Archive - Aug 2009

So now you know how "best of breed" 175/75 funds have been performing in this irrationality-driven market.

An article in yesterday's Advanced Trading magazine, written by Pipeline executives Fred Federspiel and Alfred Berkeley, which was supposed to extol the virtues of HFT (or of the Pipeline product offering specifically, we were a little confused on that issue), ended up doing anything but, and in fact confirmed many of the concerns voiced with regard to high frequency trading in the blogosphere and in other venues.

With all eyes glued to the Michigan numbers yesterday which were supposed to start another recursive market spike, most pundits failed to notice the much less cheerful ABC consumer comfort index which was virtually unchanged, and in fact the buying climate assessment indicated a deterioration.

As the market continues on its steady path to the stratosphere, first it became apparent that pension funds did not participate in the run up due to their significant reduction in equity exposure around the March max pain. What might come as more of a surprise is that according to the HFRX GlobalHedge Fund Index (HFRXGL), even hedge funds are broadly underperforming the rally. Which is why aside from various Reuters articles claiming the contrary, hedge funds are mostly on their toes regarding their staffing decisions, as many funds are dealing with disgruntled investors who are confused why they are paying 2 and 20 for levered positions in equities when they could have generated better returns outright.

• July durable goods ex-cash for clunkers up 0.8%, a decline from June. Also, the inventory pick up mirage continues being just that: inventories declined $2.7 billion or 0.8 percent to $314.1 billion. (US Census Bureau)
• Senator Edward Kennedy dies after battle with cancer (WSJ)
• Swiss response begins: Swiss private bank Wegelin announced it will stop doing business in the United States (Swissinfo, h/t William)
• AFP interviews the one-man regulator Harry Markopolos (AFP, h/t Eric)
• China to impose curbs on overcapacity in steel, cement (Bloomberg)

• Asian stocks gain on strong Chinese earnings, US Consumer report.
• Euro approaches 11-week high on signs global recession abating.
• Homebuilders buy land after 3 years of selling as US demand returns.
• Oil advances before report forecast to show that U.S. inventories declined
• South Korea Consumer confidence rises to 7-year high on state spending.
• US consumer confidence, Home prices exceed f'casts in sign of recovery.
• US deficit revised to a record of nearly $1.6 trillion for fiscal year ending Sept. 30.
• US Postal Srvcs offers buyouts to thousands of employees as it faces financial losses.

Long term Treasury yields have not discounted the economic recovery, and in fact, yields on the 10 year Treasury have a high likelihood of heading lower. Equities have discounted a strong economic recovery. This divergence won't persist for long.

Westfield, the world's largest mall operator, announced results earlier today, which demonstrated substantially accelerating real estate writedowns, primarily in the US. For the six month period ended June 30, Westfield announced $2.5 billion in property revaluations, after posting $2.6 billion in comparable charges for the entire 2008 year period: the company is finally marking its asset book to something vaguely resembling reality.

Luckily, the man sees reason and is willing to recant his anti-fiatsco blasphemies, and repent at the one, the true, Church of St. Ben and The Martyred Dollar. The previously scheduled ritualistic lashing by the CNBC decabox has been indefinitely postponed.

I think that in the environment we are heading in, there will be a premium placed on liquidity. Long gone are the days where you tie up your money for ten years in private equity or accept lock-ups of three years with some hedge fund (some are stupid enough to do this).

"Whatever this chain of vague expressions may mean, if it is intended to suggest that Bank of America settled this case to curry favor with the SEC or to avoid retaliation by the SEC, the Court needs to know the specifics." - Judge Jed Rakoff

"The fundamental problem is that conflicted ratings have and are causing massive harm to investors and now, unfortunately, to the American taxpayer as well. The current credit crisis might cost taxpayers $23.7 trillion according to the TARP reviewer Neil Barofsky and inflated ratings are universally cited as one of the primary culprits in this collapse of the credit markets." - Sean Egan

"Dear SEC - continue abusing the public's increasingly declining patience with your lack of integrity and inability to prosecute those at fault for the current crisis at your own peril." - Tyler Durden

It is the esteemed Treasury Secretary's opinion, that anything that has to do with demystifying why the Fed is hell bent on destroying the US dollar, killing the middle class, and allowing Lloyd Blankfein to purchase Larry Ellison's yacht collection, is squarely in the "problematic for the country" camp. Never mind that more than half the country (in fact almost two-thirds) have indirectly voiced their support for HR 1207. But at least it is good to know where Geithner's allegiances lie, and even better to see how good at totally perverting facts (not just taxes) the SecTres is.

In a sign that the REIT market may surprisingly lose its invisible bid, the primary beneficiaries of the IPO pump and dump game, namely Merrill and Deutsche, have announced they are deferring their underwriting fees for REIT IPOs "after buyers balked at the deals" (one doubts Cohen & Steers is part of this group of balkers).

In a stark example of how it "should" be done, the recently terminated cash for clunkers subsidy for overleveraged US consumer to purchase Japanese cars, has allowed companies such as Toyota, Honda and Hyundai to push forward a significant amount of their sales, while relying less on the back end of their production curve. Indeed, as Detroit News recently reported, of the five majorbeneficiaries of Cash for Clunkers, 4 were Japanese cars, with Toyota representing 19.2% of all cars sold under the program. And now that they got their sales out of the door, they are winding down capacity.