The bullish% sector indicators are slowly grinding lower. Not really detoriating, but not in good shape neither.
We have also the ratio Natural Gas versus Crude Oil.
Look who can be a winner:
Friday 29 May 2009
Eastern Europe is not out of the woods, yet...
Yesterday our friends at Danske Bank issued a warning:
The event risk has risen sharply in the Baltic markets and we advise outmost caution. Yesterday, the Swedish central bank Riksbanken said it will increase its currency reserve by SEK 100 bn through a loan from the Swedish debt agency. Investors seem to believe that this is a buffer to deal with potential problems arising from the Baltic crisis.
Strange, we thought things were getting better in the Baltic.
Share prices of Swedish banks dived, however, yesterday and some are speaking of a devaluation of the Swedish Krone.
Whatever is gonna happen, the debt situation for the Baltic countries remains horrible.
The event risk has risen sharply in the Baltic markets and we advise outmost caution. Yesterday, the Swedish central bank Riksbanken said it will increase its currency reserve by SEK 100 bn through a loan from the Swedish debt agency. Investors seem to believe that this is a buffer to deal with potential problems arising from the Baltic crisis.
Strange, we thought things were getting better in the Baltic.
Share prices of Swedish banks dived, however, yesterday and some are speaking of a devaluation of the Swedish Krone.
Whatever is gonna happen, the debt situation for the Baltic countries remains horrible.
Sphere: Related Content
The shape of the interest rate curve
Security KAG has created a chart of the US Yield curve describing how the spread between rates of 3 months, 5 years and 30 years are developing since 1991. The yield curve went almost flat in 2006. That was the time to set up a steepener. Now we’re on our way back to flattening.
Well… we all could have been rich by following this chart.
Well… we all could have been rich by following this chart.
Flattening was the case until recently.
The long term interest rates of US Treasuries are rising and prices imploding.
We can make the same exercise for Europe.
Housing is not getting any better...
12% of all American homeowners with a mortgage are behind on their payments or in foreclosure. Half of all adjustable-rate loans to borrowers with a weak credit record were past due or in foreclosure and we still have tons more option ARM mortgages which will switch to new rates in the coming months.
New home sales rise, but the Administration is revising the prior month substantially, hoping the market wouldn’t see it.
Why is homebuilder confidence climbing to an eight-month high?
With mortgage rates at pre-QE levels.
Rates are rushing higher, so it is clear that the FED will come out very soon with a QE v.2.
Consider this:
There are 80 million US houses.
New home sales rise, but the Administration is revising the prior month substantially, hoping the market wouldn’t see it.
Why is homebuilder confidence climbing to an eight-month high?
With mortgage rates at pre-QE levels.
Rates are rushing higher, so it is clear that the FED will come out very soon with a QE v.2.
Consider this:
There are 80 million US houses.
53 million have mortgages.
27 million are paid off.
48 million are paying in time.
5 million are behind (9,5% of 53 million with 2.8% in foreclosure)
In the 1930's 50% were seriously delinquent.(Data: US Treasury, Milken Institute)
But also Europe is not going to escape. From John Mauldin:
The value of outstanding loans to Spanish developers has gone from just €33.5 billion in 2000 to €318 billion in 2008, a rise of 850% in 8 years. If you add in construction sector debts, the overall value of outstanding loans to developers and construction companies rises to €470 billion. That's almost 50% of Spanish GDP. Most of these loans will go bad.
But also Europe is not going to escape. From John Mauldin:
The value of outstanding loans to Spanish developers has gone from just €33.5 billion in 2000 to €318 billion in 2008, a rise of 850% in 8 years. If you add in construction sector debts, the overall value of outstanding loans to developers and construction companies rises to €470 billion. That's almost 50% of Spanish GDP. Most of these loans will go bad.
"Spanish banks are now facing a very bleak outlook. Spain's unemployment rate reached over 17% last month; there are now four million unemployed Spaniards and over one million families with not a single person employed in the family. Spain and Ireland had the worst housing bubbles in the world and now Spain has as many unsold homes as the US, even though the US is about six times bigger.
"Why are Spanish banks not insolvent? Spanish banks are not marking their real estate loans to market. We've often wondered how it is that our thesis for Spanish real estate and industrial collapse has not created more victims. The answer is simple according to an article in Expansion, the Spanish equivalent of the Financial Times, from the 19th of April titled 'Spanish banks control half of all real estate appraisals.' You can't make this stuff up. We haven’t even begun to see the worst in Spain yet."
Sphere: Related Content
Thursday 28 May 2009
A lot is going on
There is a lot going on for the moment.
Most important things: month-end flows have triggered a wave of dollar buying. One of the reasons could be the FX-flows from equity fund managers due to the MSCI rebalancing exercise scheduled for tomorrow. 78 securities will be added and 99 will be deleted from the MSCI Global Standard Indices.
From the Washington Post: "Senior administration officials are considering the creation of a single agency to regulate the banking industry, replacing a patchwork of agencies that failed to prevent banks from falling into the worst financial crisis since the Great Depression, sources said. The agency would be a key element in the administration's sweeping overhaul of financial regulation, which officials hope to unveil in coming weeks, including the creation of a new authority to police risks to the financial system as well as a new agency to protect consumers, according to three people familiar with the matter. Most of the proposals would require legislation. The powers would include oversight of previously unregulated markets, such as the derivatives trade, and of market participants such as hedge funds. "
Sphere: Related Content
Most important things: month-end flows have triggered a wave of dollar buying. One of the reasons could be the FX-flows from equity fund managers due to the MSCI rebalancing exercise scheduled for tomorrow. 78 securities will be added and 99 will be deleted from the MSCI Global Standard Indices.
From the Washington Post: "Senior administration officials are considering the creation of a single agency to regulate the banking industry, replacing a patchwork of agencies that failed to prevent banks from falling into the worst financial crisis since the Great Depression, sources said. The agency would be a key element in the administration's sweeping overhaul of financial regulation, which officials hope to unveil in coming weeks, including the creation of a new authority to police risks to the financial system as well as a new agency to protect consumers, according to three people familiar with the matter. Most of the proposals would require legislation. The powers would include oversight of previously unregulated markets, such as the derivatives trade, and of market participants such as hedge funds. "
Exit
GM on its way out…
GM’s bondholders have reached a deal after failing to agree on 27 bln USD in unsecured debt. GM had proposed an exchange where bondholders would receive 10% of the equity of the restructured company.
A new proposal was filed whereas bondholders would receive 10% and an option to purchase up to 15% on condition they did not oppose the government-sponsored restructuring. The US Treasury would own 72.5% and the United Auto Workers 17.5%.
The exchange offer will be open to bondholders until Saturday 5 p.m.
GM’s bondholders have reached a deal after failing to agree on 27 bln USD in unsecured debt. GM had proposed an exchange where bondholders would receive 10% of the equity of the restructured company.
A new proposal was filed whereas bondholders would receive 10% and an option to purchase up to 15% on condition they did not oppose the government-sponsored restructuring. The US Treasury would own 72.5% and the United Auto Workers 17.5%.
The exchange offer will be open to bondholders until Saturday 5 p.m.
And the: Which company will replace GM in the indices?
Treasure no more
The big story in the markets is the continuing sell off of the benchmark 10yr US Treasury. The question is: what’s happening? Is this simply the unwinding of an unsustainable bubble caused by the flight from risk a couple of months ago? A so-called ‘normalization’ process. Or is this caused by inflation fears and triggered by the enormous debt levels the US is building?
Wednesday 27 May 2009
Unemployment
Although it’s difficult to compare the unemployment rate of Europe with the States, the ‘official’ US jobless rate is on his way to pass Europe’s. After Spain and Lithuania the States ranks third now:
Is the UK a test-case for the US?
From the Financial Times
The S&P decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years. “A government debt burden of that [100 per cent] level, if sustained, would in S&P view be incompatible with a triple A rating,” as the risk rating agency stated last week.To understand the size of the risk, take a look at the numbers that S&P considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP? Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices."
Are we going to inflation?
Not yet.
The TIP ETF is barely moving.
The S&P decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years. “A government debt burden of that [100 per cent] level, if sustained, would in S&P view be incompatible with a triple A rating,” as the risk rating agency stated last week.To understand the size of the risk, take a look at the numbers that S&P considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP? Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices."
Are we going to inflation?
Not yet.
The TIP ETF is barely moving.
Sphere: Related Content
What we are not told
As usual newspapers linked the action on the American stock markets yesterday to the better than expected consumer confidence figure. I am always wondering why media are not able to educate people better how the action on those markets is generated.
This comment comes from a trader, fed up with blatant manipulation of the S&P500 future.
