Archive - Jul 29, 2010

Econophile's picture

The Fed Reports A Sluggish Economy





The Fed came out with its Beige Book, a summary of economic activity from June to mid-July. The report overall noted "modest" growth if not slowing growth. Consumer confidence declined and durable goods orders were also down.

 

Fidel Sarcastro's picture

Market Profile Confused





With the lack of action lately we all seem to be confused - including Market Profile analysis. Watch out for the Chicago PMI...it comes out before you're really told.

 

Leo Kolivakis's picture

Circling Back to the Caisse's 2009 Annual Report





When the Caisse released its 2009 results back in February, the annual report wasn't made available then, and I didn't provide a full discussion on it. It turns out they published one of their best annual reports ever, focusing on accountability.

 

Tyler Durden's picture

Guest Post: The Pretence Of Knowledge





The "Pretence of Knowledge" was the title of economist Friedrich Hayek's 1974 Nobel speech. In his first few sentences, he described the then-prevailing economic condition in words appropriate to today:

“[this economic condition] has been brought about by policies which the majority of economists recommended and even urged governments to pursue. We have indeed at the moment little cause for pride: as a profession we have made a mess of things.”

Hayek's words in 1974 were not meant to describe today's condition, although they were extremely prescient. His hope was that the limits of knowledge would be recognized by the economics profession so that we would never reach our current situation.

Hayek's call was for professional humility at a time when Keynesians arrogantly believed they could manage the economy and the business cycle.

 

Tyler Durden's picture

China Blocks All Mainland Google Access As Pissing Contest Escalates





Earlier we highlighted a very sternly worded anti-US essay on the front page of the primary communist party daily. Some thought it was merely yet more posturing. Alas, they may have been very wrong. Associated Press reports that Google has now been completely blocked from mainland China access, with few if any details coming from Google itself, meaning this was another unilateral muscle flexing exercise by China. However, as far as Google is concerned, and judging by BIDU stock after hours, it may well be game over for the great Chinese decoupling experiment.

 

Tyler Durden's picture

In Advance Of The GDP Report, Goldman's Hatzius Sees 3% GDP Drag From State, Local And Federal In Coming Year





Tomorrow's GDP report will be a major market catalyst as it will either confirm that an inflationary double dip has now arrived and the Fed will have no option but to print, or it will come "just better than expectations", once again sending the market into a lithium-deprived paroxysm of intraday jerkiness. Yet in the medium run, tomorrow's number is very much irrelevant, especially if Jan Hatzius' latest analysis on the impact of various trends at the local, state and federal level turns out to be correct. Goldman's analysis is based on the following assumptions: (1) Congress will not extend emergency unemployment benefits beyond the current expiration date in November 2010, (2) state governments will need to make do without any additional federal fiscal aid beyond what was included in ARRA, and (3) Congress extends the lower- and middle-income tax cuts of 2001-2003 as well as the Making Work Pay tax cut of 2009 but not the higher-income cuts of 2001-2003. The latter is of particular significance because as Bloomberg reports, Obama is about to take populism into high gear, as Geithner will next week bring the proposed tax cuts for the rich directly to the masses (and the corrupt simians in the Senate). Obviously the financial implications of that one move alone will be disastrous and even if tomorrow's GDP number prove better than expected, the market may ultimately trade off on the devastating impact from the expiration of the most important subset of tax cuts. Which is why, going back to Hatzius, the Goldman economist states: "The overall impact of fiscal policy (combining all levels of government) is likely to go from an average of +1.3 percentage points between early 2009 and early 2010 to -1.7 percentage points in 2011, a swing of about -3 percentage points. We estimate that the boost to the level of GDP starts to decline in mid-2010, first gently and then more forcefully, setting up a significant negative impact on GDP growth in late 2010 and 2011." The only thing Hatzius forgot to add is brace yourselves for impact. Yet somehow Goldman's own David Kostin projects that 2011 S&P EPS will grow by double digits... even as the firm's own economic team anticipates an economic crunch. This is precisely the conflicted double speak that we have grown to love and expect from the Wall Street sellside.

 

Tyler Durden's picture

Already Bought A 3D LCD In Anticipation Of QE "Instarefi" 1.999? You May Want To Consider A Refund





Earlier today we noted that the biggest buzz on Wall Street is the recent suggestion by MS and ML's Harley Bassman that the GSEs should provide some form of autorefi program to take borrowers to market rates. As this would impact a vast majority of the 37 million of mortgages outstanding backed by the government, not only would this housing stimulus have a huge impact on consumption appetites, but it would be a political coup as all of a sudden the administration would find tens of millions of giddy homeowners who are paying far less monthly, and quite satisfied with the way Obama has handled things. It is thus likely that this program will take off shortly (if at all) just before the mid-term elections to neutralize all the pent up discontent focused on the administration. Yet there may be less than meets the eye. As Market News points out, over the past 24 hours Wall Street has gone into overdrive analzying the consequences, both positive and negative, of such a move. Below are the conclusions.

