Archive - May 21, 2009

In a research piece titled "REITs Cutting Residential Rents, Setting Stage for Further CPI Disinflation" Goldman Sachs analysts conclude that based on recent declining rent trends from residential REITs, the impact on price levels in the housing market (especially in major metropolitan centers where rent are only just now starting to unravel) will get progressively adverse, but will also feed ongoing general asset deflationary pressures, and by implication, added weakness to REIT cash flow. From Goldman:

Not only is the stock market getting hammered, but 10 Years today, and especially in the last 20 minutes have gotten the biggest beat down in months. Only the dollar is barely holding on to the green, and that is just because people are shocked, SHOCKED, that the UK may not actually be a AAA-rated credit. And the 2s10s.... fugghedaboutit - everyone is piling in short durations.

And so it begins. Rep. Alan Grayson has distributed the letter below to all Democrats in the House and will use it to generate Democratic co-sponsorship for the HR1207 Bill, aka The Federal Reserve Transparency Act, allowing the GAO to audit the Federal Reserve, and also require a Fed report to Congress by the end of 2010.

The sovereign downgrade monster is back on the rampage. Earlier today, S&P fired a blank shell straight at the heart of the usurper formerly known as the developed world, when it put UK's credit outlook on negative. The premise: debt/GDP will soon pass 100%. In that case the US should be afraid, very afraid with some estimates for the comparable ratio in the United Printing Presses of America at over 370% (including the kitchen sink).

• UAE ditched plans to join the proposed Gulf Cooperation Council monetary union.
• Oil drops below $62 in Asia as big rally pauses.
• Singapore economy shrinks 14.6 percent in 1Q.
• World markets fall after Fed sees deeper slowdown.
• Advance Auto beats by $0.10, posts Q1 EPS of $1.02 as revs rise 10.3% to $1.68B.
• AnnTaylor Stores swung to a Q1 loss of $2.3M; revs down 28% to $426.7M.
• Britain’s debt outlook lowered to negative.
• BJ's Wholesale Club's Q1 net rises 41% to $24.3M; revs up 0.2% at $2.26B.
• Cable & Wireless full-year
  

• Continuing jobless claims hit new record high at 6.7 million (AP)
• U.K.
  

Looking at the supercycle of how many ounces of gold it costs to buy the S&P, and projecting into the future, indicates that hedging by being short the index and long gold should pay off very handsomely... at some point in the 2015-2017 period. Chart 2 superimposes the current cycle with the past cycle - similarities?

• Locked out Chrysler pension fund lenders bypass Bankruptcy court, go straight to District court.

During the last bout of QE back in March, the FX markets spasmed as USD got clobbered across every major. As we noted at the time, the market did not seem to be pricing in any action on the Fed's part despite some pretty clear signals from the big guy on his internal policy decision tree.