Today's heavy volume smells a lot like billions of mouse clicks ejecting stocks. All the Fembots supervising the motion chasers were getting flogged and horsewhipped if they did not immediately eject out of their positions. The market is basically issuing a "no confidence" vote on Washington's micro-management policies.
Yesterday's Alcoa results were a disappointment because even after an 18% increase in revenues to $5.4 billion, the firm still missed consensus EPS of $0.06, coming out at $0.01 ex items. The take home message is that even with China in full ramp up mode, the margin contraction is fierce and getting worse. A simple observation of the ratio of AA stock price to ALUM price indicates just how far the stock had run ahead of itself.
Yet what caught our attention yesterday were not the weak numbers, but the market reaction to them. While the stock price plunged in the after hours session, initially 5% and today it seems like it can be down as much as 10%, the company's CDS ripped tighter, moving from 160 bps to 140 bps, and ultimately stabilizing at the midpoint: an indication of improving credit perception, and, dare we say it, a return to market normalcy and fundamentals.
Anyone looking at their 401(k) portfolio performance since the end of August will undoubtedly be very happy (and extremely surprised), as the market has climbed steadily higher despite i) increasingly declining trading volume and ii)consistent and material withdrawals from domestic equity mutual funds. Furthermore, if anyone was merely looking at the trading action in regular hours, one would think there was absolutely no profit made since early September. The reason for that: all the upside since September 14th has come exclusively from after hours action. The chart below demonstrates the relative performance of regular hour trading in the SPY as well as that in the extended session. The notable observations: gaps, gaps, gaps. Every single day, minimal volume pushes the futures index higher. Good news, bad news, it don't matter to the Goldman S&P and Russell 1000 futures desk: they just lift every micro offer, giving the impression that the market is unstoppable, often leapfrogging each other as the latest viagra'ed GDP or unemployment rumor is spread. Come morning, it is time for the HFT brigade to come in and scalp their trillions of pennies while leaving the market unchanged, then at 4pm handing it off again to leveraged futures manipulation and dark pools. In a nutshell, this is the secret of the past quarter's phenomenal market performance.
So Much For The Taxpayer Profit In Citi: Treasury Shares To Be Offloaded Over 12 Months After Investors Balk At Overpriced Toxic HoldingsSubmitted by Tyler Durden on 12/16/2009 20:06 -0400
It was just a matter of time before the administration's covert plan of rewarding bank execs for massive failure by allowing them to load up their balance sheets with record risk once again, while paying out historic bonuses, blew up in Larry Summers' face. Today's attempt by the government to not only allow the failed Citi management team to pay itself an infinite amount of money more than it deserves for destroying one of America's landmark companies (why the hell is Vikram Pandit still in charge of the Titanic?) but to pretend that it "generated" another taxpayer win by selling off its shares at a profit, was aborted after hours, when Citi could barely find enough interest to sell $17 billion at the embarrassingly low price of $3.15, below that government's cost basis. This will preclude Obama from making a TV appearance tomorrow of how the US taxpayer made even more money by backstopping Moral Hazard. What the US taxpayer however did do, is funnel money straight out of its pocket, into that of Vikram's worthless lackeys. We somehow doubt this will make the teleprompter of whatever it is Obama will be praising in his TeeVeethon tomorrow.
With the NY Composite and SPY hitting a "double top", the slide rule technicians operating the robots immediately sold stocks after the opening spike to "lock in profits". Now we have to use some forensics to see if another bear market is going to resume, or if this thing is going to keep going. Unfortunately for the bears, some favorite instruments of speculation were being dryhumped with a vengeance, showing no signs of weakness or distribution.
A recent note out of permabullish ward of the state BofAMLCFC (makes sense why they would be permabulls: after all nobody asks why CNBC is a non-stop propaganda mouthpiece for pro-market, pro-GE, pro-stimulus policies... everyone makes fun of it, everyone cracks up at Kudlow and company, but nobody questions it - it does, after all, make complete sense when one considers their agenda is to have all their ever diminishing viewers purchase however many shares of their soon to be former employer GE, even if it means said viewers financial ruin in a month or a year) shares some interesting perspectives on what would happen if a market that is priced for absolute perfection does not end up occurring (or, scarier, does). The note below out of Sadiq Currimbhoy, Merrill's Hong Kong strategist should be kept in mind any time readers enjoy the rosy propaganda from Merrill's David Bianco, which has the form, consistency and texture of two-ply Charmin'.
