Archive - Oct 13, 2009 - Story

Two environments seem to boost the efforts of small investors either to trade full time, or to launch their own hedge funds:

1. Bear markets (no one has a job anyhow).

2. Bull markets (anyone can do it!)

Fortunately, Clusterstock has put together a handy guide on "How To Launch A Hedge Fund."

Fortunately, or unfortunately, slide number six "Build the team" and bearing the advice "For example, Turn Key would recommend two accounting firms, Kaplan & Company in Chicago and Acquavella, Chiarelli, Shuster, Berkower & Co. in New York and New Jersey, and the Caymans" appears to depict an attorney (or recently victorious prosecutor) talking to a convict, complete with last-name-printed-on-the-breast bright orange shirt, handcuffs, choppy prison haircut and downcast eyes.

What, exactly, is Clusterstock trying to tell us?

California made the news again this week with an effort by marijuana advocates to put three measures on the ballot that legalize small quantities of marijuana for personal use. Currently, thirteen states allow medicinal marijuana use, including California. This recent effort represents the first step toward full legalization and a stance that States are serious about asserting jurisdiction over the issue.

Expert "whose picks move markets" Louis Navellier "does a screen" for such tried and true criteria as sales growth, margin growth, return on equity and cash flow and picks the "best" companies available. Strangely absent from this screen are any valuation criteria (Amazon at 45x forward P/E is so 2005 fundamentals) but when you have a bubble to substantiate any rubbish one wants to spin based on conflicts of interest too numerous to even highlight in passing, why care? For those whose heads are about to explode, Louis provides a formidable analogy: he "runs his portfolio like as a football team, mmmk? So, you know, as long as you got all the stats we run with ya." Brilliant.

On October 9, the NYSE provided its latest Short Interest update. The total number of shorted shares on the New York Stock Exchange at September 30 was 13.06 billion, a 3.5% decline from the 13.52 billion on September 15, a 42.5% decline from the all time high short position of 18.61 billion on July 15, 2008, and a 23.8% decline from the 2009 high of 16.17 billion in mid-March. The latest short interest represented a mere 3.42% of the total share outstanding as more and more bearish bets are closed, either voluntarily or forecefully. The current SI is equal to the short interest at the end of 2007.

Spreads were tighter in the US as all the indices improved albeit marginally as intraday ranges remained very low (but equity is still the dramatic outperformer of the last two weeks or so as IG experiences its longest period of low volatility since August of 2008). IG trades 1.5bps tight (rich) to its 50d moving average, which is a Z-Score of -0.2s.d.. At 100.5bps, IG has closed tighter on only 19 days so far this year (204 trading days). The last five days have seen IG flat to its 50d moving average.

Zero Hedge is starting to run a series of profiles of one of the most influential living people in the world. The man in question is former Secretary of the Treasury, and the man who made Goldman Sachs into the hedge fund quasar and uber-prop trading desk (rhymes with Hedge Fund Tsar, a position Barack Obama may or may not be contemplating) that it is now, Robert Rubin. Rubin redefined the term risk arbitrage (or as some would say, riskless arbitrage, thanks to the helpful nudge here and there of whoever may have been in a position of "puppet" power at any given moment) by being among the first to discover (and definitely the first to repeatedly bet the farm, making boatloads when successful, and somehow not losing when not) the amazing synergies provided by Goldman Sachs' numerous relationships as they may pertain to the firm acting in proprietary trading capacity.

Amazing how these fund managers love to chase these 1999 hookers like INTC, all hoping to catch the next 300% gain in the SOX as so many remember from the old days. No different than calling that old girlfriend 10 years later, expecting her to look and act the same when she was younger.

The most interesting chart out there is the Nikkei. The Nikkei has drawn a H&S on the highs, and we came back last night to retest the neckline around 10,130. Should the market open down (or even better GAP down) tonight, we have a perfect set-up to go retest the support line joining the lows around 9,700. A break there would be quite bearish. Anybody looking at selling equities here should absolutely look at the Nikkei as it offers by far the best risk/reward and the best set-up technically. If the market bridges the gap at 10,228 on the upside then give-up the trade.

Due to popular demand by current and former Federal Reserve employees who lost track of their actions after the $100 billionth CUSIP, below we present a full detail of all the $297 billion in monetiz... pardon, perfectly normal Quantitative Easing actions performed so far by the Federal Reserve.

In a brilliant moment of sobriety and lucidity, Charlie does a phenomenal job of explaining to the cynical Caruso Cabrera(s) why the AG's attempt to prosecute Ken Lewis is more than just posturing and why "running for governor" has little to do with trying to get to the bottom of criminal abuse of fiduciary powers and shareholder fraud. Hopefully MCC(s) can finally comprehend logic (it is excusable if that is not the case: Gallium-Arsenide has been proven so much more efficient than Silicon at being a truly efficient AND/OR/NOT gate). And Charlie's masterful reporting is capped by pointing the obvious: if Ken goes down, he very well should bring down Hank with him. If nothing else, having Hank and Ben as present witnesses should incite whatever court this drama unwinds in to charge front-row Yankee ticket prices for attendance. If the "Dynamic Dollar Depreciation Duo" can for once help a city/state with their insurmountable budget problems, so much the better.

Odd move in the DXY and the EUR/JPY. It appears that someone just bought a boatload of USD against the EUR/JPY. Yes, it is intraday, and yes, it doesn't mean jack unless at least someone else jumps on board. We will keep monitoring.

Tsy Pay Czar Wants $198M In AIG Retention Pay Reduced -Report

Tsy Pay Czar Wants $45M In Pledged AIG Repayments

Tsy Didn't Take Broad Look AIG Pay Packages

AIG Execs Only Returned $19M Of $45M In Pledged Repayments -Report

Whetever few voices of sanity remain, as every "expert" merely touts their book into the biggest bear market rally in history, need prominence. TrimTabs' Charles Biderman is among them. In this most recent Bloomberg interview, Biderman takes on what amounts to inaccurate data releases by the BLSand BEA, and tries to make some sense out of them. Biderman's punchline: "Gravity usually works at some point." The only question is when.

Currency devaluation in Latvia, government overthrow in Romania, and now blatant market manipulation in Egypt. Surely this all will somehow result in record bonuses on Wall Street. Bloomberg reports that Egypt's EGX70 index fell the most in two months after the "stock exchange suspended trading in 26 small and medium-sized companies on concern that some share prices may have been manipulated." At least the US stock market, the paragon of virtue that it is, is sure to never have to suffer the same indignity.

Having the reserve currency comes with a great deal of responsibility. Over the course of the last 15 years the United States has abused this power with reckless spending, wars abroad and a printing press that just won’t quit. As I mentioned many times during the financial crisis last fall, the dollar as a reserve currency likely saved our skin. Being the reserve currency made the dollar the obvious safehaven currency. The world was too dependent on the well-being of the dollar for it to implode. If it hadn’t been the reserve currency we probably would have faced a much more harmful crisis. But now the world is tired of seeing us abuse this privilege just as they grew tired of Britain’s abuse of the reserve currency.