Archive - Sep 2009

Yesterday Bob Toll sells 1.6 million shares of TOL. Today JP Morgan upgrades the stock, raising its recommendation from Neutral to Overweight, and stock price from $17 to $29.

What are the possible conclusions:

1. Bob Toll is a hopeless fool who knows nothing about his company's business prospects (unlikely)
2. Bob Toll does not have access to the JPM research reports huddle (likely)
3. A Rorschach test of JP Morgan analyst Michael Rehaut using the picture below reveals an answer of "a diamond in the rough" (near certainty)

Total Federal Reserve balance sheet assets for the week of September 16 of $2,101 billion ($30.7 billion higher compared to the prior week's $2,071 bn), just $73 billion shy of the all time high of $2,174 billion recorded on April 22.

• Reviews of Ron Paul's "End The Fed" (Mises Institute)
• SEC's new rating agency rules (SEC, and AP)
• Pandit says Phibro will be restructured (Bloomberg)
• New York unemployment hits 10.3% (NYT)
• Hedge Funds' ATM moves from Tokyo to Washington (Bloomberg)
• Wall Street's biggest con is M&A "Advice" (WSJ)

• Asian stocks fall as consumer finance firm Aiful seeks debt delay, Hong Kong warns of bank risks.
• EU officials press Obama on capping bank bonuses, tougher climate change.
• Euro-zone's surplus in its trade with the rest of the world hit a 7-year high in July.
• For the first time in nearly 2 years, American households grew a little wealthier in Q2.
• Hong Kong’s central bank warns lenders against mortgage-rate reductions.
• Housing starts rose 1.5% in August as apartment construction rebounded.
• Mortgage rates in US decline for third week, reaching 5.04%.

In my last article, I discussed two of the major factors to this week’s run-up in natural gas - Operation Flow Orders (OFOs) and pre-configured stop orders being hit. Here, I’d like to take a look at some other concurrent distortions in the natural gas market.

I asked the Fed a question on what was QE. Their response surprised me. It also left me confused. Does this bring any clarity to this big question?

The news in commercial real estate keeps getting grimmer by the day. This crisis will have severe implications for pension funds that are carrying these properties on their books and banks that are exposed to commercial real estate loans. In other words, the commercial real estate crisis isn't over - not by a long shot.

CNBC continues to bleed vierwers. Whereas the last time we provided an update of CNBC's Nielsen score, the GE subsidiary was down 28% YoY, the September decline is even more pronounced: at 37% in total vierwers and 26% in the 25-54 demographic. We are, however, confident that the company will take appropriate measures to address the growing lack of interest of the general public in its content by continuing to provide hard hitting, probing and objective reporting (on issues such as pornogprahy) day after day.

Flash Traffic: Radio Zero returns. A bit of anti-flash flash (just to show a little flash).  We'll go live around 8:30 ET.

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And so the pump and dump continues. Within 20 minutes of Palm's earnings release (one wonders just how much of a promptly completed "fill in the blanks" report this was) and disclosure that it is issuing a 16 million share follow on offering, joint-managed by none other than Goldman Sachs, the 85 Broad firm send out an email praising the company's glowing results...and its glowing new liquidity picture compliments of a follow-on offering joint lead-managed by... Goldman Sachs.

Developing story: absent some odd detour, this should be a good start. The next step is public opinion, and second vote at a later date, so things can still change. Furthermore, in the words of Senator Ted Kaufman: "Flash orders may be a symptom of a much larger problem." Zero Hedge wholeheartedly agrees.

Keep in mind, in May 2008 there were MANY people we will not name who thought we were headed right back to the highs, so sentiment is not really prophecy and far from it in fact. This time it's different though... bears and reality are fighting the US government and its arsenal of liquidity. That's why we can have the market diverge so much while making new highs with indicators screaming "overbought". On top of it, while some time has been bought pulling the SFP bill program in order to debate the possible raise of the debt ceiling, should the Fed and the Treasury succed and have it raised we can't exclude more quantitative easing and hence more money being poured into the markets. I guess an hyperbolic collapse of the USD would then be the most likely outcome to bring back markets to reality. In the end, bonds mature, investors have to either be repaid or then default occurs, and there are a lot of maturities and mortgage resets rolling down the pipe. So given that the ISM is about to top, QE money is running out (we are below $15Bn remaining out of $300Bn or just about), and many stimulus programs are running as well, headwinds could start being felt again. Barring more US government intervention it is likely that recent exhuberance will come to an end sooner rather than later. However as always one must remain cautious because these days capital markets are a mere reflection of government action... as long as government remains unchallenged.

U.S. FED BALANCE SHEET LIABILITIES GROW TO $2.125 TRLN SEPT 16 VS $2.072 TRLN SEPT 9-FED

We will provide the full spread of the Fed's balance sheet later tonight

Continuing the analysis of yesterday's TIC data, a key observation is that in July, even as foreigners continued purchasing Treasuries, having bought over $31 billion in Bonds (Long-Term) during the month, split evenly between official institutions and other entities, their distate for Agencies was unchanged, selling $4.6 billion, while a curious rotation was evident out of Corporate bonds, with a total $11 billion sold, at the expense of stocks, which saw a $28.6 billion increase over the month, primarily driven by non-official foreign institutions. On an LTM basis, the purchasing of stocks hit a one year high at $91 billion, a number that was matched only by the $107 billion recorded in September 2008 (subsequent to which there was a quick withdrawal from all US equity participation).