Archive - Sep 30, 2009

An article today in Time magazine with the unassuming title "The Truth About High Frequency Trading" is the latest in the spin campaign defending High Frequency Trading. The story is well known- liquidity, and innocent market makers who only care about their spread without positional exposure or underlying bias. Yet a swift refutation of the puff piece comes from a place none other, than the New York Federal Reserve itself.

A day after several failed attempts at killing the dollar did not work, what is a Fed chairman to do but try, try again. The market now tracking the JPY-EUR carry trade tick for tick.

As if the SEC could be humiliated any more, another piece of disclosure now highlights that Mary Schapiro's useless organization was unresponsive to whistleblower overtures by former Moody's employees attempting to warn the regulator "about the firm's weak compliance department and ratings process."

A week after the roll into new indices (HY13 and IG13) there was quite notable action in CDS land. Net notional change across all sectors was substantially negative to the tune of $282 billion, which however consisted primarily of matured transactions accounting for $330 billion of this number, implying the adjusted number was around positive $50 billion and a notable derisking. There likely has been a corresponding netting out on the New Transaction side over the past month as accounts were rolling existing positions.

Traders are positioned for a reversal of the down trend in the Dollar Index. Watch out below if it doesn't materialize.

The market tanked after the Chicago PMI index took a big bath on the second derivative double somersault. After hitting a better than expected 50 in August, the September number was 46.1, much weaker than the expected "expansionary" 52. the PMI is a useful advance indicator on the overall ISM, which is out tomorrow, and has been responsible for much of the presumed economic pick up in the past 6 months. As John Bougearel pointed out yesterday, ISM fans may be set for a major disappointment.

It was just a matter of time before the sensible banks (read, not some fossilized dinosaur out of Japan who apparently does not realize what a strong Yen means for his country's trade surplus) told Bernanke: "basta." The latest on the currency intervention front comes courtesy of Switzerland, where the Swiss bank has again sold a boatload of CHFs to prevent the United States from being the only country hell bent on destroying its own national currency.

We are repeating Jim Cramer's buy recommendation on CIT from yesterday... because it bears repeating.

While much of the focus has been on ADP change, little has been made of the absolute level of the ADP report. The chart demonstrates the freefall in this particular data series. We are now at 2003 levels and dropping fast.

• ADP jobs number worse than expected at 254,000, on 200,000 cuts expected (Bloomberg)
• Mortgage demand falls despite artificially low, Fed-manipulated mortgage rates (Reuters)
• Neverending government stimulus revision update: Q2 GDP at -0.7% (AP)
• IMF warns on rising bank losses - have no fear, Obama will fund IMF... forever - gotta unfund that quadrillion $ budget deficit somehow (Reuters, FT)
• Indland empire shopping center for sale - calling all investors sekking to lose money (Retail Chatr)

• Asian stocks rose for a second day, led by automakers and technology companies.
• Bank of Japan said to consider ending corporate debt purchases on recovery.
• Cash for farmers, surplus purchases in $350 million congressional dairy aid package.
• China's shares rebound from 3-day slump ahead of holiday; steel, banks, oil gain.
• Consumer confidence in US unexpectedly declines amid rising unemployment.
• EU nations to hammer out financial oversight, exit strategies in wake of G-20 summit.

The national sales tax is no longer idle talk. I guarantee that it is coming soon because Obama is running out of money and they're panicking about paying for the deficit. They just can't tax the rich enough to pay for it. Tomorrow starts the official vetting of the tax.