Archive - 2010

Greek CDS hits another all time record at 342.50 bps. Greece is now trading nearly 5 times as risky as the entire universe of investment grade US corporates. In other news, Greek Prime Minister Papanderou repeats for the third time (and fourth, and fifth) that the country will not, repeat not, repeat not, repeat not, repeat not, need a bail out from the EU, and will not (etc) drop the euro or leave the eurozone. If only anyone believed the man. Anyway, where is that damn ESH0 ramp job when you need one? The best way to send a signal that all is good in the world is for Liberty 33 to trade a quadrillion e-mini's with itself.

The notable fudge factor in today's initial claims report had nothing to do with EUCs or continuing claims (people are now rolling off both faster than ever), but the spread between the Seasonally and Non-Seasonally adjusted insured unemployment rate. As the DOL indicates, the Seasonally Adjusted Ins. Unemployment rate was 4.6%, while the Non-Seasonally Adjusted equivalent came in at 3.5%: a 110 bps spread. The last time the delta was so wide was back in January 1992!

Yesterday's (1.13.10) extraordinarily out-sized one minute volume spike on the ESH10 (S&P 500 Futures / E-mini, current basis March) has raised many questions from who and how to where and what the hell ... but virtually no one has explained, welp, the only thing that actually matters: the technical posture of key market internal readings.

The five charts below highlight the technical postures of: the ES (S&P 500 Futures Continuous Contract, current basis March) on the 1-minute; the TICK (NYSE Cumulative TICK) on the 1-minute; the VOLD (NYSE Up / Down Volume Difference) on the 1-minute; the VIX (CBOE Volatility Index) on the 1-minute; the ADD (NYSE Advance / Decline Issues Differential) on the 1-minute.

I know there is still a great debate on whether the Chinese economy is in a great bubble state. For my thinking, any time private credit is created at such as rapid rate as it was in China in 2009 something has got to give somewhere. I will leave the finer points of the debate to the China watchers, but it is clear where my thinking on this one lies.

Taking a playbook straight from Wall Street, consumers maxed out their store-branded retail cards and decided simply to not pay them in November-December. And even that could not prevent December retail sales from coming it at below expectations: one wonders just what it is that will drive the retail dynamo that ever more clueless pundits on CNBC claim will boost 2010. Here are the facts: "Fitch notes that in December more than one in every eight dollars of receivables was written off as uncollectable during the November collection period on an annualized basis." Well, at least the government got something out of this (if not private retailers) and managed to revise November sales slightly higher. Good luck repeating this.

• Roubini joins the bandwagon: The coming sovereign debt crisis (Forbes)
• So much for a strong showing by the consumer in December: retail sales fall 0.3% on expectations of a 0.5% rise, 2009 retal sales fall 6.2% - biggest drop since 1993 (Bloomberg)
• Initial claims pick up once again, add 11,000 to 444,000 (Bloomberg)
• David Boskin with a frank discussion of economic data manipulation by the government: Don't like the numbers? Change 'em (WSJ)
• No shit Sherlock: Merkel says Greece means Euro faces "difficult" time (Bloomberg) but, but, how will Bernanke kill the dollar then?
• Pin the tail on Blankfein is a game nobody wins (Bloomberg)

RealtyTrac reported its December foreclosure number which came in at 349,519, a 14% jump from the previous month, and a 15% increase from December 2008, and an end to the favorable declining monthly trend July. And according to Rick Sharga, SVP of RealtyTrac, 2010 is expected to see between 3 and 3.5 million foreclosures, which will be another record. Some recovery.

• Asian stocks, Aussie, commodities advance as Australia beats jobs estimate.
• Australia's jobless rate unexpectedly falls to 5.5% in December.
• Beige Book: US economic conditions 'improved modestly' in recent week.
• Budget deficit sets December record of $91.85B reflecting fallout from deep recession.
• Computers shipped to US in Oct-Dec quarter rose 24% YoY - IDC.
• Chavez suspends rolling blackouts in Venezuela's capital, sacks electricity minister.

It will be interesting to see how optimistic/pessimistic this quarter's bank credit losses will be reported. Here are some very interesting facts on the latest trend in Alt-a mortgages that have been in the news as of late. The following charts were culled from my mortgage default model which was built primarily from date gathered from the FDIC and the NY Fed.

RANsquawk 14th January Morning Briefing - Stocks, Bonds, FX etc.

An unlucky bullet in New Jersey. Depreciating the national debt through a stealth devaluation. Buy the Canadian, Australian, and New Zealand dollars and short the Euro. Put some Yuan on your back book for a sleeper. The fifth in a series of seven on The Mad Hedge Fund Trader’s Annual Asset Allocation Review. (FXC), (FXA), (BNZ), (CYB)

Since Congress, the Senate and the president are all powerless to prevent the looting of the middle-class, it is only fitting that Jon Stewart will give it a try. When common sense, logic and reasoning all fail to make a dent in the status quo of immaculate corruption, maybe at least humor will have some success.

Most relevantly, Jon asks the $64k question: "Are our banks made of balsa wood held together by baby tears."

I stirred a debate on Social Security. Some economists from the American Enterprise Institute (AEI) chimed in. They sort of supported me. Some 'experts' thought I was 'peddling crap'. There is a market twist to this. It isn't in the price today. But I think it will be soon enough.
The folks at Angry Bear didn't think too much of what I wrote. Their thoughts, my response.

What happened at 12:03pm Eastern Time? There were no reports out, the 10-YR Note auction wasn’t until 12pm, and the S&P500 was a bit stonewalled just under 1137.00 after a rally from the day’s low. As the market advanced slowly through the congestion it hit: a MASSIVE order, or series of orders, lifted the offer in the e-minis. But it wasn’t your garden variety large order of 2,000 mini’s – I’m talking about 114 times that size.

Courtesy of reader vertek7, we find out that today's crowning moment of S&P manipulation was purely a function of yet another fat finger. We say manipulation, because while according to the CME the two 200,000 ESH0 block trades allegedly offset each other, the market ended up shooting higher as a result, which was likely driven purely from favorable robotic interpretations of the volume spike. This market is so broken, and so upward biased, the mere observation of abnormal volume activity is sufficient to gun it higher. Also, can someone please explain how 200,000 e-mini contracts can possibly trade without soaking up all of the advertisied bid and offer side on the NBBO? HFT - meet e-minis. We hope the SEC is reading and comprehending (albeit ever so slowly) all of this, while it solicits public commentary to find out just how fucked up this market is.