Wild Wednesday Morning – GDP and Fed Edition

by Phil - April 29th, 2009 8:26 am

Woo hoo!

Get ready for a wild one today. We have the GDP at 8:30 and they’re expecting -4.7%, an improvement from last quarter’s -6.7% but Q4 started out at -3.1% with the advance figure (which is what we have today) and was revised lower and lower, easing us into the catastrophe. I pointed out to members last night that inventories and other items worried me that we may miss and we did head into the close 55% bearish as planned. We had another good day of turn calling as I send out an Alert to Members at 10:00 am titled: "DIA Adjustment Bullish," catching the nice move up we got in the morning and our 2:49 Alert was: "Back to 1/2 covers on long DIA puts," catching the drop-off into the close.

It seemed like the right strategy given our GDP concerns but the pre-markets are back up to those 2:49 levels but we’ll just have to see what sticks. I already sent out an Alert this morning detailing our watch levels for the day and, at the bottom of this post is our new 2.5% rule chart (a mini version of our Big Chart), where I noted that NONE of the US indexes have made it back to the 40% off line while the Nikkei is still 50% off as is the Hang Seng with the Shanghai dancing around that line this week. The FTSE is the only EU index above the 40% line and just by 100 points so they would be most likely to show us weakness and we’ll be keeping an eye on the UK until we feel a little safer at our levels.

The markets are up in pre-market trading but mainly because the dollar is sharply down on expectations of another round of quantitative easing by the the Fed in their 2:15 statement. Gold is back to testing $900 and oil popped back to $51 (up 4%) as the dollar has dropped a point against almost every major currency except the Yen, where it is being desperately propped up by the BOJ before it sends the Japanese economy off a cliff. The weak dollar caused the Nikkei to fall another 2.5% today (232 points) but the Hang Seng and Shanghai went 2.5% the other way led by a rebound in Transports, especially airlines, which will hopefully make yesterday’s plays on UAUA and CAL look…

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Meat Market

by ilene - April 28th, 2009 10:32 pm

How trading feels these days, courtesy of Tim Knight at Slope of Hope - Ilene

Meat Market

Allow me to try to articulate how this market feels different to me. And let’s use a little analogy in which I am a hunter searching for meat. Being a lazy hunter, let’s say I’m looking for meat that’s already been packaged to take home!

Last autumn, I felt like I had been let into the butcher’s aisle at the biggest, newest Whole Foods in the country. I could take whatever I wanted. It was easy. And the only frustration I felt was that, on the way in, I had picked up a shopping basket instead of a big cart, since I could have picked up so much more.

These days, the feeling I have is that – – just before going into the same story, my pockets have been stuffed with pork chops, tri-tip steaks, and hot links, and there are about 75 ravenous hyenas running around inside Whole Foods. I run screaming down the meat aisle, trying to defend myself, trying to keep my own meat from being stolen, and I wind up, breathless, just outside the Exit, having grabbed a single Vienna sausage with some of the gelatinous goo still clinging to it.

And that’s certainly what today felt like! Trading a market like this is a huge, huge, huge – – and I’ll say it again – – huge amount of work, and the payoff these days is meager.

I will offer a couple of encouraging charts, however. First, there’s this one of the /ES since the bottom in March.

I see a real shift going on. The green area was where the bulls were in control. No ifs, ands, or butts. It was their market.

The teal area – – in spite of generally rising – – shows an area of uncertainty and, I think, shift of control. An entire week went by, but no new highs were made.

And then we have the past couple of days. Ever so subtly, the market is moving down. Let’s take a closer look.

Today’s attempt to surge higher kissed that downward trendline to the penny and then immediately changed direction.

If the bulls can get the /ES above 872, then the bears are, for the time being, completely hosed. I could see the bulls taking the market…

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Now Hiring Credit Analysts: The PPT

by Zero Hedge - April 28th, 2009 10:11 pm

Job Op., thanks Tyler!

