Archive

The surprisingly resilient HY and IG market over the last two months (and the reason why so many hedge funds outperformed benchmarks) is starting to crack. We have discussed how purely fundamental assumptions about recoveries in the upcoming wave of defaults will likely reprice risk substantially lower, however a mere glance at existing technicals imply the HY market, especially the single B rated tranche and single names, will soon experience a drubbing.

McKinsey must have been paid $1 million to come up with that title...

I dare anyone making over $250,000/year to read the whole thing. After all you will have to fill the $1 Trillion hole...

US Budget - Free Legal Forms

Obama's (first) budget calls for no more student loan subsidies, which has caused SLM stock to plunge 40%. As Obama has no problem with spending a few hundred billion to address any and every shareholder's cry for stock price appreciation, we are confident the final budget will likely include subsidies as this was merely a minor fiscal prudence and rationality-driven oversight.

Karl Otto Poehl is pouring some major cold water on all the optimistic talking heads saying eurozone defaults can be avoided. According to the former Bundesbank president, a default of smaller member of the euro region is only a matter of time.

What was that president Obama, you will cut the budget deficit to $500 billion by 2012?

2009 deficit to be $1.75 trillion, 12.5% of GDP. It will be "eliminated" as the rich are taxed right into lower middle class.

Explains why the market performs like a schizophrenic day trader, as investors try to game the greater fool in unison, running the market up and down especially in market leading sectors such as financials. As long as a fund is not the last man in, the first 50% in any wave are set to make profits.

Explains why the market performs like a schizophrenic day trader, as investors try to game the greater fool in unison, running the market up and down especially in market leading sectors such as financials. As long as a fund is not the last man in, the first 50% in any wave are set to make profits.

Developing story, but with such blockbusters as Lyondell and Continental AG one had to expect they would pull the plug sooner or later.

New home sales tumble over -10% month over month to 309,000, on an expectation of a -2% drop. Market rips. Logical? Who cares. When horrendous news is fantastic news we advise everyone to pull their money out of the market for one reason - it is terminally broken.

In the meantime, a brief look at the real housing picture, and why anyone may soon be able to afford a Palm Beach waterfront house.

New home sales tumble over -10% month over month to 309,000, on an expectation of a -2% drop. Market rips. Logical? Who cares. When horrendous news is fantastic news we advise everyone to pull their money out of the market for one reason - it is terminally broken.

In the meantime, a brief look at the real housing picture, and why anyone may soon be able to afford a Palm Beach waterfront house.

After the prompt futures' rebound following the earlier horrific durables and initial jobless claims, we are 99% convinced the market is set on ignoring any pig that isn't smothered in lipstick (the technical argument goes pigs with lipstick are priced in), so the following piece of news will definitely not have any impact on the whole bunch of "leap of faith" focused investors cum Indiana Jones and The Last Crusade fans (best of the four by far).

• Durable Goods: -5.2% vs -2.5% consensus, Jobless Claims: 667k vs 625k; Continuing: 5112k vs 5025k
• More black hole...
  

• Capmark in default, hires Lazard to restructure balance sheet (PR)
• Lyondell fails to win DIP approval, hearing to pick up Thursday morning after profuse objections (Debtwire)
• Citi to announce agreement with government on Thursday (Reuters)
• One perspective of the government's Prime Brokerage program aka TALF (

The recent spillover of the threat of an Eastern European collapse, and its gradual spread into the Eurozone, has manifested itself best in the dramatic widening of sovereign CDS. The so-called socialization of risk had resulted in a tightening of corporate and bank default risk at the expense of the respective sovereign domiciles.

All bank holding companies with assets over $100 billion will be stress tested. The test will use a baseline scenario and a worst case- longer recession one. Here is where the Fed shows its disconnect with reality yet again, as the worst case scenario is already the optimistic one for several parts of the country. Bank testing under the worst case assumes: