Archive - Oct 11, 2010 - Story

In this week's update of "insiders selling to idiots", we find that the ratio of shares sold to bought by insiders is once again in the four digit range: 1,169 to 1 to be specific. In the past week, insider buying in S&P 500 companies amounted to only $286,000, the bulk of which was in MEMC (WFR). As for the selling: well, it appears ORCL insiders just can't wait to dump as much as they can as fast as possible. Oracle was promptly followed by such overpriced stalwarts as Google, Marriott, Autozone and Salesforce. We wonder if these insiders provide direct or indirect kickbacks to the HFTs who keep bidding the stock up at incremental penny losses, yet are fully compensated for "providing liquidity" by the exchanges in the good ole' liquidity rebate system. The silver lining: this certainly is an improvement on last week's 2,341-1 ratio. Perhaps even the idiots are getting skittish about owning stocks without having access to the Fed's backstop facilities. Also, keep in mind that the primary dealers have about $60 billion in Bills to repurchase past the End of quarter window dressing. Unfortuantely, for the players in the hot potato game, this capital can only come from stock sales.

You thought you knew everything there is to know about the implications, consequences, and ways to frontrun the government's QE2? You were wrong. For everything you always wanted to know about Quantitative Easing, and about 100 pages more, here is Morgan Stanley's Jim Caron with the definitive presentation deck on everything wicked that this way comes.

Blackrock Q4 outlook summary: "Dear Greater Fools - please come back! We need you, our ETF creation shares need you, our trillions in overrated investments need you!" From Bob Doll: "Equity valuations are attractive: We believe equities are underpriced at current levels. The tricky economic backdrop suggests a continued focus on high-quality equities, but also some allocation to cyclical areas of the market."

Well duh.

Jan Hatzius pretty much slams the door on any possibility for a liquidity moderation (let alone exit): "We found that under our own economic forecasts it might take until 2015 or longer before a rate hike became appropriate." In other words, the US economy will very likely just go down in flames, as the Fed makes sure that each and every American is infinitely "rich" courtesy of zero cost debt denominated in worthless dollars. The only salvation from this outcome is for the rest of the world to stage a Fed intervention before it all burns down.

• Foreclosure Freeze May Slow U.S. Homebuyers on Legal Worry (Bloomberg, WSJ)
• Currency Rift With China Exposes Shifting Clout (NYT)
• Obama has the book thrown at him: Moment a missile narrowly misses U.S. President's head (and what's with the naked man?) (Daily Mail)
• No Margin of Safety, No Room for Error (Hussman)
• Greece to be bankrupt longer than expected as IMF to extend loans (Bloomberg) even despite Germany's ongoing protests (Bloomberg)
• Here comes the $100 porterhouse (Bloomberg)
• Currency wars are necessary if all else fails (Telegraph)
• Even $21 Billion Won't Get You a Greek Island Amid Red Tape (Bloomberg)
• Goldman director's wild parties riles co-op board (NYPost)

• Asian currency tensions bubble as dollar falls.
• Asian shares rise on QE expectations; Yen hits 15-year high against dollar.
• China fends off pressure on Yuan, keeps gradual gain.
• Euro above $1.40 mark again after poor jobs data.
• Freeze on foreclosures could undermine recovery in housing market.
• Global finance chiefs fail to resolve exchange-rate spat as G-20 splinters.
• IMF can give Greece more time to repay loan if needed, Strauss-Kahn says.

Recent rumors of a hike in the Chinese deposit reserve ratio, were finally proven true, after earlier today China suddenly, and unexpectedly, hiked the deposit reserve ratio by 0.5% for 6 big banks for two months, to a level of 17.5%. As this is a modest liquidity-withdrawal move, it is a substitute to an overall rate hike which has also been rumored to be in the works. Of course, with the US about to embark on a "rate-lowering" equivalent move via more QE 2, it would be silly to believe China would actually follow through with this at this point, and put itself at a disadvantage. As such this modest stop gap overheating-prevention move makes sense. Whether it will be a catalyst to reverse the recent move higher in domestic Chinese stock market remains to be seen.

Although the Federal Reserve and therefore the fixed-income markets are closed for Columbus Day, we have the two Vice Chairmen, of the FOMC and the Board of Governors, both speaking today…

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 11/10/10