Archive - Oct 28, 2010

I think what the Fed does will be irrelevant in terms of economic impact, and the more I talk to people about it the more I realize most share this view. The market is solely focused on the Fed and not the election as it is relatively understood that politicians are useless even though the list of tasks to fix our economy should in theory provide them an opportunity to make themselves useful. Given they will not rise to the challenge and will keep failing to deliver any concrete measures that could lead to progress, and that rates are at 0, as Bill Gross said the only thing for the Fed to do (OR NOT) is QE. I see no value but since they have made it their mandate to target inflation and now GDP I suppose Mr. Bernanke is at least consistent within his delusion. It is interesting however that even Bill Gross has joined the bandwagon. The ECB has also said the Fed is going in the wrong direction even though I bet they would be hard pressed to explain who is buying all these Spanish, Portuguese, Irish, Greek bonds and other turds they are trying to keep afloat. In that sense their only saving grace is that they sterilize their purchases, but they too are engaged in asset price fixing aiming at controlling GDP. Fighting a structural deficit and unemployment printing money is a bit like taking a leak in the ocean to warm it up, and you have to be careful because if the wind comes at you it can backfire. - Nic Lenoir

In the popular view, a coup d'etat is a sudden event, over in a few hours or at most days, a drama played out in impoverished Third World nations. The stealth coup which has occurred in the U.S. is an entirely different kind of coup--one that has operated in stealth mode for the most part, a process of gradual infiltration and opportunistic grasping of key levers of dependence and control.

The market held steady today as headline-y good macro news was mixed with a dose of disappointing earnings news and topped off with a healthy heaping of who gives a shit. That's because with mid-term elections looming and everyone waiting to see the details of QE2...

"Don't let the rally in the stock and bond markets fool you. Many Americans are still hurtling towards a retirement disaster. Few realize it. Even many of those running the big pension funds don't know." If you want to know why hope is not a strategy, read this comment carefully.

Ben's stepping on Tim's turf. Actually he stepping on the Executive Branch. Who cares?

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RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 28/10/10

There are several articles and studies around the finance industry that talk about the value of sell-side analyst ratings or the lack thereof. Most of the studies provide a negative view of the accuracy of ratings from sell-side analysts and bring to light the many potential problems associated with sell-side analysts and their ratings including conflicts of interest with the firms that employ them as well as their tendency to appease management teams who provide them with information not available to the public by providing favorable ratings for those firms. Some other problems associated with sell-side analyst ratings include: 1) Buy recommendations outnumber sell recommendations some speculate for the purpose of making management happy. 2) Analysts often downgrade firms after negative news has already hit public eyes. 3) Unable to purchase the stocks that they cover, no “skin in the game” 4) Analysts often find comfort in being a part of the majority and often times fall victim to groupthink. 5) Compensation analyst’s receive has been found to be tied to the investment banking business the analyst generates.

As Zero Hedge will be unable to post news updates over the next several hours, feel free to use this open thread as a forum for any important developments and observations.

In September 2008 the US came to a fork in the road. The Public Policy decision to not seize the banks, to not place them in bankruptcy court with the government acting as the Debtor-in-Possession (DIP), to not split them up by selling off the assets to successful and solvent entities, set the world on the path to global currency wars. By lowering interest rates and effectively guaranteeing a weak dollar through undisciplined fiscal policy, the US ignited an almost riskless global US$ Carry Trade and triggered an uncontrolled Currency War with the mercantilist, export driven Asian economies. We are now debasing the US dollar with reckless spending and money printing with the policies of Quantitative Easing (QE) and the expectations of QE II. Both are nothing more than effectively defaulting on our obligations to sound money policy and a “strong US$”. Meanwhile with a straight face we deny that this is our intention. It’s called debase, default and deny.

Darkness Falls Across Obanksta Land, The Asian Trading Day Is Close At Hand...

Based on the data, it appears that banks, especially the regional and local banks, are starting to solve their nonperforming loan problems. This is a very significant bit of data and is relevant to the credit crunch we are having. Will it translate into increased loan activity and a recovery?

Yesterday we made a big stink over the Fed's reverse inquiry into the PD community over how much QE2 it should launch. Today, we find out what the distribution is: as Merrill's Harley Bassman points out: "Four dealers are predicting a $1+ Trillion buy program." It is good to finally know what the bogey is.

It seems like it was yesterday that Bill Gross was bemoaning the sad American state of a QE2 driven affairs. Oh wait, it was. Yet less than 24 hours later, courtesy of some dealer insight into the market we realize that it is precisely this same Bill Gross who is aggressively anticipating to profit specifically from the launch of QE2 in less than a week. To wit:

In the U.S., PIMCO still crushing the 10yr Volatility selling your amount of strangles, they are now short about 200K TYZ0 strangles, various strikes including and inbetween 124P and 129C.....

Good of Bill to hand out indulgences with one hand, and to wave bonds in (sell vol) with the other.

Make your choice ...