Archive - Apr 2009

• CPI below estimates at -0.1%, down from 0.4%, ex food and energy unchanged at 0.2% from prior month: so much for inflation (Bloomberg)
• Sam Zell says commercial real estate values doe 30% (Bloomberg)
• Goldman Sachs and Merrill: did December ever happen?
  

The DTCC data will have to wait until tomorrow as apparently the good folks who keep track of $24 trillion in CDS notional needed a good Easter rest.

Another administration 180 degree turn: stress test results to be announced shortly (WSJ)
Goldman's next $28 billion public handout (NYT)

Early Zero Hedge readers are aware that I have often discussed the benefits of the basis trade in the context of an improvement in overall market liquidity, especially at the pronounced mid/late-January negative basis initiation. I would caution readers who have established this position to be very careful in the coming days with any established bases, and prudent readers may do well to trim exposure here, and take the 200bps average pick over the past 3 months.

Zero Hedge has voiced its thoughts on the matter repeatedly (to the point where a broken record sounds outright creative) so I will present those of BCA Research instead, as the latter has some notable conclusions on the rationality of equity investments into the REIT sector.

REITs have historically been at the top of the yield-generating heap, but look to be in jeopardy of losing their appeal as reliable cash flow growth vehicles.

In a report released yesterday, it is somewhat gratifying that Merrill Lynch analyst Mary Ann Bartels agrees with Zero Hedge conclusions about possible near-term market volatility events as a result of quant fund deleveraging.

Estimated quant HF market exposure falling sharply

Intel posts $0.11 EPS on $7.1 Billion revenue, and $0.03 EPS consensus. Amusing tidbit from the press release, disclosing the tax rate for the quarter was just 1 percent, lower than the expectation of approximately 27 percent. No cash for Uncle Sam here. Assuming 27% tax rate, EPS would have been $0.08

Spreads were mixed in the US today with IG worse, HVOL improving, ExHVOL weaker, XO stronger, and HY selling off. Indices typically underperformed single-names with skews mostly narrower (as index arb remains active) as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.

As lately the comments section has gotten heated, I was wondering if readers would be ok with moving to an outsourced comment forum such as Disqus which provides for a much better and fast-paced idea exchange. It will be a change from the existing format. If readers disagree will shelve the idea.

A recently released report from Goldman is making the rounds and is amping up the buying temperature for a perennial institutional favorite, the carry trade. Even Bloomberg has picked up the story and is running with the theme. They specifically call out two ZH favorites, the BRL and the AUD - however we think this move is really too early/too late, depending on how you look at it. 

This is kinda a huge deal... Peter Fisher, managing director of BlackRock (yes, that BlackRock), states in a Bloomberg interview that Goldman's first quarter trading profit is non-recurring in nature, and believes it was mostly due to AIG unwinds... It is a little shocking that BlackRock would have anything bad to say about the phenomenal resurrection of financial companies, and puts the huge "profit" in it's true light.

Dave is pissed.

More yellow weeds than green shoots in today’s data-flow

Not yet at the negative yields we saw in November, but if today's 4x oversubscribed one month bill auction is any indication, look for the yield to grind to zero if not lower very soon. To give Steve Liesman props where it is due, "This is panic buying!?"

State tax collections for the fourth quarter of 2008 declined by 4 percent from the same quarter a year earlier, according to a new report by the Rockefeller Institute of Government. After adjusting for inflation, combined state and local sales tax revenue declined more in October-December 2008 than in any quarter since 1959. Early figures for state tax revenues in the first quarter of 2009 show an overall decline of more than 12 percent compared to a year earlier, a further dramatic worsening of fiscal conditions nationwide.

IG credit is edging back wider today so far, as it seems the wave of protection sellers that caused us to gap tighter yesterday afternoon (albeit with a small recovery at the close) have flipped. This reinforces our view of a growing trend towards swing or channel trading in IG12 as there appeared plenty of interest in buying protection this morning. IG12 is about 6-7bps wider from its open and 5bps wide of last night's close.

Interesting note out of BofA: