Sunday, August 1, 2010

David Rosenberg Says 67% Chance of Recession Based on ECRI Weekly Leading Index

David Rosenberg of Gluskin Sheff + Associates was on Tech Ticker last week giving his thoughts on the market and economy. He thinks there's now a 67% chance of a double dip recession based on the ECRI Weekly Leading Index (Economic Cycle Research Institute). He still likes gold (3,000 is his conservative target), thinks the S&P should be around 900 and believes "cash is trash".

"His prediction is based on the sharp decline in the ECRI's weekly leading index, where the growth rate has fallen for 7 consecutive weeks." (Tech Ticker article with video)

Saturday, July 31, 2010

Cloudy Economic Outlook Keeps Crude Oil Trading in Narrow Range for Week - Guest Post

submitted by oilprice.com

Oil Market Summary for 07/26/2010 to 07/30/2010

Crude oil futures continued to trade in a very narrow range, unable to cross the $79 a barrel threshold even though they ended 4.4% higher on the month.

The benchmark West Texas Intermediate rallied with the stock market late Friday to finish the week at $78.95 a barrel, virtually unchanged from $78.98 a week ago, after dipping just below $77 a barrel earlier in the week. End-of-month trading might have accounted for some the late gains, analysts said.

Peter Schiff 2006 Mortgage Bankers Association Speech, Tech Ticker July 2010

Peter Schiff of Euro Pacific Capital gave a great speech at the Las Vegas Mortgage Bankers Association conference in November 2006. Everything he warned about came true with regards to the recession, housing crash and mortgage crash (financial crisis). The spike in Treasury Yields and dump in the US Dollar have yet to occur. Actually the US Dollar Index went from 85 in November 2006 to 70 in 2008, but spiked when the financial crisis hit and covered the carry trade. Treasury yields will be something to watch as the tug of war between deflation and reflation continues. Watch out for quantitative easing part two.

Gary Shilling thinks the 30-Year Treasury Bond will yield 3% on deflation (video), however, Michael Pento (now at Euro Pacific Capital) thinks a sovereign debt crisis is 3 years away. The US Dollar Index is very close to testing its200 day moving average. $UUP (US Dollar Index Bullish ETF) tested it today and bounced. Schiff was recently on Tech Ticker saying interest rates should be higher, the US Dollar is a "bottomless pit", real estate prices are still too high and the Dow will keep falling in real terms (priced in gold). See the videos below.

Harvard's Niall Ferguson recently told Bloomberg that the US Treasury bond vigilantes will eventually hit the United States (video) and the Black Swan, Nassim Nicholas Taleb, thinks Government deficits could be the next "black swan" event (BusinessWeek). It seems like higher Treasury yields are inevitable and hopefully as a result of real inflationary growth. The question is will the 30-Year Treasury Yield hit 3% before 10%?

Friday, July 30, 2010

S&P in Descending/Sideways Channel, Under 200DMA (SPX, SPY) - Chart

Here's a quick technical look at the S&P 500 in log form. SPX is selling off at the 200 day moving average (1114) and near term resistance level. It's also trading in a descending and sideways channel. There needs to be a variety of technical confirmations to get out of this trading range.

Pimco's Gross: Population Decline Will Weigh On Growth, Deleveraging Cycle

Bill Gross of PIMCO released his August Investment Outlook titled Privates Eye, which talks about the decline in global population growth and its affect on economic growth and the current deleveraging cycle. If you want to see the chart of world population growth declining since the early 1960s visit his full post at Pimco.com. Gross said this doesn't include the wave of baby boomers retiring, who will eventually park most of their money in fixed income. Add to that Gen-Y is either unemployed or makes a fraction of what previous generations made, are loaded with debt and have higher taxes looming, and somewhat offset by rolling inheritance. Read: Gen Y: No jobs, lots of loans, grim future (msnbc). Gross also explains how Government and private debt (leverage) bridged the gap between lower population growth and stable GDP since the 1970s. Overall, very interesting piece imo.

Charts of Bond Prices and Yields at FINRA.org

If you're interested in bond quotes and yields, FINRA.org provides free bond market information to investors and the general public via TRACE. Check it out at http://cxa.marketwatch.com/finra/marketdata/Default.aspx/.

Thursday, July 29, 2010

ISEE Index Jumped 116% to 182 on 7/28 (ISEE, SPY, VIX Charts)

I stumbled upon the ISEE Index Ratio chart today (total ISE calls opened / puts opened x 100) and saw that it jumped 116% to 182 from 84 the day before. When eyeballing it, it looks to me like the biggest one day move since 2006. See the interactive chart at ISE.com aka the International Securities Exchange. I threw up two snapshots below.

The second largest one day move occurred on 4/14/2010, when the ISEE Index jumped 111% to 165 from 78 (Chart 1). Surprisingly, that marked the peak in the S&P during the past 3 months. On the contrary, the third largest one day move occurred on 3/9/2009 when the ISEE Index rose 103% to 220 from 108 (Chart 2). That 220 reading marked the official market bottom in 2009 which sparked the initial breadth thrust of SPY's 86% 12 month move. On the long term ISEE chart 220 was the all time high going back to 2006. So what's the ISEE Value saying this time?

Wednesday, July 28, 2010

Rentals Up, Sell S&P Options?, Jim Rogers, Robert Shiller, Marc Faber, Taleb, Kass (Action News, 7/28)

Quick news break, 24 links below for you to arb.

