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Archive for May, 2009
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The Federal Reserve’s Open Market Operations

by Zero Hedge - May 28th, 2009 4:48 pm

Courtesy of Tyler at ZH

The Federal Reserve’s Open Market Operations

As recently many questions have arisen as to the involvement of the Federal Reserve in bond (and other) markets, I present the data provided by the Federal Reserve of New York regarding the Fed’s Open Market Operations. The charts below summarize the individual (single-serving if you will) and cumulative purchases across both Treasuries and Agencies. In a nutshell, for 2009, the Fed has purchased $131 billion Treasuries and $63.8 billion Agencies.

Now if only the Fed would follow in Japan’s example and disclose its equity market purchases, there would be no more hard feelings.

Reader Mike points out that these are, in fact, merely agency bullet debentures. These do not include the hundreds of billions of MBS purchased recently, including the $25 billion BMS bought this week.

 

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Savient calls in play at heady volatility readings

www.interactivebrokers.com

by Option Review - May 28th, 2009 4:41 pm

Today’s tickers: SVNT, WFC, EEM, MCO, XHB, EXEL, GDX & HIG

SVNT– The specialty biopharmaceutical company’s shares have slipped 2% throughout the trading day to $5.78. The slight decline has not deterred some investors from establishing covered calls in anticipation of the potential approval of Savient’s novel biological drug treatment for failure gout patients. The firm’s biologics license application is set for review before the Arthritis Advisory Committee appointed by the FDA on June 16, 2009. Option traders were seen making some interesting plays on the stock ahead of judgment day. One investor purchased 5,000 calls at the near-term June 7.5 strike price for a premium of 1.05 apiece spread against the sale of 5,000 calls at the July 10 strike for a premium of 50 cents each. The spread cost the investor 55 cents. Such a strategy has a number of possible outcomes contingent upon the decision of the advisory committee. We note that the committee is scheduled to convene just a couple of days before the June 19th expiration of the June 7.5 calls. In the event that the drug, KRYSTEXXA ™, is approved the investor is likely expecting the June 7.5 calls to land in-the-money allowing him to take delivery of the underlying shares. Once long the stock, he has an effective exit strategy in place because of writing the calls today. He will have amassed gains of 44% on the stock if shares rise through $10.00 by expiration. Pure covered call writers also targeted the July 10 strike price where another 7,000 calls were sold and likely tied to a long stock position. The sky-high implied volatility reading of 272% for the near-term June 7.5 strike calls will likely compress after the review has yielded a decision on the gout drug. Thus, traders will be singing a more melancholy tune in the event that the drug does not receive approval and the call premium plummets.  - Savient Pharmaceuticals, Inc

WFC– Shares have reversed direction this afternoon to rise more than 1.5% to $24.50 after spending the majority of the day in the red. We noticed some traders stocking up on protective put options in the July contract at multiple strike prices. The most bearish of investors picked up 15,500 put options at the July 15 strike price for an average premium of 30 cents each. Higher up at the July 19 strike, some 20,000 puts…
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Ten Year Note Yield

by ilene - May 28th, 2009 4:30 pm

Courtesy of Jesse’s Café Américain, reminiscing about the early days as a boy programmer writing assembler level code for IBM mainframes. Lesson: code works best when no one uses it. - Ilene

Ten Year Note Yield

Le Café AméricainWhile a steeper yield curve is good for the financial sector and those other folks who borrow short and lend longer term, it does no good if those higher rates choke off growth in the real economy. That is an overlooked detail in the Bankers’ grand plans for financially engineering a recovery. This is a nation by the Banks, for the Banks, and of the Banks and their demimonde in Washington and the media.

It reminds this blogger of days gone by, when Jesse was a boy programmer writing assembler level code for IBM mainframes and other tedious tasks befitting his junior status.

A group of systems guys had been working long hours to bring up a large mainframe running VM 360 including the operating system, the peripherals, the FEP and coms, storage for a major university.

When they finally got all the bugs worked out and the system was up they quite seriously celebrated their success, saying: "Now if only we could keep the users off the machine all our problems would be solved."

Indeed. Watch the consumer along with the bond and the dollar, for those are the weakest links. From where we sit, the consumer has rolled over and won’t be getting up anytime soon ahead of a rising median wage or some other sort of income increasing faster than their expenses and debt servicing.

And the rest of the world appears to be gorged on US debt and their reserve currency, at least the non-official segments that still care about spending and profit in the real world.

