Archive - Aug 2009 - Story

"So on we go, riding the wave of yet another recovery fueled by stimulus. They work great,
until they don’t; sadly, the MSCI World Equity index trails money market fund returns since
1989, when Fed policy began in earnest to solve investment bubbles gone wrong by setting the
real cost of money to zero. Today, a sober view argues for a portfolio with moderate exposure to global markets, but with a close eye on the fissures which did not exist at the inception of prior bull markets (e.g., 1947, 1962, 1982, 1991). Giga-stimulus carries the day for now, but the morning after may come sooner this time around…"

Reversion algorithms coming to you today (as well as yesterday, tomorrow... and the day after), compliments of big, fat non-linear dynamics textbooks and their 19 year old readers.

While the short squeeze manipulators and stock borrow pullers try to kill any and every last bear out there, the much bigger problem of mortgage yields is starting to get out of control again: the last two days have seen the widest spreads on 30 Year Current Coupon FNMA in almost two months.

An event that did not catch much media attention yesterday was Goldman economist Jan Hatzius' under the radar boost to Q3 annualized GDP expectations from 1% to 3%. As regular readers know, it is prudent to always take Goldman advice and ideas with a dash of Cayenne pepper (Hatzius after all was the same gentleman who in January was suggesting a Taylor-implied -6% Fed Fund rates). However, reading the Goldman report demonstrates that this is not the bullish portent that some have made it seem to be.

Surely the increase in "compensation close to the average pay for similar executive roles at peer group companies" is very much deserved, and Zero Hedge approves the very prudent decision by WFC's board of directors. None of this would be made possible without the generosity of taxpayers and Bernanke's plan to bog America in trillions of unsustainable debt for generations to come (aka the steep yield curve). Look for WFC's TARP repayment announcement coming to an 8-K near you any day now.

"Despite the public importance of this case, the proposed Consent Judgment would leave uncertain the truth of the very serious allegations made in the Complaint. Further, the proposed Consent Judgment in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly from the $20 billion in public funds previously advanced to Bank of America as part of its 'bail out.'"

• Liquidity deluge - markets higher after UK recession shockingly discovered to be deeper than expected; BOE pumps another $84 billion (Bloomberg)
• Judge won't approve Bank of America, SEC settlement (Reuters)
• Chrysler May Replace 300C Engineering With Joint Fiat Platform (Bloomberg)
• Senate to vote today on cash for clunkers (Reuters)
• AIG breakup is fee bonanza (WSJ)

• Stiglitz said he expects a “very slow recovery” in the U.S. economy and that a replacement for Fed Chair Bernanke should be considered.
• Treasury Dept, responding to demand from China, other investors, to boost sale of TIPS.
• Asian stocks rise on confidence economy is recovering; Alumina, NTT gain.
• ECB, BOE may decide against further stimulus as evidence points to recovery.

Despite the story of recovery, New Zealand continues to show signs of weakness.

Senator Cornyn foolishly thinks McCarthyism has no place in 2009. And here we were, happy recipients of the first one million flagged complaints in less than 24 hours...

Spreads were mixed in the US with all but ExHVOL tighter (but spread moves were very marginal today with extremely narrow ranges in IG and HY once again). Indices typically underperformed single-names with skews mostly narrower as IG underperformed but narrowed the skew (notable since the skew is at contract tights and intrinsics are hovering at critical support levels from last fall), HVOL underperformed but narrowed the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew (as we heard a HY12 arb list doing the rounds).

No jobs = no recovery

Come to think of it... he's right

Deutsche Bank - "By Q1, 2011 a projected 48% of total mortgage borrowers will have negative equity."

Nuff said

If you missed your chance to stock up on double ply UST (T is for toiler) paper, fear not: you will have another chance to buy some again... and again... and again. The first opportunity will be on August 11th and 12th, when a total of $75 billion pieces of paper, backed by another rapidly deflating piece of paper will be made available for your indirect (or is that direct?) auction pleasure.

Just one question for Mary - why the hell did it take you and your even more conflicted and confused predecessor so long to get off your back and do something about Flash?

I am convinced, however, that you will be all over Dark Pools. And if not, we will hold your hands on that one. You can count on it.