Archive - Aug 2009

• Jobless claims rise by 15,000 to 576,000 (Bloomberg), even "as the economy stabilizes"
• SEC plays keep-up in high-tech race (WSJ)
• Germany braces for second wave of credit crunch (Telegraph, h/t Jake)
• Andy Xie: New bubble threatens a V-shaped recovery (Caijing, h/t Yaser)
• Jonathan Weil: Insurers' biggest writedowns may be yet to come (Bloomberg)

• Appliance makers counting on "cash for clunkers"-type rebate program to revive sales.
• Asian stock markets were mixed on Thursday. Shanghai's index rebounds 2.1%.
• China's first-half current-account surplus reported down 32%.
• Crude oil futures hit 2-month high as US inventories fell unexpectedly by 8.4M barrels.
• Democrats prepare to go it alone on health care overhaul without GOP support.
• GDP in OECD countries stabilized in Q2, with support from exporters Germany, Japan.
• Obama administration to cut 2009 budget-deficit estimate to $1.58 trillion.
• Obama administration developing plans to wind down clunker rebates program.

For the next dozen years or so, the U.S. stock market will be a wild roller-coaster ride—setting all-time highs and multi-year lows in the process. While the twists and turns of this ride are still to be written by history, the long-term, sideways “range-bound” trajectory has already been set by the eighteen-year bull market that ended in 2000.

"The worst outcome for China would be one that includes ever-rising inflation pressures, as money and
credit flows augmented by “hot money” capital inflows push the inflation rate up to a level that threatens China’s stability. Since that would be most likely under a scenario in which industrial economies are not recovering in the second half of the year, we could see a situation in which disappointment over the recovery in the big three economies coincides with disappointment about the sustainability of China’s planned 8 percent growth path. That outcome would coincide with a likely bursting of the stock and property market bubbles that are inflating in China now on the hopes that a second-half recovery will validate China’s goal of sustained 8 percent growth in 2009."

Much has been said about Goldman Sachs by articles like the one Mr. Matt Taibbi wrote and published by Rolling Stone on July 2, 2009 - “Inside the Great American Bubble Machine”. But most have not heard about Goldman Sachs involvement in the initial public offering (IPO) of Baidu (BIDU) and the subsequent BIDU share price movements back in 2005 and 2006.

All you need to know about how the markets operate these days, courtesy of Nic, an analyst at ICAP.

Archive this one for the funny pages. It has been leaked by administration officials (and sponged up by Bloomberg), that on August 25, when the CBO releases its updated budget estimate, the 2009 deficit is expected to decline from $1.825 trillion to $1.58 trillion. And, get this, one of the reasons for the reduction is the FDIC spending $78 billion less, presumably due to "fewer bank failures than the administration anticipated." Pardon us, but last time we checked, not only did the FDIC have no cash left in the FDIC, and was effectively in a debtor position vis-a-vis the administration, but of the top 4 banks pending for blow up, Colonial was under (granted with some arbitrarily optimistic loss expectations), Guaranty was about to be hawked over to a few siesta loving left midfielders, and Corus was about to... well, we are not quite sure what the hell Corus is doing these days.

Spreads widened in general today in the face of a surprisingly resilient US equity market as overnight saw more Asian angst and dollar doldrums. HY underperformed IG but both were wider as indices underperformed intrinsics and low beta underperformed high beta. Intraday ranges were wider than average in IG and HY today but both closed much nearer their wides than tights, as stocks closed at their highs. HY's resilience yesterday (following the AXL debacle) seems to have run its course with both IG and HY now wider on the week. IG and HY are both significantly wider than their Friday closes and Monday opens whereas the S&P seems modestly worse than Friday's close but considerably better than Monday's open - infer what you will.

Two months ago Zero Hedge first wrote about Alan Grayson's request to the SIGTARP to audit the $300 billion in federal guarantees received by Citigroup. Neil Barofsky has taken the request seriously, and has announced that he will "examine why the guarantees were given, how they were structured and whether the bank’s risk controls are adequate to prevent government losses."

One would think that with an almost 18% unemployment rate the Spanish have enough problems, right? Wrong. According to Bloomberg the winning (and highly subsidized) bidder for Guaranty is BBVA (Banco Bilbao Vizcaya Argentaria SA), Spain's second-largest bank by market value (probably not saying much).

Another brutal selloff in the Shanghai last night left many retail stock speculators (aka Pai Gow players) stunned and in shock, frozen with fear.

When you are TheHedgeFund, this is likely the easiest way to pay for bonuses.

A new monthly report released by the New York State Comptroller indicates that the tax collection weakness in Empire State continues. For the April-July quarter total tax revenue was $11.5 billion, $52 million below projection, and, more significantly, $3.6 billion below amount collected in the prior year period. For the Year To Date period, receipts, including transfers from other funds, through July 2009 of $15.7 billion were $190.9 million below Financial Plan projections released by DOB on July 30 and $4.8 billion lower than last year for the same period.

The Shanghai Composite at a major technical crossroads

The big question - "Why Now?" (is it because we have a big deficit) is strategically left unanswered.