Archive - Sep 2010 - Story

Presenting the chart of AAPL: the stock, which has surged from $240 to $292 in less than a month, has done so without violating the 2std dev upward channel once! In other words, nobody but programs which are designed to trade within the traditional technical upward channel of +/- 2 Std Devs are doing the trading in AAPL. And now that your confidence in a rational, non-binary market has returned, please buy, buy, buy. And pray none of these machines has a short circuit, and/or nobody decides to use the Stuxnet virus on the NYSE.

A hilarious little detour that will likely get no press attention and will be promptly covered up with another taxpayer sponsored settlement. Apparently the Norway Wealth Fund has decided to sue Citi "over alleged misstatements about the company's financial condition, which it claims caused it to buy Citi shares at inflated prices." The purchases resulted in over $835 million of losses in Citi stocks, bonds and preferred. And the cherry on top is that this is coming from the same fiduciarily irresponsible people who are now buying up Greek debt on the assumption that on a Yield to Infinity it is all "money good." Has the collective IQ of investors in the world over the past 30 years just correlated inversely with the amount of cheap (and now free) liquidity out there? Just how dumb do you have to be before you realize that everything is rigged?

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 24/09/10

The Fed just completed today's POMO. The result: $3.9 billion in debt monetized, and swiftly used by the PDs to force the Ponzi ramp to new ludicrous heights. This brings the weekly high beta stock liquidity injection courtesy of Brian Sack to just under $12 billion. After all gotta get the sheeple in: otherwise what greater fool will the HFTs and insiders sell their holdings at ever higher cost bases to? Also, the Fed is just oh so generous: the submitted to accepted ratio was the lowest during the entire QE Lite episode so far. Even banks are not all that confident they can convert the "sure money" from USTs into risk free return in a 1,000,000 PE Amazon, of course assuming the Kindle expert does not begin selling crack cocaine on its website (at margins that may for once be positive).

Last night the New York Federal Reserve reported its custody account holdings of agencies (red line, bottom panel) dropped $45.972 billion, or -5.8%, in the week ending Wednesday, September 22. Both measures are a weekly record decline. At the same time, custody holdings of Treasuries (blue line, top panel) increased by $49.657 billion, or 2.06%. This is a nominal record and the largest percentage increase in two years (since Oct 8, 2008). We have heard/read no explanation or color about this decline. So we cannot say whether this massive shift out of agencies and into Treasuries means foreigners are “running scared” from agencies or if this is simply some kind of technical adjustment.

Right on schedule, the Fed will put in about $3-4 billion in new indirect Amazon purchase orders via the 18 primary dealers. Vacuum tubes everywhere rejoice. Results at 11:00 unless SkyNet has not taken over the internet by then.

The USDCHD just printed at 0.9780, the lowest ever in history. The dollar obliteration, and the rush to safety away from the psychopaths of the Federal Reserve continues. Surely the destruction that the Fed is reaping everywhere will get investors to regain their confidence in what is now nothing more than a battlefield where the central bankers of the world can conduct their own little pissing contest while the HFT algos watch in awe and buy shit.

New home sales print at 288,000, missing expectations of 295,000, and coming at the third lowest number in history. The previous read of 276K was revised to 288K. New home inventory is now at 8.6 month supply. Add the roughly 12 months in supply at existing home sales in inventory and you can easily see why the stock market is up almost 2.0%. The median home price of $204,700 is now the lowest since December 2003.

Earlier today David Tepper confirmed that virtually everyone is now hypnotized by the biggest fallacy in the history of capital markets: that stocks determine the economy, and not vice versa. Incidentally, this is precisely what the Fed banks on, as confirmed previously by Alan Greenspan, who said on TV that the Fed is far more interested in keeping the stock market artificially high than actually caring about its mandate of keeping unemployment and inflation low. Of course, Tepper couldn't resist but talk his book, and providing the most childish and discredited validation for his bullishness: the Fed will do QE in perpetuity. "Either the economy is going to get better by itself in the next three months...What assets are going to do well? Stocks are going to do well, bonds won't do so well, gold won't do as well. Or the economy is not going to pick up in the next three months and the Fed is going to come in with QE. Then what's going to do well? Everything, in the near term though not bonds...So let's see what I got—I got two different situations: One, the economy gets better by itself, stocks are better, bonds are worse, gold is probably worse. The other situation is the fed comes in with money." We are too lazy to do it, because we have done it about one hundred times in the past, but we suggest Mr. Tepper pull up a chart of the Nikkei and superimpose on it all the times Japan launched ever more impotent episodes of QE and FX intervention. How did that work out? Yes, you can devalue currencies infinitely via QE, but that only destroys the real value of assets. And as we pointed out after the latest FOMC meeting, we are now in a new regime, where gold benefits more than stocks on further currency devaluation. Period.

It is always fun to read Mort Zuckerman's post-"dark side" conversion rants. Especially since they tend to be very much spot on. His latest focuses on the nightmare of US homeownership, which incidentally is the last thing that prevents the all out collapse of the US economy. Should the dwindling mass of homeowners (sometimes referred to in endangered species textbooks as the "middilus classius") realize that just like stocks, owning a home is very much an overrated premise, that could well be reset push this country so desperately needs.

The only thing that matters today is the ongoing drubbing of the USD, which has just surged to 1.345 to the Euro, even as the Yen meanders this morning but continues to gradually push higher post overnight lows. Expect angry statements from the ECB, and promises to do more of the same failed thing. In the meantime, the middle class' purchasing power was once crushed. The Fed's transfer of wealth from savers to debtors continues. Which is the only thing that matters to stock.

August Durable Goods come all over the place - total number is a major miss to expectations, but stripping away transportation and aircraft, these beat. As expected, the market will cherry pick what it likes and surges on the news.

• US Durable Goods Orders (Aug) M/M -1.3% vs. Exp. -0.1% (Prev. 0.3%, Rev. to 0.7)
• ( Update 1 , 08:32)
• Durable ex. Transportation (Aug) M/M 2.0% vs. Exp. 1.0% (Prev. -3.8%, Rev. to -2.8)
• Non-def Cap ex. Aircraft (Aug) M/M 4.1% Exp. 3.0% (Prev. -7.2%, Rev. to -5.3)

Perhaps someone should point out to Boeing and all US defense companies that Nondefense aircraft and parts shipments and new orders plunge by -13.5% and -40.2% in August.

• CNBC's new pet blog is off to an unsurprising start: not only does it steal Zero Hedge stories without attribution, but apparently it discovered the entire correlation story - (NetNet). As a reference, Jeff, here are Zero Hedge's nodes on implied correlation going back into 2009, and here is our Nicholas Colas post. But yes, we also were very shocked someone out there read this to begin with. So keep stealing guys, nobody will catch it.
• Two quotes of the day: "Irish debt agency CEO not worried about daily swings in bond spreads" and "Irish Finance Minister says concerned by yields in recent debt sales "
• China Will Focus On Peaceful Development: Wen (China Daily)
• China Takes Lead In Financial Deals (FT)
• Spat Tests Japan's New Government." (WSJ)
• Eurozone Crackdown On Public Finances (FT)
• Spain Under Pressure to Show `Hair Shirt' Budget as Yields Rise (Bloomberg)

At least one asset class is very much happy from the BOJ's latest FX intervention failure (see chart below): gold. Spot is pennies away from $1,300 and will pass it within hours if not minutes. To all those who still fail to see why the world is forcing a return to that barbaric relic - the gold standard - our condolences: keep shorting. To everyone else, to whom the fiat devaluation story presented on Zero Hedge almost 40% gold percent ago, is now as obvious as to those trading the JPY, well... 40%. Nuf said.

• Asian stocks fall for third day on global economic concern.
• Bank of Japan mum on intervention talk after yen's sudden drop against dollar.
• China's control of a key minerals market has US military thinkers, policy makers worried.
• Democrats abandoned plans to vote before Election Day on extending Bush-era tax cuts.
• Euro weaker at $1.3317; dollar up to 84.72 versus yen.
• German business confidence improves modestly in September; highest since June 2007.
• Oil floats near $75 in Asia; mixed US economic data suggest weak crude demand.