Each quarter or so, we have to go through all the drama and anxiety surrounding the utterances out of the FOMC. Where thousands upon thousands of traders sit bug-eyed at the computer screens, watching the 1 min. charts of the EUR/USD, SPY, TLT, trying to get an "edge" over the other 428,584 daytrading jockeys on Wall St., all looking at the exact same thing. All with their fingers madly punching the F12 and F11 keys as if their puny keystrokes are going to make any difference 48 hours from now.
First RIM, and now Baidu. BIDU stock is plunging after hours, down over 14% at last check after the company announced revenues will be between 1.19 billion yuan ($174 million) and 1.23 billion yuan. Consensus was 1.36 billion yuan. How a Chinese company, in the middle of the greatest bubble reincarnation, supported by an economy that is a reverse feedback loop, can miss, is shocking and is sure to put the recent tech rally in perspective. In the meantime, as a reminder of how collectivist groupthink is cultivated and encouraged by the mighty ones on 85 Broad, we have attached the most recent BIDU report from Goldman Sachs, which is still on the firm's Conviction Buy List.
Goldman Launches Global Heat Mapping Tool To Serve Its Trigger Happy, ADHD Addled, Red Bull Chugging ClientsSubmitted by Tyler Durden on 10/26/2009 14:14 -0400
Domestic markets seem just a little too claustrophobic recently? The S&P's inability to breach 1,100 got you down? Trading in After Hours not the cash cow it used to be? The fix for gunning stocks ever higher 24 hours a day becoming irresistible? No clue what do with yourself in the hours between 4pm and 9:30 am? Have no fear, Goldman is here with your much needed fix.
Anyone read Monday's WSJ about the myriad networking methods used by Raj to extract inside information? Funny how enormous amounts of money, effort, and time were used to "get an edge" in order to squeak out a paltry $70 million or so in a $7 billion hedge fund. He should have used his energy elsewhere, as in hiring a horde of Playstation gamers and Victoria's Secret models instead.
Recovery.org has some useful data to track the efficacy of the administration's stimulus program. Not only can the 5.93 people (not in millions, thousands, hundreds or even tens) in Rhode Island whose jobs the Federal Government managed to "save" send personal thank you letters to American taxpayers, but they can read all about the happy response on Amazon's Kindle, which apparently every single human being in the world is a proud owner of, which seems sufficient to justify the retailer's 60x forward P/E (once the short squeeze is finished after hours, that's roughly where the stock should be trading; in other news at least Americans can finally get edumacated with everyone finally reading just to look cool).
Yet another day where Goldman scored huge once again. Where is Dick Bove today? No doubt, he must be luxuriating in an Opium Den and Massage Parlor somewhere in Chinatown, cavorting with 17-year old Asian Exotica, after receiving a hefty payout from the Prop Desk boys at Goldman..
It might as well have been GDP data. This week when Apple literally blew away even the most optimistic whisper upgrades to its traditionally conservative guidance, wide celebrations echoed through the exchanges, after hours trading went wild and a few commentators even went so far as to call Apple's gain the beginning of the end of the recession. It takes only the slightest bit of analysis to introduce thick cracks into the foundation of these "theories." Of course, thusfar no one really seems to have bothered.
Big drop in SPY AH to below VWAP. Big blocks pushing lower. What is one missing here?
Garrison Satch walked through the lobby of the old 23 Building on Wall Street and winked at the receptionist. Fannie was wearing red that day and was quick to return a faux-demure smile. However, his thoughts quickly turned to VeRA–not a woman, but a secret initiative launched by the owners of the Building and the New York Stock Exchange. VeRA had her own underground facility that was accessible from both the 23 Building and the NYSE at 11 Broad Street. She also had a street entrance, but...