Archive - Jun 2010
June 29th
Bond Yields Imply The Fair Value Of The S&P Is 750
Submitted by Tyler Durden on 06/29/2010 13:22 -0500
One of the less discussed topics by the propaganda machine is that with bond yields approaching record yields, and in the case of the 2Y below them, the S&P has no place trading over 1,000. There was a time when bonds and stocks would correlate, and as bond prices surged, equities would plunge and vice versa. Now that we live in HFT days where stock values are completely disconnected from fundamentals, and even the bond market, courtesy of the Fed's seemingly endless market interference, it makes sense to extrapolate what the fair value of stocks would be implied purely based on bond yields stripping away for the Fed. Attached we present a very simple regression analysis between simple 10 year spreads and the S&P, and the 2s10s (steepness between the 2 and 10 Year) and the S&P. What both analyses indicate is that stocks are approximately 30% overvalued, at least based on historical regression patterns relying on yields to imply stock prices. Yet even though this analysis is purely statistical, here is a simple extension: with US stocks at about $13 trillion in market cap, if one assumes the suggested 30% haircut the result is $9.1 trillion in fair market value. Considering that the Fed has pumped $2.5 trillion in the form of monetary stimulus, and Obama's various fiscal stimuli now amount to just over $1 trillion, that explains the delta. Bonds are implying where stocks should be almost to the dot, absent the $3.5 trillion pumped into stocks by the administration and the Chairman. Fair value of stocks, when stripped away from the printer and Congress, is 750.
IMF Preparing For Bailout Cataclysm Part 2
Submitted by Tyler Durden on 06/29/2010 12:18 -0500From Bloomberg: "IMF is working to develop a precautionary credit line, MD Dominique Strauss-Kahn said." Last time they did the same with the New Arrangements to Borrow (discussed here), on April 12, a $1 trillion bailout followed. Get ready folks. Europe bailout two is coming.
HFT Fat Digital Finger Breaks Citi Stock, Shares Halted As Circuitbreaker Triggered With Stock Plunging 20%
Submitted by Tyler Durden on 06/29/2010 12:12 -0500
HFTs baby. HFTs. They just provide liquidity.
Methane Release From the Gulf Oil Spill: What Does It Mean? How Bad Could It Get?
Submitted by George Washington on 06/29/2010 11:46 -0500Will the methane kill marine life in the Gulf? Cause global warming? Bring on tidal waves and firestorms? Here's everything you ever wanted to know about methane - INCLUDING woolly mammoth farts ...
RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 29/06/10
Submitted by RANSquawk Video on 06/29/2010 11:41 -0500RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 29/06/10
Cold Shoulder: Goldman Warns If 1,040 Is Taken Out In S&P, 865 Is Next Stop
Submitted by Tyler Durden on 06/29/2010 11:35 -0500
Here is why the entire Liberty 33 trading desk is set on preventing a break of 1,040 in the S&P - as Goldman's trading desk technician John Noyce warns, the next stop in the head and shoulders formation, should 1040 be taken out, would be 865, not to mention a complete rout for global teleprompter stocks post the mid-term elections.
Government Betrays Americans Again, Prepares To Drop Bank Levy To Win Support For Fin Reg
Submitted by Tyler Durden on 06/29/2010 11:26 -0500
Goldman off to the races as 3 reports confirm that the captured and bribed congressmen and senators are about to drop the $19 billion bank levy in order to win the support of Scott Brown and others who demand that banks gradually lose every expense item from their P&L over time, and have revenue translate to net income.We anticipate more such 11:59th hour horsetrading, as the entire already worthless bill is reduced to one ply toilet paper for Wall Street's CEOs.
