Morning Call [6:12am ET] Country risk is back on the front burner today as the Wall Street Journal is reporting that Greek, Portuguese, Spanish and Irish bonds took a nose dive on Monday and that the cost of insuring debt of these countries has soared to a new record, close to that of Argentina and Venezuela.
Teetering on insolvency, these countries are sucking money out of the financially stronger and more fiscally responsible ones faster than the hard working people in those countries, like Germany for example, are prepared to accept. Given that private capital has refused to get sucked into this issue, the problem is now in the hands of governments and central banks. The people who own capital, work hard, and pay taxes will have to go along with a decision of their government that they themselves would never make.
You might be surprised to learn of the frequency that countries default on the public debt. The WSJ today reported that, in fact, since gaining independence in 1829, “Greece has spent 50.6% of those years in default or rescheduling”; Russia 39.1% of the time; that Spain has defaulted 13 times since 1476; Germany and France eight times each; and Hungary seven times since gaining its independence in 1918. So the problem today in Greece has been an historical one for Europe. Obviously, Latin America is no better.
To stabilize global capital markets, there must be strong debt markets and currency markets, which is not the case today as they are both quite volatile. Equity investors who fail to recognize this fact have their head in the sand and are at risk of being wiped out again, like 2008. Yes, the S&P 500 is up +40.0% in 12 months, but so were the prices of condos in Miami in 2005. Real estate prices collapsed because of the simplest reason; there was an unacceptable return on invested capital, requiring speculative increases in the price in order to sustain bullishness.
With an aggregate of trillions of dollars of international public debt so close to defaulting today, bond yields are breaking to the upside as bondholders are selling, unable to accept the risk.
It’s only a matter of time, especially if confidence in economic recovery happens to wane, before (i) the people in fiscally strong countries demand their governments put a stop to the bail-outs of other people, and (ii) the higher bond yields attract enough equity market capital to reverse the bullish trend in those markets.
That’s one thing to keep your eye on this week; another is today’s Congressional confrontation between the Sen. Carl Levin subcommittee hearings with Goldman Sachs executives. Giving public testimony under oath while under legal attack from the SEC and various private and other interests cannot be easy; but that’s the nature of power. There is always somebody who wants to take it from you. In this case, the politicians hold the unfair advantage.
Call me a cynic, but as I see it, as soon as Goldman Sachs and their colleagues in Humungous Bank & Broker (HB&B) agree to piece off the Republican Party equal to the Democrats, Goldman Sachs will be off the hook. Then the so-called Financial Services Reform legislation will get passed, giving the public a small win.
What has fundamentally changed at HB&B, though, is the understanding that there is a limit to public tolerance of moral hazard, and that even if the securities act and regulations over the constraints on financial services players are given minimal change, it is now for certain that the top officers and directors of the biggest of these companies are no longer immune to criminal prosecution of fraud and conspiracy. Just four years ago, all of us were shocked that the CEO’s of America’s seventh largest corporation at that time, Enron, failed to use their personal money and influence to evade conviction on charges of conspiracy, securities and wire fraud, but we still never believed that such a thing could happen to a Blankfein or Fuld, and now we do. We have come a long way.
We have, in my mind at least, come so far that the culture at HB&B is changing in a positive way at this very moment, and that change plus whatever controls that result from the impending financial services reform legislation, will benefit society. In this matter, I still have my doubts, but I am not the total cynic I was in recent years.
I believe, however, that we the people will always have to push our elected representatives at every level to enact legislation to eliminate conflict of interest in financial matters.
So, while Financial TV will be interesting today, the FOMC will also be meeting. Tomorrow afternoon, they will report what they want us to know about their decisions on monetary policy. Of course, the biggest issue that interests us is the timing of their intentions to put their balance sheet in order. Presently, the Fed has lost effective control of policy making in that they have no liquid assets to trade with bankers; the Fed now holds illiquid securities of questionable value they cannot sell back to the private sector. And the private sector no longer wants to buy the new debt offerings of the US government at such low yields; hence the only way forward for the Fed is to buy that paper by creating its own debt. Meanwhile its balance sheet has grown to almost $2.4 trillion from about $900 billion at the time of the Lehman Brothers bankruptcy less than 20 months ago.
Until the FOMC switches out those dubious assets for liquid short-term Treasury Bills, the FED is a problem, not a solution.
In capital markets this morning, the US Dollar has strengthened a bit (to 81.6) because of the fact the Greece bail-out is still up in the air, and that has put some selling pressure on spot Gold (down just over -$3 to $1151), and Crude Oil down another -$1 to close to $83. That’s lifted the bonds a tad and weakened the S&P futures the same.
Have a great day.
CTA Trading Desk Post-Close Report
Successful traders are keenly aware of inter-market relationships. Large pools of money moving from one capital market to another usually leave rather large footprints. There was something very different about money flows this morning and those noticing this behavior had the opportunity to make a great deal of money.
What was different about the price action Tuesday?
• High-beta stocks were soft on the opening, and were unable to rally even though the consumer confidence number released at 10am was significantly higher than forecast. Changes in behavior precede changes in trend.
• While high fliers were jettisoned, money initially was moving into very liquid large cap blue chips. When managers get cautious profits are booked in the riskier extended stocks while money is parked in defensive areas. One could see money flowing into Exxon, Walmart and select drug stocks, and shares of the best performing stocks of this bull market were sold.
• US Bonds (TLT +1.29%) were bid all day, signaling that money was leaving the equity markets and seeking a safe haven.
All this was occurring before S&P downgraded Portugal’s debt, so traders should have been prepared and ready to act once this headline hit the wires. The US Dollar (DXY +1.36%) immediately got a big push and bonds began to accelerate to the upside, but the real kicker was the massive leap in gold (GLD+1.40%). Even as the dollar soared, gold powered higher; these two markets rarely rally strongly together and the combination means a whiff of panic is in the air.
Once the 20-day EMA(1194) was penetrated the market cascaded lower taking out last week’s low of 1183 on the Standard and Poors 500 (S&P -2.36%) on heavy volume.
Market participants finally acknowledged substantial risk exists in the equity market, and began to position themselves accordingly. Whether this decline is the onset of something larger remains to be seen, but investors should expect further turbulence in the near term.
