| Kidder Reports Archive, Monday, Dec 28 |
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Latest Posts, News & Opinions
DJIA closed at 10,547.08 +26.98 +0.26% S&P closed at 1,127.78 +1.30 +0.12% Oil closed at $78.70 Gold closed at $1,106.90 Today's Recap Archives Japan unveiled a record $1 trillion budget Treasury to cover unlimited losses of Fannie, Freddie without going through Congress. Treasury bought $220 billion of MBS (in addition to the massive Fed purchases) Nikkei closed up +139 on Monday; at its 4-month high on strong industrial output data China raised its 2008 GDP estimate to 9.6% from 9% Japan said the economy will expand for the first time in three years Spending Pulse said that holiday retail saels rose 3.6% y/y Dallas Fed Manufacturing Production Index -0.5 vs 5.9; general activity 3.8 from 0.3 Treasury sold 2Y notes at 1.089% \\ Indirect bidders took 34.8% \\ Cover at 2.91
Analysis Abnormal BCA Big Pic CalcRisk CW Econoday EconPic MFGR Mish MS Roubini
I suspect the uncapping the losses of Fannie and Freddie is related to modifications. -Calculated Risk "What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said Bill Gross of PIMCO - Calculated Risk
Barchart Morning Call at 7:46
Chinese stocks closed higher after Chinese Premier Wen Jiabao said the government will cool property prices, resist pressure for the yuan to appreciate and keep inflation at "reasonable" levels.
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Spread Dec10 Wrightson
The Treasury complex spent its sixth consecutive day under pressure as supply and thin holiday conditions weigh on participants. The 2yr auction results were adequate, but not enough to inspire any real confidence about investor appetite's. Retail and pro flows were described as minimal at best. The curve maintained a flattening trend throughout the session as supply weighed on the front end. Technicals remain in a negative configuration, even though oversold conditions are heavy. Tuesday's economic reports should not have much influence on prices. There should be a more representative number of players at work tomorrow. Market psychology is in the dump right now and the prospects for a decent 5yr auction has many skeptics. -Courtesy of JK Bloomberg: Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.
Chart Feature Euro futures low close is 1.4252 Tuesday Monday Dollar index sets a 3-1/2 month high Tuesday
Columnists Asia Times Beat Bloomberg Crane Econ View David Goldman Plessis Pritchard RealClear
The Last Decade Was a Big Economic Zero - Paul Krugman, New York Times (Real Clear) The Decade When the World Tilted East - Niall Ferguson, Financial Times (Real Clear) Shiller: A Way to Share in a Nation's Growth -Economist View
Commentary Aleph Baseline Hutchinson Kid Dynamite Mauldin Naked Noland Oracle Roseman
Top 10 Reasons to Kill Senate Health Care Bill -Naked Think isolation. Think monetization. Think trapped. Think Catch-22, no remotely viable option. Think motive for propaganda. Think end of the road in a gigantic US Treasury bubble, in the process of discredit. Think last resort of monetization, due to the absence of bidders at US treasury auctions. Think pressure like a vise. The USGovt is in a great big bind and chooses not to discuss it. As European nations ponder the plight of sovereign debt default, the United States compares an order of magnitude worse from deeper insolvency. A default closer to home is considered unthinkable. So was a broad mortgage market breakdown. So was an endless housing decline. So was an insolvent broken banking system. So were consecutive $1 trillion federal deficits. All were forecasted here. -The Oracle Mr. Bernanke’s key audiences – in financial markets – do not find him credible on the central issue of the day, presumably because he is unwilling to condone measures that would ensure today’s massive banks become “small enough to fail.” If potential creditors do not fear losses, they will provide funds on easy terms to our big banks and we will re-run some version of our previous bubble. This is how our financial system works. \\ The Senate will decide soon, but Mr. Bernanke has made his case and the market has already voted. Given his testimony, his written response to Senators’ questions, and the market reaction, we recommend that Mr. Bernanke not be reconfirmed. - Baseline
