Tuesday, April 20, 2010

CDS 101 By Goldman Sachs (Education on Credit Default Swaps)

For those who want to learn about credit default swaps, Goldman explains it in this document from October 2009 [CDS 101].  The PDF file was in this press release when responding to a New York Times article.  Goldman, when will I see an exchange traded CDS index fund? We have $VXX to hedge volatility, why not CDS ETFs to hedge the next credit crisis? Aren't there futures on the CBOT CDR LIQUID 50 NAIG Index and HY? Put some options on that ETF as well, derivatives of derivatives of derivatives. UPDATE: The document got removed from Scribd, as well as the press release. See it here: http://www2.goldmansachs.com/media-relations/comments-and-responses/archive/state-of-the-market-cds-101.pdf


Goldman Sachs Initial Defense From SEC Wells Notice (9/2009)

Here is Goldman's initial defense or response to the Wells Notice (potential charge) in September 2009. Below I quoted the first page of the Preliminary Statement for an introduction. I found the documents at NYT DealBook. Sullivan & Cromwell is Goldman's law firm.
"PRELIMINARY STATEMENT

In early 2007, Goldman Sachs acted as the underwriter of privately-placed notes issued in a synthetic CDO transaction known as ABACUS 2007-AC1 (“2007-AC1”). There was nothing unusual or remarkable about the transaction or the portfolio of assets it referenced. Like countless similar transactions during that period, the synthetic portfolio consisted of dozens of Baa2-rated subprime residential mortgage-backed securities (“RMBS”) issued in 2006 and early 2007 that were identified in the offering materials (the “Reference Portfolio”). As in other synthetic CDO transactions, by definition someone had to assume the opposite side of the portfolio risk, and the offering documents made clear that Goldman Sachs, which took on that risk in the first instance, might transfer some or all of it through a hedging and trading strategies using derivatives. Like other transactions of this type, all participants were highly sophisticated institutions that were knowledgeable about subprime securitization products and had both the resources and the expertise to perform due diligence, demand any information that was important to them, analyze the portfolio, form their own market views and negotiate forcefully at arm‟s length. And like other transactions with similar lower-rated subprime portfolios, 2007-AC1‟s performance was battered by the unprecedented subprime market meltdown, which has impaired cashflow to countless noteholders in such transactions and caused many participants in the market to fail altogether.

Now, with the benefit of perfect hindsight about the magnitude of the market downturn, the Staff proposes to charge Goldman Sachs with misrepresenting material facts relating to the offering. Notably, the Staff does not contend that anything about the Reference Portfolio itself was incorrectly disclosed. Rather, the Staff‟s theory relates exclusively to the role of Paulson & Co., Inc. (“Paulson”) – now recognized as a heavy bettor against the subprime market but at the time a relatively unknown hedge fund manager – in making suggestions to the" [........] 
Continue reading at NYT Dealbook.

Iran Shows Off Shahab-3 Missile at Army Day, Ahmadinejad at Tehran Nuclear Conference and Middle East News Links (4/19/2010)

Here's a geopolitical update from last night. Iran showed off their Shahab-3 Missile during National Army Day and Ahmadinejad Spoke at their own nuclear conference. Iran wasn't invited to the US nuclear conference.  The Shahab-3 variant can travel 1,200 miles and according to an unclassified report from the US Defense Department a missile could hit the US by 2015 (Reuters).  I embedded a Nightly News Report and Russia Today video below and threw up a bunch of Middle East news links. It's a mess.  Hopefully nothing dumb happens in the Middle East because oil and gasoline could spike again for US consumers based solely on risk premium (remember $147 oil?).  I'm still watching the charts of $USO, oil futures, USD/CAD and the Strait of Hormuz [Iran Could Block Oil-Transit Strait of Hormuz, Pentagon Says - SF Gate/Bloomberg].  Also this is interesting.. Iran Adds Four More Supertankers to Crude Oil Storage - BusinessWeek.  Videos below are courtesy of NBC and RussiaToday.

Monday, April 19, 2010

The Search for a Reserve Currency - Guest Post

Guest post by Gregory R. Copley for Oilprice.com.

The Search for a Reserve Currency

Currency, like all forms of abstract value, is based on trust. And trust itself is based - except among the most naïve - on experience, and the repetitive demonstration of fidelity, whether positive or negative. At present, the US dollar, which had experienced a gradual rise during the 20th Century to the position gained well into the Cold War of being the trading world’s reserve currency. It had the mass, in terms of volumes of available currency; it had the backing of an indisputably wealthy national asset base to move away from the gold standard; it had stable governmental backing.

All of that is evaporating. Not, in absolute terms, as far as the mass of currency available, because that has dramatically expanded in recent years, and particularly during the past year of the Administration of Pres. Barack Obama. Not in the underlying asset valuation of the US economy, but it has begun to erode as the productive capability of the US to extract that value diminishes due to excess governmental interference and anti-business practices. It is far to say that other countries, from Nigeria to Russia, have vast untapped underlying asset value. That they did not create global reserve currencies from their naira and ruble was due to governance failures.

$USO ETF Failed Ceiling Test, May, June Oil Future Below Support, Traders Grab Volatility (USO, CLK10, CLM10, CLN10, $WTIC, $USD, $OVX Charts on 4/16/2010)

The risk trade (stocks, commodities) rolled over on Friday using the Goldman fraud charge as a catalyst. I looked at $USO (Oil ETF) and the May, June and July oil futures on 4/14 and it was interesting that USO failed at ceiling resistance while May, June and July oil futures broke out and failed on Friday (July looks better). Traders dumped risk or de-risked their portfolios, grabbing volatility, US Dollars and Treasuries.  I'm continuing from my original oil post with new charts.  I'm waiting to see when USO and near-term oil break out of this channel or at least re-test resistance. 