 



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Even Bloomberg Openly Ridiculing Tim Geithner Now

by Zero Hedge - May 28th, 2009 3:43 pm

Courtesy of Tyler at ZH

Even Bloomberg Openly Ridiculing Tim Geithner Now

For all with access to Bloomberg, run LTRA… For those who don’t have bberg handy, here is the screen capture of Bloomberg’s perfidious sense of humor.


click on screen for larger image

Judging by the market, Bloomberg is actively developing its next critical "cointoss" function: [PPT] GO.

 



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Initial Unemployment Claims Dip Slightly

by ilene - May 28th, 2009 3:21 pm

Mish’s take on the Unemployment numbers:

Initial Unemployment Claims Dip Slightly; Continuing Claims Approach 6.8 Million, 17th Consecutive New Record

The peak in initial claims might be in, but the peak in unemployment is nowhere close. Continuing claims hit 6.788 million, setting a record for the 17th straight week.

Please consider the Department of Labor Weekly Claims Report.

Seasonally Adjusted Data

In the week ending May 23, the advance figure for seasonally adjusted initial claims was 623,000, a decrease of 13,000 from the previous week’s revised figure of 636,000. The 4-week moving average was 626,750, a decrease of 3,000 from the previous week’s revised average of 629,750.

The advance seasonally adjusted insured unemployment rate was 5.1 percent for the week ending May 16, an increase of 0.1 percentage point from the prior week’s unrevised rate of 5.0 percent.

The advance number for seasonally adjusted insured unemployment during the week ending May 16 was 6,788,000, an increase of 110,000 from the preceding week’s revised level of 6,678,000. The 4-week moving average was 6,608,250, an increase of 123,750 from the preceding week’s revised average of 6,484,500.

Weekly Claims

click on chart for sharper image

The dip in initial claims from the March peak of roughly 650,000 is not accelerating very fast, if indeed at all. Those looking for a recovery in jobs soon are going to be disappointed.

Economists expect to see unemployment by 10% at the end of the year. I expect to see it at 9.8%+- by August and approaching 11% by the end of the year. Bear in mind the "stress-free tests" conducted by the Fed had an adverse scenario of 10.3% at the end of 2010.

Mike "Mish" Shedlock
 



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Mortgage Tankage Accelerates

by Zero Hedge - May 28th, 2009 3:17 pm

Courtesy of Zero Hedge

Mortgage Tankage Accelerates

Equities loving, loving that mortgages jumped by 50 bps over past two days. And the pounding is not ending.

 

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New home sales flat, delinquencies surge

by ilene - May 28th, 2009 3:13 pm

Courtesy of Tim Iacono at The Mess That Greenspan Made

New home sales flat, delinquencies surge

The Commerce Department reported(.pdf) a modest increase in new home sales during April, far less than analysts had expected, and sales prices continued to tumble.

IMAGE April new home sales rose 0.3 percent to an annual rate of 352,000, up from a downwardly revised level of 351,000 in March that was previously reported as 356,000 units.

The median sales price rose 3.7 for the month but fell 14.9 percent from a year ago to just $209,700, a figure that is still heavily influenced by builder incentives that, in many cases, total many thousands of dollars.

In an optimistic sign for the depressed home building industry, the inventory of unsold homes dropped to its lowest level in eight years, down 4.2 percent in April to 297,000, helping to reduce the supply of unsold homes to just 10.1 months, the lowest reading since February of last year.

The bigger housing news this morning was probably the Mortgage Bankers Association report that mortgage delinquencies and foreclosures rose to new all-time highs during the first quarter of the year.

The U.S. delinquency rate rose to 9.1 percent and 1.4 percent of all home loans entered foreclosure between January and March, both figures the highest ever since the organization began keeping records back in 1972.

Of course, mortgage rates that are now surging even faster than foreclosure rates are not going to make it any easier for the housing market to rebound. While Freddie Mac reported 30-year fixed mortgage rates rising to 4.91 percent in their weekly survey, in a WSJ report from this morning, mortgage data publishing firm HSH Associates said that average 30-year mortgage rates jumped from 5.03 percent to 5.29 percent just yesterday.

It looks like the Federal Reserve needs to get busy buying some more U.S. Treasuries and mortgage securities or, before we know it, freakishly low long-term rates (widely believed to be a necessary prerequisite for an economic recovery) will soon be a thing of the past.

 


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A brief history of General Motors

by ilene - May 28th, 2009 2:36 pm

Courtesy of Tim Iacono at The Mess That Greenspan Made

A brief history of General Motors

Among the many other indignities about to be suffered by the once great General Motors Corporation, part of the ongoing transformation of American industry that began with once great steel companies closing their doors decades ago, is the company’s imminent departure from the Dow Jones Industrial Index.

