Archive - Aug 2009 - Story

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.

An article in yesterday's Advanced Trading magazine, written by Pipeline executives Fred Federspiel and Alfred Berkeley, which was supposed to extol the virtues of HFT (or of the Pipeline product offering specifically, we were a little confused on that issue), ended up doing anything but, and in fact confirmed many of the concerns voiced with regard to high frequency trading in the blogosphere and in other venues.

With all eyes glued to the Michigan numbers yesterday which were supposed to start another recursive market spike, most pundits failed to notice the much less cheerful ABC consumer comfort index which was virtually unchanged, and in fact the buying climate assessment indicated a deterioration.

As the market continues on its steady path to the stratosphere, first it became apparent that pension funds did not participate in the run up due to their significant reduction in equity exposure around the March max pain. What might come as more of a surprise is that according to the HFRX GlobalHedge Fund Index (HFRXGL), even hedge funds are broadly underperforming the rally. Which is why aside from various Reuters articles claiming the contrary, hedge funds are mostly on their toes regarding their staffing decisions, as many funds are dealing with disgruntled investors who are confused why they are paying 2 and 20 for levered positions in equities when they could have generated better returns outright.