Archive - Feb 2011 - Story

No, snow was not blamed in this latest, and certainly not last, broke state snafu. But wait until you read the official excuse...

I’ve finally had the time to thoroughly study Bernanke’s entire Press Club speech, his appearance before Representative Paul Ryan’s House Budget Committee and bulk of the recently released 2005 FOMC minutes. The conclusion I have drawn from all this data is that the captain of our economy, Ben Bernanke, is either an economic imbecile or a financial terrorist. Through evil intent, or sheer stupidity, the outcome remains unchanged. The bottom-line: He has hijacked our economy flight and changed our destination. Bernanke is about to crash Flight 666 and all 308 million of us sitting helplessly in the passenger cabin into Zimbabwe’s airport known as Hell’s Hyperinflation Field.

This one caught us by surprise. Today, Deutsche Bank announced it was suspending new issuance in the PowerShares Agriculture Double Long ETF, the DAG. What is odd, is that unlike last week's announcement by Barclays that it would start unwinding its triple inverse S&P ETF (BXDD), which has logically been plunging as the market levitates ever higher on ever lower volume, the DAG has done exactly the opposite. In fact, as the chart below shows, the DAG is trading close to its 52 week high, having tripled from the 52 week low in July (yet still $12 away from its all time high reached in 2008). Therefore, this is not a performance issue, which needs a reverse stock split to be resolved, and likely indicates some deeper issues with creation of shares in what is rapidly becoming the hottest asset space.

When we pointed out our volume chart earlier, which indicated that volume is now a laughable joke, we received one of the traditionally amusing responses, "ZH misses the point on volume because they data mine and only compare it to the volume during the crisis. SPY volume is STILL higher today than it was pre-2007. So are we to believe that the crisis volume levels are the "real" levels for volume? If you compare back to pre-crisis, volume is actually still pretty high." Here is our response.

David Tepper's Appaloosa has released its Q4 holdings. During the quarter the famously bullish investor made some major additions to his portfolio, the most notable of which is the increase in his Citi position from 51.3 million shares to 117.5 million: a 66.2 million increase, which brings the total to $555 million as of December 31. In other words, Appaloosa's bigest position is now the same as that of John Paulson. And that's just the start of Tepper's incursion into financials: the Chatham, NJ fund also increased its holdings in Wells Fargo Perpetual Preferred Convertible stocks from 292,019 to 335,482 shares, bringing the total holding to $336 million, closely followed by the last of the TBTF trinity: Bank of America, which saw an addition of 2.6 million shares to bring the total to 334 million shares. Total equity AUM increased by $1.5 billion between Q3 and Q4 as much cash was deployed to purchase mostly financial stocks. Other notable additions were Hewlett Packard, Wells Fargo common, Microsoft, and pretty much all of the top 25 positions. New positions were initiatied in Micron, Dean Foods and United Continental Holdings. In fact the only decline among the top 25 was in Fifth Third Bancorp, which saw an 825,500 share drop in Q4. It seems that the biggest hedge funds are now the holders of pretty much the same stocks: hopefully, just as has been the case over the past 6 months, nobody will ever have to sell, as there is nobody left who is not on the same side of the reflation trade.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 14/02/11

Fedex plunged after hours only to retrace almost all of the drop, after investors were assuaged that the reason for the company's guidance cut was snow (in December, yes unbelievable), and plunging margins (this is one-time: just recall Goldman's most recent lies on the topic). In other words, while QE3, 4 and 5 is now the norm (i.e., perfectly recurring), such things as snow, and plunging profits, are transient. After all, it is only a matter of time before the Vissarionovich Jr. finds a way to subsidize his pet Russell 2000.

"The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law." Judge Robert Grossman

There was a time when news, especially very bad news, moved stocks. The last time that occurred was in the middle of 2009, before most robots had any idea just how massive the chairsatan's schizoid break with reality was. Now, that the appropriate sociopathology is fully priced in, bad news tends to have an even more profound upside impact on stocks than good news, as it guarantees that the Zimbabwe stock market will be upon us far sooner than if the economy were to have to go through another inter-QE episode. Which is why the just released news out of US Bankruptcy Judge Robert Grossman of Central Islip, New York, that MERS lacks rights to transfer mortgages will likely send the entire S&P circuit breaker up.

