Archive - Sep 2010

Below are the biggest holders of Mariner Energy stock. #1, with 10 million shares, is John Paulson who has bought the stock as part of a merger arb strategy with Apache. Other in the top 5 include Vanguard, Fidelity, Prudential, GMT Capital.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 02/09/10

Update: the explosion is on a Mariner operating platform in the Vermillion 380 field. This is not a rig. From CNN: "An oil rig has exploded 80 miles off the coast of Louisiana, with 12 people overboard and one missing, the Coast Guard said Thursday morning. Rescue attempts are underway for at least 12 people, Coast Guard spokesman John Edwards told CNN. 13 people were on board the rig total, Edwards said, noting 12 have been accounted for, but one person was missing. The accident took place 80 miles off the coast of Louisiana on the Vermilion Oil rig 380, which is owned by Houston-based Mariner Energy. The Coast Guard has multiple helicopters, an airplane and several Coast Guard cutters en route. It's unknown if there are any injuries."

Yesterday, the market surged on an ISM number that was so stretched, and so out of out leftfield, it was higher than the top expectation by the economist panel. The government once again outdid itself in boosting numbers with the hope of surging stocks. It succeeded. Now the question is whether the imminent ISM downward revision have a comparable adverse market effect. And revised it will be: David Rosenberg explains why.

It appears there is a pretty stark difference of opinions on market structure these days, with an increasingly greater majority seeing High Frequency Trading as the devil incarnate, while the HFT lobby, most typically in the face of one Irene Aldrigde, surprisingly defending the practices of the HFT practitioners. Regardless, today's incremental observation on High Frequency Trading fair market practices comes courtesy of Boris Schlossberg GFT Forex, who in a CNBC interview, discussing the massive surge in FX volume which we highlighted earlier, makes the following relevant observation on HFT: "HFT traders have been incredibly destructive to the equity market because they have essentially been doing nothing but frontrunning and quote stuffing." We wonder if Mary Schapiro was watching this particular interview.

This is just getting silly: perhaps the next update on ICI mutual fund flows should occur if there is an inflow for once...ever again. In the meantime, ICI reports we have just recorded the 17th consecutive weekly outflow from domestic equity mutual funds, and what's worse for mutual funds' depleted liquidity ratios, it is now accelerating, hitting a total of $4.3 billion, a more than 50% increase from last week's $2.7 billion. YTD outflows have now hit $54 billion, as ever more capital is going into far safer fixed income instruments. And even as mutual funds are now staring outright liquidations point blank in the face, their actual capital keeps declining courtesy of endless redemptions. As a reminder, here is what Rosenberg said on the issue yesterday: "As for liquidity ratios, equity funds portfolio manages have theirs at an all-time low of 3.4%, down from 3.8% in June. Tack on the fact that there are really not very many shorts to be covered – since the market peaked in April, short interest is 4.3% of the S&P 500 market cap (in August 2008 it was 6%) and there’s not a whole lot of underlying fund-flow support for the stock market here." As for this being a contrarian signal, hopefully all those who see this as a buying opportunity can also find a way to make the now retiring baby boomers about 10 years younger and force them away from fixed income capital reallocation. Oh, and fix the broken market and restore investor confidence that the casino is only modestly rigged.

Yesterday’s opening in Gold was suspicious, as it tracked stocks for a while. Seems like the Risk-On crowd thought Gold was a “risk” asset, not a safety asset. Oops, they were wrong. Bonds got hammered so maybe it was the inflationistas out in force buying the beginning of the new Weimar republic monetary system (free wheelbarrow with every 1 Milliard Marks). Oops that didn’t work either. Smells a little toppy here, might be a good play to short with a stop out on a gap higher. Or sell a rally as it comes back into yesterday’s range. I’d buy calls if bullish, futures seem prone to liquidity gaps.

As day two of the FCIC hearing into why the Fed flips a coin, and/ore answers a call from 200 West, to decide which bank is TBTF and which isn't, watch Ben Bernanke's tenuous dance with truth and reality at the following FCIC link.

• Headline of the day: Economy Avoids Recession Relapse as Data Can't Get Much Worse (Bloomberg).... yes, this is headline news
• Could investors fleeing stocks become a lost generation? (USA Today)
• Will the White House have to replace its recovery blog with a double-dip one? (Telegraph)
• Ozawa Pledges Yen Intervention, Futenma Rethink in Japan Leadership Race (Bloomberg)
• Fisher `Reluctant' to Ease Until Fiscal Action Taken (Bloomberg)
• South Korea's Won Rises to a 2-Week High as IMF Says Currency Undervalued (BusinessWeek)
• Japan dilemma as economic dependence on China grows (Reuters)
• European Exports, Investments Spur Economy's Recovery (Bloomberg)
• But it is all fake and due to the ECB's ongoing life support: ECB holds rates, tipped to extend liquidity lifeline (Reuters)
• Summer of Economic Discontent (WSJ)
• Outgoing economic something or another Romer has some Keynesian parting words: "U.S. Must Find Will for Further Stimulus" (ABC)

Jobless claims are unchanged from last week, and come in line with expectations. Continuing claims came higher than expectations at 4,456K on expectations of 4,450K, with the previous print revised higher to 4,479K. Non-farm productivity much worse than expected, at -1.8% on expectations of 1.9, previously coming at -0.9%. Labor costs come at 1.1%, on expectations of 1.2%, a notable increase from the previous read of 0.2%. Knee jerk reactions by the market all around.

The market may go up or down after tomorrow's NFP, but one thing is certain: the Hamptons labor day weekend is ruined for all those who day trade the S&P (with a $150BN+ VaR).

• Asian stocks rise to two-week high on US manufacturing data; Canon gains.
• Australia Q2 GDP grows 1.2% - fastest pace in three years.
• Bernanke, Bair to present views of crisis to inquiry panel.
• Brazil holds rate at 10.75%, meeting expectations.
• Economy seen avoiding recession relapse as US data can't get much worse: Survey.
• Indian sugar production may jump 38% next year on higher planting, rains.
• Manufacturing in US grows at faster pace as factories extend recovery.
• Trichet may say ECB to keep emergency lending measures in place into 2011.

With the dramatic rise in gold's popularity many still need to be educated about some of the core concepts of the gold market, such as who holds it, and who produces it. Courtesy of Money Hacker we have a useful visual representation that answers precisely these two questions. In addition, here are some of the most useful and trivial factoids about gold, that have no bearing on its price whatsoever, but serve as perfect cocktail small talk.

Today's key economic events include weekly claims, productivity revisions, retail chain store reports, pending home sales, factory orders, and the Fed’s weekly report on its own balance sheet, plus testimony from Chairman Bernanke and some other FOMC speakers.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 02/09/10