Monday, October 25, 2010

Gary Shilling on CNBC (Treasuries vs. Stocks), Home Index Rolls Over (ITB, XHB, TLT, SPY, XLF)

Gary Shilling of A. Gary Shilling & Co. was on CNBC on 10/22/2010. He sees home prices falling by another 20% and mortgages under water rising to 40% from 23%. Maybe that is why bank indexes are underperforming the Nasdaq and commodities (+ the mortgage put-back crisis). He also sees the 30-Year Treasury yield hitting 3%. Before Shilling came on, CNBC reported that the Clear Capital Home Data Index was rolling over. He says watch the standoff between Treasuries and stocks. One will give. Watch the S&P ETF (SPY) chart stream live here.


$USB (30-Year US Treasury Bond Price) vs. $SPX (S&P 500)


US Dollar Future Flash Crash or Capitulation? Prints 74.60 Low, Yen Running Higher (DXZ, JPZ, UUP, FXY)

Someone or a currency bot decided to pierce through October support in the December US Dollar Index Future (DXZ10) and print a low of 74.60. More on that print here, here and here. Short covering bots quickly rallied the almighty Dollar back to unchanged territory. It is now rolling over post G20 meeting (Dollar sell-off resumes after G20, eyes on Fed). Was that a flash crash or legit capitulation? Why are we seeing this happen in SPY and the Dollar Future during after hours? Watch 76.33 support which was the actual low on 10/15/2010. The Yen is making new highs as well. Watch that rising trend line. Charts after the jump. This week will be interesting.

60 Minutes: California Unemployment + UNDERemployment is 22% (U6), Thoughts On Economy

60-Minutes did a special on the unemployment problem in the U.S and specifically in California. We are currently in a debt-deflationary depression (see this MacroTwits video with Gregor Macdonald from 8/16/2010, he explained it). The trillion+ in Government stimulus (quantitative easing) was supposed to cure this problem. Instead the money backstopped banks, inflated stocks and commodities, deflated the US Dollar and attempted to put a floor under housing prices by buying Treasuries/agency mortgage-backed Securities to lower mortgage rates. As you can see from the Clear Capital Home Data Index reported last week, we might be experiencing a double-dip in housing.

The Fed's second stimulus (quantitative easing #2) could be announced at the November 3rd meeting which would focus on buying longer-term Treasuries to lower rates even further. Short term rates are at 0%. The Government hopes it will fuel refinancing activity and lower borrowing costs for businesses and households to provide an economic jolt. Hopefully commodity inflation doesn't mess that up.

Sunday, October 24, 2010

Niall Ferguson vs. Keynes, US Steel on Manufacturing Crisis, Cotton Makes New High - powerLINKS (10/24/2010)

powerLINKS for 10/24/2010

Harvard's Niall Ferguson was at the The Daily Beast's Innovators Summit in New Orleans on 10/22/2010. Watch the full video at Zero Hedge. This was an interesting quote:
"We've had an enormous of stimulus in the US, it's the biggest fiscal stimulus in the world, and huge unprecedented monetary stimulus. What's been stimulated? Not jobs in Michigan. What's been stimulated has been commodity markets and emerging markets. Because the liquidity just leaks out, and that's why another round of stimulus would not stimulate in the promised way." [link]
*Michigan's unemployment rate is at 13% and the cotton future tripled since early 2009.

Saturday, October 23, 2010

Ashraf Laidi Gives Update on USD/JPY, EUR/USD, G20 Meeting, Carter Worth on Market Technicals (BNN)

Ashraf Laidi, Chief Market Strategist at CMC Markets, was on BNN giving his thoughts on USD/JPY (Dollar/Yen), EUR/USD, the G-20 meeting and Central Bank currency interventions. The Yen is very strong at the moment and Ashraf said the Bank of Japan might try to squeeze USD/JPY shorts after the G20 meeting. See Ashraf's interview here (bnn.ca). If you remember, a few weeks ago the BoJ tried to defend USD/JPY support but failed. Currency trading is all about gaming Central Bank moves. I wonder how much insider trading goes on. Also check out the USD Future flash crash today courtesy of @NicTrades. She said some trades were cancelled.

Carter Worth, Chief Market Technician of Oppenheimer & Co., was also on BNN and said the S&P 500 ends the year where it started, REITs move higher (based on lower interest rates) and Gold and Apple consolidate after powerful advance. See Carter's interview here (bnn.ca).

Friday, October 22, 2010

H&R Block (HRB) Option Volatility, CDS Spike on Put-Backs, RALs (Refund Anticipation Loans)

It seems like H&R Block (HRB) is the only stock with volatility spiking at the moment. There are two things going on. Since an ex-entity of theirs, Option One Mortgage, originated mortgages at the peak of the bubble, they could be exposed to $33 billion in mortgage put-backs. The CEO said they have $188 billion in reserves though. Read more at CNBC NetNet.

However, this is probably more serious. H&R Block was told by HSBC that they couldn't sell "refund anticipation loans" anymore due to new IRS rules. This is a major part of their business.
"HSBC told Block it could not provide funding for the RALs and refund anticipation checks because the IRS has decided to stop providing a debt indicator next tax season that would say whether a taxpayer has liens outstanding, and that would make the loans too risky to provide." [WebCPA.com]

According to Bloomberg and WebCPA, 3 to 4 million of their clients used RALs last year or 17% of total tax returns. Moody's recently downgraded H&R Block to Baa2 and S&P put them on Credit Watch (BusinessWeek).

So check out the activity in its credit default swaps, options and stock. Business Insider and Bloomberg both reported that H&R's credit default swaps (Block Financial LLC) were spiking. I couldn't find a chart on Bloomberg.com but here are CDS quotes as of 10/21/2010:

Thursday, October 21, 2010

List of Government Bond Yields, Credit Spreads, Volatility Indexes

Here are useful indicators to watch during the financial mortgage put-back conflict or any upcoming sovereign debt (or bank) black swan events. I also linked to other interesting indicators at Bloomberg.com. For a list of sovereign and corporate (including U.S. and European bank) CDS (credit default swap) quotes, go here.

Is a Market Turn In the U.S. Dollar Getting Close? - Guest Post (Charts)

Provided by guest contributor Jennifer Gorton from Forex Traders

Is a Market Turn In the U.S. Dollar Getting Close?

It’s old news that the U.S. dollar is weak. In fact, the U.S. dollar is so weak that it has been on a one way path of devaluation since early June. If we know anything from the last two years of economic unrest in the global financial markets, one thing we do know is that U.S. dollar direction tends to be sharp and long. A quick look at the U.S. Dollar Index is quite revealing.




In the chart pictured above, you can see quite clearly that the U.S. dollar has moved, for the most part, in very strong trending moves for months and years at a time over the last 4 years. Although there have been small retracements in each impulsive move, you can see that traders who focus on trend following techniques in the U.S. Dollar Index have been offered plenty of trade opportunities over the last few years. Let’s break down a quick recap of U.S. dollar direction over the last 4 years.

John Hussman Thinks Quantitative Easing (QE) is Priced In

John Hussman who runs the Hussman Funds thinks QE is priced in.
"My impression is that much or all of the potential upside of quantitative easing is already fully reflected in stock, bond and commodities markets. Investors now rely not only on QE itself, but also on its success. This is a dangerous place to be." [read his full report at HussmanFunds.com (The Recklessness of Quantitative Easing)

QQQQ, JJC Above April 2010 High (+GLD, BAL TLT and Gold Video) | 10/20/2010 Technical Analysis

I drew lines on $QQQQ, $BAL (Cotton ETN), $GLD and $JJC (Copper ETN) earlier today. $JJC and $QQQQ are just above the April highs (pre-flash crash) and are leading the market. Watch that thin shelf and steep uptrend for any violations. The Cotton ETF is up 62% in 3 months in a rising wedge and GLD is testing its ascending channel. I'm watching for near-term structural reversals. I saw there was a breakdown in $TLT (the first chart). It broke below that ascending channel but caught support at 100. It's also below the 50DMA. I'll be watching $100 support closely. If TLT breaks down and Treasury yields breakout, Marc Faber said that could support the US Dollar. I could see that happening, but there are still overhead resistance levels for UUP to conquer (see previous post on $USD and $UUP).

So how does Gold play out? Adam Hewison who runs MarketClub thinks it is going lower (see video below). Something interesting is about to happen in the market. I'm not sure what it is. If I was crazy long the reflation trade (commodities, equities etc.) I'd probably have some downside insurance in place after these huge runs. Plus Doug Kass thinks we are forming a top. I'd like to know what Robert Prechter thinks at this juncture. Thoughts? Check out all the charts below and the gold vid.

Wednesday, October 20, 2010

The Unconventional Gas Red Zone (Chart) - Guest Post

Submitted by OilPrice.com

The Unconventional Gas Red Zone

Great chart from PFC Energy. Presented at an Institute of Energy Economics, Japan seminar last month.

The piece shows the "red zones" in global unconventional gas (shale, tight gas, coal bed methane). Comparing the unconventional sector in North America to six unnamed Asian nations (lettered A to F, so as not to hurt any feelings), across ten categories related to the gas business in each country. Green is good, yellow okay, red poor.

Foreigners Buy $117 Billion in Treasuries During August (Charts) - Guest Post

Submitted by OilPrice.com

Foreigners Buy $117 Billion in Treasuries During August

The U.S. bond market is murky these days.

Yields have been plummeting. But some of the action is almost certainly due to the Federal Reserve once again buying Treasuries. Since August 19, the Fed has bought $40 billion in government bonds.




But the Fed has no influence over foreign buyers of U.S. Treasuries. And these purchasers have been coming on strong.

Violent French Protests Against Pension Reform Bill Affects Fuel Supply

A pension reform bill in France led by Sarkozy, which, if passed, will raise the retirement age by 2 years to 62, is sparking riots and strikes across the Country. Oil refinery strikes are disrupting fuel supplies and hitting public transportation. See videos after the jump.

Screen shot 2010-10-20 at 7.34.42 PM
Click for Bloomberg Video on 10/19
French strikes and protests: as it happened - Guardian.co.uk
French pension reform 'necessary' - BBC Radio
Violent protests have ‘weakened unions’ in retirement battle - France24
French energy supply hit as blockades continue - France24
Police break fuel blockade in France strike - rfi english
Are the French a bunch of lazy slackers? (diss) - rfi english
France clears fuel blockades before pension vote - Reuters
Factbox: French media comment on strikes and pensions reform - Reuters
French Protests Over Pension Turn Violent - NPR
French protests turn ugly as riots hit wealthy Lyon - Reuters
Protesters block French airports - World News Australia
Like France, will US soon move to boost retirement age? - Christian Science Monitor (oui)

"Masked youths clash with police as pension reform protests get radical in France" - Russia Today footage below

Kass Put vs. Bernanke Put, Doug Kass Thinks Equities in Process of Topping Out

There's a new blog post out by Doug Kass at TheStreet.com titled "Kass: Equities Edge Toward a Top" (10/19/2010). Here's a quote:
"In light of what I expect to be a disappointing economic impact from QE 2 -- I call it quantitative wheezing -- and the negative consequences of that strategy ("screwflation") on the majority of Americans, I now believe that equities are in the process of putting in the highs for the year." [read more]

Kass successfully called for a market bottom in July on Twitter.

Zuckerberg Talks About Facebook Movie (Video), Added a 2005 Interview at Facebook Offices

Great interviews here. Facebook Founder/CEO, Mark Zuckerberg, spoke at the Y-Combinator Startup School on 10/16/2010. It was interesting to hear his thoughts on the Facebook movie (The Social Network). He talked about his days between Harvard and Silicon Valley and how he didn't build Facebook just to get girls or join a club. He also addressed how Facebook could work with China and other countries that are sensitive to speech. He said someone in Pakistan is trying to get him sentenced to death. Zuckerberg is worth $6.9 Billion on the Forbes List (more than Steve Jobs). I embedded Zuckerberg's 2009/2010 Startup School interviews with Jessica Livingston below via Justin.tv. He mentioned Eduardo, Peter Thiel and Shawn Parker in the 2009 interview. I also embedded a 2005 interview with Zuckerberg at Facebook's HQ in Palo Alto (includes keg stand footage haha). At that time he was mainly focused on expanding the "college directory product" to other schools. I remember the buzz about Facebook in 2004 when Friendster was big. Great success story.

Tuesday, October 19, 2010

Financial Crusades: PIMCO, NY Fed, Blackrock Sue Bank of America, BofA Sues FDIC, Chicago Home Loan Bank Sues BofA

powerLINKS - financial crusades edition (PIMCO, NY Fed, Blackrock, TCW Group, MetLife vs. Bank of America)

BofA says to fight mortgage bond investors - Reuters

Bank Of America Rebuffs Mortgage Letter From Investors - WSJ

Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages - Bloomberg

What Do Katy Perry and Eminem Have in Common? - Guest Post

Submitted by OilPrice.com

What Do Katy Perry and Eminem Have in Common?

Answer: both were quoted in the keynote speech last week by U.S. Commodity Futures Trading Commission (CFTC) commissioner Scott O'Malia, at the 13th Annual Energy and Commodities Conference in Houston.

Referencing pop culture in a speech on derivatives is a little unorthodox. But what O'Malia was describing to conference attendees was even more so.

The commissioner was discussing the CFTC's implementation of the Dodd-Frank Act. Otherwise known as the financial reform rules in the U.S.

A major thrust of Dodd-Frank has been the regulation of derivatives. Options, futures, swaps and other such instruments that are seen as being a large and potentially risky part of the financial infrastructure.

Chris Whalen on Property Tax, Foreclosure, MBS Note Crises (Video)

Chris Whalen of Institutional Risk Analytics explains the whole foreclosure crisis in 7 minutes on Bloomberg TV. He thinks the foreclosure crisis is a cancer, or a "slow wasting" deflationary process that is undermining our communities. Here are a few quotes from the video which is after the jump. What I took from the video is, not only did Wall Street / Credit Rating Agencies misprice the trillions in mortgage-backed securities, investors weren't even secured by the underlying collateral! The securitization process needs to be restructured (imho).
"We are turning our banks into REITs; we're turning them into operators of real estate and I think Washington has to take a page out of the depression..."

"The other thing we have to really think about big picture is property taxes. Every time there's a foreclosure somebody stops paying their property taxes" (muni crisis)

"When you have foreclosures, what's the next thing that's going to happen? Not a Federal moratorium; not a voluntary moratorium by lenders who can't deal with their backlogs anyway; we're going to have State moratoria the way we did in the 1930s and the Governors of those states are going to say "folks stay in your homes, keep paying your property taxes, default on your mortgage", that's Washington's problem"

"A lot of mortgage backed securities (MBS) have a case where the trustee may or may not have a note. Lets assume he's actually got a completed note in his files. He still may not be able to foreclosure because he may not have clear title to the underlying collateral... There's an awful lot of investors out there who don't know what they own. They may have unsecured debt instead of a fully collateralized piece of paper. The litigation's going to go on for years, you have trustees, custodians..."

"Most securities issued in the U.S. are governed by New York law.. Under New York State law there are certain things that have to happen when you set up a trust to issue securities.. The dealer has to deliver to the trustee the notes that evidence the obligation.. So if the trustee doesn't have those notes and if the name of the trustee is not actually inserted in the document in some cases, the contract isn't live. A lot of investors may hold securities that are in fact uncollateralized, in other words the trustee may not have the capacity to go out and foreclose on a home to make those bonds money good."

Steve Jobs Mentions Google and Android During Q3 Earnings Call

Speaking of Apple, listen to Steve Jobs calmly rant about Google and the Android operating system during the Q3 earnings call. Courtesy of Business Insider.

Nasdaq 100 is Leading the Market, Watching 2,050 Support (NDZ, NDX, QQQQ, XLK)

The Nasdaq 100 Index is currently leading the stock market (Apple is 19.97% of $QQQQ ETF). Apple reported record revenues and earnings today but traders sold the news as iPad sales fell short (read 1, 2 at SF Gate). The Nasdaq 100 future is currently down 1.1%. The support level to watch is 2,049 in $NDX, NDZ (Nasdaq 100 December Future) and NDQ (e-mini). There is a steep uptrend line that must hold as well. XLK has a similar level as well (chart 4). I'm watching the US Dollar, QQQQ, XLF (banks), ITB (construction) and commodities for overall confirmation. I want to see if shorts can put a dent in the chart.

Monday, October 18, 2010

S&P Flash Crash Part 2? NYSE Cancels Large SPY Trades During After Hours

What the hell happened here in $SPY (S&P 500 ETF)? Was this an after hours flash crash? Well, either way, the trades were cancelled. $766 million (7.2 million shares x $106.46) moved in eight seconds according to Bloomberg. That's a decent amount of money to transact for no reason. What would trigger this? I actually saw the number first on my live quote widget and had no idea what was going on. Apple and IBM reported earnings after the bell today and SPY is trading right at the 200 week moving average (DIA just broke that level). From Bloomberg:

"NYSE Euronext cancelled all trades in the $74.8 billion SPDR S&P 500 ETF Trust that occurred at almost 10 percent below the security’s opening price, according to an email sent by the exchange.

The trades occurred on the NYSE’s Arca platform at 4:15 p.m. New York time today and priced the exchange-traded fund that tracks the Standard & Poor’s 500 Index at $106.46 compared with its opening price of $117.74.
The ETF plunged 9.6 percent over eight seconds as 7.2 million shares traded on NYSE Arca, according to data compiled by Bloomberg. The S&P 500 rose 0.7 percent to close at 1,184.71 today."

