Archive - Sep 2009 - Story

A look at the SPY VWAP since the FOMC announcement. Just a slightly abnormal distribution.

In the continuing absence of WalStreetPro2, we present something comparable in the spirit and body of Michael Moore. Additionally, for the sequel to Capitalism, Mr. Moore may consider grabbing a baseball bat and commencing a tour de force of the United States, side by side everyone's favorite protagonist.

Bank of America, suddenly left out in the cold, without the gentle hand of the SEC to part an angry sea of taxpayers, has filed its first response to the SEC since it found itself at odds with the regulator, courtesy of Judge Rakoff. Well, a response is a loose definition for 8 pages filled with "No responses."

According to the WSJ, Reza Saleh, whom the SEC identified as the individual behind the Perot option insider trading scheme, is an actual hero: "Unsolicited and with no promise of reward, this guy put his life on the line and didn't flinch."

Say you are a hedge fund and you have been unlucky enough to have bought GGP bonds or other GUCs in the biggest clusterfuck of a CRE bankruptcy in history: how will you know what the hell is going on in the deal that has more moving parts it would make Level 99 of The Incredible Machine look tame in contrast? The easiest way is by getting access to disseminated inside information. But how will you "ascertain" that your traders will not take advantage of this material, insider information, a process that would immediately hold them liable for civil and criminal charges? By erecting internal "screening walls" of course, that are so completely impenetrable, that you traders will never be able to have drinks with you and where, just after your 8th Jager bomb, you will never disclose just which maturity it is that traders needs to nudge or which GUC they need to "start opportunistically unwinding if you know what i mean, wink, wink."

Optimism is a good thing: just ask an unstimulated Larry Kudlow. Yet when optimism is the only thing, you have problems. These tend to materialize whenever any event occurs that shows just how disjointed reality and hope are in actuality. Of course, the greater the divergence, the greater the downside shock. And if the Conference Board's numbers are any good, we are set for a recordly harsh reintroduction with reality.

Yet another ignorant swab who does not believe in the Mobile Internet Tsunami or buying on the dips.

Alan Grayson doing his immaculate Jaws impression here. And the man is definitely smelling a wounded and bleeding Fed. Must watch clip.

Grayson to Fed General Counsel Scott Alvarez: "Do you mind if we have a GAO audit to see if there has been front-running or insider trading by [Fed Primary Dealer JP Morgan]? Do you mind? Is that ok with you?"

The dollar pain continues as the dollar drops below the 90 Yen support level. Surprisingly despite the dollar weakness, there is no capital flow into domestic risky assets (10 Years are well bid). In fact, the bid in HY, the latest risk casualty of bubble psychology, is weakening. Is the carry trade now financing safer/foreign assets? If so, is yield chasing finally over?

"If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.'s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years."

- U.S. Department of State, March 1968

Other technical observations show the MACD has turned momentum but we are not in negative territory just yet, quite a way from it. Certainly expect the market to attempt a run higher into the close to turns things around and not close the week in trouble.

More troubling to TPTB should be the immediate reversal following yet another "stunner" out of UMich, Consumer Confidence or "The Market Is Up Because The Market Is Up Because The Market Is Up, etc." index.

In his interview yesterday Julian Robertson expressed substantial concerns about the ongoing US debt funding threat, using words such as "Armageddon" to describe what will happen when and if China and Japan stop buying US debt. More disturbingly, as was pointed out on Zero Hedge first, and was subsequently picked up by the WSJ, the Fed has accounted for half of all Treasury purchases in Q2 ($164 billion of total of $339 billion). Below we present data for what could be construed as a Treasury funding crisis borne out of lack of demand for longer maturities, once the QE portion of UST purchases expires. This crisis could hit as soon as October.

• Former PPT member Kevin Warsh voices in: The Fed's job is only half over (WSJ)
• Still waiting for the inventory bounce: durable good orders drop 2.4% in August, worst since January (Bloomberg)
• Mattress-maker Simmons finally throws in the towel, to file Chapter 11 (AP)
• Investors don't feel like taking chances with stocks, spending (USA Today)
• Battle brews over unused TARP cash (WSJ)

• Asian stocks decline on Nomura’s share sale, US housing data.
• China’s stocks fell, with Shanghai Composite set for its biggest weekly loss in 6 weeks.
• Dollar, Yen rise on speculation G-20 will act to curb riskier investments.
• Fed regulators say banks, other institutions face $53B in losses on loans.
• Freddie Mac announces $1B reopening of 2.125% three-year Reference Notes security.
• G-20 poised to crack down on bankers' pay, increase policy coordination.