Archive - Mar 2010

• Asian shares mostly down; India's RBI's rate hike dampens demand.
• Bernanke says taxpayers shouldn't bear cost of dismantling financial firms
• China cautioned US against citing its currency as a reason for imposing trade sanctions.
• Historic health overhaul bill passes; Democrats clinch win in 219-212 House vote.
• IMF's Lipsky says advanced economies are facing 'acute' debt challenges.
• Merkel: Greece doesn't need financial help.
• Aetna reaffirms 2010 targets, says 2010 results "are off to a good start."

RANsquawk 22nd March Morning Briefing - Stocks, Bonds, FX etc.

I am of the belief that Prepaid Legal, a publicly traded company, is actually running a pyramid scheme and a ponzi scheme (potentially illegal, but arguably legal due to the current laws of the land). They are also employing a self-destructive [pyramid] business model and instead of revamping that model and reinvesting heavily in marketing, they spend money on [ponzi] share buybacks to enrich management who are compensated in stock that is sold directly into the share buyback scheme. This is the opportunity to for the SEC to prove that it is not just the Shellgame Enablement Commission (SEC).

In April of 1994, Bill Clinton nominated to the federal bench one Denise Cote, formerly an editor of the Columbia Law Review, and the first woman to serve in the U.S. Attorney's Office as the Chief of the Southern District of New York Criminal Division. Cote pulled the federal securities case against WorldCom's officers and directors. And on March 18th of this year, Cote issued an opinion and order baring Zero Hedge partner TheFlyOnTheWall.com from reporting immediately on equity research reports from the big banks, not to mention awarding damages and attorney's fees in an amount to be determined later. It seems (brace yourself) that TheFlyOnTheWall.com had been something of an authority on equity research recommendations from Wall Street and regularly reported to its active newsfeed the 10,000 foot versions thereof with characteristic Super Fly speed.

A meltdown of Biblical proportions hits the vacation home market. A market plagued by giant snow drifts and burst pipes. Cash out refi’s have come back to haunt. Sales on the county court house steps at prices down 60%-70% from the 2006 peak. Jumbo financing is now an extinct species. A shortened school year has killed the rental market. A “bear” market of a different sort. Care to join Fredo Corleone?

The DXY is ripping, and is about to break out of recent resistance levels. News out of Europe that no bailout of Greece is to be expected, further compounded by some serious doom and gloom out of Evans-Pritchard about the EMU and the euro in general, means that the euro will soon make a date with the one point two-handle. This is certainly not good for Goldman clients who just one week ago bought into Goldman's pitch of going long the EURUSD, with a 1.35 stop. Looks like that stop is about to be breached.

Reserves? We don't need no stinkin' reserves!

This past week the S&P500 made a marginal new high at 1159. Since the last marginal new high 9 weeks ago, the S&P500 has made 1.2% and along the way it had a 7% draw down. In my opinion, that's the path to the poor house - not the end of the rainbow.

Jim Cramer may be in hot water with the SEC over his theStreet.com, and he may be a mouthpiece for the biggest ponzi enabling organization the developed world has ever seen, however, he did have some interesting and spot-on observations on the just passed health care bill. In a nutshell, and for once we agree with Cramer, if futures are not limit down right now, it is because of the same bidding hand that has kept the market going straight up at a 30 degree angle for the past year.

We previously discussed the curious phenomenon of increasing individual tax refunds handed out by the US Treasury, despite record weak tax withholdings, and speculated that the Treasury's generosity, which is very much unfounded, is one of the main reasons for the consumer "outperformance" year to date, due to the excess money obtained by US consumers courtesy of what appears an oddly lax Internal Revenue Service. We won't speculate on the secondary implications of governmental cash flows to and from taxpayers, and instead will focus on actually following the cash. The conclusion is simple: even as the IRS has paid out far more in refunds in 2010 versus 2009, the difference in gross tax withholdings between 2009 and 2010 is at year highs. The government can not afford to pay refunds, yet does so at an alarming pace. The net difference (withholdings net of refunds) for just the first 10 weeks of 2010 is already at a ($42.7) billion cumulative number: a new 2010 high.

Last week was nothing special as stock market continued to drift higher on light volume and the Volatility Index (VIX) reaching a new multi-year low. This mix of higher prices on light volume, multi year lows in the VIX and an overbought market paints a clear picture to a market technician – Be Ready for a Pullback! Last Wednesday I sent out a report covering sector rotation comparing the price performance of these sectors from the January peak with last weeks price action. It was very interesting and it pointed to a sharp sell off Thursday or Friday.

Crude oil futures kept falling back from highs even though speculative funds increased their bets that prices are headed higher. The benchmark West Texas Intermediate contract ended the week at $80.68 a barrel, after nearing $83 earlier in the week, compared to $81.24 a week ago. Saudi Arabia’s oil minister, Ali Naimi, made it clear once again on Tuesday that the world’s largest oil producer prefers a range of $70 to $80 for oil prices. Speaking to journalists in Vienna prior to and OPEC meeting, Naimi said the oil-exporting group, which accounts for 40% of daily oil consumption, won’t let tight supplies push prices too high.

China: When you build roads so fast, sometimes you never know what you may run into at the end of the road. A very short story for your Sunday reading.

Over the past two years, one of the most salient topics of discussion has been America's collapse into a Chinese state of economic disclosure - limited, opaque, and, at worst, fraudulent. Due to Zero Hedge's extremely "eclectic" selection of readers who are professionals in a variety of industries, we would like to take the opportunity to hear from all of you on what the true state of the US economy is where you are - be it (un)employment, inventories, overall business conditions, moods, general supply and demand, etc. Consider it an objective, crowd-sourced, non-manipulated business perspective.