Archive - Sep 2009 - Story

A week after the roll into new indices (HY13 and IG13) there was quite notable action in CDS land. Net notional change across all sectors was substantially negative to the tune of $282 billion, which however consisted primarily of matured transactions accounting for $330 billion of this number, implying the adjusted number was around positive $50 billion and a notable derisking. There likely has been a corresponding netting out on the New Transaction side over the past month as accounts were rolling existing positions.

The market tanked after the Chicago PMI index took a big bath on the second derivative double somersault. After hitting a better than expected 50 in August, the September number was 46.1, much weaker than the expected "expansionary" 52. the PMI is a useful advance indicator on the overall ISM, which is out tomorrow, and has been responsible for much of the presumed economic pick up in the past 6 months. As John Bougearel pointed out yesterday, ISM fans may be set for a major disappointment.

It was just a matter of time before the sensible banks (read, not some fossilized dinosaur out of Japan who apparently does not realize what a strong Yen means for his country's trade surplus) told Bernanke: "basta." The latest on the currency intervention front comes courtesy of Switzerland, where the Swiss bank has again sold a boatload of CHFs to prevent the United States from being the only country hell bent on destroying its own national currency.

We are repeating Jim Cramer's buy recommendation on CIT from yesterday... because it bears repeating.

While much of the focus has been on ADP change, little has been made of the absolute level of the ADP report. The chart demonstrates the freefall in this particular data series. We are now at 2003 levels and dropping fast.

• ADP jobs number worse than expected at 254,000, on 200,000 cuts expected (Bloomberg)
• Mortgage demand falls despite artificially low, Fed-manipulated mortgage rates (Reuters)
• Neverending government stimulus revision update: Q2 GDP at -0.7% (AP)
• IMF warns on rising bank losses - have no fear, Obama will fund IMF... forever - gotta unfund that quadrillion $ budget deficit somehow (Reuters, FT)
• Indland empire shopping center for sale - calling all investors sekking to lose money (Retail Chatr)

• Asian stocks rose for a second day, led by automakers and technology companies.
• Bank of Japan said to consider ending corporate debt purchases on recovery.
• Cash for farmers, surplus purchases in $350 million congressional dairy aid package.
• China's shares rebound from 3-day slump ahead of holiday; steel, banks, oil gain.
• Consumer confidence in US unexpectedly declines amid rising unemployment.
• EU nations to hammer out financial oversight, exit strategies in wake of G-20 summit.

So Does the Future Look as Good as the Past? Not in a million years. The Bubble fuelled car sales numbers of 2000-2007 now look to be permanently relegated to the rearview mirror. Since March 2009, amidst all the cries of a V-shaped economic recovery and a booming stock market, car sales have lagged badly. For almost all months of 2009, with the exception of July and August U.S. car SAAR has been stuck in the mid to high 9’s, their lowest levels in a decade. Now that the July-August cash for clunkers is gone, car sales are trending back to their low 9’s trajectory.

The FDIC's attempts to lure away Goldman's Managing Directors has so far met with mixed to quite mixed success...

How many times can one of the world's worst-managed and toxic-laden companies be on the verge of bankruptcy? As long as Obama is president, one could answer "in perpetuity" although CIT may finally be on its last breath. According to the WSJ: "The fate of CIT Group Inc. was hanging in the balance Tuesday as the large commercial lender readied a plan that would likely hand control of the company to its bondholders" and "Under either the scenario of a bond exchange or a bankruptcy, the shares in CIT would lose all or most of their value." In other news, Jim Cramer does not understand how debt-for-equity works

According to Nielsen, CNBC's annual decline in total September viewership was a massive 37%: the worst YoY performance in 2009. The decline in the demo audience also hit a high of 27%. The dilemma for Jeff Immelt is the following: do CNBC pundits keep pumping GE (which everyone ignores, as CNBC's credibility is practically nonexistent), or, at the expense of marking a few hundred billion assets at GECC to fair market value, incite another major market crisis. Perhaps, just perhaps, if the later were to occur, CNBC would have some chance of salvaging its prior year numbers. Although with CNBC now spending hours a day advertising GE engines, it seems like external advertisers couldn't care less: after all, GE is subsidizing its own station by selling them ad space. Business schools have a word for that: vertical integration. Sane people have another word: biased reporting.

An attempt to explain some pretty strange AXP call action.

It would appear that employees of the NY Post can do more than merely plant stories and spread unfounded rumors. Some of them actually do investigative work. Case in point - John Crudele, who has compiled FOIA reports to create a chronological narrative of Hank Paulson's speed-dialing in the days after the Lehman collapse, in a piece titled "The secret to Goldman Sachs' good fortune." The net result: more communication between Paulson and Blankfein during the heart of the crisis than anyone else (including then-President Bush), with the only exception of Ben Bernanke. Just what were these two people talking about so frequently in the two days when the Dow made an 800 point round trip? And just who was leaking the rumors that ultimately were based on information sourced by Hank Paulson himself? Crudele's chronology presents a relevant framework for analyzing just who the critical decision-makers are in US financial markets. Hopefully one day phone transcripts will be released and the full picture of just what information Blankfein was getting straight from his former boss can be reconstructed.

Normally, I look past the Chicago ISM reports, but that may not be so wise to do this time as tomorrow’s number may give us a big clue as to what to expect from the Sept ISM report as well as the Sept NFP report. Moreover, a rotten Chicago ISM for September can give a nice kick in the head to equities and a shot in the arm for treasuries.

"This country's founders built an ingenious system of checks and balances for a reason: to ensure that no special interest or group could use government power to commandeer the creative and economic wealth of our nation to their own ends. How much longer must we live in a country where the citizens are subservient to the banks, health insurance companies and any other special interest able to control our government at the expense of our the most basic principles of fairness, our future as a nation and, as a result, our freedom?" - Dylan Ratigan