It seems that, for obvious reasons, companies that spend most of their day in bankruptcy court rather than trying to make a profit are barred from the venerable index and, even though GM has been a member of that select club since 1925, no exception is expected to be made.

Oh well, now that bank stocks have staged a massive rally from their "penny stock" levels, at just over $1.30 a share, GM sort of sticks out anyway.

Not one to kick a company when it’s down, the LA Times has a neat summary of the company’s storied past – all 100 years and eight months of it – going all the way back to when William C. Durant founded it in late-1908, then lost it, then got it back, and then lost it again.

Some of the highlights from the early years:

  • 1909 – GM sells 25,000 cars and trucks.
  • 1910 – Durant brings the Buick, Olds, Pontiac, Cadillac, Champion ignition, AC spark plug and other companies into GM. Sales rise 60 percent, but earnings lag. Durant is ousted by bankers as company sinks into debt.
  • 1911 – Electric self-starter first appears on a Cadillac.
  • 1916 – GM incorporated as General Motors Corp. Durant, after founding company that builds Chevrolets, regains control.
  • 1917-19 – GM shifts most truck production to war effort.
  • 1920 – Durant resigns, later files personal bankruptcy and dies running bowling alleys…
  • 1937 – Violent sit-down strikes by GM hourly workers in Flint, Mich., shake company, lead to United Auto Workers representation.
  • 1941 – GM market share grows to 41 percent…
  • 1953 – Air conditioning first offered, on a Cadillac…
  • 1954 – GM’s U.S. market share reaches 54 percent. Company makes 50 millionth car…
  • 1960 – Reacting to invasion of small European cars, GM introduces Chevrolet Corvair. Car later attacked by Ralph Nader, who wrote book "Unsafe at Any Speed" that led to

…
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Some Facts In The GM Propaganda Race

by Zero Hedge - May 28th, 2009 2:31 pm

Courtesy of Tyler Durden

Some Facts In The GM Propaganda Race

Zero Hedge pointed out how abysmally hilarious CNBC’s repetitive conclusion that GM’s bankruptcy is a done deal, when you only have 20-35% of the bondholders on deck. True, Rattner will likely make some urgent phone calls, and attempt a gut (and wallet) wrenching appeal to the holdouts, referring to such flights of fancy as the holdout’s mother, family, the IRS, the SEC, etc. But even all that does not preclude those who believe they stand a chance of getting a better recovery in liquidation than a 20% warrant upside in a company that has in the past made such utter horrors as the Aztek, in appealing to district and, eventually, Supreme Court.

In fact, ZH is quite confident that Mr. Lauria is currently contemplating just what the best overtures to the Supreme Court should be for both Chrysler and GM. Whatever these are, the fireworks will hopefully be interesting: luckily Sotomayor is still not up and running.

As for the facts, Dealscape has a great interview with Jeff Marwil of Proskauer who lays it out straight:

"It’s not a deal if it’s only 20% of the bondholders agree, and it doesn’t mean the plan will succeed. It just means the government has support now from some bondholders, and bankruptcy now seems like a foregone conclusion," Marwil explained.

"I think the greatest challenge will be doing it right the first time and emerging from bankruptcy poised for success. Who knows how long the bondholders will fight? This will be the biggest bankruptcy ever so there are a lot of issues to get resolved," he said.

In other news, ZH has its Bowling Green spies reporting, and I hope to bring to our readers the moment when Gonzalez puts Peck to shame with the fastest steamrolling of the bankruptcy process in recorded history.

 


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The SPY – IWM Dislocation

by Zero Hedge - May 28th, 2009 2:23 pm

Courtesy of Tyler Durden at ZH

The SPY – IWM Dislocation

Somebody is really getting reamed by the SPY – IWM hedging dislocation today.

 

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Phil's Favorites

Largest Central Banks Now Hold Over 15 Trillion in Fictitious Capital

January 27th, 2012 1:52 pm

Largest Central Banks Now Hold Over 15 Trillion in Fictitious Capital

Courtesy of Russ Winter of Winter Watch at Wall Street Examiner  

I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc.  The strong yen strikes again: Honda decides to build a high-performance hybrid Acura in Ohio – instead of its home nation of Japan. The firm’s continued shift in p...



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All About Trends

Mid-Day Update

January 27th, 2012 1:40 pm

Reminder: David is available to chat with Members, comments are found below each post.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Zero Hedge

Debt Ceiling 101, Santelli Sounds Off

January 27th, 2012 12:55 pm

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

In an effort to reach the angry mob, CNBC's Rick Santelli goes all Sesame Street on the numbers behind the US Debt Ceiling Rise. Focusing for two minutes on what this practically means for every man, woman, child, and politician, the shouting Chicagoan points out that when the US breaches this new limit then the world's entire population will be on the hook for $2,346 each (and $52,409 per US person).

