Archive - Sep 16, 2009

Thousands Of Rusting Ship Hulls Are A Fitting Tribute To The Speculative Market Bubble

The Daily Mail recently made waves with a photo exposing what it called the "ghost fleet of the recession" where hundreds of ships were shown on anchor off the straits of Singapore, doing nothing except rusting: a tribute to the unprecedented collapse in world trade and the huge amount of excess slack in shipping. Yet a further analysis demonstrates that such "islands of disuse" have become prevalent globally, with virtually every part of the world now impacted by the unprecedented drop in seaborn traffic. We present the results.

Corporate Steepener Trade Breaking Out

The CDX IG12 5s10s curve has just hit a high since the March lows, following to the equity market drum beat. The popular flattener trade has now unwound as more accounts start shifting into corporate steepeners. As we have noted in the past, IG new issuance has likely peaked, and in the face of dropping new commercial paper issuance, the supply overhang is muted, forcing managers to play with the corporate curve. The 5s10s trade was one of the most popular ones in the halcyon days of late 2006 and early 2007. With near-term refi risks effectively eliminated the corporate steepener seems the place to be, especially as equities continue indicating heightened inflation pressures, yet contrary to what the Treasury market demonstrates. Nonetheless, the upcoming roll in CDS should be one to watch.

Vanguard Discusses The Number One US Export: Jobs

A candid view at how US unemployment has been outsourced over the ages. Coupled with the jobless recovery, this presents the bull case on the US' most recent incarnation as the latest addition to the United States of China.

The Market Is Now Parabolic Ahead Of Debt Ceiling Deliberations

Too bad the Fed's PR person can not disclose just how effective it has been in orchestrating a virtually straight line move in the market over the past two weeks. Zero Hedge sympathizes, and as debt ceiling deliberations are coming up, the Fed needs every favorable media mention of the deadly precision it has exhibited in enhancing consumer confidence, raising 401(k) book profits, and singlehandedly allowing corporate insider selling to outpace buying by a factor of well over 30x. After all with the dollar's value soon hitting zero, the Chairman is doing the middle class a favor by transferring its funds out of its pocket into that of multi-millionaires: call is dress rehearsal for the barter system.

Today's POMO: $1.8 Billion

After yesterday's $2 billion POMO, excess liquidity is sorely needed. After all the S&P 500 has gone a whole 24 hours without the Fed injecting some Redbull into the market. So the ever generous Chairman Ben takes out his checkbook and writes another $1.8 billion taxpayer funded check. Of the total amount repurchased, 60% is coming off 2009 auctions. With this action, there is now $14.9 billion left in Treasury repurchase dry powder.

Textron Taking Advantage Of Goldman Conviction Buy Generosity, Issues $600 Million In Bonds

It seems just yesterday that Textron was getting some love from Goldman Sachs. It took less than two weeks for the company to turn around and reciprocate the favor, by issuing $600 million in new notes, on new and improved sentiment for pent up private jet demand courtesy of Goldman, and allotting the 85 Broad Street based hedge fund a juicy place in the ranks of Joint book runners.

Bonds Spooked By Fed Hike Rumor

The latest from the market rumor mill: "hearing ny consultant reporting at least two fed members support raising rates next week...."

Preliminary Look At TIC Data

The primary concern is mainland China, where there was a marked slowdown in Long-Term Treasury (Bond) purchases: $26.6 billion were purchased in June, with $15.3 billion in July. China's exodus in all other LT securities continues: ($2.1) billion, ($0.3) billion and ($0.1) billion sold in Agencies, Corporates and Stocks, respectively. In the short-term category, China flipped its aggressive selling which is June was ($52) billion, and purchased $8.8 billion in total Short-Term Treasury securities. It appears domestic sources of capital (US Investors and, of course, the Fed) are becoming the prevalent source of funding when it comes to US Treasury purchases. As a frame of reference the Fed, via various POMOs, purchased $41.5 billion in USTs. Also, in July, the US Treasury issued $174 billion in various maturities.

Another Dollar Beatdown To Start The Day

Another precious dollar pounding moment, brought to you by the folks whose only noble intent is to push the market ever higher. Don't forget: a dead dollar is victory for the momentum chasing bulls, with the acceptable side effect of killing the middle class. As for international trade, don't worry: who needs to trade when you have a "stock market."

Time To Sell The Dollar Capitulation

Two key charts this morning for EURUSD: weekly and daily. The weekly chart shows how the market is testing as resistance the old support line of the bullish channel, and last time it attempted to reintegrate the channel last December it rejected it strongly on the close. On the daily chart, we see that the slow stochastic is basically at the same level that corresponds to all the previous significant highs, and we have run all the stops over the past few days after we broke out of the ending diagonal which sets up for a perfect capitulation.

Frontrunning: September 16

  • Pearlstein: What kind of judge stands up for truth and justice? (WaPo)
  • Treasury announces it will reduce one of its rescue programs from $200 billion to $15 billion (AP) - we now have six weeks before the US defaults under current debt ceiling regime
  • Foreign trade keeps stalling: current account deficit at 2.8% of GDP hits lowest since 1991 (AP)
  • Gold keeps climbing higher (FT)
  • The SEC gets neutered again (CNNMoney)

Daily Highlights: 9.16.09

  • Americans Back Obama's health goals even as they doubt chances for success.
  • Asian stocks were higher Wednesday after Wall Street closed at its best levels for '09.
  • Bank of England is still considering a reduction in the bank's deposit rate.
  • Bernanke says US recession 'very likely' has ended, economy still weak.
  • China shares fall on liquidity doubts.