Archive - Sep 2009 - Story

HFT tentacles have spread across the ocean and are now toying with bankrupt German retailer Arcandor. The company's stock opens up 30%, then drops 30% in a span of minutes, with 30% of the market cap traded...on no news.

"So today it begins. As I'm sure you are aware, the rules in politics bear only scant resemblance to those which govern polite society. As a result, I am wading into strange waters, and I'm sure strange things will happen. But I promise to maintain my composure and give it my best shot. Based on the support that I have received thus far, I fully expect to be facing down Chris Dodd in the general election just 14 months from now." - Peter Schiff

• US to shelve European missile shield (FT)
• Dollar hits 1 year low against Euro (Reuters)
• FedEx: buy on the prerelease (Bberg), sell on the release (MarketWatch)
• More slack added to housing market in August (AP)
• Nouriel Roubini: The Lehman anniversary (Forbes)

• Americans Back Obama's health goals even as they doubt chances for success.
• Asian stocks were higher Wednesday after Wall Street closed at its best levels for '09.
• Bank of England is still considering a reduction in the bank's deposit rate.
• Bernanke says US recession 'very likely' has ended, economy still weak.
• China shares fall on liquidity doubts.
• Credit default swaps lose disaster stigma as confidence in market rebounds.

When a major investment bank's offical Private Client presentation has such words as "Monetary Diarrhea" you know someone is in on the joke and hasn't been acquired by General Electric just yet. Nothing earth shattering here, just a good, simplified summation of how the US economy is suffering from a terminal case of Montezuma's revenge (also known as Traveller's Diarrhea, or TD - no relation to this particular author), and will be for a long long time.

A "folk heroish", conscientious, objective and honest jurist gone wild is to a bidetesque^TM, pandering, complicit and conflicted Wall Street sycophant, as Judge Jed Rakoff is to...

Jonathan Weil has the answer.

It was a mere two weeks ago that we were predicting a collapse in the September auto SAAR, not only with the push-forward effect of Cash for Clunkers expiring, but after Chrysler and GM reported even August sales that were below forecast. Yet based on a speech by Chrysler boss Sergio Marcchione at the Frankfurt Auto Show, even the "conservative" 9.5 million SAAR that we estimated for September, after the 14.1 million number in August, is going to be an optimistic number. The Fiat/Chrysler boss warned that "we are going to see harsh reality in September."

An amusing reminder of just how different opinions can be among (conflicted) finance professionals, was today's disclosure by risk evaluator Audit Integrity, which has put together a list of the twenty companies with a market cap over $1 billion most likely to file for bankruptcy. Among them: none other than Goldman Conviction Buy candidate, Textron Inc.

In other words, the HFT algos are about to go into turbo overtime: Goldman has given the green light.

In a rare example of testicular fortitude, Barney Frank has "banished" Goldman's Michael Pease from communicating with the U.S. House of Representatives Financial Services Committee. According to Reuters, the Goldmanite, and former committee staffer, has been "asked" not to interfere with the Congressional panel for a period of 12 months.

"[The Fed] is the story of the millennium. There are very few stories you can ever write about where the numbers involved have 13 digits in them." - Congressman Alan Grayson

Spreads were tighter in all the major indices today as new 2009/contract tights were seen everywhere with the high beta compression, roll compression, and curve steepening trend continuing - although HY and IG both ended well off their best levels of the day (even as stocks closed at their highs). IG12 moved back above Par and HY12 was below 600bps intraday. The drop in dispersion among single-names seems to signal traders are unwilling to step in to the high beta screamers pre-roll and we feel stringly that the steepening/roll compression has moved index curves in the off-the-runs way rich and way steep compared to intrinsics and offer some pretty cheap options for those who are not buying the recovery in refi risk.

With HR 1207 passage now guaranteed in the House, it is time to focus attention on the Senate. As of last count, there were 25 co-sponsors for Sen. Bernie Sanders' S 604 Bill: The Federal Reserve Sunshine Act of 2009.

The problem with competing views is that the bond market looks out to the medium and long term horizon while stocks today are mostly concerned with the day to day fluctuations.If you were confused , you were not alone. Investors needing to be protected are pushing managers and advisers to invest at all costs if not beware. The fast move up in equities makes you react the same way as when a drop occurs.You behave out of fear. There is no doubt that a bull market of regrets will ensue.

Smells like 1999 all over again, especially with the sectors which have the worst prospects rocketing the hardest. WSJ today reported record trading volumes by retail daytraders in August, proof positive that Gambling Fever has once again gripped the unemployed and the elderly.