Archive - Sep 2009 - Story

Today $2 billion was used up by the Fed to purchase several off the run 2021-2026 maturities and to goose up equity market liquidity just that little more. With today's action there is exactly $16.7 billion left remaining in the QE treasury basket.

Massachusetts investigators say James S. McDonald, president and chief executive of investment management firm Rockefeller & Co., has died of an apparently self-inflicted gunshot wound.

There was a time when FINRA did some good things. It did mostly useless things, and was glaringly incompetent in even those, but on occasion it would do something proper, at least when moderating analyst conflicts of interest. Then the crash came, and all bets were off. Interestingly, in October 2008, a month after the bottom came off the market, and when the kitchen sink was being thrown at stocks in order to prevent further collapse, FINRA lost the last shred of interventionist integrity it had when it decided to abolish the so-called quiet period for research actions subsequent to a follow-on offering. Yesterday, JP Morgan was more than happy to take advantage of this last shred of regulatory decency collapsing by the wayside, as more and more synergies of the SEC-Wall Street merger become effectuated.

“Come on, Direct Edge. Come on Nasdaq. Come into this data center,’’ said Stanley Young, the chief executive officer of NYSE Technologies and co-global chief information officer of NYSE Euronext.

"[The Fed] is bigger than the Congress, [it] has more power than the Congress. The Fed Chairman probably is more powerful than our president, and yet we refuse to look at it. The time has come for us to look at the Fed" - Ron Paul

Fortress investment group has been on a tear recently: the stock which had probed the sub-dollar space some months ago, recently got a much needed upgrade from the fine analysts over at Barclays, which optimism was undoubtedly bolstered by the firm's retention of one Daniel ("His Name Is Not") Mudd as CEO, who did miracles during his prior tenure at Fannie Mae for shareholder returns. After all, as the whole "once bitten..." saying goes, one can be positive he has learned from losing billions in shareholder value in the past, and will never repeat it again. (Outliers such as Bob Nardelli are just that - outliers.) Yet a casual glance at the Fortress Board of Directors reveals one Howard "Howie" Rubin. Is there more than meets the eye here?

Capital One's August charge-off and delinquency rate data was filed today, and while some voodoo accounting likely helped the annualized charge-off rate decline from 9.83% to 9.32%, the 30 day+ delinquency increased from 4.83% to 5.09%. So while the marginal credit card holder is "expected" (see definition below) to start paying credit card balances due, the recidivist abusers keep ignoring those 3rd notification letters.

• The new carry trade: Funding in dollars (FX Solutions)
• Retail sales ex auto subsidies up 1.1% (Bloomberg)
• Core PPI up 0.2%, gasoline up 23% (Bloomberg)
• Evans-Pritchard: Credit shrinks at Great Depression rate prompting fears of double-dip recession (Telegraph, h/t Geoffrey)
• Weil: Too-big banks can take comfort in Obama's math (Bloomberg)
• Retail sales here - not so much “We need to see a revenue story emerge”: Best Buy profit misses estimates as sales fall at older stores (Bloomberg)

• Asia currencies gain on signs recovery may spur rate increases.
• British inflation falls back to 1.6 percent amid favorable oil price comparisons.
• Car, gas sales seen boosting August retail sales, but consumers cautious.
• China shares rise for 3rd day on economic recovery hopes, led by metals.
• EU deepens investigation into Dutch govt.'s plan to buy ING bad assets.
• Dollar trades near weakest level this year on record low borrowing costs.
• Foreign direct investment in China climbed for the first time in 11 months in August.

"Mr. President, I have discussed a variety of questionable practices that deserve and I hope will receive a searching examination by the SEC and by Congress. While some of these innovations have produced benefits, they have also created wide disparities between high-speed traders and average investors. We do not have a clear accounting of all the costs and benefits of these recent market structure changes... High-frequency trading, while not illegal, may operate in ways that undermine the legitimacy of our financial markets. In order to restore investor confidence, we must effectively regulate unfair performance-enhancers. We must shine a light on dark pools, conduct a searching examination of high-frequency trading strategies to ensure they are not manipulative, ban flash orders, and give regulators the tools they need to ensure that broker-dealers are acting in the best interests of their clients." - Senator Ted Kaufman

Below is a long-term chart of the S&P represented in terms of ounces of gold. The peak was in 1967, with a June 1980 trough. The August 2000 peak is 200% of the '67-'90 move. The 1967 peak was the long-term 2001-2005 flat level before legging lower. And the March 2009 trough was at the 23.6 retracement of the previous move, indicating a repeat of the same shape seens in 1973. With gold popping at current levels, will the 38.2 level be a ceiling: will the gold price pop be sufficient to hold back stock prices, or like in 1973, merely a temporary resistance as the ratio drops much further?

When seasonal variations are removed from the data, the results suggest that employers expect a slight decrease in the rate of hiring when compared to Quarter 3 2009. The fourth quarter Net Employment Outlook for the U.S. is considerably weaker than one year ago at this time. According to seasonally adjusted regional data, employers in the South report a slight increase in hiring expectations compared to Quarter 3 2009, while  employers in the Midwest and West expect the hiring pace to remain nearly unchanged. Employers in the Northeast are anticipating a moderate decrease and expect the weakest hiring conditions for Quarter 4 2009. Employers across all regions anticipate a considerable decrease in hiring activity compared to one year ago.

"With slack likely to persist for years, it seems likely that core inflation will move even lower, departing yet farther from our price stability objective. From a monetary policy point of view, the landscape will continue to present challenges. We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation. With our policy rate already as low as it can go, it’s no wonder that the FOMC’s last statement indicated that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” I can assure you that we will be ready, willing, and able to tighten policy when it’s necessary to maintain price stability. But, until that time comes, we need to defend our price stability goal on the low side and promote full employment. Thank you very much." - Millions of unemployed Americans thank you Janet

As set forth above, we cannot simply accept Bank of America's officers' bald assertions that their decisions to keep each of these material events from Bank of America's shareholders were based on a full review of all the relevant information by their inside and outside counsel. The law is clear that Bank of America and its officers cannot assert an advice of counsel defense for their decisions, and at the same time persist in refusing to disclose the substance of the conversations with counsel. Accordingly, we request that Bank of America reconsider its decision to prevent this Office from adequately probing these crucial issues. We provide you with this final opportunity to reconsider. Otherwise, we will proceed with our charging decisions without giving credit to the advice of counsel defenses that Bank of America has not permitted us to test.

- From The Office Of NY Attorney General, Andrew Cuomo

In a note released earlier by Raymond James, the author Jeffrey Saut does all in his power to explain not only why Treasuries are a bad bet (inflation is a-coming), and why the market will continue ramping higher, but ironically, why, even as the author submits by calling his piece "When the music stops" that all equity market participants have entered into a bubble frenzy, the market will simply continue going higher, period. As a reminder, comparable notes were a dime a dozen just before the dot com bubble popped. Of course, nobody will care to stake their reputation on calling when this bubble, which everyone now acknowledges it for what it is, will end. However, Saut does provide some astute observations on the career risk that has gripped most portfolio managers, the majority of which have, not surprisngly, not participated at all in the current rally. We would add, a comparable career risk now permeates among the analyst community which has all now gotten on the bull bandwagon, as nobody is willing to call a spade a spade, for fear of angering some of the larger accounts or superiors, for being a contrarian in a market that swiftly silences all objecting voices as it pursues new irrational highs.