While tweaking off Turkish coffee I cooked up a bunch of oil charts on the fly. Check out USO and West Texas Intermediate Crude (WTIC) from the close on Friday.  $USO did NOT break through ceiling resistance while WTIC (oil continuous contract) did and it's sitting right on top of support.  You can also see the clear uptrend channel from October 2009 and the 50 and 200 day moving average not far behind.  The dotted line is currently support which will probably break tomorrow since futures are down.  We shall see though.  If you're on the index page, I also charted out May, June and July oil, the oil volatility index, US Dollar and the recent USD/WTIC correlation. 

$WTIC - West Texas Intermediate Contract  (Courtesy of Stockcharts.com)

USO sold off at ceiling resistance and still in this dang channel.  It's also in an ascending triangle from the March low.  The 50DMA and 200DMA are close by.  See the second chart for closer view.

$USO Long Term Chart

$USO Short Term Chart

Sunday, April 18, 2010

China Property Prices, FX Concepts, Simon Johnson on Paulson, Goldman Sachs, Mostly The Media Gang Beating CDO Fraud Allegations

News and Market Update at 9:16est:  E-Mini S&P Future -0.25%,  E-Mini Dow -0.28%, E-Mini Nasdaq -0.20%, June Oil -0.95%, Gold Spot +0.28%, US Dollar (DX) +0.20%.

FX Concepts' John Taylor: "2011 Will Be Worse Than 2008 - Zero Hedge
China's central bank to curb property prices - CCTV Video
China Developers Fall on Latest Moves to Damp Property Prices - BusinessWeek
Iranian VLCCs back on storage duty - Lloyds List
Top Goldman Leaders Said to Have Overseen Mortgage Unit - New York Times
Simon Johnson On John Paulson on Bill Maher (Video)- Zero Hedge
The One Last Ethical Bank?  Bear Stearns - Zero Hedge
Paulson May Face Litigation Following Goldman Suit, Whalen Says - BusinessWeek (but hes MVP)
Merrill Used Same Alleged Fraud as Goldman, Bank Says (Update1) - Bloomberg
SEC Investigating Other Soured Deals - WSJ
RBS may sue over 'Goldman fraud' - DailyMail
Goldman Sachs: Brown attacks firm's 'moral bankruptcy' - BBC
IMF to raise global growth forecast to 4 percent: report - Reuters
U.K., Germany Plan to Seek Information on Goldman - WSJ
Gordon Brown and Angela Merkel attack Goldman Sachs - Guardian
Gasoline Makes Crude Oil a Buy on Any Pullback - Asiablues via ZeroHedge
Europe Cuts 77% of Flights; Relief May Come April 22 (Update5) - Bloomberg
Volcano casts shadow on 1st-quarter airline earning reports - USA Today
British Airways completes 'perfect' volcanic ash test flight - News.com.au
Bin Laden, a secret fan of footie and Monty - Telegraph
Illinois bank-owned foreclosures double in first quarter (4/14) - Tribune

Floating Alternative to Nabucco Pipeline Moving Toward Implementation - Guest Post

Guest post on the Nabucco Gas Pipeline by Oilprice.com.

Floating Alternative to Nabucco Pipeline Moving Toward Implementation

Romania, Azerbaijan, and Georgia on April 13, 2010, took a major step toward the implementation of a substitute energy distribution network to substitute for the US-backed Nabucco strategic gas pipeline complex.

Azerbaijan Minister of Industry and Energy Natik Aliyev, Romanian Minister of Economy, Commerce and Business Environment Adriean Videanu, and Georgian Energy Minister Alexander Khetaguri met in Bucharest to sign a new agreement in the gas sector. The new agreement constitutes an expansion of the late February agreement that was limited to LNG exports to Romania. The new agreement set forth modalities for exporting LNG to the rest of the European Union (EU) via Romania. The new project will now be known as the Azerbaijan-Georgia-Romania-Interconnection project (AGRI).

Dick Bove: Goldman Sachs is a Buy After Charges ($GS Chart Channel Now $150-190)

Dick Bove of Rochdale Securities thinks Goldman is a buy after the SEC fraud charge on Friday (video courtesy of FoxBusiness). He said clients will not stop trading with Goldman. Careful though, Bove said Lehman was a "buy" in August 2008 a month before it went bankrupt. Look how GS stabbed through the 50 day (166.96) and 200 day moving average (167.41). $150-$190 looks like the new trading channel for now. GS closed at 160.70 (-12.79%) on 101 million shares, the most since the 2008 banking crisis. The GS knife wound needs to heal but I'll keep watching it.

