Archive - Sep 2009

Presently many otherwise intelligent and capable individuals in America do not seem to understand the origins of the financial crisis -- and the multiple aspects (or shall we say 'tentacles'?) of its origination.

Some stunning revelations have been disclosed in the David Kotz 477 page report on SEC's colossal (and in normal societies, terminal) blunder with Madoff. Primary among them is that everyone's favorite liquidity provider RenTec was not only an indirect investor in Madoff via its Meritage Fund of Funds, not only was fully aware based on internal correspondence that Madoff was a pyramid scheme, but that it did nothing to notify the authorities, and also decided to keep half of its investment with Bernie, even after numerous internal emails certifying the illegitimacy of the fund way back in 2003.

A analysis of busted Ginnie Mae MBS. This comes from a Wall Streeter who prefers to remain Anon. Scary stuff.

"This situation is economically impossible; at some point, U.S. debt would reach a level so high that creditors would stop lending us money. The question, though, is how the situation will be resolved. Will politicians confront the policy choices or delay them to the point where they will be forced upon us due to a fiscal crisis? The longer we wait to take on these issues, the worse they will get and the more painful it will be to change course." - CRFB

Relllllaaateeef Vaaaalue? What dat?

Must be so profitable to have i) an infinite array of momentum chasing quant clients and ii) an overeager ETF trading desk consisting entirely of former Tetris world champions. And after all, it makes all the sense in the world to lift consistently rising offers in a volumeless, newsless market.

Financial stocks had a huge run up from their bottom. Many have doubled and tripled, but are they still cheap?

Adding insult to injury- it's bad enough the American worker has the crappy 9 to 5er, the shared cube with the office loud-mouth, and the ever worsening benefits package- not only all this- his/her boss brings home considerably more. At a growing ratio of well over 300 to one!

A big picture objective perspective on the economy, compliments of Egan-Jones.

"As an aside, the Bureau of Labor Statistics also publishes a number from the Household survey that is comparable to the nonfarm survey (dubbed the population and payroll-adjusted Household number), and on this basis, employment sank — brace yourself — by over 1 million, which is unprecedented. We shall see if the nattering nabobs of positivity discuss that particularly statistic in their post-payroll assessments; we are not exactly holding our breath." - David Rosenberg

Market speculators have now officially written off inflation: the most recent survey of Fed Fund Rate expectations indicates that the percentage of people expecting a hike to 0.5% at the December 16, 2009 FOMC meeting has plunged from 58.1% in March to 1.5% currently. And the opposite of inflation is deflation: just ask Treasuries. Furthermore, while exactly 0% had expected the EOY rate to be at 0% in March, almost a third of the market now believes this is the case. And, most shockingly, a solid 0.1% actually sees the Fed as having a negative 0.25% rate: whether this is a misprint based on futures data is unclear, however, it would be a very amusing outcome and with QE gradually ending, this may be the very, very last bullet in Chairman Ben's gun in his ongoing duel with the currency that he so desparately wants dead.

Get used to it: momo quants trading only at noon and 3:30pm are here to stay. Also get used to the new carry trade, and feel free to stop trading anything except the new carry trade.

How much money was lost in RE this morning in my neighborhood? At least $50mm. A very sad and troubling real estate deal has proved to be a wake up call.

As the first chart demonstrates, the unemployment rate differential between HS grads and College grads has reached another record spread. While this will have the fringe benefit of discouraging floral experts with minimum wage and no 401(k) expectations from crossing the Rio Grande, the bigger issue is who in this economy is creating minimum wage/specialization jobs (especially with the US manufacturing complex in tatters).The US Socialist experiment will need to really pull its socks up if it hopes to succeed.

And this time it is not those nutcases over at Zero Hedge making the claim, but the reputable New York Times, a place where even more reputable Mexican billionaires go to provide rescue financing. The NYT discloses how Chicago-based traders (what is it with Chicago style [blank] - first in politics (no comment needed there), and now in every story about market manipulation) Optiver, may have been openly gaming the commodities market using HFT strategies.