Commodities List Bloom Energy Kitco Drum Reuters CLG Gold G Soy H Wheat NGG HGG CRB
Corn Climbs to Four-Week High as Winds, Ice Damage US Crop Soybeans and wheat also advanced My favorite commodities in 2010 include the grains, coffee, cocoa, soybean and palm oil. I also like gold and silver but believe 2010 will be a moderate year for the metals, meaning maybe a 10% to 15% gain. I’m neutral-to-bearish on crude oil but like natural gas. -Roseman in Commentary
Currencies Bloomberg BBH USD Index Greg Mike Laidi AL Twitter Reuters Spot
The next round of the gold rally will be led by Europe. The broad advantages of a grand currency devaluation will soon come front and center. Greece, Spain, and other nations will realize the benefits of debt conversion and reduction on the back of returned currencies in the Drachma and Peseta. Then comes steady currency devaluation to enable a competitive position. The common Euro serves as a straitjacket for the distressed nations in the South of Europe. They are stuck, and will surely default one by one. The Revived Roman Empire once more proves frustrating, as it has for a millennium. The sequence of events is complicated. A heavy weight will sit atop the Euro currency from European credit failures until important significant events are unfolded and a new Core Euro is launched. At first the core version might simply be the old version with carved off burdensome Southern gristle and fat. - Oracle in Commentary
Current Events Atlantic Buchanan Common Counter Harpers Huff Global Salon Slate Time
Evidently confusing Christmas with April Fool's Day, the Financial Times has named Goldman Sachs CEO Lloyd Blankfein their Person of the Year, applauding the ethical vaccum that allowed him to post record profits and $23 billion bonuses when so many are suffering. What planet do these people inhabit? -Common Dreams War Costs Americans More Than All State Governments Combined - America has become a “warfare state,” spending more on its military than state or local governments do to provide for medical services, educating children, offering a safety net to the poor and protecting citizens against crime and fires. \\ The 50 states collected $781 billion in taxes in 2008. Meanwhile, the U.S. defense budget for fiscal year 2010 will be at least $880 billion. -Global Research
Foreign Policy Afghan Anti-War Asia Times Cole Debka FP Brief Stratfor Walt Wired
The United States is sending special operations forces to fight al Qaeda in Yemen. While the United States is focused on putting its fresh 30,000 troops in Afghanistan to good use, al-Qaeda has set its sights on the Pakistani army, whose submission it sees as crucial in the broader objective of getting foreign forces out of Afghanistan. At the same time, al-Qaeda insiders say, the group will step up operations in Somalia and Yemen. - Asia Times What we have now in America is a surveillance society. You have to be careful about what you do, about what you say, and that is more dangerous than what was happening with McCarthy, but the technology the government now possesses is so much more insidious. - America Under Barack Obama, Anti-War
Grumpy Guys Cluster FA GW G's Mess Jesse Kadrosky Michaelson Ticker Taibbi Zero
Summers - The man who blew up Harvard's portfolio, has set his sight on the US next (WSJ) -Zero in Grumpy Guys The Pentagon, now that Bush/Cheney have gone away, admits that privatization was a really bad idea and that it can save $44,000 for each “contractor” replaced by a soldier or DoD civilian -Michaelson Both progressives and conservatives question the constitutionality of the healthcare bill. -GW According to data provided by the US Treasury, of the $1.8 trillion in debt the US floated this year, nearly 40% was bought by something called the 'Household Sector'. Who is this 'Household Sector'? That's what is left after you count the foreign governments and international buyers. After the Fed's purchases are counted. After Wall Street – the banks, hedge funds, money markets, corporations, pension funds, insurance companies and most of the piggy banks are counted. Who is left? No one. Is it a paper entry to make the books balance? -Michaelson (for more, see Market Ticker)
