Archive - Sep 7, 2010

Phoenix Capital Research's picture

The Muni Bond Crisis Is Officially Here: Harrisburg Drops $3.3 Million in Muni Payments





Last week, the municipal bond Crisis began in earnest when the capital of Pennsylvania, Harrisburg, dropped $3.3 million worth of municipal bond payments for the month of September.

This is just the beginning. Collectively US states continue to face massive budget short-falls in spite of massive Federal Aid. According to the Center on Budget and Policy Priorities, US states are expected to run deficits of $144 billion and $119 billion in FYs 2011 and 2012 respectively, unless they can cut spending further or raise taxes dramatically to close these gaps.

 

Tyler Durden's picture

Goldman Flow Now Selling EUR Outright, Advises Leveraged Accounts Are Caught Wrong Way In EUR Collapse





Some very disturbing commentary for the EUR bulls out of Goldman sales desk (these guys are the real deal, not the institutional sell side idiots who can't hit an elephant from 3 feet with a bazooka), which is now outright bearish on the EUR: "We’ve been better EUR sellers to the tune of half a yard, mostly technical accounts. Leveraged accounts are not participating in this move for the most part, and if anything, they have been caught the wrong way around." Which means that should the collapse continue, the margin calls will come in, and the EUR longs will go the other way, putting increasing pressure on the EUR pairs, and likely forcing the SNB to do the inevitable. Look for more EUR pain overnight.

 

Tyler Durden's picture

Tim Backshall On Europe: "Default Now Or Default Later" As EuroStat Complains That Greece Is Still Withholding Critical Data





There is one major problem with putting houses of card back together - they tend to fall...over and over. And while abundant liquidity in May and June served as an artificial prop to return European core and PIIGS spreads to previous levels merely as mean reversion algos took holds, the second time around won't be as lucky. CDR's Tim Backshall was on the Strategy Session today, discussing the key trends in sovereign products over the past few months, noting the declining liquidity in both sovereign cash and derivative exposure (we will refresh on the DTCC sovereign data later after its weekly Tuesday update). Yet the most interesting observation by Backshall is the declining halflife of risk-on episodes, which much like the SNB's (now declining) interventions, are having less of an impact on the market, as ever worsening fundamentals can only be swept under the carpet for so long before they really start stinking up the place, and indeed, as Tim points out at 5:30 into the interview, even the IMF now realizes that soon the eventual second domino will fall, and it is better the be prepared (via the previously discussed infinitely expanded credit line), than to have to scramble in the last minute as was necessary in May. In other words, the storm clouds are gathering and only fools will invest in risk asset without getting some additional clarity on what is happening in Europe. The bottom line as Backshall asks is: "do they default now or default later." And that pretty much sums it up. Buy stocks at your own peril.

 

Tyler Durden's picture

Hedge Funds See $2.9 Billion In Outflows In July, Broadly Underperform S&P YTD; Redemption Requests Imminent





First mutual funds, then ETFs, now Hedge Funds. Bloomberg reports that the smartest of the smart money have posted an outflow of $2.9 billion in July, or 0.2% of total assets: the most since January, based on TrimTabs research. "July's number follows an outflow of $2.7 billion in June. The industry has dropped 4 percent since April 2010, according to Trimtabs, which attributed the decline mostly to negative returns in May and June. Flows have now been negative five of the last eight months (see chart, this page), the worst eight-month stretch since the September 2008 to April 2009 period." And for those wondering why hedge funds are counting down each of the remaining 17 trading days with increasing dread, is the following reason from TrimTabs: "Redemptions should resume in September; historically one of the worst months for hedge fund flows. For the year, flows toward hedge funds stand at $1 billion, following redemptions of $172 billion in 2009 and $150 billion in 2008. We believe it is safe to assume this “lost” $320 billion will not come back to the industry any time soon." As is now well known, the July rally was broadly missed by hedge funds which are now underperforming the general market according to the Bloomberg BAIF Hedge Fund Index. The only open question is how many managed to lever into the rally of the first week of September and pull the cord at the very top.

 

Tyler Durden's picture

Guest Post: Primer #2: Is there a housing bubble?





In our last primer we looked at how money is created and destroyed in our fractional reserve banking system. We examined the implications of this process on inflation (which buoys asset prices like real estate) and deflation (which crushes asset prices).
In that primer I suggested that one of the main catalysts for a contraction in the money supply would be a decline in real estate prices which become self-feeding. This will dampen demand for mortgages and home equity lines of credit, the two largest generators of bank-created money, and will also cause people to save and pay off their debts as they no longer feel as wealthy. This has the effect of 1) Shrinking the aggregate money supply, and 2) Slowing the velocity of money. In this primer we will examine the question of how fairly valued Canadian real estate really is. We will use quantitative measures that are universally accepted to examine this question, rather than the qualitative fluff that is rampant in most discussions of real estate values.