Paul Wilmott Lashes Out At HFT, Laments Groupthink And Bandwagoning Of The Binary Churners
Submitted by Tyler Durden on 06/29/2010 10:50 -0500Zero Hedge's view on the systemic threat that HFT poses to markets, a topic beaten to death on the binary pages of this website, is gaining ever more supporters each day. The latest to lament the lack of imagination, creativity, and work ethic, and to caution against the greed, bandwagoning and groupthink of the binary churning crew know as the HFT lobby is Paul Wilmott, in yet another scathing critique of all that is rotten with modern market structure. One would hope after 10 years of increasingly more vocal complaints and a few hundred more flash crashes, even the incompetent illiterates at the SEC will finally pay attention and put an end to this travesty.
A Look at the Case-Schiller - No Good News
Submitted by Bruce Krasting on 06/29/2010 10:40 -0500Larry Kudlow is selling this report as good news. I think it stinks
Obama Says He And Bernanke Agree Economy Is Strengthening
Submitted by Tyler Durden on 06/29/2010 09:53 -0500The teleprompter also says that economic headwinds are due to concerns about Europe, and that the US must extend unemployment benefits to boost jobs. What can one even say at this point... The lunatics are firmly in control. We will keep listening to hear when Obama tells the general public that the Fed will stage another year long melt up as he did in March of 2009, and report promptly.
The Only Certainty in Life: Taxes are Rising
Submitted by madhedgefundtrader on 06/29/2010 09:31 -0500$2,000 in tax increases will be needed per household to cover increased government social service spending by 2015. This figure then soars to a mind blowing $12,636 by 2050. We are now paying the piper for 30 years of tax cuts and spending increases. Sure, we won the Cold War, but we did it all on an American Express card, and have been rolling over the balance ever since. The winner of elections from now on is basically irrelevant, as our problems have grown to the point of insolvability.
Developing: No FinReg Vote Today, Bernanke To Attend Presidential Economic Briefng
Submitted by Tyler Durden on 06/29/2010 09:17 -0500Obviously now that FinReg will not pass, it will suffer the same fate as the Federal budget - i.e., be put out of sight and out of mind, never to be seen again. After all Obama already got his bragging points on FinReg. Too bad he doesn't have the votes to pass it. As for the Bernanke stuff, we will keep you posted on that.
Consumer Confidence Plummets: Down 15% To 52.9, From 62.5 Consensus, 62.7 Prior
Submitted by Tyler Durden on 06/29/2010 09:10 -0500
The Conference Board is on fire today. First it killed the Shanghai after revising its China propaganda massively as reported previously, and now it indicates it surely has no credibility whatsoever, after its June Consumer Confidence number came out at 52.9, compared to 62.5 expectations, and a 62.7 previous (revised down from 63.3). And in keeping with recent tradition, we won't be surprised if this number is also massively revised down subsequently. CNBC warns to take consumer confidence numbers, when declining, with a grain of salt, and to gobble them up when rising, wholeheartedly.
S&P Resumes Downward Channel
Submitted by Tyler Durden on 06/29/2010 09:04 -0500
The S&P is back to resuming its downward channel. Blow outs in quant land, where deleveraging is at 2010 highs, are are not helping. In other news, a very lucky Elon Musk just guaranteed he will never get invited on CNBC ever again, after slamming Jim Cramer for his Buy Bear call, and calling him a contraindicator. Alas, when it comes to the Tesla business model, which assumes investors will not pay just a little more for a Ferrari, we are on the sidelines.
Morgan Stanley On 10 Year Sub 3.00%: Don't Panic, Those Steepeners Will Work... Eventually
Submitted by Tyler Durden on 06/29/2010 08:49 -0500Morgan Stanley's Jim Caron in major damage control mode. Try keeping a straight face as you read this. "Why are UST 10s below 3%? Fear and greed, but mostly fear. Many in the market have surrendered themselves to the deflationistas. It seems to be all over the media these days. Concerns about a deflationary double-dip, rumors of the Fed re-opening QE and purchases of USTs as a liquid positive-carry hedge against risky assets are but only some of the culprits pushing UST 10y yields below 3.00%. We recognize and respect these forces and concede that UST10s can fall further in yield. We will not fight this current move. Instead, we will look for the opportunity to counter it."






