Archive - Jun 2009

Strange day, with VWAP reversion ruling on no volume as has been the norm over the past 3 months.

Liquidity was so hard to come by that 2,000 bps TICK swings were almost a norm in the second half of the day, yet the SPY closed virtually unchanged.

Strange day, with VWAP reversion ruling on no volume as has been the norm over the past 3 months.

Liquidity was so hard to come by that 2,000 bps TICK swings were almost a norm in the second half of the day, yet the SPY closed virtually unchanged.

Spreads were mixed in the US with IG marginally worse, HVOL a smidge wider, ExHVOL weaker, XO wider, and HY rallying (as intraday ranges were generally half their average levels).

Much like our President who earlier announced he had quit smoking, with the exception of inhaling the occasional pack every time the mortgage spread passes 100 bps or gold gets close to $1,000. Deep thoughts from the SPARC-tamer himself. Oddly absent is a discussion of stochastic processes involving the massive loss of capital for LPs caught on the wrong end of a huge high-beta short squeeze.

It was only three months ago when people assumed that the turnaround in BLS' metric for mass layoff events meant an end to something or another. Nope. For the third straight month both mass layoff events and initial claimants for insurance picked up. There is nothing even remotely optimistic about this data... Which probably explains why unlike March when CNBC filled an entire day discussing this brand new datapoint that none of the anchors had heard before, today one would not hear a peep out of them on it. Next month: the 6 month MA gets surpassed on both indications.

It was only three months ago when people assumed that the turnaround in BLS' metric for mass layoff events meant an end to something or another. Nope. For the third straight month both mass layoff events and initial claimants for insurance picked up. There is nothing even remotely optimistic about this data... Which probably explains why unlike March when CNBC filled an entire day discussing this brand new datapoint that none of the anchors had heard before, today one would not hear a peep out of them on it. Next month: the 6 month MA gets surpassed on both indications.

No, not with regard to who can put more money into struggling Hell's Angels' favorite company Harley Davidson, or who can launch another failed bond wraparound insurance company... No, we are talking Becky Quick of course, who somehow has a knack for attracting males 2-4 times her own age.

The toxic grabfest is ending. This is best seen by the inversion in the secured/unsecured classes. While the loan universe moved 9 bps tighter over last week, the slow HY bus is still trying to load up on those Neiman Marcus bonds, hoping to see this piece of paper get taken out at par. Here's a hint - it won't.

Market tests are useful as they best indicate just what is the real value of hundreds of billions of distressed securities stripped away from any unwarranted optimism and green shoot propaganda. Today's Visteon CDS Auction was just one such test.

Market tests are useful as they best indicate just what is the real value of hundreds of billions of distressed securities stripped away from any unwarranted optimism and green shoot propaganda. Today's Visteon CDS Auction was just one such test.

The high/low beta stratification seems to have finally worked out for RIEF, although likely too late as anxious investors have said "basta", and also just in time to watch RIFF get annihilated with a -7.79% absolute (ly disastrous) performance MTD. No surprise all fees there have been waived. At this rate of decline the "Futures" Fund certainly has no future. How a "slow-trading, global futures and forwards fund" can lose money in this environment when even Joe Sixpack's makeshift garage quant operation has realized the pattern is to buy futures all day and sell them at 3:59:59 is simply beyond comprehension.

• Asian stocks rose, led by automakers and financial companies,
• European Central Bank’s Ewald Nowotny said the bank is likely to keep interest rates steady.
• European stocks fell as the World Bank said the global recession will be deeper than it predicted in March
• Federal Reserve is considering creating a utility to replace the Wall Street banks that handle US repo market transactions.
• German business confidence increases in June, signaling an end in recession.
• Unemployment and consumer debt are reducing home ownership by would-be buyers.
• US airlines get thumbs down from frequent travelers.
• World Bank predicted that the global economy will shrink 2.9% this year.
• Carlsberg A/S is close to selling its brewery in Braunschweig, Germany.

• Wallgreen's conference call: Consumers shopping closer to payday, saving more, using less credit
• Insiders apparently don't watch CNBC, don't smoke greenery, as they sell shares at fastest pace in two years (Bloomberg)
• The truth - Nobody has any idea what is going on: World Bank, Roubini see pain, IMF, Soros see recovery (Bloomberg and WSJ)
• And... World Bank cautions against recovery talk - does this mean 10 year sabbatical for CNBC (Telegraph)
• Once a $250 billion company, Nortel set to generate less than $2 billion for its assets in liquidation (WSJ)

A lot has been said recently over the much-maligned traditional rating agencies: S&P and Moody's. The rampant conflicts of interest over the past decade which everyone on Wall Street was all too aware of, somehow were a shock to politicians such as Barney Frank. In fact these very conflicts have been proposed to be the root of the credit and mortgage crisis (one can see how that is not a futile argument: if an excel workbook crashes your PC if you try to assume declining housing prices someone should have raised a red flag somewhere). Of course, that is a naive conclusion but not entirely without merit. In fact, odds are that the next time the market swoons by 40-60%, Barney Frank will refocus populist anger at exactly these rating agencies which have so far managed to escape relatively unscathed.

Bloomberg out with an article disclosing what every "tinfoil" hat wearer has known for a long time, namely that it was precisely Goldman's collateral extractions out of AIG that were the cause for the firm's collapse, and the ensuing financial catastrophe that to this day has been propped up only thanks to the US government's backstop of nearly $10 trillion in various worthless assets.