Archive - Sep 23, 2009

Predictable move in the dollar, unpredictable whiplash in Treasuries. As for the equity bubble, it will do what it does, until it pops. In other news, the cremation of the formerly reserve currency known as the dollar will be held in the Federal Reserve's back yard at a convenient date. Chairman Ben will deliver the eulogy.

Ever wonder why iPhone sales are through the roof? It might have to do with this. Consumers are once again using their credit cards, however taking a cue from the Chairman's promotion of moral hazard to a state-sponsored nationwide doctrine, they have decided simply not to pay their bills. Moody's Credit Card Index confirms this, after hitting an a new record Charge-off Rate in August of 11.49%, a 68.5% increase year over year. And where charge offs rule, delinquencies are not far behind: August delinquency rate hit 5.8%, a 26.2% increase YoY. August was a sharp reversal in prior improving trends, indicating that the consumer weakness is not getting any better, and in fact, just the opposite.

No change to QE

"The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

"The downgrade reflects the significant deterioration in the performance of the loans backing the underlying certificate. Although this performance deterioration is severe, we affirmed the rating on class 2-A-1, which is within loan group 2, because class 2-A-2 provides credit enhancement to it. In addition, the affirmations on the classes from loan group 1 reflect the performance of the loans and available credit enhancement for the group 1 underlying certificate." - Standard And Poors

• Yields 2.470% vs. Exp. 2.4625
• Bid-To-Cover 2.40 vs. Avg. 2.31 (Prev. 2.51)
• Indirect 44.8% vs. Avg. 46.20% (Prev. 56.3%)
• Indirect Bid-To-Cover: 1.26
• Allotted at high 39.82%, compared to 16.55% a month ago.
• Direct bidders increased to 11% compared to ~4% pre money market guarantee expiration (per Santelli): new capital flow?

The Yen-Euro trade just took a sharp turn lower, pushing the DXY higher. Stocks, as usual, are caught in a vortex of vacuum tubes and chasing the VXV in a circular logic argument. Give them some time to catch up.

A presumably growing economy, one that has now emerged from a recession (if one listens to the Chairman) needs fuel. Or, as the case may be, oil. So today's oil inventory report did two things: it flatly refuted the Chairman's ongoing propaganda that all is finally well with the US economy, but also played a nasty trick on oil speculators who got majorly burned after oil tumbled as a result of ongoing lack of demand for the black gold. At least all those parked tankers overflowing with oil and betting that sooner or later the stored oil will be put to some use will get a few more chances to finally be proven right.

At some point in the last 48 hours our RAN Squawk feed began to leak into the general feed for Zero Hedge. Result: this morning a number of people woke up with 200+ messages from RAN Squawk in their Zero Hedge RSS Inboxes. Sorry about that. It is not intended to be permanent. (Nor was it intended at all, actually). The feeds should be corrected now. Please excuse our dust.

Over the past year there have been some phenomenal moves in stocks, which some call high beta names, but which for all intents and purposes can be called "crap" companies (we use the term generically in the fashion it has been previously used by the mainstream media). So Zero Hedge decided to do a more in-depth analysis of just which names have benefited by the unprecedented equity rally, and whether their fundamentals justify the record moves from the stocks' 52 week lows.

Now that Flash trading is practically a thing of the past, everyone's attention is shifting to dark pools. And if the just released letter by the World Federation of Exchanges is any indication, dark pools' days could be comparably numbered.

"The environment of exchange trading has been altered, and in sorne ways has been adversely affected by many of the changes that have occurred in the world's financial system in recent years. Therefore, the continued proper functioning of regulated exchange markets should not be taken for granted." - World Federation of Exchanges Letter to G-20

• Pearlstein: A new bubble of the Fed's creation (WaPo)
• Wall St. Cheat Sheet award series continues with the financial analyst who the analyst who nailed the crisis (WSCS)
• Shocker: Ex-Moody's analyst says inflated ratings continue (WSJ)
• The Casino chronicles: Traders seek fortune in AIG, a stock once left for dead (WSJ, h/t Joel)
• Time to junk AIG (Reuters)

• Asian stock markets were lower as a monthslong rally sputtered and investors waited
• Dollar falls to one-year low as Fed may signal interest rates to stay low.
• Euro close to 1-year highs against U.S. dollar
• Fed is said to start talks with dealers on using reverse repo agreements.
• Federal Reserve policymakers likely to leave economic supports in place