Archive - Jan 2011 - Story

One of the best quarterly observations on asset classes, the Global Tactical Asset Allocation focusing on equities, has been released. This report is a must read for those few who still trade stocks. From the report: "We struggle to find any elements in our analysis pointing toward a continuing unabated 2-6 weeks advance. We are in one of this rare configuration where betting against such an occurrence is an almost (we repeat... almost) certainty. We expect a correction below 1180 on the S&P 500 in the next 20 trading days and would position accordingly. Our cyclical models are still positive so we have to assume that we will see new highs later this year. Note that the failure on the number of new highs to confirms the current highs, the high yield bond markets divergence and some other elements make this assumption less strong that it was last summer. One should be mentally ready to sell the long position which will be acquired when certain "oversold" thresholds are reached with a loss if a rebound fails to materialize and the cyclical models move to a sell signal. We would underweight emerging markets (and are strongly advising to exit the long position in our preferred market since the end of 2008, Indonesia), Europe and small caps. We would overweight Japan (but hedge the currency risk) and the US."

• Home price drops exceed Great Depression (Reuters)
• The Fed Oracle Speaks: Fed Officials Signal Intent to Back Bond Buys (Jon Hilsenrath)
• Sanders Says Bernanke Ducks Request for Details on Fed Loans (Bloomberg)
• Clarium Slumps 90% From Peak After Thiel Hedge Fund Has Third Losing Year (Bloomberg)
• EU Weighs Boosting Bailout Fund (WSJ)
• Lisbon Succeeds with Debt Auction (FT)
• Credit Suisse Plans Market for Long-Term Investors (BusinessWeek)
• UK Insurers Attacks Europe’s Bank ‘Bail-In’ Plans (FT)
• World's ATMs Pump Billions Into Wrong Places (Bloomberg)
• Rethinking the Public-Pension Punching Bag (BusinessWeek)

The general market tone is more positive this AM as winter weather impacts the Northeast. Yesterday's NFIB Small Business Optimism and other economic data did not paint a commensurately rosy picture alongside the recent ISM prints. Today's big releases will be the Fed's Beige Book, which should provide a more granular level of data points on expansion, and the US Monthly Budget Statement.

Ever since his transition from a critical, respected and objective economist to the third coming of A Joseph Cohen, Goldman's Jan Hatzius has become an increasingly irrelevant second fiddle-cum-broken record, and as such his observations have merited less and less attention. His latest spin piece on why the centrally planned US economy will grow within the parameters of "perfection pricing" is merely more confirmation of this sad transition. To wit: "2012 is still a long way off, and the uncertainty surrounding any forecast is large.  But if we are right, the implications of this forecast are reasonably benign for the US Treasury market and very benign for the equity market.  Indeed, our strategists expect only a moderate increase in 10-year Treasury note yields to 3¾% at the end of 2011 and 4¼% at the end of 2012, as well as an increase in the S&P 500 index to 1500 by the end of 2011." In other words: the debt-fueled Frankenstein of a Goldilocks monster, currently rampaging around on government-funded steroids, is really completely under control. It appears that all the gloves have come off in this last attempt to reflate the global ponzi, and sadly credibility once relevant, is now completely out of the window.

The pace picks up, but only a bit, as we get import prices, the beige book, and the December budget balance following this morning’s mortgage applications report…New POMO schedule released today.

Legitimate humanitarians inspired by real compassion inevitably seek to help men become more responsible for themselves, not less. Compared to this mission, the Loughners of the world are only a distraction, a media game which does not need to be played. While it is important to safeguard against events like that which took place in Arizona, it is even more important to safeguard against the exploitation of these events by those who would do much greater harm. The wider view requires a respect for the enduring benefits of freedom, which eclipse our momentary lapses of human character. The Liberty Movement’s interest lay not just in the chaos of the present moment, but in the clarity of a possible future; one in which man’s individual sovereignty is valued, rather than feared.

The most expected yet anticlimactic bond auction for 2011 has come and gone: after getting the backstops of the ECB, China and most recently, Japan, Portugal managed to sell €1.25 billion in 4 and 10 year paper. And while the the yield on the 10 year was better than expected, and notably lower than the 7% where the point had been trading on the curve recently, the 4 year priced notably weaker compared to previous. Of course, none of this would have been possible had the ECB not been buying Portuguese bonds in the open market for two days this week, and continuing into Wednesday, into the biggest farce of a market currently operating in Europe.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 12/01/11

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 12/01/11

Today’s slow day in dataflow found matching silence in the markets, as traders look ahead to Portuguese and Spanish auction tomorrow and Thursday, respectively.

Any billionaire who continues borrowing slides from Zero Hedge, surely knows what he/she (although in this case most certainly he) is talking about (especially one that expects a double digit drop in equities in 2011). This goes double for any billionaire who actually has a James Bond fetish to impart to his investor presentation. Attached are 89 pages of shaken and stirred data, that you wouldn't really find at any other "institutional" asset manager.

This one was just too hilarious to pass by without presenting it. It was in fact hilarious enough that it could be presented a la carte without spoiling it by actually commenting...

When you're on the right side of a macro trend, supposedly random events inexplicably go right with improbably high probability. I can live with such blatant disregard of nice mathematical properties. What I cannot live with is the lack of understanding when the trade may end. There're many ways the gold trade may end, but valuation is not one of them (though valuation may cause temporary pull-backs once in awhile). As I said in the beginning, there's simply no rational basis for gold valuation in anything else. It is, quite simply, whatever value the market is willing to pay for.

After a few days ago we described in detail the facts behind the ACA lawsuit against Goldman, we were left scratching our heads how it could be that the SEC could ever possibly scuttle this criminal case which was obviously a slam dunk through  court, and which based on the disclosures presented by ACA, is a blatant violation case of 10(b)-5 securities fraud and underwriter representation. We asked: did the SEC hide a key piece of the case against Goldman to fast track a settlement process? We concluded that even the SEC's otherwise completely inexperienced legal team should have been able to get this case through the finished line without the need to settle. Two developments today may allow us to postpone the head scratching for at least a bit. According to the FT, the Senate permanent subcommittee on investigations is about to issue a report which "will press the SEC to reopen its investigation into the bank." And in a completely separate report, we learn from Bloomberg that the SEC's top enforcement official, Robert Khuzami, who settled the SEC case with Goldman, is now being probed for his role in Citi's abrupt settlement over the summer. According to Bloomberg disclosures in a letter that served to open the probe "Khuzami ordered his
staff to drop the claims after holding a “secret conversation,
without telling the staff, with a prominent defense lawyer who
is a good friend” of his and “who was counsel for the company,
not the individuals affected.” We hope readers are able to put two and two together, and ask: just why is Robert Khuzami, former General Counsel for Deutsche Bank, still pretending to represent investor interests, when he obviously has far more powerful (and rich) interests to answer to?

A summary of today's market action with an emphasis on equities, vol, currencies, rates and commodities, and an outlook of tomorrow's key events.