History A&L Bob History Neil Howe New Geo News from 1930 Fourth Turning
Any survey of generational divisions in today’s the armed forces uncovers Xer officers who feel bollixed by their Boomer superiors. The Xers want to decentralize decision making, reduce the bureaucracy, give more initiative to leaders on the ground, make decisive choices, and embrace risk rather than shun it. Why all the smothering oversight? To reduce American casualties, of course, say Boomer and Silent (born 1925-1942)elders. To create an idiot-proof (Boomer-speak for Xer-proof) safeguard against bad headlines for political leaders back at home. But, counter the Xers, what if this approach simply ensures that America’s effort is ineffectual and that we are still there ten years from now, still slogging around and suffering casualties? -Howe
Stock Market Briefing Futia BW Pragmatic Nikkei Schaeffer St Smart 24/7 Wall St Yahoo
The S&P 500 closed at 1126 this week — 5 points over the 1121 level. Why is that significant? Because 1121 marks the midpoint between the index’s 2007 peak of 1565 and its 2009 low of 676. If you prefer to use intra-day peak and trough numbers — 1576 and 666 — you still get 1121 as a midpoint. (Bloomberg has the 50% mark pegged as 1,120.84). - Big Picture in Analysis Long acting as an important parameter for risk appetite, 1120 may pave the way for further gains in equities. But how far can equities rise with prolonged advances in the US dollar? Or, will the inverse relationship reassert itself? // Only in the last week of January will markets return to full normalcy. -Laidi in Currencies
Bond Market Briefing Bloomberg Bloomberg Tsys SMRA Reuters Wrightson
Monday close: The 2Y/10Y is flatter by -3.5bp to 280.2; record close is 284.2 on Dec 22 10Y yield is +3.9bp to 3.840% (vs 3.497% on Nov 6) 10yr Tips is +0.8bp is 1.438% 2Y yield is +7.5bp to 1.038% (vs 0.848% on Nov 6) Tips CPI inflation gauge is hotter by +3.1bp to 2.402% - YTD high is 2.402% on Dec 28 * Gauge was 0.135% on Dec 31; decade average is about 2.70% * All-time low is 0.010% on Nov 20; recent low is 1.55% in July * The 2008 high was 2.613%; gauge was 1.94% just before Lehman bankruptcy On Thursday, the spread between Dec 2010 euribor and eurodollars closed at 27.5, narrower by -25.5 from 53.0 on Dec 11. The Dec 2010 Euribor-Eurodollar spread has been narrowing below its 18-day average (last at 46.6) for most of December. This narrowing of the EU/US interest-rate differential probably means traders are losing faith in 'an extended period' of zero US interest rates. The spread provided an early warning to exit the dollar carry trade.
Currencies Bloomberg Brown Bros USD Index Laidi AL Twitter Reuters Spot
Monday closes at 16:00 Euro: 1.4381 vs 1.4363 Dollar-Yen: 91.609 vs 91.670 Euro-Yen: 131.76 vs 131.68 Canadian dollar: 1.0429 vs 1.0485 Aussie dollar: 88.71 vs 88.25
Calendar Econoday SMRA Wrightson Barchart Any Date
Tuesday 12/29 07:45 Chain Store Survey 08:55 Redbook survey 09:00 Case-Shiller index 10:00 Consumer confidence 13:00 5Y note auction 17:00 ABC Consumer Comfort Index Wednesday, 12/30 07:00 MBA mortgage applications 09:45 Chicago PMI 10:30 Oil inventory data 11:00 KC Fed index 13:00 7Y note auction Thursday, 12/31 08:30 Jobless claims 08:30 Continuing claims 10:00 Milwaukee PMI 13:00 Early close in Chicago ahead of New Year's Day Holiday Monday, Jan4, 2010 10:00 ISM factory report 10:00 Construction spending
Baltic Dry Index - - - Bloomberg - - - Google
The Baltic Dry Index fell -18 to 3,005 Thursday, its 14th consecutive decline. BDI is closed for the year. The index range in 2009 was 772 to 4,661. The BDI is down 1,656 points from its 14-month high on Nov 19 at 4,661. The multi-month low is 2,163 on Sept 25 and its 2008 high was 11,793. The 20 year average is near 2,300.
