Archive - Oct 2009

The overhang of the Cash For Clunkers effect is starting to shift to all sectors of the economy, with New Home Sales being the latest victim: sales decreased 3.6% to a 402,000 annual pace, lower than the median forecast of economists, which was 440,000. The actual number came in below even the lowest expectations of 412,000. Additionally, the median price of a new home dropped 9.1 percent from September 2008. When is the last time anyone heard a CNBC anchor talk about green shoots again?

The United States Senate Committee on Banking, Housing & Urban Affairs is currently holding an extended hearing on Market Structure Issues, where Senator Kaufman is presenting currently. Link to live webcast can be found here

Jan Hatzius, who was recently rated "most accurate economist" for good reason, after exhibiting phenomenal precognitive abilities to revise payroll numbers within 24 hours of actual number release to within 0.0001% (roughly) of the actual final number, has just decided to become a shoe-in for the next year's award nomination by announcing that tomorrow's GDP number, to be released at 8:30 am and expected to be 3.0%, will now be 2.7%. Now, we tend to joke about leaks and such, especially when it comes to Goldman (one would think Goldman's PR department has their hands full as is), but if tomorrow's GDP really is a surprise miss, which this client note seems to indicate, things will get just plain silly.

These are some of the more important stories concerning European economy.

I remember quite clearly walking home in 1990 after seeing “GoodFellas” and wondering why such obviously clever people as the gangsters portrayed in the movie would resort to crime to get ahead. Why not just apply that cunning to legitimate work, and make a legitimate living—even a legitimate profit. Now I know where all the gangsters went: They went to Wall Street.

The Liar's Poker author shares some insights on Wall Street life, its shift from private partnerships to public corporations, the treatment of risk, sexism, and cussin'. Always insightful.

• K1 hedge fund snared in probe as Barclays, JPMorgan face losses (Bloomberg)
• 48596th time's the charm- after all it's only some paper and ink...GMAC may receive third bailout package from US government (Bloomberg)
• Real homes of genius: Culver City and the housing Stockholm Syndrome. Approximately 5 percent of current home price is related to government bailouts (Dr. Housing Bubble)
• Last benefits of stimulus felt as durable goods rise 1%, 0.9% ex transportation (AP, Census Bureau)
• "Jobs created or saved" is White House fantasy (Bloomberg)
• More OutrAIGe (The Nation)

• Asian stocks drop on National Australia loss, Canon earnings; Yen advances.
• Consumer Confidence in US unexpectedly fell in October on job concerns.
• Euro up slightly to $1.4830 in European morning trade amid US consumers' worries.
• Oil falls to near $79 a barrel in Asia amid mixed signals about strength of US recovery.
• France announces €1.65B plan to prop up the country's agricultural companies.
• Home Prices in 20 US cities rise for third straight month: S&P/Case-Shiller.

The Mother of All Carry Trades has encompassed the big banks in another one of the Biggest Bubbles of recent history – and very few even know about it. Here’s a few tidbits, Goldman Sachs is the most exposed in terms of tangible equity at risk, while JP Morgan has the most gross exposure.

The pension debate needs to reopened. It's not a Conservative, Liberal or New Democratic issue, it's about doing what's best for hard working Canadians. The reforms proposed today are simply not enough and will leave far too many Canadians teetering on the edge of pension poverty. Surely we can do better. We owe it to millions of Canadians that through no fault of their own, have fallen victim to vagaries of the market.

In a surprising outcome, Securities Industry News reports that according to a research survey conducted by Greenwich Associates, 55% of investors think high-frequency trading does not have a negative impact on their trading operations, "viewing the phenomenon as the latest development in a constantly evolving market," while 46% think that their institutions are placed at a disadvantage by traders who employ such strategies. Basically, the conclusion, before we disclose more of the study's observations, is that practically nobody has any idea what is really under the HFT surface. With an equal number of advocates and critics, confusion is rampant (and for some of the more vocal HFTsupporters who believe the NBBO is never crossed and displayed liquidity is always protected, we have three words: you are wrong... More on that and "qualified contingent orders" tomorrow).

"Goldman was not a disinterested party in AIG’s bailout. AIG’s bailout—and the way the payouts were handled for its trading counterparties—hugely benefited Goldman Sachs. Goldman received a cash payment worth more than $10 billion from the U.S. Treasury—via AIG—during a system?wide liquidity crunch. Under the circumstances, I cannot think of any scenario that would have provided a more certain and stable outcome for Goldman Sachs." Janet Tavakoli

"In terms of purchasing power parity, the dollar seems a tad undervalued these days, but that does not mean it will soon appreciate...Using a real exchange rate to judge whether the dollar is overvalued or undervalued, however, requires some reference point at which purchasing power parity holds. Such a point should also be consistent with a global balance-of-payments configuration that is sustainable. Good luck finding that!...Let’s hope the exchange market does not see something that the rest of us are missing." - Cleveland Fed

Fellow Zerohedge contributor George Washington parrots the lovely Janet Tavakoli and states his (her?) ire that the "Evil Vampire Squids" at Goldman SHOULD NOT have been paid at Par for their CDS trades with AIG.

I, for one, don't necessarily agree.

I originally wrote this list of recommended books last year; recently I updated and added a few more. I hope to keep adding to it every year. It contains six sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, and Books for the Soul. Due to its length, I divided it into two parts. Here is part 2. I hope you enjoy it.