Archive - May 10, 2011 - Story

It has been a while since we refreshed the relentless insider selling rush. So it was good to see there were no surprises in the latest Bloomberg reported S&P 500 insider selling and buying. In the week ended May 6, there was $1.2 million worth of purchases, primarily in PBCT and NDAQ (some insider seems to think there is a possible upside catalyst here, ahem NYSE-deal), with a total of 10 insider purchases in the week. This was offset with a meager 165 insider sales, totalling $650 million, for a selling-to-buying ratio of 565x. The biggest selling occurred in GOOG, Praxair, Waters Corp, Campbell and Equity Residential. And while there are those who claim it is perfectly normal for insiders to cash out promptly without regard for the message sent to other shareholders, even Barrons' noticed the massive spike in selling in recent weeks, noting that any selling to buying ratio over 20 is bearish based on its limited universe of stocks. So, what about 565?

This one is just too good to pass by: the latest critic of US monetary, and budget policy, is none other than... Iran. From PressTV: "Iran's President Mahmoud Ahmadinejad strongly criticizes US economic policies, saying that the paper currency created by the American government is taking a heavy toll on the global economy." In an address to the fourth UN Conference on the Least Developed Countries in Istanbul, Turkey, on Monday, Ahmadinejad said that the cash injected into the global economy in the form valueless US dollars amount to over USD 32 trillion, IRNA reported. “This is while the US budget deficit for the 2011 fiscal year is expected to reach a figure above USD 1.6 trillion,” he added. Who would have thought The Onion reality of our centrally planned times would get to a point where Iran speaks more truth than our own politicians...

A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.

Market Recaps to help improve your Trading and Global knowledge

In a normal world, last night's surge in China's trade surplus would mean that, in a "normal" world, someone should be importing more (normal vs centrally planned - the two are not very comparable, just ask the USSR). So, assuming someone among the centrally planned proletariat actually took math 101! (the factorial sign is there due to fractional reserve mathematics, so according to a Keynesian this is really 9.3326215444×10157), does this mean that tomorrow US import data will surge, which by implication, will result in another steep cut to Q2 GDP? Well, logic would say yes, although the headline scanners on TV and in NYSE collocation boxes would beg to differ. Oddly enough, Citi also says yes. Below is Stephen Englander's note explaining why "US trade is at risk of an import surge."

And crude jumps to pre-margin hike levels. But please don't be too hard on the CME Herr President (in keeping with the whole "Weimar" theme). After all, it took them 5 consecutive tries to kill silver. We expect at least the same number before we get crude back to a price where China can wave it all in for pennies on the dollar.

Last week it was Ireland, where bond margins rose to over half, or 55%. Now it is Portugal's turn, where following the glowing success of silver speculative destruction (and crude, not so much), LCH.Clearnet has now hiked bond margins from 35% to 45%. Soon everything in the world will trade cash only... except for stocks of course. Stock margin debt is close to an all time high. But nobody is bothered by that particular speculative element. Ever.

Forgotten all about the civil war in Libya, and NATO's so far rather disastrous air, and at times naval, superiority campaign which has merely managed to get the rebels out of provisions faster than expected? Luckily, courtesy of the Pentagon Channel, NATO will provide an update on the Libyan situation in several minutes, to coincide with the end of today's $5-7 (more like $7 judging by the stock action) billion POMO. Perhaps NATO can provide some information on yesterday's crude moving rumor that it has started Naval bombardment of Libya, and also when it will finally send in the troops.

With so much of the attention once again focused on Europe's periphery (which somehow the efficient market could not be bothered with for about 4 months, even though it was all there, staring people in the face all along), it may be time to recall the Europe's core is just as troubled as everything else. Some may recall that back on December 14, S&P came out with a bit of a stunner (which in retrospect looks rather tame following the now forgotten warning on the US Debt): "And so European contagion is back as S&P, now clearly with a mandate
to remind that Europe is in a heap of trouble every month or so, puts Belgium on Outlook negative, saying that it is basically just a matter of time before the country loses its AA+ rating. The bogey: 6 months, which likely means that around May of next year, just like a year prior, we will see the same fireworks out of Europe, only this time not from Greece, but from the very heart of what is left of a solvent continent. "If Belgium fails to form a government soon, a downgrade could occur, potentially within six months.  Should a government be formed but is, in our opinion, ineffective in its fiscal stance or devolution, we are likely to consider rating action within two years." Well, it is now 6 months later, and Belgium still has no government. Time to pull the switch?

