Archive - Sep 10, 2009 - Story

"Unemployment insurance benefits have been on an upward trend over the past two
decades, partially reversing an earlier decline. The trend is associated with shifts toward a
higher share of job losers among the unemployed and longer durations of unemployment,
which may cause benefits to lapse for some recipients as labor market weakness persists." - Aisling Cleary, FRBSF

"The best indicator of health would be a GDP declining to reflect we have moved our manufacturing overseas, we have too much debt, and unfunded pensions are a ticking time bomb that makes the housing market a pleasure to deal with."

Spreads were tighter in the US as all the indices improved (with IG and HY at their tightest closes since 08/10 and rallying for the fifth day-in-a-row for the first time since the Dec08 roll). IG trades 10.4bps tight (rich) to its 50d moving average, which is a Z-Score of -1s.d.. At 111bps, IG has closed tighter on only 4 days so far this year (181 trading days). The last five days have seen IG diverging (bullishly) from its 50d moving average. Indices typically underperformed single-names with skews narrower with HVOL the most notable and talk of some index arb and tail hedge unwinds was heard.

As CNBC guests will be so quick to admit, the money on the sidelines is indeed not sitting still: it is fleeing! Even as the market has gone up by 4% over the past month, flows in domestic long-term equity mutual funds have become increasingly more negative. The total amount withdrawn is over $5 billion, and last week alone saw a -$3.2 billion outflow, according to Investment Company Institute.

Counterparty risk is considerably below its peak levels surrounding the September 2008 systemic crisis anxiety. However, while the CDR Counterparty Risk Index (CRI) is trading back to July 2008 levels (post Bear Stearns), cognitive biases to anchor on the worst case are misleading as the largest 14 OTC derivative counterparties remain 5-10 times more risky than early 2007.

Not only did we get the Obama "resubstantiation" rally, but the Program Robots went absolutely wild today, sending the companies closest to bankruptcy into Outer Space.

Dear Mr. Khuzami, see this chart? See the arrow? See the volume? Please put one and one and one together (we are happy to provide you with a calculator).

Well of course it works... What else did you expect? One million jobs and counting.

The U.S. Securities and Exchange Commission is “rigorously” investigating whether traders are using technology to manipulate markets, the agency’s enforcement and inspections chiefs said today.

Over the past week investors have been chasing risk and safety with comparable zeal. Seems like someone has discovered the granddaddy of all pair trades: long bonds and long stocks 1:1

The CFTC and the SEC are both at lunch right now, as all speculators have been definitively driven out of the market.

Not sure if there is a glitch in FinViz' data, but the most recent data indicates a ratio of 95x of insider selling $35 million to insiders buy of a whopping $367,720. If anyone has more definitive data, please advise, however a ratio of nearly 100x sellers to buyers is pretty conclusive of who is selling to the robots, as the bids are gunned ever higher.

"Estimates of the impact of the ARRA made by comparing actual economic performance to the predictions of a plausible, statistical baseline suggest that the Recovery Act added roughly 2.3 percentage points to real GDP growth in the second quarter and is likely to add even more to growth in the third quarter."

A surprisingly robust auction, indicating that demand for US Treasuries despite a continuing supply onslaught, will not taper off. Is this merely more rotation out of agencies and MBS? Whether this demand is coming from foreign purchasers or has domestic sources is, at this point, unclear.

• Yields 4.238% vs. Exp. 4.289%
• Bid-To-Cover 2.92 vs. Avg. 2.48 (Prev. 2.36)
• Indirect 46.5% vs. Avg. 48.46% (Prev. 50%)
• Allotted at high 85.35% (BBG)

The dominatrix being cautiously pessimistic. Jim Rogers tells us how she really feels.