2Y Yield Spread: Germany Over US - - - Tsys Yields
At 9:23 Monday, the spread of Germany 2Y over US 2Y is +25 vs +54 on Dec 7 German Dec 2Y is 1.23%, higher in yield by +4.0bp US Nov 2Y yield is 0.98%, higher in yield by +1.7bp; record low is 0.64% on 17 Dec 08 On Dec 7, Mar euro contract was 1.4815 vs 1.4402 today
Nikkei Forecast- - - Nikkei - - - NKH0 - - - DJH0 - - - NKH vs DJH
The Nikkei is expected to open up +20 Friday in Tokyo. The NK/DJ spread is +109 and trading well above -296, the 21-day average. Accordingly, NKH is quite rich at 405 above to DJH.
Archives and All Links - - - Archives
Keep In Mind
Either currencies or debt markets will blowup in next financial dislocation Public finances of the major Western countries are going to become unmanageable Four troubled giants are on life support and need continuing infusions Banks face huge rollovers of their corporate debt in next few years Consumer spending remains persistly weak Unfavorable conditions in residential real estate Commercial real estate foreclosures will have “catastrophic effects” Continued policy reflation should see trade weighted index fall to fresh lows (BCA) Core inflation is nearly impossible (statistically, anyway) Stocks represent valuable enterprises which are inflation and dollar hedges Either currencies or debt markets will blowup in next financial dislocation -- Dollar, gold and the VIX are likely to produce the biggest gains -- Australian Dollar and Brazilian Real appear particularly overvalued -- China and Hong Kong have ‘dangerous’ bubbles in the real estate market -- Global economy could down dramatically if China slows growth because if inflation Public finances of the major Western countries are going to become unmanageable -- Bond market pressures on the PIIGS: Portugal, Italy, Ireland, Greece and Spain -- Credit-rating agencies are on collision courses with Spain, Portugal and Greece -- Social security systems likely to be raided and social unrest is probable -- Many state/local/provincial/regional governments face a funding crisis Four troubled giants are on life support and need continuing infusions -- AIG, Fannie Mae, Freddie Mac and GMAC are long-term wards of the state -- Total risk they pose to the taxpayer far exceeds that of the big banks Banks face huge rollovers of their corporate debt in next few years -- More bank failures: 140 failures ytd and 545 banks on so-called problem list -- S&P has warned that nearly all of the world's big banks lack sufficient capital Consumer spending remains persistly weak -- Unemployment likely to move above 10.0% again after Nov drop from 10.2% -- To get a 5% unemployment rate within 7 years, US needs 300,000 new jobs a month -- Gasoline prices are higher than year ago and a cash flow drain on consumers Unfavorable conditions in residential real estate -- Residential investment is best leading indicator; huge overhang of vacant units -- Higher mortgage rates likely when the Fed stops buying GSE MBS on Mar 31 -- Significant increase in Alt-A and Option-ARM mortgage resets in 2010 -- Second wave of defaults likely as a result of resets and strategic defaults -- At least 23% of all homeowners with mortgages are underwater Commercial real estate foreclosures will have “catastrophic effects” * Fitch warns of huge CRE losses for life insurance carriers on mortgages * $1.4 trl in commercial loans are due in next 5 years; much will not be renewed Continued