All I know is that every time the technicals tell me to sell, I get crushed. (I trade ES futs) Case Schiller came out this am at 830 and we sold off 3 or 4 handles and then rallied 10 handles + right on the open even before the consumer confidence came out @ 10 for no reason other than to create a BS short squeeze in the ES. It was as if the people that needed to know to move the market knew in advance the CC#, and i'm pretty sure if that # had been terrible we would have rallied anyways. We have tested the 875 - 880 level in ES now 7 times. This market wants to go lower. There is no legit equity buying above 900. Real money sells above 900 and takes us down to 880 where futures traders set up short positions and get crushed and forced to puke and take us higher. See 5/18 ... and today. How else do you explain a 4% rally from open lows on NO NYSE volume... the first 25 handles of the rally today (up to 905) was entirely ES short covering leading equities. Notice when ES volume died at 1035 and everyone finished puking we only managed to rally 5 more handles the rest of the day. It really just makes you wonder who is controlling these ES futures like this. I never bought into the whole PPT thing…thought it was a crutch for shitty traders, but someone is definitely manipulating these things to induce short covering rallies at key points when we traders are positioned short and we would normally roll over. At this point with no equities volume I can't see a way this market ever sells off.
We saw Rick Besignor of Execution LLC on CNBC. This is what he heard:
The market is up 2.75% and sell-side desks are completely dead. You’ve got computers doing all this buying.
Sphere: Related Content
This comment comes from a trader, fed up with blatant manipulation of the S&P500 future.
All I know is that every time the technicals tell me to sell, I get crushed. (I trade ES futs) Case Schiller came out this am at 830 and we sold off 3 or 4 handles and then rallied 10 handles + right on the open even before the consumer confidence came out @ 10 for no reason other than to create a BS short squeeze in the ES. It was as if the people that needed to know to move the market knew in advance the CC#, and i'm pretty sure if that # had been terrible we would have rallied anyways. We have tested the 875 - 880 level in ES now 7 times. This market wants to go lower. There is no legit equity buying above 900. Real money sells above 900 and takes us down to 880 where futures traders set up short positions and get crushed and forced to puke and take us higher. See 5/18 ... and today. How else do you explain a 4% rally from open lows on NO NYSE volume... the first 25 handles of the rally today (up to 905) was entirely ES short covering leading equities. Notice when ES volume died at 1035 and everyone finished puking we only managed to rally 5 more handles the rest of the day. It really just makes you wonder who is controlling these ES futures like this. I never bought into the whole PPT thing…thought it was a crutch for shitty traders, but someone is definitely manipulating these things to induce short covering rallies at key points when we traders are positioned short and we would normally roll over. At this point with no equities volume I can't see a way this market ever sells off.
We saw Rick Besignor of Execution LLC on CNBC. This is what he heard:
The market is up 2.75% and sell-side desks are completely dead. You’ve got computers doing all this buying.
Tuesday 26 May 2009
Credit cards
Some statements are really worth quoting. Take this one from the Pragmatic Captialist:
It is not the banks that I am so concerned about, but the consumer. As much as the bankers want you to believe this is a crisis about them - it’s not. It’s a crisis about you - the consumer. The banks simply exacerbated the problems. The credit card issue gets to the real heart of the issue and the troubles that the U.S. consumer is likely to face for years to come.
To illustrate this, we found a chart in The Economist about the credit card return on assets (in %). It is not getting any better.
It is not the banks that I am so concerned about, but the consumer. As much as the bankers want you to believe this is a crisis about them - it’s not. It’s a crisis about you - the consumer. The banks simply exacerbated the problems. The credit card issue gets to the real heart of the issue and the troubles that the U.S. consumer is likely to face for years to come.
To illustrate this, we found a chart in The Economist about the credit card return on assets (in %). It is not getting any better.
Uranium
Did you know that now-defunct Lehman Brothers is still sitting on a 500.000 lb stockpile of uranium? Large enough to produce some very tricky devices. Should they dump this U3O8 on the market, it could have an influence on prices. But Lehman promised not to do this and to wind down the position over the next coming two years.
The question is: what the hell is Lehman Brothers doing with uranium? On behalf of speculating clients? Or on behalf of their own account? And a second question: what more commodities are they stockpiling?
And what with other investment banks?
Sphere: Related Content
The question is: what the hell is Lehman Brothers doing with uranium? On behalf of speculating clients? Or on behalf of their own account? And a second question: what more commodities are they stockpiling?
And what with other investment banks?
Time to sell my 911
Not so long ago Porsche was able to squeeze the hedge fund community with an option construction. It seems this is coming back to haunt the carmaker. On Bloomberg we found an article opining that Porsche could lose some of the 17.3 bln € paper profits they made from holding VW options because they have no money to exercise them. Through these options P. is able to control 70% of Volkswagen, but now they need to cash them before they expire.
Exercising options on 20 percent of VW’s 294.9 million outstanding shares at the strike price estimated by analysts would require 5.9 billion euros, according to data compiled by Bloomberg. The 20 percent stake would have a market value of 14.1 billion euros, based on yesterday’s price.
Exercising options on 20 percent of VW’s 294.9 million outstanding shares at the strike price estimated by analysts would require 5.9 billion euros, according to data compiled by Bloomberg. The 20 percent stake would have a market value of 14.1 billion euros, based on yesterday’s price.
Monday 25 May 2009
Hey dad, I am off to do some shopping...
This one comes from Trader Mark:
Of course mall based REITs are among the best performers of the past few months as everything (and the sun) is "priced in". And the Federal Reserve is now expanding TALF to allow nearly every loan under the sun to be shielded from reality.
Commercial real estate is saved by the FED and the analysts, upgrading all REITS were they can lay their hands on.
In the mean time malls – the real American Idol – are emptying faster than I can hand out pocket money to my children. And believe me, they have a hole in both hands.
Tenants are fleeing, the industry’s woes are worsening and consumers are changing their spending practices.
What will the future bring? Sphere: Related Content
Of course mall based REITs are among the best performers of the past few months as everything (and the sun) is "priced in". And the Federal Reserve is now expanding TALF to allow nearly every loan under the sun to be shielded from reality.
Commercial real estate is saved by the FED and the analysts, upgrading all REITS were they can lay their hands on.
In the mean time malls – the real American Idol – are emptying faster than I can hand out pocket money to my children. And believe me, they have a hole in both hands.
Tenants are fleeing, the industry’s woes are worsening and consumers are changing their spending practices.
What will the future bring? Sphere: Related Content
The dollar is sailing south
Related they all are: the dollar, interest rates and the commodities. Of course we’re hoping that for gold this will be the big one, but then the dollar has to go down further (which I don’t believe) or gold needs to rise as a stand alone.
We believe we still are in a disinflationary environment, so the dollar will not run too far and the FED will cough up more QE by buying up bonds.
If the dollar continues to decline, how are specific asset classes reacting? What’s the historical correlation to the dollar of the 10 sectors within the S&P500.
From David Rosenberg:
We believe we still are in a disinflationary environment, so the dollar will not run too far and the FED will cough up more QE by buying up bonds.
If the dollar continues to decline, how are specific asset classes reacting? What’s the historical correlation to the dollar of the 10 sectors within the S&P500.
From David Rosenberg:
• Basic materials 87% inverse correlation
• Consumer staples 79% inverse correlation
• Industrials 62% inverse correlation
• Consumer discretionary 34% inverse correlation
• Utilities 28% inverse correlation
• Financials 22% inverse correlation
• Health care 18% inverse correlation
• Tech 5% positive correlation
•Telecom 13% positive correlation
Friday 22 May 2009
Snippets
Some quickies.
The Financial sector seems to crack. The 60-minutes renko chart is not eying very well.
The Financial sector seems to crack. The 60-minutes renko chart is not eying very well.
Although the daily uptrend is still intact.
Palm (ticker: PALM) is not looking well neither. The rally of last week came to a standstill en the short term trend is down
We close with the bullish percent index of one index and some sectors. Slowly some sectors are turning south.
We close with the bullish percent index of one index and some sectors. Slowly some sectors are turning south.
Another nail in the coffin
A stockchart chart. About the advance/decline volume indicator. This indicator is measuring the volume of the advancing stocks and the volume of the declining stocks. It’s Arthur Hill looking to the cumulative version. Recent peaks and throughs in the NASDAQ coincided with peaks and throughs in the indicator. The hesitation of the index is also showing up in the indicator with a trendline break and lower highs.
Weakness is still building.
Weakness is still building.
Gold shines
It started.
The rumor mill. If the UK can lose the triple A status, why not the States?
It started.
As venom it’s spreading. The dollar is sliding. Central Banks are sneaky selling their Treasuries. Ben will have to announce much more QE.
The de-leveraging continues.
And it looks uglier by the day.
A part of Europe was enjoying a holiday, yesterday. Next Monday the States are not in. A light Friday. As it is all week. Volume is light. Dollar weakness is met with strength of oil and gold.
The strength in the gold price is met with a good performance of the goldminers. The ratio between those two is favoring the latter. This is a good sign for the ongoing rally.
The rumor mill. If the UK can lose the triple A status, why not the States?
It started.
As venom it’s spreading. The dollar is sliding. Central Banks are sneaky selling their Treasuries. Ben will have to announce much more QE.
