Archive - 2010

December 30th

Today's Economic Events

Claims, Chicago purchasing managers’ index, pending home sales, and the Fed’s balance sheet…

December 29th

After 33 Consecutive Weeks Of Outflows, ICI Reports First Inflow Into US Equity Funds As Bond Outflows Persist

The inflection point has arrived. After pulling money for 33 consecutive weeks, and withdrawing over $98 billion in capital from domestic equity mutual funds, in the week ended December 21, the Fed has finally succeeded in getting the rotation out of bonds and into stocks as per ICI. After a total of $4.4 billion was redeemed from bond funds in the same week, mostly from municipals but also $837 million from taxable bonds (still a major decline from the almost $9 billion in bond outflows the prior week), domestic equity funds saw a token inflow of $335 million, compared to last week's $2.4 billion outflow. Just enough to halt the seemingly endless outflow. Still, since the bulk of the move seems predicated upon a move out of muni bonds, with $9.5 billion in outflows in December alone, should the muni crisis accelerate, and validate the investor concern, stocks as an asset class will certainly be impaired once the muni insolvency thesis start being played out... unless of course it is met with further action from Ben Bernanke in the form of QE3, as most Zero Hedge readers believe will inevitably happen. At that point, and as always when the Fed intervenes, all bets are off, suffice to say that gold will be well over $2,000 by then.

Simon Black On Sovereign Relative Value, And Why Ecuador Presents A Great Post-Money Valuation

In today's letter from Argentina, Simon Black reminds readers that often times the best way to look at countries is like stocks: over/undervalued, and, of course, distressed: "It doesn't really matter how high or how low the price of a stock is, or what the market capitalization is... what makes a company attractive to buy is when it is significantly undervalued relative to its earnings, assets, and potential. I value countries in the same way. Brazil, for example, is like a company with a very large market capitalization that is trading at roughly net asset value, neither significantly overvalued nor undervalued. Morocco, on the other hand, is a small cap company that is trading at a premium to its net asset value and earnings-- sure, it's cheap, but it's a total disaster. Ecuador, in my assessment, is like a deeply undervalued mid cap company. It is not without its own problems and challenges, but price level here is substantially lower than the level of its well-developed infrastructure and amenities." We wonder how, if at all, the US would rate on this continuum of sovereign forward multiples of valuation (in)solvency.

asiablues's picture

Fear about defaults and more bailouts throughout the European Union (UN) has pushed Gold to an all-time high of $1,432.50 an ounce on Dec. 7. The market’s emotion related to the European debt crisis is clearly reflected through the interaction between Dollar, Euro and Gold.

AUDJPY - ES Correlation: Total Breakdown As ES Now 16 Points Rich

There was a time, long before central planning was the feces, when stocks and risk in general would correlate with the notion of decoupling, most traditionally represented by the AUDJPY, which has always been the best proxy of Chinese relative strength via the non-pegged Aussie dollar, and the now defunct carry currency of choice- the Yen, a distinction since ordained to the US' very own "reserve" currency. In those long gone days, the ES and the AUDJPY would correlate almost with mirror image perfection. Those days are now gone, and a brief correlation mapping between the performance of the two indicators shows that the ES is now about 16 pts rich to some hypothetical fair value, which however courtesy of abovementioned central planning, is completely useless and irrelevant. Suicidal types may want to play a convergence. In the summer those trades would always close profitably without exception. Lately, that is no longer the case, indicating just how incrementally more busted the market has become in just the last several months.

EB's picture

Breakfast with Jamie [Dimon]

Want to front-run the Fed? If you're Jamie Dimon, there's no need to parse FOMC statements or obscure speeches by Fed governors. No need to analyze hundreds of Treasury securities. Even hiring expert networks staffed with ex-Fed officials is unnecessary. No, if you're Jamie Dimon, you go straight to the top and break bread with William Dudley, ex-Goldmanite president of the NY Fed.

Guest Post: Dude, Where's My Job

The storyline being sold to the American public by the White House and the corporate mainstream media is that the economy is growing, jobs are being created, corporations are generating record profits, consumers are spending and all will be well in 2011. The 2% payroll tax cut, stolen from future generations to be spent in 2011, will jumpstart a sound economic recovery. Joseph Goebbels would be proud. The economy is growing due to unprecedented deficit spending by the government, fraudulent accounting by the Wall Street banks, the Federal Reserve buying $1.5 trillion of toxic mortgage “assets” from their Wall Street owners, various home buyer and auto tax credits and gimmick programs, and Fannie, Freddie, and the FHA accumulating taxpayer loses so morons can continue to purchase houses.

Forget Hugh Hendry... Ashton Kutcher Recommends You Panic, And Prepare For The Apocalpyse

It seems that it was just yesterday that everyone's favorite outspoken Eclectica manager, Hugh Hendry, was advising that the best course of action is panicking. It appears his message was not lost on one Ashton Kutcher. Per the HuffPo: "Ashton Kutcher is in hard training for the apocalypse, but this no big screen role: he's afraid that armageddon is coming.....Kutcher is stocking up on guns and spending hours and hours running the canyons near his home, pushed on by visions of being chased by wild boar. He's also taking daily bikram yoga sessions, and learning Krav Maga, a deadly Israeli combat technique taught to high-powered special ops. All of my physical fitness regimen is completely tailored around the end of day. I stay fit for no other reason than to save the people I care about." And so survivalism has just gone mainstream...and copycat cool. Good luck trying to find stockpiles of MRE rations, freeze dried beans, and ammo going forward.

Guest Post: Japan's Perpetual Motion Debt Machine

Perpetual motion is impossible, but Japan has managed the illusion of perpetual debt for 20 years. Perpetual motion--a machine which produces more than it consumes indefinitely, without any visible energy source--is impossible. So too is an economy which consumes more than it produces and fills the gap with debt. Yet Japan has maintained the illusion of a perpetual motion debt machine for 20 years.

$29 Billion 7 Year Auction Closes At 2.83%, Indirects Take Down Massive 64.2%

Today's $29 billion 7 year auction closed at 2.83%, 2.86 Bid To Cover. Unlike yesterday's 5 Year, the WI action is inverted, with the yield dropping immediately following the bond issuance to under 2.79%. What is stunning is that the Indirect Bidders took down 64.2% of the auction, which while we don't have the historical record currently, i likely on the highest in recent history. The massive Indirect participation meant Primary Dealers were left with just 31.2% of the take down. In other words, as we have been claiming for about 3 months now, the volatility from stocks, which are now an inert "asset" class melting up regardless of newsflow, fundamentals, or technicals, has moved entirely to bonds and currencies. Since nobody is left trading stocks, the daytraders are increasingly forced to trade vol in such traditionally stable products as govvies. At this rate of central planning, we expect the VIX to plunge to single digits soon, as the MOVE index explodes sooner or later.