Google Detects Attack on Gmail Originated From China, Human Rights Related

Whoa, black swan in internet land? This was posted today on Google's blog. A rep from Google was just on Kudlow explaining what happened. It looks to be human rights related.
"Like many other well-known organizations, we face cyber attacks of varying degrees on a regular basis. In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident--albeit a significant one--was something quite different.

First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses--including the Internet, finance, technology, media and chemical sectors--have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.

Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.
" (Read full post at the Official Google Blog).

More information:
E-mail leak has Google threatening to leave China (AP)
Google, Citing Cyber Attack, Threatens to Exit China (New York Times)
Google May Pull out of China After Cyberattacks (PC World)
Google to stop censoring in China, may pull out (CNET)
Google may exit China following 'highly targeted' attack (Register)

*On a more interesting note: Google to Sell Billboard Ad Space in Street Views and Maps, says Report (PC World). Talk about unlocking virtual ad inventory.

June 2010 UUP Call Spread $23 to 26, Closed at 22.72

This was an interesting trade today in UUP found at Crimson Mind.  According to CM, someone bought a UUP June $23-26 call spread for a net $0.52.  UUP (US Dollar ETF) closed at 22.72 today.  If the US Dollar continues to rally and $UUP hangs on to it's 50 day moving average, the spread could net some gains and/or protect a short position if above $23.50 by June expiration.  I'm not sure of the exact DNA makeup of the trade.  It will be interesting to see what happens with the $USD/S&P over the next 6 months.
"It appears that strategist(s) initiated June 23/26 call spread. June 23 calls were purchased for 0.58 (15K) and $0.60 (5K) against the sale of June 26 calls for $0.08 (15K) and $0.10 (5K), a net debit of approximately $0.52 per spread. Total of 54157 calls and 2134 puts traded." (Crimson Mind Activity Watch, for January 12 no direct link)

UUP (US Dollar Index Bullish Fund) - Stockcharts.com

Hedge Fund Manager of 2009: Ben Bernanke ($52 Billion Profit, Up 47%)

Last year Dvol & Associates gave John Paulson of Paulson & Co. the hedge fund MVP award for 2007-2008 for appropriately timing the credit/derivative bubble. This year you'd think Dvol would award David Tepper of Appaloosa the MVP for scooping up BAC and C at the March lows and clocking $7 Billion by December.  Hellz no.

"Release Date: January 12, 2010
For immediate release

The Federal Reserve Board on Tuesday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $46.1 billion of their estimated 2009 net income of $52.1 billion to the U.S. Treasury. This represents a $14.4 billion increase over the 2008 results ($31.7 billion of $35.5 billion of net income). The increase was primarily due to increased earnings on securities holdings during 2009.

Under the Board's policy, the Reserve Banks are required to transfer their net income to the U.S. Treasury after providing for the payment of statutory dividends to member banks and equating surplus to paid-in capital. In 2009, statutory dividends totaled $1.4 billion and approximately $4.6 billion of earnings were used to equate surplus to paid-in capital.

The Federal Reserve Banks' 2009 net earnings were derived primarily from $46.1 billion in earnings on securities acquired through open market operations (U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities), $5.5 billion in net earnings from consolidated limited liability companies (LLCs), which were created in response to the financial crisis, and $2.9 billion in earnings on loans extended to depository institutions, primary dealers, and others. The significant increase in earnings on securities was primarily due to increased securities holdings as a result of the Federal Reserve's response to the severe economic downturn. Net earnings from currency swap arrangements, which have been established with 14 central banks, and investments denominated in foreign currencies totaled $2.6 billion. Additional net earnings of $1.5 billion were derived primarily from fees of $0.7 billion for the provision of priced services to depository institutions.

Operating expenses of the twelve Reserve Banks, net of amounts reimbursed by the U.S. Treasury and other entities for services the Reserve Banks provided as fiscal agents, totaled $3.4 billion in 2009. In addition, the interest paid to depository institutions on reserve balances totaled $2.2 billion. The Reserve Banks were assessed for Board expenditures, including the cost of new currency, totaling $0.9 billion.

The preliminary results include valuation adjustments through September 30 for loans and consolidated LLCs. The final results, which will be presented in the Reserve Banks' annual financial reports and the Board of Governors' Annual Report, will reflect valuation adjustments through December 31." (Source: FederalReserve.gov)

Deutsche Bank Upgrades DryBulk Shippers On China Coal, Iron Ore Demand (DRYS, DSX, GNK, MMM, ESEA)

Deutsche Bank "believes iron ore and coal will be in strong demand from China and the recoveries in Japan and Europe will keep rates at healthy levels". Deutsche had a buy rating and $10 target on December 3, 2009, "believing potential cash flows are undervalued by the market". It's still being squeezed in a symmetrical triangle, keep watching the chart. I'm wondering if monetary policy tightening in China will affect commodity demand. Is there a bearish research piece out anywhere? The Video below is from MarketNewsVideo.com. Previous blog posts:

Jan 11: DRYS Feb 7s Active, Not Getting Love From SEA Breakout or Up Market
Jan 10: Second Chance For $DRYS, Testing Downtrend Again, $SEA Comparison

Bubble Warning: Economist Cover 1/7/2010

Economist cover story for Jan, 7, titled "Bubble Warning: Why Assets Are Overvalued. Markets are too dependent on unsustainable government stimulus. Something’s got to give". Interesting Economist. Remember Newsweek's cover in August, 2009 titled "The Recession is Over"?

Full article: http://www.economist.com/opinion/displaystory.cfm?story_id=15213157

Hat Tip Big Picture.

Rep Alan Grayson Asks Fed Lawyer If They Are Buying S&P Futures, Equities

Fed Lawyer Scott Alvarez
This is interesting. Congressman Alan Grayson asked the Federal Reserve General Counsel Scott Alvarez if the Federal Reserve was manipulating the stock and futures market. Alvarez did mention that the Federal Reserve Bank of New York uses primary dealers (JP Morgan Chase as his example) to execute trades. Can they seriously buy S&P futures and SPY?

The mystery movie doesn't stop there. Charles Biderman, CEO of TrimTabs (specializing in data-mining and equity market liquidity) was on BNN recently explaining that someone is juicing the S&P futures and he thinks it's the Government. Hat tip Zero Hedge. What the flip is going on here?

DRYS Feb 7s Active, Not Getting Love From SEA Breakout or Up Market (DryShips, Shipping ETF)

Continuing from my previous post yesterday:  Second Chance For $DRYS, Testing Downtrend Again, $SEA Comparison (DryShips Put/Call Activity, Charts, Volatility, Short Interest).  I keep reporting about DRYS because I believe a catalyst will come and move this stock + or - 25 to 30%.  It's at $6.60 and has chopped around in a symmetrical triangle for 9 months now and the vertex point is getting tighter and tighter.   It's been between $6 and 7 since November, 2009.  Today DRYS pierced through downtrend resistance at the open but then sold off 2%.  It's gaining traction with volume from the lows with big blocks hitting after 3:00 but not much price action.