The de-leveraging continues.
And it looks uglier by the day.
A part of Europe was enjoying a holiday, yesterday. Next Monday the States are not in. A light Friday. As it is all week. Volume is light. Dollar weakness is met with strength of oil and gold.
The strength in the gold price is met with a good performance of the goldminers. The ratio between those two is favoring the latter. This is a good sign for the ongoing rally.
Thursday 21 May 2009
Correction
We were not used to it anymore, but they still exist indeed: corrections. We knew one was coming. Because exhaustion was going on as shown on this chart. The McClellan oscillator was already diverging for some time now.
Sphere: Related Content
Let's bail everybody out
Good news for the commercial property industry. They will be saved too as the FED announced they will provide loans to finance the purchase of CMBS and other structures from July onward. The Fed is also evaluating the terms on which it could extend financing for investors to buy bubble-era subprime and jumbo mortgage-backed securities.
This crisis is unwinding as a fairy tale: we will all be saved in the end.
Elsewhere we mention that Congress is working on the Federal Reserve Transparency Act or known as HR 1207. As you know is the Federal Reserve Bank not really a central bank. They act as a central bank but they are a private company with shareholders as The Rotschilds, Goldman Sachs and many other names working in the shadow. They are not regulated and don’t have to report.
This crisis is unwinding as a fairy tale: we will all be saved in the end.
Elsewhere we mention that Congress is working on the Federal Reserve Transparency Act or known as HR 1207. As you know is the Federal Reserve Bank not really a central bank. They act as a central bank but they are a private company with shareholders as The Rotschilds, Goldman Sachs and many other names working in the shadow. They are not regulated and don’t have to report.
Since 2008, the Federal Reserve has loaned trillions of dollars in bailout money but refuses to tell Congress where it went. Legislative action is needed.
The Federal Reserve Transparency Act would give the GAO the authority to audit the Federal Reserve and report its findings to Congress. The bill was written by Rep. Ron Paul and has 165 cosponsors, mostly Republicans.
Democratic Congressman Alan Grayson is now working to get Democratic cosponsors for this bill (see Grayson's letter here).
Sphere: Related Content
The Federal Reserve Transparency Act would give the GAO the authority to audit the Federal Reserve and report its findings to Congress. The bill was written by Rep. Ron Paul and has 165 cosponsors, mostly Republicans.
Democratic Congressman Alan Grayson is now working to get Democratic cosponsors for this bill (see Grayson's letter here).
England rules the waves
The S&P sent out a rating alert for the UK and now all bells are ringing. The UK credit derivatives widened sharply and the pound was hit.
The UK is going from stable to negative for the first time since 1978 and I can assure you: we don’s see any happy faces.
Fitch and Moody’s were already out to affirm the UK’s triple A rating, but the damage is done.
The action of the Big Three is one thing, doing some good analysis is another. There are many rating agencies out there, but only these three are recognised by the FED. And the rest of the world. But they are commercial firms and I can assure you: the limited number of people working on such serious topics is just
a sickening joke.
The UK is going from stable to negative for the first time since 1978 and I can assure you: we don’s see any happy faces.
Fitch and Moody’s were already out to affirm the UK’s triple A rating, but the damage is done.
The action of the Big Three is one thing, doing some good analysis is another. There are many rating agencies out there, but only these three are recognised by the FED. And the rest of the world. But they are commercial firms and I can assure you: the limited number of people working on such serious topics is just
a sickening joke.
I like more agencies as Egan-Jones. At least they do some homework. If you go to www.egan-jones.com you’ll find some fine stuff.
Sphere: Related Content
Wednesday 20 May 2009
Sunoco
This stock was touted on the stockcharts.com site. A harami was formed. And indeed: our renko chart shows a positive development.
Sphere: Related Content
He's back...
David Rosenberg said good-bye to Merrill Lynch just one week ago. But he’s back working for a small Canadian boutique and a must-read report.
We cite:
Since the rebound from the March 9th lows was again led by the four sectors that led the decline during the bear phase – financials, consumer discretionary, materials and industrials – it stands to reason that this was just another counter-trend rally
The fact that the best performing stocks were the ones with the lowest quality ratings and with the largest short interest says a lot about the nature of this rally as well — the 50 heaviest shorted stocks tripled the advance among the 50 least shorted stocks — that its sustainability is in doubt. In other words, this was a rally built largely on short covering
For the near-term, it matters little because the testing process does seem to be in place right now and this carries with it well-established investment patterns. Over the past year, we have seen four other testing phases (they all failed as the market did break to new lows). Under the proviso that the S&P 500 hit an interim peak back on May 8th at 930 (it is down 3% since, even with yesterday’s bounce), here is what the recent historical record tells us to expect (at a minimum, take profits).
• The average length of the testing phase is 53 calendar days and 38 business days (versus 45 calendar days and 33 business days for the interim bear market rallies).
• On average, the S&P 500 undergoes a correction of more than 20%.
• The sectors that led during the rally, corrected most during the selloff. This means that financials, consumer discretionary, materials and industrials should underperform in the next few months, while health care, consumer staples, utilities and telecom services should emerge as the leaders.
Sphere: Related Content
We cite:
Since the rebound from the March 9th lows was again led by the four sectors that led the decline during the bear phase – financials, consumer discretionary, materials and industrials – it stands to reason that this was just another counter-trend rally
The fact that the best performing stocks were the ones with the lowest quality ratings and with the largest short interest says a lot about the nature of this rally as well — the 50 heaviest shorted stocks tripled the advance among the 50 least shorted stocks — that its sustainability is in doubt. In other words, this was a rally built largely on short covering
For the near-term, it matters little because the testing process does seem to be in place right now and this carries with it well-established investment patterns. Over the past year, we have seen four other testing phases (they all failed as the market did break to new lows). Under the proviso that the S&P 500 hit an interim peak back on May 8th at 930 (it is down 3% since, even with yesterday’s bounce), here is what the recent historical record tells us to expect (at a minimum, take profits).
• The average length of the testing phase is 53 calendar days and 38 business days (versus 45 calendar days and 33 business days for the interim bear market rallies).
• On average, the S&P 500 undergoes a correction of more than 20%.
• The sectors that led during the rally, corrected most during the selloff. This means that financials, consumer discretionary, materials and industrials should underperform in the next few months, while health care, consumer staples, utilities and telecom services should emerge as the leaders.
Conditions for corporates are getting worse
Could it be that the worst of the financial crisis is over, but that the worst of the economic crisis has yet to come?
Markit Research is out with their latest credit conditions survey and the results show that conditions now are tighter than they were a year ago except for Germany.
Look out for Spain and Russia.
Markit Research is out with their latest credit conditions survey and the results show that conditions now are tighter than they were a year ago except for Germany.
Look out for Spain and Russia.
Sphere: Related Content
Insiders are still selling
TrimTabs is ringing some alarm bells. They published a study about the selling of shares by corporate insiders and the observations are not positive:
TrimTabs, run by Charles Biderman, tracks share buybacks and acquisitions, along with new equity issuance by companies and stock buying and selling by chief executives and other corporate insiders.
This allows the firm to gauge the level of outstanding shares, or "float," in the market -- potentially useful information when trying to work out which way prices are heading next. It's particularly helpful because companies and their executives know more than outsiders such as investors, TrimTabs argues.
Judging by the behavior of these insiders in recent weeks, the signs aren't good for the stock market, the firm said Monday.
Last week there were $31.3 billion of new equity offerings, as many of the nation's largest banks sold stock to raise new capital, TrimTabs reported, noting that's the highest level of issuance this decade.
"Companies took advantage of the rally to flood the market with new shares," TrimTabs wrote.
Meanwhile, announced corporate buying was "almost non-existent," no new cash takeovers were unveiled and insiders sold $500 million worth of stock, the firm added.
The overall float of shares in the market soared by $34.6 billion during the first 10 days of May. That puts this month's float increase on course to be the largest this decade, TrimTabs said.
"The message the 'house' is sending is clear -- investors should get out of the stock market," the firm concluded.
Sphere: Related Content
TrimTabs, run by Charles Biderman, tracks share buybacks and acquisitions, along with new equity issuance by companies and stock buying and selling by chief executives and other corporate insiders.
This allows the firm to gauge the level of outstanding shares, or "float," in the market -- potentially useful information when trying to work out which way prices are heading next. It's particularly helpful because companies and their executives know more than outsiders such as investors, TrimTabs argues.
Judging by the behavior of these insiders in recent weeks, the signs aren't good for the stock market, the firm said Monday.
Last week there were $31.3 billion of new equity offerings, as many of the nation's largest banks sold stock to raise new capital, TrimTabs reported, noting that's the highest level of issuance this decade.
"Companies took advantage of the rally to flood the market with new shares," TrimTabs wrote.
Meanwhile, announced corporate buying was "almost non-existent," no new cash takeovers were unveiled and insiders sold $500 million worth of stock, the firm added.
