Archive - Oct 2009 - Story

Because we all need one sooner or later.

Yesterday, the market moved on what was the double whammy of the government's own rather fluid favorable interpretation of what was essentially the government's very own stimulus. Yet others can play, and unwind, the number fudging game too. According to David Rosenberg, absent the now declining impact of the massive governmental stimulus, GDP would have been flat if not negative. So much for bickering over whether GDP was 2.7% or 3.5%: at the end of the day, on a normalized, non-stimulus inflated basis, GDP was flat, and if the equity market cared about isolating non-recurring items such as excess government spending driving a collapsing economy, the stock market reaction would have been quite the opposite.

CNNMoney published a story how stimulus spending has created or saved some 650,000 jobs- a figure reported by the White House today. But as I read the story, and the reasons/excuses for its complex claims of job creation/preservation- can someone please stand-up if your job was created by stimulus spending?

Give me a G... Goldman Sachs announced today that it plans to cut the rescue loan arranged for CIT Group by $875 million, to just $2.125 billion.

Even as liquidity swaps and CPFF hit a new all time low since inception at $33 and $32 billion, respectively, the Fed's accelerating purchases of securities, mostly MBS and agencies, keep the Fed's balance sheet flat week over week.

• Expect major dark pool, ECN, ATS backlash: NYSE Euronext net profit down 28% in Q3 (AP)
• Fed supervision backlash picks up as regional Fed directors threaten with MAD: Per Lyle Gramley: "If Congress interferes with the Fed’s ability to do what
  has to be done, it could have major negative effects on the
  economy through its impact on inflation. The threat to central bank autonomy looks to be the worst that I can recall in my lifetime." (Bloomberg)
• Eurozone jobless at 9.7%, highest since 1999 (BBC)
• Deflation in Europe: Euro consumer prices still down (AP)
• Deflation in Japan: 2.3% drop in Japan CPI (Forbes)
• Bankers expect rising bonus pay, courtesy of massive government subsidies, to break record in global poll (Bloomberg)

• Asian Stocks rise as earnings, Japan jobless data, stoke growth optimism.
• Bank of Japan keeps benchmark rate at 0.1%, stops buying corporate debt.
• Dollar falls for fourth month against Euro, US growth aids risk demand.
• Japan central bank forecasts 3 years of deflation as it ends emergency credit steps.
• Oil poised for biggest monthly gain since May on optimism over US demand.
• U.S. Economy expands for the first time (+3.5%) in more than a year amid stimulus.
• U.S. Home vacancies increase to 18.8M as lenders seize properties.

Main charts to keep an eye on over the next week, via Goldman Sachs, which sucks at predicting GDP but is good at providing "market color." Remember: when in doubt use cephalopod reverse psychology.

September steel imports staged a moderate comeback, after dipping to recent record lows in August. The September total came in at $1.0 billion or 1.1 million metric tons. As announced by the census bureau, the increased activity was reflected "primarily in blooms, billets, and slabs. Monthly increases occurred primarily with Canada." Year to date data, however is nothing to chear about, with a 50%+ decline year over year: "The year to date final statistics through August 2009 showed steel imports of 9.6 million metric tons compared to 19.4 million metric tons through August 2008. The largest commodity decrease was in blooms, billets, and slabs. The largest country decrease was with Canada."

One of our favorite economic data series, the AAR weekly traffic report, was released today, and even as the data moves ever further from the Lehman anniversary when the economy presumably went into a standstill, the October 24th data still demonstrates a healthy -14.8 weekly YoY drop, and a little changed -18% YTD drop compared to the prior week's -18.2%. Interestingly, the AAR is commencing to show not just year over year data, but year over two years (YoTW?) going forward, ala what CNBC is trying to do to deemphasize the drop off in their audiences. Although while CNBC's 2008 spike was beneficial, the AAR will effectively be focusing on the major drop from an "old normal" economy. This kind of unbiased objectivity and benchmarking should raise red flags all around.

Even as Tim Geithner was boldly lying today on national TV, claiming that he abhors the concept of too big to fail, and condemns moral hazard, behind everybody's back he, together with the entire Obama administration, was trying to pass a law that would shift TBTF from a temporary program into officially canonized law. This is a scandal that has gotten little recognition in most of the MSM: in essence it guarantees that the massive mega banks like Goldman Sachs, BofA, and JPM will take on so much disproportionate risk the next time around (and with a moral-hazard encouraging Federal Reserve as risk regulator virtually guarantees their implosion) that not only will they blow up spectacularly once again, but that their bailout next time around will surely force America, already strapped with trillions of new upcoming debt courtesy of stimulus after stimulus, into sovereign insolvency.

He came, he saw, and he couldn't believe his eyes... or ears. It is almost painful to watch David Rosenberg smack the Managing Partner of Seygem Asset Management like the puppet doll the formerly insightful anchor has become. The same goes for the balance of his CNBC colleagues as they proceed to ask highly (ir)relevant question after question.

Watch gold and its price reaction in the post recession environment to come. It’s in the divergences relative to historical experience, if they occur, that the important messages will be found for the current cycle. In fact, this is one of our primary focal points of the moment – divergences. Gold just may become quite the very meaningful macro economic character marker that few seem focused upon for this reason. But if indeed gold tells us something very different is afoot in the current cycle, it will also have direct implications for equities, fixed income assets, etc. and the investment community in general that have been trying to discount a typical post recessionary outcome for a good number of months now already. Gold as the very important report card? Exactly.

The surrealities of a "healthy" economy never end. The latest indication of the new banrkupt normal is New York State itself. A new report by NY state comptroller Thomas DiNapoli entitled "Highway Robbery: State's ailing road and bridges robbed; State siphoned money to pay for operations and debt service" tells you all you need to know about just how prosperous the ailing economy really is. According to DiNapoli, "only one-third of the money in the Highway and Bridge Trust Fund has actually been used to pay for highways and bridges. The rest has been siphoned off to pay for debt service on back-door borrowing and to fund operational costs for the DMV and the state Department of Transportation." Is that lack of stolen pocket change Mr. DiNapoli can believe in? Apparently not - Mr. DiNapoli's words: "I think outrage and anger is certainly appropriate; we need to channel that into thoughtful public policy." Yet anger is so September 2008. Welcome to the Xanax highs of the new credit bubble.