Archive - Jul 15, 2009 - Story

Always helpful to hear Rosie's perspective as he ferrets out the important data from the noise.

Another confidence peak reached (and breached).

The flip flop between equity and credit accelerates. Just as the administration managed to lower mortgage rates enough to get a moderate pick up in refi applications, bonds are starting to get out of control.

There has been alot of talk over the past few weeks about high frequency trading. We have argued that the volume these high frequency traders are creating is not beneficial to the market. Lets take a closer look at what a high frequency favorite stock looks like. The poster boy for HFT this week is none other than 80% U.S. government owned, AIG. AIG recently underwent a 1 for 20 reverse split since the “issuer” wanted to make their stock look more attractive to institutional clients. You would have expected volume in this stock to be reduced by 20x. Instead, volume has remained at a consistent pre split level of 75 million shares/day. How could this be? Did something change to attract more institutional buyers? Did the black hole of AIG liabilities somehow close? No, the answer here is that the High Frequency traders found a new stock to play in.

A relatively obscure piece in the Triangle Business Journal, referring to a piece in the National Mortgage News, demonstrates how some of the larger banks are bypassing the PPIP and going direct to willing toxic buyers in a very "under the radar" fashion. In this particular case, Wells Fargo has apparently offloaded $600 million in subprime loans to Arch Bay Capital at 35 cents, or double what other hedge funds had offered. While the price discrepancy alone is worth a follow up, the TBJ had this interesting tidbit to note about the transaction:

No one involved in the recent sale is talking on the record, which may
be a key reason lenders will look to private transactions to unload bad
assets rather than turn to a government-sponsored program.

The pre-emptive attack on the rating agencies has begun. As Zero Hedge has long suspected, once the next major leg down in the market occurs,populist anger will again have to be directed away from its true focal point- the intersection of Wall Street and DC. And since major investment banks such as Goldman have already suffered major reputational blows over the past several weeks, it behooves everyone to throw the straw man in the open... In other words, the next congressional lynching will focus exclusively on S&P, Moody's and Fitch, and likely will result in the end of one or more of the rating agencies. And last week's action by CalPERS is just the catalyst to get that particular avalanche rolling.

We were hoping CNBC would catch Zero Hedge's prompt yesterday about analytical powerhouse Merrill siding the DK. They did not disappoint. Not much else to be said here.

Great clip explaining the lifecycle in the materials economy. Now you can buy that fifth iPod you don't need, and know where it came from, where it will go, and what prompted you to buy it.