Even if the S&P declines promptly to 1150 another rally should commence. If the market fails to clear the recent high and subsequently takes out the intervening low, the trend will officially change from up to down.
That story remains untold; expect increased volatility as the battle between buyers and sellers intensifies.
Have a great evening.
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Comments
Re: C Counterpoint
"Submitted by nebish (33 comments) on Thu, 04/22/2010 - 11:08 #61372
Hi all. I actually have $5 May Puts on C as we speak. The gov't has to liquidate its stake, as they have already stated they will, and a reverse split is already on the table to shrink the float mightily. So, I really don't think breaching the $5/pps mark is an event. The R/S, when it happens (not if), will vault the stock just like AIG did to make it institutionally friendly to invest in. I also can't help but think that C will be receiving (or perhaps has received already?) a Wells Notice relating to all the CDO investigations and civil lawsuits that are likely just getting cranked up.
I'm looking for C to cool off her near term back to the $4.30's...but that's what makes a market, eh? GL!"
nebish-
I see C bidding at 4.55 pre-market, and that pretty much triggers my mental stop. So my swing trade will end here for now. A little hasty on the stop? Not really. These disciplined stops kept out of trouble the last 12 months on the short side. I also have low tolerance for risk right now. (The shares I bought for the 8-year-old remain on the table, as a different kind of discipline applies there.)
I may reopen a position at any time, of course, including later this morning.
Well done. Giving credit where it's due.
Thank you!!
Thank you kindly, 2nd!! The best thing about this blog is the civil discourse and the sharing of knowledge that helps us all get better. Coming from you, this is a terriffic compliment, as you are one of the folks on here who I always read fully.
FD: I had 50 puts at an avg. cost of around .27/K. I did sell 30 yesterday at .45/K (pretty much got out all of my original capital) and will let the balance of 20 K's ride to see where they go. So, I am just a nickel/dimer, but options are plenty dicey enough without plunking down big positions (especially in the current market).
I do think that long term C will be much higher and isn't going away, so I think you're old-school buy & hold strategy for your child is a smart play.
Best of luck and thanks again for calling me out. You made my day.
re-C counterpoint
this is off the top of my head......but at age 69, having sat at mant dinner tables w/my non child-bearing aunts and uncle in my teens (not having children seemed to give them $$$ to put in investments/stock market unlike my folks who concentrated on having children) it seems to me the old saw was that stocks that did reverse splits tended to drop about 20% or so afterwards before stabilizing wheather they went on to be winners or losers. Be careful w/reverse splits.....
Cara 100 Ratings Changes
Good morning.
Upgrades:
BA - to Outperform @ Wells Fargo
WHR - to Neutral @ JP Morgan. PT = $116
Downgrade:
GOOG - Downgraded to Buy from Conviction Buy @ Goldman
New Coverage:
INTC - Sterne Agee Initiates with a Buy. PT = $28
ORCL - Citi Initiates with a Buy.
PT Raised:
TXN - from $27 to $30 @ Kaufman Bros. Hold
TXN - from $34 to $36 @ FBR. Outperform
Gold Miners
MADRID (MarketWatch) -- Newmont Mining Corp. on Tuesday said net income attributable to shareholders nearly tripled in the first quarter at $546 million, against $189 million in the year ago period. . . . The company said its average realized gold price rose 22%.
http://www.marketwatch.com/story/newmont-mining-ne...
African Barrick Gold earnings rise 143pc in first quarter
http://www.telegraph.co.uk/finance/newsbysector/in...
Russia's total gold output down 7.9 pct y/y in Q1
The first quarter 28.9 tonnes
http://www.reuters.com/article/idUSLDE63Q18Z201004...
Good news for Junior Miners
culture at HB&B is changing?
Bill said - "We have, in my mind at least, come so far that the culture at HB&B is changing in a positive way at this very moment, and that change plus whatever controls that result from the impending financial services reform legislation, will benefit society."
If the culture inside HB&B is changing, it is not apparent from the outside. They are still employing structural tricks and traps to harvest revenue from their poorest customers/victims. They receive loans at 0% and charge credit card rates of 30%. They are blocking the creation of a financial consumer protection agency with teeth that would remedy this. They have set aside huge amounts of bonus money for 1Q 2010 based on trades stemming from Fed handouts instead of recapitalizing their balance sheet that is currently based on extend and pretend. They still routinely collect money from deliberately complex derivative trades sold to municipalities after these trades "surprisingly" blow up. From a societal standpoint, HB&B continue to be leeches on the body politic. I will acknowledge material change within HB&B when I see them ACTING in a socially responsible manner, and not before.
Perhaps you have contacts inside HB&B from people who are starting to express regret but the overall industry continues right along with the same policies - mainly because their sizable bonuses depend on the continuation of such policies. If the change is only individual, spoken off the record, and does not result in changed behavior, is it a material change? If a man starts to regret beating his wife, but still continually beats her every night and continues to profit from that, does such change matter to her?
I say arrests and perp walks for control fraud, a flurry of civil suits from defrauded "customers", the restoration of Glass Steagall, and a stand-alone consumer protection agency with Elizabeth Warren at its head are the bare minimum for me. If change doesn't come from within, then change must come from without.
"Default" Dear Brutus is in ourselves...
Bill,
I find your commentary today extremely interesting and thought provoking. (Not unusual.)
Earlier today I read how IBM plans to "Crowd Source" its employees at Mish's site and also Ron Paul's classifying the Obama administration's policy as "Corporatist" your listing of sovereign debt history fits right in.
Many years ago I read Barbara Tuchman's book, "Proud Tower" exposing the group think of a century ago when it was thought wars were passé due to international economic linkage... just before "The Great War" began.
Prior to WW2 US isolationism assured many we would leave the war to the Europeans and their colonies.
The bombing of London, German commanders believed, would cause Britain to sue for peace. Ironically, even after the policy brought on heroic resistance and resolve, the British commanders thought the same when they bombed German cities to dust.
In each of these situations group thinking was ultimately proven to be overcome by human factors which had been dismissed by the mass planners.
I don't know what form it may take, but somehow I believe people will reach a point where we hear a unified ENOUGH! — the EU may be the first — and real reform (or rebellion) will occur.
To some degree I think the individual's withdrawing from US stock mutual funds in the past year has already shown this. The "commanders" need the masses to join in and play the role expected or this charade will end differently.
Re: C Counterpoint
Thought you guys might want to read this:
"What's Killing Citigroup -- Slowly" - new from Jim Jubak
http://tinyurl.com/2dx26ds
Regards,
BH
Re: re-C counterpoint
tobyt- Thanks. If C follows through with a reverse split, I'll sell into it.
GOOG
Hey TOF looks like GOOG is getting down to that 520 support level. I know you were eyeing it before.
Look at GOOG:SPY. Talk about underperformance! A rebound from that situation would be interesting.
Cara 100 Update
PT Raised:
CAT - from $76 to $86 @ RBC. Outperform
TXN - from $33 to $34 @ Wedbush. Outperform
Sold NYX at $34
that I bought yesterday morning. Taking a litle more risk off the table.
Ford
After hitting the year high yesterday of 14.55, Ford released earnings of 50 cents (2.1 billion) per share this morning before market open, and promptly sold off on heavy volume this morning and is now down 3%. But how will it end? Annualized, that's a P/E ratio of 7. Will traders see this as a dip to be bought?
Edging towards the short side
VXX/FAZ. I can't tell who's more nervous right now, bulls or bears. But I'm not sensing much complacency.
CONFIRMATION
ALOHA!!
Right now I am getting no downward confirmation on the POG from the KITCO CURRENCY INDICATOR. Only one currency is confirming, the Yen and all 13 others are not. I find it interesting that the USD is in a fairly large up rally at .57 yet gold and silver and oil are yawning. POG down $2, POS down $0.07 and Oil down $.74.
On the GS side of things in terms of "confirmation" I see these guys are facing a tough grilling because it was Levin who told Obama in a face-to-face meeting with Tim Geithner and Larry Summers present at that same meeting that he should get rid of them.
I still cannot reconcile myself to believe that if America makes these corporate/HB&B cosmetic changes that all we be right with the World. I do not see how you can have a monetary system where you can print money into infinity and not have this same corruption exist at these lofty levels.
I made the statement a long time ago that all banks are MIDDLEMEN skimming profits off the top like the Mafia at the Tropicana. What value to society do "paper shufflers" truly have? I have never seen any. Why is it any American or American corporation who has an excellent credit rating with a long history of solvency and enough assets cannot borrow at the same discount window rate that US FED banks do now? Why is it the US Treasury cannot loan direct? Why do we need the US FED(a private cartel) in the MIDDLE of everything? I have been alive over 50 years and I do not see that the US FED has added any value to my life in terms of what my money(a USD) can buy. If money continually buys less then is that not an "F" on the US FED's monetary report card?
Real CHANGE is not switching faces at banks and chastising CEOs on national TV and doing perp walks. Its restructuring the basis of all our economic ills. It is the restructuring of malinvestment at its deepest level ... ITS THE MONEY STUPID!
Two "monopolies" need to go ...
Good morning
tobyt.... thank you for the kind words this weekend... At this time, I am looking at a few ' pick and shovel ' companies, ( 'new directional ' diagnostic companies, involving different, more rapid and accurate, disease identification processes ). The companies have been in business for several years, but only ' public ' for the last few. I believe one, in paticular, will surpass where SQNM once traded, although I am sure it will take awhile. RNA importance has, to me, been regarded as the ' second cousin ' to the DNA research labs, although they both eat at the same table ! As an aside, however, DNA testing is on the table for use in all 50 states where there is criminal indictment. I believe, however, this will expand to use in many, many other areas. There is a small public company, that actually use to compete with SQNM, but, in recent years, focused on DNA testing, and is reaping contract after contract... ORCH ... it has come off a good base in the last year, and may back off to $ 1.70 ish... but maybe not.. I have had a position since January of this year ( although I traded it at much higher levels years ago ).. I will have to post an RNA article later, as I did not copy it.. it deals with the different approach to diagnostic evaluation of disease...
Re: Ford
davefairtex -
I like Ford. Same thing happened with New Gold last week. Blow out quarterly report and it went down only to zoom in the following days. You know F doesn't even have the President pretending that its emergency loan was paid off with car sales as he did for GM last week. It's producing solid product and making a profit through strong leadership.
Tata Motors has a forward P/E of 10.84 and Toyota's at a whopping 68 with its American sales under pressure due to ghosts in the gas pedal. UAW is under a lot of pressure to play fair or perish.
Just bought some F.
Cara 100 Update (Final)
CAT - estimates, target boosted at UBS. Shares of CAT now seen reaching $74. Estimates also upped, to match the company's new guidance. Neutral rating.
TGT - price target increased at Credit Suisse. TGT price target improved to $64 from $55. The company is making a clear shift from "pay less" to "expect more." Reiterate Outperform rating.
TXN - target boosted at BofA/Merrill. TXN price target improved to $28 from $26 after solid 1Q10 results. Margins out of gas. Maintain Neutral rating.
WHR - estimates, target boosted at Goldman. Shares of WHR now seen reaching $130. Estimates also upped, to match the company's new guidance. Buy rating.
BDI
http://tinyurl.com/3sm9kd
Take a look at the Baltic Dry Index, BCI (Cape Index) Spot 4 TCE AVG (USD) today. I don't know if it's a misprint but yesterday it was 29061. Today it jumped 6048 to 35109. I don't recall ever seeing a jump like that before. The graphic doesn't seem to reflect the increase, so it's probably a misprint.
Gold and Silver ...
Just took a moon shot.
Re: culture at HB&B is changing?
Great discussion! is the culture changing? Hmm... I'm an optimist that it might in due time, but....
I'm in the middle of Michael Lewis's book: "The Big Short." mentioned in this discourse before, and think it's a must read for anyone who wants more detail about the players being grilled this week. But here's something that just blew my mind yesterday.
It would appear that," Moody's and S&P asked the loan packagers not for the FICO scores of the individual borrowers of the loans contained in the pool to be rated, but the AVERAGE FICO score of the pool. "
So what did these guys do? The rigged the pool with outliers of high FICO scores that masked the poor quality of the rest of the loans/borrowers. In this manner, the packagers (who were soon to buy CDS on the very loans they were packaging, or help others to do so) were able to get triple-B quality junk rated triple -A. Oh and btw, the triple-A CDO's cost less to buy a CDS on becuase it was "triple-A".
