Archive - 2010 - Blog entry

The Big Bonus story is coming out and boy is it going to stink. D.C. has done it's best to put lipstick on this pig. A talking down to the bank bosses and a 'see through' tax. That strategy is not going work.

The United States Commodity Futures Trading Commission (CFTC) will hold a public meeting at 1:00 pm EST on Thursday, January 14, 2010, to consider issuance of a proposed rule on energy position limits and hedge exemptions on regulated futures exchanges, derivatives transaction execution facilities and electronic trading facilities. Watch a live broadcast of the meeting via webcast on www.cftc.gov.

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.

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.

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)

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.

Société Générale (SocGen), France’s second-biggest bank, has told its clients to be bullish on commodities, stay with stocks and "anything but cash" in 2010.

If it weren’t for Hugo Chávez, my favorite Latin American dictator, life would be pretty dull. The guy is a walking, talking economics lesson. He’s so easy to pick on because he has the Sadim touch (you know, instead of turning things into gold like Midas, he turns things into crap). Everything he has done has moved Venezuela backwards. The people who actually do something productive in the economy hate him. The have-nots love him because he promised them lots of free stuff. But lately his numbers are sinking: his policies don’t work.

This post demonstrates how economic ignorance and megalomania combine for a devastating result for the people of Venezuela. This is a script for Venezuela’s future.

If the government isn't doing anything to fix this dangerous situation, we'll have to do it ourselves ...

- New Study Analyzes The Bill’s 200-Plus Pages Covering Derivatives, Outlines Potential Industry Impact And Gives A Timeline Leading To US Senate Passage
- Says New Competition Lies Ahead For Dominant Major Dealers From New Group Of Smaller, Nimble Tech-Savvy Dealers

Dumping the world’s most overvalued asset. America’s debt service to double. Hey buddy, can you spare $2.5 trillion? Short a few JGB’s while you’re at it. The fourth in a series of seven on The Mad Hedge Fund Trader’s Annual Asset Allocation Review. (TBT), (JGB)

If governments do not nip this bonus bonanza in the bud, then the next financial meltdown is only a matter of time. How long will we allow the rest of the economy to be subservient to the reckless arrogance and greed of a financial sector gone rogue?

Is the government going to force 401k and IRA money into treasuries?

Or is that just a wild rumor?

As a muni trader, my bonus is derived directly from my P/L which is accrued over the quarter and kept in a separate account. It does not go into the firms bottom line and then back out to me. Also, like most traders, I accrue 2% of my gains in a loss provision account in case I have a major write-down in the year. My bonus is 10% of my profit for the year. If I make $50mm for the year my bonus is $5mm

What does my bonus have to do with the MBS trader who's sitting on losses? Did I or did I not show a profit of $40mm to the firm’s bottom line?

As I have stated throughout all of last year, the macro, fundamental and
political headwinds facing banks make them good shorts and risky
investments. They faced a good run in this recent bear market rally,
but the spirits have cursed them for the medium term. In addition,
these guys act as if they have never heard of PR and strategy, ex. this
bonus thing.