Archive - Aug 2009 - Story

Spreads widened in general today in the face of a surprisingly resilient US equity market as overnight saw more Asian angst and dollar doldrums. HY underperformed IG but both were wider as indices underperformed intrinsics and low beta underperformed high beta. Intraday ranges were wider than average in IG and HY today but both closed much nearer their wides than tights, as stocks closed at their highs. HY's resilience yesterday (following the AXL debacle) seems to have run its course with both IG and HY now wider on the week. IG and HY are both significantly wider than their Friday closes and Monday opens whereas the S&P seems modestly worse than Friday's close but considerably better than Monday's open - infer what you will.

Two months ago Zero Hedge first wrote about Alan Grayson's request to the SIGTARP to audit the $300 billion in federal guarantees received by Citigroup. Neil Barofsky has taken the request seriously, and has announced that he will "examine why the guarantees were given, how they were structured and whether the bank’s risk controls are adequate to prevent government losses."

One would think that with an almost 18% unemployment rate the Spanish have enough problems, right? Wrong. According to Bloomberg the winning (and highly subsidized) bidder for Guaranty is BBVA (Banco Bilbao Vizcaya Argentaria SA), Spain's second-largest bank by market value (probably not saying much).

Another brutal selloff in the Shanghai last night left many retail stock speculators (aka Pai Gow players) stunned and in shock, frozen with fear.

When you are TheHedgeFund, this is likely the easiest way to pay for bonuses.

A new monthly report released by the New York State Comptroller indicates that the tax collection weakness in Empire State continues. For the April-July quarter total tax revenue was $11.5 billion, $52 million below projection, and, more significantly, $3.6 billion below amount collected in the prior year period. For the Year To Date period, receipts, including transfers from other funds, through July 2009 of $15.7 billion were $190.9 million below Financial Plan projections released by DOB on July 30 and $4.8 billion lower than last year for the same period.

The Shanghai Composite at a major technical crossroads

The big question - "Why Now?" (is it because we have a big deficit) is strategically left unanswered.

Cessna maker Textron, whose stock has gotten bombed over the past year after the very public bashing of any and all private jet purchases, might be in more hot water. After briefly making the press in relation to speculation that it could be an acquisition target, which subsequently turned out to be a large insider trading leak that subsequently led to the suicide of the alleged perpetrator, Textron is now being sued by the City of Roseville Employees' Retirement System for business condition misrepresentations.

“Perhaps this is because of my own prejudices as a former bond?markets trader, but the pessimistic minority seemed much more experienced and literate to me. They were also generally a lot more senior. That might not mean much but it does suggest to me that there is a risk of bad news in the future causing a stampede of pessimism. Of course the majority is not necessarily wrong (in spite of the claims of contrarians, who paradoxically enough include nearly everyone, it seems), but the volatility impact of information that confounds their expectations is much greater than that of information that reinforces their expectations.” - Michael Pettis

Equities happy to track dollar down, not so happy when it roars right back up.

PIMCO happy, Bernanke happy, Dollar mauled, Stocks flying. All is good.

According to Reuters, the amended deal between the IRS and Switzerland to cut down the number of disclosures from 52,000 to 5,000 comes on the heels of the understanding by the US Treasury that after Goldman and CRE, it is now 52,000 tax cheats who hold the financial world hostage. Apparently if all the 52,000 tax evaders fled from UBS, it would spell the end of the world (once again).

Arthur Levitt on a crusade to prove just how innocuous HFT is, first in the WSJ yesterday, now on Bloomberg. This begs the question, if it really is so wonderful, why defend it so vociferously? Which, of Arthur's conflicted interests, has pushed so hard for this PR campaign?

"And while we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative. In combination with other factors, that likely means a continuing devaluing of the U.S. dollars versus other currencies, especially the EM currencies. Accordingly investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure."