Archive - Jul 2010 - Story

Just to confirm the earlier post about the uselessness of sellside research, here is the latest overview of global themes and risks (risks? what risks?) from Goldman's former head of something something and the world's biggest permacow. As usual, ignore the conclusions, and focus on the primary data and the charts, which provide useful methods to attain independent conclusions. Slides 43 onward are among the more insightful.

The Guardian reports that the prominent Greek reporter and blogger Socratis Giolas was allegedly murdered by the Sect of Revolutionaries terror group, after being shot 16 times in front of his pregnant wife. "The 37-year-old radio chief is the first journalist to be killed in the country since newspaper publisher Nikos Monferatos was gunned down by the infamous 17 November terror group in 1985. Giolas, who was also a frequent blogger, posting reports on popular online newsblog Troktiko, sought to illuminate Greece's seamier underside. The shooting came days before he was due to release an investigative series on corruption, colleagues said." It is always unfortunate when the investigative media loses inquisitive and intelligent minds, either outright violently (Giolas) or otherwise (Mark Pittman). Yet for every voice silenced, ten new ones appear. And even recent attempts in the US for a wholesale quieting of wide swath of the blogosphere will likely succeed in nothing more than merely roiling the hornets' nest of discontent. Luckily, no violent interventions have occurred in America (to date) - with the establishment fully aware it can simply throw a few dollars bills at and "capture" the better journalists out there, in exchange for 30 pieces of silver and "guaranteed" book sales, there is no need for bloodied hands. However, if this lack of inquiry results in merely more and more dirt being buried under the surface, when someone finally does hit the paydirt, the unfortunate events from Greece may be transplanted to a newsroom much closer to home.

In his traditionally curt and to the point way, Hugh Hendry proclaims his "love" for the president, in this rare profile piece on the Scottish fund manager by the NYT. While none of his opinions will come as a surprise to Zero Hedge regulars ("The euro? It’s finished, Mr. Hendry proclaims.  China? Headed for a fall."), we do recommend the article to those still unfamiliar with one of the truly iconoclastic fund manager still left in the open. While Hendry does not run a fund nearly as large as some behemoths out there (his Ecletica is less than $1 billion, John Paulson is $30), it does afford him a nimbleness that JP (whose recent rumored liquidations in the gold market are destined to create feedback loops that further accelerate liquidations) or, much more blatantly, Pimco (with its $1 trillion + in Treasuries, Corporates, Sovereigns and Mortgages) which is the market in all its verticals, can only dream about. It also affords him the opportunity to say what is on his mind, and on those of many others, who however dread the political consequences for being a little too honest. It is this forthrightness and honesty that has reserved Hendry a sterling place within the Zero Hedge community, his candor regularly scoring posts receiving well over 20k reads (and at 60k hits, his "I recommend you panic" is among the Top 20 most popular Zero Hedge posts of all time.

In what will come as a surprise to precisely nobody, a new study by McKinsey has confirmed that sellside analysts were "typically overoptimistic, slow to revise their forecasts to reflect new economic conditions, and prone to making increasingly inaccurate forecasts when economic growth declined." In other words, as V.I. Ulyanov may wall have said, useless idiots, had he lived in a time when Tesla was being pitched to him at a N/M PE multiple. One only needs to recall AJ Cohen's bold (and slightly more than idiotic) 2007 prediction for an S&P at 1,675 (dot 11235813*) in 2008, when the market closed at least than half that number, to see just how utterly worthless these people and their garbage predictions truly are. Yet day after day they serve as content filler inbetween ads on CNBC, as they sucker whatever remaining viewers the propaganda organization has left into one failed investment idea after another.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 19/07/10

There. Is. No. Double. Dip.

And with the weakness in macro finally spilling over into micro, and especially in the formerly indomitable tech space (now the TXN plunge keeping IBM company) please repeat this mantra a few hundred thousand more times each day, to use up all available brain cycles, and to prevent any independent thought as well as the realization of just how broken things truly are.

Save for Intel, the Q2 earnings seasons is not going as well as the bulls had hoped for.

A most welcome summer gift by Jeremy Grantham, who discusses:

1 Portfolio Outlook and Recommendations
2 Finance Goes Rogue (But Volcker Wins a Round!)
3 The Fearful, Speculative Market
4 Everything You Need to Know About Global Warming in 5 Minutes
5 “Seven Lean Years” Revisited
6 Aging Populations, Pensions, and Health Costs

Update: Stock right back up to pre drop levels, as BP says scientists conclude seepage naturally occurring, not related to Macondo well... The market seems to be buying it - after all it appears all the scientists have Ph.D.'s

A White House spokesman says BP's ruptured oil well is leaking at the top, along with seepage about two miles away.