The overall float of shares in the market soared by $34.6 billion during the first 10 days of May. That puts this month's float increase on course to be the largest this decade, TrimTabs said.
"The message the 'house' is sending is clear -- investors should get out of the stock market," the firm concluded.
The worst is over - Goldman Sachs
The advanced Goldman Sachs Global Leading Indicator (GLI) is out tomorrow and is important. Goldman Sachs analysts think that we are now past the low point in the economic cycle, although in most regions we are still far from expansionary territory. The GLI has shown two months of sequential improvement for the first time since 2006 and the momentum component has moved into positive territory. Here is the picture that illustrates that momentum:
Tuesday 19 May 2009
Anglogold Ashanti
Yesterday this South-African goldminer lost more than 5%. Although we're up a little today, the trend as measured by our 60-minute renko charts, became negative. Is this the start of a decline or is gold and this group of stocks able to reverse course again?
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Quality time
Yesterday stocks went higher worldwide.
On what reason? India? Did we just turn a corner?
All what we can say is that the volume was extremely light.
But most investors don’t ask questions.
How healthy is this ongoing rally?
Based on quality we mention that stocks with junk bond ratings have performed best.
All the more evidence that this rally is/was about short covering instead of a reach for risk.
On what reason? India? Did we just turn a corner?
All what we can say is that the volume was extremely light.
But most investors don’t ask questions.
How healthy is this ongoing rally?
Based on quality we mention that stocks with junk bond ratings have performed best.
All the more evidence that this rally is/was about short covering instead of a reach for risk.
Panic is over ... for now
We have a chart of the top 20 sovereigns with the largest amount of net Credit Default Swap notional exposure. The winner is clearly Italy, followed by Spain. The green boxes show the difference between the prices of these CDS dating from 6 March and now.
Yes: tightening all over the place.
How come?
Better underlying data? A positive credit event? As far as I know things are becoming gloomier with the day.
The only reason can be a squeeze.
If one counts well, he only will find 19 names. Yes, one is missing. Just behind Belgium.
Let’s have a guess: which country could that be?
Yes: tightening all over the place.
How come?
Better underlying data? A positive credit event? As far as I know things are becoming gloomier with the day.
The only reason can be a squeeze.
If one counts well, he only will find 19 names. Yes, one is missing. Just behind Belgium.
Let’s have a guess: which country could that be?
Yes: The Emerald Isle
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No manipulation
FOX News has a video dated 14 May 2009 where interesting comments are made concerning the strange things happening with the stock indices. This link is providing more information.
Thanks to myprops.com we have the following transcript:
With 2 minutes 30 seconds remaining in the video, Dan Shaffer, President of Shaffer Asset Management, gives shocking evidence of direct government intervention in the stock market:“Something strange happened during the last 7 or 8 weeks. Doreen you probably can concur on this -- there was a power underneath the market that kept holding it up and trading the futures. I watch the futures every day and every tick, and a tremendous amount of volume came in a several points during the last few weeks, when the market was just about ready to break, and it shot right up again. Usually toward the end of the day – it happened a week ago Friday, at 7 minutes to 4 o’clock, almost 100,000 S&P futures contracts were traded, and then in the last 5 minutes, up to 4 o’clock, another 100,000 contracts were traded, and lifted the Dow from being down 18 to up over 44 or 50 points in 7 minutes. That is 10 to 20 billion dollars to be able to move the market in such a way. Who has that kind of money to move this market?On top of that, the market has rallied up during the stress test uncertainty and moved the bank stocks up, and the bank stocks issued secondaries – they issues stock – they raised capital into this rally. It was perfect text book setup of controlling the markets – now that the stock has been issued…” [interrupted by Richard Suttmeier].
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Thanks to myprops.com we have the following transcript:
With 2 minutes 30 seconds remaining in the video, Dan Shaffer, President of Shaffer Asset Management, gives shocking evidence of direct government intervention in the stock market:“Something strange happened during the last 7 or 8 weeks. Doreen you probably can concur on this -- there was a power underneath the market that kept holding it up and trading the futures. I watch the futures every day and every tick, and a tremendous amount of volume came in a several points during the last few weeks, when the market was just about ready to break, and it shot right up again. Usually toward the end of the day – it happened a week ago Friday, at 7 minutes to 4 o’clock, almost 100,000 S&P futures contracts were traded, and then in the last 5 minutes, up to 4 o’clock, another 100,000 contracts were traded, and lifted the Dow from being down 18 to up over 44 or 50 points in 7 minutes. That is 10 to 20 billion dollars to be able to move the market in such a way. Who has that kind of money to move this market?On top of that, the market has rallied up during the stress test uncertainty and moved the bank stocks up, and the bank stocks issued secondaries – they issues stock – they raised capital into this rally. It was perfect text book setup of controlling the markets – now that the stock has been issued…” [interrupted by Richard Suttmeier].
Monday 18 May 2009
Bearish?
Are you bearish on financial stocks? And want to enter a new position on the Direxion Daily Financial Bear 3x Shares or FAZ?
Just wait, we're not there yet. Looking to our renko chart, we advise some more patience. Although the situation is oversold for some time now, the SAR has to flip under the price action before we would take a position:
The EUR/USD and ZAR
Thank you, Goldman Sachs for informing us about the development of two trends in the FX universe.
Hedge funds are positioning themselves to short the dollar. Not surprisingly especially in EUR/USD. And some flows were directed by these hedge funds to non-Japan Asian currencies as the CNY, HKD en INR (China, Hong Kong and India).
And than there was this piece of news from Reuters:
(Reuters) - British mobile phone giant Vodafone (VOD.L) has already brought 20.5 billion rand ($2.38 billion) into South Africa to buy a 15 percent stake in local operator Vodacom, the latter's lawyer said on Sunday.
With unions trying to block the deal with a last-minute legal injunction, the Vodacom lawyer said the money arrived on May 7 and the rand would fall if it had to be repatriated.
We know in the mean time that green light was given by the Pretoria High Court and Vodacom , de biggest listing on the JSE this year, started trading. So the shorters of the ZAR last week, have to cover their positions as the 20 bln ZAR will not be repatriated.
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Hedge funds are positioning themselves to short the dollar. Not surprisingly especially in EUR/USD. And some flows were directed by these hedge funds to non-Japan Asian currencies as the CNY, HKD en INR (China, Hong Kong and India).
And than there was this piece of news from Reuters:
(Reuters) - British mobile phone giant Vodafone (VOD.L) has already brought 20.5 billion rand ($2.38 billion) into South Africa to buy a 15 percent stake in local operator Vodacom, the latter's lawyer said on Sunday.
With unions trying to block the deal with a last-minute legal injunction, the Vodacom lawyer said the money arrived on May 7 and the rand would fall if it had to be repatriated.
We know in the mean time that green light was given by the Pretoria High Court and Vodacom , de biggest listing on the JSE this year, started trading. So the shorters of the ZAR last week, have to cover their positions as the 20 bln ZAR will not be repatriated.
The Liquidity Paradox
The inverted liquidity pyramid is a concept coming from Independent Strategy and illustrating the different levels of liquidity. Important to remember is that central banks cannot impact – or failed– on the most important layer: the top. The liquidity destruction in that department is still going on and no adequate instruments exist to stop this. As financial authorities never regulated these markets and risk appetite could flourish unbounded, nobody has an answer nor a solution ready to stop the liquidity implosion. These markets came to a practical standstill 18 months ago: no more prices, no more trades, the financial desert… and there seems no cure for the moment.
Not good at all…
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Not good at all…
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Relaxing
Chart of the Day publishes a chart a day. The most recent one was very interesting. This chart depicts the earnings growth. We know that earnings of one quarter always are compared with the earnings of the same earnings twelve months earlier.
The stocks of the S&P500 – Americans finest – have imploded over the last 20 months (almost two years). Real earnings (adjusted after inflation, that is) have dropped to a record low.
The ‘better than expected’ mantra is very deceitful if we look to a longer time frame. And of course, it is the financial sector responsible for this huge fall.
But anyway…
The stocks of the S&P500 – Americans finest – have imploded over the last 20 months (almost two years). Real earnings (adjusted after inflation, that is) have dropped to a record low.
The ‘better than expected’ mantra is very deceitful if we look to a longer time frame. And of course, it is the financial sector responsible for this huge fall.
But anyway…
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Housing bubbles
Sometimes I can not believe my eyes. Here we have a chart of housing bubbles around the world – with Ireland as a clear winner – based on the price-rent ratio: the price of homes divided by rental income earned. If the ratio goes higher housing prices are leading rental income or rental equivalent costs of a home. And vice-versa.
Ireland was leading the troops. Amazing though that this ratio is going up again. An aberration? Or are rents going down faster than housing prices as foreigners are leaving the Emerald Isle in droves?
Ireland was leading the troops. Amazing though that this ratio is going up again. An aberration? Or are rents going down faster than housing prices as foreigners are leaving the Emerald Isle in droves?
