Archive - Jul 2009 - Story

The relationship between the 10 Year and the 30 Year Mortgage spread and the actual level of the 30 Year Mortgage has broken down in the last week. Did the (mortgage) vigilantes pull a fast one?

And readers say Zero Hedge is pessimistic. Don't read this if you don't want to break out of your MSM-induced happiness daze. Compliments of Matterhorn Asset Management. Snippet:

All the money committed so far has only achieved two things: Firstly it has created some short term hope which together with totally illusionary sightings of green shoots have generated a small stock market correction (which we forecast in our January Newsletter) and some belief that the crisis is ending. Secondly, all the funds printed so far to save the system have gone to Wall Street but has done nothing whatsoever for the real economy. And what is the government doing about it. They are doing the only thing they know which is to print more money.

This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?

If that were the case we could all go home and write out pieces of paper or use Monopoly money to spend in the shops or repay our debts.

Sheila Bair's favorite math equation these days: 

where n = bank failures and x = tax rate

From GX Clarke

What exactly is an indirect bidder?

This question used to be fairly easy to answer. An indirect bidder was one that did not trade with Primary dealers and dealt directly with the Fed at auctions. That's the kind of quirky funny twist on language that would draw the ire of a George Carlin, "So an IN-direct bidder Bids
Directly. Hmmmm."

GE Capital, aka the next CIT, is practicing its recently acquired hypnosis skillset (perfected via daily lessons from CNBC anchors) which has culminated with a 63 page presentation replete with far too much empty verbiage and green shootery.

The take home message:

• H1 Net Income has plunged to $1.7 billion on $557 billion in total assets, and only thanks to firing pretty much everybody: $1.9 billion in SG&A savings
• This is down $24 billion from Q4 as GECC is "continuing to rapidly reduce balance sheet"
• Loss reserves are skyrocketing: currently at $6.6 billion, up one billion from Q1
• 2009 TY original outlook: $5 billion; Fed base case: $2.0-$2.5 billion, Fed adverse case: $0
• How many more people can GECC fire as its balance sheet implodes?
• Oh yeah, and if CRE really blows up, CIT, here we come
  

• Asian stock markets move mostly in a tight range after their string of recent rallies.
• CFTC report to blame speculators responsible for driving oil-price swings.
• Coal producers cope with sluggish demand
• Crude Oil trades near a three-week high after gains in equities markets
• SEC firms up plan to limit short sales of stocks.
• AIG unit keeps $2.4B from asset sales as taxpayers wait for payment

• Must read: Arizona set to implement recourse mortgages - this could be the beginning of the end (Housing Doom, h/t Credit Trader)
• Congratulations Ben - you have succeeded; dollar reaches 2009 low (Bloomberg) (yet less than $90 billion in foreign liquidity swaps left to pull... then what?)
• And here's to a healthy Euro: Lithuanian economy shrank 22.4% in Q2 (Bloomberg)
• High frequency traders say speed works to everyone's advantage (Bloomberg)
• Judge Drain does not lead to the sewer, stands up to pressure and follows arcane, little-appreciated thing known as the law: leaves Platinum Equity in the cold on Delphi (AP)

Surprised? While the out-of-work scramble to find jobs, State government agencies and politicians are spinning on how many jobs are created under the stimulus plans.

Fundamentals got you down? Worried that 19 year old kid with the trigger reflex, trading breakout chart formations and a stratospheric P&L will replace you any day now (especially if you are an expert on "finding good jobs in tough times")? Better use up all those TV-spots while you got them to hit on pretty, barely legal University of South Carolina anchors.

(At 2:25 am in the morning, a little levity is allowed: there is at least 7 hours before the short squeeze rips again.)

Has to be seen to be believed

Yes, that's 585%. No comment needed

Spreads were tighter in the US as all the indices improved (with HY and IG back to early SEP08 levels on an adjusted index basis). Indices typically underperformed single-names (as despite the late day surge to new tights in IG, we heard more single-name protection buying hedged via the index) with skews mostly narrower as IG underperformed but narrowed the skew, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew.

Enough, already.

Hey Ron, didn't realize your new position as a contributing editor on CNBC came with the contributing title of "Portfolio Manager." Didn't Stevie put a one year kibbosh on that? But I digress... And in all honesty I am surprised that you seem to have the correct spin on things (as per letter below from Jim Cramer's failed media experiment TheStreet).

...Although once the debate moves away from Flash to its natural progression into dark pools and ultimately HFT, watch out below: "Any move to restrict high frequency trading could have a significant impact on exchanges’ transaction fees as well as revenue earned from co-location; there is also the chance that efforts to restrict HFT in the equities world could bleed over into other asset classes as well, including futures. We view potential regulatory changes as a net negative for exchanges, but it is far too early to assess the impact of potential regulation on these two issues."

The clock is now ticking on the rigger Echange - Broker/Dealer oligopoly