Archive - Nov 2009

Disclaimer: The following set of links and associated cynical commentary touches on mature subjects and may not be suitable for some investors. Topics covered include: hyperinflation, sovereign default and yes, even investing in Zimbabwe.

It's time to take Zero Hedge to the next level.

…wait until you see what’s in the cards for commercial real estate. That’s right, the next train wreck will be in commercial real estate. Couldn’t be worse than last year’s residential market crash? That remains to be seen. But it’s coming soon, probably as early as the second quarter of next year, and there’s nothing that can prevent it. The government will intervene, trying desperately to delay the day of reckoning, and may even succeed. For a while. But make no mistake about it, that train is going off the tracks no matter what.

Sentiment Trader's Price Oscillator reading just went off the charts. Earlier, it hit a value of 72%, an 18% increase, and a number which falls between two and three standard deviations from the mean: a 1% outcome assuming a normal distribution.

Spreads were notably firm today, with HY outperforming IG, as markets gapped tighter at the open, were unable to recover Friday's tights and leaked tighter all day following the risk-on dollar down trend 'trade-du-mois'. A day of little real news but a continued sell USD, buy anything USD-based saw stocks gapping up to almost 2009 highs on almost 2009 low volumes and we suspect credit's rallies were helped by fund unwinds after Friday's loan BWIC.IG has now traded within a 20bps range (115bps to 95bps) since 7/23 (on an adjusted basis) while equities have continued to move higher with 'buy-the-dips' working incessantly on lower and lower volumes.

Score another point for peak oil proponents...

Barclays, whose primary goal these days seems to be to enjoin the Fed in ruining the dollar (talk to a gummy bear salesman from Barclays and you will get a "short the dollar" pitch), presumably in order to make even more money on their alleged huge short dollar prop exposure, is out with a new note from currency strategist Steven Englander. His latest perspective is that all of today's conventional wisdom interpretations of IMF data demonstrating a diversification away from the dollar in global reserves is in fact not what it seems. If it were, the dollar would be at most worth zero, and at worst, the Fed would be paying you to take every new batch of brand new Obama-faced $1 trillion bills from its basement.

There is now no question that the sole, undisputed factor driving credit and equity markets is the dollar destructive collusion between the Fed and the major global central banks. As long as the Fed is dead set on inflation, and is willing to throw trillions of free liquidity at any problematic flare up, and is happy to keep interest rates at 0%, liquidity-addicted equities will likely push higher until such time that the incremental hopium "hit" does nothing, and markets overdose, ending up not just in the critical condition reminiscent of fall 2008, but outright death. Until then, expect to see your daily dose of market buoyancy from whatever algo is currently the dominant momentum platform gunning the market ever higher, even past all disconnect with traditional correlations such as FX, credit and commodities. If the Fed wills it, so it shall be. Alas,while the Bank of England was apparently an easy target, when it comes to massive financial fraud and malfeasance, the Fed is untouchable.

Hapless short-sellers howling again over the weekend about "head and shoulders breakdowns", myriad Elliot Wave patterns pointing to a "speed crash", etc. made for some easy meat for the Goldman Prop Desk Traders. The tape was turned and suddenly all the fund managers scrambling to raise cash were suddenly buying anything and everything to make sure they were fully invested in the "right stocks" by year end.

Should we throw out capitalism altogether? Or would that be throwing out the baby with the bathwater?

• Yield 1.404% vs. Exp. 1.419%
• Bid-to-cover 3.33 vs. Avg. 2.82 (Prev. 2.76)
• Indirects 68.5% vs. Avg. 52.77% (Prev. 48.97%)
• Indirect bid-to-cover: 1.39
• Alloted High 38.42%

The DXY minibounce from the 75 support level is being tracked by 10 Year Treasurys tick for tick. The only outlier is the equity market where to say there is no volume participation would be an overstatement. The VIX is meandering somewhere in between the SPY and the USTs. All in all, the FX and the bond markets are once again ignoring the shallow equity melt up which is as produced as the President's daily TV appearances.

For all who have written asking for a clear and succinct summary of all of the Fed's various market intervention mechanisms, we provide the following overview report written by the Fed itself. Topics covered include Monetization, Excess and Borrowed Reserves, Open Market Operations (Outright and Temporary), Repo transactions, Currency, Clearing Balances,and many others.

"My name is Goldman Sachs. I am a taxpayer-sponsored survivor living in New York City. I am blasting on all Bloomberg frequencies. I will be at 85 Broad everyday at mid-day, when the sun is highest in the sky. If you are out there... if anyone is out there... I can provide SPY bids, I can provide SPY offers, I can provide securities and just a little liquidity. If there's anybody out there... anybody... please. You are [not] alone."

According to Tabb Group’s Bob Iati, over 30% of buy-side shares in the U.S. are now executed by algorithmic trading platforms, and that latency as little as 10 milliseconds could cause a firm to lose up to 10% of its revenues. “It’s a real, hot issue.” If not being able to steal at 10 milliseconds is so damaging, I guess not being able to microsteal or nanosteal is absolute Armageddon.