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Friday 15 May 2009
EUR/USD
There is a technical event in the FX-markets. For the first time since 2005 the EUR/USD is moving above its 200 day moving average. Will the dollar lose more the coming months? Those caught long on the dollar will become quite nervous.
Hey boys and girls out there, it was another eventful week: time to close shop and to go down to the pub for a good pint of Guinness. Cheers to everybody and enjoy your weekend.
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Rating agencies: rate thyselves
The most important and well-known rating agencies are Moody’s, Standard & Poor’s and Fitch Ratings. The reason: they are in bed with the FED because the huge collateral business at the Federal Reserve has to be evaluated by those three. On the other hand, these outlets are quoted on the Stock Exchange. The potential conflict of interest between profit/shareholders and independency is obvious and we all suffer the consequences.
Now this is what we’re reading on Bloomberg:
The U.S. Federal Reserve may revise rules that currently favor Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, Fed Chairman Ben S. Bernanke said in a letter released today by Connecticut Attorney General Richard Blumenthal. The Fed is "conducting a broad review of our approach to using rating agencies," Bernanke said in an April 13 letter written in response to a complaint from Blumenthal that the central bank’s rules unfairly favor the companies that helped cause the financial crisis. "That review encompasses the ratings of securities of all types accepted as collateral at all our recently established credit facilities as well as collateral accepted to secure regular discount window loans," Bernanke wrote. David Skidmore, a Fed spokesman, didn’t return calls seeking additional comment. The Fed currently only accepts collateral evaluated by the "major" nationally recognized statistical ratings organizations, or NRSROs, Bernanke said. Because "the number of NRSROs is expanding" the Fed is conducting its review, he said."
The consequences for these stocks are clear.
Now this is what we’re reading on Bloomberg:
The U.S. Federal Reserve may revise rules that currently favor Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, Fed Chairman Ben S. Bernanke said in a letter released today by Connecticut Attorney General Richard Blumenthal. The Fed is "conducting a broad review of our approach to using rating agencies," Bernanke said in an April 13 letter written in response to a complaint from Blumenthal that the central bank’s rules unfairly favor the companies that helped cause the financial crisis. "That review encompasses the ratings of securities of all types accepted as collateral at all our recently established credit facilities as well as collateral accepted to secure regular discount window loans," Bernanke wrote. David Skidmore, a Fed spokesman, didn’t return calls seeking additional comment. The Fed currently only accepts collateral evaluated by the "major" nationally recognized statistical ratings organizations, or NRSROs, Bernanke said. Because "the number of NRSROs is expanding" the Fed is conducting its review, he said."
The consequences for these stocks are clear.
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The China Syndrome
We hear a lot of stories about China and how they are fighting the crisis by storing metals and oil. But how is the economy really doing?
Here for we look to the China container trade via China ports data (from www.transport-trackers.com) . Although these data are from jan/feb 2009 we observe that they’re really falling from a cliff.
Here for we look to the China container trade via China ports data (from www.transport-trackers.com) . Although these data are from jan/feb 2009 we observe that they’re really falling from a cliff.
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Money for eveybody...
YRC Worldwide Inc is neither a bank nor a financial institution. In fact: it’s a truck company. One of the biggest in the States. This trucker is looking for TARP money to the tune of 1 bln USD.
That’s a lot of money for a private company. The reason? The government is asked for help in order to relieve pension obligations.
We know the pension situation in the US is a sort of mess after a decade of rampant speculation in all different kind of markets.
But begging for a federal bailout is one step further. More money will be printed, if the government steps up here.
That’s a lot of money for a private company. The reason? The government is asked for help in order to relieve pension obligations.
We know the pension situation in the US is a sort of mess after a decade of rampant speculation in all different kind of markets.
But begging for a federal bailout is one step further. More money will be printed, if the government steps up here.
Thursday 14 May 2009
A regulated CDS market
Did you read it too?
The Obama administration on Wednesday unveiled a sweeping plan to regulate OTC derivatives in a move to increase transparency and reduce risk in a largely unregulated market worth more than $680,000bn. The new rules would force “standardised” OTC derivatives to be cleared through central clearinghouses to reduce the risk of investors being over-exposed to a single counterparty. The plan could force banks and other big corporate users of derivatives to set aside more capital to cover potential losses.
680.000 billion USD is 680 trln USD. That’s notional value. Real market value of the derivatives contracts is estimated around 13 to 15 trln USD. However: you’re never sure these days. Another thing with these contracts is that it is a zero sum game. For every buyer, there’s a seller. What these contracts actually do is transferring wealth between parties. And they can destroy the market for particular bonds or sectors, because sometimes CDS amounts are a multiple of the underlying bond issue they covering.
So yes indeed, if this market is regulated in an intelligent way, it will clean one of the biggest threats of the financial crisis.
Aaargggh – finance and intelligence don’t work well together. Greed, theft, GS on the contrary ….
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The Obama administration on Wednesday unveiled a sweeping plan to regulate OTC derivatives in a move to increase transparency and reduce risk in a largely unregulated market worth more than $680,000bn. The new rules would force “standardised” OTC derivatives to be cleared through central clearinghouses to reduce the risk of investors being over-exposed to a single counterparty. The plan could force banks and other big corporate users of derivatives to set aside more capital to cover potential losses.
680.000 billion USD is 680 trln USD. That’s notional value. Real market value of the derivatives contracts is estimated around 13 to 15 trln USD. However: you’re never sure these days. Another thing with these contracts is that it is a zero sum game. For every buyer, there’s a seller. What these contracts actually do is transferring wealth between parties. And they can destroy the market for particular bonds or sectors, because sometimes CDS amounts are a multiple of the underlying bond issue they covering.
So yes indeed, if this market is regulated in an intelligent way, it will clean one of the biggest threats of the financial crisis.
Aaargggh – finance and intelligence don’t work well together. Greed, theft, GS on the contrary ….
Swallow this TARP money
Yes, there they are again. De boys/girls of Goldman Sachs. Remember that they asked for 10 bln TARP money? Well, they asked for 25 bln USD in the first place and tried in a clumsy, childish way to correct this. Hat tip to the folks of clusterstock discovering this one.
But even more revealing is this document describing how Paulson, now former Treasury boss was forcing 9 bankers to take TARP money. This thing is mindblowing.
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One egg for the banker a day...
Oh dear, this was shocking. I mean throwing eggs to Dermot Gleeson, our AIB Chairman, yesterday as everything was his fault. Dermot was on his way to the shareholders meeting to approve the 3.5 bln EUR injection offered by the government. I know, shares have lost 90% of their value. But that’s the risk you have with shares, now isn’t it? Even more: why didn’t we sell in the slide to under 1 EUR? Our rabbit-in-the-headlights reflex?
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Wait, this is confusing.
This message was circulating yesterday – hat tip to The Market Oracle
Breaking News: Imminent Big Bank Failure on Overnight Bank Loan Failure
Jim Willie of the Hat trick Newsletter has just sent an urgent message of a potential imminent big bank failure that would be expected to hit the financial markets hard - message as follows –
just got word from a reliable source with an excellent track recordhe calls me every several weeks when he has something very critical to sharehe wants me to put the word out and to see what comes back to confirm or add to the storyan extremely large overnight bank transaction loan failed last night, gathering major attentionit started in US west coast, went to Hong Kong, then Singapore, then Londonit failed in London, by that is meant no return was given on the overnight loanhe guessed the size was something like $10 to $30 billionhe suspected (without much direct evidence) that it was Citigrouphe believes the failing bank is a London subsidiary for a giant US-based bankhe likened it to a plumbing blockage with extreme backup consequenceshe expects a ripple effect to cause shock waves, or a flood of sewagewe wondered if it could have Commercial Paper consequences, since often used in overnightshe has five expert friends watching for specific market reactions, like LIBORso be on the lookoutin February, this source said that in May June timeframe, foreign creditorswill put the screws to the US bankers, who are recognized as totally corruptforeigner big bankers want to remove some power levers from US control
This message was circulating yesterday – hat tip to The Market Oracle
Breaking News: Imminent Big Bank Failure on Overnight Bank Loan Failure
Jim Willie of the Hat trick Newsletter has just sent an urgent message of a potential imminent big bank failure that would be expected to hit the financial markets hard - message as follows –
just got word from a reliable source with an excellent track recordhe calls me every several weeks when he has something very critical to sharehe wants me to put the word out and to see what comes back to confirm or add to the storyan extremely large overnight bank transaction loan failed last night, gathering major attentionit started in US west coast, went to Hong Kong, then Singapore, then Londonit failed in London, by that is meant no return was given on the overnight loanhe guessed the size was something like $10 to $30 billionhe suspected (without much direct evidence) that it was Citigrouphe believes the failing bank is a London subsidiary for a giant US-based bankhe likened it to a plumbing blockage with extreme backup consequenceshe expects a ripple effect to cause shock waves, or a flood of sewagewe wondered if it could have Commercial Paper consequences, since often used in overnightshe has five expert friends watching for specific market reactions, like LIBORso be on the lookoutin February, this source said that in May June timeframe, foreign creditorswill put the screws to the US bankers, who are recognized as totally corruptforeigner big bankers want to remove some power levers from US control
QUOTE ME IF YOU WISH
my source remains anonymous/ jim
Just after being published around 10.20, the Footsie started to slide.
Than the financials in the US session acted as follows:
Just after being published around 10.20, the Footsie started to slide.
Than the financials in the US session acted as follows:
Yes, the bear ETF for financials is reversing.
Coïncidence?
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Wednesday 13 May 2009
Natural Gas
Natural gas was going down for months and months in the US. But now it’s back. And the price is going higher. Since May started, NG is rising and not looking back.
Is this normal?
No it isn’t.
What more can we say.
We’re looking to the US Natural Gas Fund (ticker: UNG) renko chart . This is way overbought, but look to the volume: it comes in bundles of positive price action.
Is this normal?
No it isn’t.
What more can we say.
We’re looking to the US Natural Gas Fund (ticker: UNG) renko chart . This is way overbought, but look to the volume: it comes in bundles of positive price action.
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Corporate bonds
Risk appetite is returning in the markets. Everybody says: ‘yes we know’. But do we realize the consequences? No. Because we can’t. The best we can do is guessing.
In the mean time we observe that corporate credit is back. The US CDX five year investment grade index is now on levels prior to the Lehman debacle. The spreads have tightened sharply.
This goes to the expense of another segment of the credit markets: government bonds. Rates went up last weeks.
We know it’s the intention of the FED to keep rates in this asset class low. So will this lead to another round of quantative easing. We place a positive bet on that one, this afternoon at Paddy’s.
We don’t know if this is a positive sign. Unprecedented money creation is causing this ‘normalization’ which is not for real anyway…
To illustrate we mention this morning news, coming from Belgium and illustrating that not all is well with European banks so far:
Business newspaper De Tijd is reporting that the Belgian government is working on a new rescue plan because KBC - market value €8bn - is set to write down the value of its CDO portfolio by a further €1bn. This fresh hit seem to have been triggered by a downgrade of bond insurer MBIA.
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In the mean time we observe that corporate credit is back. The US CDX five year investment grade index is now on levels prior to the Lehman debacle. The spreads have tightened sharply.
This goes to the expense of another segment of the credit markets: government bonds. Rates went up last weeks.
We know it’s the intention of the FED to keep rates in this asset class low. So will this lead to another round of quantative easing. We place a positive bet on that one, this afternoon at Paddy’s.
We don’t know if this is a positive sign. Unprecedented money creation is causing this ‘normalization’ which is not for real anyway…
To illustrate we mention this morning news, coming from Belgium and illustrating that not all is well with European banks so far:
Business newspaper De Tijd is reporting that the Belgian government is working on a new rescue plan because KBC - market value €8bn - is set to write down the value of its CDO portfolio by a further €1bn. This fresh hit seem to have been triggered by a downgrade of bond insurer MBIA.
Tuesday 12 May 2009
It's not over, until it's over
The number of shares above their 50 day moving average remains high. Above 90% of all securities quoted on the NYSE are in a bullish mood. But sentiment is top heavy.
Too early to fall as a group, but we mention that some bellwethers are consolidating. As an example we take Apple (ticker: AAPL).
Be aware that Apple is overbought, but not ready to fall. For a clearer view on the trend, we look to the renko chart.
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Too early to fall as a group, but we mention that some bellwethers are consolidating. As an example we take Apple (ticker: AAPL).
Be aware that Apple is overbought, but not ready to fall. For a clearer view on the trend, we look to the renko chart.
Commercial real estate
Real Point, the commercial real estate analyst, has downgraded several hundred CMBS structures (commercial mortgage backed securities). Even better: they provided us with a comprehensive delinquency report for April. Most notable is the explosion in 90+ day delinquencies for March relative to April. Detoriation is accelerating in all categories.
This is in sharp contrast with the upbeat report REIT analysts of Merrill and BoA are producing just to facilitate placements of these outlets, the last couple of weeks.
I suggest that the steep rally of the last weeks was engineered by the Powers-That-Be in order to give way to a round of capital increases. That seems to be over now.
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This is in sharp contrast with the upbeat report REIT analysts of Merrill and BoA are producing just to facilitate placements of these outlets, the last couple of weeks.
I suggest that the steep rally of the last weeks was engineered by the Powers-That-Be in order to give way to a round of capital increases. That seems to be over now.
Load my boat
Sometimes we can look to this worldwide crisis from a different angle. We have a picture from vesseltracker.com. It shows the container ships off the coast of Singapore. Green means: yes there is activity, red says: we’re just hanging around. It’s another way to show us how limited shipping activity is on the largest parking lot on earth.
From International Economy:
The world's busiest port for container traffic, Singapore saw its year-over-year volume drop by 19.6 percent in January 2009, followed by a 19.8 percent drop in February. As of mid-March 2009, 11.3 percent of the world's shipping capacity, sat idles, a record.
From International Economy:
The world's busiest port for container traffic, Singapore saw its year-over-year volume drop by 19.6 percent in January 2009, followed by a 19.8 percent drop in February. As of mid-March 2009, 11.3 percent of the world's shipping capacity, sat idles, a record.
If this anecdote proves to be symptomatic, where will the rally in the container stocks leading us?
We look to DRYS.
Monday 11 May 2009
Let's have a smile
We got a series of Warren Buffet quotes thanks to bankling.com.
Enjoy
On Investing
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
“Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.”
Enjoy
On Investing
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
“Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.”
Funny Ones
“A girl in a convertible is worth five in the phonebook.”
“When they open that envelope, the first instruction is to take my pulse again.”
“We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’”
“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
“In the insurance business, there is no statute of limitation on stupidity.”
Ireland: not a bright spot for the moment
Everyone has his unemployment worries, these days. Most well known are the US, but if we look to the Irish unemployment rate than the Emerald Isle is in nothing short of their American counterpart.
Share prices are going bonkers over here. Thank you. AIB and Bank of Ireland stock prices quadrupled over the pas few month. Everybody is telling in the pub that this is due to the planned bail-out of the government. Maybe, but I rather think shorters covered their positions. As everywhere else in Europe.
What if the government ends up with 70% of AIB shares?
Share prices are going bonkers over here. Thank you. AIB and Bank of Ireland stock prices quadrupled over the pas few month. Everybody is telling in the pub that this is due to the planned bail-out of the government. Maybe, but I rather think shorters covered their positions. As everywhere else in Europe.
What if the government ends up with 70% of AIB shares?
Time to buy. These guys are not so weak as everybody assumes.
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On the move...
Banking stories are floating around…
Interesting article in the FT: more than 50 analysts, traders and to salespeople left the building of Dresdner Kleinwort last week. Did they go to the pub. Maybe but definitely they went to Evolution and Nomura.
This is what we call a mass movement. Is it also the beginning of a new trend?
Now, this is bad news for Commerzbank, just in the process of pulling out of London and looking for a buyer for Kleinwort Benson.
Here’s another one: Friedman Resigns as NY FED chairman of the board of directors. Stevie is a former Goldman Sachs employee, who loaded his account with GS shares in December 2008 and January 2009. What’s wrong with that? the FED board is asking in some comments…
That’s where these guys are good in: asking stupid questions.
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Interesting article in the FT: more than 50 analysts, traders and to salespeople left the building of Dresdner Kleinwort last week. Did they go to the pub. Maybe but definitely they went to Evolution and Nomura.
This is what we call a mass movement. Is it also the beginning of a new trend?
Now, this is bad news for Commerzbank, just in the process of pulling out of London and looking for a buyer for Kleinwort Benson.
Here’s another one: Friedman Resigns as NY FED chairman of the board of directors. Stevie is a former Goldman Sachs employee, who loaded his account with GS shares in December 2008 and January 2009. What’s wrong with that? the FED board is asking in some comments…
That’s where these guys are good in: asking stupid questions.
Friday 8 May 2009
The Big Boys are playing
Looking to the action yesterday we notice how the market is eager to go down. As an example we take the Direxion Daily Small Cap Bear 3x Shares where: look to the surge of volume yesterday. Not normal.
It’s Bespoke Invest who is dissecting this market in details:
Today was one of those rare days (at least based on the last two months) that the market declined. While the index was down a little more than 1%, the average stock in the index was down more than 2%, which indicates that the largest stocks in the index held up better than the smallest stocks. We also broke the index into deciles (50 stocks in ten groups) based on their performance from the start of the rally through yesterday's close to see how they performed today. While the very best performing stocks during the rally actually held up okay today, the 2nd, 3rd, and 4th best deciles were down big today. The two deciles of stocks that were up the least during the rally were also down the least today.
What do we learn: the pro’s are playing this market very well.
Ok, lads, this was the week, see you all in the pub for a good beer. Enjoy…
It's there - at last
De stress test report is out.