Robert Gibbs also says officials are monitoring bubbles that can be seen on an underwater camera.

Leaks could mean the cap on the well has to be opened to prevent oil and gas from escaping elsewhere.

The mechanical cap on the well stopped the flow of oil into the Gulf of Mexico on Thursday.

In an odd development, today bond traders have been fielding calls to express an interest in a $50 million bond BWIC. Two observations: traditionally any recent BWICs percolating have usually involved loans, and typically in the form of much larger baskets. This one, however, is all bonds, consists of 17 names, the largest of which are UPS, DIAG, TGT, HARVRD and PEP, and even more interesting is that this is for the most part 2030 and longer-maturing paper. It appears some fund has decided to unwind a big portion of its duration exposure. Granted, the bonds are mostly IG, with the biggest coupon at 7.9%, but nonetheless, the fact that $50 million in HY can not be placed in the traditional bond pipeline speaks volumes about the lack of liquidity in the bond market, especially for longer-dated, and thus inflation sensitive paper. As for stocks, it is very obvious that any liquidity in equities has long gone, as stocks undergo 0.5% rallies in the span of seconds, on no news, just momentum-driven HFT block order frontrunning.

Two weeks ago John Hussman appeared on CNBC in a segment in which he had the (dis)pleasure of deconstructing Michael Darda's permabullish argument, which has been virtually unchanged and cosmetically rehashed ever since Darda went John Holmes in 2007 at the very peak of the market (Hussman also sparred against James Altucher, but that was pure torture under any iteration of the Geneva Convention or the Basel Treaty, and we will spare our readers the result - masochists can see the clip here). 30% lower and nothing has changed. Which is why in his daily letter, Hussman has some much needed qualifiers to debunk the Darda argument which is as wrong now as it has always been. Tangentially, Hussman has a question for Darda: "just before the market plunged by more than half, [Darda] asserted "the fundamental underpinnings of stocks are superb." He later appeared on CNBC in January 2008 sporting a beard, asserting that all of the recession talk was overblown, and telling a reporter at TheStreet that he would not shave the beard "until the recession talk ends or housing recovers, whichever comes first." As of a couple of weeks ago, he had no beard, which was perplexing." Hopefully Larry Kudlow can ask this question of Darda (and AJ Cohen) next time he has his favorite permabullish cheerleader brigade on deck. The full clip of Hussman's unfortunate encounter with a very clean shaven, and oddly smug, Darda can be seen here.

We have been observing the recent collapse of the ECRI index in all its glory over the past several months. As we have discussed previously, this is one of David Rosenberg's preferred leading indicators. Below we present some of his summary observations on the four distinct cycle in the ECRI index, with an emphasis on the current one, which as Rosie highlights is Phase IV - Recession (Zero to Trough), in which the S&P drops by 6.4%, and the worst performing assets are consumer discretionary, industrials and tech, contrary to what has been performing the best over the past six months. Time for some sector rotation.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 19/07/10

The bank that has been bailed out a hundred times before is, shockingly, rumored by Bloomberg to not pass the stress test. In other news, all Greek banks are doing swell for now.

Once again deep value investors vie for the claim they are not only consummate relative value stock pickers (in a time when implied correlation is at all time highs, making relative value as dead a concept as the dodo), but underwater geologists too. At least that was the case until last night, when it was uncovered that (at least one more) seepage near the BP well site may be leaking oil, methane and who knows what else uncontrollably, potentially confirming the running thesis proferred by Matt Simmons that leaks are prevalent and not localized to just the Macondo well. Reuters follows up: "Investors fretted about possible seepage from BP's capped Gulf of Mexico well on Monday and speculation grew about assets the company may sell to pay multibillion dollar costs for its oil spill. A BP spokesman said the seep was detected by its engineers but it was unclear whether the source was the blown-out well, adding that seeps were a natural phenomenon in the Gulf." The stock has sold off appropriately, now that BP trades as a "distressed catalyst" story, with any given day seeing the shares going up or down by double digit percentage. How this stock is still pitched as a relative value play is mindboggling, when one adverse piece of news could send it materially lower.