Buyers Of May 27 $KBE Puts Up 150-percent On Goldman Charge, Unrealized Of Course (KBW Bank ETF)

Whoever made these trades deserves a medal in timing.  Remember on Thursday I reported via CrimsonMind that someone sold 28,260 May 29 calls of $KBE (SPDR KBW Bank ETF) for $0.58 and purchased 28,260 May 27 puts for $0.40?  If I'm calculating this correctly, that's $1,639,080 collected upfront on the call sale and $1,130,400 used to buy puts.  So the calls were used to finance the put buy with $500,000 left over.  The May 27 put closed at $1.00 on Friday, up $0.60 or 150%!  So the put contracts are now worth $2,826,000 (-1,130,400 purchase) = $1,695,600 net.  Add on to that the $1,639,080 collected from the call sale (assuming KBE expires in May below 29) and the trader made $3,334,680 in less than 24 hours.  The problem is profits are unrealized until the trader unloads all the contracts or exercises them below $26.60 before May 21.  KBE closed at 27.26 (-3.23%).  If volatility really picks up here this trade could be up 200-300% by expiration.  If it was a levered hedge on long KBE positions, it was a hedge with dividends.  That's why you watch option volume people!  If you followed the puts with 2 naked contracts you turned $80 into $200 (less commissions) or just protected your KBE shares.  I'm not recommending you do this, it's very risky on the downside if naked (.40 could turn into .30 pretty quickly).

From post on 4/15/2010:  Retail, KBW Bank ETF Protection, ISE Sentiment Index Volatility (ISEE, KBE, XRT, IWM)

Saturday, April 17, 2010

$SPY, $DIA Sell Off at 61.8% Retracement Level (Charts)

The charts say SPY and DIA (S&P and Dow-30 ETF) are testing the 61.8% retracement level from 2007-2009 peak to trough.  Perhaps the reason why we sold off so hard on Friday (along with the Goldman fraud charge).  Adam Hewison of MarketClub warned about this level a few days ago in a chart video.  If you click on the charts below you can see critical support levels that need to hold and see 61.8% retracement levels, uptrend channels from the March 2009 low and February 2010 low, which was pierced by SPY on Friday.  The Dow held up a little better.  Did you notice that SPY lost 1.59% while DIA only lost 1.24% on Friday?  It's also interesting that SPY and DIA volume are at multi-year lows, matching 2006 and early 2007.  By the way the buyers of XRT, KBE (KBW Bank Index) put protection on Thursday are up big.  Charts are courtesy of FreeStockCharts.com.

Hussman: Haven't Seen Final Uncomfortable Valuation Trough, Sees Overbought Conditions With Upward Yield Pressure [Extend and Pretend Note]

John Hussman of Hussman Funds released a note on April 12 titled "Extend and Pretend". He thinks we are overbought and haven't seen the "final and uncomfortable valuation trough" that usually precludes a secular bull market. He thinks "perhaps 6-8 years from now".

"Secular bull market periods tend to begin with quite low multiples to normalized earnings (historically, on the order of 7), which is what provides the platform for a very long period of subsequent gains. It would not be surprising to observe a sequence of cyclical movements comprising a bear-bull-bear series, ending with a final and uncomfortable valuation trough (perhaps 6-8 years from now) before the market is finally priced to deliver that sort of sustained "secular" period of long-term gains. Current valuations provide no such platform.

Again, at this point it does not matter whether we anticipate further credit strains or not. Wholly on the basis of current valuations, stocks are priced to deliver unsatisfactory returns in the coming years - a situation that is worsened by strenuous overbought conditions and upward yield pressures here."
[full report is here]

Barry Ritholtz, William Black On Goldman Fraud Allegation

Barry Ritholtz of FusionIQ and the Big Picture blog and Professor William Black ("federal prosecutor during the S&L crisis and associate professor of economics and law at the University of Missouri-Kansas City") were on Tech Ticker this morning talking about Goldman's fraud allegation.  For more information on what's going on, here it is in order:

Goldman Sachs Charged With Fraud By SEC Over Shady CDO Dealings (ABACUS) - link
Goldman Responds To SEC Complaint - link
Paulson & Co. Responds to SEC Complaint Against Goldman Sachs - link

Friday, April 16, 2010

SEC Charge Against Goldman has Volcanic Impact on Energy Markets - Guest Post

Guest post by OilPrice.com

SEC Charge Against Goldman has Volcanic Impact on Energy Markets

Oil Market Summary for 04/12/2010 to 04/16/2010

Oil prices plunged on Friday after the U.S. Securities and Exchange Commission charged Goldman Sachs with fraud in its marketing of certain subprime mortgage securities, amid a general sell-off in financial and commodity markets.

The allegations against one of the biggest market makers in virtually every markets dampened speculation heading into the weekend. Much like the volcanic eruption in Iceland spewed a cloud of dust over northern Europe that grounded all air travel, the SEC charge cast a pall over financial markets.

Kyrgyzstan: Business, Corruption and the Manas Airbase (Part 3) - Guest Post

This is part 3 of a 3-part guest post on the recent revolution in Kyrgyzstan by OilPrice.com. Here are videos from the protests.

Kyrgyzstan: Business, Corruption and the Manas Airbase


(Part 3)

Kyrgyzstan’s mass anti-government protests last week were essentially the culmination of more than a decade of disillusionment and dissatisfaction that accumulated in the nation’s political, economic and social spheres from the period of Akayev to his successor Kurmanbek Bakiyev, with virtually every Kyrgyz concerned about rising prices and falling standards of living, both issues of little concern and dimly understood in Washington.

Paulson & Co. Responds to SEC Complaint Against Goldman Sachs

Paulson & Co. Inc. Responds to SEC Complaint Against Goldman Sachs

NEW YORK, April 16 /PRNewswire/ -- Paulson & Co. Inc. has the following statement in response to the SEC's complaint against Goldman Sachs & Co. announced today:

As the SEC said at its press conference, Paulson is not the subject of this complaint, made no misrepresentations and is not the subject of any charges.

While Paulson purchased credit protection from Goldman Sachs on securities issued under the ABACUS ABS CDO program, we were not involved in the marketing of any ABACUS products to any third parties.

ACA as collateral manager had sole authority over the selection of all collateral in the CDO, securities of which were subsequently rated AAA by both S&P and Moody's.

Paulson did not sponsor or initiate Goldman's ABACUS program, which involved at least 20 transactions other than that described in the SEC's complaint.

SOURCE Paulson & Co. Inc.


Source:  Paulson & Co. Inc. Responds to SEC Complaint Against Goldman Sachs -- NEW YORK, April 16 /PRNewswire/ --

Goldman Responds To SEC Complaint

It's a jungle out here today. May crude oil -2.65%, SPY closed -1.51%, the SEC charged Goldman with Subprime CDO fraud, and Goldman responded.
Goldman Sachs Makes Further Comments on SEC Complaint
April 16, 2010

New York, April 16, 2010 - The Goldman Sachs Group, Inc. (NYSE: GS) said today:We are disappointed that the SEC would bring this action related to a single transaction in the face of an extensive record which establishes that the accusations are unfounded in law and fact.

We want to emphasize the following four critical points which were missing from the SEC’s complaint... [continue reading here].

From the initial release.
"The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation" [read full release at goldmansachs.com]

Eurocontrol Volcanic Ash Cloud Press Conference, Aviation Industry Could See $1 Billion Hit (Videos)

This volcanic ash cloud out of Iceland is affecting the Euro aviation industry. Shares of European airlines took a hit. Below is the Eurocontrol press conference on 4/16/2010 and news.

Goldman Sachs Charged With Fraud By SEC Over Shady CDO Dealings (ABACUS CDO Tied To Subprime Mortgages)

Goldman is getting charged with fraud by the SEC over conflicts of interest when structuring and marketing (for hedge funds to short) collateralized debt obligations tied to subprime mortgages right when the housing market was showing signs of distress.  This is shady over-the-counter financial crack dealing at its best.


SEC Charges Goldman Sachs With Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages

FOR IMMEDIATE RELEASE
2010-59

Washington, D.C., April 16, 2010 — The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."


Thursday, April 15, 2010

Yale's Robert Shiller: 50% Chance Of Another Housing Downturn, Don't Bet Farm On Housing Recovery (BloombergTV and NYT)

Yale Professor Robert Shiller recently wrote piece in the New York Times titled Don’t Bet the Farm on the Housing Recovery - April 9, 2010 NYT. Shiller co-founded the S&P/Case Shiller Home Price Index (see chart below). He remains cautious on the recent housing recovery.
"On March 31, the Federal Reserve ended its program of buying more than $1 trillion of mortgage-backed securities, and the homebuyer tax credit expires on April 30.

Recent polls show that economic forecasters are largely bullish about the housing market for the next year or two. But one wonders about the basis for such a positive forecast.

Momentum may be on the forecasts’ side. But until there is evidence that the fundamental thinking about housing has shifted in an optimistic direction, we cannot trust that momentum to continue." [NYT]

On Bloomberg TV today he said there's a 50-50 chance of another housing downturn. For the full video click here.

Israel/Hezbollah Warning, Goldman on $99 Oil, Greece Taxing Higher Income, China Increases Crude Production, Markets Could Derail Again -Soros, Credit Card Delinquencies Fell In March

Important news for April 13-15, 2010

War between Israel and Hezbollah 'imminent', US warned - Telegraph
"A war between #Israel and #Hizbollah that could spread across the Middle East is "imminent", King Abdullah of Jordan has warned the US." ..(hopefully not)
Israel accuses Syria of arming Hezbollah - AFP
Syria Gave Scuds to Hezbollah, U.S. Says - Wall Street Journal
Syria denies it gave Hezbollah Scud missiles - Associated Press
Syria denies arming Hezbollah with Scud missiles - Reuters India
Goldman Sachs:  Oil Is Going To $99 - Pragmatic Capitalist (USO, $WTIC)
Rail Traffic Continues To Surge (Chart) - Pragmatic Capitalist
Goldman Sachs:  Good Q1 Earnings Priced In - Pragmatic Capitalist
Greece asks for IMF-EU rescue talks - Guardian (ht edwardnh)
Greece Closer to Aid Request; IMF, EU Due in Athens - Bloomberg
Morgan Stanley fears German exit from EMU - Telegraph (ht alaidi)
Markets could be derailed again, warns Soros - Reuters Blogs (ht Zerohedge blog)
Soros, Chanos Blast Banks - FinAlternatives 
Greece poised to pass key tax bill to slash budget gap - Reuters
Credit card delinquencies fell in March - Reuters
Capital One credit card defaults rise in March, annualized net charge-off rate 10.87% - Reuters
Defaults Rise in Federal Loan Modification Program - New York Times (4/14)
Batista Plans to Sell 20% of OGX Oil Company - Bloomberg
Nearly 600 dead, 10,000 hurt in China earthquake - UPI via Xinhua
Factory production grew 0.9%, labor Market Struggles - Bloomberg
China domestic crude production rose 4.6% on year to 380.7 million barrels - UpstreamOnline
With Oil Deals, Merger Advisers Rejoice (China 40% of deals outside US) - NY Times
JP Morgan Chase & Co. Q1 2010 Earnings Call Transcript - Seeking Alpha (ht enoehtoen)
Argentina annual inflation rate at 40% based on March inflation - Lanacion (ht edwardnh)
Continental Air, United Said to Resume Merger Talks - Bloomberg
Lehman wins OK to create asset management company - Reuters (ht alea)
last but not least..  Gmail Adds Drag-and-Drop to File Attachments - Mashable

Retail, KBW Bank ETF Protection, ISE Sentiment Index Volatility (ISEE, KBE, XRT, IWM)

As the market keeps running after breaking above that 115 (SPY) ceiling resistance level (remember on 2/21/2010 Goldman strategist Abby Cohen said S&P fair value was between 1250-1300?), once $SPX crossed above 1,150 resistance it welcomed 1200+ where it's trading at today (1,212). Since we are near "fair value" according to Goldman, I'm watching the stock insurance market aka put options.

Courtesy of the Options Activity Watch at CrimsonMind.com, there appears to be protective positioning in the Retail ETF (XRT) and KBW Bank ETF (KBE).  At 3:00p XRT is at 44 and KBE is at 28.32.
"SPDR KBW Bank (SPDR_Series_Trust/Specialty-Financial) - KBE:  "One options strategist sold 28,260 May 29 calls for $0.58 per contract (bid:0.55 ask:0.70) and purchased 28,260 May 27 puts for $0.40 per contract (bid:0.30 ask:0.40)"
"SPDR S P Retail (SPDR_Series_Trust/SPDR_Series_Trust) - XRT:  32,500 Sep 40 puts were purchased for an average premium of $1.40 per contract against the sale of 32,500 Sep 34 puts for $0.40, a net cost of $1.00 per spread."

On my International Stock Exchange (ISE) widget on the right sidebar, XRT had the lowest ISEE ratio (call/puts opened) and IWM was second with 84,406 calls and 2,806 puts as of 1:30pm est.  Who knows why the IWM puts were opened, if insurance or speculative.


The full ISE Sentiment Index (ISEE Index), which measures call/put data on all securities on the ISE, has been volatile.  On 4/13/2010 the ISEE ratio was at 78 and the next day it hit 165.  "ISEE is computed by dividing opening long call options bought by customers by opening long put options bought by customers".  Last year I analyzed how the S&P traded off the ISEE index here.

ISEE Index Chart courtesy of ISE.com

Click the labels below for recent posts.

The Aftermath of the Kyrgyz Revolution - The Lesser Players (Guest Post)

Guest post by OilPrice.com .

The Aftermath of the Kyrgyz Revolution - The Lesser Players

(Part 2 in a three-part series)

The recent unrest in Kyrgyzstan has largely been portrayed as an epic clash between U.S. and Russian interests.

That said, interest in events in Bishkek extend far beyond Kyrgyzstan throughout the regional and one should expect the following voices to add their concerns as the situation evolves. While largely overlooked by media coverage, their influence could be a significant factor in both interim and long-term solutions that emerge to Kyrgyzstan’s recent upheavals.

Oil Update, Revisiting 2008 Oil Peak, S&P/Oil Divergence, Inventories Down (Charts: Oil Futures, USO, $USD, XLE)

Remember in early 2008 when oil diverged with the S&P?  The S&P peaked in October 2007 just as oil was building momentum.  Crude went from $100 to $147 where it peaked in mid 2008 right before the banking crisis (see post on 7/11/2008: Oil touches $147: USO/XLE Charts/Options Analysis).  It was interesting that the divergence between USO and XLE tipped off the oil peak.

Today the S&P just about doubled from the March low and crude oil securities have either pierced through multi-month ceiling resistance levels or are battling them as we speak.  Light Sweet Crude (continuous contract) closed today at $86.80.  It is close to the 50% retracement level (91.42) using the 2008 peak and 2009 trough and pierced through January resistance.  I'll zoom in on $WTIC below.

$WTIC (Light Crude Oil Contract - courtesy of Stockcharts.com)

Check out the May (CLK10), June (CLM10) and July (CLN10) crude oil futures.  They all pierced through ceiling resistance and are riding an upward triangle in a point of serious inflection.  It looks like January is the new floor (for now) to hedge or stop a failed upside bet, like SPX $1,150 currently (imh opinion).

CLK10 Crude Oil May 2010 Future (courtesy of optionsxpress)

Wednesday, April 14, 2010

Interesting Options Action: SLV, EEM, PG, USO, VIX, XHB (4/13/2010)

$PG (Procter & Gamble), 15,800 May $65 Calls (closed at $63) - OptionsInsider
$USO (Oil ETF), 2,000 July $43-48 Call spread (closed at $40.89) - OptionsInsider
$EEM (Emerging Markets ETF), 50,000 May $43-$40 Put spread (closed at 43.34) - CrimsonMind
$XHB (Homebuilders ETF), 5,000 June $18 straddle (appears) (closed at 17.76) -  CrimsonMind
$VIX (Volatility Index), 5K x 7.5K May $20-$26 Call spread (closed at 16.20) - OptionMonsterTV
$SLV (Silver ETF), 16,711 July $16 Put (20,800 total with 5,619 open) (closed at $17.84) hedge?

(Courtesy of ISE.com, saw on widget)

Click the links for more info on the ticks.

Tuesday, April 13, 2010

The Truth Behind The Recent Unrest in Kyrgyzstan - Guest Post

OILPRICE.COM – – 14 APRIL 2010

The Truth Behind The Recent Unrest in Kyrgyzstan

The following article is the first of three examining the recent unrest in Kyrgyzstan and its implications. Part 2 tomorrow will deal with the regional fallout from the “Tulip Revolution V2.0” and Part 3 will examine in detail Washington’s highest priority in Kyrgyzstan - its ongoing access to the Manas Transit Center airbase.

