Archive - Jun 2009

Total short capitulation: that's the best way to describe what happened in the loan/bond universe during the last week. The only bond that widened was that of Aeroflex. Continued tightening in retailers and auto names has gone on beyond stupid-pill levels and officially entered the bizarro twilight zone: TRW bonds tighter by 400 bps, with both Sealy and Neiman Marcus tighter by roughly 300 bps.

Total short capitulation: that's the best way to describe what happened in the loan/bond universe during the last week. The only bond that widened was that of Aeroflex. Continued tightening in retailers and auto names has gone on beyond stupid-pill levels and officially entered the bizarro twilight zone: TRW bonds tighter by 400 bps, with both Sealy and Neiman Marcus tighter by roughly 300 bps.

• Airlines may lose $9B in 2009, double previous forecast, IATA Says
• Airlines say wait for Airbus directive on A330
• Ailysys Q4 loss widens to $113.8M on goodwill write-off. Revs down 20% at $155.5M.
• American International Group Inc. has disclosed deals to sell assets of $6.6B since bailout.
• Analogic Q2 earnings fall 66%; sees 2 more weak quarters.
• Barclays Plc is in talks to sell Barclays Global Investors
• BlackRock said to be frontrunner for $10B Barclays Global Investors.
• Fink aspires to be no.
  

• Corporate profits diluted 4% by U.S. share sales, dividend cuts (Bloomberg h/t root)
• HSBC unit to stop financing for investors in hedge funds (Bloomberg)
• Gorgon Brown faces revolt after poll thrashing (Reuters)
  

Update 1: Chrysler just filed its response to the Indiana appeal. The biggest variable here is the value that Chrysler assumes the first lien lenders would attain in a liquidation which at $800 million, Jones Day claims would be a far worse outcome than the $2 billion the secured lenders are guaranteed under the current plan.

The Indiana Pensioners' Supreme Court Stay Appeal presented below. Oddly, on page 6 the Indiana Pension Funds have for the first time noted that their first lien holdings are $100 million, whereas in all prior disclosures they noted it was $42 million. Does this number include the Oppenheimer face holdings? Otherwise it seems like a rookie clerical error that will not help their case. Alternatively, Indiana Pensioners have been purchasing Chrysler first lien debt in the open market.

• Gordon Brown repeats vow not to go away (Telegraph)
• Airline execs say industry outlook still grim (Reuters)
• Extreme dumb money bullish sentiment (Technical Take)
• Blackrock set to become largest quant fund in th
  

The last time I discussed dark pools, it was in the context of SEC regulation due to the increasing sense of opacity of what happens in this subset of the stock market.

WSJ reporting that the White & Case windmill chase is to be finally decided, likely in less than 48 hours, and by none other than Bill Clinton nominee and recent cancer survivor Justice Ruth Bader Ginsburg.

In his daily report yesterday, David Rosenberg had some pertinent things to say about deflation, not the least of which was debunking Melissa Francis' preconception that inflation is equivalent to commodity price increases.

In his daily report yesterday, David Rosenberg had some pertinent things to say about deflation, not the least of which was debunking Melissa Francis' preconception that inflation is equivalent to commodity price increases.

RenTec up 22 bps for the first week of June, compared to 2.36% for the S&P. Maybe Simons, sick of being on the wrong side of the beta trade, has thrown in the towel and readjusted his portflio to generate the same relative beta performance as the market has exhibited, and is still failing? For how much longer?

• Must read 1: Revenge of the nerd: quants demystified (Newsweek)
• Must read 2: Learning from the great crash of 1929 (Bear Market Investments)
• Must read 3: Mauldin: The new, new normal (

[youtube=http://www.youtube.com/watch?v=vIL3fbGbU2o&hl=en&fs=1&]

Some realistic downside projections: U3: 17-21%; U6: 30-37%.

Best case scenario: U3: 14-17%; U6: 26-31%

And here is what Bernanke, and everyone else who wonders where we are headed, should be looking at: