Spreads managed to hold onto modest widening today in the US as IG underperformed HY, indices underperformed intrinsics, single-name activity was extremely muted, and low beta underperformed high beta. Notable underperformance in Europe, spreading idiosyncratic sovereign risk to SovX to FINLs to Main and up to XOver was not enough to upset the optimistic US investor today, though it was one of the least convicted days in a long time.
Even as Bank of America is preparing to restart securitization and thus provide the single greatest gift to creditors the world over, as this is merely the first step in wiping out/transferring yet more trillions in private sector debt, it has done the public a bigger favor by compiling the following list of key terms for all those lost in the current labyrinth of definitions,acronyms and euphemisms. Since following the Goldman legal plight will require a facility with some heretofore quite complex constructs, the following catalog is a must read for all financial novices.
How many ways can a Wall Street Banker bend over an institutional client before they scream "ouch"??? Let me count the ways (with a spreadsheet, may I add)...
Spreads were broadly tighter today with HY outperforming IG as equities got a boost from retail sales, Bernanke's low-and-long comments, and Beige book headlines. JPM's earnings (along with CSX's beat and INTC's smash) also helped as financials outperformed in equity and credit. The psychological break of several critical levels in equity and credit indices seems relevant for the moment (despite the survivorship bias inherent in these long-run indices reducing the real worth) but there was no arguing with the breadth today as tighteners outpaced wideners by over 8-to-1.
Another day where the problems of the PIIGS, gyrating interest rates, skyrocketing unemployment and vacancies, imploding housing starts, and other assorted ills are totally shucked off by the favored "must own" sectors: REITs, retail, and financials.
Delinquency rates up, Cap rates up, Macro outlook down, CRE REIT equity prices up. Sounds about right!
Anyone notice that Michelle C-Squared has been gradually dolling up for the inevitable Dow 11,000? Hate to sound like a broken record, but it appears that each day we have another round of breakouts in the retail and REIT sector, as if fund managers are giddy at the prospect of Michelle losing a few buttons on her blouse on Monday.
Last weekend The Los Angeles Times featured a story about the war room discussions at PIMCO. Now with over $1 trillion under management and bonds teetering, the pressure must be huge to start chasing equities and other risk assets.
Another day with a plethora of consumer stock breakouts, defying higher interest rates, ongoing problems with the PIIGS, and other assorted credit-related convulsions and algospasms.
On top of the previously announced record delinquency rate for Fannie, here comes some even worse news out of commercial real estate, which together with record high downtown vacancy rates, should be enough to push all REITs to 1052 week highs tomorrow. RealPoint has just released its March CMBS delinquency data, according to which delinquencies hit an all time high 6%. Not to be ignored, according to TREPP this number is even worse, at nearly 8%, after the single biggest monthly spike in 30 day + delinquencies.
Surely this must be worth a strong buy upgrade of the REIT sector by someone (too bad most banks already have these in the "conviction buy to the grave" category). Bloomberg TV reports that the office vacancy rate in downtown NY has dropped to September 11th levels, and is about to pass 14%. In other words short reality, long hopium and office REITs, and presto - 100% P&L overnight. Who needs such boring things as cash flows when you have record vacancies and guaranteed, undipsuted bailouts.
Are Pig Farmers Doing All The Trading? "The Top Five Prop Desks Are Buying And Selling Securities With Leverage ... To Each Other!"Submitted by Tyler Durden on 03/29/2010 11:56 -0500
A suitable follow up to our earlier post on domestic equity fund flows (which have been negative year to date), and our conclusion that Primary Dealers are merely taking advantage of the ZIRP carry trade, is Rosie's observation that the only entities doing any relevant trading are the prop desks of the Big Five TBTFs. If that is indeed the case, the market, which Rosenberg concludes optimistically is 25% overvalued will certainly face a Black Monday-type correction as soon as the elusive "unpredictable" occurs and the Prop desks as always scurry for cover, with no volume consolidation to the upside. It would be such a wonderful time to truly implement the Volcker Rule as the bank's prop desks, if David is correct, are about to cause some major damage to the market... Of course, it is these very prop desks that are the staunchest opposition to the Volcker Rule and its negative implication on prop trading.
Excess marginal dollar liquidity is gone and the USD is spiking in value. Commodities (particularly oil & the energy sector in equity) are rolling over and are ready to sell off big. Equities may follow soon. In the FX arena, long USD is best, especially against EUR (PIIGS), GBP (just another pig), NOK (CEE exposure), HUF (see NOK), AUD, and JPY.
As the PIIG crises went into full swing again, it was a "Risk Off" day today. Except when in fear of a market correction, it is time to buy mortgage insurers, homebuilders and REITs.
It is irrefutable. The Bernanke Fed will go down in history as the most wildly successful ever. Nobody in financial history has been able to re-sky stocks in one year after the two largest banks in the country were within a hairsbreadth of imploding. No doubt, he will be trumpeted and hailed as a national hero, for orchestrating the fastest run in retail stocks in world history.