The extraordinary events of last week in Kyrgyzstan, which saw the overthrow of President Kurmanbek Bakiyev’s administration by a popular uprising and its replacement by a provisional government have been portrayed by many in the "Beltway-istan" (Washington DC) as the latest tussle betwixt Russia and the U.S. in the ‘Great Game” for influence in the post-Soviet space.

China Small-Cap 500 Index At 5,000 Resistance, Up 224% From 2008 Low

The China Small-Cap 500 Index is testing 5,000-5,500 resistance after running up 224% from the September, 2008 low. Read this article at Bloomberg.com [China’s Small-Cap Stocks Fall Most in Three Months]. You can find the chart here.  Look at the insane move. Does this index have an ETF and volatility index? Watch that uptrend line.

CSI Smallcap 500 Index (SH000905:IND, screenshots from Bloomberg.com)


Zoomed in, the uptrend structure needs to break for a downside move...


This continues from my post on Jim Chanos on Charlie Rose.

Chanos on Charlie Rose: China Property Bubble, RMB Devaluation? (FXI Analysis)

Hedge fund manager, short seller, Jim Chanos was on Charlie Rose tonight giving his view on China.  If you didn't already know (see presentation video), Chanos believes China has a huge real estate bubble and thinks the RMB could depreciate, taking the other side of the consensus view that China should de-peg the Yuan from the US Dollar to set global trade free. This is just a preview.
"So supply will equal demand at some point, it always does and then there's this precarious tipping point where suddenly you can't sell a project and then it's just as if everyone from the port side of the cruise ship goes to the starboard side of the cruise ship all at once. You get a tipping point. You get this sort of light bulb moment, 'I got to get out while I can', and the buyers dry up"....

"One of the most obvious trades of the world right now is that the RMB, the Yuan, is undervalued"... "Everyone is assuming that China needs to peg its currency higher to avoid the export deflation that's going on. Well Chinese exports aren't the problem here and what if it turns out that by having to nationalize lots and lots of real estate bad debts, the RMB is DEVALUED. That's something nobody is expecting, particularly all the hot money that's going into China".

Interesting about the RMB. Is he trying to play China's real estate market like the U.S in 2005? (AAA debt turned sub-prime). For recent posts on Jim Chanos click the link.  I also provided a chart of $FXI  (iShares China 25 Index Fund) below the video. Click here for recent posts on Chinese real estate stocks and the Hang Seng Property Index a few months ago. There were record breaking deals going on at that time.

Sunday, April 11, 2010

EUR/USD Pierced Downtrend On 45 Billion Euro Greek Aid Offering, German Ministry of Finance Says It's Not An ACTUAL Decision

EUR/USD initially broke above the 50 day moving average and downtrend resistance when it opened tonight.  Watching to see if there's a retest.  EUR/USD is currently up 0.92% at 1.36239.  Charts below courtesy of FreeStockCharts.com.  For previous posts on the Euro click EUR/USD or FXE and watch it stream live on the real-time quote widget to your left.

Here's what is going on from Bloomberg:
"The euro rallied after European governments offered debt-burdened Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end its fiscal crisis and restore confidence in the currency." [read full article].
But...
"The euro zone's agreement Sunday about details on an aid plan for Greece must not be misunderstood as an actual decision to provide aid, but it does justify hopes that the country will be able to refinance its debt on its own, the German Finance Ministry said Sunday." [read full DJ article at Nasdaq.com]

EUR/USD (Euro/US Dollar)

EUR/USD (zoomed in)

How Goldman Won the Over-the-counter Derivatives Poker Game Against All Investment Banks (CBS Videos)

There was a CBS exclusive the other day titled "Is Goldman Sachs Playing Fair" by Armen Keteyian. Below are the video segments: The Power of Goldman Sachs and Insight into Goldman Sachs. Basically how Goldman won the trillion dollar over-the-counter derivatives poker game against Bear Stearns, Lehman Brothers, Merrill Lynch et al, and the gap between Wall Street and Main Street.

Peak Oil Alert, Soros On Pound Devaluation, Chanos on Charlie Rose, China Iron Ore Imports Rise With Rare Trade Deficit, Greece Needs 80 Billion Euros Over 3 Years, Magazine Ads Decline, Shiller On Housing Recovery...

From DV LinkFest LLC, mostly from Twitter stream.

Update:  Greek official: 80 bln euros "logical" aid amount for next 3 yrs - Reuters
Eurozone nations offer Greece euro30 billion in loans - AP
*Full Text Of EMU Statement - Zero Hedge
Greece Hints It Might Need Aid If Markets Remain Skeptical - Reuters/CNBC
Soros Says Pound Devaluation Is Option for Next U.K. Government - Bloomberg
April 9 Soros Interview on Greece, haven't yet corrected imbalances from 2008 - Bloomberg
Magazine Advertising Pages Declined 9.4% in Quarter - NY Times
China’s March Iron Ore Imports Rise on Steel Demand - BusinessWeek
Yuan rise still on cards despite rare trade deficit - Reuters
UK stops 'vulture funds' picking on poor - BBC News
Poland ETF (PLND) In Focus After President’s Death - ETFdb
Short-Seller Jim Chanos: Red Flag Over China (on Charlie Rose) - BusinessWeek
More Banker Outrage: Protesters Plan Marches on Wall Street Banks - ABC
Ex-Lehman Officials, Auditor Sued Over Repo 105 Transactions - BusinessWeek
China Sees First Trade Deficit in Years - New York Times
China records rare $7.2bn trade deficit, questioning exchange rate- Financial Times (sub)
Florida 90-Day Delinquency Rate Hits 19.39 Percent, US Rate is 8.78 Percent - Mish
US military: Oil output may dip causing massive shortages by 2015 - Guardian (@edwardnh)
Shiller: "Don’t Bet the Farm on the Housing Recovery" 3/9/2010 - New York Times
Do rising oil prices threaten the economic recovery? - Econbrowser
San Francisco Office Vacancy Rate at 17.7% up from 14.7% - SFGate
Spring on the Tracks - Gregor.us
Hong Kong foreign reserves rise to US$258.8B - ChineseStock.org
Kyrgyz interim leader asks for Moscow aid - FT.com
Trader blows whistle on gold & silver price manipulation - New York Post

Saturday, April 10, 2010

High Inventories Keep Crude Oil Prices from Advancing on Week - Guest Post

Guest post by OilPrice.com.

