Archive - Dec 15, 2009

"Builder confidence in the market for newly built, single-family homes receded one point to 16 in December as continued weakness in the economy and job markets weighed on consumers’ potential home buying plans, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), released today.The December HMI fell one point to 16, its lowest point since June of this year. Two out of three component indexes also were down, with a one-point decline to 16 registered for current sales conditions and a two-point decline to 26 registered for sales expectations in the next six months. The component gauging traffic of prospective buyers remained unchanged for a third consecutive month, at 13." - National Association Of Home Builders

When Dubai World black swanned global investors last month with what amounts to be a reported $80 Billion in debt liabilities, it sent shivers down the spine of many a financial manager and stock trader. For those who were paying attention, Dubai’s troubled assets were no surprise, it was simply a matter of time. Oft repeated by contrarian analysts and investors like Dr. Doom Marc Faber, Gerald Celente, Jim Rogers, and Karl Denninger, the mathematical certainty of the economic crisis would play out - eventually.

REITs have ascended too far from their fundamentals -DJ US Real Estate Index has outpaced S&P 500 index by more than 50% during a time when their macro and fundamental outlook pale compared to that of the broad market. There is no "deal" to be had here! What you are witnessing is momentum trading, not fundamental value.

Nothing too secret here: banks are willing to wager the systemic stability so they can get another bonus payment before everything hits the fan next year. What happens when (not if) TARP is needed again? Well, these banks will have to nationalized, or else there will be a revolution. And these banks know this, so they would rather cash in at least one more bonus after which who the hell cares.

Just in case you needed some more validation for a "strong" Euro thesis, the latest bit of news out of Europe shows that all those problems that were initially swept under the rug, just like in a crappy Japanese horror movie, find a way to reach out and haunt Central Bankers worldwide. First the Baltics, then Greece, then Austria, and now, once again, Ireland. 50% state ownership of Ireland's two leading banks is now on deck. To keep this as surreal as possible, may we suggest that Fred "Iceman" Mishkin quit his job in Columbia where all he does is spread completely factual and thoroughly undiscredited economic non-bullshit and run for [president/despot/tyrant/monarch/steam spewing geyser] of Iceland.

This is the second time in a week that a bill auction has closed at exactly 0%. The Treasury has auctioned off $57 billion since December which is yielding absolutely nothing. Surely, this can go on forever. In fact, can the US reverse roll all of its $7 trillion in marketable securities in the form of 1 months? That would surely help the deficit as no interest has to be paid by the US. Ever.

RANsquawk 15th December US Morning Briefing - Stocks, Bonds, FX etc.

On last week’s Mad Money, game show host Jim Cramer told his acolytes “to pick up [Best Buy] BBY before Tuesday morning’s announcement.” First, trading stocks ahead of earnings is the riskiest aspect of trading. Most professional traders close their positions ahead of earnings and decide what to do after the announcement. The reason for this risk management strategy: guessing earnings is a complete gamble.

[Hawker Beechkraft] announced that it has received cancellation notices from NetJets, Inc. for a significant number of aircraft previously contracted to be delivered over several years beginning in 2011. The impact of the cancellations will be to reduce the Company’s current backlog by approximately $2.6 billion. HBAC has previously disclosed that NetJets, while a considerable source of backlog, was not expected to provide the Company any substantial revenue during 2009 or 2010 and has historically not represented more than 10 percent of the Company’s annual revenue. The cancellations represent approximately 90 percent of the Company’s previously contracted backlog with NetJets. After removing the cancelled NetJets orders from backlog and considering the anticipated sales and order activity for the fourth quarter, backlog is expected to be approximately $3.5 billion at December 31, 2009. The Company continues to expect depressed demand in the near term.

A frequent theme on Zero Hedge is the structural limitation imposed on corporate revenue and profitability absent an overall increase in the currency in circulation, or said otherwise, in the "velocity" of money. If banks do not lend out the money, and the money does not somehow find its way to companies' top lines, there is logically less revenue thus lower EPS (especially with the key layoff rounds already having taken place). We were gratified to see Rosenberg pick up on this theme in his latest "Latkes with Dave" piece. As Rosenberg points out, the banks continuing unwillingness to lend money out will end up transforming not only the political landscape in D.C., but could very easily be the end of the seemingly endless bear market rally.

"Not a whole lot of excitement today as the US stock market is making it increasingly easier for Chinese stocks to out-trade them in terms of daily volume (actually on a good day Chinese stocks trade more volume in $ terms that NY, Tokyo, and London together)." - Nic Lenoir

Now that the market lives and breathes with every Fed decision and transaction, reading tea leaves and juggling cow feces has about the same predictive impact on security outcomes as analyzing fundamentals or technicals. Yet from the perspective of correlations, nothing is as important as the dollar: equities have a -100% correlation to the value of the dollar, which in turn impacts commodities and even interest rates. The dollar is the primary market leading indicator. Which is why we present the key points from the Goldman Sachs "Themes and Ideas for Q1 2010 and Beyond: FX Sales Strats" in which Goldman shares a few thoughts on why in its chartist opinion, and contrary to that voiced by Jim O'Neill and other Goldman strategists, the dollar is headed higher. And possibly much higher.

Just because every credit collapse mushroom cloud has a silver lining. The Obama miracle recovery captured in one simple, easy to remember song.

After posting a minor dip in October, at 9.04%, Capital One's charge off ratio once again resumed its upward climb, hitting 9.60% in November. This number was 9.77% in September so it looks like December data could be even worse as all those newly purchased plasma TVs start demanding payment. The worst data point was the 30 Day+ delinquency rate which was at 5.87%, which compares to 5.38% in September and 5.72% last month. If this number continues growing it is inevitable that the charge-off rate will also spike in the future. Meredith Whitney's greatest fear is slowly coming true.

Another masterpiece in the blistering Santelli-Liesman clash. The Rickster continues questioning the economic comprehension of Comcast's brand new chief economics reporter. That, and of course highlighting the propaganda reporting of said economist who enjoys highlighting good news, and "sweeping any bad news under the rug." When asked "do the bulls want to cry when the numbers don't go their way" Liesman responds appropriately, and hilarity ensues as usual. Some pearls of wisdom from Steve: "Rick, what you need to do is understand Emergency Claims Benefits" to which the retort is: "You don't say anything I find interesting to hear."