60 Minutes Looks at High Frequency Trading (Must See Videos)

Steve Kroft checks out the high frequency trading business in this 60 Minutes episode. He interviews Manoj Narang of high frequency trading firm TradWorx, Joe Saluzzi of Themis Trading LLC (who is against HFT), Larry Leibowitz of the NYSE, Senator Ted Kaufman and SEC Chairman Mary Schapiro. They also stroll through the NYSE data center in Mahwah, NJ.

SPY/SLV Double Dip is Here, SPY/GLD Next? ($SPX, $INDU Silver, Gold Ratios)

Check this out folks. SPY/SLV is testing the 2009 low RIGHT NOW! Will SPY/GLD follow suit? SPY/GLD is trading below the moving average death cross (50dma below 200dma) and appears to be in a descending triangle. Could we see a Prechter "Dow 2000" equivalent in the Dow:Gold ratio (1.486 from .182*8.17 using .182*11,000=2,000? Or will we actually see the ratio trade at 0.50 ($INDU 2,000/$GOLD 4,000). What do you think. Charts courtesy of StockCharts.com.

SPY/SLV (S&P 500 ETF/iShares Silver ETF)

SPY/GLD (S&P ETF/Gold ETF)

$INDU (Dow Jones Industrial Average/$GOLD (Continuous Future)

USDA World Crop Price Projections Rise, Corn at 2 Year High (USDA Price Table, USDX/CZ Chart)

The USDA released the October "World Agricultural Supply and Demand Estimates" report on 10/8 and a "Crop Production" update via NASS (National Agricultural Statistics Service). Commodities rallied on lower supply estimates and higher 2010/2011 price projections. Read the articles for more information.

Below is a table of 2010/11 price projections from the USDA report. If you chart out agricultural commodities, commodity indexes, base metals and precious metals, you can see that some prices pierced through overhead resistance on Friday. Right now the corn future is at a 2 year high (see chart). I'm also watching to see if the US Dollar Index catches support around here (see uptrend from 2008-2009 and 2009 floor on USDX/CZ10 chart). Eventually there will be a hard asset correction imo; however, the Ag trend, especially corn, looks strong. We'll see how 2010 ends. Hopefully input costs are hedged going forward if we see price spikes. Cocoa Puffs are already expensive as it is. Here we go: "Don Mulligan, chief executive at General Mills, told investors that the food company was “about 50 per cent hedged” for the 2011 fiscal year, which began in June." FT.com 8/2010.

NY Fed's Brian Sack on Asset Prices and Balance Sheet Policy 10/4

Brian Sack, Executive Vice President of the New York Federal Reserve, gave a speech at a CFA Institute Fixed Income Management Conference on 10/4. He made interesting remarks about asset prices and balance sheet policy. People should understand the forces at work here.

Jim Rogers Interview on 10/6/2010 (Protect Yourself With Hard Assets)

Jim Rogers was interviewed by Tech Ticker's Aaron Task on the streets of NYC on 10/6/2010. Key theme to this interview, as always, "protect yourself with hard assets" [silver, agricultural commodities, gold (with possible correction)].

Soros: Treasury Yields Could Follow JGB Yields Lower, Renminbi Appreciation is Wild Card (Columbia Speech)

Famed reflexive hedge fund manager, George Soros, gave a speech at Columbia University on 10/5. He said Treasury yields could move even lower if the U.S. follows Japan (deflation, 0% cash rate, 1% 10y Japanese Government Bond yield). He mentioned that US banks would continue to borrow at 0% and invest in Treasuries. We already have the Fed bid in place (NY Fed's Brian Sack's speech on 10/4).  However, if the Chinese Government allowed the Renmimbi to appreciate against the U.S. Dollar it would change his view.

Tourism Resorts and Oil Exploration in the Caspian Sea - Guest Post

Guest post by GlobalintelligenceReport.com

Tourism Resorts and Oil Exploration in the Caspian Sea

SITUATION: One indirect consequence of the Gulf of Mexico oil spill is the impact it may have on the financing of the many tourism projects that have sprouted along the Caspian Sea. Bordered clockwise from the North by Kazakhstan, Turkmenistan, Iran, Azerbaijan, and Russia, the Caspian Sea is one of the largest bodies of water and an object of strategic ambitions. Though the global financial crisis put may grandiose Caspian Sea tourism projects on hold, some of them are coming back to life, but investors should be alert to tourism trends, corruption, and unanswered questions about demand and potential profit.

ANALYSIS: The magnitude of the consequences of the Gulf of Mexico oil spill is still hard to assess, even more so as there is no consensus as to the exact quantity of oil left in the water: The government says 25% while other organizations, such as the University of Georgia, say 75%.

Jon Stewart Takes Jab at Foreclosure Robo-Signing Crisis, Catch 22 (Video)

Jon Stewart on the foreclosure crisis. Hat tip to Zero Hedge blog.

Large XLK December 20-23 Put Spread at Resistance, $7.6 Million Net Debit

A large put spread was put on in the tech ETF $XLF. According to CrimsonMind 112,300 December $23 Puts were bought for $0.87 and 112,300 December $20 Puts were sold for $0.19. That's a net long put position worth $7.6 million. XLK is at technical resistance so the puts could be hedging underlying long exposure. Both Chris McKhann at OptionMonster and CrimsonMind thought they were connected with shares. WallStreetPit also had analysis. Read the articles for exact profit/loss figures. If XLK trades down to $20, the spread would make decent money.

XLK SPDRs Select Sector Technology ETF (FreeStockCharts.com)

Chris Whalen: Less Than 1/4 the Way Through Foreclosure Process (AEI Presentation)

Chris Whalen, who runs Institutional Risk Analytics, gave a presentation at the American Enterprise Institute (AEI) on 10/6. Here are the slides. He gave some harsh warnings about the banking system in 2011. You can watch the conference at Pragcap.com.
"Mounting cash flow stress on all lenders is reaching crisis levels. Non-payment by borrowers and mounting foreclosure backlogs are creating the conditions for the collapse of some of the largest U.S. banks in 2011." (Chris Whalen presentation at AEI. Slides also at Business Insider)

Follow Chris Whalen on Twitter (@rcwhalen) for updates.

Karl Denninger on Dylan Ratigan Show Talking Foreclosure Fraud, State AGs Across the Country Lash Out at Banks

Dylan Ratigan spoke with Karl Denninger, author of Market-Ticker.org, on his show about the foreclosure mess going on. If you didn't know, State Attorney Generals all across the country are accusing banks of fraudulently foreclosing on properties. I embedded the MSNBC video below and linked to various articles.

Marengo Mining Raises C$20M For Yandera Project (MRN, Copper)

If you're interested in copper or molybdenum mining companies check out Marengo Mining (MRN.to). It is a microcap mining company based in Australia but owns the major Yandera Copper-Molybdenum-Gold project in Papua New Guinea. I wrote about Marengo last year when I read that Quantum Partners LDC (a Soros fund) scooped up 20% of the equity during a capital raise. With MRN trading at 0.16/share on the Toronto Stock Exchange, the stock is essentially a call option on the Yandera asset and expansion. As of 9/23/2010 Marengo had 738.8 million ordinary shares outstanding and 84.7 million options open to acquire shares at various prices.