Major Option Volume In MSFT, September 28 Calls, January 2012 30s

Microsoft (MSFT) options were active on the ISE Today. On my ISE widget it was the most active on the call side. As of 3:30 it had an ISEE Ratio (customer calls opened/puts opened x 100) of 17,814. In total, across all strikes, 154,624 calls traded and 868 put contracts were opened on the ISE exchange. According to CrimsonMind.com, someone *bought 110,000 September 28 calls at $0.24 and 20,000 at $0.23 (130k total). They noted the bid/ask was 0.22/0.24 (activity was closer to the ask). Also, 30,000 January 2012 30 calls were *sold at $1.98 and 20,000 at $1.97 (50k total). The bid/ask in this case was 1.97-2.03, closer to bid. Hschwartz over at *Whatstrading.com said the September calls were bought and the January 2012s were sold. He also mentioned a 700,000 share hedge and a big spread yesterday. That's some decent institutional size making moves.

Skyworks Breaks Out of 8 Year Channel (SWKS, RFMD, TQNT, SMH, AAPL, QQQQ)

The last time I wrote about semiconductor company Skyworks Solutions was 185% ago on 2/6/2009, right after it broke above resistance on positive earnings. It closed at $6.77 that day with call options running amok. SWKS then rallied 140% by August on strong smartphone growth. They just reported Q3 2010 results. I'm not going to analyze the financials or price valuation ratios in this post but revenues were up 44% YoY and Non-GAAP Operating Income was up 122% (press release). See $SWKS, $TQNT, $RFMD, $SMH technical analysis, chart comparables and updates/downgrades after the jump.

Tuesday, July 27, 2010

MTV's Jersey Shore Cast Rings the NYSE Opening Bell (Video)

The cast of MTV's Jersey Shore rang the opening bell this morning at the New York Stock Exchange (NYSE). It was a situation. The baller cast includes Snooki, Angelina, The Situation, Pauly D, J Woww, Ronnie, Sammie and Vinny. This is a monumental moment in history folks. If you're not excited like I am about season two you should be ashamed. Video #1: NYSE opening bell, Video #2: Jersey Shore season two trailer.

Monday, July 26, 2010

Mark Zuckerberg Interview With Diane Sawyer (ABC Video, 7/21)

A new movie about Facebook is coming out called "The Social Network", I embedded the trailer in a previous post. Diane Sawyer on ABC on July 21 interviewed Facebook's CEO and Founder Mark Zuckerberg. She spoke with him about Facebook hitting 500 million members (third largest country in the world), plans to go public, the recent contract dispute with Paul Ceglia claiming he owns 84% of Facebook (which Zuckerberg calls BS), the new movie which he calls "fiction" and reflections on Harvard. He also answers viewer questions. Dude is on top of the world at 26. Below is a 6 minute interview clip and links to more footage from the interview.

Sunday, July 25, 2010

Ford Beat EPS Estimate, Retired $7B Debt; $F Call Options, Stock Realize Value On Week (Technical Analysis)

Ford reported second quarter net income of $2.6 billion or 61 cents per share, up $338 million from second quarter 2009. Pre-tax operating income totaled $2.9 billion or 0.68 cents a share, up $3.5 billion from second quarter 2009. Ford beat the Bloomberg consensus estimate of $0.41. They unlocked vehicle value, read this Bloomberg article:
"Mulally is boosting profit by reducing discounts while selling new models such as the Taurus and Fiesta subcompact with more options that fetch higher prices.

Buyers paid an average of $30,309 for Ford cars and trucks in June as they splurged on extras like voice-activated phones and stereo systems, according to Edmunds."

Before I get into the $F chart and option activity that made traders cheese, here's a summary of their earnings release including net income, revenue, cash, debt, interest costs, liquidity and overseas numbers. View the full release to see their outlook.

North Korea State TV Threatens South With "Sacred War", Nuclear Deterrent

keep an eye on this. The video and articles are courtesy of Reuters.

7 More Banks Fail In US, Bank Deleveraging Continues

The FDIC said seven banks failed on Friday 7/23/2010. Below I provided the bank name, asset base, deposit base and acquiring bank through an FDIC "loss-share" transaction. Community banks are still in full failure mode so debt deleveraging is still alive and well in the banking system. As of March 31, 2010, these seven banks had a total of $2.1 billion in assets. Crescent Bank had $1.01 billion alone. The estimated cost to the FDIC deposit insurance fund was $431 million. So far this year 103 banks have failed and a total of 140 banks failed in 2009. See the complete failed bank list at FDIC.gov.

Saturday, July 24, 2010

The Social Network Trailer (Facebook Movie)

Below is the movie trailer for "The Social Network" (500millionfriends.com), the new movie about Facebook / Mark Zuckerberg's creation at Harvard. Looks decent.

Oil Prices Show Little Momentum for Breaking Through $80 Barrier - Guest Post

Guest post by oilprice.com

Oil Prices Show Little Momentum for Breaking Through $80 Barrier

Oil Market Summary for 07/19/2010 to 07/23/2010

Prices of crude oil futures slumped below $79 a barrel on Friday despite a stock market rally and the rise of Tropical Storm Bonnie in the Gulf of Mexico.

The downward turn on Friday followed a sharp gain Thursday amid positive corporate earnings reports that some saw as a signal of economic recovery and the brewing tropical storm.

Thursday, July 22, 2010

Tax Cuts Expire End of 2010, Expect Boring Market (Kass), Unemployment Benefits Extended

Here are *premium* news links for 7/22. The market indices violated a few resistance levels today. Developing...

Securing Uganda’s Oil Industry Urged But Repeat Terrorist Attacks Seen As Slim - Guest Post

Guest post by OilPrice.com

Securing Uganda’s Oil Industry Urged But Repeat Terrorist Attacks Seen As Slim

Although the Ugandan government can boost the security of its fledgling oil industry from future terrorist attacks that may scare away certain investors, Africa analysts doubt violence replicating the twin bombs that struck during the World Cup final is likely.

Somali militant group al-Shabab claimed responsibility for explosions that tore through the capital Kampala July 11 and killed more than 70 people.

Quicken Loans Moving 1700 Employees to Detroit, Light Rail Coming #Detroit

This is potentially good news for Detroit's tax base, tech and financial districts, and the city economy in general. All they need to do now is build that M-1 light rail up Woodward (CNN), move the Palace of Auburn Hills downtown (Detroit Pistons) and Detroit could start attracting corporations, jobs and people back to the city on the cheap. What do you think? Detroit's downtown actually looks good, can it not build out from the core? Below is the Quicken Loans press release, a Detroit link fest and view of Campus Martius Park/ Kennedy Square.

Quicken Loans to Move Headquarters, 1,700 Employees to Downtown Detroit by Mid-2010

Move establishes large Quicken Loans presence downtown two years earlier than original plan


LIVONIA, MICH. - JULY 13, 2009

Quicken Loans today announced plans to move its headquarters and approximately 1,700 of its team members to leased space in downtown Detroit’s Compuware Building by mid-2010. The move is subject to state and city approvals.

Ford (F) Earnings Friday, Chart, Options Setting Up (Part 3)

Get ready for Ford (F) earnings on Friday. I've been watching the chart ($F) and option activity for over a week now (see post on 7/14 and 7/20). Calls were mainly active in my previous posts, but today saw put volume in August above open interest. Calls were still heavily traded though and the ISEE ratio actually favored calls, I'll get into that later. At the close a total of 31,099 August $11 Puts traded with 24,116 already open. I'm not sure if they were opening or closing trades, naked sales or connected with stock, just pointing out that the Aug $11 put was in play (like calls last week) with volume > open interest in decent size. The put closed at $0.36 and would profit if $F traded below $10.64 before August expiration (or volatility spikes on a downside move). Ford closed at $11.55. Back to the ISE Call/Put Ratio. The ISEE ratio (ISE customer calls opened vs. puts) favored calls today: Calls: 3.83K / Puts: 802 with ISE implied volatility at 44.77 and historical volatility at 40.75.

Animated Explanation of Wall Street Reform Bill, White House Video (Kumar?)

The White House put out an animated youtube video explaining the Wall Street Reform Bill (full text) which was signed today by Obama. I originally found this video at ZeroHedge. Is Kumar the voice on this? White Castle!!!

Wednesday, July 21, 2010

China Consumes More Energy Than US For First Time, China Denies It (USO, Crude Oil, CL)

IEA graphic, full size at IEA.org
China surpassed the United States in energy consumption for the FIRST TIME according to the IEA.
"IEA calculations based on preliminary data show that China has now overtaken the United States to become the world's largest energy user. China's rise to the top ranking was faster than expected as it was much less affected by the global financial crisis than the United States." (IEA.org)
China denied it.

Bernanke Testimony, Semiannual Monetary Policy Report 7/21/2010

The Federal Reserve released their semiannual Monetary Policy Report today and Chairman Ben Bernanke testified before Congress. Find the full testimony text and video below. The full report PDF can be found here or at the Federal Reserve website. In other political news, President Obama signed the Financial Regulation Bill H.R. 4173 (CSPAN video) and the Senate passed the unemployment insurance extension bill 59-39. It is headed to the House tomorrow. The bill H.R. 4213 would extend benefits for 2.5 million Americans out of work for 6 months+ through November. The Dow closed down 109 points.

Chairman Ben S. Bernanke
Semiannual Monetary Policy Report to the Congress

Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.
July 21, 2010

Chairman Dodd, Senator Shelby, and members of the Committee, I am pleased to present the Federal Reserve's semiannual Monetary Policy Report to the Congress.

Economic and Financial Developments
The economic expansion that began in the middle of last year is proceeding at a moderate pace, supported by stimulative monetary and fiscal policies. Although fiscal policy and inventory restocking will likely be providing less impetus to the recovery than they have in recent quarters, rising demand from households and businesses should help sustain growth. In particular, real consumer spending appears to have expanded at about a 2-1/2 percent annual rate in the first half of this year, with purchases of durable goods increasing especially rapidly. However, the housing market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction.

Taliban Using Monkey Fighters (Taiwan News Re-enactment)

The Taliban in Afghanistan are using monkey fighters. Here's a re-enactment by NMA News (NextMedia.com, Taiwan). Monkey soldiers are armed with AK-47s. Stay strapped around Monkeys!

30-Year Treasury to Hit 3% on Deflation Bid -Gary Shilling, TYX, USB Charts

Economist Gary Shilling of A. Gary Shilling & Co. was on Bloomberg TV yesterday talking about deflation, Treasuries and the Euro (EUR/USD). Watch the full embedded Bloomberg interview below. If they yank it, the media file is at Bloomberg.com. Shilling hasn't really changed his views, but he did say he lightened up on Euro shorts when the trade went against him recently. He's still anticipating a turn though (has small short position). Here's a summary of what Shilling said.
  • Euro will hit parity with US Dollar, problems will deepen in Europe
  • 30 Year Treasury Bonds will yield 3%, 10 Year Treasury Notes closer to 2%
  • Real return for Treasuries will be higher with 2-3% deflation (example)
  • Sees a double dip recession, slower growth (2% Real GDP growth annually over next decade)
  • Decade of deleveraging by financial sector and US consumer will bring deflation, slow growth
  • Government replacing private sector deleveraging, how much can they do...

Tuesday, July 20, 2010

Levels and Indicators to Watch in Gold Spot Chart XAU/USD

Adam Hewison's new MarketClub blog video gives you potential support levels and technical indicators (Fibonacci, MACD, proprietary trade triangles) to watch in Gold Spot. His monthly trade triangle is still green but hopefully you're well hedged from the recent top.  It's a free video.

VIX August 60 Calls Trade and VXX Puts? VIX, VXX, SPY #Volatility

Yesterday's action in the VIX (volatility index) futures options was interesting. The OptionMonster volatility sonar reported that 50,000 August 60 calls traded at 0.20. There was also activity in September (1x2). The action was "re-establishing protection in August and September". If SPY fails again at the $104-105 shelf and the $VIX spikes, the Aug VIX call and future will probably rise in value.

VXX is the ETF for near term futures on the VIX (a rolling long in the first and second month NOT spot http://www.ipathetn.com/VXX-overview.jsp). Today there was an article in the WSJ talking about the VIX futures curve being in contango (July: 26.10, August: 29.50, September: 31.8, October: 33 cfe.CBOE.com) and Jon Najarian mentioned that a trader bought August VXX puts yesterday, a 25-22 put spread I believe. The article said "a put in this instance signals expectations that the market will be calmer. Thus, this investor may have an outlook that is more like the VIX than the index's stormier futures". 

VXX is losing value today and the market is back in the green. The July VIX future expires tomorrow. So were those 50,000 AUG 60 calls for $1,000,000 simple disaster insurance in size before August expiration? The strike price is currently double the August contract. Watch $104-105 area on SPY in my opinion. In other VIX news look at this Barclays Rolls Out Inverse VIX ETN (XXV). See SPY, VXX and VIX Spot charts plus the volatility sonar video after the jump.

Watching Ford (F) Stock, Option Action Pre-Earnings, July Auto Sales (Part 2)

I'm watching Ford stock and option activity. I'll arb some Ford news and update the chart later. Last week I saw interesting call activity from August to January 2011. The options were also active before that post. I'm not quite sure of the exact nature of the in-and-out of the money call trades, but either way position accordingly for the technical catalyst on Friday, July 23 (Ford's earnings release). The trading channels on the chart are at an inflection point and $F is just above the 50 and 200 day moving average. An ascending triangle breakout above $12.15 resistance (January high, perhaps left shoulder) could confirm more upside. All in all, $F needs to hold the rising channel and 200DMA if it wants to retest the recent highs. Were the calls speculative in nature gaming Q2 earnings and July US auto sales on Aug 3? Hedge breakdown risk people, like GLD last week (imo). After the jump is a chart and surprise Ford video.

China’s Stocks Rally on Policy Outlook, Automakers Earnings - Bloomberg
"AW Car Co., which makes passenger cars in China with Volkswagen AG, added 1.8 percent to 17 yuan. Chongqing Changan Automobile Co., the Chinese partner of Ford Motor Co. and Mazda Motor Corp., rose 4.6 percent to 9.94 yuan."

Mike Pento Sees Sovereign Debt Crisis 3 Years Away, Hobbs vs. Pento (CNBC Video)

Michael Pento, Chief Economist at Delta Global Advisors, appeared on CNBC on July 16 and debated with Simon Hobbs and Daniel Gross of Newsweek. As always Pento made some interesting points about the economy and unleashed some data. CNBC's Hobbs put up a good fight though, until maybe the AAA credit rating part, I'll come back to this post in 3 years. Pento still sees trouble on the horizon for the US economy and told Hobbs he was writing off the economy for years. This was a decent debate. Below are quotes and the CNBC video. The original topic was why S&P 500 companies are hoarding so much cash.

Monday, July 19, 2010

30Y Bond/USD Decoupled, SPY, VIX, TLT, IEF, Copper, $UST, $USB Charts, Pre-Market Update

Desayuno with Distressed Volatility for Monday 7/19: First off here are a few news items mostly from my Twitter feed. These events aren't affecting Shanghai, EUR/USD or US index futures so far.

1. BP down 5%+ as FTSE opens, concerns over seepage detected near damaged well - @SkyNewsBiz

2. Hungary Forint Tumbles Most in Six Weeks as IMF Ends Talks With Hungary - Bloomberg
(*Here is Hungary CDS Quote at Bloomberg.com)

3. Ireland's credit rating downgraded by Moodys to Aa2 - Irish Times
(*Here is Ireland CDS Quote at Bloomberg.com)

4. Man buys Europe’s entire cocoa supply, analysts suspect market cornering - National Post

I saw that the 30Y Treasury Bond and US Dollar Index decoupled since mid-June. $USB is up 9.95% and $USD is only up 1.90% over 3-months. The US Dollar Index could eventually test the 200DMA and perhaps bounce at the March high. It's still trading in a descending channel with 50DMA resistance up above.

Stock Prices, Economic Data Buffet Crude Oil Futures in Lackluster Trading - Guest Post

Guest post by OilPrice.com

Stock Prices, Economic Data Buffet Crude Oil Futures in Lackluster Trading

Oil Market Summary for 07/12/2010 to 07/16/2010

An unexpectedly sharp drop in a key consumer confidence index sent stocks plummeting on Friday and drove down prices for crude oil futures so that the benchmark contract finished the week virtually unchanged from last Friday.

Sunday, July 18, 2010

Lawrence McDonald Thinks SEC Going After Lehman Next (Goldman Settlement)

Lawrence McDonald, former Lehman trader/VP who wrote the book "A Colossal Failure of Common Sense", thinks the SEC will go after other firms more active in the synthetic CDO space after the Goldman settlement. He told PBS Newshour, "I think the big fish that the SEC wants is Lehman Brothers". The movie might not be over for $LEH.
"Goldman Sachs was actually a third-tier player in these kind of synthetic CDOs. Other firms were much more active. And I think you will see things there in terms going after the other firms on these toxic products.

But, more interestingly, I can give you some -- I can break some news tonight. Behind the scenes, I think the big fish that the SEC wants is Lehman Brothers. Lehman Brothers' bankruptcy is 10 times the size of Enron. It's bigger than Enron, WorldCom, Adelphia combined. And I'm hearing behind the scenes, the SEC, the FBI, and the Justice Department are active in going after Lehman Brothers executives."

Find the full article and video at PBS Newshour:

Was Record Settlement Against Goldman Sachs a Good Deal for Company? http://www.pbs.org/newshour/bb/business/july-dec10/goldman_07-16.html

Wall Riding in India (Videos)

Sunday entertainment. I had to put these videos up. Watch people ride motorcycles and cars around a vertical track in India.

Saturday, July 17, 2010

S&P 500 Failed at Death-Cross, Deflation Bid Rules Week $TLT, $IEF, $SPY, $QQQQ, $GLD, $UUP Charts, Links

RISK ON, RISK OFF. The market took a hit Friday on option expiration due to lower consumer confidence, lower inflation, so-so earnings, economic data and technical resistance. Read the articles below. $SPY closed -2.75% at $106.66, $DIA -2.5% at $101.01 and $QQQQ -2.76% at $44.34. Last night the Nikkei 225 index (Japan stock index) was down 2.86% at one point and Reuters mentioned a large futures seller, so that move could've diffused into the S&P. In my post two days ago (chart) I mentioned that $SPY was stuck at downtrend resistance and the 50 day moving average, also Adam Hewison's INO blog video warned about a sell off at the "death cross". So technicals were an important factor there imo. Below is a decent link fest and 1-week chart comparison of $TLT, $IEF, $SPY, $QQQQ, $GLD, $UUP and intra-day $SPY. I'll chart out each ETF individually and bond yields next.

Friday, July 16, 2010

Nikkei 225 Down 2.86%, Large Futures Seller #Japan

Nikkei was active overnight to the downside (update: 2:15c)

1) Decent intraday downtrend in Nikkei 225 (1st chart), keep eye out for breakout
2) As noted in my previous post, 9,000 is an important support level (also $EWJ in there)  
3) "Large lot selling of futures by a foreign investor" -Reuters 
4) Nikkei September Future (2nd chart), sold off at 50 day moving average, downtrend resistance

    Nikkei 225 Intra-day -2.862%, 9,408


    Nikkei 225 Index Sep 2010 Future (Chart: OptionsXpress)

    Thursday, July 15, 2010

    Goldman Paying SEC, IKB Deutsche, RBS $550 Million Fine (Judgment)

    Today Goldman Sachs agreed to pay a $550 million fine to settle civil fraud charges by the SEC. $150 million will be wire transferred to German bank IKB Deutsche Industriebank AG, $100 million to RBS (Royal Bank of Scotland, formerly ABN AMRO Bank), $300 million to the SEC (Securities & Exchange Commission) and $15 million to payback fees (disgorgement). The judgment also said the Defendant (Goldman) must comply with a few "undertakings" which expire in 3 years (find the full SEC vs. Goldman Judgment PDF at SEC.gov).

    Financial Regulatory Reform Bill Passes, H.R.4173 Full Text (7/15/2010) #FinReg

    The the financial regulatory bill aka the "Restoring American Financial Stability Act of 2010", "Wall Street Reform Act" or Dodd-Frank bill passed today 60-39 by the Senate and is headed to President Obama for signature. The House of Representatives passed the bill last month 237-192. The bill is 1,616 pages long. Here is the summary and the full embedded PDF file after the jump. You can also find the full H.R.4173 bill in HTML format at the Library of Congress (Thomas). This is big time regulation.

    (H.R. 4173) entitled ‘‘An Act to provide for financial regulatory reform, to protect consumers and investors, to enhance Federal understanding of insurance issues, to regulate the over-the-counter derivatives markets, and for other purposes.’’.

    The Bear Market and Depression: How Close to the Bottom? - Prechter

    The Bear Market and Depression: How Close to the Bottom?

    July 12, 2010

    By Elliott Wave International

    While many people spend time yearning for the financial markets to turn back up, a rare few have looked back in time to compare historical markets with the current situation -- and then delivered a clear-eyed view of the future informed by knowledge of the past. One who has is Robert Prechter. When he thinks about markets and wave patterns, he goes back to the 1700s, the 1800s, and -- most tellingly for our time now -- the early 1900s when the Great Depression weighed down the United States in the late 1920s and early 1930s. With this large wash of history in mind, he is able to explain why he thinks we have a long way to go to get to the bottom of this bear market.

    Here is an excerpt from the EWI Independent Investor eBook, which answers the question: How close to the bottom are we?
    * * * * *
    Originally written by Robert Prechter for The Elliott Wave Theorist, January 2009

    Wednesday, July 14, 2010

    FOMC Minutes From June 22-23 (Federal Reserve)

    FOMC Minutes from from June 22-23. Read full release at Federalreserve.gov.

    "Committee Policy Action

    Illinois Plans to Raise Billions ($6 Billion Estimated in Unpaid Bills -Comptroller)

    Here's a quick summary of the CNN article today which includes an embedded video featuring Illinois Comptroller Daniel Hynes. Illinois plans to raise:
    1. $900 million through Build America Bonds
    2. $1.3 billion in short-term notes next week
    3. $1.4 billion in debt related to tobacco settlement funds in November
    4. $3.7 billion through debt markets to fund pension obligations

    "It could have as much as $6 billion in unpaid bills that have left schools, social service agencies and vendors waiting months to be paid, according to state comptroller Daniel Hynes."

    If you remember, Illinois took out Iraq on the CDS top probability of default list the other day (link).

    $SPY Stuck at Downtrend Resistance, 50 Day Moving Average (#Chopfest, July 14)

    SPY (the S&P 500 ETF) is stuck at downtrend resistance and the 50 day moving average (109.64). The 200DMA is at 111.41. SPY is currently +0.02 at $109.68. Oh now up +.09, chopfest.

    SPY chart courtesy of FreeStockCharts.com

    MCDX Spreads Up 100%+ Since November (Muni Bond CDS, Credit Default Swaps)

    Distressed Volatility has been alerting you about the municipal crisis since day one (see labels Municipal Bonds or Municipalities for recent posts). Here's an in depth post on the muni crisis from February 25 titled Municipal Crisis Is Spreading, Updates on Distressed Municipalities. Another memorable moment in history was six days ago, when the CDS (credit default swap) probability of default percentage on the State of Illinois was one notch above Iraq! They switched spots since then though. The point is, eroding tax receipts, debt interest payments and lack of funds are squeezing municipalities, some more than others. Illinois had $4.7 billion in unpaid bills and transfers at the end of last quarter (FY 2010).

    MCDX, an index referencing municipal bond credit default swaps, or insurance on muni debt, is up 100%+ since November of 2009. MCDX.NA 14 was not available at that time. On 11/9/2009 I put up Markit MCDX.NA End-of-Day Spreads in a Disqus comment.

    Ford (F) Call Options Active on ISE, Ford Sync Pandora Demo Video (AppLink)

    Interesting option action in Ford today, it was featured on my ISE widget. I saw that Ford (F) calls were active compared to puts, especially the August $11 (under open interest), $12 (under OI) and $13 calls (above open interest: volume 33,387, OI 19,630). September and December also saw decent call volume vs. puts but under OI. There are 633,000 calls already open between $12 and $15 in September which is interesting (option chain snapshots below).

    It looks like the January 2011 calls saw a spread of some sort but on minuscule volume compared to open interest. Ford had a high ISEE ratio today (ISE customer calls opened/puts opened x 100), ISEE Ratio: 1,802, Calls: 21,985 Puts: 1,220Speculating or hedgulating? $F closed at $11.66 so if it hits $13, those $11s-13s could be profitable.

    Tuesday, July 13, 2010

    Ceglia Sues for 84% of Facebook, Aluminum Prices vs. Alcoa, Rent Miami Luxury Cheap, Delinquent Prime RMBS Up

    Links for July 13, 2010

    Man Sues Facebook for 84% of Ownership - Mashable

    US trade deficit widens to $42.3 billion in May, largest gap in 18 months, as imports rise - AP

    Charles Bradford (Affiliated Research): Aluminum Prices a `Headwind' for Alcoa: Bloomberg Video

    US corporation credit quality faces market threat (watching VIX): Moody's - Economic Times (h/t @asiablues)

    Miami's Downtown Comes Alive as Condos Fill With Renters - Bloomberg
    (Roomates pay $900/month each for wrap around balcony, water views, gym, spa, steam room)

    30-Year Treasury Bond, TLT Watch, Bond Vigilantes Here Yet? (+IEF, 10Y-Note Charts)

    If you're not already watching Treasuries, keep an eye on the 10-Year Note, 30-Year Treasury Bond, $TLT (20+ Year Treasury Bond ETF) and $IEF (7-10 Year Treasury Bond ETF) as they are all testing near term support levels. Look at the 30-year Treasury and TLT specifically as they are most at risk of breakdown here. Something to be aware of just in case the bond vigilantes are preparing something. There's still deflation risk in the air though, so if that's the case we'll see if the long bond gets invited to the bid. Any current or future bond vigilantes reading this? Take a look at the charts of $USB, $UST, IEF and TLT below. I'm also looking at a ratio, I'll post the chart tomorrow.

    S&P Trading 40% Above Historical Norms Based On Normalized Earnings -Hussman

    This week's "Weekly Market Comment" by John Hussman titled "Misallocating Resources" is a good read. He is the President of Hussman Funds. Read the full report at their website. Below I quoted the paragraph where he talks about S&P valuation. He takes on the price-to-forward operating earnings valuation ratio that analysts use.

    Monday, July 12, 2010

    Place Your Hedged S&P Bet, $1,440 or $400 Target ($SPY, $SPX, All or Nothing)

    Vinny Catalano, president of Blue Marble Research, was on Tech Ticker today and gave two potential outcomes for the S&P which I found interesting. He said the S&P will either trade at $1,440 on $80 earnings per share (EPS) x 18 price/earnings multiple (P/E) -or- hit $400 on $50 EPS x 8 multiple. Place your hedged bets folks, all or nothing. Below I embedded the Tech Ticker video along with an S&P 500 chart going back to 1990, the last time the S&P traded at $400. The S&P closed at 1,078 today so in percentage terms it's either 33% upside or 62% downside from here. Will it be higher EPS with multiple expansion or lower EPS and compression.

    S&P: U.K. AAA Rating Long Term, A-1+ Short, Negative Outlook (7/12)

    From S&P today, read the full release.
    # We are affirming our 'AAA' long-term rating on the United Kingdom reflecting our view of the U.K.'s resources, as evidenced by its wealthy and diversified economy, ample fiscal and monetary policy flexibility, and adaptable product and labor markets.

    # However, in our view, a number of large and politically challenging spending decisions are still to be made, and Standard & Poor's medium-term economic forecasts for the U.K. are less optimistic than the assumptions underlying the budget. We therefore believe there is still a material risk that the U.K.'s net general government debt burden may approach a level incompatible with the 'AAA' rating.

