Archive - 2009

The man who brought down Galleon is not finished, and if the report by Reuters' Matt Goldstein is correct, FBI special agent B.J. Kang may well have his sights set on the top of the hedge fund pantheon: SAC Capital itself. This is not a surprise to Zero Hedge, and is something we have speculated on in the past, however the intricacies of such a spectacular take down would have to be refined beyond any reasonable doubt as any allegations against Mr. Cohen will likely see the involvement of every single $1,000/hour billing lawyer in the world, taking on any DOJ case.

Major move in Fed Fund futures today, with the implied probability of a rate hike to 1.25% by November 2010 nearly doubling to 14% from 8.1%. In fact major move to the right across the spectrum, as expected Fund rates at 1% or higher surging by over 50% and now coming it at 45.4% compared to 31% as recently as yesterday. The inflation hawks case just got stronger by about 50% as well. Yet with trillions more in bad real estate assets on bank balance sheets still needing Fed purchases, the Chairman is truly between a rock and a hard place.

With today's highly suspicious BLS job data (we are waiting to hear from TrimTabs' Charles Biderman for his take on this number) we would like to highlight some of the majorly broken correlations that are getting broken today and causing major pain for traders on the other side. And while any statistician will tell you correlation does not imply causation, in this market of low volume algo trading, correlation is likely the only thing that implies causation. The questions now: i) when does Bernanke succumb to the inflation hawks who will beat the drum on tightening even louder, and ii) will the fund flows out of bonds into futures be enough to offset the dollar surge, whose natural expression is to push stocks lower.

Hatzius' -100,000 is likely right, as usual, and the government will simply unrefudge all the data retroactively. Can't have the Chairman's reconfirmation be accompanied by factual economic releases. Especially not from the econometric champions at the BLS.

• Asian stocks, oil retreat as US service economy slows; Korean Won gains.
• Crude oil fell for a third day on report showing US Srvcs industries unexpectedly contracted.
• Payrolls in US probably decreased at slower pace in November: Bloomberg Survey.
• Venezuelan banks seem to be on the verge of a crisis, stoking fears of nationalization.
• Abercrombie, Macy’s report drop in business in Nov as discounts failed to persuade shoppers.
• Bank of America raises $19.3B in biggest US stock sale since 2000.
• China Shipbuilding plans to raise as much as $2.15B in Shanghai IPO.

RANsquawk 4th December Morning Briefing - Stocks, Bonds, FX etc. (Nonfarm Special)

Even with declining initial unemployment claims being trumpeted to great Comcastic fanfare as a sure sign of the end of the Apocalypse, and the Seasonally Adjusted Insured Unemployment number now down to 5.465 million, (dropping from an early August peak of 6.904 million), the one number consistently forgotten is the exhaustion transfer as more and more jobless no longer qualify for traditional 6 month unemployment insurance (being unemployed for more than half a year will do that to you). Nonetheless, combining the two data series presents a much uglier picture: adding the 3.859 on Emergency Unemployment Compensation to those on current benefits yields a total of 9.3 million who are suckling at Uncle Obama's teat! Furthermore, the series has ticked higher recently even as initial claims have continued declining. The combined number is a mere 175k off the all time high in this cumulative data series of 9.5 million recorded in late July. Additionally, at the market bottom in March the combined number was just under 7 million, meaning that as the market has rallied over 60%, the economy has lost 2.5 million workers! And don't forget that over the past 6 months an additional set of workers has rolled off the even extended EUC insurance benefits, which according to some estimates could be higher than 1 million (cumulatively) over the past 6 months. As this data is lost somewhere in the limbo of U-6, we can only extrapolate what the attached chart would look like if it captured not just those who collect the weekly $400 or so from Zimbabwe Ben, but also those who no longer are eligible.

The most actively downloaded credit snapshots on DARPA recently are the following:

• Dresser-Rand Group - snapshot and writeup
• Cornell Companies - snapshot and writeup
• SPX Corp - snapshot and writeup
• DaVita - snapshot and writeup
• Whiting Petroleum - snapshot and writeup
• Alimentation Couche Tard Inc  - snapshot and writeup
• Warnaco Group Inc/The  - snapshot and writeup
• SEACOR Holdings Inc - snapshot and writeup
• Valmont Industries - snapshot and writeup
• Buckeye Technologies - snapshot and writeup

For those of you still pondering Dubai or do you sell, you're missing the rally of a lifetime.

How times change. Managing expectations, we think, may be a lost art. Under promise, over deliver. Did no one teach this administration that?

Yesterday was a quiet day in CDS with broad tightening despite a weak equity market. Some of the only names wider were former CNBC owner GE, REIT BXP, XL Financial and COF. Today's data should provide for much more reddy goodness.

Simultaneous bearish signals registered across Market Internals (TICK, VOLD, ADD, VIX) at exactly 3:27 pm, which directly presaged 5 increasingly greater TICK lod readings that registered over the next 30 minutes; demonstrating an overwhelming desire to sell by market participants. Today’s bearish instance is a perfect exemplar of a practical nuance within technical analysis and just one of many which successful traders effectively employ on a daily basis.

The Federal Reserve's balance sheet declined by $15 billion to $2,183 billion from the prior week, after the Fed presumably offloaded $2.7 billion in MBS: this is the first time since QE started that MBS holdings have declined. If anyone can tell us just who the idiots are who bought MBS from the Fed (and at what price), and who the even greater idiots are who are supposed to believe this, please send us an email.

Congressman Kucinich said today:"America is in the fight of its life and that fight is not in Afghanistan -- it's here ... We are deeply in debt. Our GDP is down. Our manufacturing is down. Our savings are down. The value of the dollar is down. Our trade deficit is up. Business failures are up. Bankruptcies are up."

Call and write your senator ... keep up the pressure to change insane fed policy.