High Inventories Keep Crude Oil Prices from Advancing on Week

Oil Market Summary for 04/05/2010 to 04/09/2010

Crude oil prices ended the week virtually unchanged from a week ago as optimism about demand warred with trepidation about historically high inventories in both crude oil and gasoline.

The benchmark West Texas Intermediate contract settled at $84.92 a barrel on Friday, only 5 cents ahead of the previous week’s Thursday close after surging above $87 a barrel early in the week and then declining for three straight sessions.

Bears noted that oil seemed unable to stay above $87 a barrel level, while bulls said that oil had tested the $84 level going down and found resistance.

USO (Oil ETF) Chart Artistry, Trends, Targets and Bull Put Spread

I'm watching $USO and did some chart artistry (USO LavaChart™) on the oil exchange traded fund at FreeStockCharts.com. I'm watching $42 resistance and the recent trend break just above $40, which could act as support.  You can see it's testing the uptrend from February which hits that support level.  What will happen?  Will USO slide slowly through the uptrend to $40, break out to hit (1) or breakdown at (2).  I think USO is very interesting here because it's been in a sideways channel for months.  If oil spot spikes it could tip the oil futures curve into steep backwardation and yield dividends for the USO roll.  There's definitely a risk the US Dollar spikes and commodities take a hit, we shall see.  I'll break down oil, gold, silver, dxy and e-mini S&P futures in part 2, continuing from part 1 on ETFs. I added interesting USO headlines below the chart.

Greenspan: Overseas Savings Glut Kept Long Term Rates Low, Fed Funds Rate Was Ineffective In Controlling Housing Inflation (Financial Crisis Inquiry Commission Testimony)

Continuing from my previous post on Michael Burry vs. Greenspan vs. Peter Schiff, I thought I'd provide deep thoughts by Alan Greenspan at the Financial Crisis Inquiry Commission hearing a few days ago.

He made an interesting case that the Fed Funds rate between 2002-2005 was ineffective in controlling long term interest rates which mortgage rates are priced on ("the conundrum"). He found that a savings glut in the developing markets, or lack of investment, kept long term rates down and had no effect on home price inflation at that time. Remember he was so confused about the yield curve in 2005? The curve started to invert in March 2006 if you remember.

Treasury Yield Curve March 2006 (Courtesy of StockCharts.com)

Below I embedded Alan Greenspan answering questions from U.S House Rep. Bill Thomas below and the PDF of his testimony. Should he have forced rates significantly higher even with the inversion? Here is Greenspan's Brookings Institute paper titled "The Crisis" if interested.

Thursday, April 8, 2010

Gas Producers Go to the Dark Side (Oil Exploration) - Guest Post

Guest post by OilPrice.com.

Gas Producers Go to the Dark Side

It's finally happening. Gas producers are starting to crack.

With the natural gas to oil price ratio running at a nearly-unprecedented 21-to-1 ($86.80 per barrel for crude versus $4.12 per mcf for gas), gas producers are throwing in the towel. And switching over to the "dark side". Oil exploration.

Up until now, many die-hard gas producers had been sticking to their guns and continuing to drill gas plays. Particularly shale gas, where producers claimed economics are still attractive. Even at current depressed gas prices.

Videos of Anti-Government #Kyrgyzstan Riots and Protests

There is a revolution going on in Kyrgyzstan. The opposition formed an interim Government and seized control of the police. Rising prices, unemployment and authoritarian rule are responsible.

Pfizer Call Options Active On ISE at 38.2% Fibonacci Retracement, Are Price Multiples Priced In For Lipitor? (PFE, XLV Chart)

What's going in Pfizer's options?  Today I was on my decent looking 3-column blog and saw that $PFE was most active on the ISE (International Securities Exchange) Put/Call widget on the right sidebar.  It updates every 15 minutes.  The ISE widget shows customer opening calls vs. puts which then creates the ISEE call/put ratio.  In this case opening activity on the ISE was skewed towards calls: 41,830 calls traded compared to 113 puts netting an ISEE ratio of 37,018.


Alternative to Nabucco Gas Pipeline Undercuts Potential Disruptions to EU Energy Supplies - Guest Post

Guest Post by Yossef Bodansky at oilprice.com.

A Floating Alternative to Nabucco Undercuts Potential Disruptions to EU Energy Supplies

In late February 2010, Romania, Azerbaijan, and Georgia finalized an agreement on the direct export of Azerbaijani natural gas to Romania. This has profound ramifications for halting Turkey’s ability to hold the EU hostage to energy supplies via Turkey, and offers far more rapid easing of European energy pressures.

