Archive - May 21, 2009

"And with the right kind of eyes you can almost see the high-water mark—that place where the wave finally broke and rolled back."

- Hunter S. Thompson

The Kondratieff Wave chart below, prepared by the Long Wave Group, gives some food for thought.

"And with the right kind of eyes you can almost see the high-water mark—that place where the wave finally broke and rolled back."

- Hunter S. Thompson

The Kondratieff Wave chart below, prepared by the Long Wave Group, gives some food for thought.

"And with the right kind of eyes you can almost see the high-water mark—that place where the wave finally broke and rolled back."

- Hunter S. Thompson

The Kondratieff Wave chart below, prepared by the Long Wave Group, gives some food for thought.

Spreads were broadly wider in the US as all the indices deteriorated (despite modest tightening all day from gap wider opening levels). Indices generally outperformed intrinsics with skews mostly narrower as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.

In an early precedent of Bank Failure Friday (and a LOT of work for the CNBC green shoot spin doctors for early Friday am consumption) BankUnited just expired, in the largest blow up of a bank to date in 2009. The bank will be "sold" to Carlyle, Blackstone and WL Ross. But why should Carlyle et al "pay up" for the asset when they can get Sheila Bair to use taxpayer money to backstop the entire sale for them. And when we are talking $12.8 billion in assets, it surely is much better to get Joe Q. Sixpack to make sure you (Wilbur Ross et al) don't have any risk exposure.

Some volumetric observations: the chart below demonstrates a "cumulative volume divergence from average" histogram. Recently, on up days, the volume has been significantly below average, and yet accelerates above average on down days. Another observation: on down days, the VWAP for the SPY is the magical barrier that simply refuses to be breached. Today for example, the ramp into the close occurred despite that the volume pushing the SPY higher was again below average toward the end of the day.

Some volumetric observations: the chart below demonstrates a "cumulative volume divergence from average" histogram. Recently, on up days, the volume has been significantly below average, and yet accelerates above average on down days. Another observation: on down days, the VWAP for the SPY is the magical barrier that simply refuses to be breached. Today for example, the ramp into the close occurred despite that the volume pushing the SPY higher was again below average toward the end of the day.

Some volumetric observations: the chart below demonstrates a "cumulative volume divergence from average" histogram. Recently, on up days, the volume has been significantly below average, and yet accelerates above average on down days. Another observation: on down days, the VWAP for the SPY is the magical barrier that simply refuses to be breached. Today for example, the ramp into the close occurred despite that the volume pushing the SPY higher was again below average toward the end of the day.

Some very fitting words from Mike Cembalest of JPM, putting the Green Shoots theory, and the irrational exuberance of the past 2 months, in perspective (highlights added).

Ah, the 3:30 PM Volume Spike. Like a well wound Patek Philippe. 2.1 million SPYs traded to the dot.

Ah, the 3:30 PM Volume Spike. Like a well wound Patek Philippe. 2.1 million SPYs traded to the dot.

Ah, the 3:30 PM Volume Spike. Like a well wound Patek Philippe. 2.1 million SPYs traded to the dot.

I am happy to report that up to this point, over 1,400 signatories have endorsed the Fed Transparency petition.

Importantly, earlier Rep. Raul Grijalva (D-AZ) has signed on to cosponsor H.R. 1207. Rep. Grijalva brings the total of Democratic cosponsors to 30. There are 136 Republican House members already cosponsoring the bill, and 218 votes are needed in the House for passage.

California is on its own. At least that is the conclusion based on Tm Geithner's earlier statement that TARP cash can not be used to bail out the Golden (or any other) state.

The spread between the 10 Yr UST and the 30 Year current coupon mortgage index has collapsed to the tightest level in 2009. If the selloff in 10 Year bonds continues for another 68 bps (at this rate that would be achieved in about 3 hours), it will be cheaper to finance a mortgage compliments of bankrupt Fannie and Freddie, than to issue US Sovereign debt.