On August 23, 2010, Marengo raised C$20 million at C$0.084 from various investment funds in North America. The company has no revenue except for interest on cash and has netted losses every quarter due to expenditure burns. For the quarter ended 6/30/2010, Marengo had A$59,498 in revenues, a net loss of A$(4,284,756), A$6,984,582 in cash +A$24,000,000 capital raise, A$25,769,730 in total assets and A$22,443,518 in equity. I put up snapshots of annual and quarterly trends from the Q3 release. It's pretty clear what's been going on, they burn cash and then raise after a year. But going forward, if $COPPER breaks out (IMF says 'few signs' metals supply can keep pace with demand, Copper Will Trade at $11,000 in a Year, Goldman Says), Asian economies boom, inflation hits and/or currencies debase; Yandera could be a hidden gem. The biggest risk here would be lack of capital to survive.

USD/JPY's Descending Travels Continue, Pierced Pre-Intervention Support (at 82.786, Chart)

USD/JPY just pierced through the pre-intervention low of 82.87. It is currently trading at 82.69. Watch for major capitulation to catch an upside wave. This channel reminds me of the Euro earlier this year. The Bank of Japan wants the Yen down but they are also fighting Fed policies.

Japan’s 10-Year Bond Futures Fall Most in a Month After Auction - Bloomberg
Dollar hits 15-yr low vs yen, falls broadly - Reuters

USD/JPY (US Dollar/Japanese Yen)




Courtesy of FreeStockCharts.com

Hugh Hendry is Short Cheap Japanese Industrial Credits Using CDS

First off, check out the office of Eclectica Asset Management in this BBC interview with CIO/CEO Hugh Hendry (hat tip Paul Kedrosky's blog). In the comment section someone said this video was a year old. If you didn't know, Hendry is currently short $2 billion worth of 10 year Japanese industrial debt with a 1% yield using credit default swaps. That's cheap! Listen to this KingWorldNews interview for more. Carney's NetNet Blog at CNBC.com noted today (via FT) that he's betting against China by shorting Japanese corporate debt.
"Mr Hendry has purchased cheap credit protection on companies such as Nippon Steel or JFE Holdings for as little as 50 basis points annually, expecting that spreads will blow out following an export-led slowdown."
Was this trade the next "John Paulson trade" he was talking about at that Russian Forum earlier this year?

Hussman: Market is Overvalued With Economy Slowing (10/3)

John Hussman, who runs the Hussman Funds, put out a new market comment on October 4 titled "Economic Measures Continue to Slow". He still believes the market is overvalued based on Shiller's P/E ratio.
"At a Shiller P/E of 21 and a historical peak-to-peak S&P 500 earnings growth rate of 6%, a simple reversion to the historical (non-bubble) Shiller norm of 14 would require seven years of earnings growth and yet zero growth in prices. Stocks are not cheap here."

He also talked about the ISM and Fed Indices, ECRI Weekly Leading Index, dividend payout ratio vs. operating earnings growth, and how he views "current market conditions as something of a Ponzi game"! The most interesting part was on his hedges. Read the full comment here.

Reads: Brian Sack, Hatzius Scenarios, Gary Shilling Housing Update

There is quality information popping up in the blogosphere tonight! Here's a quick link festival. I already squawked most of these links on Twitter (@dvolatility).

Brian Sack: Managing the Federal Reserve's Balance Sheet /Remarks at 2010 CFA Institute Fixed Income Management Conference, Newport Beach, California - New York Fed

David Rosenberg Attacks The Fed's Intentional Ponzi Approach - PragCap (Sack talked about propping up asset prices)

Here's Why House Prices Will Now Drop Another 20% - Business Insider

Goldman's Hatzius: Two main economic scenarios "fairly bad" and "very bad" - Calculated Risk

The Gas Cartel Idea: On the Road to Another OPEC? - Guest Post

Guest post by the Global Intelligence Report team

The Gas Cartel Idea: On the Road to Another OPEC?

As oil sees its image tarnished from the disastrous oil spills that took place off the coast of the Gulf of Mexico and off the coast of Dalian, China, and as the most promising oil fields remain off limit to the Western oil majors, gas is gaining in popularity.

Gas is present in large quantities and in many countries of less questionable reputation such as in the United States and is also less harmful to the environment than oil. Though gas is not intended to replace oil, some gas-rich countries such as Russia and Iran are strongly advocating for a gas cartel to regulate the industry, which can explain the reluctance of Russia to adopt sanctions towards Iran at the United Nations as both countries heavily rely on the income generated by their natural resources.

Sell Mercedes, Put Gold Rims on Tractor; Jim Rogers on Commodities and Stocks (CNBC Video)

Jim Rogers (Rogers Holdings) was back on CNBC yesterday giving market calls. Below is a summary of what he said plus the video after the jump. He thinks you should dump your Mercedes and put gold rims on a tractor while farming agriculture (not necessarily in those words). Look at previous posts featuring Jim Rogers. He's been right the majority of the time and has timed trades publicly very well.

Sheila Bair of FDIC: Beware of Bond Bubble, Interest Rate Risk!

Sheila Bair, Chairwoman of the FDIC, was on CNBC today talking about bonds. She believes bonds are in a bubble in the long term. See my recent post on LQD, the investment grade bond ETF, a few days ago.

"Longer term, I do worry about interest rate risk and the ramifications of this very long, protracted period of very low interest rates. Eventually they're going to start going up, and what happens? A bit of a bond bubble now, it appears"....(from CNBC transcript)

$USDJPY Bouncing Around Support Lows In Descending Channel, What If USDX Rallies

Watch these levels on USD/JPY. I threw up the weekly, daily and 15 minute charts of USD/JPY. Watch the descending channel, near term support on the 15-minute (83.16) and the long term downtrend from 2008. If USD/JPY holds support here it could test that downtrend line and 50 day moving average resistance (not on chart). The trend is clearly down. But if $USDX rallies from here I'm wondering if there'd be a short squeeze. A trend violation would bring on a decent retracement. Something to watch going forward.