    # As a consequence, we have maintained the negative outlook on the long-term rating on the U.K.

    XLF July 15 Call Options Active, Second Mortgage Warning, Dagong on US Credit Risk (Reads)

    `Big, Bold' Bet on U.S. Banks Rallying Drives Surge in Call-Option Trading - Bloomberg

    Call Options on Financials ETF (XLF) in High Demand - Wallstreetpit.com
    [July option expiration is on Friday, could be placing bets on earnings next week,
    September/December calls also active, calendar spread]

    Google Working On Secret New Ad Format: "Interactive Video Ads" - Business Insider

    David Rosenberg: Odds Of Double-Dip Jumped Another 3% Last Week, ECRI - Business Insider (July 12)

    Liening on banks: Second mortgages are next housing crisis - NY Post

    Chinese credit firm says US worse risk than China  - AP

    Sunday, July 11, 2010

    Accredited Investor Rule is a Joke (Exposed in 2008), Knock Down Existing Financial Infrastructure

    In my opinion, the existing financial infrastructure and out dated securities laws need to be bombed out and rebuilt in order to provide a REAL, transparent, normal functioning market. As we saw in the years leading up to the financial melt down, excessive bank leverage, lack of capital (credit losses / counterparty insurance claims), credit rating failures, artificially low borrowing costs and private illiquid markets between banks, hedge funds and insurance companies detonated the biggest suicide bomb in financial history. "Accredited investors", "qualified buyers" and "sophisticated investors" were also directly responsible and these securities laws are too big to fail.

    Saturday, July 10, 2010

    Crude Oil Tracks Stocks Upwards to Close Week Above $76 a Barrel - Guest Post

    Guest post by oilprice.com

    Crude Oil Tracks Stocks Upwards to Close Week Above $76 a Barrel

    Oil Market Summary for 07/05/2010 to 07/09/2010

    Crude oil futures finished the week on a positive note, tracking stocks upward after hitting the low for a month earlier in the week.

    The benchmark West Texas intermediate contract settled Friday at $76.09 a barrel, up 65 cents on the day. On Tuesday, the contract declined for the sixth session in a row, closing at $71.98, its first dip below $72 in a month.

    Friday, July 9, 2010

    Watching UUP (US Dollar) On Uptrend Support, 50DMA and Treasuries

    Something to watch going forward will be the US Dollar ETF (UUP) or US Dollar Index Future (as well as currency pairs).  I like watching UUP as a proxy for some reason. It's sitting on uptrend support when measured from the December 2009 low, before the Eurozone crisis hit and FXE (Euro ETF) lost 20%. We'll see if the USDX continues to rally or breaks down, and why. The 50 day moving average could act as resistance going forward. It's still above the 200DMA. I'm also watching Treasury bond yields and IEF/TLT. Some believe the deflation whale could send yields even lower from here. However, be careful of the bond vigilantes when Treasury yields break their uptrend line (see what Harvard's Niall Ferguson had to say). Below are links, the UUP chart and Mish Shedlock on Tech Ticker today.

    Illinois CDS Default Probability Above Iraq, Unpaid Bills $4.71 Billion

    The Illinois Comptroller's Office released the state's fiscal year 2010 results and said "Illinois ended the year in the worst fiscal position in its history". They have a backlog of $4.712 billion in unpaid bills and fund transfers. Taxes took a hit as well, sales tax receipts were down 6.9%, corporate income tax receipts fell 20.5% and individual income tax receipts fell 7.7%. The Governor proposed a "$1.3 billion “revenue failure” short-term borrowing for late July".

    On May 17, 2010 I reported that Illinois had $4.5 Billion In Unpaid Bills for FY Q3, so unpaid bills are up $200 million. Today I saw that Illinois CDS (credit default swaps) were trading above Iraq when measured in CPD% (cumulative probably of default). According to CMA's most actives, Illinois 5Y CDS closed at 361.38 basis points with a 27.31% CPD, while Iraq 5Y CDS closed at 440.70 bps and 26.99% CPD (table snapshot below). California CDS is trading right below Iraq on the highest default probability list (343.67 bps, 26.65% CPD). What the hell happens now. Federal bailout? Legalize marijuana (tax revenue)? Higher tax rates? Google buyout? Municipal merger? Or default.

    Dan Gilbert Guarantees Cavaliers Win Championship Before Lebron (Letter to City)

    After Lebron James decided to leave the Cavs for the Miami Heat, Cleveland Cavaliers owner Dan Gilbert released this must read letter to the city. After his loss, Gilbert is coming back with a vengeance.  Hat tip Benzinga.

    "Dear Cleveland, All Of Northeast Ohio and Cleveland Cavaliers Supporters Wherever You May Be Tonight;

    As you now know, our former hero, who grew up in the very region that he deserted this evening, is no longer a Cleveland Cavalier.

    This was announced with a several day, narcissistic, self-promotional build-up culminating with a national TV special of his "decision" unlike anything ever "witnessed" in the history of sports and probably the history of entertainment.

    Thursday, July 8, 2010

    LeBron James Joining Miami Heat (Decision Video)

    LeBron James will join Dwayne Wade and Chris Bosh in Miami (ESPN). Watch the decision video below. Sucks for Cleveland and Madison Square Garden ($MSG).

    GLD, SLV, GDX at 2008 Uptrend Line, Put Hedge Up (Gold, Silver, Miners)

    7/7/2010: Here's an update from my previous post on 6/29 saying that John Paulson of hedge fund Paulson & Co. should hedge his gold denominated fund or massive $GLD ETF position with puts. Paulson & Co as of 3/31/2010 owned 31 million shares of $GLD which was his top holding. The August and September in-the-money $121 and $122 put contracts performed well during the technical sell off. As you can see from the chart below, the puts are up 25% to 50% in 7 days while $GLD lost 3.3%. $GLD is sitting right at ascending channel support from the 2008 low and being squeezed in an ascending triangle near the vertex point (where ceiling resistance crosses the uptrend line). The same can be said about $SLV (the Silver ETF) and $GDX (Gold Miners).

