Archive - Sep 2009 - Story

ICI has released its most recent fund flow data, and while overall flows have been positive, this has been exclusively due to a ramp up in taxable and municipal fund inflows. In equities, there has not been one positive inflow since August 12. Last week saw a $2 billion outflow from domestic equity mutual funds, bringing the total for the last month to $7.1 billion. Attached are equity flows superimposed over the performance of the SPY.

First Textron's CFO Ted French was sacked, and now the CEO, Lewis Campbell, is retiring at the ripe old age of 63. The new CEO: a 19 year GE veteran. Hopefully he will have the same sucess with "restructuring" Textron Financial as Goldman, pardon, the Fed, pardon, GE, has had, with "restructuring" GE Capital. In the meantime, the entire management slate has been wiped clean. Opportunistic timing, or would it have been difficult to put TXT on its conviction buy list and subsequently issue debt for it, if it was public that the CEO was bailing? Inquiring minds don't really give a rat's ass anymore.

Hard to tell if it's a coincidence, or if the market just rejected the news as Ben Bernanke pretty much said he would print whatever amount necessary even in the face of improving conditions to make assets go up. The initial reaction was positive in equities, welcoming the guaranty of continued ability to carry any deranged semi-defaulted asset for a meager spread without having to worry. But then the equity markets turned on a dime, to finish a fair bit lower, and down on the day.

You didn't expect a spike in volume on the puke, did you. Keep an eye on the real action, better known as AH.

Even as the FDIC is scrambling to find ways to replenish the practically empty Deposit Insurance Fund, one of its options, namely borrowing from the Treasury, may be a non-starter due to the egregious monetization by its counterparty, the Federal Reserve, as both run up against the Federal debt ceiling.

The question: is "The client" buying or selling today.

This can't be good for the dollar bears and the liquidity addicts.

"Agents acting on behalf of the Federal Reserve Bank of New York's Open Market Trading Desk will gradually reduce the average weekly purchase amounts of agency mortgage-backed securities, starting with purchases conducted during the reporting week beginning Thursday, September 24, 2009. Additionally, the Open Market Trading Desk will gradually reduce both the size and frequency of individual agency debt purchase operations, with the frequency of agency debt purchases remaining, on average, once per week before declining to once every two weeks at some point during the first quarter of 2010. All other terms of the purchase programs remain unchanged." - NY Fed

Gambling Fever is now reaching exponential proportions, proof positive in today's Wall Street Journal, outlining how Bucket Shop traders are gunning stocks like AIG. Even the former superbear Damon Vickers is now running one of these daytrading shops, pumping stocks like AIG with outlandish $300 price targets.

Predictable move in the dollar, unpredictable whiplash in Treasuries. As for the equity bubble, it will do what it does, until it pops. In other news, the cremation of the formerly reserve currency known as the dollar will be held in the Federal Reserve's back yard at a convenient date. Chairman Ben will deliver the eulogy.

Ever wonder why iPhone sales are through the roof? It might have to do with this. Consumers are once again using their credit cards, however taking a cue from the Chairman's promotion of moral hazard to a state-sponsored nationwide doctrine, they have decided simply not to pay their bills. Moody's Credit Card Index confirms this, after hitting an a new record Charge-off Rate in August of 11.49%, a 68.5% increase year over year. And where charge offs rule, delinquencies are not far behind: August delinquency rate hit 5.8%, a 26.2% increase YoY. August was a sharp reversal in prior improving trends, indicating that the consumer weakness is not getting any better, and in fact, just the opposite.

No change to QE

"The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

"The downgrade reflects the significant deterioration in the performance of the loans backing the underlying certificate. Although this performance deterioration is severe, we affirmed the rating on class 2-A-1, which is within loan group 2, because class 2-A-2 provides credit enhancement to it. In addition, the affirmations on the classes from loan group 1 reflect the performance of the loans and available credit enhancement for the group 1 underlying certificate." - Standard And Poors

• Yields 2.470% vs. Exp. 2.4625
• Bid-To-Cover 2.40 vs. Avg. 2.31 (Prev. 2.51)
• Indirect 44.8% vs. Avg. 46.20% (Prev. 56.3%)
• Indirect Bid-To-Cover: 1.26
• Allotted at high 39.82%, compared to 16.55% a month ago.
• Direct bidders increased to 11% compared to ~4% pre money market guarantee expiration (per Santelli): new capital flow?

The Yen-Euro trade just took a sharp turn lower, pushing the DXY higher. Stocks, as usual, are caught in a vortex of vacuum tubes and chasing the VXV in a circular logic argument. Give them some time to catch up.

A presumably growing economy, one that has now emerged from a recession (if one listens to the Chairman) needs fuel. Or, as the case may be, oil. So today's oil inventory report did two things: it flatly refuted the Chairman's ongoing propaganda that all is finally well with the US economy, but also played a nasty trick on oil speculators who got majorly burned after oil tumbled as a result of ongoing lack of demand for the black gold. At least all those parked tankers overflowing with oil and betting that sooner or later the stored oil will be put to some use will get a few more chances to finally be proven right.