It’s on page 8 that we can read everything about the “SCAP Buffer”, or the amount of money these banks will need to raise in order to come into compliance with the stress test. By far the biggest number on that row is the $33.9 billion for BofA, but that’s just 2% of BofA’s risk-weighted assets. Check out, by contrast, the $11.5 billion that GMAC is being asked to raise: that’s a whopping 6.6% of risk-weighted assets.
The ‘bank’ in the worst shape is GMAC. Yes, the same GMAC who wants to take over the obligations of Chrysler Financial.
Whatever the conclusions are, Tim Geithner has what he wanted: he gained precious time.
It’s on page 8 that we can read everything about the “SCAP Buffer”, or the amount of money these banks will need to raise in order to come into compliance with the stress test. By far the biggest number on that row is the $33.9 billion for BofA, but that’s just 2% of BofA’s risk-weighted assets. Check out, by contrast, the $11.5 billion that GMAC is being asked to raise: that’s a whopping 6.6% of risk-weighted assets.
The ‘bank’ in the worst shape is GMAC. Yes, the same GMAC who wants to take over the obligations of Chrysler Financial.
Whatever the conclusions are, Tim Geithner has what he wanted: he gained precious time.
Sphere: Related Content
The commodity bull run
The medicine is working.
Resulting in rallies in all asset classes.
The global economy seems to be bottoming.
If the recovery is healthy, is not sure. Because this time it’s not driven by consumers but by governments. Until now.
The last couple of weeks we observe that commodity markets are picking up again. One striking example is oil.
Look to what is happening there:
Resulting in rallies in all asset classes.
The global economy seems to be bottoming.
If the recovery is healthy, is not sure. Because this time it’s not driven by consumers but by governments. Until now.
The last couple of weeks we observe that commodity markets are picking up again. One striking example is oil.
Look to what is happening there:
We can debate what reason is driving oil price higher, but what matters is that oil prices are up. And keep moving up. The rounding bottom and some upside stories are playing out in news and charts. And interest is returning.
From GS:
Being short is no longer an option... you either caught the bull flu and started buying stocks that have lagged, or have decided not to get involved. This is where we are now. Consensus is no longer expecting a difficult H2, instead we are trying to question how far we are in the new growth cycle. Staggering change of sentiment over the past 4 weeks. I will not go on again about what the potential risks facing equities but just looking at the facts: yesterday was our busiest day in a while (sign of a top or start of a big bull trend), the low quality stocks are the ones that have been outperforming, earnings haven't played a big role in calling stocks, it's been more about ownership. Less owned stocks have fared better (UK, Swedes, RUKN) vs well owned (GLE, CSGN etc) which tells me this continues to be more about positioning than a big repricing of growth and the cycle.
A rally is a rally. Overbought or not.
And what if this one was elaborated to give companies the possibility ro tap the marktets for more money? Just a thought.
Thursday 7 May 2009
The ECB is on the move
The ECB cut rates with an unsurprisingly 25 bp. But Jean-Claude T launced afterwards some very remarkable proposals: additional repo operations, Repo ops with 12 month maturity, quantitative easing, purchase of covered bonds, EIB is becoming a counterparty.
Unconventional measures for the ECB? Remarkable.
Apparently, things are not that rosy as (European) exchanges think.
Gold is soaring.
Na why should that be…
Sphere: Related Content
Unconventional measures for the ECB? Remarkable.
Apparently, things are not that rosy as (European) exchanges think.
Gold is soaring.
Na why should that be…
If pigs could fly, this place would be a busy airport
De lack of attention concerning the swine flu thing is amazing. Here’s a last update coming from Goldman Sachs:
"Production of hundreds of millions of doses of swine flu vaccine may move ahead next week after the virus spread to 23 countries and 41 U.S. states, world health officials said. The number of confirmed cases in the U.S. jumped to at least 642, led by an outbreak in Illinois, after state health labs received kits to perform their own tests of people with symptoms, the U.S. Centers for Disease control and Prevention said today on its Web site. The cases include two U.S. deaths and may represent a fraction of the total cases, officials said. Disease trackers are monitoring 81 cases in Spain and 27 in the U.K. to determine whether the virus formally called H1N1 has established itself outside North America. Such a finding would prompt the World Health Organization to declare a pandemic, the first since 1968, the agency said. A WHO panel will meet next week to discuss whether vaccine makers should begin producing a swine flu shot once they finish with the seasonal flu vaccine. "We have recommended for all manufacturers to put everything into place to be able to start manufacturing the vaccines," Marie-Paule Kieny, director of WHO’s initiative on vaccine research, said today at a news conference in Geneva. "A further review might be potentially to stop seasonal vaccine production." WHO, the United Nations’ health agency based in Geneva, determined that a swine flu shot would have to be made in separate plants from the seasonal flu version. Swine flu vaccine may also require a follow-up booster shot in order to be effective because it is an entirely new strain, Kieny said. The single-shot seasonal flu vaccine itself acts as a booster, reinforcing natural antibodies from previous exposures to viruses."
Until now, the standard flu vaccines are going to make us rich. The reason: the real customers of these vaccines are the governments. This is already an established industry and yields tend to be driven down by competition. The most important vaccines are produced by:
· Novavax (NASDAQ: NVAX)
· Dynavax (NASDAQ: DVAX)
· Hemispherx Biopharma (AMEX: HEB)
· BioCryst Pharma (NASDAQ: BCRX)
· AVI BioPharma (NASDAQ: AVII)
· deCode Genetics (NASDAQ: DCGN)
· Crucell (NASDAQ: CRXL)
· Vical (NASDAQ: VICL)
Instead think about this: biochip sensors. Last year, agricultural losses of hundreds of millions of dollars were caused by the inability to quickly locate the source of a salmonella infection. What is needed, and will arrive in the not-so-distant future, are sensors that can detect disease pathogens cheaply and instantaneously.
EETimes is reporting that CombiMatrix Corp. has made biochips that can be programmed to identify any known flu type. CombiMatrix says its microarray can be updated for new influenzas in less than a day and can deliver test results in only four hours.
Sphere: Related Content
"Production of hundreds of millions of doses of swine flu vaccine may move ahead next week after the virus spread to 23 countries and 41 U.S. states, world health officials said. The number of confirmed cases in the U.S. jumped to at least 642, led by an outbreak in Illinois, after state health labs received kits to perform their own tests of people with symptoms, the U.S. Centers for Disease control and Prevention said today on its Web site. The cases include two U.S. deaths and may represent a fraction of the total cases, officials said. Disease trackers are monitoring 81 cases in Spain and 27 in the U.K. to determine whether the virus formally called H1N1 has established itself outside North America. Such a finding would prompt the World Health Organization to declare a pandemic, the first since 1968, the agency said. A WHO panel will meet next week to discuss whether vaccine makers should begin producing a swine flu shot once they finish with the seasonal flu vaccine. "We have recommended for all manufacturers to put everything into place to be able to start manufacturing the vaccines," Marie-Paule Kieny, director of WHO’s initiative on vaccine research, said today at a news conference in Geneva. "A further review might be potentially to stop seasonal vaccine production." WHO, the United Nations’ health agency based in Geneva, determined that a swine flu shot would have to be made in separate plants from the seasonal flu version. Swine flu vaccine may also require a follow-up booster shot in order to be effective because it is an entirely new strain, Kieny said. The single-shot seasonal flu vaccine itself acts as a booster, reinforcing natural antibodies from previous exposures to viruses."
Until now, the standard flu vaccines are going to make us rich. The reason: the real customers of these vaccines are the governments. This is already an established industry and yields tend to be driven down by competition. The most important vaccines are produced by:
· Novavax (NASDAQ: NVAX)
· Dynavax (NASDAQ: DVAX)
· Hemispherx Biopharma (AMEX: HEB)
· BioCryst Pharma (NASDAQ: BCRX)
· AVI BioPharma (NASDAQ: AVII)
· deCode Genetics (NASDAQ: DCGN)
· Crucell (NASDAQ: CRXL)
· Vical (NASDAQ: VICL)
Instead think about this: biochip sensors. Last year, agricultural losses of hundreds of millions of dollars were caused by the inability to quickly locate the source of a salmonella infection. What is needed, and will arrive in the not-so-distant future, are sensors that can detect disease pathogens cheaply and instantaneously.
EETimes is reporting that CombiMatrix Corp. has made biochips that can be programmed to identify any known flu type. CombiMatrix says its microarray can be updated for new influenzas in less than a day and can deliver test results in only four hours.
Tonight...
Tonight‘s the night…
At last the stress test results will be published.
A lot of rumors are swirling around.
From the WSJ:
"The results of the government's stress tests of the largest 19 U.S. banks continued to trickle out, highlighting the burgeoning gaps between the industry's strong and weak players. Among the institutions that have been instructed by the Federal Reserve to raise more capital are Wells Fargo, Morgan Stanley, GMAC, State Street, Bank of America, Citigroup and Regions Financial. Banks that don't need fatter capital cushions include Capital One, American Express, Bank of New York Mellon, Goldman Sachs, MetLife and J.P. Morgan Chase."