Now Hiring Credit Analysts: The PPT (Self Administered 401k Included)

All you wannabe masters of the universe who want to bypass the three- to five-year apprenticeship at Goldman Sachs and go straight to the motherlode of manipulative machinations, look no further than this job posting on the Ladders, in which none other than the bastion of free market communism, aka the New York Fed, is seeking a Financial Analyst/Corporate Bond Analyst. With all the newly minted billions of corporate debt floating around and not yet purchased by gullible "buy-and-hold" investors, the PPT has realized it is short one credit Wizard of Oz. An amusing blurb from the Request For Plunge-Protectors (RFPP):

The candidate would be expected to develop a macro approach towards analyzing corporate credit with a focus on those high-grade and high-yield sectors that have implications for monetary policy and financial stability. This will entail tracking credit spread movements in both cash and derivatives markets and understanding how they are impacted by changes in the macro environment. This will also entail informing policy makers on what these markets say about the macro environment and market liquidity. A key element will also be to understand the market microstructure against which price movements take place and the conditions under which they could negatively impact market liquidity and financial stability. To this end, the candidate would be expected to develop extensive contacts with corporate credit market participants – both primary dealers and buy-side investors — as well as to interface with other areas of the bank, such as Bank Supervision and Research.

It is about time the Fed hired someone to inform them that both the "macro environment and market liquidity", not to mention the "market microstructure", are on the verge of collapse. Then again, this posting puts everything in perspective: obviously the last corp bond analyst got poached by Goldman, and the NY Fed is flying on Tiny Tim’s cliff notes for what to do in an emergency which can be summarized by the phrase "Buy Everything."

We urge our readers to please apply for this position, and not just to take pictures of the famous oak conference room where the fate of LTCM was being decided 12 years ago: someone has to slow down this plane before its hits the mountain at warp 9.

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Overallotment: April 28

by Zero Hedge - April 28th, 2009 10:06 pm

Tyler Durden’s Overallotment: April 28

Ken Lewis – dead man walking (Bloomberg)
Citigroup scrambles to raise capital (FT)
Swing flu is no a global pandemic (FT)
Obama refuses to take blame for terror plane photo shoot, voters still drink kool-aid (WSJ and WSJ)
The Chrysler diversion continues (Bloomberg)
Citi seeks approval to pay Phibro bonuses (WSJ)

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Now We’re Cooking!

by ilene - April 28th, 2009 9:51 pm

Karl Denninger at The Market Ticker is Cooking Mad.

Now We’re Cooking!

It’s about damn time.

Sources say investigators are digging into whether Joseph Cassano, the former head of London-based AIG Financial Products, and two of his top deputies – Andrew Forster, an executive vice president, and Thomas Athan, a managing director – committed securities fraud and other federal crimes, reports CBS News chief investigative correspondent Armen Keteyian.

At issue: whether they intentionally provided false information about the size of AIG’s losses in the mortgage-backed securities market to the public and auditors.

Well that’s a start.

Now go find the "side letters" and start busting people up and down the line, including all their damn counterparties!

And while you’re at it, make sure you include people like Bernanke, Paulson and Geithner in the list of people who get their asses hauled in front of a Grand Jury.

Oh, and if you think these clowns don’t have gall, or actually are a bit sheepish these days? You’d be dead wrong.

And now CBS News has learned that Athan and Forster pocketed bonuses paid out by AIG just two months ago – in the midst of a federal investigation. Sources say they are now negotiating a way to pay them back.

Is there something wrong with a check – or wire transfer?

Nor is the storm letting up. In fact, if anything, when it comes to Lewis its headed for Cat 5 territory:

Both Bernanke and Paulson in mid-December knew Bank of America was obliged by statute to publicly disclose the huge losses Merrill Lynch & Co. had racked up that month. You don’t get to be chairman of the Federal Reserve or, in Paulson’s case, secretary of the Treasury or head of Goldman Sachs Group Inc. without learning this basic tenet of U.S. securities laws. Instead of making sure the public was fully informed of the losses before Bank of America completed its purchase of Merrill on Jan. 1, they did all they could to keep the secret safe.

