Archive - Jan 2010

Initial claims for the week ended January 23 were second consensus miss in a row, coming in at 470,000 (SA), a decline of 8,000 from the prior week's downward revised 482,000 (to 478,000), however 20,000 higher than the consensus of 450,000. The comparison of SA and NSAinitial claims can be seen on the chart below. A dig through the data indicates that probably the entire spike in claims can be attributed to some strange moves in Initial Claims coming out of California, where initial claims surged to an all time high of 115,462. Is there more than meets to eye to the "rosy" picture in the Golden State.

At this point using the words "Greece" and "record" in the same sentence is starting to get uncool. Alas, today, it has to be said one more time. The country's CDS is now at 387 bps, another all time wide, while the spread to Bunds is just getting plain silly. Of course, the chorus of voices begging for calm is increasing, with Spain's prime minister the latest to claim that "nobody will be leaving the euro." It is unclear at this point if he is referring to Greece or Spain. This is coupled with Papandreou saying that he is "seeing speculation in world financial markets" regarding his country's risk, and the ever ubiquitous " rumors can create problems." Dick Fuld surely can sympathize.

• Meltzer: The Fed's anti-inflation exit strategy will fail (WSJ)
• It's time for Bernanke to move on (MarketWatch)
• Bernanke is unfit to be reconfirmed: "If nothing else, Mr. Bernanke has proved to be a consummate bureaucrat,
  spending most of his time in recent months lobbying for major
  expansions in the Fed's regulatory powers, which, if granted, would
  take it far beyond the purposes for which it was created in 1913." (Washington Times)
• Goldman viewed as favored by regulators, Fed says (Bloomberg)
• Quantitative easing: we are all central bankers now (Jesse)
• Here comes the new temporary debt thatch roof: Democrats to raise debt limit $1.9 trillion to $14.3 trillion (The Hill)
• Darling to hold secret talks with bankers in Davos (Guardian)

RealtyTrac has new numbers out. More bad news in my opinion. The trend is continuing and this trend is not our 'friend'.

• Asian stock markets were broadly higher following a rise on Wall Street.
• Brazilian Central Bank keeps its benchmark interest rate at a record low of 8.75%.
• China sets up energy policy body headed by premier amid growing demand, shortages.
• China shares rebound on bargain-hunting after a 4-session decline, led by developers.
• China’s banking regulator told lenders to step up scrutiny of property loans.
• Dutch state and ING appeal EU ruling on payback of aid given during financial crisis.

There is a rumor of a bailout going around. It is worth watching as the Greece/Germany spread was wider by 17bps on the day again. It may be worth looking at shorting some bunds here, especially given that 10s rejected their 118-10 resistance yesterday in the US. - Nic Lenoir

RANsquawk 28th January Morning Briefing - Stocks, Bonds, FX etc.

In his first State of the Union speech in 2010, President Barack Obama carefully chose his words in calling for a new jobs bill to stimulate real organic economic growth. However, politicians have always been extremely deft about making speeches that present a united front with the people against corruption, while often hammering out legislation behind closed doors that ensures no real change will ever occur. To determine if the wool is being pulled over our eyes once again, let’s turn to the actual text of President Obama’s State of the Union speech.

Where is all this leverage? Prime brokers now play hard ball. If you want to short a highly volatile stock, expect to pledge your first born child as collateral. The eminent doctor is increasingly looking like a one hit wonder. We are going to die from ice, not fire, and of boredom, not from cardiac arrest.

China has created a new housing bubble. Here are some excellent reports on what the bubble looks like and some ominous glimpses on how it may end. Like all bubbles it will burst and the economic fallout will impact China's economy and the U.S.'s. The frenzy indicates that the blow-up will occur soon.

As President Obama addressed the nation, the Lords of finance were out defending the private equity industry. They stand to gain the most if financial reforms pass...

Bottom line: A "yes" vote for Chairman Bernanke raises the likelihood of defeat for every member of the Senate standing for election in 2010 and 2012. And in any event, the rising tide of popular unhappiness with Washington and Wall Street promises to remake the American political landscape in a way not seen in the post WW II era. The comfortable assumption of stability in American political life is about to be replaced by instability and change, but that is what democracy is all about.

In this 1.27.10 edition of the Fibozachi Technical Update (FTU), we present 15 technical profiles of the:

(1) S&P 500 E-mini contract (ES); (2) VIX (CBOE Volatility Index); (3) NYSE VOLD; (4) NYSE TICK; (5) US Dollar Index (DXY); (6) Crude Oil Futures (CL); (7) Gold Futures (GC); (8) Silver Futures (SI).

Guest Post by David Fiderer

The insufficiently unexamined issue regarding the timing of AIG’s downfall is the AAA pyramid scheme embedded inside of AIGFP’s CDO portfolio. The ratings agencies defined reality in the alternate universe of CDOs, where bona fide due diligence was impossible and opportunities for abusive self dealing were rife.

A discussion of the cash flows of Agency MBS and what it means to Fed policy. It might be the basis of QE 2.0 Lite. Also a side story on how Big Ben juiced the market in March/April of last year. Just another one of those things that were done to put some money on the 'Street'.