Archive - Jan 2010

• Asian stocks advance to 16-month high on US manufacturing, commodities.
• Brazilian stocks closed at a 20-mt high on a raft of positive economic data at home.
• Crude-oil futures jumped to a 15-mt high on colder weather, economic optimism.
• Euro zone's mfg sector purchasing managers' index rose to a 21-mt high in Dec.
• US manufacturing expanded in December at the fastest pace in more than 3 years.
• US Treasury plans to sell $16 billion in four-week bills on Tuesday.
• Agricultural Bank of China plans to raise $22B via dual listing in Shanghai, Hong Kong.

TrimTabs' Charles Biderman discusses the flow of funds, and the interest rate outlook for 2010: nothing too outlandish - the Treasury bubble thesis revisited, as well as the biggest issue of all - the roll (much more on this from Marla soon). Also some observations on the interplay of money markets and alternative funds, extensively discussed here. Also, according to TCW's Chief Global Strategist the treasury bubble will burst in a few months, coupled with a collapse of the dollar. What this means is that rates will surge. What this also means is that once rates surge, equity values will be whacked as the cost of capital will no longer be zero (sorry Zimbabwe Ben, but you are completely wrong - a cost of capital of zero is the number one reason for pretty much all bubbles). So what do futures do? Up, up, up. The stocks-bonds divergence trade is alive, schizophrenic, utterly insane and well.

Morgan Stanley, appears to have reacquired the title of the "Riskiest Bank on the Street" with increasing VaR and declining risk adjusted returns that reflect growing risk in its investment portfolio, which is rife with assets that I am quite bearish on.

RANsquawk 5th January Morning Briefing - Stocks, Bonds, FX etc.

I will be the first to admit that 2009 was a disappointing year for my investment results. Although the first quarter of the year was the strongest that I ever had during the Asset Securitization Crisis, and I clearly saw the trend reversal coming at the end of the quarter, I significantly underestimated the length, breadth and depth of the trend reversal. With that being said, I do want to put things into perspective...

A peek into what the top hedge funds and institutional funds are buying for 2010...

"As you know I strongly believe in respecting market price-action, and I will update market scenarios and price targets across asset classes as trading unfolds and supports or resistances are met or broken. Let’s brace for a choppy 2010 as I think it is our greatest certitude: volumes will remain relatively low and the markets will therefore be chaotic. The only case where we see volumes picking up actively is a strong rebalancing towards risk aversion as the world economy relapses, so I guess we should welcome ranging choppy price action for now as we cannot hope for much better given none of the fundamental problems with the world economy have been resolved." Nic Lenoir, ICAP, 2010 Outlook

Greenspan’s error in judgment, conceived from his Ayn Rand based view of the World, was not that people would act in their own self-interest (they do), but rather that removing all the rules was a required pre-condition for this to occur. It is not a mutually exclusive situation where you can only have personal freedom/responsibility with no rules. On the contrary, real freedom is the ability to act on your own within the confines of the rules. Without a set of rules, there cannot be a game, only chaos. Hopefully, the new Financial regulations being discussed will focus upon creating rules that motivate behavior that benefits the public good as opposed to focusing on micro-managing the actions of the individual. This concept is certainly the basis for the old saying: “Good fences make good neighbors”. - Harley Bassman, ML RateLab

Zero Hedge readers will miss out if they fail to carefully study Matt Taibbi's piece on Fannie, Freddie, and the mortgage bubble (as well as a number of other tangential but critically important topics).  Mr. Taibbi makes much of being delicate with me over what he sees as our disagreement on the issues, but I think he mistakes a few (and generally minor) differences in our conclusions for a real divide on the facts.  We are, as near as I can tell, in pretty violent agreement on the substance of the argument: The present exploding bubble is the result of mis and malfeasance on all sides.

The 2009 calendar year numbers for the Social Security Trust Fund are in. These numbers confirm that the Fund is badly off track. Is there a fix to this systemic problem?

PPIP is even worse than I thought ...

Well, despite some brutal holiday travel, international airports, flight delays and exciting weather for our psychotically committed staff, the machine rolled on (albeit a bit more slowly) at Zero Hedge. So if you were off coping with in-laws and children not-your-own with as much liquor as you could consume, you might have missed out on quite a lot. Don't worry. We have the cliff notes for you here, and we've got things revved up again for 2010. So take a quick look at the past week or so, and then brace yourself for the months to come. We've got a wealth of things planned for you. It promises to be a rather interesting year.

After last year's debacle, most hedge funds feel lucky to still be alive. After suffering through the steepest, fastest bear market in history, many lessons were learned. And I'm guessing that many hedge fund gamblers are starting out in January with some New Year's trading resolutions.

At this point is the United States even capable of permitting bubbles to deflate without a massive run-up to a desperate crash? Probably not.

Someone in France has seen "Heat" too many times.