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Merrill Gruntled, Believes Markets Combobulated
The latest piece out of ML's RateLab, the bank's US Rate Strategy think tank, is arguably one of the weakest analytical reports issued by the group in a long time with statements such as:
As the reality of the FED’s firm hand sinks in, disgruntled traders operating in discombobulated markets will relax. We may have violent moves in both level and shape, but as the risk of a 1930’s depression or a Zimbabwe inflation dims, risk vectors will slide back into their longer-term ranges.
and this:
We have not changed our view. [T]he average yield of the Treasury 10yr over the past six years is 4.16% with considerable congestion at the 4.0% level. Using any combination of Real GDP plus CPI, it is hard to see a Nominal GDP of much above 4% over the medium term. So there is our cap. Conversely, with over $2 Trillion of new Treasury supply and a Foreign Central Bank community eager to diversify away from the USDollar, breaching 3% seems unlikely under even the most dire economic circumstances. This means that although professional options traders may profit from “delta hedging” the relationship between Implied and Realized Volatility, true end-users should soon significantly reduce their usage of options as a hedging tool.
Good thing black swans are just a figment of Nassim Taleb's imagination. Dear Harley - pretty charts and all, but aside from your axed position, is there anything factual you can provide aside from references to CNBC anchors who claim that the recession is over, or maybe a counterpoint to the claim that your firm only exists because Ben Bernanke had some late onset amnesia and didn't quite remember just why your new uber boss Kenny bailed all of you guys out in the last minute with your latent $15 billion in losses (and will eventually result in major civil lawsuits with eventual huge monetary rewards for BAC shareholders).
We agree with your observations that the market is pricing in virtually limitless Fed and Treasury support: if it wasn't, the S&P would be at or near 0. However, unless you assume the Socialist States of America will be the new appellation for this country in perpetuity, at some point one has to assume the removal of the backstops. Believing that the 3-4% UST range will be the "new normal" then is beyond naive. Instead of adding all the other fancy graphs (below), the most useful one to see would have been to show just how insane a 4-5% mortgage rate is in a historical timeframe, not just in the US but globally. After a credit bubble explosion with a magnitude in the tens of trillions, if there is one thing one can claim with certainty, it is that a range bound level is exactly what will never occur if the market equilibrium is allowed to be restored without the nudging power of the administration's printing presses.
Of course, for the sake of your new employer, whose fate does rest on "risk vectors sliding back into their longer-term ranges", and thus your ongoing paycheck receipts, we hope you are correct. We would be the last to suggest that a piece pushing the anti govie vol trade is in fact just the opposite of the trade that ML/BAC is currently putting on the books in anticipation of reality actually catching up (either with a bang or a whimper). On the other hand, when pundits make claims such as "In other words, the Black Swan has made his appearance and flown south for the winter" you know it is days if not hours before another massive unexpected event occurs and the southward migration of 6 sigmas rapidly reverses.
Pretty charts compliments of ML's RateLab:
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it's beyond me why anyone listens to bailed out institutions. moral hazard and conflicts of interest are so prevalent in Wall st it invalidates almost everything that comes out of the industry. too much white noise. truly independent research is not hard to find with the internet.
A bunch of deluded idiots in wall street. This amounts of self-hypnosis where you keep suggesting yourself in something that is not true and ultimately you believe in it. 'serenity now, insanity later'.
And then the economy crashed again. And then the flu pandemic fully arrived. And then the big one hit California. And it was good.
I am Chumbawamba. Batshit crazy since 2009.
Speaking of H1N1 this is from a guy on The Oil Drum - a bit off topic there - who is very active is his local emergency preparedness organizations.
http://www.theoildrum.com/node/5569#comment-518700
"
Hi, all. A bit off topic but hopefully useful nonetheless...I've had a series of conversations with the CEO of Emergency Management Solutions in the past couple days and here is what I have learned:
"Social disruption may be greatest when rates of absenteeism impair essential services, such as power, transportation, and communications." (WHO)
"
You can get killed walking your doggie. . .
I'm in the UK right now. They have actually stopped trying to quarantine patients suspected of having swine flu. They are estimating now that there will be 100,000 new cases per day.
