Archive - Sep 21, 2009 - Story

"One year ago, almost to the day, the U.S. economy had a financial heart attack, from which it is still recovering. That heart attack, like all heart attacks, was a shock, and it has caused much discussion about who is to blame, and how can we avoid such heart attacks in the future. In my view much of that discussion has been off point. To make an analogy to a physical heart attack, the US had a heart attack because it is the equivalent of a 450-pound man with serious ailments too numerous to list, who is trying to live as if he were still a 20 year old who can party 24-7. It doesn't take a rocket economist to know that that will likely lead to trouble. The questions I address in my testimony are: Why didn't rocket economists recognize that, and warn society about it? And: What changes can be made to see that it doesn't happen in the future?" - David Colander

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When the Fed spends the time and money to provide an "in depth" analysis of whether the asset bubbles it itself creates over and over are predictable, you know you have reached escape velocity.

In other news, soon to be skyrocketing Udmurtia unemployment from released Kalashnikov assembly-line workers, will be well below worst-case expectations, resulting in a dramatic pop in the regional stock market, where three Atari 2600 machines trade 10 shares of the one listed stock. Next steps: UAW to start a local branch to assimilate the work pool, and all secured debt in the semiautomatic gun maker will shortly be wiped out courtesy of a Steve Rattner, who seems to have disappeared completely from the face of the earth (but not so sure about 998 Fifth). Lastly, Goldman will somehow end up with full equity control over the legendary maker of AK-47s.

"We understand investors are not supposed to fight the cash, but this is starting to become a bit ridiculous. It seems buyers of the market cannot be satiated and are vociferously purchasing the lowest of credit quality without restraint. With the high yield priced at roughly 770bp over Treasuries, it can be argued the market is still historically cheap – because it is. The visceral reaction to the 80bp tightening of the last two weeks has been, “too much, too soon,” and that sentiment is probably correct too. Unfortunately, these are the kind of dynamics that cause strategists to wake up in the middle of the night and go for a long run. Short-term technical concerns are running at odds with our longer-term fundamental view." - John Fenn, HY Strategy, Citigroup

Vicis Capital, a $2.9 billion hedge fund started by Lehman trader John Succo has halt client withdrawals after it received $550 million in September redemption request. The firm has already paid down $2.7 billion in comparable redemptions since October. The asset manager's Vicis Capital Fund, a $2.5 billion volatility fund, has been the primary culprit for LP dissatisfaction after losing 12% YTD, having returned 14% in the last year.

Developing story: The trap is closing, Ken Lewis is sweating, Hank Paulson is evaluating one way ticket costs to non-extradition treaty countries.

Following up on our call for a reversal in USD weakness, here is what we see in the very short-term: USDJPY has broken its downtrend channel as expected. 91.65 is now support and upon retest we would expect the market to follow through and go higher after this break.

Headlines, as always, from the highly entertaining News From 1930 blog. And all, very appropriate for our blow by blow recreation of the Great Depression, courtesy of the historically predisposed Chairman.

Quant guru Paul Wilmott laments the passage of common sense on Wall Street as the dominant paradigm has become mathematicians relying on (flawed) models, with no regard for street smarts. One sympathizes.

After last year's collapse, you would think that stocks would be sworn off forever. But repeated "mop-ups", monetizations, etc. has simply incited new bubbles to keep the gambling fever alive.

Janjuah that is. And, much more troubling that Grant's recent "bear-to-bull" trans-species surgical intervention, is Bob's refusal to abbreviate like a drunken sailor. If there ever was a threshold event, this is about as close as they come.

It just never ends: Goldman puts a company on the Conviction Buy list and 3 days later the company issues either bonds or stocks. The most recent beneficiary of this highly ethical practice: Spirit Aerospace. This is a topic that has been beaten to death on Zero Hedge, so we will just present the facts.

Dearest SEC, since we know you are infrastructurally and intellectually challenged (in the broadest sense of the word), we have decided to make your life easier. As you likely are not aware, Dell today acquired Perot Systems (we imagine the companies used the attorney-client privilege to avoid disclosing any transaction details to you). All fine and good: here is the link to the 8K should you wish to familiarize yourself with the EDGAR filing system. Yet something that you may want to consider in your 8 hour daily coffee breaks is the following blatant front running in Perot October Call Options.

Facts and TV spread fiction continue to diverge: the latest data point: Moody's REAL Commercial Real Estate Index.

"The market has averaged about 375 sales per month for the seven months in 2009" said. Over the same time period in 2008, sales were averaging nearly 1,100 a month." - Moody's Managing Director Nick Levidy