Archive - Oct 2010

After declining in August by a solid 8%, September consumer bankruptcy filings once again are on the rise, with the monthly total hitting 130,329, 4.4% higher than the prior month. Overall, YTD bankruptcies of 1,046,449 are 11% higher than compared to the same period last year, as America revels in its newly found post-recession reality by going straight to bankruptcy go and not passing go. As Dow Jones reports, "the bankruptcy filings so far in 2010 represent the highest total since 2005" and are on track to hit a record 1.6 million by the end of the year. Can someone please forward this data over to the nice Ph.D.'s over at the NBER to whom timing recessions is now nothing but a joke.

Who says the only investable assets are equities, fixed income or commodities? Not TIAA-CREF - the Teachers Insurance and Annuity Association has figured out that one of the arguably best fat tail investments has nothing to do with America's megabroken capital market structure, and is instead going back to grass roots... Literally. The FT reports that "TIAA-CREF, an asset manager, is ramping up its exposure to agriculture by buying a specialist investment firm, in an effort to double its activities in the emerging area of “real asset” investing. Westchester, in which the US pension fund has taken a controlling stake, manages about $1bn in assets and nearly 320,000 acres of farm land, as well as acquiring land on behalf of large clients. About 80 per cent of its holdings are managed on behalf of TIAA-CREF, one of the world’s biggest money managers." In other words, farms (or "real assets" as they are known in polite company) are about to become the next big bubble, and the "you have two cows..." joke is about to make a very violent comeback.

BN  *LANDESBANK ALLEGES FRAUD OVER GOLDMAN'S DAVIS SQUARE VI CDOS
BN  *LANDESBANK BADEN-WUERTTEMBERG SUES GOLDMAN SACHS OVER CDOS
BN  *LBBW IS GERMANY’S BIGGEST STATE-OWNED LENDER :2525Z GR, GS US

So... now what?

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 04/10/10

The recent merger between United and Continental confirms merely the inevitable: ever since the deregulation of airlines some 30 years ago, the path in corporate development in the carrier business has been one toward constant consolidation, interspersed with the occasional bankruptcy, as companies are massively and pro-cyclically leveraged to the same economic growth model that caused Moody's computers to #REF out whenever a decline in home prices was assumed. Oddly enough the evolution in the airline carrier space will soon be mimicked by what is happening in market structure, as more and more exchange, ATS, dark pools and what not realize that the only way to survive is by growing horizontally instead of relying on organic growth in a market which is seeing less and less participation. And while a detailed chart showing the development in market structure is still missing at the corporate level, the New York Times has put together the following very informative infographic which shows how little by little America will soon be served by just one airline, in which first class is reserved only for those working south of 58th street in Manhattan, while everyone else will be shoved in the cattle car back in coach. Because only a fool thinks that a two-tiered market exists solely in stock trading...

Time for our now daily flash-crash segment. After on Friday, LQD flash crashed and several tens of thousand shares traded courtesy of some rogue algo, only to be DKed subsequently, a crash that mind you saw the very suspicious absence of Waddell & Reed in its execution, it is about that time, when 24 hours later we need, nay demand, another flash crash. After all why would all those who claims our markets are beyond busted be taken seriously if there wasn't a daily flash crash somehow, somewhere. Luckily, here comes Century Aluminum (CENX) to prove all those naysayers absolutely correct once again. Oh, and just like in LQD and who knows how many times before, no circuit breakers were triggered: remember that SEC lie that stocks would never drop below 10% of the NBBO following some latent version of SkyNet hitting the tape? A week ago we demonstrated out how PGN dropped from $44 to $4 in one millisecond. Today, CENX dropped by 17% (way beyond the circuit breaker threshold), before trading resumed at previous levels. As for all those who made a killing by taking advantage of broken algorithms? Sorry, you are out of luck again - several hundred thousand shares ended up in the trash basket again.

The National Association of Realtors is a marketing engine with what some may call (but not I, of course) comedians for chief economists, yet their data and their economist’s opinions are quoted regularly in credible, mainstream financial news shows and newspapers. WHY???!!! On that note… Bloomberg reports the NAR states "Pending U.S. Sales of Existing Homes Increase 4.3%"

Liberals and conservatives, progressives and libertarians should all be up in arms about this.

