Fed Minutes: Conditions Warrant Low Fed Funds Rate, Thomas Hoenig Votes Against Action (3/16/2010)

From the FOMC Minutes on 3/16/2010, the Fed Governors (minus Thomas Hoenig) see "exceptionally low levels of the federal funds rate for an extended period". I'm going to chart out gold and oil contracts next to see if they sense inflation or deflation (or fiat money-flation).
"Committee Policy Action

In their discussion of monetary policy for the period ahead, members agreed that it would be appropriate to maintain the target range of 0 to 1/4 percent for the federal funds rate and to complete the Committee's previously announced purchases of $1.25 trillion of agency MBS and about $175 billion of agency debt by the end of March. Nearly all members judged that it was appropriate to reiterate the expectation that economic conditions--including low levels of resource utilization, subdued inflation trends, and stable inflation expectations--were likely to warrant exceptionally low levels of the federal funds rate for an extended period, but one member believed that communicating such an expectation would create conditions that could lead to financial imbalances. A number of members noted that the Committee's expectation for policy was explicitly contingent on the evolution of the economy rather than on the passage of any fixed amount of calendar time. Consequently, such forward guidance would not limit the Committee's ability to commence monetary policy tightening promptly if evidence suggested that economic activity was accelerating markedly or underlying inflation was rising notably; conversely, the duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further. A few members also noted that at the current juncture the risks of an early start to policy tightening exceeded those associated with a later start, because the Committee could be flexible in adjusting the magnitude and pace of tightening in response to evolving economic circumstances; in contrast, its capacity for providing further stimulus through conventional monetary policy easing continued to be constrained by the effective lower bound on the federal funds rate." (source: federalreserve.gov)

"Voting against this action: Thomas M. Hoenig.

Peshawar Suicide Bomb, Bond Yields vs Market Correction, CBOE Put/Call Ratio, Office Vacancy Rate Up, Rents Less Bad (REIS)

Matt Tiabbi on banks toxic swap deals with Jefferson County, Alabama - Rolling Stone
Wilbur Ross with Virgin Money bid for Royal Bank of Scotland - Dealbook
Rick Bookstabber (SEC Senior Policy Adviser) on the Municipal Market - Rick Bookstaber Blog
China Construction Bank - China GDP Growth >9.5% would be problematic - FT
CBOE Monthly Equity Put to Call Ratio Nears All-Time Low -VIX and More
Could Rising Bond Yields Trigger An Equity Market Correction? - DKMatai
Deflation on the prowl as Bernanke shuts down his printing press - Telegraph
Office vacancy rate hits 16-year high - Reuters
Net Yen Shorts Surge Even As Euro Shorts Hit Fresh Record (CFTC) - Zero Hedge
Philadelphia Sells Debt as Muni Issuance Rises From Low of 2010 - Bloomberg
Related: Treasury Says Build America Bonds to Save Issuers $12.3 Billion - Bloomberg
Suicide bomber kills 38, wounds 100+ at NW Pakistan party rally in Peshawar - Telegraph
Triple blasts hit northwest Pakistan capital near U.S. consulate - CNN
Iraq bombers target embassies, killing at least 41 - LA Times

Watch oil.... Three Blasts Hit Saddar Area Peshawar - April 5, 2010 (Video)

Alan Greenspan Responds To Michael Burry's NYT Op-Ed, Peter Schiff Wants A Public Debate

Watch Alan Greenspan on ABC News (1st video) respond to Michael Burry's NYT Op-Ed (I Saw the Crisis Coming. Why Didn’t the Fed?). Michael Burry (a 1-man hedge fund) was first in on credit default swaps or insurance on sub-prime MBS (see the 60 Minutes story).

ALAN GREENSPAN, the former chairman of the Federal Reserve, proclaimed last month that no one could have predicted the housing bubble. “Everybody missed it,” he said, “academia, the Federal Reserve, all regulators.” But that is not how I remember it. [read at NYT]

30 Year Rally In Bonds Over? Bill Gross, Jim Grant Bets House Plant's Life, TYX (30-Year Treasury Yield Index) Chart

The 30-Year Bond yield ($TYX) could be reversing its 30 year secular downtrend.  Check out the chart.  It is interesting that Bill Gross, the biggest bond fund manager in the world at Pimco, prefers stocks over bonds (CNBC Video).  Gross also mentioned that the US, UK and Japan have the ability to default through money printing (devaluation/reflation) which "produces lower prices in bonds and negative returns" and "there's an estimated $40 trillion present value of entitlements in the United States, and the recent health care reform has added about $500 billion to that... a trend nonetheless that suggests it's going higher and higher and higher" (Bill Gross Bloomberg Radio interview).

It would be interesting to see a big re-balancing out of bonds and into stocks going forward.  It wouldn't surprise me to see bond volatility soon (watch the $MOVE Index).  Look at the 30 year chart of the CBOE 30-Year Treasury Yield Index (symbol: TYX at FreeStockCharts.com). Technically, watch the downtrend resistance level closely and a potential base of support.

30-Year Treasury Yield Since 1980

Also Jim Grant (Grant's Interest Rate Observer) would bet on his houseplant's life that US Treasury Yields are likely to rise and he takes on the US Dollar (video below courtesy of Bloomberg).  Grant downgraded US Treasuries (see video).  If interested Jim Grant debated with David Rosenberg on Treasury Yields (link). David Rosenberg thinks Treasury yields are headed lower, taking the other side of Gregor Macdonald, Jim Grant and Bill Gross.

Interviews w/ Chatroulette Founder Andrey Ternovskiy, 20 Million Unique Visitors Last Month!

Chatroulette clocks 20 million unique visitors a month according to Andrey Ternovskiy, the 17-year old founder.  It was created only 3 months ago!  Scobleizer on CinchCast interviewed him while waiting in line for the iPad.  Andrey is currently talking with VCs.  Gotta love the black swans in internet land.

Prechter: Between Now and May is 3rd Best Selling Opportunity Since 2000

Robert Prechter of Elliott Wave International thinks between now and May is the 3rd best selling opportunity to sell stocks over the past 10 years.  First in 2000, second in late 2007 and third "between now and a few weeks from now".  What do you think, will there be a third wave down from the 2007 peak (Wave C)?  Prechter thinks we're in for another deflationary episode, even after the trillion in stimulus.
"I think you can short just about everything, somewhere between now and May we're going to have a real rollover. Think about this progression. In October the bond market topped out. In November the Dollar bottomed. In December Gold and Silver and the utilities average, go figure that one, topped out. In January the CRB Index of commodities topped out. The US stock market is the last domino holding up. The best trade on the board, the one I've been bullish on for the past six months has been the US Dollar....."

For more watch the full interview below or find it through Bloomberg Video.
Deflation Wave vs. Printing Press

Chicago Commercial Real Estate Updates (April 3, 2010)

Articles from ChicagoRealEstateDaily.com.

3/31/2010:  Apple Store on North & Clybourn finds buyer [read]
3/31/2010:  Streeterville Red Roof Inn foreclosure suit (in $484 Million CMBS) [read]
3/29/2010:  Downtown office vacancy rate at 17.1% [read]
3/24/2010:  Mirvac must must refinance $123.5M in industrial loans [read]
3/22/2010:  Local office values to keep falling: survey [read]
3/19/2010:  Two steak houses coming to River North [read]
3/17/2010:  Allerton Hotel has $72 million in overdue loans [read]
3/15/2010:  Level of distressed local property jumps [read]
3/10/2010:  Bank of America forecloses on Silver Tower condo project [read]
3/8/2010:  Delinquent mortgages, construction loans rise in Chicago [read]

Nice Apple Ipad Review Video By PC Magazine

Check out this Apple Ipad review by Tim Gideon of Pcmag.com. This thing looks "off the hinges" imho. If interested Walt Mossberg of All Things Digital did a review a few days ago.

Jim Grant and David Rosenberg Debate Treasury Bond Yields (Video Link from 3/23/2010)

There was a "great debate" on March 23, 2010 between Jim Grant (Interest Rate Observer) and David Rosenberg (Gluskin Sheff) on if Treasuries are for losers. Jim Grant thinks "T-bonds are trash" and David Rosenberg is an "optimist on the T-bond because he's a pessimist on everything else", the FT moderator said.  Watch the full debate video at Jim Grant's website here. Hopefully it is still up.  Below I put up quotes from both sides that I found interesting. I also recommend you watch the Marc Faber, Nassim Taleb, Hugh Hendry debate on Treasuries.


Master of Business Card Throwing Video (Samsung Digital Camcorder H205 Launch)

Watch this guy throw a business card like a Hira-shuriken (Ninja throwing star). It was an ad for the new Samsung Digital Camcorder H205 and was filmed with it. He can pop a balloon on the ceiling of a gym with a business card.

Icahn Dumps Blockbuster In March 13D Filing, $BBI Financial Trends and Senior Subordinated Notes At 20.25

Remember Icahn was buying Blockbuster in 2005. I thought there was some kind of 2004 Kmart real estate play going on but turns out they mostly lease space.  Six months ago they announced they were closing 960 stores or 5.5 million square feet of space through 2010 (Costar). It looks like the no late fee and quasi-netflix plan didn't hit the ball out of the park.  Maybe flooding the market with $1 dollar kiosks will save the day or perhaps sell overseas assets. Numbers speak louder than words so check out Blockbuster financial trend analysis over 10 quarters (revenue growth %, revenue, net income, net margin % and shareholder's equity, interest coverage and Netflix revenue revenue trend) courtesy of Wikinvest.  I also provided charts of BBI stock, $300 million subordinated notes and Icahn's liquidations.  First watch this video.

Hydropower In Central Asia, Rogun Dam Project - Guest Post

This is a guest post by Philip H. de Leon of OilPrice.com.

The Hydropower Solution in Central Asia: yes but…

Surfing the wave of the hype for renewable energy such as hydropower and the invitation by the United States to many regional countries to get involved in the efforts to stabilize Afghanistan, Tajikistan is bringing back to the table the Rogun hydropower dam project. Rogun, conceived in Soviet days, was planned to generate 3,600 megawatts but the collapse of the Soviet Union halted the completion of this project. Now an independent country, Tajikistan, one of the poorest in the world, sees Rogun as a central element for its energy independence and a source of severely needed foreign currencies that could be earned through the export of electricity.

That effort comes at a time when clean energy is seen as the panacea to reduce the world’s dependency on polluting fossil energy, just like using olive oil was once seen as a solution to reduce cardio-vascular diseases. The push for clean energy is laudable but an expensive undertaking. Its implementation remains sketchy in poor countries where the lack of long-term political, economical and social visibility is a deterrent for foreign governments, companies, multilateral institutions and venture capitalists from making long-term costly investments. The “let’s all hold hands and save the environment” speech quickly dies when the practicality of such projects are plugged into the picture.

China PMI Reaches 57, Copper Demand To Slow, Mortgage Bond Yields Jump, March CMBS Delinquencies Up

Here are some interesting articles I just read. Get ready for some charts.

Jiangxi Copper Says Demand Growth to Slow on Power Spending Cut- Bloomberg
M&A Creeps Higher as Cross-Border, Hostile Deals Spur Recovery - Bloomberg
CMBS Delinquencies Up Sharply In March (Trepp/Real Point) - Zero Hedge
Will Government Debt Risks Derail The Expansion? (Bond/Swap Spreads) - JP Morgan
Fed Ends Its Purchasing of Mortgage Securities - New York Times
Mortgage-Bond Yield Spreads Jump as Fed Exits Market - Bloomberg
China's manufacturing activity picks up in March - MarketWatch
Overtaking the Dollar: The Three Phases of Yuan - Economic Forecasts and Opinions
ADP Says U.S. Companies Unexpectedly Cut Payrolls - Bloomberg
Fannie Mae Releases February 2010 Monthly Summary - PDF
General Growth files exit proposal, auction rules - Reuters
Starwood Said to Raise $2.8 Billion for Real Estate Funds - Bloomberg
How to Corner the Gold Market by Janet Tavakoli (3/30) - Huffington Post
Marijuana legalization will be on California ballot (3/25) - Reuters

Walt Mossberg Reviews the Apple Ipad, Hits Stores April 3

Walt Mossberg of AllThingsDigital reviews the Apple Ipad below.  It hits stores this Saturday (4/3) for $499.

El-Erian's Outlook: 10-Y Treasuries Yield 2.75-5%, US Growth To Slow During Second Half of 2010 (Pimco)

I recommend you read this long CBS Money Watch interview with Pimco's Mohamed El-Erian.  He gives his outlook on Treasury yields, US growth, unemployment, inflation, sovereign debt in Europe/Brazil and attractive bond markets.  Below are quotes regarding 10-year Treasury yields and US growth going forward.
"The yield on the benchmark 10-year U.S. Treasury bond will bounce around between 2.75 percent to 5 percent until the end of 2011."

"Look for growth rates to be an annualized 4 percent to 5 percent in the first half of the year. Growth will likely slow in the second half to an annualized 2 percent." 
Read article at - CBS Money Watch
10-Year US Treasury Yield at 3.84% (stockcharts.com)

July Call Option Activity in CYB, Trading Band Expansion Related or Shorts Covering ($CYB, $CNY, $USD/CNY)

There's been interesting activity going on in the Chinese Yuan ETFs lately. Remember the strong volume in $CNY (Market Vectors Renminibi/USD ETN) on 3/22 that brought it up about 5%? Now there appears to be option activity in the WisdomTree Yuan ETF ($CYB) (hat tip OptionMonster).   As you can see 1,956 July 25 calls traded at 0.40 with 11,433 open and 1,750 July 26 calls traded at 0.17 with 15,819 open.  The volume was way UNDER open interest so I'm thinking the volume could've been shorts covering or perhaps a spread.  Thoughts?  On the put side >=July, 2010 there are 33,000 July 25 puts open and 10,000 October 24 puts open, so it's hard to tell who's positioning/hedging which direction.  Keep an eye on the Renminbi aka Chinese Yuan going forward.  If China ever de-pegs from the Dollar it would change the whole macroeconomic game and bring volatility to CYB, CNY and CNY/USD. See charts and CNY/USD trade live below.

Moscow Metro Suicide Bombings, The True Causes - Guest Post By OilPrice.com

Guest post by OilPrice.com on the Russian bombings, enjoy.

The True Causes Underlying the Moscow Metro Bombings

The tragic news of the 29 March twin suicide bombings of two Moscow Metro stations during the morning rush hour has produced outrage worldwide, with the Kremlin quickly adding that the attacks were carried out by the Caucasus Mujaheddin, a northern Caucasus-based militant Islamist guerrilla group that claimed responsibility for the bombing of a Moscow to St. Petersburg express train last November.

The grim death toll can be seen as yet another statistic in the Kremlin’s ongoing war with Chechnya separatists that erupted in December 1994. Underneath and driving the savagery of the last 16 years is a resource that few commentators note – oil.

Options Running Out For Argentina In Falklands Oil Fight - Guest Post

Here is my first guest post by OilPrice.com.

Argentina Running Out Of Options In Falklands Oil Fight

As Argentina's oil battle with the United Kingdom rages on, the only other obstacle the South American country can throw at oil companies planning to drill near the Falkland Islands is to interdict U.K. ships or equipment - but regional expert Riordan Roett doubts the Argentines are “stupid enough to do that.”

This would be a “very dangerous move” on the part of the Argentine government, said Roett, director of Latin American studies at Johns Hopkins University in Washington. Argentina, which went to war with the U.K. in 1982 over Falklands’ sovereignty, is “very careful” about challenging the British in reaching the islands, Roett noted.

Explosion Hits #Moscow Metro, Soros and Kaiser Bid For BSE, Goldilocks Environment For Leveraged Credit, China's Geely Buys Volvo for $1.8 Billion, Greece To Launch Syndicated Bond...

Update:  Moscow Metro Blasts Kill at Least 34, Ministry Official Says - Bloomberg


25 people killed and several injured by two bomb blasts in Moscow metro - The Nation


Two blasts hit Lubyanka station and Park Kultury station in Moscow - Guardian


Soros and Kaiser (Argonaut) bid for 4% of BSE (Bombay Stock Exchange) - Business Standard

"This is “an almost ‘Goldilocks’ environment for leveraged credit markets, JPM"  - Bloomberg

China's Sinopec "net profit up 116.5% on the previous year to Yuan 61.76 bil." -PlattsOil Twitter

Zhejiang Geely Holding Group buys Ford's Volvo Cars unit for $1.8 billion - AP

Head of Abu Dhabi's sovereign wealth fund missing after glider crash - AP

Swiss Frac ($USDCHF, $FXF) action, charts - Previous post

"Greece to launch a syndicated bond Monday or Tuesday" - FT.com

Chinese exchanges launching stock futures on April 16 - MarketWatch

Swiss Franc ($USD/CHF) Filled Gap Down On Sunday, $FXF In Clear Downtrend Since November, Watch USD/CHF Symmetrical Triangle

The US Dollar quickly filled a gap down on the Swiss Franc moments ago. It hit a low of 1.058 and then charged higher to 1.068 where it stands now. The long term view of $USDCHF shows a symmetrical triangle with an inflection point approaching. $FXF (the Swiss Franc ETF) has been in a downtrend since late 2009. It needs to break above that level to commence a new uptrend (imo).

Utility Scale Solar Power Is Coming! Bill Gross Interview of eSolar

Check this out! Bill Gross of eSolar is here to save us from an energy crisis. Utility scale solar thermal energy is almost at price parity with fossil fuels.

Image from eSolar.com

Google CEO Eric Schmidt Speech At 2010 Abu Dhabi Media Summit (ADMS), Rupert Murdoch Presentation Video ($GOOG, $NWS)

Below is Eric Schmidt, the CEO of Google, speaking at the 2010 Abu Dhabi Media Summit between 3/9/2010 and 3/12/2010 (courtesy of YouTube Channel TheADMS2010). I also put up Rupert Murdoch's presentation (News Corporation).

Greenspan On China Bubble, 10 Year Note Yield If Above 4% (3/26/2010)

Greenspan spoke with Bloomberg about Treasury yields (if 10 year yield rises above 4% aggressively), the huge Federal debt, US jobless rate, US Dollar, China bubble and the Fed Rate/10 Year yield conundrum during 2004 which he said was responsible for the housing bubble and crisis. Here's a quick summary and then the 12 minute video.

Chinese Firm Buys Foreclosed LA Marriott, 10% of Hotel Loans Delinquent In February, CMBS Delinquencies at 5.73% (Moody's) But Slowing - CRE Reading

Commercial real estate link fest and a video....

Watch Yields Closely and S&P 1150 Level (Philip Manduca of ECU Group)

I remember seeing Philip Manduca of ECU Group plc on CNBC today making sense of the markets. He talked about the Euro Zone's fiscal problem, US fiscal problem, how to trade the US Dollar, Euro and Yen during all of this and said keep an eye on Treasury yields, S&P 1,150 and stick with gold for the long term. He's sticking with the US Dollar in the short term but said that could change in a week.

A Spiritual Stock Market Awakening

If you are confused about the market, the video below has the answers. By Jefferson Krull at HitTheBid.net.

If SPY Breaks Below 115 There's Double Dip Risk, ISEE Call/Put Ratio Not Bearish (TLT, SPY, 3/25/2010)

Watch the new $115 support level or the yellow line below. If 115 gets taken out on strong volume the market could be making a forward looking statement, if you know what I mean.  It is testing the lower end of a 2 month uptrend channel as you can see below.  If channel support gets taken out tomorrow then $115 support could be in play again.  Just saying, if I were net-long equities in a $136 Billion portfolio I'd have breakout/double top risk insured with puts and reevaluate at $115.

The ISEE Index or ISE buy-to-open call/put ratio was not bearish as of today's close (more info here on ISEE). It closed at 155 verses 160 on 3/16/2010 and 67 on 1/26/2010 (pre-correction). Below 100 means puts > calls.   You can see the double dip in bearish bias that brought on the correction (second chart below). Also FYI, the line in the sand for the E-Mini June Future is 1,141 (ESM10 chart videos).

I included at the bottom a SPY and TLT (long bond etf) comparison chart for today. SPY was up 1% at one point but ended up closing in the red, on decent volume.  TLT gained on SPY's weakness towards the end of the day but still closed lower. Interesting stuff going on, especially with interest rates and currencies.  Either way I like it.

Peter Schiff Takes On Greenspan's 66-Page Report On Financial Crisis (Brookings Institute)

Peter Schiff responds below to Greenspan's 66-page recent report found here (Brookings Institute).

"This new market-based workforce, Greenspan said, helped push up growth in the developing world. This in turn fueled a global savings glut that drove down long-term interest rates, leading to an "unsustainable boom" in house prices, he said." (Reuters)

Remember he was always wondering why the long end was moving lower in 2005?  Calling it a "conundrum".  Greenspan also testified before congress in October, 2008 and said he found a flaw in his ideology.  Here is the video (Dissecting Alan Greenspan's Testimony, Finds Flaw in His Ideology).  Peter Schiff says it was all because he left short term interest rates artificially low for too long and he warned about housing in 2006 (Bloomberg/CNBC videos from 2006).

Where is EUR/USD Headed, Broke Support (Dennis Gartman, John Taylor and Chart), 1.30 and 1.25 Look Like First Support Levels, 1.35 New Ceiling Resistance

EUR/USD has been in play on this blog since February when it was at 1.39. I said a few days ago to watch the critical 1.349 support level on EUR/USD and since then it broke through that floor and is now trading at 1.33. Here's what is going on:
"European Union leaders will hold what is likely to be a tense and difficult summit on Thursday, divided over how to help heavily indebted Greece and struggling to maintain confidence in the euro.

Diplomatic efforts on the eve of the two-day summit failed to bridge differences over whether to offer a safety net to Greece, helping push the euro down to a 10-month low after Portugal suffered a debt down downgrade."
(read full Reuters article at CNBC.com)

So it's obviously a big mess and hedge funds are trying to make dough off this.  On Fast Money Dennis Gartman of The Gartman Letter said he was short the Euro and said it could hit 1.25, 1.20 or 1.15 (how about 0.75). He mentioned that the 100 day moving average crossed below the 200 day moving average which is a selling indicator.  Also if you're interested Gary Shilling thinks the Euro will hit parity with the Dollar.

US Dollar Breaks Out, GLD, SLV, JJC, USO, SPY Down, Market Analysis Part 1

Market Analysis for 3/24/2010 (Part 1: DXY, GLD, SLV, JJC, USO, SPY)

I'm going to chart out a bunch of stuff and chop up posts into parts.  Institutions have been minting Dollars on the Dollar rally since December, 2009.  Click here for an index of previous posts/charts/large spec action on the US Dollar.  The US Dollar Index broke out yet again folks.  Since gold peaked in the beginning of December, 2009, DXY (US Dollar Index) is up 10%.  Remember that Forex brokers offer leverage up to 400:1 on currency pairs in some cases.  So 10% is like a million percent people!  Look at the correlations between DXY, GLD (gold etf), SLV (silver etf), JJC (copper etf), USO (oil etf) and SPY (S&P etf) since GLD peaked.  The US Dollar outperformed everyone...

Thomas Lee: Falling VIX-to-Credit Correlates With Positive Equity Flows, Be Tactical During Tightening Cycle (Favors Financials and Technology), Sees Supply/Demand Imbalances In Publicly Traded Credit

Thomas Lee, JP Morgan's Chief US Equity Strategist was on Bloomberg TV on 3/22/2010. I quoted below what he said about equities. He also thinks there are supply/demand imbalances in the publicly traded securitized credit market (demand > supply), there are opportunities in bankruptcy plays (auto parts suppliers) and believes health care legislation will create jobs. He said be "tactical on policy normalization" but financials (net interest margin) and technology usually outperform during the beginning of a tightening cycle. If you followed his advice since June 17, 2009 you would've made a lot of money. For previous posts featuring Thomas Lee click here.

Niall Ferguson Testifies On China Exchange Rate Policy, Text

Harvard's Niall Ferguson testifed before the Committee on Ways & Means committee on China's exchange rate policy.  Below is part of the testimony.  Find the full testimony PDF here (waysandmeans.house.gov).  He basically says be careful of potential market implications if protectionism runs amok.  I will embed the video when it is available.

Chicago Students Condemn Board of Education On Cafeteria Food

"When you go to school, you expect a decent meal but instead you get slop," she said. (link)
Students to Board of Ed: Stop serving us slop - ChicagoBreaking, 3/24
Chicago school officials to ditch doughnuts, Pop-Tarts - ChicagoBreaking, 3/23
Chicago high schoolers to demand better food at board meeting - ChicagoBreaking, 3/23

Also 4-day school week?  Mayor Daley says it's a move in the wrong direction..
Daley turns thumbs-down on four-day school week - ChicagoTribune, 3/23

David Tice: Secular Bear Market Won't Bottom Until Market Reaches Book Value, Sees S&P At 400 and Unemployment 15%, Likes Gold

With the market nearing 11,000 I have to put David Tice up. David Tice of Federated Investor's Prudent Bear Fund thinks the S&P will hit 400 and unemployment will hit 15%.  He recommends being short "negatively correlated vehicles" to stocks, real estate, your paycheck and bonus, and buying gold and precious metals. He says look at what happened to Japan.
"We have not yet worked off the excesses, we still have vast excesses and imbalances that still have to be worked off and this secular bear market will not bottom until we get back below book value or near that".
Bloomberg.com Video Link

Reading: MOVE Index, CBOE IPO, Africa Cyber Threat, Euro to $1.20 (FX Concepts)

The MOVE Index (bond market VIX) And Outlying Events - TheMacroTrader
CBOE Filing $300 Million IPO - CNN Money
February new home sales drop 2.2 percent to new low - AP
February Existing Home Sales Data, Shadow Inventories etc. - Previous Post
Bank of America cutting more loan balances - WSJ
Ackman’s Greatest Short Ever Told Began With Handshake Refused - Bloomberg
Why #Africa is the world's biggest cyber threat - Foreign Policy
Lehman Head Warns of More Big Bank Failures - Handelsblatt (translated by CreditWritedowns)
John Taylor (Largest Currency Hedge Fund) Sees Euro Dropping To $1.20 By August - Zero Hedge
Goldman gets stopped out of EUR/USD at 1.34!! - Zero Hedge
GoDaddy.com plans to stop registering domain names in China - Washington Post

February Existing Home Sales -.6%, 33-Month Shadow Inventory, 8.6 Months On Market and Zillow Home Value Index Link (Charts/Tables from NAR)

Existing home sales were down 0.6% in February (preliminary) over January to 5,020,000 units with 8.6 months of inventory. Existing home sales are up 7% over last year. The existing home sales price was up $200 over January to $165,100 but still down 1.8% over last year. First is a piece of the news release and table with US existing home sales, regional data, inventories and months of supply on the market. I charted out US existing home sales and monthly inventories at the bottom and gave you information from S&P on shadow inventory that could put pressure on the housing market going forward. I just added info on the Zillow Home Value Index at the bottom which shows a peak on the month-over-month chart that started last November.
"Washington, March 23, 2010

Lawrence Yun, NAR chief economist, said widespread winter storms in February may mask underlying demand. “Some closings were simply postponed by winter storms, but buyers couldn’t get out to look at homes in some areas and that should negatively impact near-term contract activity,” he said.

“Although sales have been higher than year-ago levels for eight straight months and home prices are much more stable compared to the past few years, the housing recovery is fragile at the moment.”

Total housing inventory at the end of February rose 9.5 percent to 3.59 million existing homes available for sale, which represents an 8.6-month supply2 at the current sales pace, up from a 7.8-month supply in January. Raw unsold inventory is 5.5 percent below a year ago.

“The key test for a durable recovery comes in the next few months as the tax credit deadline approaches,” Yun said. “If we see a surge in home buying comparable to last fall in the months leading up to the original tax credit deadline, then enough inventory should be absorbed to ensure a broad home price stabilization.”

Geithner Testifies Before Congress On Fannie Mae Freddie Mac Reform (CSPAN Video, Written Testimony)

More politics for you to enjoy. This time Treasury Secretary Tim Geithner testified before the House Financial Services Committee on reforming the GSEs (Fannie Mae and Freddie Mac). 

"March 23, 2010
TG-603

Secretary Timothy F. Geithner
Written Testimony
House Committee on Financial Services

Introduction

Promoting and maintaining stability in the housing market is critical to achieving economic recovery and sustainable long term growth. The Administration's broad housing policies, including support for the ongoing functions of the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, together with Treasury's and the Federal Reserve's purchases of mortgage-backed securities, have been crucial to restoring stability in the housing market and to maintaining the availability of mortgage credit. Private capital has not yet returned to provide the amount of funding that would be needed to allow families to get a mortgage to buy a new home or to sensibly refinance the house they already live in. Without the continued activity of the GSEs and the Federal Housing Administration (FHA) in the current environment, mortgage rates would be higher and homeowners would have a significantly harder time obtaining credit. While conservatorship, undertaken by the Federal Housing Finance Agency (FHFA) during the Bush Administration, pursuant to Congressional authorization under the Housing and Economic Recovery Act (HERA), and continued under the Obama Administration, was necessary, together we must begin the process of fundamental reassessment and reform.

Obama Signs Health Care Bill At Ceremony - Video, Full Bill Link H.R.3590

Historic day for health care. Here is a video of Obama signing the bill from CSPAN.org. Obama and Biden give a speech before the bill is signed.
"President Obama spoke about the passage of the health care bill before signing it into law. Members of the audience included health care advocates, members of Congress, medical professionals, family members of Senator Ted Kennedy, and Americans who had written to the president about their challenges with health insurance." (CSPAN.org)

Wondering where the full bill is? Here's a link to the full text of the Patient Protection and Affordable Care Act (H.R. 3590) at the Government Printing Office (text/pdf). There is also information on the health care bill at OpenCongress and the Library of Congress. Here is a summary of the health care bill at the Library of Congress.

Reading: January CRE Prices Up 1%, China Condemns Google, Hellenic Post Bank Owns Greek CDS, E&Y Responds To Lehman Bankruptcy Examiner's Report 3/22/2010 - 3/23/2010

The Moody’s/REAL Commercial Property Price Index climbed 1% in January - Calculated Risk
Store closings to put pressure on malls - Calculated Risk
Institutional investors against private equity fees - Naked Capitalism
China to Post $8 Billion Trade Deficit in March: Wen - ABC News
Cablevision buying blog network Gothamist - Tech Dirt
Monarch Insurance offers medical marijuana program in California, Hawaii - Insurance Journal
Biggest Greek CDS speculator is state-owned Hellenic Post Bank (TT) - Zero Hedge
Ernst & Young responds to the Lehman Bankruptcy Examiner's report, defends position - re: The Auditors
China condemns decision by Google to lift censorship - BBC News
Official update from the Google blog:  A new approach to China: an update - Google
Strange Similarities Between 2007 Peak and Current Rally High - Afraid to Trade

Has 1-Month LIBOR Bottomed? Fed Discount Rate Update ($LIBOR, Primary Credit Rate)

Interesting movement going on in 1-month rate land. LIBOR is the London Interbank Offered Rate and is a "trimmed average of inter-bank deposit rates offered by designated contributor banks, for maturities ranging from overnight to one year" (Wikipedia). LIBOR rates are also used to price or adjust variable-rates when economic conditions change. On January 11, 2010 I thought there had to be a spike at some point, look at the chart. 1-Month LIBOR stood at 0.233 on 1/11/2010 and it just spiked to 0.2472 a few days ago.

Renminbi/USD ETN CNY Was Up 5% Today, Revaluation Speculation?

Check out $CNY, the MarketVectors ETN for the Chinese Renminbi/US Dollar pair (Yuan/USD). Hat tip @fiateconomics, @theback9 on Twitter for pointing this out. As you know the US Government is trying to get the Chinese Government to appreciate their currency against the US Dollar to stimulate trade.
"March 22 (Bloomberg) -- People’s Bank of China Governor Zhou Xiaochuan said his government and the U.S. may engage in bilateral discussions about currency values, adding that too much political “noise” isn’t “helpful.”" [Bloomberg].

"Zhou, head of the People's Bank of China, said while U.S. policy makers are under pressure to lower unemployment, China also faces a "tremendous task to create jobs." [Reuters]"

Like Jim Rogers said in the recent BNN interview:  "(The Chinese) know that they can never be a great international economy unless their currency floats. You can't have a blocked currency and be a major player on the world stage, they know that" (Rogers interview, usd/cny chart).  So is China nearing a currency move?  Someone thinks so (unless it was a f--- up!).  Look at the crazy move in $CNY today on higher than average volume.  I don't see any options on it.

$CNY / Market Vectors - Renminibi/USD ETN (courtesy of stockcharts.com)

$CNY  - 1 Minute Chart (courtesy of freestockcharts.com)

CLSA's Chris Wood Is Overweight Asia, China, Collapse of US Dollar Standard (CNBC, 3/1/2010)

Before this gets too old, Chris Wood of CLSA's Greed and Fear newsletter and "the man who predicted the subprime crisis (Telegraph, 9/2007)", said on CNBC to be overweight Asian equities, China stocks and gold, and sees the collapse of the US Dollar standard.  This CNBC video was on 3/1/2010 from the CLSA Asia-USA Forum. He sees the pullback in China stocks as a buying opportunity. Hedge fund manager Jim Chanos probably thinks you sell the rally after the pullback.
"My view is firmly that investors should remain overweight Asian equities with a focus on China and Indian stocks. In my view the over heating concerns in China we see this year, the incremental tightening we see in China represents a massive buying opportunity to buy more China stocks. The key point to understand is that the inflationary pressures we see in Asia this year are healthy, they reflect the fact that Asia has growth, it has income growth. Whereas in the Western World we still have this deflationary situation".

E-Mini S&P Future Action After Health Care Passes, Bart Stupak Speaks and Crowd Goes Wild [Videos, ES Live Charts]

Here are two videos I recorded after the health care vote passed.  I included a streaming E-mini S&P June Future chart with Bart Stupak speaking on CSPAN.org.  The crowd goes crazy.  The future was down 0.7% once the bill passed and rallied back to -0.54% the last time I checked.  The second video is during the reconciliation vote.

I zoomed out on the chart and saw that the S&P June Future broke below a rising channel and could test new support at 1141.67 (from the January highs that were just broken).  In the second video you can see a downtrend on the 2-day/5-minute chart.  The charts I used in the videos are from Optionsxpress.

Jim Rogers Talks Chinese Yuan Peg, Urban Real Estate Bubbles, Trade Wars, USD/CNY Chart (BNN, 3/18/2010)

Summary of what he said about China's currency peg and potential trade wars between China/US on the Business News Network out of Canada (BNN.ca video link).  Rogers called the bottom in the US Dollar Index late last year at 75 (link), it's now at 80.75.

    Bart Stupak Voting Yes On Health Care Bill, Could Pass Tonight [Video]

    With the big health care vote tonight, I just read that Obama clinched Bart Stupak's (Michigan) health care vote today by signing an executive order banning federal funding of abortions. This could seal the deal. Futures will be interesting to watch tonight. Here is Bart Stupak today on Associated Press video.

    India Raises Rates, 2010 LBO Boom?, $FXI P&F Chart Analysis, Dick Bove On Citigroup, Housing, China Development Forum, Advanta Bankruptcy....

    India's Central Bank could raise rates next month (BNP Paribas SA, Standard Chartered) - Bloomberg
    LBO Boom Coming in 2010? Analysis of debt/CDS plays and LBO screener - Zero Hedge
    Dick Bove: Citi Shares to hit $8.50 in next few years - Tech Ticker Video
    Dick Bove: Housing to see a 10-15% dip - Tech Ticker Video
    Chinese Food for Thought ($FXI), point & figure chart - Charles Amadeus
    China Development Forum 2010 - Cdrf.org.cn
    China Accuses U.S. of Politicizing Yuan as Trade Surplus Sinks - Bloomberg
    Commerce Minister Chen Deming: China may report trade deficit in March - AP
    Advanta bankruptcy filing is a blow to small business lending - CNN Money
    CDS 101 by Goldman Sachs (Learn about credit default swaps) - Goldman Sachs PDF
    China: Google's exit to hit bloggers, activists - One India
    Chinese-made train heads to Mumbai - CCTV Video

    New Blogger Template Design Is Here, Demo Video #newbloggertemplate

    Thanks Blogger, my HTML skills weren't up to par.  I think it's time for a sick 3-column layout with page tabs on Distressed Volatility.  To look all professional. Here is what they launched, quoted from the Blogger in Draft blog.  Check out the demo video below.
    • 15 new, highly-customizable templates from our design team, split into four families: Simple, Picture Window, Awesome Inc, and Watermark
    • One-, two-, and three-column layouts for each template, with complete control over the size and arrangement of the columns
    • Hundreds of background images and patterns from iStockphoto, the leading microstock image marketplace

    Icahn Sues Raynor For $100 Million On Federal Mogul 13D Filing (IEP)

    It looks like there's beef in 13D filing land. After going through my WCI post from 2008, which included various filings from Icahn against management, I decided to check out what was going on at Icahn Enterprises (IEP). It appears there is a feud between Icahn Enterprises and Geoffrey Raynor's hedge funds. On a Federal Mogul 13D filing in January, Raynor filed a complaint about Icahn's recent $2 Billion bond offering (regarding the nature of his Federal Mogul holding in connection w/ the offering).  Icahn is now suing Raynor for $100 million in damages for interfering with the offering. Wow..

    First here is part of the decent sized debt offering made by IEP:
    "Senior Notes Offering

    On January 15, 2010, Icahn Enterprises L.P. (“Icahn Enterprises”) and Icahn Enterprises Finance Corp. (“Icahn Enterprises Finance” and, together with Icahn Enterprises, the “Issuers”), closed their previously announced sale of $850,000,000 aggregate principal amount of 7¾% Senior Notes due 2016 (the “2016 Notes”) and $1,150,000,000 aggregate principal amount of 8% Senior Notes due 2018 (the “2018 Notes” and, together with the 2016 Notes, the “Notes”) pursuant to the purchase agreement, dated January 12, 2010 (the “Purchase Agreement”), by and among the Issuers, Icahn Enterprises Holdings L.P., as guarantor (the “Guarantor”), and Jefferies & Company, Inc., as initial purchaser (the “Initial Purchaser”)." [source: sec.gov]

    Here is part of the 13D made by Raynor's Nineteen Eighty-Nine LLC.
    "It has come to the attention of the Reporting Persons that Icahn Enterprises, L.P. may be materially misrepresenting the nature of its ownership of certain assets in connection with its recently announced $2 billion Senior Note sale.

    A Bullish and Bearish Case On The Market (3/19/2010)

    Alright, alright...  Where are we headed people?  I've absorbed many different opinions from the tele, news stories and blogs.  $SPY made new highs, oil couldn't break resistance...yet, $GLD is making lower highs (watch that new symmetrical triangle though) and the USDX could breakout again above $81. We'll see what happens on Monday post-healthcare vote.  The best thing to do is watch the chart imo.  If the S&P breaks below 1,150 again it will be a failed breakout and potential double top, or a prep for a boring sideways channel.  I will chart out a bunch of sh*t later.   I'll leave you with a bullish and bearish case on the market.  Read this post at Beanieville Inc: Bears calling for major top, again and below is a video of Robert Prechter (Elliott Wave International) on CNBC warning about the next wave down coming. Good luck.

    7 More Banks Fail On Friday (March 19, 2010)

    This quote on quote readjustment period is surreal.  Will every community bank go under in this Country?  For the full list of failed banks go to FDIC.gov (h/t @polizeros).

    Bank Name

    City

    State

    CERT #

    Closing Date

    State Bank of Aurora Aurora MN 8221 March 19, 2010
    First Lowndes Bank Fort Deposit AL 24957 March 19, 2010
    Bank of Hiawassee Hiawassee GA 10054 March 19, 2010
    Appalachian Community Bank Ellijay GA 33989 March 19, 2010
    Advanta Bank Corp. Draper UT 33535 March 19, 2010
    Century Security Bank Duluth GA 58104 March 19, 2010
    American National Bank Parma OH 18806 March 19, 2010

    Meredith Whitney: Housing Will Double Dip, Bank Mortgage Model Broken (CNBC)

    Meredith Whitney (Meredith Whitney Advisory Group) was on CNBC talking about the housing and mortgage-backed securities market.  Below I quoted text from CNBC.com.  I didn't hear it on the video unless I missed it.  On the video she said watch what happens at the end of March when the Fed stops supporting the mortgage market (1/3 of Fed's balance sheet tied to mortgages).  From the recent Fed statement.
    "To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month" [full statement]

    She called the correction that started in 2010 [12/9/09 post].  She also said the bank model is broken.  They can't make money on mortgages anymore with the securitization market closed.  
    "The asset classes of MBS and Treasurys are priced for a material correction in my opinion," she said. "The only buyers of agency MBS are the Fed and banks so you see how precarious that market is." [Meredith Whitney via CNBC]

    I also looked at the NAHB Builder Confidence Index chart a few days ago and saw a possible double dip coming (possible double bottom or retracement in the chart).  There are other data points to use for confirmation like home sales, inventories, Case/Shiller housing price index etc.  I think housing is important and will lead the US markets and economy going forward.  Unless corporations subsidize the mortgage market with all the Benjamins on their balance sheet.  Video below courtesy of CNBC.com.

    Is Google.cn going dark in China soon? Will Sohu take over? (GOOG, SOHU)

    Wtf?!  It's still up though as you can see.  This is kind of a big deal.  It's still speculation but they did say at FT.com there was a 99.9% chance they were shutting it down.   在过去的乐趣?It all originated from that gmail hack from China in early January, see post.  Closing down google.cn would disrupt a bunch of advertisers and close off a lot content, and not be cool at all!


    "Shares of Baidu, Google's chief rival in China, rose sharply on Monday following reports that Google is almost certain to close its search operations in China, while Google's shares declined." - InformationWeek.com
    "Google-China Row Thickens over Complaint Letter: Most Alleged Signatories Say They Didn't Sign the Complaint Letter About Possible Google Pullout..." - ABCNews
    "Though Google is denying anything about its processes have changed, MSNBC.com reported Tuesday that searches on subjects that had been blocked as objectionable are yielding results. For example" - ITBusinessEdge
    "Who wins when Google leaves China? Microsoft and Baidu might not like the answer" (Sohu and Tencent) - Fortune.com
    "A group of Google's advertising partners in China has sent a letter to the Web giant, saying it has waited in "profound pain" for word on the company's plans" -CNET
    "Google's China ad partners wait in 'incomparable pain'"- BusinessWeek.com
    "Google Partners Call For Clarity on China Plans" - Reuters
    "Google China Exit Could Boost Tencent, Not Just Baidu" - Barrons Tech Trader Daily

    I'm watching GOOG and SOHU charts, I will update if anything should happen. Here is a 1-month performance comparison of SOHU and GOOG from Stockcharts.com.


    Read a Harvard Thesis on the CDO Market Meltdown

    Finally a non-BS, unbiased report I can read about the subprime mortgage-backed CDO meltdown by a Harvard undergraduate last year.  The report is 115 pages long and packed with charts.  I found it at Deal Journal.
    "Deal Journal has yet to read “The Big Short,” Michael Lewis’s yarn on the financial crisis that hit stores today. We did, however, read his acknowledgments, where Lewis praises “A.K. Barnett-Hart, a Harvard undergraduate who had just  written a thesis about the market for subprime mortgage-backed CDOs that remains more interesting than any single piece of Wall Street research on the subject.”" [LINK]

    Greece, Discount Rate Could Bring EUR/USD 1.349 Retest, Couldn't Take Out 50DMA [Chart]

    Articles today on the Euro.
    Greece Concerns Hit Euro - WSJ: "NEW YORK—Speculation that Greece will seek aid from the International Monetary Fund pressured the euro Thursday morning in New York." [link].

    Greece Requests EU Support Package - WSJ "BRUSSELS—Greek Prime Minister George Papandreou on Thursday requested that European Union leaders at their summit next week agree to a package of standby loans to...." [link]

    *Or Fed discount rate hike speculation [BusinessInsider]

    The Euro/USD is down 0.89% right now. I've been watching the 50DMA on both EUR/USD and USDX (US Dollar Index).  EUR/USD couldn't take out the 50DMA so a 1.349 retest could be in the cards.  It's also riding a downtrend from December, 2009 and the ultimate trend decision is imminent at the vertex angle.  Stay tuned.

    EUR/USD (Euro/US Dollar) - freestockcharts.com

    Why Did Gold Breakout and Not Silver, GLD, SLV and GLD:SLV Ratio

    Anyone know why gold's nephew silver didn't make new highs when gold did a few months ago?  It's interesting that the GLD/SLV ratio (3rd chart) shot up 63% (5.5-9) through August-October 2009.  Is silver late to the party or is gold moving ahead of itself.  It does seem like GLD is the anti-fiat money play of choice. What's weird is the correlation spread from 2006.  In the 4th chart look how GLD and SLV rallied in lockstep until the 2008 crisis, which widened the price correlation during the reflation move.  Technically though, if SLV gets near $19-$20 resistance it could be an interesting breakout play.  That's if the deflation whale or Fed doesn't break up the precious metals party.  $16 looks like the next support level on $SLV/Silver May future.  SLV is trading at $17.  I also took a snapshot of Hecla Mining, a small cap silver mine in Idaho (see 2009 action) and it broke above the 50dma recently and is nearing $7 resistance.  If the secular precious metals play is still intact, watch silver. Thoughts?  For more information on the silver move read: Got Gold Report – COMEX Commercials Halt Silver Advance at news.silverSeek.com. Also, check out medieval silver coins at this museum.


    Obama Discusses Health Care Bill on Fox News w/ Bret Baier (3/17/2010)

    Obama was on Fox News discussing the health care reform bill and foreign policy with Bret Baier. Below are part 1 and 2. Hat tip to Drudge Report. If interested here's a link to the bipartisan health care reform round-table. If the videos below don't show up for some reason here is part 1 and part 2.

    Roubini and Paul Britton of Capstone Warn About Volatility Ahead (CNBC Video)

    Nouriel Roubini and Paul Britton of Capstone Holdings warned about potential volatility ahead on CNBC. Mid-term elections, liquidity withdrawals and downside earnings surprises could awake the volatility monster. The VIX (volatility index) is currently at the January lows (17.69).  What do we see first, 12 or 38? Action in the VIX option pit could get interesting going forward.

    3-Year Volatility Index (VIX) Courtesy of Stockcharts.com

    Fed Keeps Rate at Zero Percent, SPY Rides Above January Highs [GLD, SPY, TLT, UUP] 3/16/2010

    There were interesting correlations today after the Fed left rates at 0% - 0.25% and said purchases of $1.25 Trillion in agency mortgage-backed securities and $175 Billion in agency debt neared completion. The Fed still sees subdued inflation. I provided a comparison chart of TLT, SPY, GLD and UUP reacting to the statement and broke each out separately ($DXY instead of UUP) with simple technical analysis.   I like watching the reflation crew to judge overall strength of the market and inflation expectations.  SPY broke above the January highs, GLD is flirting with near term ceilings, 20+ Treasuries are making moves around critical support above the downtrend and DXY is testing 50DMA support. See charts for more info and setups.  The rest of the week will make or break the charts.  Overnight futures are up except the Dollar. Watch out for volatility, as always.

     SPY (SPDRs S&P 500 ETF)

    TLT, GLD, SPY, UUP, USO Comparison Post Fed Statement

    GLD (SPDR Gold Trust)

    DXY0 (US Dollar Index)

    TLT (iShares 20+ Treasury Bond Fund)

    Secondary Market Platforms Could Revolutionize Investment Industry; Banks and Insurance Companies Are Still Considered Accredited Investors!

    Part of the title above is based on what Michael Lewis said in an interview with Bloomberg, "big firms that used to essentially be the smart money at the poker table had become the dumb money". Look what first defines an accredited investor at the SEC, a bank and insurance company. Lehman Brothers had no idea how to value their assets and AIG had no idea what they were insuring!

    "The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

    1. a bank, insurance company, registered investment company, business development company, or small business investment company;

    2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;" (SEC.gov)

    Will NAHB Builder Confidence Double Bottom? March HMI at 15, Couldn't Break Above 1991 Low (XHB, ITB)

    Is it just me or did the HMI (builder confidence), Present, 6-Month and Traffic data fail to break above 1991 resistance/2008 high in September 2009 and now possibly building a base for a double bottom in confidence.  Since late 2007, 10-20 has been the range so 20 needs to be taken out for a confident builder recovery, imo.  Data comes from NAHB.com.



    For a short term comparison between HMI and XHB/ITB movement, the builders index peaked in September, 2009 at 19 and is now at 15. During that same period XHB (homebuilder etf) and ITB (home construction etf) sold off and regained all their losses.  Which is priced in, the housing etf, builder index, or not enough information?

    ITB and XHB

    Here was the release from NAHB.com
    "Foreclosures Weigh on Builder Confidence in March

    March 15, 2010 - Builder confidence in the market for newly built, single-family homes fell back two points to 15 in March as poor weather conditions and distressed property sales posed increasing challenges to both builders and buyers, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

    Economic Impact If Chicago River, O'brien Locks Close, Asian Carp Invasion!

    Asian Carp volatility continued. There is currently a Silver Asian Carp terrorism alert for the Great Lakes. They are those crazy jumping fish that are in the Mississippi River that disrupt the food chain and knock people out on boats. If they invade the Great Lakes they'd affect the $7 Billion recreational and commercial fishing industry. The US Army Corps of Engineers are deciding whether they should close the Chicago River and O'brien Lock on a part-time basis to control the migration, but that would disrupt $1.5 Billion worth of Chicago freight and jobs. Interesting debates are going on between Illinois, Michigan and those affected. John Taylor of Wayne State University studied the economic impact of closing the locks and compared lock freight traffic to rail and truck. Here is what he presented to the US Supreme Court.  It was part of Michigan Attorney General's case to the Supreme Court to close the locks.
    • Barge traffic in Chicago has been declining for many years.
    • More than seven million tons of freight shipped through the locks in Chicago are low-value bulk commodities like sand, stone and scrap metal.
    • Seven million tons of this low-value cargo is the equivalent of only two loaded freight trains per day in a region that has an average load of approximately 500 freight trains per day.
    • Extra transportation and handling costs associated with lock closure are less than $70 million per year or less than thirteen-one thousandths of one percent of Chicago's annual GDP.  [Source:  Wayne.edu]

    So do you buy or sell CDS on the Asian Carp invasion?  I found news clips from December 2009 when one Asian Carp was found in the Chicago Sanitary and Ship Canal.  Also provided is John Taylor's speech and recent news.