The new agreement calls for transporting the Azerbaijani gas via pipelines to the SOCAR-owned Kulevi terminal on the Georgian coast of the Black Sea. From there, the liquified gas will be shipped across the Black Sea by tankers to new terminals in the Romanian port of Constanta. From Constanta, the gas will be distributed through the Romanian pipeline system. “In five years’ time, Romania will become an energy hub in its geographical region thanks to this project,” predicted Tudor Serban, the Secretary of State for Romania’s Ministry of Economy, Commerce, and Business Milieu.

Greek Stock Index Below 50-Day Moving Average, CDS at 450bp

The Dow Jones Greece Stock Index and Greece (Athens) General Share index both broke below their 50DMAs.  The next stop could be the lows from February as support.  Charts courtesy of Stockcharts.com.  See below for updates on Greek debt and CDS.

ETF Technical Analysis Update on SPY, GLD, SLV, UUP, USO [Part 1]

Gold, silver, S&P 500, oil and the US Dollar Index are all at interesting levels.  I thought I'd chart out GLD, SLV, SPY, USO and UUP tonight and do gold, silver, E-mini S&P, Dollar Index futures and ETF ratios tomorrow. If I'm all wired up on guarana and ginseng I'll throw in Treasuries and yields.  Charts below are courtesy of StockCharts.com. By the way you can watch the ETFs stream live on the widget above.

GLD (Gold ETF):  If GLD takes out 114 resistance from January it could rally to 119 which is the next major inflection point.  RSI is above 50 and pierced through the previous high plus the MACD is above 0 line. There was interesting volume on a few GLD call strikes today, 24,980 April 114 calls traded with 31023 open and 11040 May 114 calls traded with 5450 open. There was also activity in March 2011, courtesy of CrimsonMind:
"Late in the trading session today 11,250 March 110 calls traded at $11.20 (bid:1.10 ask:1.30) and 22,500 March 140 calls traded at $3.15 (bid:3.05 ask:3.20)."


Here is a closer look at GLD.  It needs to break above 114 to prove it can test 119.


SLV (Silver ETF):  It is interesting that GLD broke to new highs but SLV didn't.  You can see that 20 is the ultimate ceiling resistance level to conquer.  A near term $19 break could be a decent hedged bet though, imo.  It just broke above a downtrend it looks like so all eyes are on precious metals.  SLV relative strength (RSI) is decent and the MACD is above 0 (also see post on GLD:SLV ratio on 3/17).

Wednesday, April 7, 2010

Fiscal Condition of Detroit (CRC), Paulson & Co. March Results, LA Bond Rating Cut, Thoughts On Maiden Lane III, Yahoo and Foursquare?

Interesting articles mostly from my Twitter feed (April 6 and 7, 2010).

Moody's cuts L.A.'s bond rating, warns of further downgrades - LA Times
Fiscal Condition of Detroit by Citizens Research Council of Michigan PDF (ht @pkedrosky)
Report: Detroit bankruptcy looms without drastic change - Detroit News
Paulson & Co. has a good March - MarketWatch (ht @morgan03)
S&P 500 and all ten sectors overbought - Bespoke Financial Group (ht DailyCrux)
Food Stamp Usage Hits Record 39 Million, 14th Monthly Increase - Mish (ht @mika2k1)
Peak Oil Theorist Now Thinks We're At Peak Demand, Oil Won't Break $100 - Business Insider
Unvarnished: New Social Network Could Ruin Your Reputation - PC World
Calacanis: Here's My 48-Point iPad Review - Business Insider
Thoughts on Maiden Lane III - Aleph Blog
U.S. Regional Mall Vacancies Climb to Decade High, Reis Says - Business Week
China Central Bank Said to Resume 3-Year Bill Sales - Bloomberg
Euro's reserve standing may be hit by Greek crisis - Reuters
Hyatt, Starwood eye Indian hotel market - Reuters
Yahoo Considers Buying Foursquare For ~$100 Million - Business Insider, VentureBeat
Macarthur rejects Peabody's $3.3 billion offer - Reuters
Thousands May Lose Rental Vouchers - NY Times (ht @future_shock)
Business software maker CA to cut 1,000 jobs, consolidate offices in restructuring effort - AP

Australia Raises Rate to 4.25%, Japan Stays Put At 0.1%, Statements and AUD, JPY Reaction

The Reserve Bank of Australia raised the cash rate by 25 basis points (0.25%) to 4.25%.   Here is a quote from the RBA statement by Governor Glenn Stevens 4/6/2010.
"Interest rates to most borrowers nonetheless have been somewhat lower than average. The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today’s decision is a further step in that process." [read full statement at rba.gov.au]
The Bank of Japan left its overnight rate at 0.1%. Here are some quotes from the monetary policy statement.
"The Bank of Japan will encourage the uncollateralized overnight call rate to remain at around 0.1 percent."

"The Bank recognizes that it is a critical challenge for Japan's economy to overcome deflation and return to a sustainable growth path with price stability. To this end, the Bank will continue to consistently make contributions as central bank.    In the conduct of monetary policy, the Bank will aim to maintain the extremely accommodative financial environment." [read full statement at boj.or.jp PDF]
Interesting movement going on in AUD and JPY pairs from 12:30-3:30a.  You can see the various uptrends, downtrends, channels and triangles.  I want to see how oil and gold react as well.  Chart source:  FreeStockCharts.com.

Tuesday, April 6, 2010

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.

Monday, April 5, 2010

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.

Sunday, April 4, 2010

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]

Saturday, April 3, 2010

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.


Friday, April 2, 2010

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.

Thursday, April 1, 2010

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.

Wednesday, March 31, 2010

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.

Tuesday, March 30, 2010

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.

Monday, March 29, 2010

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