*Japan: BoJ Interest Rate cut to 0.0%-0.1%
*Forex: JPY weakens on BoJ rate cut (FXStreet.com)
*BOJ Steps Up Asset Purchases, Lowers Benchmark Interest Rate (Bloomberg)

JPM's Lee Bullish on October, Kass, QQQ Pullback, U.S. Auto Sales, Stiglitz on Euro, Rosenberg on Q4 GDP

Articles for 10/3/2010-10/4/2010 (more articles after the jump)

Kass: Quantitative Wheezing - TheStreet.com

David Rosenberg: GDP Could see negative 4th Quarter vs. John Ryding (also read the Breakfast With Dave report this morning)

Dealbreaker Sales Talks: A Hot Market for Blogs - Dealbook

Bank of America Chief Technical Strategist Anticipates 10-12% Pullback In Nasdaq - Zero Hedge (QQQQ, NDX)

Rare Earth Mineral Prices Explode In Q3 - Zero Hedge (China/Japan trade dispute)

Nomura Joins Goldman In Saying QE Is Priced In, That It's No Longer Safe To Buy Treasuries - Business Insider (TLT)

Bernanke's Speech on Fiscal Challenges (Rhode Island Public Expenditure Council)

Chairman Ben S. Bernanke
At the Annual Meeting of the Rhode Island Public Expenditure Council, Providence, Rhode Island
October 4, 2010


Fiscal Sustainability and Fiscal Rules

The recent deep recession and the subsequent slow recovery have created severe budgetary pressures not only for many households and businesses, but for governments as well. Indeed, in the United States, governments at all levels are grappling not only with the near-term effects of economic weakness, but also with the longer-run pressures that will be generated by the need to provide health care and retirement security to an aging population. There is no way around it--meeting these challenges will require policymakers and the public to make some very difficult decisions and to accept some sacrifices. But history makes clear that countries that continually spend beyond their means suffer slower growth in incomes and living standards and are prone to greater economic and financial instability. Conversely, good fiscal management is a cornerstone of sustainable growth and prosperity.

Although state and local governments face significant fiscal challenges, my primary focus today will be the federal budget situation and its economic implications.1 I will describe the factors underlying current and projected budget deficits and explain why it is crucially important that we put U.S. fiscal policy on a sustainable path. I will also offer some thoughts on whether new fiscal rules or institutions might help promote a successful transition to fiscal sustainability in the United States.

$LQD in Rising Wedge Around 2003 Peak (10y Yield, C0A0 Spread)

Not much has changed since my previous post on bonds on August 23. $LQD, the iShares iBoxx Investment Grade Corporate Bond ETF, is trading at 112 which is 4.4% away from the 2003 high (117) and up 47% from the October 2008 low. It is trading in a rising wedge which should be watched closely. Friday saw some interesting "flash crashy" action on big volume which sent $LQD down 9% to 101 at one point. See hedge accordingly and zero hedge blogs. The trades below $108 were considered erroneous and cancelled by the NYSE.

So how does the story end with bonds? If you're "balls to the walls" bearish, you have to time the reversal perfectly. I'll be watching for Treasury bond volatility (via MOVE Index) or widening credit spreads which could catalyze a retracement. If quantitative easing by the Fed combined with growth/deflation fears push the 10y Treasury yield down to 2% support, LQD could retest the 2003 high of 117 (less any credit scares that could re-price default risk and freak out spreads). I'd rather watch for a rising wedge breakdown with volatility.

Below I gave an update on LQD's key statistics, technicals on LQD using multiple time frames, the 10-year Treasury Note yield chart, BofA/Merrill Lynch U.S. Corporate Master Index Option Adjusted Spread to Treasuries (C0A0) chart and a snapshot of the US Investment Grade CDS Index via CDR.

John Paulson of hedge fund Paulson & Co, Jeremy Siegel of Wharton and Tom Lee, Chief U.S. Equity Strategist of JP Morgan, all said in some form that bonds are either in a bubble or should be sold. I agree, the 30 year bull market is over, but can it overshoot? Goldman and Nomura say no.

Overnight Charts: E-mini S&P -0.6%, Nikkei Future -1.3%, Yen Rallies Back

Futures update overnight:

December S&P E-mini future (EMZ10) -0.66%,
December Nikkei future (NKZ10) -1.36%
December Japanese Yen (JPZ10) +0.14% (takes back all losses!)

Watch JPY ceiling resistance (1.2070), 1,125 on the Dec E-mini S&P and 9,200 -> 9,000 support levels on the Nikkei future. Correction time?

Nikkei future

E-mini S&P

Japanese Yen future

Charts courtesy of Optionsxpress

10y AAA General Obligation Muni Bonds Yield 2.65%, Watch Treasury Spread

No credit or interest rate worries yet for the 10y AAA tax exempt General Obligation bond index as of 10/1/2010. According to Bloomberg though, New Jersey just sold bonds above this yield. If you're interested in actively watching this space, monitor the downtrend line on the chart for a potential breakout in yields. Also, watch out for State bailouts.

Regarding interest rate spreads, QE2 is your friend until the end. Check out the yield spread between the AAA GO 10y Muni Bond Index and 10Y Treasuries. AAA 10y Muni's yield 2.65% and 10y Treasury Notes yield 2.51%, a 0.14 spread. The municipal bond index is from Municipal Market Advisers.

Sovereign CDS Wideners: New York, Illinois, California, Jersey

States topped the sovereign CDS wideners list at CMA Datavision on Friday. Did Meredith Whitney spook CDS traders? U.S. Government may bail out States in next 12 months - Bloomberg video. A credit default swap (CDS) is insurance on debt.

New York 5Y CDS +13.1% to 219.63 basis points (100 bps = 1%)
Illinois 5Y CDS +9.81% to 285.50 bps
California 5Y CDS +7.88% to 280.50 bps
New Jersey 5Y CDS +5.76% to 222.07 bps





Related: New Jersey Pays for Negative Outlook as Yield Widens on $669 Million Sale

Facebook Movie Explained in One Minute (The Social Network)

Weekend entertainment courtesy of NMA.tv: The Facebook Movie in One Minute 臉書傳奇瘋世界

"Homemade Spacecraft", Watch a Weather Balloon Rise to Space

Weekend Entertainment: Watch this amazing video of a homemade spacecraft rising to space. From Luke Geissbuhler's Vimeo. Hat tip Crossing Wallstreet.
"Video from a camera attached to a weather balloon that rose into the upper stratosphere and recorded the blackness of space."

Links: Harrisburg Rehab, Hendry's Bet, Lennar, Flash Crash Report, Corn, Knight Capital, Tea Bubble

powerLiNkS for 10/1/2010. Enjoy the weekend.

IShares LQD Crashed 11 Points In Seconds This Morning (LQD) - Hedge->According.ly (@sellputs)

Harrisburg, Pa., to seek distressed city status - Reuters

Mayor Linda Thompson seeks 'distressed' status for Harrisburg - PennLive

*Hugh Hendry's $2 Billion Short - King World News

Lennar Acquires Distressed Real-Estate Assets - WSJ

Privately held Facebook in 5-for-1 stock split - Reuters

20+ Year Treasury Yield Watch, QE Priced In? (GS) $TLT, $TYX

If TLT (iShares Barclays 20+ Treasury Bond Fund ETF) violates ascending channel support and the 50 day moving average, it could roll down to the 50 week and 200 day moving average (96-97 going forward). TLT is at 104. This is just a scenario to watch. Also keep an eye on the 30-year Treasury Yield (3.73%). Charts after the break...

Russia-Germany Nord Stream Pipeline Under Way - Guest Post

Submitted by Global Intelligence Report

Russia-Germany Nord Stream Pipeline Under Way

SITUATION: Russia has succeeded in getting funding for the Nord Stream gas pipeline (formerly North European Gas Pipeline, NEGP), which will go under the Baltic Sea to Germany. It obtained environmental approvals from the littoral states concerned rather easily and earlier this year began to lay the pipes undersea.

ANALYSIS: The deal is another indicator of ever-growing German-Russian cooperation and reorientation of German diplomacy, even as this takes place against the interests of Germany’s EU partners.

Oil Ripping Tonight (USO, WTIC, XOIL)

Light Sweet Crude Oil and USO could rip through their symmetrical triangles tomorrow based on tonight's action. If they do, the May highs could be in play. I'd rather watch that area for a catalyst/breakout. I'll be watching oil, metals and specifically agricultural commodity prices going forward. If reflation hits with a vengeance I'll have to prepare for cereal box deflation. The November Oil Future CLX10 just broke through its downtrend line ($80.60).

Oil rises to near $81 on US economy, demand signs - AP
Crude Oil Rises to Seven-Week High on China, U.S. Economic Data - Bloomberg
OIL FUTURES: Crude Up On Momentum; Equities, China Data Support - WSJ

See a collabo of charts after the jump..

State Bailouts, Socializing Credit, $50B in Distressed Debt Defaults? Ireland Banks - powerLINKS

powerLINKS of the day

*Hedge funds hold Ireland to ransom over Anglo Irish Bank bail-out - Telegraph.co.uk

Ireland faces "horrendous" bank bill - Reuters

Bailout of Irish Nationwide doubles to €5.4bn - IrishTimes

Whitney Says States May Need Federal Bailout in Next 12 Months - Bloomberg, Video

Tennenbaum Says $50 Bln of Distressed Debt Could Default: Video - Bloomberg

Grant Says U.S. `On the Road' to Socialization of Credit - Bloomberg

Buffett Seeks `Large Investment Opportunities' in China: Video - Bloomberg

Video of Riots in Spain, Moody's Downgrades Credit Rating - Distressed Volatility

9/24 - Chanos Says He's Shorting For-Profit Education Stocks: Video - Bloomberg

Awaiting Multi-Year Trend Confirmation / Big Money Chart Painting (Technical Update 9/30/2010, QQQQ, SPY, DIA, IWM, JJC, UUP/SPY, AAPL, SWKS, NFLX)

Technical Update: 9/30/2010 - Awaiting Multi-Year Trend Confirmation

It's time for the big hedge funds and whoever controls the U.S. equity markets (Waddell Reed?) to paint the charts and confirm the multi-year market trend. Right now there are two camps. The $12 Billion+ hedge funds (Tepper, Paulson) who are bullish on every asset except for bonds and hedged with a rolling prescription by Dr. Bernanke via 24/7 Fedgreens Pharmacy. Or the deflationists who believe the Fed will fail at stimulating the economy, we're in a new market structure, P/Es are going to single digits and debt deflation from the 30-year securitized credit bubble² will persist in real terms.

Video of Riots in Spain, Moody's Downgrades Credit Rating

Here are links to articles and embedded RussiaToday videos. Also street Flamenco music from Barcelona to level the head.

General strike in Spain to protest against austerity measures - Telegraph

Protests Limited To Spain, Brussels. Country-specific campaigns against austerity look set to continue as cuts begin to bite - Montreal Gazette

European Austerity Fuels Tensions - WSJ

Spain's Credit Rating Cut One Level by Moody's; Bonds Rise - Bloomberg

Flying Car Update, NextGen Terrafugia "Transition" Videos 9/30/2010

Get ready for the modern day flying car by Terrafugia for personal air travel. Don't tell me this personal $TRAN trend won't catch on, assh&%#! Hat tip to @p357 for this Fast Company article yesterday. I blogged about Terrafugia last year with videos from their first flight, the press conference and a Fox News interview.

Also info from a johntheadams youtube.
"The Terrafugia® Transition® Flying Car is Here! If you have a regular state-issued drivers license you can obtain an FAA Sports License with no medical exam. Cruising air speed: about 115 MPH (100 Knots). Speed on the ground: 65 MPH. Range: 450 Miles. And YES, it even has an INTEGRATED PARACHUTE that can protect both you AND the aircraft! Price: $190K ($10K deposit held in escrow)."
Recent press releases form their website:

September 8, 2010: "Flying Car" Company Moves into Initial Production Facility (PDF)

July 25, 2010: "Flying Car" Moves Closer to First Delivery (PDF)

See new videos below.

Netflix vs. Gold, NFLX Price/Sales Ratio at 2003 Highs, Going Parabolic!

The Netflix (NFLX) chart is in parabolic mode. It just hit $170, up 209% year to date. Of course with Blockbuster bankrupt and AppleTV streaming Netflix, you can understand why. I embedded a chart of NFLX revenues and its Price/Sales ratio over 5 years. NFLX P/S went from 1.28 in December 2008 to 4.75 today and revenues increased from $359 to $519 million. The NFLX price/sales ratio hit a peak of 5.54 in 2003. This will be a great short on a trend break, but let it ride. Back to my original point. It appears that the the real store of value, for the time being at least, is a basket of paper envelopes backed by DVDs and streaming movies (and TV episodes). In 5 years $GLD returned about 200% and NFLX 820%!

VXX December $19 Calls Active, Out of the Money (35,000/1590 Open)

Interesting day today. I'll look at the actual VIX futures curve chart next and a video from the OptionMonster volatility sonar report on a DEC/JAN 1x2 put transaction in the VIX futures. $VXX is the iPath S&P 500 VIX Short-Term Futures ETN or the first 2 months of the VIX futures curve, which rolls month-to-month. So $VXX is exposed to the curve widening or flattening as the contracts are bought and sold month-to-month. This post is specifically on the out-of-the-money option activity I just saw in the VXX December 19 Call. VXX is currently trading at $16.87. You can watch it stream live on my quote widget.

$DRYS Call Options Spike On MS Upgrade, Drilling Contract (Ocean Rig UDW)

DryShips (DRYS) call options were active on Monday. I originally found this information on Andrew Wilkinson's report on Seeking Alpha. The action could've been related to the Morgan Stanley's DRYS upgrade to "equal-weight" from "underweight" and the $5.50 price target. The chart looked vulnerable around downtrend resistance and the 50 day moving average as well. It took out both of those levels on Monday and is now testing the 200 day. First, the trades:
"Traders scooped up some 2,300 in-the-money calls at the October $4.0 strike for an average premium of $0.45 each. Optimists also picked up roughly 6,700 calls at the higher October $5.0 strike by shelling out an average premium of $0.05 apiece.

"Bulls looked to the November $5.0 strike to take ownership of some 4,000 call options at an average premium of $0.14 a-pop." [Source: Andrew Wilkinson via Seeking Alpha]

So we got all of this call option activity and then boom....

John Paulson: Buy Multiple Homes, Stocks, Gold; Sell Bonds on Double Digit Inflation, Lower Dollar (Courtesy of Fed Policies)

You all saw $12 billion hedge fund manager, David Tepper, say a week ago on CNBC that he was bullish on stocks hedged with a rolling "Bernanke Put" on the economy. Now, according to the articles below, $30 billion hedge fund manager, John Paulson, during a speech at the University Club of New York, said buy stocks (based on earnings yield/10y spread), buy multiple houses, sell bonds, and gold could overshoot to $4,000 on double digit inflation and a lower US Dollar. See Paulson & Co.'s recent letter to investors from Zero Hedge. This is nothing new, Paulson and his book have been bullish on the economy since the bailouts. Did he talk about hedging positions during his speech? I guess that's what the Federal Reserve is for. So I guess socialized greed, for a lack of a better word, is good! Courtesy of freshly printed Federal Reserve Notes, laced with cocaine, yep. Don't forget about the E in P/E if the economy doesn't pick up (via David Rosenberg). If that's the case, equity put options and credit default swaps are just a mouse click and premium installment away.

Articles:

John Paulson: Sell Bonds; Buy Stocks; Double Digit Inflation Coming - Robert Lenzner at Forbes.com

John Paulson Lecture: "Bonds Are Wrong, Stocks Are Right" - Zero Hedge

Gold Price Could Hit $4,000, Says Paulson - GoldAlert

John Paulson's Scary Speech: Double Digit Inflation By 2012, Gold At $4,000 - Business Insider

Sears Offers $665mln Senior Secured Notes, CDS Tightens By 32% (SHLD)

Sears (SHLD) is offering $665 million in Senior Secured Notes (due 2018) to "repay borrowings under our senior secured revolving credit facility, to fund working capital requirements of our retail businesses, capital expenditures and for general corporate purposes, including common share repurchases and pension funding obligations" [full release].

Get the money while it's cheap. Remember Tom Lee of JP Morgan said there would be a giant refi-boom in corporate debt? These unregistered notes are being offered privately to "qualified buyers" and $165 million to the Sears Pension Fund. I was browsing CMA Datavision's CDS market movers and saw that Sears Holdings was the top tightener. Sears 5Y CDS (tightened by 32% in basis points, credit quality improved) to 256bps. Look at all the Sears Roebuck Acceptance Corp bonds outstanding.

Courtesy of CMA Datavision

Gold, S&P vs. Dollar Correlation Back On In September (DXZ, GCZ, ESZ)

Below is a 6 month chart comparing the December Gold Future (GCZ), December E-Mini S&P future (ESZ) and the December US Dollar future (DXZ). They trade overnight. In the beginning of September, Gold pushed away from the US Dollar and moved in tandem with the S&P to the upside.

The "real" crew appears to be back. Since March of this year Gold significantly outperformed the S&P. We'll see if this correlation continues in October. Overnight the Dollar is rallying, ES is down and Gold is down. The S&P and Gold need upside confirmation here after their huge September runs (imo). You can see what a correlation retracement would look like on the chart. The December Dollar Future needs to take out 80 resistance. Charts after the jump.

Interesting currency updates I just came across:

Two currency blocs — same problem, different solutions (EUR, RMB or Yuan) - FT Money Supply
China May Retaliate for Currency Measure, U.S. Businesses Say (Yuan) - Bloomberg (h/t fal)
Brazil's Mantega sees global "currency war" (BRL): FT - MarketWatch (h/t empiractor)

Warren Buffett on Rail Shipments, Carpet Yardage Retracements (CNBC)

On 9/23/2010, Warren Buffett was interviewed by Becky Quick on CNBC and talked about the recession and small business data (specifically Berkshire data).

On the recession: "I think we're in a recession until real per capita GDP gets back up to where it was before. That is not the way the National Bureau of Economic Research (NBER) measures it, but I will tell you that, on any common sense definition, the average American is below where he was before, or his family, in terms of real income GDP. We're still in a recession and we're not going to be out of it for a while, but we will get out of it."

Railroad, carpet, brick and insulation business retracements and employment: "[rail] If you take the peak period per shipments and then you go all the way down to the bottom, we're 61% of the way back up". "Our carpet business, our brick business, our insulation business, they're not back 61% but they are moving back".

"If you take our carpet business, it fell from 13 million yards a week we'll say to 7 million yards a week. That cost 6,500 jobs. We're back up to maybe 9 million yards a week [33% retracement] but we haven't had to add yet. If we get to 10 million we'll start adding people, but it's lagging and it will continue to lag"

Look at the BRKA (Berkshire Hathaway A-Share) chart. It is trading just above the 61.8% retracement level as well, peak to trough. Nice v-shaped recovery for the stock and now it's 21% away from the 2007 high. Now what?

TechCrunch Disrupt 2010 Conference Live Video (SF, #tcdisrupt)

Here is the TechCrunch Disrupt conference live on TechCrunch TV + chat embedded via Ustream. Also this just in from GigaOM, "Breaking: AOL Close to Buying TechCrunch".

David Rosenberg Takes Other Side of David Tepper's Longs Hedged With Fed Put Options

David Rosenberg, Chief Economist at Gluskin Sheff and former North American Economist at Merrill Lynch, wrote a note about David Tepper's CNBC appearance. This is macroeconomic warfare! From Business Insider.
"Too bad we weren’t invited as a guest on CNBC last Friday to engage in a friendly debate with this portfolio manager because he didn’t outline the third scenario, either because he doesn’t believe it or he just plain didn’t contemplate it or he’s simply not positioned for it. That third scenario is that the economy weakens to such an extent that the Fed does indeed re-engage in QE, but that it does not work. So the “E” goes down and the P/E multiple does not expand. [Read more ]

Brace yourself for my EWI Dow 1,000 themed post! So will azazel the deflation demon silently invade the U.S. economy or is that risk officially backstopped by the Fed? It's also interesting that David Rosenberg thinks gold will hit $3,000 an ounce.

David Tepper's Bullish Bet on the Fed's Put (CNBC Video)

This is an interesting story because I blogged rapidly about the 2008 financial crisis. David Tepper, who runs $12.4 billion hedge fund Appaloosa Management, which made investors a 30% compounded annual return since 1993, explained on CNBC how easy it was to make $7 billion buying distressed financial securities (stock and debt) during the 2009 bank bailouts. He's right, it was free money. From what I remember, there was no way in hell the Treasury/Fed would have let more "too-big-to-fail" banks go under after the Lehman bankruptcy disaster.

Trading Update on EWZ (iShares Brazil ETF)

Here's a trading video on EWZ (iShares Brazil ETF) by Adam Hewison over at Market Club. He likes it better than the U.S. market. The chart looks interesting.

News for 9/26/2010

Sunday 9/26/2010 powerLINKS!

Iran Industrial Systems Attacked By Stuxnet Worm (Videos, Links)

Did the cyber-warfare trend just break out? See CNN/Bloomberg videos after the jump featuring experts.

Stuxnet computer worm takes its toll on Iran, where nuclear plant may be target - VentureBeat

Iran Fights Malware Attacking Computers - New York Times

Iran confirms massive Stuxnet infection of industrial systems - Computerworld

How Stuxnet Malware Used AutoRun Trick to Infect PCs (Microsoft Windows) - eWeek

Malware Hits Computerized Industrial Equipment (Siemens AG) - NYT Bits

PressTV - US, Israel behind cyber-attack on Iran?

Al Jazeera - Iran 'attacked' by computer worm

President Obama's Speech to United Nations (Video, Text)

I embedded Mahmoud Ahmadinejad's speech to the United Nations General Assembly; how dare I not embed President Obama's speech video with text? See it after the jump..

Q2 M1, M2, MZM Money Velocity Chart Updates, Rising Since Q4 2009

Update on M1 Velocity, M2 Velocity, MZM Velocity (money velocity at the St. Louis Fed - FRED database) and Monetary Trends (page 12 of the 9/21/2010 St. Louis Federal Reserve report).

Definition from the St. Louis Fed: "Velocity is a ratio of nominal GDP to a measure of the money supply (M1 or M2). It can be thought of as the rate of turnover in the money supply--that is, the number of times one dollar is used to purchase final goods and services included in GDP". 

With the Government bailouts and dramatic increase in the money supply, velocity should confirm if money is actually leaving the banks and stimulating (or trying to stimulate) the economy. If money velocity starts going crazy, that's where the hyper-inflationary fears come in, which will probably result in the Fed raising rates dramatically. The Fed doesn't see that happening any time soon though (see FOMC Statement 9/21/2010). Q3 data should be arriving soon. Charts after the jump.

Recession is Over, Poverty Rate at 1994 High, Uninsureds Skyrocketing, Temp Employment Booming, Money Velocity Up Since Q4

As the market (SPX) keeps moving higher in US Dollar terms, not priced in gold, (when is the "real" debt deflation correction? I see money velocity is up since Q4 2009, so perhaps never) the NBER, National Bureau of Economic Research, on 9/20/2010 declared the recession ended in June 2009. In September, the Census Bureau released 2009 data on Americans without health insurance and poverty rates. The poverty rate hit 14.3%, or the 1994 highs, and the number of uninsureds hit 16.7%, the highest level on the 1987-2009 chart in the report. If you do more research, you can see that tempporary employment is up 33% from June 2009 (ASA Staffing Index 72-96), which makes sense. So will the increase in money velocity translate temp employment into permanent employment and lower the poverty rate, and not just boost earnings per share? I threw up all the charts below. First the quote from NBER on the recession.

Weaker Dollar Propels Oil Higher Amid Mixed Economic News - Guest Post

Submitted by OilPrice.com

Weaker Dollar Propels Oil Higher Amid Mixed Economic News

Oil Market Summary for 09/20/2010 to 09/24/2010

Crude oil prices battled their way to a gain for the week as worries about the economy warred with the upward pressure from a weakening dollar.

Positive news in several categories of durable goods orders helped boost oil prices nearly 2% on Friday, so that the benchmark West Texas Intermediate futures contract, which switched from October to November this week, could tack on nearly 4% for the week.

Video: Stephen Colbert's Opening Statement Before House Judiciary Subcommittee on Immigrant Farm Workers (9/24/2010)

GLD is up 0.36%/$126.75 (oh btw: RT @Livevol_Pro: $GLD Jan'11 130 $call's purchased 20,000x), SPY is up 1.89%/$114.63 and UUP (US Dollar) is down 0.95%/$22.99, so why not take a break and watch Stephen Colbert testify before the House Judiciary Subcommittee on Immigration, Citizenship and Border Security (from C-SPAN 9/24/10 coverage). He was also asked to leave before giving his statement (video #1). Weird day today on Capital Hill, haha. More on this hearing from CSPAN. Videos are after the jump.
"Witnesses spoke about the American agricultural sector's reliance on foreign, and often undocumented, workers to pick fruit and vegetables on America's farms. Comedy Central's Stephen Colbert appeared in character to testify. Mr. Colbert was part of a United Farm Workers campaign calling on unemployed Americans to take jobs in the agriculture sector. As part of the program he spent a day laboring at a vegetable farm in New York in August 2010."

Gold Spot (XAU/USD) Approaches $1,300/ounce! Charts of the Day

Gold Spot (XAU/USD or Gold in U.S. Dollars) is approaching $1,300/ounce. Look at the 2-year move. You can step in front of the train first.

Gold Spot (XAU/USD) tonight $1,297 via fxstreet.com


Gold Spot 3-Year Log Chart - fxstreet.com (look at that 2 year move)


Live Gold Spot Price from Kitco.com

[Most Recent Quotes from www.kitco.com]

Mahmoud Ahmadinejad Full Speech Video at United Nations (9/23/2010)

Mahmoud Ahmadinejad (President of Iran) spoke at the United Nations today. He talked about how the U.S. Government and American Statesman orchestrated the 9/11 attacks. Wtf? Enjoy!

Wall Street 2's Shia LaBeouf Interviewed, Had Dinner at Soros's House

Shia LaBeouf was interviewed by Aaron Task at Tech Ticker and said he turned 20k into 650k when he started trading at a Schwab office in California. The movie comes out tomorrow in theaters. I found a video on the Wall Street 2 Youtube channel with Gordon Gekko (Michael Douglas), Shia LaBeouf and Josh Brolin talking about credit default swaps at dinner, lol.

Here's a quote from Shia LaBeouf from the Tech Ticker interview. Oliver Stone was also on there.

"Went to George Soros' house for dinners. Hung out with Donald Trump and talked about real estate," he says. "I'd hang out with Jim Chanos. Nouriel Roubini was like my closest friend through all of this." (source: Tech Ticker, video after the jump)

The Game is Changing and the US is Now on the Defensive - Guest Post

Guest post submitted by Global Intelligence Report

The Game is Changing and the US is Now on the Defensive

The People’s Republic of China’s PLAN in the Indian and Pacific Oceans: The Game is Changing and the US is Now on the Defensive

Two warships of the People’s Republic of China (PRC) People’s Liberation Army-Navy (PLAN) docked at a port in Myanmar on August 29, 2010, in the first publicized PLAN ship visit — but not the first actual PLAN visit — to Myanmar.

It was a move designed to help pre-position the PRC in its relations with Myanmar in the lead up to that country’s upcoming national elections. The move also ended two decades of discreet PRC approaches to its naval presence in the Indian Ocean. It also follows the open PLAN task force presence in anti-piracy operations off the Horn of Africa, and the now open commitment to use of the Pakistani Baluchistan port of Gwadar, at the entrance to the Persian Gulf.

Significantly, although the PRC maintains itself as both a heartland and maritime power, it is aware that the great challenge to break out from US global strategic dominance is essentially a maritime matter. Given economic and other realities, the US will be forced to rely increasingly on the US Navy — and particularly the Seventh Fleet in the Pacific and Indian Oceans — to project US influence.

$SPY Head and Shoulders Pattern, Symmetrical Triangle 2007/2009 (Chart)

$SPY is testing the January highs, or perhaps the left shoulder in a head and shoulders formation. Unlike the failed mini head and shoulders pattern we experienced from May-July 2009, this one's been forming for 10 months now. For the H&S reversal to be in play, I need to see a decent sell off at the right shoulder. Since the beginning of September, exposure to GLD, SLV and SPY (capped) have been working. If I were long what I just mentioned, I'd have my finger on the put protection trigger. Futures are up tonight and DX is at 79.81 (pierced August low).