Today, in what is supposed to be an original piece, the NYT suddenly discovered that the stock market is no longer relevant.... it is probably our turn to say thanks - to think of all the jeers we got when we said that nobody really cares about stocks any more back in the spring of 2010, and in the summer... and in the fall... and winter... not to mention every single other time when we demonstrate that volume in stocks is now below abysmal. But just to validate with one charts what it takes some bloggers several pages of extended narrative to convey, here is today's ES volume chart. 884k shares traded, on 1.387MM average. This is nearly 40% below average. Perhaps it is time for some more essays about just how worthless and how irrelevant the stock market is, now that only a few machines trade it. After all, the NYT sure can do with the page views... And yes, some people are rotating their decimated muni holdings into stocks. The Golden Age for the ponzi scheme is back!

Today's dose of late afternoon S&P deux ex machina comes from the Fed Advisory Council, presumable a council populated by bankers, which basically gives a reprieve to the credit card companies.

• FED DURBIN RULES DRAW `BROAD AND DEEP OPPOSITION' FROM BANKS
• FED RULES 'EXTREMELY DAMAGING' TO CONSUMERS, BANKS, CARD FIRMS
• FED ADVISORY COUNCIL SAYS REGULATOR SHOULD WITHDRAW PROPOSAL

Mistakes are not be made as billions more are stolen from the populace.

Now that the $25 million AUM Egypt ETF is expected to be indicative of the entire Egyptian stock market, and which will likely be claimed to be correct even if its underlying securities never manage to trade up to parity, when and if it reopens, there is little that can surprise us anymore. With that in mind, we would like to present the MUB ETF, whose recent surge has left it trading at a premium to NAV that has not been seen since just before the March 2009 666 lows. As the chart below shows, the last time the MUB was trading at 100.79, it did so at a record discount to NAV. Now - about three months later, it is the inverse, as the municipal tracker has now inverted and is trading at a multi-year premium. This begs the question: does underlying value chase the synthetic price? And if so, does it mean that it is time for a compression trade in which the MCDX is sold coupled with selling of the MUB in anticipation of a return to parity spread. That would be the case in a normal world. In this one, in which the WTI-Brent spread just hit another fresh all time wide, who knows...

"Mark", a member of the ever growing cadre of disillusioned, disenchanted and disgruntled millions of American unemployed, has written a letter shared by A Company of One, in which he explains the plight of 99'ers (those whose extended unemployment benefits are set to expire) in which he chronicles his plight and his terminal disappointment with the American system. One can only imagine how all the "99'ers" would feel if they did not have the benefit of living at least partially subsidized for 2 years in the socialist state of America. If Bahrain is any indication, where the government's attempt to purchase the love of its people just failed today, pretty soon not even the 99 weeks of EUCs will do much to suppress what is an unmistakably rising anger among the broad US population. "This new America is alien to me -- it is an America of greed and corruption and avarice and mean spirited selfishness and hatred of the common good -- it is an America of savage beasts roaring and tearing at the weak, and bullying the humble and peacemakers and poor and those without means to defend themselves. I am not welcome here anymore. I don't belong here anymore. It's as if some evil beast controls government, the economy, and our lives now."

Blink and you will miss the latest revolution. Algeria riots yesterday, Bahrain earlier today, and Iran now. Per AP: "Clashes between Iranian police and tens of thousands of protesters wrecked central Tehran on Monday as security forces beat and fired tear gas at opposition supporters hoping to evoke Egypt's recent popular uprising. The opposition called for a demonstration Monday in solidarity with Egypt's popular revolt that a few days earlier forced the president there to resign after nearly 30 years in office. The rally is the first major show of strength for Iran's cowed opposition in more than a year. Police used tear gas against the protesters in central Tehran's Enghelab, or Revolution, square and in Imam Hossein square, as well as in other nearby main streets. Demonstrators responded by setting garbage cans on fire to protect themselves from the stinging white clouds." And a quick refresher in Geopolitics 101: Iran has lots of oil...and, supposedly, nukes (assuming Norton anti-virus has a Stuxnet patch).

The comedy value of the various interpretations of this chart is simply priceless. We leave it up to our readers to share their views on why Tungsten has almost doubled in the past year, and what that means for the cost-benefit analysis for central banks in substituting "one metal" with "another"...