Archive - Aug 7, 2010
Japan Redux: A Video Case Study Of The Upcoming U.S. Lost Decade
Submitted by Tyler Durden on 08/07/2010 20:56 -0500Whether one believes in inflation or deflation, one thing is certain: in many ways the current US experience finds numerous parallels to what has been happening in Japan for not one but two decades. While major economic, sociological and financial differences do exist, the key issue remains each respective central bank's failed attempts to reflate its economy. While long a mainstay of Japan, if the first failed version of our own QE, which pumped $1.7 trillion of new liquidity into the system, is any indication, future comparable efforts by our own Fed will be met with the same outcome (and hopefully with the same political result: the half life of an average Japanese prime minister is 6 months - if only our career politicos knew their tenure in office could be capped at half a year...). There is of course the "tipping point" optionality discussed earlier by Ambrose Evans-Pritchard, when comparing the hyperinflationary timeline during the Weimar republic, which noted that it took just a few months for the economy to slide from a period of price stability to outright hyperinflation. Either way, for an ironic look at the Japanese deflation scenario, targeted more at novices although everyone will likely learning something from it, we present the following informative clip from, ironically, the National Inflation Association, which asks whether Japan is a blueprint for America's imminent lost decade(s).
July P&L Disappointing For Quants
Submitted by Tyler Durden on 08/07/2010 20:22 -0500Ian Arvin's Innovative Quant Solutions has completed its July performance tracking analysis, and the result is a major weakness for quants in the just completed otherwise animal spiritsh month, as increasingly fewer factors proved successful, with pronounced weakness in the traditionally robust during the bear market rally Momentum factor. From the summary of the attached report: "The IQS model was down 1.57% for the 4 weeks ending July 31, while the sector neutral model was down 1.01%. Year-to-Date, the IQS model is down 2.74%. IQS top decile of stocks has returned +3.6% YTD, while (according to the WSJ) the DJIA has returned +0.4% YTD, S&P 500 has returned -1.2% YTD, and The Total Stock Market has returned -.04% YTD. The IQS 1000 model was down 6.03% for the 4 weeks ending July 31, and down 6.09% YTD. IQS 1000 top decile of stocks has returned -.8% YTD. Factor categories that added to performance were led by Value and Sentiment. Momentum and Improving Financials underperformed. Weekly returns were volatile – up one week, down the next. IQS 1000."
Art Cashin: "The Fed Is Walking A Tightrope In A Hurricane" And Other Observations
Submitted by Tyler Durden on 08/07/2010 16:33 -0500The head of floor operations at UBS, who has followed the Dow since its triple digits days, and has been covering the market for the past 40 years, shares his ever amusing insights with Eric King. Art Cashin, whose daily comments on "napkin charting" and requisite market "nimbleness" are now legendary, and have appeared many times on the pages of Zero Hedge, discusses such matters as market topping, various levels of deterioration within the economy, the ongoing wage deflation, the shift of US society to a welfare state, the deflationary collapse of the economy, and the imminent response by the Fed: never one to mince words, Cashin observes with pinpoint accuracy "if you ask small businesses why aren't you borrowing, their answer is 'send me a customer, don't send me credit.'" and concludes "the Fed is walking a tightrope in a hurricane and it's going to be tough." We just found the understatement of the weekend.
Goldman Made Between $11 And $16 Billion In 2009 Trading CDS And Other Derivatives
Submitted by Tyler Durden on 08/07/2010 15:32 -0500As part of its most recent FCIC grilling, David Viniar left the political theater a month ago with a homework assignment to disclose all of the firm's derivative profits, as well as provide granular detail on its derivative trades. Today, courtesy of a memo from Goldman intercepted by the WSJ, we now know that derivative trades accounted for between 25% and 35% of 2009 revenue. "Based on the percentages provided by Goldman, such businesses generated $11.3 billion to $15.9 billion of the company's $45.17 billion in net revenue for 2009." As a reminder, the Office of the Currency Comptroller noted (table 2) Goldman had $49 trillion in total derivatives as of Q1. However, the bulk of the profit comes from trading credit derivatives where Goldman, post the assimilation of Bear and Lehman into the collective, is now virtually an undisputed trading powerhouse, and due to the OTC nature of the product allowing firms to set bids and asks as is, as long as liquidity in cash products continues to decline, Goldman will continue to dominate not only the most profitable vertical of derivative trading, but CDS will continue to generate roughly a third of the firm's profits, for both flow and prop. Post the recent shifts in prop trading across Wall Street, it will be interesting to see what the impact on the top line will be now that allegedly CDS trading at Goldman will be exclusively on a flow basis. The irony is that the Volcker Rule seems to focus almost exclusively on equity trading, while the bulk of the firm's questionable flow-prop "Chinese wall" transgressions may occur precisely in derivative trading, and should be the one area under much more scrutiny by regulators and legislators.
What The Weak Employment Numbers Mean
Submitted by Econophile on 08/07/2010 13:23 -0500A disappointing July jobs report came out Friday showing weak employment gains, further evidence that the economy is stalling out. What will the Fed do?
A Hiroshima Memorial
Submitted by madhedgefundtrader on 08/07/2010 11:17 -0500Friday was the 65th anniversary of the Hiroshima atomic bomb. A visit to the Atomic Bomb Victims Hospital. Futilely treating gamma rays and beta particles with mercurochrome and traditional Japanese folk remedies. No one could live there for 20,000 years. Every type of plant strangely flourished after the bomb, but men and women were left sterile. Where has the bomb taken us today?
Rumors of News. News of Rumors.
Submitted by Bruce Krasting on 08/07/2010 08:09 -0500Washington is now in the business of spreading rumors relating to Wall Street. Just another example of how D.C. is taking the fun out of the game.
What Is Really Going On With China Real Estate: A Standard Chartered Survey
Submitted by Tyler Durden on 08/07/2010 02:23 -0500In pursuing an answer to the most elusive question around these days, namely just what is going on in China's real estate market, Standard Chartered has conducted the first phase of an exhaustive survey analyzing precisely what the real estate trends in Beijing, Shangai, and other Tier 1, 2 and 3 cities. The survey attempts to answer such key questions as: "What is really going on in China’s real-estate sector? Are prices falling – and if not, will they? Are developers’ finances
getting tight, and if so, will they be forced to cut prices? Confronted with the State Council’s stringent cooling policies, are developers postponing project starts and stopping construction? And if they do stop building, will this derail the economy and thus force the State Council to loosen policy?" For all curious to learn more about the truth behind the hype regarding China's real estate, which has more polarizing opinions than pretty much any other issue, this is the presentation for you.