The $6.5 trillion lost in the bursting of the housing bubble is not a "paper loss," it is tragically real. Is anyone surprised that housing continues to slide? According to this report, Home Market Takes a Tumble: Turnaround More Distant After 3% Drop, Steepest Quarterly Decline Since 2008, housing has declined in value for 57 straight months, almost 5 years. Since the housing bubble topped in most areas in 2006, and it's now 2011, that makes sense: 2006 + 5 = 2011. American homeowners have lost $6.5 trillion in equity in those 57 months.

SocGen provides a very informative chart on the dramatic dislocation between the EURUSD and PIIGS risk levels, as demonstrated by Greek CDS prices. Whereas in the past the two correlated very strongly, since early 2011, the pair has diverged dramatically, leading many to speculate that just like in the case of Japan, the G-7 did another coordinate intervention to push the EUR higher in 2011 at the expense of the USD and other currencies. Is it time for a "correlated" snapback? SocGen muses: "After reaching a 17-month historical high of 1.4940 last Wednesday, the EUR/USD fell towards 1.4250. The risk of a further drop cannot be excluded short term given today’s climate, even though the 1.4250 support zone appears solid (50-day moving average) and breaking through this level would open the door to a rate of 1.4000."

And once again inflation refuses to accept it is transitory. April Import Price Index was reported up 2.2%, following a revised 2.6% increase in March (previously +2.7%). Notably, the core of the action was in petroleum and food prices. From the release: "Foods, feeds, and beverages prices advanced 1.8 percent in April after a 4.2 percent rise in March. The April increase was driven by a 22.8 percent jump in coffee prices....The price index for nonfuel industrial supplies and materials rose 1.7 percent in April following a 2.0 percent rise the previous month. Both increases were led by higher chemical and unfinished metals prices, which increased 2.4 percent and 1.7 percent, respectively, in April. The rise in chemical prices was driven by a 6.6 percent advance in plastics prices, and the largest contributors to the rise in unfinished metals prices were prices for gold and other precious metals." In a nutshell, the 12-month advance in April was the largest year-over-year increase since an 11.2 percent gain between April 2009 and April 2010.

Zero Sum trading (in which the banks make money and taxpayers lose it) continues: following previous reports of trading perfection at both D-grade trading "powerhouse" Bank of Countrywide Lynch, and FRBNY-lite JP Morgan, Goldman craps the bad by being the only big bank so far to post a trading loss day in Q1 (even if it was for $0-25 million). This is unacceptable. As a result SLP latencies will be cut from 0 nanoseconds to -10, as Goldman will proceed to a Tachyon based trading infrastructure. In beta tests, such "frontrunning to the future" trading has already posted solid results: in addition to the humiliating trading day loss, GS had 32 days with profits of ">$100 million." And it still failed to impress... Now that HFT "girl around the block" Citi is no longer there for the taking by anyone with a growing liquidity rebate itch, this number will plunge.

Goldman on Greece: "We do not see a ‘haircut’ as a viable solution, particularly at this juncture, for a number of reasons: 1. The risk of potential financial ramifications (‘domino effects’) seem too large; 2. the level of debt that is sustainable will be guesswork until growth has stabilized and a primary surplus achieved; 3. the incentives for pursuing adjustment (in Greece and elsewhere) may wane if the debt stock is aggressively reduced; 4. finally, private-sector funding is unlikely to flow back at sustainable levels any earlier than under the current approach of conditional financial support....We still do not expect to see sovereign liability management exercises in Ireland and Portugal. Bonds in these two sovereigns will, however, likely remain subject to higher volatility, reflecting decisions taken on Greece in coming weeks, in addition to local events (e.g., the Portuguese elections, approval of the support package, etc.)."

• Eurozone gesteht Athen weitere Milliarden zu (Handelsblatt) always remember: German is the official language of the Weimar Republic
• Japan's Prime Minister to give up salary until nuclear crisis over (CNN), while Tim Geithner will give up nothing until debt ceiling crisis solved
• Mississippi crests in Memphis at nearly 48 feet (AP)
• New Greek Deal Possible by June (WSJ)
• Merkel Says No Aid Decisions Until Greek Assessment Reports (Bloomberg)
• Japan Unlikely to Get In Yen's Way (WSJ)
• Pressure Put on Pakistan Army (FT)
• Trouble in Syria Sets off Alarm in Tehran (FT)
• Military Draws Up Afghan Exit Plan (WSJ)