Archive - Sep 2009 - Story

"We'll let the party continue, I am just not going to partake of the tainted food"

In a critical development for the future of the Federal Reserve, Ron Paul has confirmed that today HR 1207 has garnered the elusive one vote to bring it to a total of 290, or a two-thirds congressional majority. At this point passage of the bill is guaranteed, and hopefully some long, long overdue transparency into the Wall Street-pandering machinations that occur every day within the Fed's four walls at the expense of the American middle class and unmitigated destruction of the US Dollar will finally become a fact.

The VIX is now green for the day, even as equities are stuck in a continuing 2009 high breakout channel. It appears dispersion traders are aggressively buying index vol as they sell single name vol ahead of option expiration. Furthermore, the persistent bid for treasuries is there. As the money market guarantee is set to expire in the next few days, is this merely a last minute push by advisors telling their clients to get out of MMs and into the "safety" of any and all other asset classes? And speaking of money market accounts:we are now back to the pre-Lehman levels. All the "money on the sidelines" that moved out of equities as a result of the events since the Lehman collapse is now back in.

The Daily Mail recently made waves with a photo exposing what it called the "ghost fleet of the recession" where hundreds of ships were shown on anchor off the straits of Singapore, doing nothing except rusting: a tribute to the unprecedented collapse in world trade and the huge amount of excess slack in shipping. Yet a further analysis demonstrates that such "islands of disuse" have become prevalent globally, with virtually every part of the world now impacted by the unprecedented drop in seaborn traffic. We present the results.

In a developing story reported by the AP, Cuomo has allegedly subpoenaed five relevant Bank Of America directors who had presumably been briefed on actions taken by the bank in its Merrill merger prior to the public disclosure, and is seeking their sworn testimony.

The CDX IG12 5s10s curve has just hit a high since the March lows, following to the equity market drum beat. The popular flattener trade has now unwound as more accounts start shifting into corporate steepeners. As we have noted in the past, IG new issuance has likely peaked, and in the face of dropping new commercial paper issuance, the supply overhang is muted, forcing managers to play with the corporate curve. The 5s10s trade was one of the most popular ones in the halcyon days of late 2006 and early 2007. With near-term refi risks effectively eliminated the corporate steepener seems the place to be, especially as equities continue indicating heightened inflation pressures, yet contrary to what the Treasury market demonstrates. Nonetheless, the upcoming roll in CDS should be one to watch.

Rep. Alan Grayson announces there will be a hearing in late September on the bill to audit the Federal Reserve.

A candid view at how US unemployment has been outsourced over the ages. Coupled with the jobless recovery, this presents the bull case on the US' most recent incarnation as the latest addition to the United States of China.

Too bad the Fed's PR person can not disclose just how effective it has been in orchestrating a virtually straight line move in the market over the past two weeks. Zero Hedge sympathizes, and as debt ceiling deliberations are coming up, the Fed needs every favorable media mention of the deadly precision it has exhibited in enhancing consumer confidence, raising 401(k) book profits, and singlehandedly allowing corporate insider selling to outpace buying by a factor of well over 30x. After all with the dollar's value soon hitting zero, the Chairman is doing the middle class a favor by transferring its funds out of its pocket into that of multi-millionaires: call is dress rehearsal for the barter system.

After yesterday's $2 billion POMO, excess liquidity is sorely needed. After all the S&P 500 has gone a whole 24 hours without the Fed injecting some Redbull into the market. So the ever generous Chairman Ben takes out his checkbook and writes another $1.8 billion taxpayer funded check. Of the total amount repurchased, 60% is coming off 2009 auctions. With this action, there is now $14.9 billion left in Treasury repurchase dry powder.

Market update courtesy of non-HFT algorithms.

It seems just yesterday that Textron was getting some love from Goldman Sachs. It took less than two weeks for the company to turn around and reciprocate the favor, by issuing $600 million in new notes, on new and improved sentiment for pent up private jet demand courtesy of Goldman, and allotting the 85 Broad Street based hedge fund a juicy place in the ranks of Joint book runners.

The latest from the market rumor mill: "hearing ny consultant reporting at least two fed members support raising rates next week...."

The primary concern is mainland China, where there was a marked slowdown in Long-Term Treasury (Bond) purchases: $26.6 billion were purchased in June, with $15.3 billion in July. China's exodus in all other LT securities continues: ($2.1) billion, ($0.3) billion and ($0.1) billion sold in Agencies, Corporates and Stocks, respectively. In the short-term category, China flipped its aggressive selling which is June was ($52) billion, and purchased $8.8 billion in total Short-Term Treasury securities. It appears domestic sources of capital (US Investors and, of course, the Fed) are becoming the prevalent source of funding when it comes to US Treasury purchases. As a frame of reference the Fed, via various POMOs, purchased $41.5 billion in USTs. Also, in July, the US Treasury issued $174 billion in various maturities.

Another precious dollar pounding moment, brought to you by the folks whose only noble intent is to push the market ever higher. Don't forget: a dead dollar is victory for the momentum chasing bulls, with the acceptable side effect of killing the middle class. As for international trade, don't worry: who needs to trade when you have a "stock market."