Neither Bernanke nor Paulson told the Securities and Exchange Commission, according to the letter Cuomo wrote to lawmakers and regulators. They didn’t tell Lewis or anyone else at Bank of America to do

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Dave’s Daily

by David Fry - April 28th, 2009 8:58 pm

MARKET COMMENT

Dave Fry’s ETF Digest, April 28, 2009

I wish my Money & Banking class in college was this easy—hell, even gym was hard by comparison to current bank stress tests. Basically it’s an open book test allowing banks to set their own evaluations on some toxic waste and hope investors take it all in stride. The false and misleading statements from CEOs like BAC CEO Ken Lewis are, in ordinary times, shocking. These days it passes for business as usual. “We don’t need any capital….we’re sound…we can return TARP money today…and so forth.” So, BAC and C do in fact need more capital. Who knew!?!

Today markets were pulled lower by iffy stress test results and pushed higher by better than expected (there’s that bullish slang again) consumer confidence numbers.

Volume remains light and one would imagine more action will result from the Fed meeting aftermath although it should be a nonevent but then so was the last one. Nevertheless, any time the Fed meets investors pull in their horns until an announcement is made.

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BofA $70 Billion Short of Capital After Stress Test

by ilene - April 28th, 2009 8:49 pm

Courtesy of Mish

Bank of America $70 Billion Short of Capital After Stress Test

The group that performed the stress tests state that Bank of America May Need $70 Billion.

Bank of America Corp. needs $60 billion to $70 billion of capital, according to Freidman, Billings, Ramsey Group Inc. analyst Paul Miller, who cited stress tests performed by his firm.

Bank of America should consider converting its preferred shares to common stock, including $27 billion of privately held preferred “as soon as possible,” Miller wrote in a note to clients dated today. Miller said his firm’s versions of the stress tests were “somewhat tougher” than those by U.S. regulators.

Fed Pushes Citi, BofA to Increase Capital

The Wall Street Journal is reporting Fed Pushes Citi, BofA to Increase Capital

Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government’s so-called stress tests of lenders, according to people familiar with the situation.

Executives at both banks are objecting to the preliminary findings, which emerged from the government’s scrutiny of 19 large financial institutions. The two banks are planning to respond with detailed rebuttals, these people said, with Bank of America’s appeal expected by Tuesday.

The findings suggest that government officials are using the stress tests to send a tough message to struggling banks. Industry analysts and investors predict that some regional banks, especially those with big portfolios of commercial real-estate loans, likely fared poorly on the stress tests. Analysts consider Regions Financial Corp., Fifth Third Bancorp and Wells Fargo & Co. to be among the leading contenders for more capital. Wells Fargo declined to comment.

If [Bank of America] is forced to bolster its capital, it could do so in one of several ways, including selling assets, selling more shares to the public or converting the government’s preferred shares into common stock. That would boost the company’s capital on paper but could also leave the U.S. government as Bank of America’s largest shareholder while diluting the value of the stock held by existing shareholders.

Some bank executives have said that even after meeting with Fed examiners on Friday, they still don’t understand details of the government’s methodology for conducting the tests.

Taxpayers To Take Yet Another Hit

Bank of America, Citigroup, Wells Fargo, and Fifth

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Chris Flowers: TARP Insufficient, Need $2 Trillion In Stimulus

by Zero Hedge - April 28th, 2009 6:18 pm

Courtesy of Tyler

Chris Flowers: TARP Insufficient, Need $2 Trillion In Stimulus

Not too surprising that the man who buys and sells banks (at one point for a profit, lately, not so much) believes that the bank bailout package is inadequate. Where is Bill Gross to chime in how the Fed needs to buy $1 quadrillion of Treasuries stat?

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Busy Day For REIT Analysts

by Zero Hedge - April 28th, 2009 5:59 pm

Courtesy of Tyler Durden at ZH

Busy Day For REIT Analysts

Or at least for the ones that are still getting paid. Two more price target increases courtesy of Merrill Lynch, first SL Green, which "beat on one-time items", and second for AMB, which is "well positioned to weather the storm." With all the ML equity raises done on the past 3 weeks, aren’t all REITs perfectly positioned to weather the storm? Oh wait, now that they will all survive post 2010, you will instead see a massive race to the bottom chasing the 3 retail tenants that have not gone bankrupt yet. About as smart as sneezing in the rush hour 6 train.

Who knows, maybe one can squeeze out a few last nickels out of this REIT rally.