We have a right to know what we're eating.

Our research on Interoil (IOC) leads us to believe there may be a lot of skeletons in its closet, making it a top choice for our next bearish position.

This weekend's chief financial tragicomedy was without doubt the busted conference call conducted by Citi, in which Ireland finance minister Brian Lenihan ended being heckled openly by a roster of about 200 people, who were a little late in realizing that the operator had forgotten to mute all their lines. This was described previously in painful detail by the Telegraph. And while Ireland is still refusing to acknowledge that anything out of the ordinary happened, and Citi has most certainly deleted any copies of the first part of the conference call, the second part of the call was obtained by Zero Hedge. What is obvious from the call is the extreme sensitivity the operators and organizers have toward any open line, while proffering extreme apologies for the confusion that was prevalent on Part 1 of the call, which apparently lasted for 45 minutes (the entire call ended up being one hour thirty minutes, after it was supposed to be half that duration). Furthermore, if as Ireland claims none of the alleged shenanigans occurred, then why is the first thing uttered by the moderator his "profound apologies for the foul up that the conference provider has had earlier." As for the call itself, we fail to see how someone who claims there is no local deposit drain (like in Greece) due to "Ireland being an island" and thus making deposit evacuation difficult, is supposed to calm investors and result in tightening spreads. Although, as we disclosed earlier, the ECB's €1.4 billion in sovereign bond purchases last week, successfully unraveled that particular mystery as well. For all this, and much more, as well as a rather amusing Q&A, the link to the entire call is attached below.

Another day another falling dollar.

Good thing too or we'd be heading for the toilet this morning.

Mary Ann Bartels, BofA's technical research analyst looks at the NDX large spec positions reported in last week's COT report, and does not like what she sees: "Large speculators aggressively bought NDX futures last week to a net long of $3.2bn notional from $0.8bn notional previously. Readings are in a crowded long. Between mid Feb and early April of 2010, HFs accumulated NDX aggressively into a crowded long position and S&P 500 went up 7.9% for this time period. The market corrected 10.2% from the peak crowded readings in the NDX in later April and May. We are estimating a market pullback of 10%-12%."

Bears I talk to this morning have a pit of a spring in their step this morning. Certainly it's not everyday the market sells-off and spends more than a handful hours in negative territories. Here are a few charts that show that the next few hours will be key / 10 ticks will be key. We need a daily close below 1,130 in S&P futures to confirm weakness. As the charts show, Dax is on support here and need to accelerate lower in order to break the recent uptrend. Similarly, EURUSD and AUDUSD are both weaker today yet still not threatening the uptrend. - Nic Lenoir

Brian Sack, head of the Fed's Open Market Manipulation and Intervention Group, speaks. In a presentation he has given in Newport Beach, presumably so that he is close enough to Bill Gross so that Pimco does not even need to leave a trace in calling up the FRBNY, he tells those who care to buy, buy, buy. Well, that's reading between the lines. What he says on the surface is that asset purchasing is an "imperfect policy tool", and yes, he should know - especially as pertain to Amazon and Netflix. He follows by stating that any Fed asset purchase plan should be flexible, while warning that it is difficult to "calibrate" cost, benefit of Fed purchases. Of course, according to him more asset purchases are "unlikely to complicate Fed's exit" - any why would they: there will be no exit at $2.5 trillion, who is idiotic enough to think the Fed will be able to exit at $4, $40 or infinity... Lastly, in a bid to avoid the unemployment line, Sacks says that asset purchases seem to improve financial conditions, and that the economy is "vulnerable to downside surprises." Luckily, as the WGC pointed out earlier, buying gold is the perfect hedge to protect against more Bryan Sack fat finger-type events.

In my view, the evidence suggests that the expansion of the securities portfolio to date has helped to foster more accommodative financial conditions, and further expansion would likely provide additional accommodation. Of course, whether the FOMC decides to take such a step will be determined by its assessment of whether the benefits of additional policy stimulus outweigh the perceived costs of expanding the balance sheet.

David Rosenberg debunks the five main "recovery" myths that have gripped the mainstream media, which, of course, always eager to put three extra layers of lipstick on the piggy truth.