Archive - Oct 2009 - Story

The latest Carload Traffic data from the Association of American Railroads is out. If one relies on one of Warren Buffett's traditional leading indicators, there is no respite in sight for the economy. Weekly decline was -17.1% for week 38, with material hits across virtually every carload category. Cumulative traffic decline was relatively flat over the past month at -18.2%.

"What is critical to recognize is that both California and the U.S., as well as numerous global lookalikes such as the U.K., Spain, and Eastern European invalids, are in a poor position to compete in a global economy where capitalism is morphing from its decades-long emphasis on finance and levered risk taking to a more conservative, regulated, production-oriented system advantaged by countries focusing on thrift and deferred gratification. The term “capitalism” itself speaks to “capital”—the accumulation of it and the eventual efficient employment of it—for growth in profits and real wages alike." - Bill Gross

All risky assets closed at their lows as the disappointing macro numbers today (following on from yesterday's green shoot withering headlines) were not helped later in the day by the weak auto sales numbers (which were in general in line to slight worse than expected but dramatically down from CfC summer-time fun and games). The unusual dollar questioning of Bernanke pushed some volatility into DXY (and ramping in EUR/JPY was unable to budge it much) as his 'other-than-fiscal issues' comment (which reminds us of Monty Python discussing the Romans) slammed DXY and then saw a run to quality as DXY closed at its highest since 09/08.

It was immensely refreshing to find an actual probing piece of investigative journalism coming out of Reuters, instead of the traditional regurgitated, opinion-based, fluff-filled, secondary source monologues (we prefer the British spelling) we have become accustomed to seeing out of the Thomson Reuters behemoth. In a rare example of how even the MSM gets it right sometimes, Matt Goldstein has done an admirable job of connecting the dots based on a FOIA request he had submitted to the FDIC, in which the insolvent (as of today) Deposit Insurer has provided Goldstein with a unique glimpse into the daily travails and activities of its boss, Sheila Bair, and how they may have a direct bearing on the future of none other, than a very troubled Chief Executive Officer.

Once again, the Program Robots have switched, now trading for the "Deflationary Bust", as portfolio strategists are bewildered and confused. At best, they are just trying to stay with the Wildebeest Herd and avoid getting run over by an apocalyptic collapse or Weimar/Zimbabwe hyperinflation.

With 64.8% of the industry now reporting, we are seeing a sales rate for September of 8.9 million units SAAR. This lower pace appears to be heavily influenced by the pay back from the cash-for-clunkers program as luxury brands do not appear to be having the same large drop as more utilitarian vehicle makers. - Citigroup

As prospects for an amicable resultion at Club CIT grow ever more blacklightish, the company is now alleged to be desperately seeking a $5-7 billion DIP loan (the kind you need when you file for Chapter 11, and when all your existing equity is wiped out). Our advice to CIT: approach investment advisory guru Jim Cramer: it was a long and arduous 48 hours ago (and 100% higher) that the soon to be Comcast employee was pronouncing how the stock was "primed for upside." If there is anyone who would put their money where their mouth is, Jim Cramer is your man. And to a former hedge fund manager of Jim's caliber, $7 billion is parking meter money.

Some more observations on the stock market bubble: Joe Saluzzi raising hell at Bloomberg even as his nemesis Irene Aldridge gets interviewed by a cow.

Goldman revises Non Farm Payroll expectations from -200,000 to -250,000 one day ahead of the number. Go long here at your peril.

"The S&P 500 future has broken the overlap around 1,037/38 and is now well established below the trendline joining the lows. After attempting to retest the 1.6165 break out of the H&S neckline 2 days ago at 1.6125 and failing, GBPUSD is back down below 1.60. The Nikkei, after a failing to breakout higher out the wedge around the tops and also failing to fill the gap left open in October, is plunging quite abruptly. The Nasdaq future fell short of challenging the overlap with the lows of July 2008 at 1762, and came back to test 1670 this morning. This last level is quite pivotal, and we would use that as a good guidance for further acceleration lower or conversely a hold could mean we reached downside potential. Personally I remain convinced that medium term we are going a lot lower in equities, a break of 1670 would only make my view nearer term than I originally thought." - Nic Lenoir

While no one is drinking around the Cash for Clunkers punch bowl anymore, even the fittest and healthiest of domestic players are slumped, hungover.

Developing story: David Faber reports Comcast would end up owning 51% of NBC Universal. Ironically, this may finally make CNBC somewhat objective. More importantly, over/under on Dennis Kneale contract extension?

The always informative Warren Pollock has put together a very useful clip on former Fed Chairman Paul Volcker (who, as we discussed recently, had some scathing words for not only the existing TBTF infrastructure, but for Goldman Sachs itself). Recommended watching.

Correlation algorithms were working overtime in Q3, when both the S&P and the DJIA returned exactly 14.98% each.

"In reference to behavior, it’s become clear that investors attitude are changing and the new normal is not to invest one’s savings in stocks rather that money is flowing to bonds. Recent data points to exactly this type of behavior and perhaps getting trounced once is enough for a certain legion of investors but not all. As we had seen in 2000 in every drop of stocks, we are slowly loosing participants to join in this exuberant party. Investors who miss out this time are also assured of not feeling any party hangover." Yves Lamoureux