 

Tyler Durden's picture

Meredith Whitney Sees A 10% Drop In Wall Street Headcount And "Dramatic" Declines In Payouts In 18 Months





And you were wondering why the SEC and certain politicians with extensive connections to the financial services lobby are starting to stir now that it is common knowledge that every single hedge fund and trading desk's woes are a function of HFT run amok (which is exaggerated BS of course, but from Wall Street's darling, HFT has now become the one thing everyone loves to hate, and blame their own underperformance on). And as we suspected, there is a far more structural issue underlying the recent faux-move to restore confidence in markets, namely imminent pain for Wall Street headcounts... and bottom lines. According to Meredith Whitney, who had been relatively quite in recent weeks, Wall Street faces the departure of about 80,000 staffers, or 10% of all, within 18 months, not to mention a major drop in Wall Street compensation. The reason is the same as the one we pointed out earlier: slowing revenue growth, primarily due to the complete collapse in trading volumes, as computers have used their binary elbows to push everyone else out of the markets, and with Wall Street's primary revenue model now being exclusively reliant on trading, this is equivalent to a partial extinction event as many trading firms will have to close. This also means that the New York City economy is facing another major solvency crisis as tax receipts are sure to plummet.

 

Tyler Durden's picture

Guest Post: Why Paul Krugman Is An Imbecile—or a Fraud





There’s a saying in Spanish: Por la boca muere el pez. “The fish dies by the mouth”. Nobel economics laureate Paul Krugman has a recent op-ed piece in the New York Times which goes an awful long way to showing that he is a complete and utter imbecile—or the worst sort of cheap huckster imaginable.

 

Bruce Krasting's picture

SS to Pay $100(s) of Billions to Illegal Workers





Hard to make up....

 

Tyler Durden's picture

A Confused Summer Market With Bounty On It





Vix posted a very key bullish reversal ouside the lower bollinger band. Over the last two years, this has been a bearish signal for equities 100% of the time. In January the top in price lagged the low in Volatility by 7 business days, and the lag was 10 business days in April. Buyers beware, you have one or two weeks of fun, and after that comes a strong bearish move which will take the market lower than 1,000 in S&P futures. We will be very carefully following bearish divergence for equity indices to confirm this major signal.

 

Tyler Durden's picture

Mike Pento Kicked Off CNBC For Telling Truth, As Dumb Money Manager Says "Nothing Is In A Bubble When People Want To Buy It"





Some CFA guy (not quite Econ Ph.D.)tells CNBC that "nothing is in a bubble when people want to buy it." At the same time Michael Pento tells CNBC the truth. Guess which one manages to enrage the infantile moderator, and is told to never show his face on CNBC again...

 

RANSquawk Video's picture

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 07/09/10





RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 07/09/10

 

madhedgefundtrader's picture

China’s Insatiable Appetite for Gold





An historically hard currency culture suddenly has money to spend. To get China’s gold investment up to American levels on a GDP basis, it needs to buy 25 million ounces worth $31 billion. That amounts to 34% of the 2009 global annual production of $110 billion. The Chinese aren’t going to provide the next spike in gold prices, but they are building a floor higher than anyone expects.

 

Tyler Durden's picture

Thunder Road Report On The Imminent Surge In Silver, And Much More





"I can’t remember a time in my 23 years in the market when there was so much confusion and uncertainty about the outlook. As the monetary catastrophe unfolds gradually, some days things look a little brighter, then the sheer enormity of the problem becomes only too apparent once again. Sentiment keeps flipping between optimism and pessimism, but the debt bubble just gets bigger! Noel Gallagher wrote “These are crazy days, but they make me shine”, and that sounds like a good enough motto for trying to invest right now (fingers crossed). The silver price has started to trade differently and it appears that BIG MONEY is moving in to the metal (at long last) and fighting the Cartel. There is evidence that the supply of physical silver is getting tight and it could be the beginning of a major upward move in the price." - Paul Mylchreest's Thunder Road Report

 

Tyler Durden's picture

Summarizing Mary Schapiro's Comments On Being Only 20 Years Behind The Market Structure Curve





Mary Schapiro is making some waves at the Economic Club of New York, where for the first time ever, she has given some indication she is only two decades behind the curve when it comes to a market that now has a 5 to 1 ratio of HFT to retail participation (yes, you are all not only frontrun daily, but also surrounded by Sky Net). Here is a summary of her key points from the Economic Club speech earlier, courtesy of Themis Trading.

 
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