Archive - May 24, 2011 - Story

...And much more

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

Market Recaps to help improve your Trading and Global knowledge

It looks like the SAC investigation is about to go to the very top. As we reported over the weekend, Senator Chuck Grassley recently commenced an investigation into at least 20 trades, both stocks and options, at SAC Capital, that may implicate the billionaire with the zamboni in insider trading (despite a very spirited defense that Mr. Cohen is a true humanitarian at, heart having recently purchased none other than the NY Mets, evidence of his civic duty) and lead to an insider trading conviction that would make the Raj Raj affair pale in comparison. Of course, any investigation of SAC would draw many parallels to Madoff, where it would appear impossible that any potential insider trading over the years occurred without the regulator's knowledge. Hence, in a new letter to the SEC, the senator has made it clear that he is now investigating whether or not SEC pursued and/or resolved any of the numerous Finra referrals regarding SAC. Grassley is also seeking: "how the number of referrals over this timeframe compares to similarly situated firms, [and] whether a Wells Notice was ever drafted with regard to SAC Capital related to any of these referrals or related to any other matter (if so, please provide a copy of any Draft or Final Wells Notice)." We expect to discover the answer to the last question to be exactly zero. We also expect that various district attorneys will suddenly jump at the opportunity to earn a few political brownie points now that they smell some very nutritious blood in the water.

Well, if anyone was looking for the green light to invade Syria, here it is:

• UN SAYS SYRIA VIOLATED NUCLEAR AGREEMENTS
• SYRIA VIOLATED INTERNATIONAL AGREEMENTS, BUILT REACTOR

And in case there is any doubt who is next:

• UN NUCLEAR WATCHDOG EVALUATING NEW IRAN WEAPON DOCUMENTS

It's a good thing the UN found all those WMDs that were the pretext to establish Halliburton's oil extracting infrastructure in Iraq. Then again, history never repeats itself.

Israeli Prime Minister Benjamin Netanyahu is set to address congress in a widely expected speech, the key focus of which will be to diffuse the situation following the president's remarks from last week over what the appropriate borders for the Israeli state should and should not be. As Reuters reports: "When Israeli Prime Minister Benjamin Netanyahu addresses Congress on Tuesday, many will be watching to see whether he escalates a war of words with the White House over how to make peace in the Middle East. Netanyahu has a mostly sympathetic ear in Congress, where few lawmakers in either party speak up for the Palestinians, hewing to decades of close U.S.-Israeli ties. But the Israeli prime minister has had a rocky relationship with President Barack Obama, and last week said the president's vision of a Palestinian state based on the borders of 1967 could leave Israel "indefensible."" Watch the full thing below.

Presented without commentary.

And so Yandex, the Russian SixDegrees.com, has broken for trading at $35. After hitting an initial print of $40, the stock is already down substantially from the high and at last print was trading around $31.79. Absent GETCO stepping in and stabilizing the stock price, there may be far fewer "like" buttons hit on this particular iteration of Facebook. In the meantime, we continue to eagerly await the public launch of the Ukrainian www.adultfriendfinder.com.

Some interesting headlines just hit Reuters:

• UK GOVT COMMITTEE SAYS IT BRINGS ACTIVITIES OF LARGE DEALERS ON  LONDON METAL EXCHANGE TO ATTENTION OF OFFICE OF FAIR TRADING
• UK GOVT COMMITTEE SAYS 4 LARGE COMPANIES OWN LME-REGISTERED  WAREHOUSES, CALLS THAT “RESTRICTVE”
• UK COMMITTEE NAMES JPMORGAN <JPM.N>, OWNER OF WAREHOUSER HENRY  BATH, AS ONE OF THOSE 4 COMPANIES
• UK COMMITTEE SAYS WOULD BE CONCERNED IF OWNERSHIP OF WAREHOUSES  BY DOMINANT DEALER ON LME WAS ANTICOMPETITIVE
• LME SAYS MINOR METALS TRADE ASSOC. ASSERTION TO UK PARLIAMENT ON  METALS WAREHOUSING IS “UNJUSTIFIED AND COMPLETELY OUT OF CONTEXT

The latest and last regional index confirms that the economy is now not only slowing its rate of expansion, but is in fact contracting. The narrative is plain ugly: "The index of overall activity was pushed into negative territory by weak readings for shipments and new orders, while employment growth held steady. Other indicators suggested additional softness. District contacts reported that capacity utilization turned negative and backlogs fell further, while delivery times grew more slowly. In addition, manufacturers reported an uptick in finished goods inventory growth." But not all is bad: for example those predicting inflation are once again proven correct: "Distrcit manufacturers reported that raw material prices increased at an average annual rate of 6.12 percent in May - the highest reading since the inception of our surve in December 1993 - compared to April's reading of 4.81 percent." Fear not: it is "transitory." And 82% of experts say no QE3 is coming so....

