Archive - Sep 2009

Investment grade bond issuance this year hit all time records, with the six-month moving average hitting an unprecedented $692 billion through May of 2009. And yet while government guaranteed Aaa financial company issues accounted for a major portion of this, IG-rated industrial companies issued a record $317 billion of new bonds this year. Yet, in many ways like the Cash for Clunkers subsidy, the government endorsed refi binge is coming to an end, and Moody's estimates that July and August will have a monthly IG issuance of $66 billion on average, which represents 57% of the monthly average through May.

After I looked at the data from 1900 to 2008, it is safe to conclude that September historically was the worst month for investors, period.

Stuy Town, which as Zero Hedge wrote about several days ago is in dire straits and a few months away from default, has claimed its first casualty in the face of the Florida pension fund, aka State Board Administration which has disclosed a full loss on its $250 million investment. Next question: is Blackrock still carrying Stuy Town at 100 cents on the dollar for its own LP appeasement purposes (PEs heart FASB looseness)? This piece of information will likely get as much coverage on GE's propaganda central subsidiary as Chrysler missing August sales estimates by almost 20%.

It appears the market now only acts sensibly on big volume selloff days. The chart below is what one would expect, and what one would never see over the past 6 months.

Could the impact of Cash for Clunkers have been materially overestimated? Based on the results from Ford, it would seem so, as the high expected SAAR of 15-16 million is now looking more and more like a mirage. Goldman Sachs is expecting a 15.5 MM SAAR for August, and yet they were betting on a 39% increase in Ford sales YoY, falling woefully short of the actual number which was a just announced 21%. What is much more interesting, is where Chrysler numbers will come out: Goldman is expecting a 5% increase in sales, yet a note out of AP quotes an insider saying that August sales were a 15% drop for the Fiat subsidiary.

Remember yesterday how the market ramped when the Yen got whacked, leading to strength in all other pairs and a pounding of the dollar? Alas, Bernanke, Printing and Press LLC is unable to repeat its daily lashing of the greenback.

Just when you thought the Fed was trying to gradually disintermediate itself from capital markets, they are off to the races with another POMO action. As of this auction, $276.3 of the $300 billion in Treasury repurchase allocation has been used up, leaving less then $25 billion for future POMO actions. As Zero Hedge discussed before, this total will be used up in the next 2 weeks. What then? All of a sudden the invisible bid under equities is looking very, very precarious.

"When you hear about the Federal Reserve Transparency Act getting stalled in committee, think of Daniel Webster, bought and paid for with central bank money. When you read Fed apologia in the New York Times, The Economist, and the Wall Street Journal denouncing the "reckless populism" of the Act, think of the newspaper editors in Biddle's pocket."

So just where does that leave CRE owners who need to refinance this year or early next? In trouble, that’s where. And if this were not enough, we can tell you from first hand knowledge that bank regulators have been crisscrossing the country examining bank CRE loans intently. They do not want another mortgage debacle as was residential real estate on their current watch. Like they have a choice, right? In many cases current CRE appraisals are being conducted against existing bank property loans and capital calls are going out to CRE owners who have always been model credits and have never missed a payment in their lives. And CRE values will improve in this type of a regulatory and available capital environment? Quite the opposite, as you already know.

If you needed confirmation of just how spectacularly overvalued CIT stock is, look no further - the company issued an 8-K stating that even though it was supposed to sell its common stock under an indenture to satisfy an interest payment, it was unable to do so in a Commercially Reasonable Efforts mechanism. In other words - there was absolutely no institutional interest for CIT's stock at current levels, or any discounts from current levels, thereby confirming that CIT is essentially a zombie name traded daily by a bunch of speculative computers.

A proposal to swap Agency Preferred shares for repossessed properties owned by the D.C. lenders. This plan could work. Everyone wins. What do you think?

• Is the next shoe in Europe dropping behind the scenes? European countries voluntarily increase IMF funding (Berninger, h/t Dave)
• Next industry in line for bailouts: Commercial jet market still awaits recovery, EADS chief says (Bloomberg, h/t Jake)
• 10 year Eurozone jobless high: 9.5% (BBC)
• What banks are really doing with foreclosures (Diana Olick)
• The coming deposit insurance bailout (WSJ)

• Asian shares were mixed Tuesday, with Shanghai's 0.3% gain supporting some markets.
• Australia's performance of manufacturing index rose 7.2% to 51.7 in August.
• Brazil’s top sugar region may miss output forecast: reports.
• China’s manufacturing expanded at the fastest pace in 16 months in Aug. with record lending.
• Consumer prices in the euro zone fell 0.2% in August from a year earlier.
• Eurpoean and US share prices are under pressure today.
• German retail sales rose 0.7% in July after tumbling in the preceding two months.