Archive - Jul 2009

Rep. Cliff Stearns not heart GS

If you have had your fill of Rosie for a while (not sure how that is possible, but a big hypothetical if), here is a wonderful piece by Hoisington Investment Management Company. Some great monetary and fiscal insights. Also lends credence to the theory that Gross very well may be spot on and the market is run by a bunch of herd-instincted, CNBC watching WOPRs (at least on the basis of upcoming deflation).

From The Fourth Branch Of Government's Secular Outlook, Interest Rate Strategies:

With Treasury yields near the top of our expected range, PIMCO plans to overweight duration and take exposure to the 5-to 10-year portion of the yield curve. However, consistent with our Secular Outlook, we plan to also retain an emphasis on the short end of the curves in the U.S., Europe and the U.K. as central banks are likely to tighten more slowly than markets expect.

Sure, that 10 year at 3.6% is such a bargain. So let me get this straight, equity markets are planning for near hyper-inflation yet Bill Gross is happy to lock in current inflation levels. Presumably someone is wrong: here is our guess who.

The VIX is hell bent on demonstrating it can go back to under 10 even as bond vol keeps on calling its bluff. However, someone keeps selling vol in wholesale amounts and reraising all in (the 5th round has been, of course, with taxpayer money) on stable market bets despite all fundamental signs to the opposite.

CNBC seems hell bent on clarifying what liquidity is. Oddly there was no commercial for JPM's Highbridge or Sigma X to follow the segment. Charlie - one sympathizes with having to butter up Van Praag. However, as you are digging into the other side of the story, can you ask your buddy Lucas just why is it that Goldman had to get a Fed VaR exemption and go with the toothless SEC as its risk regulator. This would make for some truly insightful reporting.

Spreads were tighter in the US as all the indices improved (with HY at new contract highs but IG staying wide of its tightest levels as the S&P closed at 2009 highs - although VIX is massively lower than the 60% levels last seen when SPY was here). Indices typically underperformed single-names (as a late day pick up in single-name activity suggest some index arb flows at play) with skews mostly narrower as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew.

Thought provoking

Whoever is buying up stock today, sure ain't reading Moody's most recent REAL Commercial Property Price Index Report. Then again, robots aren't paid to read, they're paid to lead.

- CRE falls 7.6% in one month (May), on top of the 8.6% decrease for the previous month.

- Now -28.5% YOY and -34.8% from peak (October 2007).

- Transaction volume slows to its lowest level yet.

CDS:

Citi and BofA tighter by 26bps and 15 bps to 318 and 150bps, respectively.

Equity:

Citi and BofA down by 8% and 6% to $2.77 and $12.14, respectively.

Is capital structure arbitrage, gasp, back? Holy pair trades are again in vogue, Batman. Makes sense, especially with US Sovereign CDS slightly wider even as Goldman is providing gobs of liquidity to today's market as usual (i.e., equities up, up, up).

Charlie Gasparino's recap of his behind the scenes meeting with Van Praag - apparently Goldman's most recent noble cause: "Providing liquidity" and their "proclivity for electronic trading."Odd... So odd.

The broader market now tracks every (inverted) move in the DXY. Bernanke has achieved his quest - the rest of the world (and America itself) perceiving the US and its market as a commodity. Is anyone stupid enough to be hiring fundamental analysts these days?

Recently, the Congressional Oversight Panel announced that based on the currently accepted process the Treasury has adopted for banks to repurchase TARP warrants, the ultimate "recovery" to taxpayers would be 66 cents on the dollar. In other words, using the top secret, private method that the Treasury has signed off on, taxpayers are impaired once more even though the banks that repurchase their TARP warrants are presumably so healthy, that their EPS ebulience is supposed to drive the market higher and higher each day. How much longer will Joe Q Public have to suffer while Wall Street once again goes back to its habits of hitting the LIE for the 7 pm Southampton dinner date 4 out of 7 days a week. Apparently as long as the 401(k) is still up for the day compliments of "justificatory" drivel pouring from GE subsidiaries, the public is more than happy to be abused day in and day out. So what happens when reality finally sets in?

A comical piece was aired on CNBC this morning, which was similar in composition to horse manure. Take a look at this video right here. Does this guy have any idea what he is talking about?

It almost takes you back.

Andrew Horowitz of the Disciplined Investor conducts a very informative interview with the (in)famous Matt Taibbi, touching on such broad topics as the economy, CIT's bankruptcy, earnings, program trading and of course Goldman Sachs. A much better way to spend 45 minutes instead of watching the high-pitched talkings heads in the octobox.

Interview link (and also check out Andrew's website: he has many other great interviews with the likes of Mish Shedlock, Kevin Depew, Dennis Gartman, Brett Steenbarger and many others).