The fact that the rating agencies asked for an average, rather than the median of the pool (never mind that they should have looked at every single FICO score), is just mind boggling to me.
Good things these people don't work with nuclear material....
good book -
Re: Edging towards the short side
VXX- opened 18.80, off 19.12
FAZ- opened 11.79, off 18.83
Good example of the kinds of gains/time frames I've been settling for on the short side for a long, long time...
Re: CONFIRMATION
Amen.
I feel the same way concerning professional politicians.
I've never had an economics or business class, but was able to successfully run my own business for forty years. I faced down three attorneys when a former client imposed on my personally created property. All it takes is common sense.
An old Swede who started a successful local manufacturing company once told me, "I don't know much about business except you got to take in more than you pay out." Congress could use his advice.
General Marshall, when Chief of Staff during WW2, insisted on a morning summary of the war on one side of a sheet of typing paper. We should be able to do the same with any bill or the Income Tax.
Complexity is for the defense of crooks.
Greece developments
April 27, 2010 11:23:15 AM
*(GR) S&P CUTS GREECE THREE NOTCHES FROM BBB+ TO BB+ (now junk status); outlook Negative
- S&P: The negative outlook reflects the possibility of a further downgrade if the Greek government's ability to implement its fiscal and structural reform program materially weakens in our view, undermined by domestic political opposition at home or by even weaker economic conditions than we currently assume.
- "The downgrade results from our updated assessment of the political, economic, and budgetary challenges that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory, In our revised projections, we forecast Greece's net general government debt-to-GDP ratio reaching 124% of GDP in 2010 and 131% of GDP in 2011. "
Re: Edging towards the short side
As for the gains I left on the table, No Comment...;)
C reentry
4.42
Re: Greece developments
And people listen to S&P because...why? They've done so well in the past?'
It sure did move the market though. The down elevator sure goes faster than the up-elevator sometimes. Thanks Vad.
Re: CONFIRMATION (big short)
This is exactly what the perps in this saga were after. They wanted (and I'm sure still want) an instrument, that was so dense and complex, a derivative of a derivative that couldn't be objectively priced, so that they could charge whatever they wanted to being the middleman in these transactions.
"Complexity is for the defense of crooks" - I'm kinda liking that.
bonds anyone?
TLT breakout today, big volume. Those of us calling for bond market problems (me, for instance) after QE's end sure ended up looking silly. At least for now anyways.
GS
Anyone noticed that GS price held up better than the index?
Leveraged ETF Margin Requirements
My broker has a notice that margin requirements are being raised as of yesterday on leveraged ETF's. I think this will deflate the market a little more than the headline on Marketwatch saying Greece is the cause of this selling.
Deeds Not Words
No doubt those on the stand today have a sense of urgency, they are fighting for their survival.
What must we do to 'fight the power'?
Demand TRANSPARENCY. If we don't get it, from the Fed or those dumping dollars down the rabbit hole of the GSEs, we have to keep writing our representatives demanding representation.
Redirect our capital allocation to those individuals and companies who execute the transparency and integrity. How do you BOYCOTT XYZ? You don't associate with them. If your $tay Mad portfolio loses over fifty percent in a year, should people buy your next book "Ge77ing Back to Even"? Your call.
We get the leadership from the intersection of the three branches of government that we demand. If we accept empty rhetoric and bad policy, we deserve it.
A very public thanks again to Bill for meeting with me yesterday. I found him to be a warm, sincere, informative MAVEN and CONNECTOR. He is underappreciated in our time.
Gold Comex opex tomorrow April 28
do you feel lucky, goldbugs?
GLD:TLT is holding up decently, so far - both are being bought up as safehavens apparently - for now.
http://stockcharts.com/h-sc/ui?s=GLD:TLT&p=W&yr=3&...
Gold is at new ATH in EUR of course (what else), and the EURUSD might could go down hard if it breaks 1.32.
If nothing else breaks seriously, the S&P futures could / should bounce from just above 1180 and make yet another run back up to the highs.
Commodities in general (RJI) have not yet broken down seriously either, except possibly copper, which is a bad sign I think.
Re: Greece developments
ALOHA!!
Vad ... That's still a higher rating than 80% of the US FED's MAIDEN LANE assets being managed by BlackRock Group! HA!! I have never seen so much global fraud in my life and yet for the most part it is viewed as "genius"! A stupid person is someone who works hard and saves ... FIAT MORALITY!
Re: Gold Comex opex tomorrow April 28
ALOHA!!
Right now the global currencies are still confirming the current POG with 10 currencies on the plus side, down one, from 11 earlier this morning, even in the face of USD up .80. Dropping below 9 would be cause for short term concern, only from a currency perspective.
Ags got blasted this am
volume and $... DD's #'s too strong to ignore ... watching option movement at pot and mos.. ready to step in.
WATG
RE: WATG - You may have seen this press release but I'll post it here:
http://finance.yahoo.com/news/Wonder-Auto-Obtains-...
Per the press release: "gained trail orders from a German client for its German headquarters and American branches. This client is one of the most famous automotive absorbers manufacturing firms, especially for high-end luxury cars and modified cars."
Anyone have any inclination as to whom this is? Dollar amount is small at $2 Million annually, but this could be a nice reputational win for them.
The reason I'm so bullish on this name is the long term trend toward automobile growth in China and the auto parts manufacturers are going to be big winners. China has 5 to 6 times our population and only just recently passed the US in annual sales of cars.
In their April 6th pre-announcement on earnings they stated:
""The Board of Directors is pleased with Wonder's achievement in the first quarter of 2010. Wonder Auto's first quarter results are not only the result of outstanding organic performance, but are also the result of significant expansion in the auto safety business and alternative energy vehicles components business. We believe these favorable dynamics, in addition to renewed strength in China's onshore auto market, point to a highly favorable operating environment for Wonder Auto in 2010 and following years. Wonder Auto's performance, as well as aggregate China auto market statistics, corroborate long-term growth trends in the Chinese automotive market, as compared to short-term behavior from the 2009 Chinese government stimulus. We see multiple signs of a continuing resurgence in the Chinese automotive market attributable to strong onshore consumer behaviors."
FD: Long WATG at a $12.15 average.
Re: culture at HB&B is changing?