The Feb $7 Calls saw volume of 30,000 today with 46,493 open.  Maybe OptionMonster knows if they were closed out or fresh longs.  The call is at 0.28.  The Feb $7 Put saw volume of 10,729 with 11,818 open.  Check that as well.  It looks like the shipping ETF (SEA) confirmed a breakout today (unless it closes in the red).  It is up 2.8% to $15.  DRYS is officially not getting love from the market or the shipping index.  What the deal?  Live streaming DRYS and SEA charts below with trends. You might need Microsoft Silverlight software to view the live charts from BATS Exchange.

Is One-Month LIBOR Bottoming Out? $LIBOR and EuroDollar Future Chart

Remember Overnight LIBOR hit 5.09% in October, 2008 and moved 50% in a day?  Here is a blog post with 1-Month LIBOR at 4.5%.  Insane...  Things were REALLY bad at that time.  Now 427 basis points later, 1-Month LIBOR is chilling at 0.23.  Are we now at the point where borrowing costs are too low?  1-Month LIBOR made a higher low from 12/31/09 to 1/7/2010 (.23090 and .23130) and stood at .23331 on Friday. Check out the chart of $LIBOR (London Interbank Offered Rate 1-Month) and 1-Month Eurodollar Futures.

1-Month LIBOR Rate (Stockcharts.com)


1-Month EURODOLLAR Future (CMEGroup)

Second Chance For $DRYS, Testing Downtrend Again, $SEA Comparison (DryShips Put/Call Activity, Charts, Volatility, Short Interest)

DRYS (DryShips Inc) has been dead money for the past few months.  It saw activity in it's calls in mid November (which was a failed call spread I believe) but the main focus was the chart.  DRYS has been bouncing around in a symmetrical triangle since early September.  This means that lows are getting higher and highs are getting lower, forming a decision point. A surprise $300 Million issuance of convertible notes forced a retest of $6 support. You can see on the 6 month chart that DRYS is testing the upper portion (resistance) of the downtrend for the 4th time.  DRYS tested support 3 times so far, so at some point a level will strike out.   If buying gathers momentum and kills the downtrend it could see a decent rush towards $8 imo.  There are still near term ceiling resistance levels to take out $7, $7.50. 

It looks like traders bought $7 Feb calls and sold $7 puts for a net credit in February (Options Update: Back-Month Bull Bets DryShips Inc. Can Conquer Resistance, 1/6 Schaeffers Research).  DRYS closed at $6.77 Friday. Just like November, DRYS appeared on the most active call/put list on the ISE.  It had 7,407 calls vs. 154 opened on the ISE and WhatsTrading noted strong activity on the Feb 7 calls on the ask. Also DRYS saw nice volume (covering?) from the $5.80 low.  Another factoid, the DRYS put/call ratio has been steadily increasing since December (0.26 to 0.33).  It's still a third of calls though.  Plus the DRYS VIX, although at lows not seen since 2008, rose since Christmas WITH price (0.45 to 0.55).  From 12/1 to 12/15/2009 6 million shares were covered to 11.25 million.  Interesting.

The Shipping ETF ($SEA) pierced through resistance on Friday. There was big volume not too long ago in the ETF. Will DRYS follow SEA?  We'll see folks!!!!!

$DRYS 6 Month (Stockcharts.com)


2010 Outlook By RanSquawk (Back To Basics)

Interesting report out by RanSquawk on the US Dollar, UK, S&P, Fed, Commodities, CRE, EU, etc.
"2010 Outlook…Back to basics
Fri, Jan 8 2010, 16:30 GMT
by RANsquawk Research Team

The fake sound of progress

The past twelve months have witnessed extreme trading patterns. The beginning of the year saw market participants flee the equity markets to such an extent that it seemed the bottom would never be reached. However once the bottom was found in March, investors never looked back and drove stocks higher for the remainder of the year..." (Read more at FXStreet.com).
 http://www.fxstreet.com/fundamental/market-view/2010-outlookback-to-basics/2010-01-08.html

CES 2010: Intel InfoScape Touchscreen, 3D TVs and Ford Sync (Videos)

Check out the videos below from the 2010 Consumer Electronics Show. Including my favorite, the double HD 9-foot Intel InfoScape Touchscreen, 3D TV reviews and Ford Sync technology. Convergence gone wild. Which 3D TV will take off? (Stocks and ETFs to watch: QQQQ, XLK, F, INTC, MSFT, PC, SNE, SHCAY).
"Inside the Intel booth at the 2010 Consumer Electronics Show, the Internet was displayed in double HD. Running on an Intel Core i7 processor, the touchscreen measures 9x9 feet and vividly displayed in 1920 x 1920 resolution, dynamically pulling in 500 snackable nuggets of information, photos, tweets and blog posts from the Internet." (ChannelIntel on Youtube)

What Are CDOs, Credit Default Swaps and Total Return Swaps? For Next Time

Here are credit derivatives explained by Janet Tavakoli of Tavakoli Structured Finance. Forms of credit protection, synthetic financing, collateralized debt instruments etc.  Aka, cool over-the-counter institutional contracts originated by our bailed out banks that made themselves and hedge funds billions at the expense of our financial system and Federal Reserve balance sheet. LOL. On a positive note, for systemic risk/transparency (kind of), there is a new clearing house for CDS contracts at the CMEGroup to check out.

Markit CDXIG12V2.SR.XR.USD
2I65BYCJ2 2014 - Jun 100
101.0642383
Markit CDXIG13.SR.XR.USD
2I65BYBX2 2014 - Dec 100
101.0244860

Markit.com also provides a hub for CDS index pricing and analysis with 1 month price/spread charts here.  Charts longer than a month would be nice.  So for next time...

Introduction to Collateralized Debt Obligations (find full pdf) (Tavakoli Structured Finance)

"A Collateralized Debt Obligation (CDO) is backed by portfolios of assets that may include a combination of bonds, loans, securitized receivables, asset-backed securities, tranches of other collateralized debt obligations, or credit derivatives referencing any of the former."

Introduction to Credit Default Swaps

"Credit default swaps, CDSs, are the most common type of credit derivatives transaction. This very simplified article explains the importance of the counterparty protection provider in these transactions."

Introduction to Total Return Swaps

"Total Return Swaps, TRSs (also known as Total Rate of Return Swaps, TRORS), are a less commonly known form of credit derivative transaction. They are also synthetic financings."

Also this is good stuff:  Janet Tavakoli: Clawback Subsidized GS Bonuses For Selling Hot Air!

Jeremy Siegel Sees Stocks Up 10-15%, Fed Raising Rates, Correction Mid-Year

Jeremy Siegel of Wharton sees a 10-15% return on equities with a mid-year correction when the Fed starts tightening. The better economy could force the Fed to raise rates to 2-3% by next fall and will "break a few of these commodity bubbles". The interview was done at Bloomberg.com.

Siegel Sees Stocks Rising 10%-15%, Mid-Year `Correction' (Bloomberg Video)

Soros CEU Lectures on Theory of Reflexivity, Financial Markets (Videos)

For you philosophers out there, here are two Soros lectures on the theory of reflexivity and how it relates to the financial markets. He takes on the efficient market hypothesis that you learned in business school. Lectures were recorded at Central European University on 10/26/09-10/30/09. You can find 3 more lectures at the Financial Times. He sees a the possibility of a double dip recession in 2010 or 2011 (Lecture: The Way Forward). If you want an archive of historical Soros interviews go to the SorosChannel on Youtube (unofficial). Also read: George Soros Theory of Reflexivity MIT Speech 1994.

Mobius of Templeton: Risk of 20% Correction in Secular Bull Market

Mark Mobius of Templeton Asset Management thinks we could see a 15-20% correction in this secular bull market, like what happened in Dubai and Shanghai last year.  He sees nothing unusual about a correction of that magnitude.  Mobius also added that low yields allow for higher P/E ratios and I'm sure that allows a narrower dividend yield spread.  Have to check up on that.  BRING ON THE CORRECTION.

2nd video below: Twenty minutes earlier Mobius gave his thoughts on emerging markets, Chinese shares, tightening and risks to the global economic recovery (monetary base, derivative losses, protectionism).

Article: Breach in HFT Algo Risk Parameters Could Pose Risk to Market

I found a very interesting article written by Dennis Dick, CFA at Bright Trading LLC regarding the huge dump in Rambus (RMBS) recently.  He thinks it was related to "high frequency market making gone bad".
"Without traditional market makers, willing to step up and be the buyer of last resort, we risk having more incidents, like the Rambus incident."
Read the article:  HFT Market Making May Lead to a Crash.  I don't know much about HFT (except from reading ZeroHedge and Themis Trading white papers), but I've seen movies where robots malfunction and it doesn't end well.  Who knows, maybe every ounce of risk is under control.

Kansas City Fed President Hoenig Speech on 2010 Outlook, Monetary Policy

Find the full speech from Kansas City Fed President Thomas Hoenig at kc.frb.org (pdf file). He's optimistic on 2010 GDP growth however sees risks with artificially low interest rates.
"As we look forward in 2010, most economists expect GDP growth will increase at between 2.5 to 3 percent, with only modest improvement in labor markets and financial conditions. I am more optimistic. I expect that GDP growth, at least through 2010, will exceed 3 percent."

"In the case of fiscal policy, the ballooning federal deficit must be controlled and reduced. If not, the federal debt will soon exceed national income. As the private sector recovers, increasing demand to finance both public and private debt will likely place upward pressure on interest rates. Eventually, there will be pressure put on the Federal Reserve to keep interest rates artificially low as a means of providing the financing. The dire consequences of such action are well documented in history: In its worst cases, it is a recipe for hyperinflation."

"Addressing the deficit will be made all the more complicated by the fact that many of the stimulus programs are scheduled to wind down in 2011 at the very time the Bush administration tax cuts are also scheduled to expire. It will be an extremely abrupt shift in fiscal policy from stimulus to restraint that will cause the economy to weaken."

"In the case of monetary policy, the challenges are no less daunting. The Federal Reserve must curtail its emergency credit and financial market support programs, raise the federal funds rate target from zero back to a more normal level, probably between 3.5 and 4.5 percent, and restore its balance sheet to pre-crisis size and configuration" (read full speech)

Get ready for interesting times in interest rate land.

$CRB/$SPX Ratio at Inflection Point, 2010 Commodity Outlooks (SPY, GCC)

While I tweak on white tea and ride $CRB blog post momentum (previous post: $CRB testing 300 resistance), I found an interesting ratio chart of $CRB:$SPX.  It is testing downtrend resistance and the 200dma.  It will be very interesting to see what happens next.  If commodities spike here it could put pressure on the market (companies, consumer etc), no?  Unless this is an I-shaped recovery.  The S&P and commodities have been rising together since Dec, 2008-March, 2009 on the reflation trade. Is there a direct $CRB ETF?  There's an equity version but $GCC looks decent.  Equities version of commodity index launches on NYSE (MarketWatch), CRB Commodity Index Gets ETF Tracking, GCC (SeekingAlpha).  So back to the inflection point, there are 4 possible outcomes.  One rises faster than the other in tandem, one rises and the other falls or one falls faster than the other in tandem.  Which will it be...

$CRB:$SPX (Commodities/S&P500) (Stockcharts.com)

Scouring the web....
IMF: 'Commodity prices to rise in 2010'(Telegraph.co.uk)
Commodities may outpace equities in 2010: Bhambwani (MoneyControl.com)
Commodities to rise in 2010 (Miningmx.com)
GOLDMAN’S 2010 COMMODITY OUTLOOK (PragCapitalist)
Goldman Sachs Research: Energy: Oil & Gas (ShiftCtrl)
2010 Commodity Market Outlook, Fundamentals Will Matter (Morgan Stanely)
Canada to Top U.S. Market in 2010, Manulife’s Petursson Says (BusinessWeek)
BlackRock's Doll: Forget inflation, buy stocks (Reuters)
5 experts offer 2010 strategies (Philly.com)
Commodities Back as Gurus Eschew Financial Assets (BusinessWeek)
How bountiful ag market will be in 2010 may depend on crop prices (TireBusiness)
In 2010, Don't Go for the Gold (Platinum?) (TheStreet.com)
India PM Economic Adviser: RBI May Hike CRR To Help Tame Inflation (DJ)
Oil Prices in 2010 (Kerr Trading on CNBC)
Tea Shortage to Widen as Rising Demand Exceeds Supply (Bloomberg)
World coking coal prices seen rising (Purchasing.com)
JPM Emerging Markets Outlook and Strategy_2010.01.06 (JP Morgan)
BofA ML 2010 Commodity Outlook (BofA/ML)
UBS Wealth Management Research: UBS Global 2010 Outlook Summary (UBS)
Nomura 2010 Global Economic Outlook (Nomura)
Sources: US scrap prices will continue rising (Steel Business Briefing, Sub)
Copper Prices Rise on ‘Strong’ Demand Outlook; Aluminum Climbs (Bloomberg)

$CRB Commodities Index Testing 300 Resistance, CRB CCI Futures Update

The reflation trade via the $CRB looks healthy but needs to take out 300 resistance from August 2008. After that, like oil, there's not much resistance ahead. If it can't take out 300 there could be a correction. It's hard to tell the exact range to start fading commodities and reflation, given that demand for real return is growing and momentum is not on the downside. Copper is on fire, oil is on fire and gold rebounded from a recent correction.  I will continue to watch interest rates though. $CRB is up about 32% since my April blog post. The CCI CRB Index, which is the old index, has futures and options that you can find at barchart.com. At today's close cash is at 504 and the June 2010 contract is at 508. Check out the current call/put ratios: Jan:2010=370.69, Feb:2010=23.4, April 7.02 and June:2010=2.04. The dollar amount fades out as you move out though.  Below is a chart of the new index.  The new and the old have different ratios of commodities, it's explained here.