 

Tyler Durden's picture

After A Huge Intraday Amplitude, A Divergence-less Day Closes On Muted Note





Today was a very abnormal day in stock trading. Abnormal, because despite the massive amplitude in the intraday swing (from 1,102 to 1,116) and the nearly unchanged close, none of the "free money" monkey business occurred: there were no divergences between either ES and AUDJPY or ES and the 10Y UST. This is quite surprising and rather troublesome as it marks possibly the first time this has occurred in several months. Is some semblance of normality creeping back in stocks, as even HFTs begin to get kicked out of the market due to margin erosion and cannibalization? If so, watch for valuations to eventually promptly catch up to fair values on the margin... far lower than prevailing price levels.

 

RANSquawk Video's picture

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 29/07/10





RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 29/07/10

 

MatrixAnalytix's picture

Equity Market Being Propped Up As Market Remains Last Line Of Defense Against Deflation





Recent 1 to 1 Treasury to Equity correlation continues to break down as we noted monday...note Treasuries holding near high of the day as equities rally back into green...something is amiss in the financial markets right now with one of these markets being artificially skewed...

 

Tyler Durden's picture

Moody's Puts Iceland's Baa3 Rating On Outlook Negative, Next Stop - Junk, As Island Nation Continues Giving Banks the Finger





Just because the unpronounceable volcano did not do quite enough damage, and both Hekla and Katla are taking their sweet time, the Iceland Supreme Court recently ruled on the illegality of foreign FX-linked loans, and "Icesave" is still DOA, here is Moody's with a stern warning for the country to change its anti-Keynesian ways promptly or else. "Today's rating action was triggered by the recent Supreme Court ruling on the illegality of foreign-exchange-linked loans and government's continuing difficulties in achieving a resolution to its "Icesave" dispute with the UK and Dutch governments. Specifically, the Supreme Court ruling has the potential to cause substantial bank losses on foreign currency-denominated loans to domestic borrowers and may therefore require additional government support to the banking system. Moreover, a failure to resolve the "Icesave" dispute could lead the Nordic countries and the IMF to withhold future disbursements to the Icelandic government." Zero Hedge is certainly rooting for the tiny island country, even if it is triple hook rated, as it continues to give the middle finger to all the developed world kleptocrats.

 

Tyler Durden's picture

Stunner: 12th Sequential Domestic Equity Outflow (And $11 Billion In July Alone) Invalidates Volumeless July Stock Surge





The latest update from ICI is a doozy: in the week ended July 21, domestic equity mutual funds saw a 12th sequential outflow of $1.5 billion. Even as the market has surged 10% in the last three weeks, just under $10 billion have been redeemed from mutual funds, completely invalidating the move and further justifying the skeptics who see absolutely no reflection to reality in the volumeless ramp orchestrated by a few momentum HFTs and a couple of Primary Dealers with some excess leftover Discount Window change. Not to mention that 12 weeks in a row of outflows pretty much marks game over as far as retail participation is concerned in stocks. Regardless of what the market does, where it close, how high it ramps, etc, retail just pulls money indiscriminately from the market, without any regards for what the fraudulent and fabricated current level of the DJIA may be: all mom and pop just want is to get the hell out of stocks stat and get into fixed income. The market is now completely disconnected from fund flows, and the only thing potentially keeping it in the stratosphere in addition to deranged binary concoctions are various "self-fulfilling prophecy" high gamma ETFs, which continue to push stocks away from fair value to the tune of several standard deviations. However, just like on May 6, the rubberband will, sooner or later, snap, and make May 6 seem like a dress rehearsal.

 

Tyler Durden's picture

QE 2.0 Or QE 1.999: GSEs And FHA Are Preparing Auto-Refi Program Taking Millions To Current Market Rates Overnight





The main story making waves this afternoon is the presentation by St. Louis Fed's James Bullard titled "Seven Faces of The Peril" in which the Fed president pledges that the Fed should immediately recommence purchasing Treasurys if the deflation scenario picks up, which he notes is an increasingly likely probability. In the paper, Bullard argues that the Federal Open Market Committee’s extended period language may be increasing the probability of a Japanese-style deflationary outcome in the U.S. within the next several years, and concludes that an appropriate quantitative easing policy offers the best hope for avoiding a low nominal interest rate, deflationary outcome. "The U.S. is closer to a Japanese-style outcome today than at any time in recent history...A better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities.” While of course keeping up a facade that the Fed is in control, Bullard does speculate about the downside case: “The most likely possibility from where we sit today is that the recovery will continue through the fall, inflation will start to move up and this issue will all go away. Suppose we get another negative shock, another surprise. We have to be prepared in that event to have a plan in place to do something." Yet all of this is in the sphere of probabilities of QE2.0 and for now at least, is something to consider in the intermediate future. Yet something far more sinister may be brewing just below the immediate horizon. As Mark Hanson suggests based on speculation by both MS and ML (oddly enough released concurrently, MS report attached below), the GSEs and the FHA may be preparing to imminently launch an instant auto-refi program which would take millions of borrowers to current market rates overnight! In the process $45 billion of consumer savings would be created. Welcome QE 1.999.

 

madhedgefundtrader's picture

Why Singapore is Sizzling





Singapore has won the sweepstakes to become the world’s fastest growing economy. A white hot first half 18.1% GDP growth rate. The financial sector is booming, thanks to an explosion of newly minted Chinese billionaires. Goldman Sachs and Morgan Stanley scrambling to add local staff. Time to bury old grudges? (EWS).

 
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