As the Fed-engineered stock market rally rolls over, then perhaps the Mainstream Media sitting in the press box sucking corporate-sponsor provided beverages will awaken and look at the progress of the Fed's game: lots of corporate hits, but no runs, nobody on base and zero RBIs (runs batted in)--that is, no jobs created despite the trillions in treasure lavished in new credit. It feels like we're entering the eighth or ninth inning of the Fed's perversely destructive game, and all we need is an umpire to call "STEE-RIKE!" and end the doomed-from-the-start "extend and pretend" game the Status Quo has been playing since 2008.

It may be time for the CME to hike some coffee margins as prices for the legal drug are starting to get out of control. According to Dow Jones, Smucker has just increased its average coffee product price by 11% in its 4th price hike in just the past year. This, along with all other comparable deflationary developments (according to some) could not have been foreseen by anyone, and will lead to the Fed's Elizabeth Duke discussing next year how, very inexplicably, America's low and middle classes are forced to choose between espresso shots and toilet paper.

When it comes to austerity in Europe, it appears that no costs are too big or too small. That goes for sharing teleprompters as well. Compare and contrast the latest remarks by Barack O'Bama (or Obama, following the president's prompt departure out of Moneygall on seasonally unadjusted volcanic ash concens) and Enda Kenny...

And another pearl of wisdom from the Fed's uberthinkers, in this case Elizabeth Duke: "the recent increase in gasoline prices has affected consumer choices in housing and other purchases, big and small. Family incomes have not kept pace with rising costs and many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage. During the housing boom, when gas prices were much lower, potential homebuyers moved steadily farther away from employment centers in search of more affordable homes. This was referred to as the "drive till you qualify" method of home buying. Foreclosures remain high in these areas where the cost of driving to work has become so great." At least America's poor can still afford to buying deflating iPads... And after all didn't they said QE2 was a success for everyone? Or maybe the recent Philly Fed finding that lower and middle class families are actually suffering under the QE2 mandate, much in line with expectations of everyone who is not a Princeton economics professor or alumnus, are finally being validated. Oh well, this is nothing that a little QE3 can't fix. And some more thoughts from a Ph.D. in Captain Obviousness: "the collapse of housing prices and resulting worker immobility has changed consumers' appetite for homeownership. In Fannie Mae's 2010 Own-Rent Analysis, the percentage of respondents who said they were more likely to rent their next home than buy climbed from 30 percent in January to 33 percent in December of the same year." It's insight like that that explains why those Fed governors get paid the big Bernankebux.

Following the recent negative Chinese PMI print, the latest confirmation of the global economic slowdown/stagflation comes from Europe where Eurostat reported that EMI Industry Orders declined 1.8% in March, in line with expectations. This was the first M/M decline since September, although the Y/Y number was still a substantial +14.1%. Not surprisingly, previous months were revised lower: February revision: +0.5% m/m (+0.9%) January revision: +1.1% m/m (+1.2%). The momentum of previous months assured a 3.4%
average gain in 1Q. As Market News reports: "The drop in March was accentuated by falling demand for heavy transport equipment, which tends to be very volatile with a limited immediate impact on production. Excluding this category, orders fell 1.1% on the month and were 15.2% higher on the year. Intermediate goods orders increased 0.6% on the month and were 19.2% higher on the year, suggesting that the industry recovery will continue for some time. The drop in heavy transport demand helped drag down capital goods orders 4.6% on the month, giving a 14.5% rise on the year. Consumer durable goods orders plunged 6.8% in March and were 2.6% lower on the year. Still-sluggish consumer demand and competition from low-cost producers abroad have undermined capacity in this branch. Non-durables orders fell 3.5% on the month and were 0.5% lower on the year." And for those still wondering why there is a concerted effort at pushing the EUR lower, here it is: "Leading indicators suggest that demand will wane in the months
ahead. Manufacturers polled by the European Commission in April expected
new orders to lose steam in 2Q. The outlook index fell 5.1 points from
the record high in January to return to the level in July. Still, their
assessment of order book levels continued to improve, thanks mainly to
higher export back orders. They estimated that orders on hand would
assure 3.7 months of production, up from 2.6 months in January." In other words: must keep that export dynamo turning or else.

New home sales and speeches from several Fed officials. Even with the debt ceiling breached, and retirement funds tapped, it does not prevent the Treasury from issuing new bonds: $35 billion in 2 Years to be auctioned off at 1 pm. But never fear: Brian Sack will pump another $5-7 billion in our daily POMO.