Guilty are few and far between, but high enough inside their co's to trickle down their company's cultures.
I have many friends at UBS, GS, Wachovia, BofA and C, who work their asses off and follow both legal and ethical rules and are high quality people.
But the culture of kill or be killed and mega bonuses is still alive and well. It is the culture where books like Liar's poker, which was aimed to dissuade people from going to wall st, actually lure the wolves to run to wall st.
They have your deposits, your 401k, your insurance, your politicians, the power to influence/control money supply, and the power to write the rules/regulations indirectly. How can they lose?
Re: culture at HB&B is changing?
Individually, most German soldiers were honorable people, and believed in their country. Following the orders of Hitler was the problematic part. In the end, the German nation paid collectively for that mistake. It takes courage to go against the crowd. Marlene Dietrich did, and was thought of as a traitor by many Germans for years after the war's end. But as she said, her stand was "the decent thing to do."
HB&B needs to be stopped from skimming off 20% of this nation's productivity. It will happen, simply because it must. Their very power and control of the system will bring them down; as a group they will be unable to resist retaining their bonuses and perks while the rest of the country wallows in misery, and in the end, they will increasingly become targets of populist anger. Some political candidate yet to emerge will make a decision to effectively channel this anger, and then it will all be over. Dems and Reps will fall all over themselves to get out of the way of the train, and it will happen in weeks rather than months or years. We're not at that tipping point yet, but it is not far off.
This reminds me a little bit about how communism ended. It seemed all-powerful, right up until it wasn't. And then the prisoners of the system were suddenly freed, and were elected to high office. At that point, having "Goldman Sachs" on your resume will not be so helpful - like being an honest and hard-working "SS-Sturmbannfuhrer" in the old Third Reich was quite a nice job, right up until it wasn't.
You guys inside HB&B - you really want to keep riding until the horse dies underneath you? Remember Chuck Prince's theory about dancing until the music stops? How well did that work out?
Just a thought.
One thing that strike me ( imhao )
is the congressional panel is prepared this time.
Re: culture at HB&B is changing?
"This reminds me a little bit about how communism ended. It seemed all-powerful, right up until it wasn't. And then the prisoners of the system were suddenly freed, and were elected to high office."
Actually, those connected to old powers successfully retained offices under the new ones. Executives of Comsomol (Communist Union of Youth), various KGB folks, military guys, trade union guys and even some of Communist party shots quickly changed their spots, suddenly turned into devoted church-goers and "discovered" rebellion against Soviet regime in their past. Examples of the former prisoners of the system becoming anything even remotely allowed near authority are few and far between... just ask academic Sakharov freed by Gorbachev.
Better analogy would have been Revolution of 1917 and Communist takeover of the country. That was a clean case where having capitalist/bourgeois past was akin to death - literally.
Re: C reentry/ Out
Out at even money. Not liking the action. Back to 100% cash.
Consumer Metrics Institute corrects me
Mr. Cara:
Recent reports of a strengthening recovery are not fully supported by the
behavior of consumers on the web. At the Consumer Metrics Institute we
measure the depth and quality of web based consumer "demand" on a daily
basis, and during this recovery the year-over-year changes in "demand" that
we measure actually peaked in August 2009 and have been declining ever
since.
In fact, our "trailing quarter" of web based consumer demand slipped into
year-over-year contraction on January 15th, and since then we have been
plotting the progress of this 2010 contraction event against the profiles of
similar events in 2006 and 2008:
http://www.consumerindexes.com/commentary_2010_con...
As you can see from the above chart the current consumer "demand"
contraction event is unique: if there is a "second dip" it may very well be
unlike anything we have seen recently. Instead of a "call-911" type of event
in 2008 or the "hiccup" witnessed in 2006, we may be seeing a "walking
pneumonia" type of contraction that has legs.
Over the most recent 7 quarters our economically "upstream" Daily Growth
Index has led the "downstream" factory GDP numbers by about 17 weeks. If
that pattern continues to hold, we are currently about halfway through the
consumer transactions that will drive the third quarter's production and
GDP. If the blue line shown in the above chart continues drifting laterally
over the next 40 days, the 3rd quarter 2010 GDP will look a lot like what we
have previously projected for the 2nd quarter 2010 GDP, contracting at a
mild but persistent rate.
In summary, our data is telling us that U. S. consumers are very reluctant
to take on the kind of debt that they have traditionally assumed when
pulling the economy out of previous recessions. Even a recent upturn in our
retail index faded once the seasonal impact of the forward shifted Easter
holiday had passed. Furthermore, even during the Easter retail up-tick the
quality of the transactions was not very high. Big ticket items requiring
longer term financial commitments were relatively scarce, and for that
reason our Weighted Composite and Daily Growth Indexes did not materially
respond.
Our mission at the Consumer Metrics Institute is to measure (on a daily
basis) exactly how consumers are leading the U. S. economy. We "mine"
nation-wide internet consumer tracking databases on a daily basis for early
warnings about the demand side of the economy. Our data is significantly
upstream economically from the factories and the products measured by the
GDP, putting us far ahead of the traditional economic reports. Perhaps our
data is too timely; we are so far ahead of conventional economic measures
that our story generally differs (either positively or negatively) from the
stories being simultaneously reported by more traditional sources.
The indexes themselves can be found at http://www.consumerindexes.com.
An overview can be found at http://www.consumerindexes.com/Overview.pdf.
I realize that your readers are probably tired of hearing about the
recession, and frankly our data is certainly less uplifting than the picture
currently being painted by most economists. But our data has substance and
(as you can see) the chart is telling us that something actually is
"different this time."
If you feel that a cautionary story should be heard amongst the optimism
currently out there, simply reply to this e-mail. If you are on a tight
deadline, call me directly at the Consumer Metrics Institute:
(303)656-9801.
Thank you,
Richard Davis
Consumer Metrics Institute, Inc.
Actually Richard, we are both right. I have repeatedly been negative on the data, but I have also cautioned the econ Bears that some of the data (if you can believe it) has turned or appears to be turning positive.
I have also stated that all through the time that China's economy was cranking out phenomenal numbers, from 4Q2007 into 4Q2008, the Shanghai stock market was plunging, so there is certainly no 1:1 correlation between econ data and equity prices.
As to deadlines, I am swamped. Started my day at 4am; how about you? :-)
breaking out that 10999 party hat!