$CRB (Reuters/Jeffries CRB Index (EOD) (Courtesy of Stockcharts.com)

Macy's Leaving 5 Malls in Midwest, New Jersey (Video Analysis, News Links)

Macy's is leaving underforming locations at selected Malls in the Midwest and New Jersey.  CRE green shoots.  Below are local news links for the specific areas and video analysis from Thestreet.com.

IWM Sentiment Update: Put/Call Ratio Higher Than 2008, 100k Feb 60 Puts Traded, Contrarian Signal Or Directional?

Not sure of the exact nature of the trade but 100,000 Feb IWM $60 Puts moved today with 15,000 open. It was the biggest size on the chain. It appears that 86,460 moved at 0.92 at 3:38 on the ISE and 13,520 moved at 0.94 on the CBOE. I'll try to find articles on this. It could have been sold or used to hedge that I do not know. $IWM closed at 63.79.

Looking technically, IWM is above Sep/Oct support (62.5) and is riding an uptrend.  If it fails to hold the uptrend and 62.5 the 50dma is next at 59.78.  There's been zero confirmation of a correction but IWM's steep put/call ratio uptrend since December shows that hedgies are hedging small cap exposure (or perhaps put selling on a volatility burn to 10 VIX?!). From 12/21/2009 the IWM put/call ratio jumped from 2.40 to 3.3 (chart).  LOOK at this 2 year chart, there was a MAJOR spike in puts-to-calls.  I'm not sure what to make of it. Either it's the biggest contrarian trade in history or the market is sensing a strong sell off.  Short interest is way below 2008 levels but since October, 2009, it's been rising with price.  As of 12/15 173 million shares are short compared to 130 million shares on 10/15.  Again, with IWM above support and volatility hitting new lows with overall bearish sentiment, what do you fight price or sentiment!? (Links above are to IWM data at Schaeffers Research).

IWM (Russell 2000 iShares) (Courtesy of Stockcharts.com)


IWM Put/Call Ratio (Courtesy of SchaeffersResearch.com)

Fed Minutes For December 15-16, 2009 (Released January 6)

Minutes of the Federal Open Market Committee
December 15-16, 2009
A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors in Washington, D.C., on Tuesday, December 15, 2009, at 2:00 p.m. and continued on Wednesday, December 16, 2009, at 9:00 a.m.

Developments in Financial Markets and the Federal Reserve's Balance Sheet

The Manager of the System Open Market Account reported on developments in domestic and foreign financial markets since the Committee's November 3-4 meeting. Financial conditions generally had become somewhat more supportive of economic growth. There was little evidence of year-end funding pressures, although demand for Treasury bills with maturities extending just beyond year-end remained elevated. The Manager also reported on System open market operations in agency debt and agency mortgage-backed securities (MBS) during the intermeeting period. The Desk continued to gradually slow the pace of purchases of these securities in accordance with the program for asset purchases that the Committee announced at the end of its November meeting. By unanimous vote, the Committee ratified those transactions. There were....

30-Year T-Bond Yield, Oil, US Dollar and S&P All Up On Month ($TYX, $SPX, $WTIC, $USD)

During the past month the 30-Year Bond Yield, Oil, US Dollar and S&P all rose in tandem. You don't see this every day. Below are price and performance comparisons. From December 5, 2009 to January 5, 2010 $TYX (30 Year T-Bond Yield) was up 4.08%, $USD up 2.42%, $WTIC (West Texas Crude Oil) up 8.35% and $SPX (S&P 500) up 2.76%.

1-Month Comparison by Price Movement (Courtesy of Stockcharts.com)


1-Month Comparison by Performance %

Bill Gross: Market Not Priced For Problems, New Normal (2010 Outlook)

Pimco's Bill Gross was recently interviewed at Time.com in an article titled:  Pimco's Bill Gross Sees 2010 as Year of Reckoning.  He shared his thoughts on the Fed, MBS, cash, corporate bonds, high yield, attractive sovereign debt and stocks. 
"Over the past six to nine months, the 60% pop off the bottom not just for stocks but for high-yield bonds, etc., is indicative of a return in perspective to the old normal as opposed to the new normal. We think that 2010 will be tempered, and that doesn't mean bear markets but it does mean a growing realization that we have a lot of problems and the markets aren't necessarily priced for it."


Other related articles:
Pimco cuts holding of UK and US government bonds (Telegraph.co.uk, MarketWatch Video)
Insurer Regulators May Ease Capital Rules After Pimco Analysis (BusinessWeek)
PIMCO: Corporates vs. Treasuries (MarketWatch Blogs)
Pimco Sees Corporate Bonds Topping Treasurys in 2010 (WSJ)
Pimco Executive: 80% Risk of U.K. Downgrade (WSJ)
Take That, Pimco! Goldman’s O’Neill Dismisses U.S. Debt Woes (Barron's)

Will February Crude Oil Break 83.28 October Resistance? Phil Roth of Miller Tabak Thinks Oil Could Hit 90-95 If So..

Crude Oil (Feb CLG10 and Mar CLG11) is heading toward October 2009 resistance and if Feb successfully breaks above 83.28 and March above $83.51, $90 resistance (from 2008) is next.  It could be related to underlying demand, inflation expectations, excess liquidity, hedge funds, who knows.  Just watch the price.  The crude curve going out a year is in contango btw (81 to 86) and someones in the money on $80 calls.  If oil breaks down here, $70 and $65 look like decent support.  It already hit $70 in December.

Feb Crude Oil CLG10 (OptionsXpress)


$HUN (Huntsman) January Calls Double From December Breakout, Stock 21%

When there's large option activity setting up (or playing) a technical breakout it has the potential to make money.  I presented chemical company Huntsman ($HUN) activity on December 3 actually after the breakout: Huntsman (HUN) Call Options Active, Broke Above $10 Resistance, ISE Put/Call Most Actives, Implied Volatility. During the past month (December 3 - January 4), the stock and JAN option activity (if bought to open) turned out to be decent trades. As you can see from the chart below, HUN is up 21% in a month!  Good job to those who opened JAN calls on the ISE.

$HUN (Chart at freestockcharts.com)


Source: Yahoo Finance


Performance:
JAN HUN $10 CALL: Volume 4,302, 854 Open ($1.05) - 1/4/09 at $2.35 +123%
JAN HUN $11 CALL: Volume 5,217, 100 Open ($0.63) -1/4/09 at $1.40 +122%
JAN HUN $12 CALL: Volume 5,223, 0 Open ($0.35) -1/4/09 at $0.60 +71%
JAN HUN $13 CALL: Volume 2,564, 0 Open ($0.25) -1/4/09 at $0.15 -40%

Pimco's McCulley: Cyclical 2010 Outlook, Running Light On Risk (Nothing Appetizing In The Cafeteria)

Paul McCulley of Pimco is out with his 2010 cyclical outlook.  Read the full report at Pimco.com.  Here are the last two questions where he got into detail. Link:  Paul McCulley Discusses PIMCO’s Cyclical 2010 Outlook.
"Q: What are the investment implications of the cyclical outlook?

McCulley: As we translate all of this into investment strategy, we have to be incredibly cognizant of lingering uncertainties and the full range of potential outcomes. Because that range is so wide right now, our risk-taking is more tame than it would be if we had a normal distribution of expected outcomes. For now, we are limiting overall risk exposures, but we have to be ready and willing to recognize alternatives to the baseline forecast if and when they unfold, and to act opportunistically.

This all leaves us with portfolios that appear, more than at other times, to be hugging the benchmarks with no bold positioning. Some might suggest we’ve become closet indexers, but, on the contrary, we’re making a very active decision to run light on risk. At this point, we know this is not going to be a particularly high-yielding portfolio. You can only eat what’s in the cafeteria, and right now the cafeteria doesn’t have anything particularly appetizing in it.

Q: How is the outlook being reflected in portfolio positioning?

IYR Testing Uptrend, SRS Call Options Active Jan-Apr, Charts, CRE Links

This is from yesterday I forgot to post these charts and the option chain.  $IYR (DJ Real Estate Index ETF) is testing it's trend and $SRS (the levered short ETF) saw some call activity in the January $8, April $7 and $10 calls.  If IYR breaks down and volatility rushes into SRS for a few days it could be a decent play if they were long, however the calls could be tied to stock.  Right now the Jan $8 call is up 0.02 to .20, Apr $7 is down .08 to 1.29 and the Apr 10 is up 0.02 to 0.50. **UPDATE: OptionMonster goes through the complex trade here.  Below is the trade from CrimsonMind.
"30,000 Jan 8 calls traded at $0.21 (bid:0.19 ask:0.20) and 20,000 April 7 calls traded at $1.36 (bid:1.32 ask:1.36) and about an hour later 10,000 April 10 calls traded at $0.48. It appears that the options are tied to shares. Total of 62200 calls traded compared to the 10 day average volume of 10781. Total of 1652 puts traded." (source: Crimsonmind.com)

December HSBC China Manufacturing PMI Hit 56.1 vs. 44.8 in March (Chart)

The December China HSBC Purchasing Managers Index (PMI) hit 56.1, up from 55.7 in November and 44.8 in March, 2009. According to Reuters it's at the highest level "since the survey began in April 2004". There was also a big increase in output prices. Read these articles for more information. I built a chart with the information provided by Reuters. Here is the press release at markiteconomics.com which includes a historical chart dating back to 2004.

RPT-UPDATE 2-China HSBC PMI hits fresh high, warns of inflation (Reuters)
China and India lead Asian economic rebound (FT.com)
*Global Output Continues Its Rise As Asian Manufacturing Surges Ahead (FistFullEuros)
UPDATE: China December PMIs Signal Recovery, Prices On Rise (WSJ)
Chinese Manufacturing Grows by Most Since April 2004(Bloomberg)

Tim Seymour vs. Peter Schiff on Inflation (CNBC Fast Money Video)

Seymour defeated David Rosenberg, next up Peter Schiff. Might be a tough battle.

Paul Krugman: 30-40% Chance Recession Will Hit In Second Half of 2010

Economist Paul Krugman was interviewed on Bloomberg and said there's a 30-40% chance we'll see a recession in the second half of 2010. He said the inventory bounce and stimulus will fade out in the middle of the year and he brought up 2002 when growth faded to near negative. Click here for Bloomberg Video.

CMBX.NA.BB Making New Lows at 5, Diverging With AAA (5.4.3 Charts)

It looks like the Fed can't save BB rated turned F- 2006/2007 commercial mortgage trusts priced in CDS. CMBX.NA.BB.5, CMBX.NA.BB.4 and CMBX.NA.BB.3 are making new lows at 5 cents on the dollar! They are currently diverging with AAA rated CMBX at the moment. It's too bad this lonely group didn't get invited to the risk party.  Below is CMBX.NA.BB (5, 4 and 3) vs. CMBX.NA.AAA (5, 4 and 3) from Markit.com. So what's up with CRE, priced in or new wave coming.  I just wrote about CMBS delinquencies, commercial mortgage defaults and CRE price indices with a bunch of charts on 12/6.






Articles in CMBX/CDS land:
Dealers to Create Prime Mortgage Credit-Default Swaps (Bloomberg)
15 Potential Commercial Real Estate Failures That Could Start a Meltdown (DailyReckoning)
Merrill RateLab's Stocking Stuffers (Zero Hedge)
Delinquent CMBS, the `C’ stands for climbing (FT Alphaville)
General Growth Properties Debate: Whitney Tilson Responds (Round 7) (Market Folly)
Real Estate Poses Risk to U.S. Recovery, Ryding Says (Bloomberg)
Commercial real estate will not cause another recession, expert says (LA Times)
Real estate faces a tough slog to recovery, glut of space (WSJ)

Burj Dubai Skyscraper Officially Opens Today, Watch Fireworks (Video)

Turning point? Also look down from the top of the Burj Dubai spire here and watch the fireworks display. Burj Tower website: http://www.burjkhalifa.ae/.




News: Dubai Opens Tallest Tower Partially Leased in Slump (Bloomberg)

Hat tip beanieville for video.

Marc Faber, Dennis Gartman Long US Dollar and Stock Market (Videos)

Dennis Gartman and Marc Faber are fans of the long US Dollar, long stock market trade. Gartman said he's long US Dollars as a hedge. I think that's a good risk/reward because the US Dollar could go up on higher interest rates, US economic growth, risk overseas and/or flight to quality. Right? Unless the Government drowns the currency again.

Marc Faber thinks the US market will outperform emerging markets which will rally the US Dollar in the near term with a sentiment reversal. He sees USD/EUR up another 5-10% in the short term. He sees risk with Treasuries, cash and Gov printing in the long run and potential volatility in currencies/interest rates in 2010.

Quantum Partners/Soros Owns 20% of Marengo Mining (MRN, MGO), Watch Copper and Molybdenum Price

Before this news gets too old, one of George Soros's funds (Quantum Partners LDC) took a 20% stake in Marengo Mining on September 2, 2009.  Soros acquired CAD$7.6 Million worth of stock at CAD$0.086. The Sentient Group owns 26.7%.  Marengo is a junior Australian diversified metals company with a strong position in Papua New Guinea with their Yandera Copper-Molybdenum-Gold project.  Check out the Yandera project video. I don't usually look at penny stocks, but if the dude who broke the Bank of England is in this, I'll check it out.
"The funds raised will be used to accelerate exploration and development of Marengo’s 100% owned Yandera Copper-Molybdenum-Gold Project in Madang Province, Papua New Guinea (the “Yandera Project”) including new district exploration programs targeting further additions to its existing resource inventory."

The Yandera Definitive Feasibility Study, which is scheduled for completion by December 2010, is based on Indicated Resources of 314 million tonnes grading 0.48% copper equivalent and Inferred Resources of 352 million tonnes grading 0.43% copper equivalent, as the foundation for an open pit mining operation, initially processing at 25Mtpa with the potential to increase to a long-term rate of 50Mtpa."
(source: marengomining.com)

Harvard's Feldstein On 2010 Recession Risk and Gold as a Hedge

Jon Najarian Spoke With Doug Kass On BizRadio, $SPX:$VIX Chart

Two weeks ago Jon Najarian of OptionMonster spoke with Doug Kass (Seabreeze Partners) on BizRadio.com.  I found it on OptionMonsterTV (youtube channel).  Doug talks about Hovnanian, housing/mortgage data, Buffett, 2010, conventional wisdom, and how "we are in a bull market for complacency".  I added a chart of $SPX:$VIX below.  Get ready for #twentyten, is it time to sell calls, buy puts.. yet?!

Huffington Suggests Moving Money Out Of Big Banks On Kudlow (Video)

Kudlow debated with Arianna Huffington today on her suggestion that people move their money out of the big banks and into community banks.  What would happen to the ex-TARPies if people actually did this in mass? I'll leave you that to ponder while you're getting a champagne shower tonight. Happy new year.

Unusual Move in PHK on Large Volume (Pimco High Income Fund Charts)

Wow, you don't see this everyday, especially when it's a lone move.  Hat tip to Marla Singer at Zero Hedge for pointing this out today, visit the post "What Yield Was the Device That Just Hit PIMCO's High Income Fund?" for an in-depth look.  The chart says 8.26 million shares dropped on PHK and it opened at 12.14, hit a low of $8.81 and closed at $11.30 (-6.69%).  Hundreds of thousands of shares then scooped it up after hitting a capitulation low below 9.  It was a volatile day for PHK with no news on the high yield space, PHK exposure or a forced dump somewhere, unless I'm missing something.  FYI, Top institutional holders as of 9/30/2009 were Atherton Lane Advisers, LLC (6.4 million shares) and Wells Fargo (1 million shares) (Yahoo Finance).  Not saying they are related to the volume.  Check out the charts.  What's up?

PHK (Pimco High Income Fund) Intra-day (Courtesy of FreeStockCharts.com)


PHK 6 Month Chart (Courtesy of Stockcharts.com)

$SLV Put Options Setting Up For 2010, Active From Feb-April (Silver ETF)

The silver ETF ($SLV) had interesting put activity today.  SLV put/call activity was on the most active/top bearish list at the ISE.  SLV had an ISEE ratio of 2, puts/calls opened = 52,561/1,087.  CrimsonMind.com had this..
"40,000 Jan 15 puts traded at $0.04 (bid:0.04 ask:0.05), approximately 20,000 Feb 15 puts were purchased for an average premium of $0.23 per contract and 20,000 April 15 puts were purchased for an average premium of $0.53. Total of 85956 puts traded compared to the 10 day average volume of 11170. Total of 7600 calls traded." (CrimsonMind Activity Watch)

I found info on the trades at OptionMonster (webcast) and TheOptionsInsider. It looks like the SLV trade was bearish or protective going into 2010 and could be a roll from January.  Here is the pic of the option chain from Yahoo Finance.

SLV (Silver ETF) $15 February Puts Opened (Courtesy of Yahoo Finance)


SLV $13-15 April Puts


Robert Prechter of Elliott Wave Interviewed at Minyanville (Video)

Found this video on Elliott Wave International. This was done in November I believe. Markets are a fractal, ride the wave! Hat tip Minyanville.com.

China Has Fastest Train in the World, Travels 245mph, 394Km! (Videos)

And we have the Amtrak and Government Motors..  At least we can head out west on the California Zephyr, which I plan to take from Chicago-California in due time.
"The train can go 394.2 kilometres per hour, it's the fastest train in operation in the world," Zhang Shuguang, head of the transport bureau at the railways ministry, told Xinhua. By comparison, the average for high-speed trains in Japan was 243 kilometres per hour while in France it was 277 kilometres per hour, said Xu Fangliang, general engineer in charge of designing the link, according to Xinhua. Beijing has an ambitious rail development programme aimed at increasing the national network from the current 86,000 kilometres to 120,000 kilometres, making it the most extensive rail system outside the United States."  (full story at AFP, and another story at TimesOfIndia)

Bill Gross Dec Update .01% Savings vs. Utilities, XLU Performance Comps and January Calls Moving

From Bill Gross December Outlook at Pimco.com, Anything but .01%. Speaking of $XLU, it's trading at $31.53 and 10,339 calls just traded on the Jan $32 strike at .16 w/ 60,100 open. Look deeper into the ticks/nature of the trade...  I provided a chart of $XLU and an XLU 1 year performance chart vs. QQQQ, SPY and DIA.  XLU +10.45%, DIA +22.75%, SPY +26.36%, QQQQ +54.70%.  Nice performance gap.
"OK, so where does that leave you, the individual investor, the small saver who is paying the price of the .01%? Damned if you do, damned if you don’t. Do you buy the investment grade bond market with its average yield of 3.75% (less than 3% after upfront fees and annual expenses at most run-of-the-mill bond funds)? Do you buy high yield bonds at 8% and assume the risk of default bullets whizzing at you? Or 2% yielding stocks that have already appreciated 65% from the recent bottom, which according to some estimates are now well above their long-term PE average on a cyclically adjusted basis? Two suggestions."

"Let me tell you what I’m doing. I don’t have the long-term investment objectives of Berkshire Hathaway, so I’m sort of closer to an average investor in that regard. If that’s the case, I figure, why not just buy utilities if that’s what the future American capitalistic model is likely to resemble. Pricewise, they’re only halfway between their 2007 peaks and 2008 lows – 25% off the top, 25% from the bottom. Their growth in earnings should mimic the U.S. economy as they always have, and most importantly they yield 5-6% not .01%! In a low growth environment, it seems to me that a company’s stock should yield more than its less risky debt, and many utilities provide just that opportunity. Utilities and even quasi-utility telecommunication companies now yield between 5 and 6%, whereas their 10- and 30-year bonds yield less and at a higher tax rate to you the investor."

Eric Sprott Thinks S&P Will Break Below March Lows, Still Likes Gold and Thinks We Are In 15-20 Year Bear Market

Eric Sprott who runs a $4 Billion hedge fund in Toronto thinks the S&P will break below the March lows.  He thinks we are in a bear market that will last 15-20 years and the Fed is a ponzi scheme.  He's not the only one. James Altucher begs to differ (on Kudlow).
"The Toronto-based money manager, whose Sprott Hedge Fund returned 496 percent over the past nine years while the S&P 500 lost 32 percent, said the index’s 67 percent rally since March reflects investors misinterpreting economic data. He’s predicting the gauge will fall 40 percent to below 676.53, the 12-year low reached on March 9." read full story at BusinessWeek

h/t The Business Insider

Pimco's El-Erian Thinks S&P Will Drop 10% Under 1,000 In Span Of 3-4 Weeks

Mohamed El-Erian of Pimco still thinks we're on a sugar high. He also said this back in August, so this has been a very long high. The Fed supplies some potent sugar paper. Watching yield curve ratios ($UST10Y:$UST3M).

Stocks Higher? Famed Investor Says Don't Bet on It (AP, 12/27/2009)
"Homes are selling at their fastest clip in nearly three years, the unemployment rate is falling and stocks are up 66 percent since their March lows — the best performance since the 1930s. What's not to like? Plenty, according to Mohamed El-Erian, chief executive of giant bond manager Pimco." (read full article)
 Also read an interview with El-Erian at Fool.com, Get Ready for a Bumpy 2010.

Is the US Dollar About to Knock Out Copper? ($USD/$COPPER Convergence Chart, 跆拳道?)

Is the USD about to knock out Copper?  Convergenza?  $USD head fake?  Or is there something I'm missing w/ the pricing mechanism.  Что здесь происходит?  Continued from my previous post.

$USD vs. $COPPER


Iran Riot Videos on Holy Day, Ahmadinejad Response on BBC (12/27/09)

Intense protests or riots are going on in Iran.  Some videos are graphic. At the bottom Ahmadinejad was interviewed on BBC.  All of the videos were shot on cell phones and posted on Youtube. It's a revolution.  The first video shows a group of baseej is surrounded by the crowd, and disarmed..

March Copper, $JJC Short Interest and USD/$COPPER, COT Report - Pre-Junior Miner Analysis

Before I dig deeper into this junior copper mining play, I thought I'd browse the underlying action in copper by charting out the March future, $JJC, $JJC short interest and the Commitment of Traders (COT) report to see where the large specs are at.

The Copper Comex March 2010 Future is in a new rising channel as you can see.  It just pierced through a resistance level and is riding the 50 and 20dma and is close to testing 2008 resistance.   It's riding the reflation trade from the beginning of 2009 like everything else.  The US Dollar rally and gold dip, if sustained, could affect copper so I'll be watching $USD, $GOLD.  Near term support for March Copper is first the uptrend, then the 50dma (3.08) and strong support at 3.0.  It is trading at 3.319. 

Copper Comex Mar 2010 Future (Courtesy of OptionsXpress)


Next up is the most recent HG (Copper) COT report.  The last time I looked at the Copper COT, large specs were at an inflection point.  Since then they went from net neutral to slightly net long and kept the Dec future on the uptrend.

Detroit: City On The Move (1965 Video), Last Glory Days Before Riot of 1967

This is insane. These videos are from 1965, only 45 years ago. Two years later the city burned down during the 1967 riots. After watching the 6 videos below listen to the 16 part documentary Wake The Herd Productions did on the 40th anniversary of the 1967 Detroit riot" on WILS AM 1230 in Lansing, Michigan on July 24, 25 2007. They go through every single event that led up to the riots. Detroit had the auto industry on lock down and underlying racial tensions had to f@#% it all up! Damn.

John Paulson, Stiglitz Speak at Economist Panel on Credit Bubble

Hear John Paulson speak about the massive mispricing of risk which eventually led to the financial crisis.
"For me it was so obvious that these securities were completely mispriced and we were living in a casino. I think the other players that were involved in the business they got caught up in the exuberance, they got caught up in the competition to increase their underwriting volumes, caught up in the competition to increase their fees. They were very focused on annual earnings, quarterly earnings and annual bonus pools and with the amount of the liquidity, everyone got caught up in what became a massive credit bubble."

He also talked about Government bailouts, common equity cushions etc... Paulson is making bank on $BAC and $GLD this year, timing those trades quite nicely.


Other links:
2008 John Paulson Congress testimony
Right before he nailed the $GLD trade
Paulson & Co. 3Q Letter, 13F Holdings [GLD, BAC, WYE, AU, SGP, C]
John Paulson Has Highest Net Long Exposure Ever (BAC, CMCSA, HEIG) on 12/8
MissTradeTV Interview w/ Greg Zuckerman

Did Expanded Government Ruin Detroit? (Video) Another Detroit Update

While searching for news about terrorists boarding planes to Detroit, I found a video at Global Economic Analysis (Michigan Forces Business Owners Into Public Sector Unions; Detroit's Aura of Hopelessness) with a guy attempting to explain why Detroit is in ruins.  He blames the leftists since the 1960s, mainly the expanded role of Government, teachers unions and the UAW.  I'm pretty sure social issues (1967 Detroit Riot) didn't help the situation either.  In the end, 27% (in reality 50%) of Detroit citizens are unemployed and the auto industry continues to buy out workers (Ford...GM is still reorganizing under Gov control).  Also Detroit has a budget deficit of $300 Million and Mayor Dave Bing is trying to "raise the cap on the amount of fiscal stabilization bonds Detroit can sell from $125 million to $250 million" (AP).

On a positive note, it's interesting that urban farms could possibly save the city (Investors see farms as way to grow Detroit - LA Times).  Also fresh car demand from China and India could funnel cash into the Detroit autos, which could ignite labor demand (China’s rural markets have big appetite for cars - MSNBC).  China’s Shanghai Automotive Industry Corporation Group (SAIC) recently did a 50:50 joint venture with GM India for $500 Million (Business Standard).  I bet Detroit becomes a top economic powerhouse in 80 years... You heard it here first people.

A 22 Year Chart Of $SPY To Keep An Eye On (3/1988 - 12/2009, Streaming)

This is a 22 year chart of $SPY trading live via FreeStockCharts.com with trend lines. Where will the next correction take place and/or at what level will SPYs valuation be priced in?  We are hitting the downtrend from the October 2007 peak.  The chart view is monthly and I included the 50 month moving average, MACD, RSI and Chaikin Money Flow.

Janet Tavakoli: Clawback Subsidized GS Bonuses For Selling Hot Air!

Lets see if Tavakoli can actually make something happen here. She was recently on FoxBusiness and wrote an article at Huffington Post about how Goldman Sachs is getting tax payer subsidized bonuses for slinging value destroying hot air and Treasury bail out cover-ups.  DV wrote a post on Tavakoli in October when she was interviewed by Max Keiser and provided links to articles she was quoted in dating back to 2005.  Also read the ongoing battle between the NYT  and Goldman Sachs.  Who will win the financial rap battle.

Goldman Sachs Responds to The New York Times on Synthetic Collateralized Debt Obligations (goldmansachs.com)

VS.

Banks Bundled Bad Debt, Bet Against It and Won (New York Times)

Peter Schiff Offers to Testify About Cause of Financial Crisis, But Not on List

Peter Schiff put out a youtube video tonight (1st below) entitled "A Nightmare before Christmas".  He brought up the health care bill, debt ceiling raise ($12.4 Trillion) and news on Treasury's aid cap for Fannie and Freddie.  That is decent news right there.  Schiff also said Congress didn't invite him to testify about the financial crisis (Dimon, Blankfein, Mack Among First to Testify at Crisis Panel).  It's funny that Schiff was the only one on CNBC in 2006 warning about the financial collapse.  Maybe Goldman Sachs should have done the same.  Merry Chistmakahwanza!
"The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. (must read NY Times article: Banks Bundled Bad Debt, Bet Against It and Won, 12/23/2009)
 

SPY, DIA, QQQQ Downtrends, Thin Air and Ascending Triangles! (12/20/09)

As previously mentioned, the Dow and S&P are testing their downtrend from the 2007 peak.  Here's a look at market ETFs before Monday's open.  First I'm going to present the 3 year view and then the 3 month view.  All of the charts are from stockcharts.com.

$SPY mirrors the S&P and is testing the downtrend from 2007.  Also July 2008 ceiling resistance is a few points higher.

$SPY


Official Floored Trailer Is Out, Looks Good

Floored looks good. It's an inside look at the trading floor and the transition to computerized trading.  Go to the site for more information.

Bank Failures Reach 140, FDIC List

Insane in the membrane..
"Bank Failures in Brief 2009

The list of Bank Failures in Brief is updated through December 18, 2009. Please address questions on this subject to the Customer Service Hotline (telephone: 888-206-4662).

December

First Federal Bank of California, F.S.B., Santa Monica, CA with approximately $6.1 billion in assets and approximately $4.5 billion in deposits was closed. OneWest Bank, Pasadena, CA has agreed to assume all deposits. (PR-239-2009)

Imperial Capital Bank, La Jolla, CA with approximately $4.0 billion in assets and approximately $2.8 billion in deposits was closed. City National Bank, Los Angeles, CA has agreed to assume all deposits, excluding certain brokered deposits. (PR-238-2009)

Independent Bankers' Bank, Springfield, IL, with approximately $585.5 million in assets and $511.5 million in deposits was closed. The FDIC created a bridge bank, Independent Bankers' Bank Bridge Bank (IBB Bridge Bank, N.A.), to take over operations. (PR-237-2009)

What Level is the "New" Normal For Distressed Volatility, 10 or 20?

For you volatility valuation analysts out there, what level is the new (or old) normal for distressed volatility, 10 or 20? We hit the 10s in 2007 before the market peak and now we are around 20. Is buy and hold back which will push volatility back to 10 or are we in a new era of heightened volatility. Below I provided a VIX spot chart, futures curve and a video from the most recent Sonar.

David Rosenberg thinks the VIX will be between 30 and 40 next year and if Prechter's right that a new wave is coming in 2010, perhaps he's right. The S&P still needs to break the uptrend. I'd like to hear what the VIX pros have to say. Good places I like to check.

Morgan Stanley Now Bullish on US Dollar, CMC's Laidi on USD/JPY (video, chart)

Sara Eisen of Bloomberg said Morgan Stanley is now bullish on the US Dollar...

Roubini Discusses Dollar Carry Trade, Emerging Markets, Slack In US Economy

From the HKTDC press release + video below, Roubini was interviewed ahead of the Asian Financial Forum in Hong Kong coming up on January 21, 2010. He said a reversal in the USD carry trade, which could take a while, could affect asset prices in Asia and emerging markets. Also there's a 20% chance of a double dip recession.

"14 December 2009 – Asian markets can expect a rough start to 2010 as low interest rates push down the value of the US dollar and create asset bubbles, particularly in emerging markets, according to the New York-based economist, Professor Nouriel Roubini.

In an interview with the Hong Kong Trade Development Council (HKTDC), Prof Roubini said the trend is likely to continue for another six to 12 months, with near-zero interest rates prompting global investors to take short positions on the US dollar and long on relatively risky assets.

“Asian, Latin American and emerging markets will have to close their short dollar position, and dump their leverage long positions in the assets,” said Prof Roubini. “And that would lead to a very classic, dramatic snap back of the dollar, and also sharp correction of asset prices in Asia and in other emerging market economies. But it’s not going to happen anytime soon." Source: HKTDC.com

Roubini: Dollar Carry Trade Has Legs, Brazil Real Overvalued (USD/BRL, Global Interest Rates)

Roubini believes the rally in risky assets has further to run on the US Dollar carry trade. From Reuters yesterday: Roubini: carry trade to last at least 6 more months. He also believes the Brazil Real is overvalued (Bloomberg). Others are hopping on the BRL is overdone train (Demand for Brazilian Real May Wane in 2010, Levycam Says).  So who will pick up BRLs carry trade slack, AUD? Here's a 1 year chart of USD/BRL and global interest rates.

BRL/USD (courtesy quote.com)





Interest Rates Powered by Forex Pros

Three Gold Support Levels To Watch (GLD), Watching SEA/Shippers As Well

Gold stabbed through it's 50 day moving average today. Crazy moves. It was definitely a good idea to buy put protection on December 2! Gold has a few support levels to battle (1075, 1025, 1000 and 985). Gold is at 1100 and Jim Rogers said he'd nibble at $1000. The 200 day moving average is at 985.

Gold Continuous Contract (Courtesy of Stockcharts.com)


US Dollar Index Short Squeeze Continues, UUP Calls, Large Specs Making Money! (12/17)

Nice move tonight on the US Dollar Index. It is up 0.55% to 77.41 and hit an intraday high of 77.60. The catalyst for the Dollar rally could have been from the mess in Dubai on Thanksgiving.  Investors were piling into UUP calls at the beginning of November.  UUP call buying continued in December and large specs were also loading up on futures. From the chart tonight it looks as if the short squeeze is still in play.  It is close to testing August resistance and now has the 50dma to act as support.



(DXY Courtesy of INO.com)

So UUP/UUP calls, DXY large specs should be making some money here on this parabolic move from 74.50.  Whether it's a new long term trend to 90 is a wait and see.  Big money could be covering their shorts and riding some money to the upside on this crowded trade, imo.  Jim Rogers is making some dough on this move, he told you on a Tech Ticker video.  This move in USDX could be related to: Sovereign debt downgrades in Dubai and Greece and possible bank nationalizations in Ireland, a potential S&P downgrade of EUR1.46 trillion covered bond programs, US Growth (or not) and/or Bernanke hawkishness, and maybe PMs are taking risk off the table and/or switching to Yen as a funding currency.  *Update on US data today (FedEx issues cautious 3Q forecast, Claims for jobless aid rise).  It will be interesting to see how the S&P reacts to the Dollar.  A higher dollar cuts into overseas profits.

Also, Adam Hewison of MarketClub just released a US Dollar, crude oil and gold technical trading video update on his blog.  I'm going to check out shippers, coppers and a potential play.  мир.  Full disclosure, although I work as an affiliate for MarketClub, I have followed Adam's work and am confident in his services.