recovery

So Does the Future Look as Good as the Past? Not in a million years. The Bubble fuelled car sales numbers of 2000-2007 now look to be permanently relegated to the rearview mirror. Since March 2009, amidst all the cries of a V-shaped economic recovery and a booming stock market, car sales have lagged badly. For almost all months of 2009, with the exception of July and August U.S. car SAAR has been stuck in the mid to high 9’s, their lowest levels in a decade. Now that the July-August cash for clunkers is gone, car sales are trending back to their low 9’s trajectory.

Does all this mean the W-recovery is off the table? Not necessarily. What it means is that there is a lot of liquidity in the system that will spur another asset bubble. And we all know that asset bubbles do not end well.

Just don't tell that to delinquent loans: now at 9.24% of all loans.

And thus the original question is how quickly can the accumulated corporate cash buffer be converted into revenue growth? It seems companies don't really care to answer that: the growth will come from "elsewhere" they will be happy to announce, and refer you to the GDP - where all "growth" comes from transfer payments, and other fictitious items indicating "growth" yet all those merely do is sucker more and more people into the stock market at bubble valuations (why are not more companies doing follow on offerings, absent REITs of course? Is it because institutional stock managers know that valuations, which this is all really about, are simply insane?). Absent some investment in CapEx you can kiss your V-shaped revenue (and thus earnings) recovery goodbye. But who honestly cares about how a stable economy works any more when you have trillions in excess liquidity provided by Bernanke Capital LLC?

"So on we go, riding the wave of yet another recovery fueled by stimulus. They work great,
until they don’t; sadly, the MSCI World Equity index trails money market fund returns since
1989, when Fed policy began in earnest to solve investment bubbles gone wrong by setting the
real cost of money to zero. Today, a sober view argues for a portfolio with moderate exposure to global markets, but with a close eye on the fissures which did not exist at the inception of prior bull markets (e.g., 1947, 1962, 1982, 1991). Giga-stimulus carries the day for now, but the morning after may come sooner this time around…"

Monday the Obama administration and China begin talks- namely on currency tensions, the US budget deficit and the massively huge trade gap with China.

China, in addition to the hundreds of billions of low-cost, high-labor manufactured goods they’ve come to be known for; are importing 150 Chinese economic officials, in one of the largest visits ever to the United States.

Market tests are useful as they best indicate just what is the real value of hundreds of billions of distressed securities stripped away from any unwarranted optimism and green shoot propaganda. Today's Visteon CDS Auction was just one such test. And if there was a way to grade the test, it would be an emphatic F: not so much for bankrupt Visteon which is already in the morgue, but for other comparable auto suppliers whose bonds and loans recently have seen overambitious PMs buying their debt as if every single credit instrument would be rolled into Taxpayer Capital LLC's Worthless Assets Fund.

Market tests are useful as they best indicate just what is the real value of hundreds of billions of distressed securities stripped away from any unwarranted optimism and green shoot propaganda. Today's Visteon CDS Auction was just one such test.

Market tests are useful as they best indicate just what is the real value of hundreds of billions of distressed securities stripped away from any unwarranted optimism and green shoot propaganda. Today's Visteon CDS Auction was just one such test.

Today's RH Donnelley CDS auction closed at an abysmal 4.875 final price (on top of the IMM). When will DTCC/JPM change the default recovery on bonds for the CDSW calc from 40 to 10? Why 10% - because, as the chart below demonstrates, that is what the weighted average CDS auction recovery has been for the past 8 months.

Today's RH Donnelley CDS auction closed at an abysmal 4.875 final price (on top of the IMM). When will DTCC/JPM change the default recovery on bonds for the CDSW calc from 40 to 10? Why 10% - because, as the chart below demonstrates, that is what the weighted average CDS auction recovery has been for the past 8 months.

Just as the futures buying hand starts gobbling up them spoos on the horrible housing and mortgage news, mortgages fail to stage any recovery. But please, keep equities artificially high - money out of treasuries into equities, on the road to 7% mortgages, is exactly what the doctor ordered.

Just as the futures buying hand starts gobbling up them spoos on the horrible housing and mortgage news, mortgages fail to stage any recovery. But please, keep equities artificially high - money out of treasuries into equities, on the road to 7% mortgages, is exactly what the doctor ordered.

Submitted by John Bougearel of Structural Logic

Structural Logic 5.22.09 -

On today's release of housing numbers, Bloomberg reports more false positives on the economic recovery path. On the second straight month of pending home sales rising (up 3.2%), many are calling this the bottom, pretty much THE leading indicator that we are close to out of the woods. I mean, come on... housing got us into this mess, it'll get us out, right?