Archive - Jul 2009

Not sure if this is a compliment to Dennis, for front-running the intellectual titans over at Merrill Lynch, or to Merrill, for agreeing with DK.

• EU launched a probe into a Belgian state subsidy.
• EU to take Austria to court for not demanding repayment of hidden subsidy linkedto bank sale.
• Geithner will aim to reassure Middle East investors.
• Retail sales for June up .6%; PPI up 1.8%, more than expected.
• Singapore’s economy grew 20% in the second quarter --first time in a year since

One of the least understood concepts on Wall Street - Value At Risk aka VaR. For a good practical example of what happens when it goes ballistic, see the Goldman Press Release. And for some observations on why VaR could be the latest black swan-in-waiting, as well as for a much more in depth overview of liquidity, especially as it pertains to lack of diversity, please read the attached presentation out of the Professional Risk Managers' International Association.

As if anyone expected less than one of the most ridiculous beats ever. Notable: VaR hits what looks like another record high at $245 million, higher by $5 million from the last March record. One can barely hold their breath to see the number of $100 MM+ trading days in the quarter.

From GATA's Adrian Douglas:

In the Middle Ages alchemists toiled in vain to transmute lead into gold. One wonders why they used such an expensive starting material, such as lead, when modern alchemists in the gold
world have succeeded in transmuting paper into gold. This article reveals the anatomy of a scam
that has been perpetrated on investors and goes a long way to explain and tie together
developments in the precious metals markets in recent years.

The TRW game of ping-pong continues. Otherwise, some insignificant tightening across the board.

CDS market investigated by U.S. Justice Department (Bloomberg)

Geithner says global economy faces setbacks (Bloomberg)

Budget deficit tops $1 trillion for first time ever, set to hit $2 trillion this fall (Wells Fargo and WSJ)

German investor confidence falls (Bloomberg)

BlackRock earns at least $71 million for managing taxpayer money (Bloomberg)

The man who made the Black Swan a household item, provides some literary insight.

Just when people were convinced that the ongoing SEC investigation up in Stony Brook may forever end the good old cash exuberant days, where quantum physicists and voice pattern recognitionists somehow generated billions in P&L, Jim comes out and surprises everyone with a RIEF performance of up 0.88% MTD (excluding today's trading, one imagines). Oh, and he seems to enjoy patronizing all non-quant RIEF investors.

Just when people were convinced that the ongoing SEC investigation up in Stony Brook may forever end the good old cash exuberant days, where quantum physicists and voice pattern recognitionists somehow generated billions in P&L, Jim comes out and surprises everyone with a RIEF performance of up 0.88% MTD (excluding today's trading, one imagines). Oh, and he seems to enjoy patronizing all non-quant RIEF investors.

When I did the first of my Random Walk series, I focused exclusively on the empty storefronts in Manhattan's Madison Avenue Gold Coast area. It was enlightening to many to see just how deep into the heart of the monster the CRE collapse had cut. However, unless you look at the commercial real estate apocalypse unraveling in Central and Eastern Europe you ain't seen nothing yet.

Expanding on Cornelius' early piece on China, here is an analysis out of some BNP quants who for one reason or another are convinced the end's in sight. For those who are forgot where they put their Ritalin, here is the punchline:

"By the very nature of the model, this result gives us two conclusions. Firstly, there exists a bubble in the Shanghai Composite Index. Secondly, it will reach a critical level around July 17-27, 2009. This will lead to a change in regime which may be a crash or a more gently bubble deflation. An extended version of this note, with a careful assessment of the confidence intervals and comparisons with the previous Chinese bubble ending in Oct. 2007, will be released soon."

Another educational clip out of FORA TV, this time Dan Ariely, a professor of behavioral economics at Duke University, presents examples of cognitive illusions that help illustrate why humans make predictably irrational decisions - lately that would include purchasing stocks.

Client-User interaction doesn't get any more appropriately informative than this.

To all who think the pushing, shoving, rudeness and lines of Eastern Europe are bad, I suggest checking out the local airports on a Monday night (where ironically there are more Eastern Europeans than in Eastern Europe).

Downloading some amusing pics now for your enjoyment.