And then the WashPost is telling us that even BoA might not need new capital. Other sources suggest 34 bln USD.
Bloomberg is offering following nuggets:
"Banks that need to raise capital under the government’s stress tests will have until June 8 to develop a plan and until Nov. 9 to implement it, U.S. bank regulators said today. The capital buffer for each bank holding company "is sized to achieve a Tier 1 risk‐based ratio of at least 6 percent and a Tier 1 common risk‐based ratio of at least 4 percent at the end of 2010, under a more adverse macroeconomic scenario than is currently anticipated," the regulators said in a joint release. The government will release results of the so-called stress tests Thursday at 5 p.m. Washington time."
Suppose for one second that the results are better than expected – they will be – and this media circus was deliberately organized in order to have another stock rally, what will it be? A 'sell the news' reaction?
Sphere: Related Content
At last the stress test results will be published.
A lot of rumors are swirling around.
From the WSJ:
"The results of the government's stress tests of the largest 19 U.S. banks continued to trickle out, highlighting the burgeoning gaps between the industry's strong and weak players. Among the institutions that have been instructed by the Federal Reserve to raise more capital are Wells Fargo, Morgan Stanley, GMAC, State Street, Bank of America, Citigroup and Regions Financial. Banks that don't need fatter capital cushions include Capital One, American Express, Bank of New York Mellon, Goldman Sachs, MetLife and J.P. Morgan Chase."
And then the WashPost is telling us that even BoA might not need new capital. Other sources suggest 34 bln USD.
Bloomberg is offering following nuggets:
"Banks that need to raise capital under the government’s stress tests will have until June 8 to develop a plan and until Nov. 9 to implement it, U.S. bank regulators said today. The capital buffer for each bank holding company "is sized to achieve a Tier 1 risk‐based ratio of at least 6 percent and a Tier 1 common risk‐based ratio of at least 4 percent at the end of 2010, under a more adverse macroeconomic scenario than is currently anticipated," the regulators said in a joint release. The government will release results of the so-called stress tests Thursday at 5 p.m. Washington time."
Suppose for one second that the results are better than expected – they will be – and this media circus was deliberately organized in order to have another stock rally, what will it be? A 'sell the news' reaction?
Tuesday 5 May 2009
It's a long way to Tipperary...
How do I love this song written in 1912.
But a long way it is.
I have a friend who’s a bond dealer at D.
I spoke him this morning and he confirmed what is becoming clear the last couple of days in the market: the demand for good credits is booming.
It seems that credit markets are on their way back.
This theme is also reflected in the Credit Derivatives Swap markets where spreads are tightening. No, not all is lost. But it will take a long time.
I spoke him this morning and he confirmed what is becoming clear the last couple of days in the market: the demand for good credits is booming.
It seems that credit markets are on their way back.
This theme is also reflected in the Credit Derivatives Swap markets where spreads are tightening. No, not all is lost. But it will take a long time.
Having said this, friends, I as you attention as the bull movement is overbought with the minute now.
All technical indicators are screaming now that the equity markets are overbought. Look to this indicator showing how many stocks of the S&P500 are humming above their 50-day moving average... Spooky
So, be careful out there
Blogs well written - Minds as sharp as a pen
There are some intelligent blogs outside. I like the nakedcapitalism.com blog. And I like Tyler Durden or even better Cassandra. These are highly skilled people or groups of people producing so much interesting high quality information not available say one year ago.
This one is from Cassandra:
So hearing Mobius, Cohen, and other pundits speak of bull-markets and greenshoots is predictable. But I reckon that Mssrs Schilling,and Roubini, will in time - once again - more likely be correct insofar as I believe continued recession and mild deflation will predominate longer than optimists (and inflationists)- and in particularly longs, can bear once the shorts have sufficiently covered and the intermediate term optimism rolls over with the continued bleak news flow. Then, the trend-followers will mechanically bail, and reverse positions, prescient programmes and specs, too, will re-establish their shorts, until finally the squeezed-in will, once again get squeezed-out, and those amongst us with weak constitutions will be forced to hide the pills and sharp objects to avoid .... tragedy.
But also this one from Adam (Option Armageddon) where he quotes David Rosenberg, chief economist of Merrill Lynch:
You know it’s a low quality rally when the top 50 most heavily shorted stocks are the ones that outperform the most – up 28% in April, an 1,860 basis point spread over the broad equity market.
Sphere: Related Content
This one is from Cassandra:
So hearing Mobius, Cohen, and other pundits speak of bull-markets and greenshoots is predictable. But I reckon that Mssrs Schilling,and Roubini, will in time - once again - more likely be correct insofar as I believe continued recession and mild deflation will predominate longer than optimists (and inflationists)- and in particularly longs, can bear once the shorts have sufficiently covered and the intermediate term optimism rolls over with the continued bleak news flow. Then, the trend-followers will mechanically bail, and reverse positions, prescient programmes and specs, too, will re-establish their shorts, until finally the squeezed-in will, once again get squeezed-out, and those amongst us with weak constitutions will be forced to hide the pills and sharp objects to avoid .... tragedy.
But also this one from Adam (Option Armageddon) where he quotes David Rosenberg, chief economist of Merrill Lynch:
You know it’s a low quality rally when the top 50 most heavily shorted stocks are the ones that outperform the most – up 28% in April, an 1,860 basis point spread over the broad equity market.
Best places I know...
Brussels is boring, states an OECD report.
Well, maybe. Though you can wine and dine as nowhere else and taste more beers than you can dream about.
Even the same OECD report states that the best dining city is Paris – it’s clear that these officials don’t have to pay the bill themselves...
But more about the French in this report:
The French spend more time sleeping than anyone else in OECD countries. They also devote more time to eating than anyone else and nearly double that of Americans, Canadians or Mexicans. The Japanese sleep nearly an hour less every night than the French and also spend longer at work and commuting than they do indulging in leisure activities.
I happen to know some French people in Dublin.
Nice folks and so very … French.
Always in for a good night at Lillie’s Bordello.
Et maintenant, des nouvelles concernant la région bordelaise et le récolte de 2008.
It’s the Live-ex index of fine wine prices which is tracking the price of French finest. Take a look to the price of a crate of 2008 Lafite.
Now this is called a parabolic price rise.
Well, maybe. Though you can wine and dine as nowhere else and taste more beers than you can dream about.
Even the same OECD report states that the best dining city is Paris – it’s clear that these officials don’t have to pay the bill themselves...
But more about the French in this report:
The French spend more time sleeping than anyone else in OECD countries. They also devote more time to eating than anyone else and nearly double that of Americans, Canadians or Mexicans. The Japanese sleep nearly an hour less every night than the French and also spend longer at work and commuting than they do indulging in leisure activities.
I happen to know some French people in Dublin.
Nice folks and so very … French.
Always in for a good night at Lillie’s Bordello.
Et maintenant, des nouvelles concernant la région bordelaise et le récolte de 2008.
It’s the Live-ex index of fine wine prices which is tracking the price of French finest. Take a look to the price of a crate of 2008 Lafite.
Now this is called a parabolic price rise.
Monday 4 May 2009
Bankers...
From 2006 through 2008, the 10 largest financial companies in the US awarded their chief executives a cumulative total of more than 560 million USD in cash, stock and options.
We lean back for some seconds, close our eyes and reflect on this.
Those firms – some of which are no longer among the 10 biggest – have lost a total of nearly 1 trln USD in market value since the end of 2006.
We lean back again.
The guy who published this in the WSJ then makes a personal remark:
…something is dangerously wrong with a system that showers riches upon good and bad leaders alike.
Are bankers on in the US or in Europe so much different? Yes, in terms of the amounts they are rewarded. No, in terms of earning much more than John Doe for no reason. These people are not more intelligent or more capable neither do they work much harder or are they more creative or innovative. On the contrary, they have to rely heavily on other people to know and/or recognize what’s going on in their own bank. Most of the time they don’t have a clue what their alchemists in the dealing room are brewing.
And when it start to storm they are not capable to guide their company for more than five minutes.
For starters: look to the Irish bankers…
Mortgage rates in the US are going higher. They are up to 5.20% from 4.70%. Will this hurt the refinancings? Or even more: the entire home industry?
Difficult to say.
Only thing: all rates are climbing.
Why didn’t Bernanke address this last week during the FOMC meeting?
Or is het confident that rates will come down again?
The 10-year US benchmark yield rose Friday to its highest point of 2009.
Difficult to say.
Only thing: all rates are climbing.
Why didn’t Bernanke address this last week during the FOMC meeting?
Or is het confident that rates will come down again?
The 10-year US benchmark yield rose Friday to its highest point of 2009.
Is this a sign that inflation is already coming?
Is this the V-shaped recovery?
Or just sector rotation
Elsewhere we see the DBA has taken off since the last FED meeting. This ETF is wheat, soybeans, corn and sugar.
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