    REIS Vacancy Rates, Kass (Bottom's In), UBS Cuts S&P Target to 1,150 from 1,350, Overnight Gold Chart

    Below are interesting articles and the Fast Money video from tonight featuring Doug Kass vs. Brian Kelly (of Kanundrum Capital see Seeking Alpha articles). Kass thinks the market bottom's in for the year while Guy Adami still thinks the market is headed "significantly" lower, with 1040 as bogey level. Dow $1,000 anyone? I'm watching GLD and SLV here, they are both at serious inflection points (ceiling resistance/uptrend support are meeting). They held the 2008 uptrend today, we'll see about tomorrow. Overnight, GCQ10 (Aug Comex Gold) is testing the downtrend line from 6/28-7/1 peaks. Links, chart and CNBC video are after the jump.

    Wednesday, July 7, 2010

    Dick Bove: Citigroup Headed Toward $8.50 (Down 93% From 2007 Peak)

    Here is Dick Bove of Rochdale Securities conversing with Harry Rady of RAM on Citigroup (on CNBC). Bove thinks Citi will trade at $8.50, 117% above today's close ($3.90). Citi's been making some moves recently, here are recent articles and a quarterly chart since '87.  In 2009 Citi hit the 1990 low, down 93% from the 2007 peak.

    Niall Ferguson: Treasury Bond Vigilantes Coming, Default Or Inflation Choice For US

    Harvard Professor Niall Ferguson was at the Aspen Ideas Festival and met up with Eric Shatzker of Bloomberg. He said the Treasury bond vigilantes are coming. Meaning US Treasury bonds will be under attack by short sellers, like Bear Stearns and Lehman Brothers.
    "Sooner or later, maybe after Japan has felt the pain, the bond vigilantes will get to the United States. I don't think it will be this year, because the worse things get in the Eurozone, the more attractive US Treasuries look. But in the absence of any political will to address this problem and the latest numbers from the congressional budget office should scare everybody in this country. This is simply an inevitability."
    "So we really have at this point a kind of choice before us. Is it going to be inflation or is it going to be default.  Right now what's really troubling is that there's no sign of inflation, which is the easy way out of a debt burden in the United States. On the contrary, we have monetary contraction at a really quite alarming rate and effectively zero inflation in terms of core CPI.  So the [option?] of inflating this debt away, which a lot of people think will be exercised, doesn't seem to be there right now. What you're left with is therefore default and I think it's a fair bet that the United States will default, at least on the unfunded liabilities of social security and Medicare at some point in the foreseeable future."

    Tuesday, July 6, 2010

    Tokyo Nikkei Index Around 9,000 Support, EWJ Similar (Chart)

    Watching floor support and downtrend resistance levels on the Nikkei Index (Tokyo) and $EWJ (iShares MSCI Japan Index ETF). The Nikkei tested the 9,000 level three times since summer 2009. It is currently trading at $9,255.94, -0.88% tonight. Also take a look at the long term downtrend/descending triangle on EWJ since 2007. Something has to give at some point. Here are a few articles and charts.

    James Altucher vs. Roubini and Prechter, S&P 1,500 or Dow 1,000? WTF!

    Watch James Altucher and Professor Nouriel Roubini battle it out on CNBC. Altucher sees 1,500 on the S&P with S&P EPS hitting $80 in 2010. By the way, Barton Biggs just slashed his 2010 EPS estimate to $70-75 and liquidated US stocks aggressively, at least that's what he said. Backing out cash, Altucher said stocks are trading at 11x earnings, below the historical average of 15, so he wants the S&P to fill that gap. Doesn't 80 x 15 = 1,200? The S&P already hit that level in April. Nouriel disagrees with James, he thinks the market is overpricing Q2 growth. Roubini sees 1.5% GDP growth vs. the 3% consensus estimate in the second half of the year. More estimates: Doug Kass sees $90 on the S&P in 2011 with 2%+ growth in the second half and Robert Prechter of Elliott Wave thinks the Dow will hit $1,000 over 5-6 years. Yes $1,000. Who to believe, who to believe.... Video courtesy of CNBC.com.

    Barton Biggs Sells Stocks, Expects $70-75 EPS, Double Dip and Afraid of Policy Errors (1930s Redux)

    After being bullish throughout Q1 and Q2 (1, 2), Barton Biggs (Traxis Partners) on Bloomberg TV said he reduced his long exposure in US stocks aggressively. He was mainly in tech. Biggs is afraid of policy errors tanking the market and singled out 1937 as a template.

    S&P Death Cross Imminent! Non-Event So Far (S&P Future, Index Chart)

    Below are charts of the September S&P E-mini Future (ES_U) and S&P Equity Index. The death cross is underway, when the 50-day moving average crosses below the 200-day moving average. The S&P is trading below both moving averages so they act as resistance.

    Some people think the death cross is backward looking or a BS event. It could already be priced in, but should be respected. It confirms the fact that shorter-term price action (50 days) is beating out longer-term price action (200 days), to the downside. Ultimately, the death cross could confirm a new bear market. But you know what I find interesting people?

    Monday, July 5, 2010

    Links: Illinois Budget Crisis, Commodities Relapse, Shipowners, Gold Chart and BP Foreign Interest

    Supercharged global link-fest for July 5, 2010

    Illinois facing 'outright disaster' amid budget crisis - MSNBC/NYT (h/t @future_shock)
    Commodities `Relapse' May Last Through 1st Half of 2011, RBS's Moore Says - Bloomberg
    Greek Shipowners Waiting for Lower Prices to Buy Vessels, RBS Banker Says - Bloomberg
    Speaking of RBS: Bob Janjuah Leaves RBS - Zero Hedge

    Federal Reserve Express?

    I found this article interesting at Business Insider. Happy July 4th weekend!