    Mish, Marc Faber Believe Japan Is Undervalued, But Preparing For Doom

    On Tech Ticker recently, Marc Faber (Gloom Boom Doom Report) and Mish (Global Economic Analysis) both thought Japan was undervalued. If you look at the 20 year Nikkei chart it's been in a deflationary spiral since 1989. Japan might be an interesting play as the Nikkei 225 is down about 73% from the 1990 peak (39,000 to 10,700). Hopefully the US doesn't follow that route. Yahoo Finance chart link. Broke US municipalities should buy up robot receptionists and substitute teachers out of Tokyo [video link] and the Bloom Box energy revolution would hire the lost jobs.

    Nikkei 225 20 Year Chart -73% (Courtesy of Yahoo Finance)

    Mish thinks there's a 50% chance the S&P could hit a new low below 666. Marc Faber disagrees, he thinks a harsh correction would bring on more money printing by the Fed to provide a backstop.

    China Premier Wen Warns Of Double Dip Recession Risk (NPC Videos)

    DV China: 仿旧波动

    China Premier Wen Jiabao at the National People's Congress press conference warned of double dip recession risk and stood firm on the RMBs (yuan) value. Wen said high unemployment rates in major economies, sovereign debt crises, risks in the financial sector, public finance, prices of bulk commodities, unstable currency exchange rates and inflation threats could bring setbacks to the global recovery or a double dip recession (used translation from CNN video below). I embedded a translated CNN video where he talks about the Chinese economy and gave a link to the full translated CCTV press conference.

    Chinese Premier Jiabao Wen at NPC Press Conference


    Video: Michael Burry of Scion Capital Speaks With 60 Minutes On CDS Bet

    Michael Burry on 60 Minutes
    Michael Burry speaks! In the 60 Minutes episode tonight (Inside The Collapse, featuring author Michael Lewis) they featured Michael Burry who was first in on the credit default swap bet against deteriorating pools of sub-prime mortgages. The same trade hedge fund manager John Paulson put on thereafter and made billions.  Michael Lewis (author of Liars Poker) is coming out with a book called "The Big Short" featuring Burry's CDS move.  For more information read the Vanity Fair article. Lewis also talks about the roles of Goldman, AIG, S&P, Moody's, delusional incentive structures, moral hazard and incompetence, which combined, dropped a financial bomb on Wall Street and ultimately the Fed's balance sheet.

    Lewis: "This is where it gets a little creepy. The people who were most instrumental in building the subprime mortgage machine also happened to be the ones who had the most detailed understanding now of the securities in the ruble and they're being paid all over again to sort through the mess because they are the experts. That is an age old trick on Wall Street just generally speaking, people who create disasters make a lot of money cleaning up the disaster because they're the ones who know about the disaster". This is like the eighties junk bond/S&L crisis cubed. Videos embedded below are courtesy of CBS 60 Minutes.

    Citi Relaxes While Lehman Repo-105 and Wamu Settlement Hits, WAMPQ Lost 91% At The Lows But Closed Down 36%

    Last week felt like a mini aftershock from the 2008 banking crisis. First the Lehman bankruptcy examiner's report came out exposing shady balance sheet maneuvers and then a Washington Mutual/JP Morgan settlement hit which cut Wamu's pink sheet ($WAMPQ) value by 91% at the lows but closed down 36.26% (h/t the99th). Citigroup (especially the recent call buyers!) is just sitting back enjoying itself. Here is more information on the JPM/Wamu settlement and the WAMPQ chart.

    Junk Bond, Savings and Loan Scandal Looks Familiar [CBS Video 1990]

    Was the 2008 banking crisis the Drexel Burnham Lambert/Savings and Loan mispricing of risk bust handed over to the taxpayer x 1000? Check out this CBS News clip from 1990.

    Larry McDonald on Lehman Examiner's Report, Greatest Hide The Salami Move In The History of Wall Street (Repo-105, Counterparties, Videos)

    Larry McDonald (a former bond trader at Lehman who helped make the firm $2 Billion in 2007) was on Bloomberg talking about the Lehman Chapter 11 Examiner's Report and called Lehman the "greatest hide the salami move in the history of Wall Street". According to the report Lehman hid assets through the use of off balance sheet Repo-105 transactions which painted a misleading picture of their financial condition. Lehman had 7 counterparties involved in the Repo-105 deals who could have "squeezed" Lehman given their exposed weakness (read Zero Hedge post: Lehman's Repo 105 Counterparties Barclays, Mizuho, UBS, Deutsche Bank, And KBC May Have Attempted To "Squeeze" The Bank).  Sounds like Repo-105 in this case was desperation + auditing (via Ernst & Young) gone amok. The video is from BloombergTV on Youtube.

    Citigroup Call Options Triple With Pandit's Bullish Estimates At 2010 Citi Financial Conference, $C

    This week saw big call option activity in Citigroup ($C) at the $4 strike. A few days ago CEO Vikram Pandit testified before the TARP Oversight Committee and said commercial real estate was not an issue on their books and they wouldn't come back for aid [Full video here].  After Citigroup paid back TARP funds, US taxpayers still own 27% of the common stock at $3.25.  Today Vikram Pandit made a presentation at the Citi 2010 Financial Services Conference.  From the full PDF file here are a few bullish estimates or goals he made [Source: Citigroup].
    • Citicorps "Global Revenue Pool" could grow 21.8% to $3.9 Trillion with emerging markets representing 55% revenue growth [Page 12].
    • Goal to increase managed assets 5% annually (compound annual growth rate) from $1.38 Trillion in 2009.
    • Goal to see 1.25%-1.50% Return on Assets from 1.15% in 2009. 

    Full Examiner Report of Lehman Brothers Bankruptcy, Repo-105

    Here are links to the "Report of the Examiner in the Chapter 11 proceedings of Lehman Brothers Holdings Inc." by Anton R. Valukas of the Jenner & Block law firm.  It looks like Lehman hid some assets look at Volume 3 - "Repo 105".  Zero Hedge blog has a detailed post on it and check out this Bloomberg story (JPMorgan, Citigroup Helped Cause Lehman Collapse, Report Says).  For Volume 6-9 Appendices visit http://lehmanreport.jenner.com/.

    Volume 1 - Introduction, Executive Summary & Procedural Background; Risk
    Volume 2 - Valuation; Survival
    Volume 3 -  Repo 105
    Volume 4 - Secured Lenders; Government
    Volume 5 - Avoidance Actions; Barclays Transaction

    Here's a look back at Lehman's last moments before bankruptcy during the weirdest time in financial history.

    Lehman Disaster Sending Index Futures Lower, BAC Buys MER (September 14, 2008)
    Lehman Brothers In Play, South Korean Bank Buy Out? (Option Analysis) (August 24, 2008)
    Freddie Mac, Lehman hit in the Fannie Mae, Dow! (July 11, 2008)