Doesn't this look similar to the flash crash in April?  Below are after hours charts showing the 106.46 print (courtesy of FreeStockCharts.com). To see the actual time/sales of each trade go to Zero Hedge.

Links: Mauldin on Mortgages, Goldman's Outlook, Big Mac Index (Yuan Undervalued by 41%), Cotton at 140 Year High

Some reads... I'm watching the large, regional and community bank ETFs and indexes.

Copper Leads Decline in Metals as Dollar Rallies, China Inventories Grow - Bloomberg

The Subprime Debacle: Act 2 (and foreclosure, title, MBS crisis) by John Mauldin - Credit Writedowns

Goldman's David Kostin gives outlook on S&P and economy - Zero Hedge

Banks Shared Clients’ Profits, but Not Losses - NY Times

Flashback to 1870 as Cotton Hits Peak (at 140 Year High) - WSJ

Big Mac Index: Euro is overvalued by 29% (to the US Dollar), Yuan is 41% undervalued - Economist

Facebook CEO Mark Zuckerberg interviewed at YCombinator’s Startup School - AllFacebook.com

Pension Funds Flee Stocks in Search of Less-Risky Bets - WSJ

Auto industry's new math sends leases soaring - Automotive News

Internet ad revenues break records during first half of ’10 - IAB and PwC

Rosengren/Evans Speeches at Boston Fed, LSAPs vs. Deflation (10/16/2010)

Boston Fed President Eric Rosengren and Chicago Fed President Charles Evans spoke at the "Monetary Policy in a Low Inflation Environment" economic conference at the Boston Federal Reserve. They want to bring down longer term rates (Treasury yields) even further by using LSAP channels (Large Scale Asset Purchases) to avoid the Japanese deflation trap. They believe these policies will drive lending, mortgage refinancing activity and reflate the economy. Hedge fund manager David Tepper mentioned this on CNBC that the Fed would lower mortgage rates significantly to avoid deflation. Read the speech slides below. Gregor Macdonald during MacroTwits Hour mentioned these speeches (hat tip). Here is Ben Bernanke's full speech at the Boston Fed conference. Also read "NY Fed's Brian Sack on Asset Prices and Balance Sheet Policy 10/4". The Federal Reserve and Government Sponsored Enterprises (Freddie Mac, Fannie Mae and the FHA) are deeply involved in the markets right now.

Sunday, October 17, 2010

US Dollar/S&P-Oil-Gold Relationship Watch, UUP RSI and ADX Indicators - Technical Update

Technical Update on USD Relationships 10/17/2010: As mentioned previously on 9/28, the $USD inverse relationship trade (US Dollar/S&P-Oil-Gold) has been working during the past month and a half (chart 1). UBS's Art Cashin mentioned this relationship on King World News on Friday. So lets look at the charts. The US Dollar Index ( $USD) looks like it's due for a reversal in the short term and could possibly test that downtrend line using the two lower highs from June and September (chart 2, 3). RSI (relative strength) looks oversold and the MACD (moving average convergence-divergence) indicator could cross to the upside. The MACD is still below the mid-line though which still confirms overall downside momentum and the 50/200DMA death-cross is still in play. Watch the multiple downtrend lines. Volume increased on the rally on Friday.

Saturday, October 16, 2010

Peter Schiff: Creating Inflation Will Not Solve Unemployment Problem

Peter Schiff on Tech Ticker (10/15/2010). He talked about the implications of a lower Dollar, inflation, 0% Fed Funds, CPI ex-food and energy, commodity prices, rising costs, inflation/unemployment, lower Dollar/exports, the trade deficit and financing the Government debt. I embedded the video after the break.

Weekly Geopolitical Summary, 14 October 2010 - Guest Post

Submitted by the Global Intelligence Report

Weekly Geopolitical Summary, 14 October 2010

·Head of Turkmengaz Fired and Replaced with Deputy
·CYBERCOM to Go Operational This Month
·Govt Takes over Hungarian Plant after Deadly Toxic Spill
·French Transport and Oil Industry Strikes Risks Radicalization
·Bolivia to Start Lithium Production in October
·ISAF's Torkham AfPak Border Crossing Reopened
·Iran's President Visits Lebanon in Clear Attempt to Boost Hezbollah

Bernanke Speech at Boston Fed: Monetary Policy in a Low-Inflation Environment (10/15/2010)

Chairman Ben S. Bernanke
At the Revisiting Monetary Policy in a Low-Inflation Environment Conference, Federal Reserve Bank of Boston, Boston, Massachusetts

October 15, 2010

Monetary Policy Objectives and Tools in a Low-Inflation Environment

The topic of this conference--the formulation and conduct of monetary policy in a low-inflation environment--is timely indeed. From the late 1960s until a decade or so ago, bringing inflation under control was viewed as the greatest challenge facing central banks around the world. Through the application of improved policy frameworks, involving both greater transparency and increased independence from short-term political influences, as well as through continued focus and persistence, central banks have largely achieved that goal. In turn, the progress against inflation increased the stability and predictability of the economic environment and thus contributed significantly to improvements in economic performance, not least in many emerging market nations that in previous eras had suffered bouts of very high inflation. Moreover, success greatly enhanced the credibility of central banks' commitment to price stability, and that credibility further supported stability and confidence. Retaining that credibility is of utmost importance.

Friday, October 15, 2010

Gary Shilling: Home Prices to Fall 20%, Likes 30y Bond and Cash (Sees Decade of Slow Growth and Deflation)

Gary Shilling, who runs research firm A. Gary Shilling & Co., was featured on a Bloomberg Podcast on 10/14/2010. He's still in the deflation camp and believes home prices will fall by another 20% to revert back to the long term trend. 30 Year Treasuries are still his favorite investment and have been for 29 years. He has a new book coming out next month titled: "The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation". So you know where he stands. Shilling believes gold is rising on "the rejection of paper currencies" not because of inflation. It's interesting that he doesn't care about the recent price moves in agricultural commodities (corn, cotton). Maybe food spikes will be the next "$147 oil" catalyst that brings on the next crash in risk assets.

In his portfolio, Shilling said he's heavily weighted in cash and 30-year Treasury bonds (sees the 30y bond yield at 3% and 10y-note yield at 2%) and remains "suspicious" on stocks and commodities. $TLT (20+ Treasuries ETF) better hold $100 and the 50DMA btw. For more, listen to the whole 10 minute podcast here (via Bloomberg Radio).

Justin Bieber vs. Alan Greenspan on Housing Bust (Jimmy Fallon Video)

This is funny. Pop star Justin Bieber (impersonated by Jimmy Fallon) blamed former Fed Chairman, Alan Greenspan, for inflating the housing bubble and causing the "credit freeze" by keeping interest rates artificially low for too long.

Greenspan already testified before the Financial Crisis Inquiry Commission about this (link - Overseas Savings Glut Kept Long Term Rates Low, Fed Funds Rate Was Ineffective In Controlling Housing Inflation, Financial Crisis Inquiry Commission Testimony). Watch the video after the jump.

Bond ETF Technical Update: TLT, LQD, HYG, IEF (TLT Broke Ascending Channel, 100 is Critical)

TLT (20y+ Treasury ETF) broke through an ascending channel, a near term support level AND the 50 day moving average. $100 support from the mid-2009 high and, if that breaks, the 200DMA ($96.27 but rising) look like support. Will the two year lower high in TLT stick and confirm the 30 year bottom in yields? $100 and the 200DMA are very important levels to hold here.

Bank Repos Hit Record of 102,134 in September (RealtyTrac, Sharga Interview)

According to RealtyTrac, banks repossessed a record number of 102,134 homes in September. During the third quarter, bank repossessions (bank-owned foreclosures or Real Estate Owned/REOs) hit a record of 288,345 (+7% from Q2 2010, +22% from Q3 2009), foreclosure auctions scheduled hit a record of 372,445 (+5% from Q2 2010, +4% from Q3 2009) and default notices declined to 269,647 (-1% from Q2 2010, -21% from Q3 2009). Read the press release for data on total foreclosure filings (defaults, scheduled auctions and bank repossessions), foreclosure sales and foreclosure rates by state. Below is a quote from RealtyTrac's CEO, James Saccacio, and an interview with Senior VP Rick Sharga on Tech Ticker.
“Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months,” said James J. Saccacio, chief executive officer of RealtyTrac. “We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks.”

Cotton ETN $BAL Up 63% in 3 Mos, Cotton Price Inflation Hits China

Cotton inflation is hitting China. Watch the video below: Video: High cotton prices strike textile industry - CNTV. By the way, did you know the iPath Cotton ETN is up 63% in the last 3 months? Also take a look at the actual futures contract from 2005. There must be a put play in there somewhere.

$BAL (iPath DJ-AIG Cotton Total Return Sub-Index) - (courtesy of StockCharts.com)


Cotton Continuous Future (CT) - 2005-10/2010 (courtesy of FutureSource.com)


Related stories:

Industry seeks check on ‘speculative' cotton export registrations - Hindu Business Line

Cotton Futures Advance to Record on Speculation China May Boost Imports - Bloomberg

Cotton prices rule at record levels - Business Recorder

NY cotton ends at 15-yr high on dlr, Chinese rally - Reuters

Windmill Country: Gins fire up on high cotton yield, prices - GoSanAngelo.com

Cotton cloth producers fall on hard times - CNTV [China]

Thursday, October 14, 2010

Zuckerberg on the Facebook/Microsoft Bing Social Search Partnership (Video, 10/13/2010)

Mark Zuckerberg spoke on the Facebook/Microsoft Bing social search partnership at Microsoft HQ. He said he wants to partner with the "underdog".

"The thing that makes Microsoft a great partner for us is that they really are the underdog here right and because of that they're in a structural position where they're incentivized to just go all out and innovate..."
Watch the video after the jump.

Wednesday, October 13, 2010

NY Fed Buying $32 Billion of Treasuries/TIPS From 10/15 to 11/8 (Schedule and TLT Chart)

I found this info first at Reuters today. The New York Fed is re-investing $32 billion of principal from agency debt and agency MBS into Treasuries with various maturities and TIPS (Treasury Inflation Protected Securities). Below is a snapshot of the actual schedule from Newyorkfed.org. I'm watching the Treasury ETFs for any confirmed reversals here, specifically IEF (7-10yr Treasuries) and TLT (20+). TLT pierced the ascending channel, pierced floor support at the 7/1 high and is under the 50 day moving average. TIP is making new highs. Are the bond vigilantes testing market missiles? After the jump is the Treasury Operation Schedule and 2 year TLT chart. There are two potential scenarios for Treasuries: 1) they follow JGB yields lower on continued stimulus/deflation; 2) yields breakout on recovery/inflation (see the Faber and Soros links below).

Animated Gold Market Update! Mr. T on Bloomberg and GLD Chart from 2005

Everything you need to know about the gold mania and more (video courtesy of NMA.tv). Also, look at the GLD chart from 2005 and Mr. T on Bloomberg TV (h/t Deal Breaker).



Swiss Finish Sets New Standard for Global Bank Regulation - Guest Post (Credit Suisse/UBS)

Submitted by globalintelligencereport.com

Swiss Finish Sets New Standard for Global Bank Regulation

INCIDENT: The traditional Swiss finishing school taught young women etiquette and social graces, but international bank regulators are talking about something much tougher when they refer to a "Swiss finish" for global banks.
Just how tough became clear last week, 4 October, when a Swiss commission proposed that its two giant banks, UBS and Credit Suisse, be subjected to capital requirements of up to 19%, nearly three times as tough as the 7% capital-to-assets ratio recently suggested by the Basel Banking Committee as a minimum global standard.

SIGNIFICANCE: The ambitious Swiss plan, designed to solve the "too big to fail" problem, will set the standard for megabank regulation as Group of 20 heads prepare for their summit in November. It almost certainly means that other big global banks such as JP Morgan Chase and Deutsche Bank will face capital surcharges from their national regulators.

Marc Faber on Bonds, Stocks, US Dollar, Interest Rates and Commodities (10/12/2010)

Marc Faber, who writes the Gloom Boom & Doom report, made some big calls yesterday in this Bloomberg article yesterday. In summary he said: The US Dollar Gains on higher interest rates (which "begin to rise within about three months"), buy stocks and sell bonds. His reasoning? The Fed printing money. Read the article. Also, Faber said in this SFGate/Bloomberg article that the turning point would also "mark declines in commodity prices".

However, according to this Business-Intelligence Middle East article on 10/11/2010, Faber said in his October report that there could be a stock market correction in October/November.
"Writing in the October edition of The Gloom Boom & Doom report, Faber says the Fed will start printing money again and that would create a negative sentiment driving markets down. He doesn’t however see a threat to the March 2009 lows."
So does the Bloomberg article trump this article? Maybe the fun begins in December after a correction. Tech Ticker interview?

Tuesday, October 12, 2010

Federal Reserve Minutes From 9/21/2010

"A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors in Washington, D.C., on Tuesday, September 21, 2010, at 8:00 a.m."

Developments in Financial Markets and the Federal Reserve's Balance Sheet
Staff Review of the Economic Situation
Staff Review of the Financial Situation
Staff Economic Outlook
Participants' Views on Current Conditions and the Economic Outlook
Committee Policy Action


View it here (Federalreserve.gov - Minutes of the Federal Open Market Committee 9/21/2010). After reading it check out this blog post: A Bombshell in the FOMC Minutes at Macro and Other Market Musings.

More: Sovereign Default Swaps, French Strikes, Housing, Buffett, Google Car, Gold, LionsGate/MGM, MS/GS Profit Estimates

powerLINKS archive

Buffett Says `Pain Will Be Felt for a Long Time' Amid Recovery - Bloomberg

CMA Global Sovereign Credit Risk Report for Q3 2010 - Stocktwits Blog

Lions Gate Offers to Acquire MGM - MarketNewsVideo

Goldman, Morgan Stanley Profits Seen Falling - WSJ (h/t @hamzeianalytics)

Google Tests Self-Driving Cars - MSNBC

Goldman Raises 12 Month Gold Forecast From $1,365 To $1,650, Silver To $27.60 - Zero Hedge

S&P Expects 6-8% Home Price Decline Through November 2011 - Zero Hedge

French strikes: 3.5 million take to streets to protest pension reform - Telegraph.co.uk

Reads: China Hikes Bank Reserve Ratio, Rail Traffic, Ireland Debt, VIX/VXV, Kathy Lien on USD, Office/Industrial Vacancy Rates (CBRE)

powerLINKS archive

China Banks Hit Again with Required Reserve Ratio Hike - Reuters

China Hikes RRR (Nicholas Consonery, China analyst at Eurasia Group) - CNBC Video

China Trade Surplus Poised to Cap Biggest Quarter Since Crisis - Bloomberg

Kathy Lien's outlook on the Dollar, USD/JPY, yields and quantitative easing etc. - CNBC Video

1165 Fut Key to Flash Crash & Gold & Silver (Top Step) - Hedge->Accordlingly

Is Ireland About To Impair Bank Senior Debtholders? - Zero Hedge

Rice May Surge 30% as U.S. Crop Misses Forecast, Group Says - BusinessWeek (h/t @Soybeanwatch)

1M-3M Volatility Term Structure Plunges To Steepest In Years (VIX/VXV) - Zero Hedge

Rail Traffic Continues To Be Strong, And It's Actually Accelerating - Business Insider (h/t @pdenlinger)

California accepts $2.33-billion bid for 24 state office buildings (State will lease back for 20 years) - LA Times (h/t @bankrchick)

U.S. Office And Industrial Vacancy Rates Decline For First Time In Three Years - CBRE Press Release (h/t @bankrchick)

Obama seeks bipartisan support for infrastructure upgrade ($50 Billion) - CNN Video

David Tice Likes Silver, Gold and Miners But Not Stocks (CNBC Video 10/11/2010)

David Tice, bear market strategist at Federated Investors (Prudent Bear Fund), was bullish on gold, silver and precious metals mining companies but bearish on stocks on CNBC (10/11/2010).

"Essentially we have a very flammable condition and sparks could happen anywhere. I mean, just look at gold and look at the rest of the commodities. You can see silver and gold going up every day; gold at $1,350; we have this mortgage foreclosure issue that could be the next spark; there are earnings coming through strong but those are a lagging indicator; we still have European debt problems in the PIIGs, I do not think those have been solved...."

"Markets simply get tired and we've essentially retraced a Fibonacci level from the original decline. This market is acting a little bit tired; it took a long time to break through 11,000; maybe it goes a little more with some euphoria about Republicans winning back the house; however, this is short term."

"I still believe in precious metals mining companies....still like gold and silver even at these high levels.....and I sleep much better at night being generally short stocks rather than long stocks."

Soros Sees 2011 Global Slowdown; Optimistic on Greece (CNBC Video)

In a CNBC interview with Maria Bartiromo, George Soros (Soros Fund Management) warned about the risk of a second global economic slowdown in 2011. His view is that politics against further stimulus will exacerbate the problem. Soros was optimistic on Greece though. He believes corporations building liquidity from profit growth will just bid for other companies instead of hire employees. China and currency wars were also mentioned. A few days ago I posted his view on Treasuries. Video after the jump.

Monday, October 11, 2010

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)

Sunday, October 10, 2010

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.

Saturday, October 9, 2010

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%.

Friday, October 8, 2010

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.

Thursday, October 7, 2010

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

Wednesday, October 6, 2010

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

Tuesday, October 5, 2010

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)

Monday, October 4, 2010

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

Sunday, October 3, 2010

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

Saturday, October 2, 2010

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."

Friday, October 1, 2010

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

Thursday, September 30, 2010

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