Here we are again.
Bob
GLD
GLD is at $114.40 and is working on putting in it's highest close since 12/4/2009 when it closed at $113.75. That was the day after GLD topped out intraday on 12/3/2009 at $119.54 and subsequently rolled over. Meanwhile miners (GDX as a proxy) have been juyst holding steady in sympathy with the broad equity market.
Amazing to see both Gold and the $USD both so extremely strong today (and silver weak). Now that the powers that be are about to stick the band-aid on Greece it appears that Portugal will move immediately to the top of the headlines. Top it off with some political theater.......all sorts of craziness today.
Re: culture at HB&B is changing?
"Individually, most German soldiers were honorable people, and believed in their country."
Yes, and this included many in the officer corps who were opposed to Naziism but loved their country. Quite early after the US entered the war Adm. Canaris made an offer through Alan Dulles in Switzerland to remove Hilter and negotiate peace. FDR refused to consider the offer and held out for "unconditional surrender" against the advice from Gen. Marshall, Gen. Eisenhower and many others who realized such a demand would cost thousands of lives lost unnecessarily on both sides.
There were many attempts to assassinate Der Führer and Canaris along with many honorable men and women were executed for their efforts.
Re: Consumer Metrics Institute corrects me
ALOHA!!
I started at 3:30AM Hawaii time! Its that MOTHERS DAY thingy!!! We sell a lot of flowers now thanks to the Mother's of America and whoever thought up Mothers Day.
Interesting ... This confirms the NFIB and its SMALL BUSINESS SURVEY which for the end of March registered a 86. This is the longest time period in the history of the NFIB indicator that the outlook for small business has been this dismal.
Vad the Index's looks like a DBI setup.
Or is the dip going to be bought.
Bob
Re: GLD
ALOHA!!
KITCO CURRENCY INDICATOR has moved up to 12 out of 13 from 11, with only the Yen abstaining, but unlike the early morning the Yen POG% is now green not red. Many currencies are seeing their POG soaring today ... even with the USD up .85! I have never seen this happen on a day when the USD is up so high. Usually its the same old drill USD up POG down!
Maybe GS and the biggy COMEX players are tied up in too much litigation or maybe the World is seeing a sovereign LIABILITY BUBBLE they do not wish to participate in!
Re: Vad the Index's looks like a DBI setup.
What time frame are you looking at?
Re: Vad the Index's looks like a DBI setup.
2min S+P. Now looks like double bottom. 1190 support. I was just looking across the room at my computer at 3:00 and my first reaction was thats a DBI. See how you screwed up my brain.
Bob
Re: culture at HB&B is changing?
You have my vote.
Re: Consumer Metrics Institute corrects me
Awesome! Thank you for sharing.
Re: Consumer Metrics Institute corrects me
"Whoever thought up Mothers Day" I believe that would be Joyce Hall ;-)
Re: C reentry/ Out
If Debt Defaults in Europe is happening or going to happen for sure as we speak and some in US may follow (BK states), shouldn't we put some money in FAZ, VXX, GOLD bugs, ..etc.., Just an observation here..any ideas??
Re: Vad the Index's looks like a DBI setup.
Everything's fine with your brain, as far as chart reading and setup recognition go, LOL. It is DBI and a little inverted C&H, threatening breakdown. Problem is, daily candle is a bit too extended already and we are nearing end of day so I wouldn't be taking any trades here. Market is fairly news-sensitive, too, this handle for instance got completed on the latest headline:
IMF considering increasing its share of Greece aid package by €10B amid fears the €45B plan will not be enough - FT
- currently the EU has proposed providing €30B and the IMF €15B, but some speculation has circulated that the package could be boosted to as much as €70B.
So... as a chart formation - yes, as a trade right here and right now - not by me.
Re: Vad the Index's looks like a DBI setup.
I see a five wave decline, and a whole lotta green here.
Re: GLD
GLD is up a tad more today than TLT as I write this (in percent of course)
S&P Pivot point of 1181 is holding..
I see dip buyers here again... go figure..
Broke below the prior W4
If indeed that was a Wave 4 in that corrective mess.
1175 is critical test. Hibernation is over.
S&P Index
Moved 50% of my long only account (which is 100% cash) into the S&P 500 at the close. With the volume spike and VIX spike (good call by those 40 VIX call buyers huh?) I'm viewing this is an opportunity to make money, not to run and hide.
Today's news was already known so I'm not sure how much legs it has. Keep in mind what the French finance minister said yesterday: essentially that Greece would not fail. I'm taking her word on it and I think Europe was hoping to see Greece resolve itself on its own accord...the yield spikes are forcing them to deal with it. I believe we will see a bottoming process between 1180 and 1150 as these issues are dealt with. I'm still of the view that these sovereign issues are a RESULT of the crisis and not a CAUSE of a new upcoming crisis.
EDIT:
If 1150 doesn't hold then I'm ok with cutting my losses because it's not really that big of a loss.
gold - wow
I have to say, Gold is looking better than long term treasuries today. With the euro getting crushed, gold absolutely went nuts in euro terms - up 3.11%. Even in strictly dollar terms, gold had a great day.
The crap stocks (AIG in particular, down 16%) got eaten for lunch, the former leaders of the pack XHB (-4.2%) and XRT (-3.4%) were soundly trounced, and utilities, healthcare, and beaten-down quality stocks like GOOG and WMT relative to SPY did quite well. Pretty clearly traders are selling risk.
But for me, gold was the surprise winner of the day. I fully expected the demise of the euro (breaking support and down 1.57%) to push gold right off a cliff, but the exact opposite happened. Perhaps this time around, traders (and investors?) are fleeing paper for the yellow metal. Is there a new sheriff in town?
Greystar (T-GSL)
Hi All - Couldn't resist another entry on this one following the big drop after some enviornmental wacko's temporarily have taken over the ministry there. I figure with the World Bank's 10% shareholding coupled with an investment by the company of ~$140 million to bring the project (22mm oz/Au & 34mm oz/Ag) to final feasibility will allow common sense to prevail and an operating permit to issue in due course. Not too worried about the Chavez inspired insurgency in the country, but there is still plenty of risk regardless. Happy Trading
Re: culture at HB&B is changing?