...

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Chart School

ECRI Recession Call: Growth Index Contraction Eases Further

January 27th, 2012 12:35 pm

Courtesy of Doug Short.

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week's -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).

Early last December Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television's Surveillance Midday. You can watch the video on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its...



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Market Montage

Average Age of U.S. Vehicles Hits Record 10.8 Years

January 27th, 2012 11:15 am

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

Some combination of better made cars, and less Americans able to pay new car prices has conspired to push up the average age of U.S. vehicles to a new record high.  Reflecting this sea change, one of the best investment g...



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Insider Scoop

Research in Motion Surging after Prem Watsa Stake

January 27th, 2012 10:05 am

Courtesy of Benzinga.

Shares of battered tech company Research in Motion (NASDAQ: RIMM) are seeing much strength during Friday's trading session.

Fairfax Financial Holdings released a 13G filing with the SEC this morning, in which they disclosed a 5.12% stake in Research in Motion.

Currently, shares of Research in motion are up over 4% at $16.85. Over the last year, Research in Motion is down over 72%.

Research In Motion Limited is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. RIM provides platforms and solutions for access to information, including e-mail, voice, instant messaging, short message service.

...

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Sabrient

Sabrient Risers - 1/27/2012

January 27th, 2012 12:00 am

Top 5 RisersStockRatingAnalysisASBCBUYMany analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving.CZZSTRONGBUYThe recent earnings history for Cosan Ltd shows significant improvement while projected valuation continues to rise.STLDBUYProjected value continues to rise for Steel Dynamics while long term increases in earnings growth are also becoming more widely expected.PSESTRONGBUYAn increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a fe...

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ETF Selector

Wall Street Party Hangover (SPY, DIA, QQQ, IWM, GLD)

January 26th, 2012 6:16 pm

Courtesy of John Nyaradi.

Major markets and major index ETFs corrected slightly today after the stock market’s euphoric party yesterday

Major markets suffered a slight hangover today, as the S&P 500 dropped .57%, the Dow Jones Industrial Average dropped .18%, the NASDAQ dropped .46% and the Russell 2000 Index dropped .34%, after yesterday’s crazy Fed and Tech Sector induced Wall Street Party.  The NASDAQ, in particular, partied very hard, so hard in fact that the NASDAQ reached its 11 year record high.

The major market index ETFs were hungover too as the SPDR S&P 500 ETF lowered .51%, the SPDR Dow Jones Industrial ...



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Option Review

Big Prints In Deutsche Bank Put Options

January 26th, 2012 1:38 pm

 

Today’s tickers: DB, ATHN & LSI

...



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OpTrader

Swing trading portfolio - week of January 23rd, 2012

January 23rd, 2012 8:56 am

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here

Optrader 

...

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IRA Strategy/Income Trader

Weekend Virtual Portfolio Update 1/22/2012

January 22nd, 2012 10:09 pm

Here is the virtual portfolio weekend update. Basically a recap of the positions and some notes about the trades. As usual, I'll post the previous week's P&L for comparison. Not the greatest of week in general! AA Money Only transaction last week as we bought back the AA Feb 9 puts on Tuesday for close to a 70% profit. The idea is to sell another set of put as soon as we get a chance. Previous week P&L - $400.00 We lost some ground this week, but we'll keep on selling premium! FAS Money We also lost some ground in this virtual portfolio, but we have sold plenty of premium for the coming week. A little correction would go a long way to help! On Wednesday we sold the FAS Feb 72 puts (already good for 50%), on Thursday we added the Jan4 78 calls and on Friday we had to roll the Jan 78 puts to the Jan 80 puts. We were hoping for these ones to expire worthless on Friday, but a late stick killed that hope. Previous week P&L - $4372.00...

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Stock World Weekly

Stock World Weekly: QE-cating

January 22nd, 2012 2:52 am

NEW: Elliott and Ilene are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest Stock World Weekly. We discuss the Fed's next move, and it's new policy for more QE-cating.  Brief review of Sabrient's trade ideas for 2012 (already doing well) and a few new buy-writes from Phil and Pharmboy. Enjoy! (Feedback appreciated - give some life to the comment section below.)

Click this link for this weekend's newsletter, and sign in or sign up.

...

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Pharmboy

Biotech Investing for 2012

January 18th, 2012 1:09 am

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack.  Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game.  More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline.  In addition, the stock can be manipulated by market makers so investors don't know which way is up.  I approach investing in biotechs as a long term prospect.  I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on ...



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