Archive - Dec 2009

RANsquawk 2nd December Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 2nd December Morning Briefing - Stocks, Bonds, FX etc.

In light of an especially noteworthy Full Moon, both gold bugs and those who are particularly 'in tune' with the waves of collective social mood (akin to social tuning forks) ought to remain extra cranky for an additional few days. 02:28:xx, Wednesday morning (12.2.09), marked a Full Moon; we at Fibozachi always reference time in EST, which is universal 'market time' while everything else is just ‘noise,’ though apparently there is something other than just dead 401(k) money scattered across mutual fund sub-accounts domiciled in Manhattan/ Boston (equities), Chicago (commodities) and Newport Beach (bonds).

All those charts of one thing in terms of another...all of them so, so stupid...unless of course you happen to live in North Korea today and just found yourself 100x poorer and scrambling to exchange whatever is in your wallet for dollars, ovens, bananas, penguins, horses, toothpicks, hookers, Kindles (never mind if you can't read: that will just make you a targeted Amazon customer), matches, or... gold. And as Bernanke will soon be converting Benjamins into brand spanking new Obama-portraited dollar denominations, the S&P, in "real" terms (represented in ounces of gold) is now back to April levels, and receding fast.

In this year of outlier events, the outlier trade may be realized.

The Institute for Fiscal Studies said not only did public sector workers have greater access to so-called gold-plated defined benefit schemes than those who worked for private companies, but the schemes themselves were typically more generous.

Gold continues to march to its own drummer.  This time clearly supported by massive North Korean retail buying (inflation being under complete control).

Update: No really, totally under control!

Following up on the earlier post in which Robert Litterman basically told his quant colleagues that they either have to stop competing with Goldman or die, we present the following presentation from GSAM titled "Maybe it really is different this time" from the June 2009 Nomura Quantitative Investment Strategies Conference. In essence Goldman finds that when one factors in liquidity and trading costs, the returns by momentum and value (as well as most other strategies) strategies have in fact underperformed miserably over the years. Furthermore, with everyone now enjoying the tools of the trade courtesy of $29.95/month TradeBiot programs, the crowding in the quant arena will generate more volatile returns as well as lower Sharpe ratios, while the stronger results will be available to the smaller managers who focus on less liquid stocks or markets. But we thought liquidity was what all buyers were demanding and benefiting from? It is ironic that the quants most likely to succeed are those who stray from the beaten bath. Of course the only ones who profit are those who provide the liquidity, courtesy of every more generous exchanges which are exponentially losing traffic to non-exchange ATS.

Just in time for the holidays (but carefully timed to avoid contributing to the Black Friday numbers) we've refreshed the offerings at the Zero Hedge Cafepress store! We won't bother describing the outstanding wares we now offer here. Just go take a look.

With everyone expecting the Chairman's reconfirmation process on Thursday to be merely a formality, Senator Bob Corker throws this wrench after he "said he wasn't sure yet whether the chairman had the votes on the Banking committee or in the Senate as a whole." The Hill reports, "I don't know where that sits," Corker told reporters when asked if Bernanke would have the votes to get a second term, adding he wasn't sure whether Bernanke would have the votes in the 23-member Senate Banking Committee, either.

Those of you shocked to see the official Treasury Direct debt ticker break the statutory debt limit number of $12.104 trillion may have overlooked a clever loophole.

Spreads were tighter in the US today with HY outperforming IG as the dollar fell overnight and early macro data appeared less than terrible (though some underlying indices showed weak outlooks). HY skews have narrowed significantly in the last couple of days (with intrinsics underperforming) and as we discuss in detail below, today's moves take indices back to unch from 11/25 but scratching the surface shows some clear signals of change.

Questions for our Esteemed Chairman ...

Talk about a brief tenure. Guess today's GM numbers were not all that hot after all. Is Steve Rattner the replacement? Or maybe the President himself can put in some private sector time (oh wait GM is publicly owned now too, nevermind).

Presented without comment