$SPY is also near the inflection point in a symmetrical triangle from the 2007 high and 2009 low, meaning directional judgment day for the market is near! Keep an eye on those moving averages (50day-blue, 200day-red). They are both acting as support levels, but, imo, a bloody red day would violate both of them. I recommend you also watch the weekly and monthly moving averages (recent posts w/charts: 9/14/2010, 9/8/20109/2/2010). I'm embedding Prechter Tech Ticker videos next. From what I remember, he believes the head and shoulders pattern is valid. The next few days, or weeks, will be critical for SPY as it trades closer to that apex point in the symmetrical triangle. Thoughts?

SPY (SPDRs S&P 500 ETF) - Courtesy of FreeStockCharts.com (click for larger view)


Hussman Update, China Debates, Top Step, Credit Default Options, Bond Bubble (Siegel), State Pensions, Breakfast w/ Dave

powerLINKS, financial news arbitrage (pL archive)

Goldman Sachs, Morgan Stanley Split on Junk as Prices Soar: Credit - Bloomberg

Sequential Signals by John Hussman - Hussman Funds

Breakfast with Dave: Surveys Say Hunker Down for a Slow Recovery by David Rosenberg - FMXconnect

Swaps on U.S. Government Debt Climb to Highest in Six Weeks (CDS 49.4bps) - Bloomberg

Treasury 10-Year Yield Trades Near Three-Week Low Before Home Resales Data (2.56%) - Bloomberg

Gov't needs $133.78 a share to recover GM money - AP

Exposure at Default: Does Bank American Have Any Alternatives for Countrywide? - by Chris Whalen of Institutional Risk Analytics - Zero Hedge

CHANOS: CHINA IS THE NEXT ENRON - Pragmatic Capitalism

Shaun Rein (bull) vs. Andy Xie (bear) on China property market - CNBC Video (after jump + more links)

Blockbuster R.I.P? At 5 Cents, Expected to File Chapter 11, Subordinated Notes at $4.0 ($BLOKA, $BBI)

Continued from my post on April 2, "Icahn Dumps Blockbuster In March 13D Filing, $BBI Financial Trends and Senior Subordinated Notes At 20.25", a Chapter 11 bankruptcy filing could be imminent for the company. Blockbuster ($BLOKA, formerly $BBI) is trading at $0.05 on the pink sheets. R.I.P? The subordinated notes are at $4.0 (see chart below) and, according to @credittrader of Credit Derivatives Research, the first liens are at $52. Any Blockbuster credit default swaps outstanding? I didn't see any action on CMA's website. From Reuters:

FOMC Statement 9/21/2010, Expect 0-1/4 Percent For Extended Period

Federal Open Market Committee Statement from FederalReserve.gov.

"Release Date: September 21, 2010

For immediate release

Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.

September CMBS Update: Total Delinquencies Up, 90+ Days Down (RealPoint)

RealPoint has their September CMBS (Commercial Mortgage Backed Securities) Delinquency report up for the month of August at Realpoint.com. Key points from the executive summary.
"In August 2010, the delinquent unpaid balance for CMBS increased by an additional $551.8 million, up to $61.39 billion from $60.84 billion a month prior."

Papandreou: Greece Won't Default, 10y GGB Inflection Point (11.36%)

Greek Prime Minister, George Papandreou, was interviewed on the floor of the NYSE yesterday by Bloomberg TV. In the video he said "We (Greece) are not going to default" and refuted Roubini's claim that Greece was insolvent (read: The Eurozone’s Autumn Hangover - Project Syndicate 9/15/2010).

The 10-Year Greek Government Bond (GGB) is yielding 11.36%, around the May high. It doubled since November 2009 and is now testing trend support. If the 10y GGB yield breaks down, it could violate a few trend lines and retrace. The Greek 5-Year Credit Default Swap closed at 881 basis points, which is still elevated but below the June peak of 1125bps. The CDS appears to be losing strength as well. I'm not quite sure what's going on behind the scenes, but watch the charts for breaking news. Betty Liu interviews Papandreou after the jump.

Also.. Riot Police On Standby, As Greek Truckers Form Massive Protest Blockade (BusinessInsider)

Worries About Consumer Demand, Deflation Drive Down Oil Prices - Guest Post

Guest post by OilPrice.com

Worries About Consumer Demand, Deflation Drive Down Oil Prices

Oil Market Summary for 09/13/2010 to 09/17/2010

Flagging consumer sentiment and renewed concern about deflation sent oil prices into the doldrums this week, as prices dropped 1.2% on Friday to close the week down 3.6%.

The benchmark West Texas Intermediate futures contract settled at $73.66 a barrel on Friday, down 91 cents on the day, compared to $76.45 a week ago.

A pair of bearish statistics on consumer sentiment and inflation drove down crude oil prices on Friday.

Flagstar On Unusual Stock Volume (FBC), $600 Million Share Sale #banks

Flagstar Bancorp ($FBC), a regional bank headquartered in Troy, Michigan (who needs a capital injection) put out a press release regarding the big stock volume on 9/14 and 9/15/2010. They didn't address the volume specifically but reaffirmed their outlook for 2010 with key drivers. I originally found this information at Crain's Detroit Business.

MatlinPatterson Global Advisers LLC, the majority owner of Flagstar, who provided a $250 million capital injection in December 2008, is trying to raise $600 million through a stock offering. For a better explanation, listen to this Bloomberg audio interview with an Oppenheimer analyst.

It will be interesting to see what happens. Below is part of the press release, $FBC's stock chart with volume and a ychart showing the five year net income and revenue trend ending on 6/30/2010. $FBC hit a 52 week low of $1.73 on 9/15 and closed at $1.94 today.
FLAGSTAR RESPONDS TO UNUSUAL MARKET ACTIVITY

USD/JPY 15 Minute Wedge Getting Tighter After Yen Intervention Spike

USD/JPY (US Dollar/Japanese Yen) is in a rising wedge on the 15-minute chart and it's getting tighter. It's above the 50 day moving average and brushing up against downtrend resistance from the peak in May. Dollar/Yen is up big since the Yen intervention spike. I bet there's a retracement at some point. You are fighting "strong monetary easing". Quote from Bloomberg today:
“The BOJ pretty much left the full amount of intervention in markets, a sort of effective unsterilization,” Nishioka said. “The chance for additional policy easing is increasing after the government finally intervened in the currency market.”
Keep an eye on the Yen and JGBs (Japanese Government Bonds). Keynesian end point?

George Soros on Gold's Bubble, "Blah" U.S. Economy, China (Video)

Billionaire George Soros, who runs (or used to run) billions at Soros Fund Management, spoke with Reuters about the "blah" U.S. economy, double dip recession risk, fiscal restraints, effectiveness of quantitative easing ("if there's no demand [for the money], it won't be used"), China's explosive growth, the undervalued Yuan, Euro, Japanese Yen intervention and the gold bubble.

