2.5 million jobs."

- David Rosenberg

Yet another indication of just how dismal the economy is, was the recently announced non-existent demand for raw material imports, particularly steel, which saw was a mere 775k tons in August imports, a 66.5% decline from August of 2008, or a dollar value of $758 million down 76% from the $3.2 billion imported in August 2008. After a brief "second derivative" headfake in July numbers, the August results indicate that even as economists expect a massive pick up in inventories and what not, domestically America is using raw materials at a fraction of even 2008's run rate.

Germany is the biggest test for Keynesian stimulation versus a hands off approach. The German election clinches their turn away from fiscal stimulus. Germany has done the least Keynesian spending gimmicks of any major economy and the new financial team headed by incoming Minister of Finance, Hermann Otto Solms will turn to free market friendly policies. You won't believe what they have to say about economics and their economy. I predict they will recover from the re/depression long before the U.S.

Things are really getting out of control now, as the "V-Shaped Recovery" vs. "Great Depression II Bust" macro strategies are now being daytraded on a 5-minute chart by the fast-triggered 19-year old chart monkeys now in charge of billions under management at the biggest fund firms, endowments, foundations, etc.

Zero Hedge has been accused of discussing "conspiracy theories".

Okay . . . but what does that mean?