Archive - Jan 2010

As investors of all stripes continue to go gaga for the Cult of Cupertino (snap, crackle, AAPL), what can we actually learn from Apple, Inc.?

An Insurrection to dump two thirds majority rule in California. Searching for fiscal restraint in the Land of Fruits and Nuts. Is Washington sucking the lifeblood out of the Golden State? Time to load the boat with the state’s bonds.

In a pathological example of nearly clinical hypocrisy, PIMCO's Bill Gross yesterday dedicated 4 meandering essay pages full of polemical ramblings to the characterization of America's sad political and financial hybrid reality. Yet the billionaire's saddest message is precisely the self-deluded aggrandizement that Gross decries yet willfully takes advantage of every single day. Because after bemoaning the fate of America's broken political system, and ridiculing the Federal Reserve's kleptocratic-friendly ways, it is precisely people like the PIMCO chairman that are most guilty of taking advantage of every single loophole presented to them, even as they criticize just this activity. This, beyond all the petty trivialities that Gross discusses, is precisely what is most wrong with America - at this point everyone, and especially Mr. Gross, knows too well that the wealth transfer from the middle class to the elite 1% of society will not end until such time as America itself defaults. Yet having the very people that benefit the most from this, write non-apologetic letters in which they criticize the very system that lets them walk home every day with an extra zero in their bank account simply due to their special connections within this very broken system, is beyond reproach.

• Asian stocks rise, led by carmakers, banks; Copper gains, bond risk falls.
• Australian retail sales rose 1.8% in November - the most in eight months.
• China’s central bank said it will target “moderate” loan growth in 2010.
• Dollar near 3-week low on signs global rebound gaining momentum.
• Oil pulls back below $83 in Asia after cold weather sparks 20 percent rally since December.
• Spot iron ore delivered to China rose to the highest in more than a year amid “panic buying” by steel mills.

It's going to be pretty hard extracting your metatarsus from your anus this time around. I mean, everyone makes mistakes with taxes, but the multi-billion dollar back door bailout that you tried to hide via EMAIL???!!! Come on, guys. If you're not smarter than that then you definitely won't be able to solve this financial situation thingy... Unless he knew absolutely nothing about the biggest bailout in the history of his country - under his watch, that is.

Just the other day I stated "Why does everyone confuse a bubble with economic progress" in a post about a very probable bubble in China (see "It Doesn't Take a Genius to Figure Out How This Will End" then get your chuckles on with "Goldman Seems to Trust the Chinese Economic Reporting a Tad Bit More Than I Do!"). Well, as if on cue, Stocks, Metals Decline Around World After China Curbs Lending; Yen Weakens...

RANsquawk 7th January Morning Briefing - Stocks, Bonds, FX etc.

The motto for last year will probably end up being, "You really don't get what you paid for!". In reviewing the banks that were originally included in the Doo Doo 32 (a list of likely doomed banks created in the spring of 2008), I decided to take the devil's advocate perspective (an exercise that we normally pursue) and attempt to build a bullish case for the sectors that I viewed bearishly yet have outperformed the S&P and escaped profitable shorting during the last three quarters. The results are illuminating.

While more and more hedge funds are delving into the mutual fund space, sophisticated pension fund managers, like Barclays, are scrutinizing their alpha managers.

It is now reported that hundreds of the over 1,300 General Motors dealers who lost their franchises, just may have a shot at getting them back. Saab, however; is still a Hail Mary pass if there ever was one.

Watching the VIX hit a 16-month low, I am beginning to believe that Uncle Ben and the other members of the FOMC have created a 1980s style interest rate trap for banks and other leveraged fixed income investors via the Fed's asset purchase program. It's all about OAD, if you know why I mean. Unfortunately, nobody on the FOMC does.

"As we look to December data (reported this Friday) if the seasonal adjustment multiple returns to anything in the range of historical norms it should provide a huge lift to the reported m/m change. In quantitative terms a return to the 1996–2008 average would create a seasonal lift of 431K to the as-reported m/ m change. In comparison the 1996–2007 actual December m/m change (unadjusted) was 116K. Put differently, if this was an average December for job creation and the adjustment factor returns to a historical average we would see a non-farm payroll print of +316K on Friday." - Stifel Nicolaus

The SEC's highly overpaid bureaucrats will have to wake up early next Wednesday and read all the Goldman Sachs pamphlets on what a bid ask spread is, what predatory algos are, and why HFTs have hijacked the market in order to sound somewhat intelligent at a "Sunshine Act" hearing on high frequency trading, dark liquidity and sponsored access. Being insufferably worthless Wall Street puppets, the hearing will achieve nothing, and will be followed by a Sunset Act hearing in a few years, where a post mortem of all that could have been accomplished, but wasn't, will be eulogized, together with aremembrance of America's once alive capital markets.

Just as yesterday we shared the top 10 groputhink reasons for the rip in 10 years from 3.84% to 3.75%, so today we provide 10 possible justifications for the round trip back to 3.83%. Most likely, none of this is true or relevant, but we have to fill posts with content, even if it is complete bullshit.

Today's action is more of the same: aggressive selling on the far end of the curve has pushed the 2s30s to steep to quite steep levels yet again. In the meantime, the Mortgage spread is down to 64 bps, a 52 week, if not all time tight spread. Soon the Fed's purchases of MBS will make the mortgage market "safer" than 10 years. The 30 year MBS is already trading well inside of comparable Treasuries. So beside the constant and unrelenting market insanity, all is normal.