Archive - Aug 2009

Fannie reports on its loan book. 32% of its total is 'trouble' classes. Big losses to come.

One entertaining side effect of soon paying $4.00 for gas again while housing prices keep crashing is that bond prices will soon be very amusing. But no worries, at least that paper profit in the 401(k) which the baby boomers will soon need to start extracting is up for the day - Bernanke's Friday mission - accomplised. In the meantime, better get a whole lot of those OMO actions ready on deck.

From Goldman Sachs:

• Residential housing market continues to weaken
• Commercial real estate beginning to take center stage
• CRE equity may have further to fall or be completely wiped out
• Equity valuations driven by the consumer, with the cryptic proviso that "equity value might have downside" - no kidding
• And the best - REIT equity prices have risen... but property values continue to fall

Foreign holdings of USTs and Agencies increased by $23.5 billion monthly to $2,810 billion from $2,787 billion in the prior month. This is now less than 20% of the comparable increase in Securities Held Outright by the Federal Reserve, implying foreign purchasers are starting to fall far behind in their purchases of US securities relative to the Fed's monetization rate.

• Nonfarm payrolls down 247,000, right on top of Goldman's whisper estimate, unemployment rate now 9.4%, bonds yields explode (BLS, AP)
• Insider trading probe at SocGen cost former IB chief his job, TCW co-founder Robert Day also under investigation (Bloomberg)
• Australian workers cut work hours instead of firing (Bloomberg, h/t Aditiya)
• Jonathan Weil: Blowing up your company gets raised to art form (Bloomberg)
• It's not all golden at Goldman (Reuters)
• Goldman Sachs is (not) ripping you off (Ritholtz)

• Most major Asian stock markets move lower ahead of US jobs data.
• BoE to inject an addln $85B in new money into the U.K. economy.
• Car shoppers can purchase via $2B 'cash-for-clunkers' program through Aug.
• Initial claims for jobless benefits fell by 38,000 to 550,000 last week.
• Fewer layoffs expected in July as recession winds down, but few new hires.

At last, a couple red pills find their way on the market.

Fannie's churning derivatives as usual. About $100 billion a day. They also lost a few Bil in the process. Who's on the other side of this? Fannie's pals on Wall Street,

And the green shoot hits just keep on coming. If you wondered why FNM stock has been flying lately, here is your answer: the company's net worth has dropped below zero again.

Ironically, that pretty much explains the upward movement of all underlying stocks these days.

Why is it that people who base their opinions on facts come off significantly less amusing than the clownshoes who predict a future based on hope and personal conflict of interest bias. Watching a boring TrimTabs' Biderman debate with some guy named John Herrmann (not to mention some other "portfolio manager" named Ron Insana) who sounds like he just came out of accounting one oh one in Rose-Colored Glasses community college is simply deliciously hilarious.

In a brilliant piece of investigative reporting, Chris Martenson (original article here) has uncovered that the Fed, merely a week after issuing $28 billion in 7 year bonds (which Zero Hedge discussed previously) via its puppet, the US Treasury, of which $10 billion ended up being purchased by primary dealers, has turned and bought 47% of the primary allocated bonds in Open Market Purchases. This is undisputed monetization removed simply via one primary dealer and less than 5 days of temporal separation in order to leave no easy trace.

Yep. VWAP.

Credit Suisse's global risk appetite index is now at "Euphoria" levels, matching the highs from November 2007, and has retraced from "Panic" at the fastest rate since the October 1987 crash. Next official stage on this index: "Irrational Exuberance" although at least now it has gripped the entire market, not just tech stocks.

First the 85 Broads roll one of them out at CNBC, depositing the permabullish dinosaur Abby Cohen to preach how the bull market has just restarted compliments of the mega squeeze in AIG, FNM and CIT (in finance you are as valuable if you bat 0.000 as if you bat 1.000), and now, hot on the hells of Hatzius' upgrade to Q2 GDP from 1% to 3%, they roll out another macro bullish piece, saying July nonfarm payrolls will be up to -250,000 from -300,000 (the question of whether the 50,000 actually matters in any scheme of things, is irrelevant). Ironically, it was yesterday that Jan thought projected employment assumptions wouldn't budge. So much has changed in 24 hours.

With widely publicized stories about Goldman raking in $50 million per day, trading outfits are rushing and racing to get equipped with a Hi-Fi Robot Trading Platform.

Ran into this ad the other day, for Robot currency trading. Another "set it and forget it" program where a computer buys and sells for you, and you simply sit back and "watch the money roll in".