Vad - "Actually, those connected to old powers successfully retained offices under the new ones."
Funny what happened in Russia. I was thinking more about Poland and Czechoslovakia. People who had "street cred" opposing the former regime moved to the top (Lech Walesa, Vaclev Havel), at least temporarily. Also note the case of Nelson Mandela being a prisoner for 20 years, then becoming President of South Africa. This may bode well for the futures of William Black, Elliot Spitzer, Robert Khuzami, and Elizabeth Warren.
HB&B insiders might consider shooting Hitler and becoming good corporate citizens instead of grimly trying to hold on to their world until the likely gotterdammerung forces them to change. Those who don't learn from history are doomed to repeat it, no?
Re: gold - wow
davefairtex
Given the strength of the $USD this morning and weakness in equities, it seems very plausible to me that many traders lightened up on gold and gold miners early in the day (to raise cash) figuring that the downdraft would eventually cause gold to tumble and provide a better entry later in the week.
Will be interested to see how gold acts in Asian/European action. Given today's confluence of events and momentary breakdown in $USD/Gold correlation, it seems a gap up may have the effect of leaving many traders on the sidelines. (Of course, until we see more confirmation, I won't rule out the possibility that today was a massive headfake driven by Comex gold expiration)
Re: gold - wow
BillySundance -
I have noticed a correlation in the past to "greek problems" and upward pressure on GLD:FXE. Today, given the downgrade, I believe that's just an exaggerated version of that same correlation. It would be interesting to track Greek long bonds against movement in GLD:FXE. I bet you'd see a clear correlation there.
Here. Try this one. It is Gold (in euros) alongside $ATG:NBG (greek stock market:national bank of greece). Theoretically, at least, NBG is heavily exposed to greek bonds, and so it acts as a proxy for them, at least nominally. The correlation is pretty strong - at least directionally anyway.
http://stockcharts.com/h-sc/ui?s=GLD:FXE&p=D&b=5&g...
The goal here is to answer the question: why did GLD rise when the buck went up? Possible answer: people fled from euros into Gold as a result of problems in Greece. The correlation might be better if I could use greek bonds instead of a greek bank.
Lloyd Blankfein has begun his testimony
http://bit.ly/9En5B7
Toward the next big war
"The whole system is rigged..." - Celente
http://tinyurl.com/29y76at
Obladi Oblada
Each morning my reticular formation sends a pulse to my cortex at 5 AM sharp here in California. I get up and check world markets one more time, as usually I awake and peek in the night that the markets are still there. Markets were churning under the red open lines today overseas. At 6:15 I find my place under the patio and as my wife calls it face Mecca or my belief of where Wall Street is and meditate for a few minutes. I wonder what the machines are up to for the new day.
As I see it the machines run the financial markets today. We have the Humungous Bank and Brokerage Houses, the Dark Pool, and the Hedge Funds. I strongly believe with out proof that an orchestrated attack on equities occurred today. That the machines stop buying and begin placing orders under the market pulling it down and harvesting stop orders. That is the stocks you had placed stops on are now on someone else's ledgers for a price better than you had a few hours ago.
I find it hard to believe that today's news was new for anyone trading markets. The US Stock exchanges are USD based. To me the rise in the dollar if anything says this market should become stronger as it is dollar backed. So, today doing nothing the equities rise in value today about a penny a dollar just in exchange rates. Great place to have your money invested.
After hours I see more green than red in the trades. So tonight a bunch of unmachine types will get home and find they have cash in their account and not stocks. How many of them will pull the funds and sit on them at 1% in a saving account for the rest of their lives? I don't think so.
In a few days Greed On Demand (GOD) will begin buying the shares it missed today for a little more each day.
From John and Paul
Obladi oblada life goes on bra
Lala how the life goes on.
Obladi oblada life goes on bra
Lala how the life goes on.
http://www.youtube.com/watch?v=pJhcGepfG04
May your computer shine brightly at the bell.
Xdroid
Levin Panel 1
Rousing opening statements by the Senators berating Goldman Sachs for being just slightly above amoeba on the DNA chain.
Unfortunately the witnesses were then given a chance to respond and the Q&A ensued and it became crystal clear that the committee was in WAY over their heads. Problem is, GS is a market maker, not investment advisors. Committee didn't get it. Thing is, if I want to buy crap at 10 cents on the dollar, GS is the place to go. They have stuff like that on their books, or will find it or create it. They make judgements about how to hedge the risk until they unload it - e.g. if they think it's great, they'll likely have an on-balance long position. Or, if they think it's poo-poo, they'll probably have a net neutral to short position on it (and instruct their salesman to get to work selling it) until it's all sold out.
This inquisition is going nowhere FAST.
Re: Lloyd Blankfein has begun his testimony
Blankfein is telling the subcommittee the whole point I have made from the beginning of blogging in 2004: (paraphrase) "There are many parts of the business, we have different interests and obligations and we are responsible to all parties in all the businesses we do."
In other words, there are conflicts of interest and moral hazard that are extreme, but trust us, we know how to manage it.
I think not. There will be financial services reform that puts HB&B into a new ball game when this is done with.
Re: Lloyd Blankfein has begun his testimony
I think you're right Bill. Conflicts of interest really showed up big today.
Re: Lloyd Blankfein has begun his testimony
From someone in the business, I have to say that the Goldman Sachs people did an admirable job today, facing an almost impossible task. I mean when they line you up against a wall, put the blindfolds on, and offer you a cigarette, you know what's coming. Great theater, but, as I see it, the excellent subcommittee merely laid out a case why the issue of conflicts of interest must be resolved, now. Forget the politics; solve the problem. Goldman is no different than any of the other firms except for the fact they are the best at the game. So, you don't like the game -- and I don't, and those Senators clearly don't -- then change the rules.
LLoyd has Ended His "Testimony"
Blankfein = Blank Stare and incredulous look on face when pressed by Levin and later McCaskill. The furrowed brow indicated he was hard pressed.
Watched it on CNBC who cut it off at an interesting point to go to their GS supportive crew. They did later go back to Levin's concluding remarks.
Re: Lloyd Blankfein has begun his testimony
I agree...and that's a GOOD thing, despite what the market voting machine told us today. The committee is using GS as a scape goat, but they are all the same. I was thinking this as I was watching it today. Are you telling me that any of these other investment bankers are doing it differently? Maybe not as profitably but not differently.
