Archive - Aug 2009

The Delaware Senator highlights his key concerns in the ongoing crusade for fixing a broken market where the shares of a bankrupt ward of the state determine the overall direction of a $14 trillion stock market.

Bloomberg's chart of the day comes courtesy of proud "TARP 4eva" badgeholder Bank Of America. Basically it says to expect another 40% rally in the markets (yes on top of the 50% witnessed already) simply because America is now the same basket case economy that Japan was in the 1990s (and continues to be today), even though as everyone will attest the connection between economic reality and market stupidity ended long ago.

Despite his erudication and spellingtude, the chairman of Cerberus Int'l was unable to save the three headed titanic. Farewell Steve Feinberg, we won't miss you and your crappy second liens.

Sure, the Fed has printed a lot. But is that enough for inflation? Money velocity is nil, and that's because the money is trapped in excess reserves, which the Fed is paying interest on until it's done with the bailouts and ready for the next inflation-fueled upsurge.

You want to earn your $1 billion budget? Start by explaning why a bankrupt company is the proxy for the S&P500!

As a reminder, The SEC's budget is nearly $913 million dollars, spread over 3,600 people, or over $250,000 per person. Judging by the SEC's phenomenal historical performance of achieving absolutely nothing aside from catching one plane-jumping self-admitted ponzier, and allowing the Bank of America bonus lawsuit to take a few too many turns for the surreal, it is a practical certainty that Wall Street will make sure D.C. allocates a few extra billion to keep the SEC happily efficient in its track record of catching exactly zero notable Wall Street based criminals. After all, that's what shareholder/taxpayer subsidized fines are for.

Also the below interview with the head of the SEC has exactly zero mention of instituting the downtick rule for buying stocks, or the fact that 4 stocks now account for 30% of the NYSE volume: a perfectly normal occurrence in the eyes of former FINRA head

"American International Group Inc.’s equity is currently worth zero, whatever manic depressive Mr. Market may say today. It is likely to remain zero based on AIG’s own analysis of its future over the next few years. In fact, its obligations to the U.S. Treasury would trade at a discount today. The only reason AIG’s stock should trade above zero today is if you believe crony capitalism will fund the birth of an AIG clone—in other words if you believe AIG’s future will be a rigged game."

All you need to demonstrate that the market moves over the past decade have been driven by nothing besides excess liquidity.

No major commentary needed... Ironically support now at yesterday's VWAP...for now - wait for the breach. Thank god for liquidity providing algos.

A new page in the fight between HFTs and everyone else was turned recently, after Adair Turner, Chairman of Britain's Financial Services Authority, said that he would consider the implementation of a "Tobin tax" on banking transactions. As a reminder, James Tobin introduced the idea of the Tobin tax in 1971, as a tax on cross-border currency trade, which at its core was meant to moderate short-term speculation in currency trading. Its latest incarnation, however, would strike at the heart of the speculative bubble that has gripped global markets.

The failure by HSKAX and HFRXEMN indices to generate any profits YTD indicates that traditional market neutral players are in peril of being markedly redeemed, or are currently in process. Who steps in to fill in the void is anybody's guess although some assumptions can be made.

So the conclusion is that it always has and always will be about the US consumer. And any concerns that China may stop purchasing US securities are, unfortunately, groundless - China can ill afford to push the US middle class into a greater savings mode, and thus will cooperate as much as it can with the Federal Reserve in keeping both mortgages (for the illusory net wealth effect) and interest rates as low as possible for as long as it can. However, this being simply another fiat-funded bubble, and due to its Ponzi nature, a much more vicious one, the second this symbiosis ends for whatever unforeseen reason, the impact on China, and by implication on the US, will reverberate throughout monetary and fiscal policies and likely result in civil unrest both in the US and China, once Walmart can no longer provide cheap garbage to satisfy the American demand for constant credit-financed unneeded products, and once the China GDP illusion of minimum 8% growth is popped, resulting in an end to the Communist-Capitalist hybrid experiment.

Total Federal Reserve balance sheet assets for the week of August 26 of $2,049 billion

• Spending increases in July thanks to CfC subsidies on less than expected consumer income (AP)
• AIG in no rush to sell stuff (WSJ, h/t Aditya)
• AIG rises and many ask why (NYT)
• AIG's swap blunder now replaying on Wall Street (Bloomberg)
• Hulbert: Rally since March has been extraordinarily speculative (MarketWacth)

• Asian stocks advance on higher commodity Prices, Dell earnings.
• Banks on the FDIC's sick list top 400.
• China’s stocks retreat, Index heads for fourth weekly decline.
• Consumer Spending in US probably climbed in July on `Cash for Clunkers'.
• Euro heads for second monthly gain versus the dollar on recovery optimism.