Archive - 2010

BlackRock, Inc. (BLK) Vice Chairman Bob Doll has been putting out annual predictions for 15 years. Doll, who helps oversee about $3.2 trillion at BlackRock, the world’s biggest asset manager, just released his ten predictions for 2010 and for the next ten year. Eleven of the twelve predictions he made for 2009 were right.

The most anticipated event in New York commercial real estate, the (technical) default of long-suffering Stuyvesant Town is finally a fact. Bloomberg reports: "Tishman Speyer Properties LP and BlackRock Inc. will miss a bond payment today on debt from their $5.4 billion purchase of Stuyvesant Town and Peter Cooper Village in 2006, according to a spokesman for New York City Councilman Daniel Garodnick."

A note released earlier by Citi analyst Keith Horowitz continues Citi's attempts at whacking the prevailing dogma, after the firm's recent downgrade of AA. Horowitz' primary conclusion: "Based on our analysis of the five main revenue pools, we see 2010 FICC revenues down 15-20% y/y – or closer to a 1H07 run-rate." As a result, Citi cut its EPS estimates for MS by $0.30 to $0.36, for GS by $0.25 to $5.25, form JPM by $0.15 to $0.55 and left BAC unchanged at a loss of ($0.66).

By now Zero Hedge readers should be aware of the distinction between the national debt and the national debt that is subject to statutory limits.  Limits like the newest ceiling of $12.394 billion signed into existence by President Obama just before New Year and after a strict party line vote.  Before the vote, most debt clocks shattered the old limit effortlessly and kept going.  Of course, this is because most debt clocks aren't aware of the distinction between debt, and "debt subject to limit."  (Not to mention on budget and off budget debt).  Stone & McCarthy, however, get the difference.  Their report, issued today, does a deep dive into the statutory limit, how long the new limit is likely to last, the political ramifications to the administration of raising, once again, the limit, and the nature of fiscal policy in the United States in general.

The chart below demonstrates the plunge in the civilian labor force participation: in December 153.059 million were in the labor force, 15.267 million were unemployed and 83.865 million were not in the labor force: a 64.6% participation rate. Now keep in mind the 5 year average participation rate has been 65.9% (including December's data, 66% excluding). That is a 3.073 million delta, and the definition of labor force attachment is probably a loose combination of government semantics. Had those 3 million still be in the labor force (and, of course, not employed), the number of unemployed workers would have been 18.340 million, which in turn would result in an unemployment rate of 12%.

How high can home prices go with a ten year inventory overhang? Baby boomers are about to suck the life out of this market. No “rosebud” for me. The first in a series of seven on The Mad Hedge Fund Trader’s Annual Asset Allocation review.

Nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent. In December, both the number of unemployed persons, at 15.3 million, and the unemployment rate, at 10.0 percent, were unchanged. Among the unemployed, the number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up, reaching 6.1 million. In December, 4 in 10 unemployed workers were jobless for 27 weeks or longer. About 2.5 million persons were marginally attached to the labor force in December, an increase of 578,000 from a year earlier. Among the marginally attached, there were 929,000 discouraged workers in December, up from 642,000 a year earlier. In December, the average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.2 hours. The change in total nonfarm payroll employment for October was revised from -111,000 to -127,000, and the change for November was revised from -11,000 to +4,000. In December, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 3 cents, or 0.2 percent, to $18.80. The civilian labor force participation rate fell to 64.6 percent in December. The employment-population ratio declined to 58.2 percent.

"8:30: Employment report for Dec…will payrolls rise or fall? GS: -25k, median forecast (of 76): flat, ranging from -100k to +85k; last -11k. Economists are evenly divided on this question as last month’s near stabilization and ongoing improvement in claims for unemployment insurance has prompted half of the forecasters to predict an increase for December. In our case, we think the drop in continuing claims, which has historically been helpful in forecasting payroll changes, should be heavily discounted as the sharp rise in workers receiving extended benefits indicates that much of this decline is simply the expiration of eligibility for the regular 26-week program" - Goldman Sachs

• Asian stocks gain, led by retailers, Japanese exporters; Copper declines.
• Beijing's per capita GDP expected to top $10,000.
• China central bank hiked interest rate on its 3-month T-bills by about 0.04 point, to 1.3684%
• China's exports may post first gain in 14 months, highlighting Yuan policy.
• Gold declines for second day as dollar gain curbs alternative asset demand.
• India expects GDP to grow at 7-7.5% for the fiscal year ending March 2010.
• Office vacancies in the U.S. surged to a 15-year high in the Q4-- Reis Inc.

A healthy smattering of today's "news", fit for digital consumption.

RANsquawk 8th January Morning Briefing - Stocks, Bonds, FX etc.

Hold on to your hat, the bond vigilantes will be out full force on Friday. And when the bond market goes 'boo', its chill will be felt across all asset classes.

While the domestic money printing syndicate refuses to accept the glaring reality that endless money printing causes unavoidable hyperinflation (the only question being when), China has decided it is time to start closing the spigot. Bloomberg reports that, "China’s central bank began to roll back its monetary stimulus for an economy poised to become the world’s second-biggest this year, seeking to reduce the danger of asset-price inflation after a record surge in credit. The People’s Bank of China yesterday sold three-month bills at a higher interest rate for the first time in 19 weeks." Ah the benefits of a planned economy: controlling the supply and the demand at the same time. And further, being pegged to the dollar, China receives all the secondary benefits of the Chairman's endless dollar printing. Ain't life grand in Beijing...

Yup ...

"Computerized algorithmic market making works in any type of oscillating market, as the computer can keep flipping out of it’s longs, and covering it’s shorts. It works in a trending market, as long as there is some type of choppy trade. The problem lies, when the computer system can’t flip out of the position. Most algorithmic systems are programmed with some type of risk parameter. If this risk parameter is breached, the computer will dump it’s position and cut it’s losses. This is what may have happened in RMBS today. An algorithmic system making markets on the long side, got too long, and was unable to wiggle out of the position because of the follow-through in selling pressure. Once it was down so much in the position (the risk parameter was breached), it dumped. This simply added fuel to the fire. That is why the sudden plunge to $16 happened. If you check the chart, you will not see this, because Nasdaq busted all trades under $22. But don’t kid yourself, these trades happened, and we should be very alarmed, because it will happen again, and it may happen to the entire stock market." Dennis Dick, Stock Trading