People are having swine flu parties and getting together to expose their children and themselves to all get the flu at the same time. Doctors are on TV telling people not to do this of course.
ALL but one that have died have been people that were already sick with some life threatening illness or very young and sick. One person just died, and the onyl cause they can find is the flu. He was probably some sort of pussy... or queer.
They have actually stopped trying to quarantine patients suspected of having swine flu. They are estimating now that there will be 100,000 new cases per day.
that's some bad. but the stock market is ignoring it.
good articles: http://shor7.com/?ZEUCI
Anagrams for Batshit crazy:
A Tzars Bitchy
Scarab Thy Zit
Crab Hasty Zit
Crab Hazy Tits
Crabs Hazy Tit
I'm I the only one that is getting a little exhausted by Zero Hedge keeping the wall of worry so 100% alive? And comments that quote a firm that makes money from emergence preparedness with big corporations, is hardly worth mentioning. Yes, swine flu will be a problem, but I do happen to agree that 3% is a floor.
Cut the crap, Benjamin. Quantitative Easing is not working. Try something else, you genius.
I am Chumabwamba.
Replace "swine flu" with "subprime mortgage mess". Your attempt to discount the impact of the swine flu sounds eerily similar to a few years ago when the subprime fiasco was beginning to emerge. The bottom line is no one knows how bad the "it" du jour will be. Prepare as you see fit. If others want to discuss it and run out and buy foodstuffs, guns & ammo--it's no skin off your nose, is it?
Medvedev debuts the new global currency at the G8:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aeFVNYQpByU4
Oh, it's not new at all, it's gold, bitches.
I am Chumbawamba.
Ain't nobody here your bitch. You sound like a little punk talking shit online saying that all the time. Man up.
Punk talking shit:
Halting Tip Skunk
A Skintight Plunk
Phat Skulking Nit (My favorite.)
I'm pretty sure you all saw this:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_...
LLOYDS BANKING GROUP is poised to write off as much as £13 billion on its loans to commercial property, businesses and mortgage holders as the crisis engulfing the taxpayer-backed bank deepens.
First-half results due to be posted in three weeks will show that its losses are accelerating, in spite of recent suggestions that the worst of the recession is over.
Seems like every "analysis" from Wall St is a flat line for a while followed by up.
Breath of fresh air
http://www.reuters.com/article/newsOne/idUSTRE55L1VP20090622?sp=true
I hate MER. Has nothing to do with their share price and has everything to do with the way MER brokerage treated their clients. I am not a client of MER but I have seen plenty of innapropriate investment selections they chose for their clients. I hope MER gets sued.
I used to work for Gruntal they were happy there until 9-11
"At its peak in the mid-1990s, Gruntal was the country's 14th-largest brokerage firm But then
regulators nearly shut down the firm in 1995. Three top managers in the back office (known as the "cage") were found to have been siphoning money to personal accounts for a decade. The CEO himself went to prison for diverting dividends from Gruntal's "dead" accounts--by law they were supposed to go to the state--to falsely boost the firm's net profits. All told, $14 million was embezzled."
WELL SAID TD!
.
The Unites States of Goldman Sachs is just fine. Everyone is making money and unemployment is not as bad as it looks. Now everyone follow me down the rabbit hole!
We are borrowing the stimulus money. More stimulus is equivalent to throwing gasoline on the fire. We can't possible pay the debt back..this is not sustainable. hat tipt to: .http://shor7.com/?ZEUCI s
Can I have my blue pill now please? Just kidding.
I liked the previous format better. You could read most or all of a post..it was cleaner, easier on the eyes. Too much black in the new site..causes tension. Content is good though.
Weekly Market Analysis from Charts and Coffee Blog - http://chartsandcoffee.blogspot.com/2009/07/sunday-night-coffee-7122009....
Merril is gruntled. The market is combobulated. Americans are gusted. And this lack of prefixes is tracting.
Sorry to get off topic here... but does anyone know what going on w/ the site/the team? No posts today except for this one, site down on and off all day, no Tweets. Anybody know if they're okay? (We worry, y'know.)
NSA setting up the site listeners.
Hey. Don't joke. Bad things can happen to people who tell the Truth.