policy reflation should see trade weighted index fall to fresh lows (BCA) -- Yen may become the funding currency to short to fund the carry trade -- Dollar in bear market until Fed signals confidence in growth and hints of exit! -- Capital controls to curb hot money flows if dollar weakens again -- But watch trade deficit -- if it continues to narrow, the dollar may do better Core inflation is nearly impossible (statistically, anyway) -- Owners' equivalent rent is largest single component of the core CPI at 24%. -- Rental vacancies remain high, landlords have virtually no pricing power -- CapU is 71.3%, up from post-war low of 67.6%; but still curbs inflation and wages Stocks represent valuable enterprises which are inflation and dollar hedges -- Inventories and staff are very lean; operating leverage gives earnings much upside -- Dollar devaluation is huge positive for firms with int'l revenues; and visa versa -- Emerging economies with reserves, high productivity growth, low debt are valuable
28 December 12PM
Eurobondonline - Fixed Income - CarryTrade - Eurex - Euribor - EquityIndex - SFE - Ratios EquityIndex We are long ESH0, NQH0, DJH0 We have stop reversals, opposite the trendspotter.We are long Feb Vix CBT we are short ZBH0, ZNH0, ZFH0, ZTH0 We have stop reversals, opposite the trendspotter . we are long TBT and PST Fixed Income ETF's CBTSpreads We have flatners & steepners on. ZBH0 - ZTH0 trades 3.02 ; We are long 2 ZBH0/short 7 ZTH0 from 3.02 bp's; ZFH0 - ZTH0 trades 1.04 bp's . We are short 5 ZFH0/long 6 ZTH0 from .96 based on daily moving average cross. Eurex we are short Bund , Bobl , short Schatz & long Gilt .We have stop reversals , opposite the moving averages. Eurex Curve We have steepners on Mar10 Bund/Schatz trades 1.54. We are short 2 Mar0 Bund / long 9 Schatz at 1.335 bp's ;Bobl/Schatz trades .65 bp's; We are short 5 Mar0 BOBL/long 12 Shaz at .53 bp's Mar10 Bond/BUND trades 1.356 We are long 2 ZBH0/short 3 Mar10Bunds 1.38 bp's; based on daily moving average cross. CarryTrades: Mar10Bond - GEH10 trades 4.44 bp's, We are long 1 ZBH0/short 5 GEH0 from 4.22bp's and will add when there is a moving average cross ZNH0 - GEH0 trades 3.70 We are long 2 ZNH0/short 7 GEH0 at 3.50bp's and will add when there is a moving average cross Mar10CBTSwap - GEH0 trades 5.75 bp's We are long 1 SRH0/short 3 GEH0 at 5.37 bp's and will add when there is a moving average cross Mar10Bund - IH0 Euribor trades 2.64 bp's We exited long 1 Bund/short 3 IZ9 from 2.77 bp's at 2.59. and will reset near 2.75 Mar10Gilt - LH0 Short Sterling trades 3.82 bp's We are long 1 Mar10Gilt/short 5 LH0 from 3.68 bp's and will add when there is a moving average cross EURO$ We are short GEH1 GEH0 - GEH1 trades 1.49 . We are long GEH0/short GEH1 at 1.38 Euribor We are short IH1 IH0 - IH1 trades 1.20 . We are long IH0/short IH1 at 1.14 Short Sterling We are long LH1. LH0 - LH1 trades 1.66. We are short LH0/long LH1 at 1.64 LU0/LU1 - IU0/IU1 We sell 10 LU0 / buy 10 LU1 at 1.64 and buy 6 IU10/sell 6 IU11 at .91 = .73;Dec 3 we exit at .66.LU10/LU11 Sterling - IU10/IU11 Euribor trades .75 Dec 21 - short 10 LU0 /long 10 LU1 at 1.67, long 6 IU0 /short 6 IU1 at .91 = .76 SFE we are short SFE 10yr, 3yr & IRU0 . We have stop reversals , opposite the moving averages. SFECurve We are long 5 IRH0/short 5 IRZ0
BONDS Briefing USH TYH 5-min 10-min 10Y 2Y/30Y TU/US Bund/TY
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