So then it becomes a question of the system that was created...which needs to be fixed.
Time to focus on prices
Today, the S&P 500 was down -2.3%; the Europe top 100 was down -3.1% and the Dow Jones World Index dropped -2.4%. Trillion dollar haircut today. Forget Financial Entertainment TV; monitor prices and focus on risk.
Btw, for those of you who questioned my opinion this morning about a culture change happening in the industry, Lloyd Blankfein was, I think, quite serious when he said that the industry was being managed much more conservatively now. I believe it; that's why I wrote it. These people are the best in the world at what they do. They are not desperate; they don't have to steal, and they certainly don't want to go to prison. They are young and have families. Trust me; they get it.
Re: Time to focus on prices
GS, like any other corporation, exists to make a profit. The reason they are in the present position is because they were efficient at exploiting the environment created by the very same people interrogating them. Congress needs to look in the mirror to find the source of the problem. My guess is that the only way to prevent excessive leverage is a return to the gold standard, and I don't expect that to happen until its too late. I'm an optimist by nature, so find this depressing. As an aside, the miners were treated more like paper than reserves in the ground today. Added a little GRS.
Re: gold - wow
If you go to your SD boxes and look, you will find the coins look, feel and sound the same as they ever did. I guess that's a good thing. Today's action say to me that the dollar is no longer the only safe haven. Quite a change there. Maybe the world is smelling the debt levels here, finally.
Re: Time to focus on prices
My goodness Bill, saying "time to focus on prices" while saying one last thing about your culture change observation just isn't likely to get me focused on prices! It drags me back to consider your earlier point!
I think more conservative management is great. However what I really want is the banking system to make real, material changes in how it does business. No more loans from the Fed at 0% and 30% interest cards, no more $40 over the limit fees, no more $30 bounced check fees, no more over-complicated derivatives sold to municipalities, and no more conflicted financial advisors selling auction rates to widows & orphans while the market seizes up. When I start to see this happen, THEN i will believe that the people you describe are not only the best, but also good members of society as well.
Until then, I remain unconvinced. These guys have proven themselves untrustworthy, so they are guilty until proven innocent through repeated virtuous action.
Now I can focus on prices. :)
Re: Time to focus on prices
I focused on prices and risk today. I got back to 95% cash after a couple of bullish, short term, small profit ventures. Reason: EMA 20-22 has succumbed for short term (and VST). Intermediate Term has a ways to go but a top spotter is in place and confirmed today, according to my subscription service. I have respect for these Spotters, until they are taken out.
Re: Time to focus on prices
I too watched as much of the charade as was necessary to conclude that they were tilting with blunted lances. All I saw were two sides of the same nickel that enrich themselves from stealing from the public purse, bantering over semantics.
The culture change if it happens at all will take many many years. Of course the industry is being managed more conservatively. It was that or die an ignoble death. They manage more conservatively with the guarantees from the public purse. Has Goldie given up their 'bank' charter? Is it any wonder that their capital grows at the expense of savers who earn less than 1%? Why in the hell would any IB or commercial bank lend when you can make billions arbitraging the yield curve.
I will say again that if bank, I bank and commercial RE were marked to realism, 30% of S&P 'profits' would evaporate. There is serious accounting fraud at almost all levels in the system. Until there is honest accounting which reveals honest money and positions, the system is kaput. But the dance can continue until it doesn't.
In case you are feeling sorry for HB&B....
Today a client's loan modification became final after a year and five month effort as their lender (one of if the hugest of the HB&B) juked and jived. These folks started the process before there was a Stimulus Bill and have weathered many changes in guidelines and people juggling their paperwork. In the end, it took filing complaints about delays (and accruing arrears during their trial mod) with the State Attorney General and Comptroller of the Currency to get it closed. Quite a marathon for one exhausted homeowner who was certainly facing the loss of their home without this asssitance.
Their happy result was a reduced payment based on 2% interest for five years stepping up once a year to 5.25% interst in year nine - fixed for the remaining 18 years. There is a balloon note at maturity after 27 years due to 40 year amortization. The lender was kind enough to defer $80,000 of principal with no accured interest, due at maturity along with the balloon. The net effect is 4.2% combined interest rate on a note over $400,000. At the end of the day the bank will receive over 110% return on their investment over 27 years AND more than half their money back (the unpaid principal). I'm certainly not losing any sleep over it. In fact, tonight will be bliss.
Re: In case you are feeling sorry for HB&B....
Oh happy days. Some shmuck gets a 2% loan for five years but where is MY SOUP. I pay 5% on a loan with 8 years left on the principal. Justice is a mean mistress that peaks under her blindfold and rewards the profligate.
But good for you. You just made a serf happy that his hovel is his castle, no matter how conflicted the 'owner' vs. debt holder be.
Debt forgivness is a time honored way to start over. Reducing the cost of carry is simply a way of keeping the peasants paying for the privilage of living where they should not.
Re: In case you are feeling sorry for HB&B....
Ross,
He ain't heavy...he's my brother. http://www.youtube.com/watch?v=C1KtScrqtbc
Watching John Lee position himself for a multi session trade
in PM's. Have yet to use what remains of my account for a trade. Will try and find a setup today.
http://ibankcoin.com/chart_addict/2010/04/27/gold-...
ECB has mandate to intervene with taxpayer money
in time of systemic crisis, or so it is suggested. Resolution to bond market issues in Europe may occur at a quick pace, putting an end to the uncertainty, although I guess those nasty currency speculators would have a field day...
(I can only cross my fingers and hope for a cheaper Italy this summer :)
http://www.telegraph.co.uk/finance/economics/76407...
$vix is back
http://jessescrossroadscafe.blogspot.com/2010/04/m...
note previous highs on $vix during pullback at the beginning of the year. Wouldn't take that long for $vix to reach that level and then turn around as the market grinds higher, skewering the bears some more...
Re: gold - wow
I still find it odd that gold has not been bought up during the European sessions recently, the big moves come as yesterday during the US session.
Perhaps the Europeans already have all the gold they need to hedge the most likely coming major euro money-printing, and it's the US investors that have been caught unprepared?
The US session today will be very very interesting.
(f.d. - positioned only in physical stuff at this moment.)