Archive - Jul 2009

Richard Ripp compares top-down to bottom-up estimates and concludes that top-down estimates have proven to be more accurate over time.

From GX Clarke

What exactly is an indirect bidder?

This question used to be fairly easy to answer. An indirect bidder was one that did not trade with Primary dealers and dealt directly with the Fed at auctions. That's the kind of quirky funny twist on language that would draw the ire of a George Carlin, "So an IN-direct bidder Bids
Directly. Hmmmm."

GE Capital, aka the next CIT, is practicing its recently acquired hypnosis skillset (perfected via daily lessons from CNBC anchors) which has culminated with a 63 page presentation replete with far too much empty verbiage and green shootery.

The take home message:

• H1 Net Income has plunged to $1.7 billion on $557 billion in total assets, and only thanks to firing pretty much everybody: $1.9 billion in SG&A savings
• This is down $24 billion from Q4 as GECC is "continuing to rapidly reduce balance sheet"
• Loss reserves are skyrocketing: currently at $6.6 billion, up one billion from Q1
• 2009 TY original outlook: $5 billion; Fed base case: $2.0-$2.5 billion, Fed adverse case: $0
• How many more people can GECC fire as its balance sheet implodes?
• Oh yeah, and if CRE really blows up, CIT, here we come
  

• Asian stock markets move mostly in a tight range after their string of recent rallies.
• CFTC report to blame speculators responsible for driving oil-price swings.
• Coal producers cope with sluggish demand
• Crude Oil trades near a three-week high after gains in equities markets
• SEC firms up plan to limit short sales of stocks.
• AIG unit keeps $2.4B from asset sales as taxpayers wait for payment

• Must read: Arizona set to implement recourse mortgages - this could be the beginning of the end (Housing Doom, h/t Credit Trader)
• Congratulations Ben - you have succeeded; dollar reaches 2009 low (Bloomberg) (yet less than $90 billion in foreign liquidity swaps left to pull... then what?)
• And here's to a healthy Euro: Lithuanian economy shrank 22.4% in Q2 (Bloomberg)
• High frequency traders say speed works to everyone's advantage (Bloomberg)
• Judge Drain does not lead to the sewer, stands up to pressure and follows arcane, little-appreciated thing known as the law: leaves Platinum Equity in the cold on Delphi (AP)

Surprised? While the out-of-work scramble to find jobs, State government agencies and politicians are spinning on how many jobs are created under the stimulus plans.

Fundamentals got you down? Worried that 19 year old kid with the trigger reflex, trading breakout chart formations and a stratospheric P&L will replace you any day now (especially if you are an expert on "finding good jobs in tough times")? Better use up all those TV-spots while you got them to hit on pretty, barely legal University of South Carolina anchors.

(At 2:25 am in the morning, a little levity is allowed: there is at least 7 hours before the short squeeze rips again.)

Has to be seen to be believed

Yes, that's 585%. No comment needed

Spreads were tighter in the US as all the indices improved (with HY and IG back to early SEP08 levels on an adjusted index basis). Indices typically underperformed single-names (as despite the late day surge to new tights in IG, we heard more single-name protection buying hedged via the index) with skews mostly narrower as IG underperformed but narrowed the skew, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew.

The NY Times describes a new breed of bad creditors, "Ruthless Defaulters". Ruthless or just fed up and angry? What is the 'tipping point' where default crosses over to repudiation?

A phenomenal graph from Sean Keane at Triple T Consulting showing commercial real estate loan proportions of Tier 1 bank capital across the US...

Enough, already.

Floyd Norris at the NYT is excited about the Index of Leading Economic Indicators. Let's peek under the hood to see what's going on.

Hey Ron, didn't realize your new position as a contributing editor on CNBC came with the contributing title of "Portfolio Manager." Didn't Stevie put a one year kibbosh on that? But I digress... And in all honesty I am surprised that you seem to have the correct spin on things (as per letter below from Jim Cramer's failed media experiment TheStreet).