Archive - Sep 14, 2009

A year after Lehman collapsed, what have they learned on Wall Street? Absolutely nothing. That's pretty much what I see on Wall Street and at the large "sophisticated" Canadian public pension funds. Behind the rhetoric, it's business as usual. Who needs risk management when the markets are on fire and you're looking to shoot the lights out?

"Mr. President, I have discussed a variety of questionable practices that deserve and I hope will receive a searching examination by the SEC and by Congress. While some of these innovations have produced benefits, they have also created wide disparities between high-speed traders and average investors. We do not have a clear accounting of all the costs and benefits of these recent market structure changes... High-frequency trading, while not illegal, may operate in ways that undermine the legitimacy of our financial markets. In order to restore investor confidence, we must effectively regulate unfair performance-enhancers. We must shine a light on dark pools, conduct a searching examination of high-frequency trading strategies to ensure they are not manipulative, ban flash orders, and give regulators the tools they need to ensure that broker-dealers are acting in the best interests of their clients." - Senator Ted Kaufman

Below is a long-term chart of the S&P represented in terms of ounces of gold. The peak was in 1967, with a June 1980 trough. The August 2000 peak is 200% of the '67-'90 move. The 1967 peak was the long-term 2001-2005 flat level before legging lower. And the March 2009 trough was at the 23.6 retracement of the previous move, indicating a repeat of the same shape seens in 1973. With gold popping at current levels, will the 38.2 level be a ceiling: will the gold price pop be sufficient to hold back stock prices, or like in 1973, merely a temporary resistance as the ratio drops much further?

The President asked the banks to do 'good'in his speech today. That isn't going to work. An old story of a bad deal.

When seasonal variations are removed from the data, the results suggest that employers expect a slight decrease in the rate of hiring when compared to Quarter 3 2009. The fourth quarter Net Employment Outlook for the U.S. is considerably weaker than one year ago at this time. According to seasonally adjusted regional data, employers in the South report a slight increase in hiring expectations compared to Quarter 3 2009, while  employers in the Midwest and West expect the hiring pace to remain nearly unchanged. Employers in the Northeast are anticipating a moderate decrease and expect the weakest hiring conditions for Quarter 4 2009. Employers across all regions anticipate a considerable decrease in hiring activity compared to one year ago.

"With slack likely to persist for years, it seems likely that core inflation will move even lower, departing yet farther from our price stability objective. From a monetary policy point of view, the landscape will continue to present challenges. We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation. With our policy rate already as low as it can go, it’s no wonder that the FOMC’s last statement indicated that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” I can assure you that we will be ready, willing, and able to tighten policy when it’s necessary to maintain price stability. But, until that time comes, we need to defend our price stability goal on the low side and promote full employment. Thank you very much." - Millions of unemployed Americans thank you Janet

As set forth above, we cannot simply accept Bank of America's officers' bald assertions that their decisions to keep each of these material events from Bank of America's shareholders were based on a full review of all the relevant information by their inside and outside counsel. The law is clear that Bank of America and its officers cannot assert an advice of counsel defense for their decisions, and at the same time persist in refusing to disclose the substance of the conversations with counsel. Accordingly, we request that Bank of America reconsider its decision to prevent this Office from adequately probing these crucial issues. We provide you with this final opportunity to reconsider. Otherwise, we will proceed with our charging decisions without giving credit to the advice of counsel defenses that Bank of America has not permitted us to test.

- From The Office Of NY Attorney General, Andrew Cuomo

In a note released earlier by Raymond James, the author Jeffrey Saut does all in his power to explain not only why Treasuries are a bad bet (inflation is a-coming), and why the market will continue ramping higher, but ironically, why, even as the author submits by calling his piece "When the music stops" that all equity market participants have entered into a bubble frenzy, the market will simply continue going higher, period. As a reminder, comparable notes were a dime a dozen just before the dot com bubble popped. Of course, nobody will care to stake their reputation on calling when this bubble, which everyone now acknowledges it for what it is, will end. However, Saut does provide some astute observations on the career risk that has gripped most portfolio managers, the majority of which have, not surprisngly, not participated at all in the current rally. We would add, a comparable career risk now permeates among the analyst community which has all now gotten on the bull bandwagon, as nobody is willing to call a spade a spade, for fear of angering some of the larger accounts or superiors, for being a contrarian in a market that swiftly silences all objecting voices as it pursues new irrational highs.

Turned on CNBC this afternoon and saw Maria "Octomom" Bartiromo screaming and screaching about how GE stock broke out because "technicals do matter".

Inflation is a possible but not a guaranteed outcome of what is taking place in the economy today. Deflation or a muddle-through economy with very low nominal growth are possible and probable outcomes.

Zero Hedge suggests readers send Ken (and probably Hank) some "Sleep Well At Night" cards.

"As a country, we must demand that our politicians stop serving those whose business models are based on systemic theft and start serving those who seek to create value for others -- the workers, innovators and investors who have made this country great." - Dylan Ratigan

"Commission staff is also reviewing other market structure issues, including Regulation ATS, direct market access, high frequency trading, and co-location" - Mary Schapiro

In a sign of just how eager all foreigners are to piggy back on the US' premeditated destruction of the dollar, Germany has just issued $4 billion in three-year dollar denominated bonds.

With nobody believing anything that comes out of CNBC these days, The only reason to watch the GE subsidiary it seems is for these rare occasions when Rick Santelli lays the smack down on Steve Liesman, and on occasion, goes against the whole propaganda grain (not our words).