AIG CDS Chart Reflection (Insurance on the Insurer) 2008-2010

Below is the 5-Year AIG Group Credit Default Swap from 2008-2010 via Bloomberg.com (link: CAIG1U5). The chart shows the insurance premium to protect against the default of the biggest property and casualty insurance company in America (in 2006 and 2007). AIG's Fortune 500 rank was #9 in 2006, #10 in 2007, #13 in 2008 and #245 in 2009. AIG Group CDS is currently trading at 2008 levels, the period of complacency before the Lehman bankruptcy bomb hit. Pretty big moment in history no?

Alan Greenspan Converses With Council on Foreign Relations 9/15/2010 (CFR.org)

Alan Greenspan (President of Greenspan Associates and Former Federal Reserve Chairman who kept interest rates artificially low in the early 2000's, heh), had a conversation with Mort Zuckerman at the Council on Foreign Relations today (September 15, 2010).

He discussed the future of the housing market, prospects for recovery, how raising taxes would decrease the deficit and how "stimulus is crowding out private investment".

Link: http://www.cfr.org/publication/22947/conversation_with_alan_greenspan_video.html

Nouriel Roubini at Google Zeitgeist 2010 (Video)

Dr. Realist, Nouriel Roubini, spoke at the 2010 American Google Zeitgeist conference. Nouriel starts at 19:50. The video includes:

Chrystia Freeland Global Editor-at-large, Reuters
James Wolfensohn Chairman, Wolfensohn & Company, LLC
Nouriel Roubini Chairman & Co-founder, Roubini Global Economics
Ted Turner Chairman, United Nations Foundation
Tom Brokaw Special Correspondent, NBC News
Mikkel Vestergaard CEO, Vestergaard Frandsen Group


Links: LA Port Traffic, Pimco's Deflation Bet, China CDS, TARP Deadbeats, Yen Intervention (USD/JPY, Nikkei Charts)

Pimco Makes $8.1 Billion Bet Against `Lost Decade' of Deflation - Bloomberg (h/t Morgan_03)

LA Port Traffic in August: Imports Surge, Exports down year-over-year - Calculated Risk (h/t credittrader)

China to Allow Credit-Default Swaps With Restrictions - BusinessWeek

Flagstar ($FBC) seeking $600 million share sale: report - Reuters

TARP Deadbeat Bank List Tops 120 in August - SeekingAlpha

Japan Intervenes for First Time Since 2004 to Rein in Yen - Bloomberg

$SPY at Apex Point in Symmetrical Triangle (Weekly Chart) 9/14/2010

*$SPY (S&P 500 ETF) symmetrical triangle inflection point alert on the weekly chart. Omfg. Directional judgment day is near for $SPY. The downtrend line from 2007 is closing in on the uptrend line from 2009, near the apex point (where the trends cross). Watch for a strong catalyst that breaks a trend. All I can say is, hedge accordingly.

$SPY price position:
> 50 Week Moving Average
< 200 Week Moving Average
< January 2010 High (potential left shoulder)

SPY chart courtesy of freestockcharts.com

Continued from: $SPX Trend Line From 1974 Hits 650-800 Until 2015 ($SPY, S&P 500)

$SPX Trend Line From 1974 Hits 650-800 Until 2015 ($SPY, S&P 500)

I'm taking you back to the seventies (1974 low) in the first $SPX chart (S&P 500 Index). I drew important trend lines and added the 50 and 200 month moving averages to both charts. The second chart shows the 2000-2010 chop-fest. Writeup pending..

*Writeup 9/14/2010: On the first $SPX log chart, I drew a trend line that hit the 1974 low, 1982 recession low and almost the March 2009 low. The S&P/Trend Line spread widened significantly during the late eighties and early nineties, but tightened when the tech bubble burst. Today, after rallying 80% from the March 2009 low and correcting a bit, market participants have to decide if we're experiencing a 2004 redux (see chart 2) or in a 100 year structural change. If we're in a 2004 redux, the S&P must break above the 50 month moving average. All throughout 2004, $SPX was above and below that level and eventually found support.

As you can see from chart 1, the S&P is trading above the 200 month moving average and below the 50 month moving average. What we don't want to see is the 50 month cross the 200 month to the downside. It would either put overhead pressure on the S&P or aggressively price it in before it occurred (imho). You can't see it, but I bet the 50 month crossed the 200 month to the upside in the early eighties, which sparked the 20-25 year rally. I'm saying this now because the moving averages haven't been this close since that time period.

Links: Jim Simons on CNBC, Warren Buffett (No Double Dip), Albert Edwards, Pento on Interest Rates, BofA (9/13/2010)

Banks Rise as Basel Gives Firms Eight Years to Comply - BusinessWeek

The graphs indicate bonds are at inflection point - Citywire

Microsoft Said to Plan Debt Sale to Pay for Dividends, Buybacks - Bloomberg

Chart of the Day: Beware Downward Adjustments to Earnings Estimates (by David Rosenberg) - Credit Writedowns

Hussman: Watch the lagging indicators - Credit Writedowns

Jim Simons (Renaissance Technologies): Market 'Resilient,' Not Going Much Lower - CNBC [3 part video - Market Outlook, Flash Crash, Future of Renaissance and Math for America]

Goldman's Hatzius Sees 25-30% Chance of Recession, Tax Expiration Risks, Quantitative Easing on 10% Unemployment (CNBC Video)

Jan Hatzius, Chief US Economist at Goldman Sachs, was on CNBC today. Here's a summary of what he said and the video.

Karl Denninger Interviewed By Max Keiser (9/10/2010)

Karl Denninger who writes the Market Ticker blog was interviewed by Max Keiser. Real talk.

Link: http://maxkeiser.com/watch/on-the-edge/episode-70-10-september-2010-guest-karl-denninger/

Signs of Financial Stress First Appeared in Credit Default Swaps (CDS)

I was flipping through this month's Bloomberg Markets magazine and came across page 150 titled "Finding Stock Clues in CDSs". Here's a quote:
"This year's fiscal turmoil in Europe and the market slump of 2008 have something in common: Both had their roots in debt. Be it Greece in 2010 or Lehman Brothers Holdings Inc. and General Motors Co. two years ago, some of the earliest signs of financial stress first appeared in the credit markets--specifically, credit-default swaps--before spreading to other asset classes such as equities." (from the October issue)

Credit default swaps are insurance contracts on a company's bonds that trade over-the-counter between banks, institutional investors and hedge funds. There has to be a way for smaller "accredited" players to get involved in a liquid and more transparent CDS market, since "too big to fail" obviously didn't work. How about a revolution in securitization as well? I'll give more thoughts on this later.

Price moves in credit default swaps provide "material" (in my opinion) information on underlying credits and have more credibility than the actual credit rating. If CDS prices spike dramatically, either a bank or hedge fund is speculating on higher default risk, nervously hedging underlying long exposure, or as billionaire hedgie George Soros put it,