Archive - Sep 3, 2009 - Story

The "loan problem" has not gotten any better, in fact, quite the opposite. Also, for an example of how everything will collapse once the unwind begins, look no farther than Wells Fargo.

Spreads were mixed in the US with all but HY marginally tighter (indices saw very small intraday ranges once again and closed well off their best levels unlike equities). Indices typically underperformed single-names (liquidity was minimal in single-names as dealer notched down spreads to encourage some action in low spread names) with skews mostly narrower as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.

A fitting headline to cap a day in which retail analysts from various investment banks were yapping ceaselessly, trying to convince CNBC's viewers that consumer discretionary is the next REIT space, and that HFT computers are mere minutes away from trading trillions of shares with one another, thereby pumping retail stocks into the ionosphere, is the news out of the WSJ that Liz Claiborne has hired restructuring and turnaround advisor Alvarez & Marsal, best known for advising the wind-down of Lehman's bankrupt estate.

3:30 pm. To the dot. An underfunded SEC is happy to see computerized HFT tulipmania back in charge of the market.

Without doubt the two biggest issues before the US economy are the threat of a double dip recession and what happens when the massive liquidity pump is i) stopped and ii) put in reverse. And of the key macro economic indicators, deflation is by far the biggest bogeyman (and wildcard). Even in the context of so-called better than expected economic data, i.e., the growth in GDP, a more exhaustive dig through the deflator for gross domestic purchases reveals that deflation has still firmly gripped the economy. Yet price perceptions, which have an impact on the consumer saving and spending rate, while critical are merely one of the numerous indicators that one has to keep an eye on. The group of the four horsemen of a depression also includes overall systemic leverage, the availability of credit, and unemployment.

The Treasury Curve is much steeper ‘relatively speaking’ than even its high absolute levels imply – is this what Gold is reflecting?

Today's intraday bizarro market: bonds and dollar ticking higher, as stocks pretend to climb, with VIX sinking all day.

On a slow news day, a few enjoyable blasts from the past compliments of Chairman Ben, confirming his distinguished track record of predicting "stuff" and "containing crises"

The recent run up in gold, coupled with the decline in the dollar (via the DXY) has raised the GLD/DXY ratio to July 2008 levels, with just under 1.5x points left for Gold to hit multi-year relative highs. With gold seen as not only an inflation hedge, but a systemic collapse safe haven, could the run up in gold have more than just inflationary implications? With the dollar safe haven status out of the window, it does, in fact, only leave gold as the only TEOTWAWKI hedge. At flat dollar levels, look for gold to test the $1050 level relatively soon.

Developing Story

One wonders why it took so long to incentivize the SEC to actually prosecute wrongdoing on Wall Street. One also wonders how much of this new windfall will remain once all the Madoff-related lawsuits against the SEC clean the regulator's clock.

Out of the 24 retailers who reported August same store sales results, the surprise split was even with 12 beating estimates, and 12 reporting below estimates. Yet the biggest weakness was seen in the Upscale/Specialty category, where only Nordstrom beat its -9% same store sale estimate marginally, coming out at -7.6%, likely as a result of continued heavy discounting/clearance. The other category names, including Saks, Macy's and Hot Topic all came in well below expectations. Also notable is the lack of color from discount retail bastion WalMart which has stopped reporting monthly same store sales.

You didn't think the $9 trillion budget deficit was going to finance itself did you? Neither did the Department of the Treasury. Which is why it just announced $128 billion in Treasuries on deck, of which $70 billion in 3, 10 and 30 Year Notes, to be auctioned off on September 8, 9 and 10th. With $25 billion in remaining Fed buybacks, September will be a very interesting month indeed: the Treasury portion of QE will likely be exhausted by the end of next week via POMOs: one only hopes China sees this as a positive development.As a point of reference, August saw $272 billion in new issues, while September's runrate is now at $384 billion (and a $4.6 trillion annual runrate).

TrimTabs TrimTabs earlier disclosed that the ratio of insider selling to buying had averaged about 31x for August, with $6.3 billion of insider sales matched by only $210 million on insider buys. Insiders apparently decided to exit August with a bang, with the last week of insider transactions doubling the sell-to-buy ratio to 61.8x! Over half a billion in stock was sold, while a whopping $8 million was purchased.

If there is any doubt as to which way insiders were leaning during this "market rally," this data should seal that particular coffin.

A favorite practice by numerous market makers, better known as "spoofing," in which order blocks, which will never be executed, prop up either side of an order book with the goal of manipulating the stock price, is starting to get much needed scrutiny across the Atlantic. In the meantime the SEC is resting on its Madoff laurels, as more and more investors are confirming a necessary and sufficient inventory of pitchforks.

In a clip that has to be seen to be believed, California Congressman Pete Stark displays the most unbelievable combination of economic incomprehension, stupidity, hubris, and to top it off tells interviewer Jan Helfeld to "get to fuck out" or he will be thrown out of the window for daring to expose just what a sack of... hot air Stark is.

A line that will now live forever, thanks to Congressman Stark: "The more debt we owe, the wealthier we are".

That pretty much sums up political "thought"