Archive - 2009
So, what does it mean if we get another significant downturn? Well, not only are the 2003 to 2007 vintage mortgages in trouble, but those 2008 and 2009 mortgages are at risk as well. What are the chances of this happening? Fairly significant. For all of those guys who swear we are on the brink of a booming economic recovery, recall that it was housing depreciation that set all of this off to begin with.
- Here comes Spain: Spanish banks start to unload property portfolios (WSJ) Some brilliant insight: "Accumulating properties also stopped a sharp drop in prices, avoiding
the painful write-downs banks are required to book when the value of
their assets falls." The FHA will not be reading this article
- How uou like your strong euro now Europe? After two years of crashing banking systems and economic recession, the euro zone enters 2010 with a full-blown debt crisis (WSJ)
- Treasuries set for worst year since 1978 as U.S. steps up sales (Bloomberg)
- First Brazil now Russia: Finance Minister Alexei Kudrin says Russian stocks "too expensive", nobody cares (Bloomberg). In the meantime Templeton's Mark Mobius, who after a 104% rise is still down relative to 2007 (56% decline in 2008) says "If you compare Russian valuations now with
other major countries, it’s not overpriced. There are still
opportunities there" One wonders who is pitching their book
- E-mails inside AIG reveal executives struggling with growing crisis (WaPo)
- Just in case you thought the "recovery" was for real, GMAC to demand $3-$4 billion more from the Obama endless bailout fund (Bloomberg)
As the 'naughties' come to a somewhat anti-climactic close, it is important for those of us in the investment community to take stock of what new lessons have been learned, what immutable laws have been reinforced, and what changes in policy, strategy and execution need to occur in order to avoid a repeat of the booms and busts of the last decade.
While everyone is scared to death of the next Black Swan event, they're totally ignoring the Black Sloth event in the making...
Last night the nikkei failed to make a high close on the year and we see that S&P futures today failed after barely testing the topside resistance of the channel. We have long highlighted the strong divergence in momentum indicators for S&P futures which in theory is precursor to a 10% correction at least. With Nikkei right on resistance as well we have a compelling case to play a reversal here, and would only consider the trade a failure if we have a daily close above the resistance of the daily channel. We are also almost right at year-end, and if we remember last year the market did not wait for any later vacationers to start 2009. Maybe a reversal of low volume end of year price action is in the cards again, the risk reward certainly is good to trade the market that way.
On November 18th, I suggested that everyone:
Tape is getting more boring each day. Financials seem to be waffling back and forth, unable to move in one direction or another with any conviction. Meanwhile, traders are restless and bored, and really cannot find anything worth watching other than the anchorettes on CNBC.
I have a friend in the car business who loved Pontiacs- in the days before mainstream, popular imports, you were either a General Motors, Ford or Chrysler man; and specifically GM patrons had their own specific preferences to go along with their favorite brands of cigarettes- Chevrolet, Pontiac, Buick- you get the picture. My friend still loves Pontiacs, to this day, reminiscing of the days when he was eighteen, gas was 25 cents a gallon and his ’65 Pontiac GTO “Goat” cost $3,500 out the door. But, those days are over and if you’re a Pontiac man, well, you can just about smell the formaldehyde and see the undertaker coming, leaving nothing but memories and $7,000.
What a difference a few decades makes?
Pimco CEO: We're Trained to Think the "Farther You Fall, The Higher You'll Bounce Back. We're Hostage to the V"-Shaped Recovery ModelSubmitted by George Washington on 12/29/2009 15:25 -0400
Are we going to have a V-shaped recovery? W-shaped? L-shaped? WWWWW-shaped?
Jim Bianco submits: "The Federal Reserve owns 80% of AIG. With each passing day it looks like the Federal Reserve is adopting AIG Financial Product’s business practices. That is, when faced with a financial problem, they create complicated tools (like CDS). When critics says these new products will not work, tell them they do not know what they are talking about and create even more complicated tools to dazzle everyone. Once the tools are so complicated that no one understands them, you will be hailed as an expert with no peer. You might even be named TIME’s Person of the Year."
It appears that even after thoroughly dominating the US legislative, judicial and executive branches, the long tentacles of the squid have been no better than the Mongolian hordes at overcoming the Chinese Wall (which is ironic seeking how easy it is to ignore the same construct internally between the firm's prop and flow traders...and yes, we will be posting our response to Goldman shortly, we have not forgotten). In the meantime, half a world away, a small Chinese power generator, Shenzhen Nanshan Power, is blatantly refusing to honor contracts with Goldman Subsidiary J. Aron for $80 million in derivative losses, and it appears that China itself has decided to stand behind the small company.
The last time we provided Hovde Capital's contrarian perspective to the prevailing opinion on GGP's valuation, there were some stock price fireworks. Is it time for round 2? Over 70 pages recapitulating the short thesis are attached.
"As volumes are abysmal this week, we continue to think the risk is for lower US Treasury prices as supply chokes the market in low volume/appetite on this holiday week. Equities keep grinding higher and are getting awfully close to resistance levels, with ever lower volumes "supporting" the price action." - Nic Lenoir, ICAP