Archive - Oct 2012

It's the anniversary of the 1987 crash. It's a Friday 'after' another failed EU Summit. The Dow is down 200pts. You are not buying the dip. So enjoy the full Romney vs Obama roast from last night in all its honest truthiness.

We want to 'believe', we really do; but anyone with any sense (and no skin in the game) can see through the data; the eon-like periods of foreclosure and the drastically reduced supply. No matter how 'bullish' homebuilders are, or how much they dream of a future pickup, calling the recovery (as Bob Shiller recently noted) is just a fool's errand. The truth is, for the average citizen, housing is not recovering - the wealth effect is not creating animal spirits - and we do indeed have more to fear than fear itself. The following 79 second clip from Bloomberg TV should perhaps clarify the 'difference' in demand for housing. Primary residence 'buyers' are down remarkably, while 'investors' are up dramatically - now at pre-crisis bubble levels! Perhaps, as we noted here, Och-Ziff's stepping away from the 'flip-that-house' or 'REO-to-Rental' game is as good an indicator of exuberance as any.

Caution is the word of the day.

Because someone has to generate revenue for Apple.

On a day full of memories (and a market which is down the most in 4 months), we thought (courtesy of Doug Kass) the irreplacable Mark Haines view of the 1987 crash from 2007 (just a few days after what would be the market's absolute top) was worthy of remembrance. What is perhaps most notable in the discussion is Elaine Garzarelli's 'nailed-it' indicator-based call of the top in 1987 and subsequent total 'absolutely bullish' miss in 2007 - as central bank intervention had already removed any 'indicator-based' value from market participants' toolkits and business cycle comprehension. We wonder what Haines would have made of QEtc. and today's exuberant irrationality. Must-watch to 'check' some exuberance at the door.

BP's New Excuse Doesn't Hold Water

What if the fiscal cliff collides with a replay of the Bush vs Gore 2000 election fiasco...

Is this it? Nobody knows for sure, but just like yesterday's GOOG pogrom sent 165 hedge funds (at least) scrambling for cover (but, but, it is a perfectly efficient market - unpossible), and destroyed their October P&L in a millisecond move, forcing even the CME to lower index margins to avoid margin calls (as we predicted), so today's violent drop in AAPL stock to the furthest below the 100-DMA since June 2011 may test the nerves of all those residents of the hedge fund hotel cAAPLfornia, which at last check was a record 230 longs as of June 30 (and now well higher), many of whom have a cost basis that is now above the current price. Will selling remain cool, calm and collected, or will someone panic ahead of what is sure to be another late day margin call bonanza for the repo desks forcing massively levered beta-chasing hedge funds to dump assets in order to procure the suddenly invaluable margin? Stay tuned and find out.

... and here are the facts!

CNBC is convinced - this is just profit-taking, and think about where we have come from? We prefer to base our positioning on expectations of the future as opposed to extrapolations of the past. If only we could ignore the last two days, Europe would look awesome! Every asset class is indeed up for the week: stocks, EURUSD, sovereign bonds, and corporate and financial credit. However, the last 36 hours or so has seen almost half of the week's gain s chaffed away by them pesky profit-takers (apparently). EURUSD is 100pips off Wednesday's highs; Bloomberg's BE500 (broad equity index) is around 2% off Thursday's highs; IG and Financial credit spreads are around 5-10% riskier from Wednesday's tights; Spain's equity market is 3.5% lower than its peak on Wednesday and Italy down 2.5% from its mid-week highs. Sovereigns have remained relatively resilient - giving back only a few bps of their gains this week (Spain/Italy -40bps on the week). But apart from all that - Europe's doing great apparently. Spot the odd chart out (and which do you trust?)

Spacy week, though… Song pick of yesterday’s said it all. Somehow, things have spun out of control and the rocket started stalling and then drifting into the void…

Poor Major Tom left the capsule too early.

Regional elections in Spain over the weekend. As Rajoy denies there’s any pressure to seek help, BONOs slide. Damned if you don’t; damned if you do…

Interesting to see Core EGBs’ only muted reaction to the fading Risk sentiment, though (Bunds and UST still +15 on the week).

Whereas some may have welcomed the latest development in the Great French Socialist Revolution chronicles, primarily those 8-16 year olds who would directly benefit from president Francois Hollande's attempt to capture the vote of those still ineligible to actually vote, by promising to do away with homework (because it encourages "inequality" as homework apparently "favors the wealthy"), everyone else saw right through it for the sad attempt at populism it was. Luckily, the impact of this idiotic policy, if it were to actually pass, would not be visible for at least a decade at which point French society would be so dumb (not to mention poor) that few would actually care. However, another proposal being currently contemplated in France may have far more immediate terminal consequences to the life expectancies of those personally experiencing the reincarnation of wholesale of socialism. Because as Bloomberg notes, "Heating a French home could soon require an income tax consultation or even a visit to the doctor under legislation to force conservation in the nation’s $46 billion household energy market." Congratulations Europe: in your ongoing crusade of wealth redistribution (when all this could have been averted if you, and the US, had simply allowed the banks who control your society to collapse), you are about to make heating one's home a privilege for the despised Bourgeoisie, an act which must be monetarily punished, and socially ostracized.

Presented with little comment - aside to note the explosion in average trade size today as AAPL plunges back below its 100DMA - BTFD or small doors, large crowds?