Archive - Jan 20, 2011

No one knows exactly what events will transpire over the next 15 to 20 years as this Fourth Turning morphs from regeneracy to climax and finally to resolution. The mainstream media, most politicians, and self proclaimed progressives are blind to the cyclicality of history. They believe history proceeds in a linear upwards path. These are the people you see on TV talking about toning down the rhetoric, false gestures of bipartisanship, and soothing words about the financial crisis being a thing of the past. They fail to understand that once the mood of the country is catalyzed by a trigger event or events, there is no turning back the clock. Winter must be dealt with head on. Very few, if any, “financial experts” anticipated a housing collapse, followed by a deep recession, a 50% stock market crash, and a financial system which came within hours of total implosion on September 18, 2008 (as detailed in the documentary Generation Zero). Absolutely no one anticipated the extreme measures taken by the U.S. government and Federal Reserve to “Save” the country from a 2nd Great Depression. These measures have added $5 trillion to the National Debt in the last 40 months. It took 205 years to accumulate the 1st $5 trillion of debt.

It must suck to be a banker at Morgan Stanley these days. While their colleagues at Goldman make a not too shabby $430k, MS' workers are forced to toil over a measly quarter of a million. The company today reported total year end compensation of 'just' $16,048 million which amounts to $256,627 per person, or 40% less than Goldman. Granted, the number is a whopping 50.8% of LTM revenues, and it is a 7.5% increase from last year's $238,652 average... but there is a catch: in 2010 employees employee comp subject to deferral increased by 50% from 2009, from 40% to 60%, and a whopping 80% for operating committee members. So not only are they getting paid less, but they are not going to get it at all for many years. No wonder MS is now the administration's favorite insolvent company IPOing bank (except, of course, for the case of AIG, whose nationalization saved Goldman Sachs. It is only natural that that one is IPOed by... Goldman Sachs).

As noted yesterday, David Tepper is coming back to CNBC this Friday, in what many expect will be a reprise of his September appearance which was one of many events to unleash the buying spirits and save the year for so many Hodge funds loaded with financial stocks (we eagerly await February 15 to get the latest round of 13F and uncover just how many of the biggest financial "bulls" used the Q4 rally to dump). It appears, however, that this time around Tepper will not be dispensing with his usual POMO-inspired exuberance. In an interview with the Post, Tepper, who from media shy has become just a "little" overexposed, says that 2011 will be "harder and not without risk." Will this be the top-tick event of the market's recent and relentless bear market melt up?

The BLS' struggle with seasonality continues. After last week Initial Claims were far worse than expected, this time they were due for a flip, and as expected, came in better than expected, printing at 404K on expectations of 420K, compared to a revised 441K. The Non-seasonally adjusted claims declined from 763,098 to 550,594. Continuing claims was also better than expected, coming at 3,861,000 on expectations of 3,985,000. All in all, another number that will be revised worse next week, and which does nothing to dent the Unemployment Rate which needs consistent sub-400k claims to actually improve the jobeless rate. Probably most interesting was that persons claiming UI benefits across all programs jumped by nearly half a million in the week ended January 1 to 9.6 million.

• "No inflation" - Police fire shots to disperse new Tunis protest (Reuters)
• Volcker takes aim at long-term investments (FT)
• Brazil ups rates and signals more tightening (FT)
• China: U.S. No. 1 no more (Washington Times)
• China data fuel overheating fears (FT)
• China Isn't Ready To Lead The World (IBD)
• Morgan Stanley Profit Misses Estimates as Trading Revenue Falls (Bloomberg)
• Zimbabwe mulls treason charges over WikiLeaks (AP)
• Apple Ranked Last by China Environment Group for Transparency (Bloomberg)
• Europe's Risk Watchdog May Prove Toothless in Prevention (Bloomberg)

Global markets trading lower this AM on China growth story that indicates further tightening is imminent in the region. Yesterday’s mortgage/housing data montage was mixed to slightly positive as weather was no doubt a factor. Today features weekly jobs data as well as the Philly Fed, both of which will be watched closely to see if jobs data returns to its prior dour trend and if the 4Q10 upswing in activity is sustainable. In corporate land, the calendar appears to still be full and growing on a forward basis. From an issuer’s perspective, the still-low all in coupon rates combined with the risks of waiting to issue are quite attractive.

Guess whose CDS are breaking out to multi-year highs...

Claims, Philly Fed, existing home sales, index of leading indicators, and the Fed’s balance sheet….Small $1.5-$2.5 billion POMO focusing on the long (2028-2040) end.

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 20/01/11

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 20/01/11

"I have known strong minds, with imposing, undoubting, Cobbet-like manners; but I have never met a great mind of this sort. The truth is a great mind must be androgynous."--Samuel Taylor Coleridge

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

The market sold off today as earnings were more mixed than...