Archive - Aug 26, 2009 - Story

With many pundits extolling the inventory pick up and the imminent exponential growth of US GDP, it probably makes sense to observe demand for primary raw materials for durable goods. Or, rather, the lack thereof. July US Steel imports were at the second lowest reading in over three years, at 0.9 million tonnes, well over 50% below the average monthly import total of 2.5 million tonnes. One would presume an inventory pick up would be preceded by a pick up in steel imports. Alas, the facts do not back up that assumption.

The first fully blown subsidy program in the form of Cash for Clunkers is now over. Many more undoubtedly will follow, with Cash for Woodshed Plasma TV likely to appear in 3 to 6 months. As it will facilitate Made in Taiwan and Japan exports to the US, one does not anticipate any WTO trade wars. Some observations on the consequences of CfC.

Some assembly required.

Yes... He's back.

Green shoots are no longer producing bullish signals for the stock market. At best, they are a mixed signal. On yesterday’s Consumer Confidence upside surprise, the high tick for the day was at exactly on the announcement at 9:00 am. The market “gets it” that the green shoots have been but a temporary elixir for the consumer. What now, brown cow that the Clunkers program ended Aug 24 and the new homeowner tax credit has largely been used up (those that wanted to take advantage of the tax credit would have done so by July for the new school year).

The Zero Hedge Logo Tees are in!  These are the limited run, high quality, silk screened shirts you've been waiting for.  Get them while they last over at -273.

Another quite intriguing piece by Chris Martenson "The Shell Game - How The Federal Reserve Is Monetizing Debt" reveals some of the intricacies of the Fed's monetization game and, by digging deeper into the Fed's Custody Account, demonstrates not just how the Federal Reserve is enabling foreigners to swap out of Agencies into Treasuries, but how it is implicitly monetizing a markedly larger portion of debt than is assumed.

Yet another bout of panic selling on the open, but that didn't stop the HeatMappers from propping and supporting the "Daytrading Darlings" being gamed by the 19-year olds running grandma's 401(k) money over at Fidelity.

Another minor data discrepancy appears...

Whether or not the government has something up its sleeve to rescue commercial real estate is still unknown, despite various floating rumors. What is not debatable is that the ultra luxury CRE segment in New York, those crowning skyscrapers whose ownership as recently as 2 years ago resulted in a cache of real estate glory and jealous stares from competitors, has experienced an unprecedented decline in value in a short 24 months.

• Yield 2.494% vs. Exp. 2.509%
  
• Bid-to-cover 2.51 vs. Avg. 2.21 (Prev. 1.92)
• Indirects 56.4% vs. Avg 34.6% (Prev 37%)
• Indirect bid-to-cover 1.31x
• Allotted at high 16.55% (BBG)

It seems these days everyone is happy to blame Greenspan for creating the biggest housing/credit bubble in American history, yet few have the same problem when it comes to voicing their support of Ben Bernanke, who is repeating exactly the same monetary steps (mistakes) as performed by his predecessor. Proponents will say that this time the justification was to prevent a full financial systemic collapse, and the trillions of excess liquidity (an approach that even Greenspan did not embark on full bore) that drowned the capital markets were just what the doctor ordered. Whether that is true or not will be debated by historians who analyze the 2009 as the year when China, the US and the Eurozone let loose the most unprecedented monetary loosening in the history of the non-gold standard world.

Yet is today really that different?

"We really fail to see how it could possibly be that the same central bank official, who, over a span of a decade, presided over two massive bubbles and their busts, can be viewed as being a positive force for the markets. Perhaps there is some solace in knowing that the same person who created this awesome and complex $2 trillion Fed balance sheet will be around to dismantle the largesse since he’s probably the only one that knows how." - David Rosenberg

The Fed's fix for a few billions bonds was satisfied once again, after taking a brief respite yesterday. In today's POMO, $2.3 billion bonds was repurchased, with well over $1 billion around the year 30 maturity. CUSIP QB7 was a May 7, 2009 issue: primary dealers can breathe a sigh of relief that they have to hold $353 million less of this, courtesy of the US taxpayer/$ printing press.

So now you know how "best of breed" 175/75 funds have been performing in this irrationality-driven market.