Monthly TIC Data Observations
by Zero Hedge - August 17th, 2009 10:20 pm
Courtesy of Tyler Durden
In order to attempt filling a recent vacuum in public TIC data aggregation and analysis, Zero Hedge is starting a monthly TIC report, highlighting the notable disclosures by the Treasury International Capital System. Today’s TIC press release can be found here - in brief:
Net foreign purchases of long-term securities were $90.7 billion.
- Net foreign purchases of long-term U.S. securities were $123.6 billion. Of this, net purchases by private foreign investors were $105.2 billion, and net purchases by foreign official institutions were $18.4 billion.
- U.S. residents purchased a net $32.9 billion of long-term foreign securities.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $19.5 billion. Foreign holdings of Treasury bills decreased $11.3 billion.
Main highlights between the lines:
Foreign purchasers bought a total of $104.2 billion in Long Term securities, consisting almost entirely of treasuries ($100.5 billion). Gross agencies purchased were $5.1 billion, offset by $13.7 billion in paydowns for a net agency reduction of ($8.7) billion. Net Corporate Bonds also declined by a total of ($6.8 billion). Agencies and Corporate Bonds saw declines in foreign holdings in May and April as well. Corporate stock purchases peaked at $19.5 billion in June, after being positive by $16.7 billion in May and $4.6 billion in April.
Chinese purchases of Long-Term Treasuries were sizable at $26.6 billion (including ongoing sales of Agencies and Corporate Bonds for a third months in a row). Chinese treasury purchases in June were stronger than in May ($ billion) and April ($10 billion). While shifting its securities into Long Term securities, China also sold $51.7 billion of Short Term Treasuries (T-Bills), a significant change from prior periods, after it purchased $34 billion Bills in May and sold $14.8 billion in April. Net, China sold $25 billion of treasuries in June, reducing its near maturities and purchasing more long-dated bonds, presumably to take advantage of the higher 10/30 Years yields throughout June.
Surprisingly, the UK purchased the largest amount of Bonds in June, at $45.7 billion, while also purchasing $500 million in agencies, selling $1.1 billion in Corporate bonds, and buying $4.3 billion in corporate stocks.The UK previously purchased $14.2 billion and $22.4 billion of LT Treasuries in May and April, respectively. The UK also sold half a billion in Bills in June.
Japan was also a prominent purchaser of LT Bonds, at $32.8 billion, concurrently selling $2.9 billion in agencies, $2.1 billion in Corporate…
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The CFTC Is Seeking Your Feedback
by Zero Hedge - August 17th, 2009 8:35 pm
Courtesy of Tyler Durden
Today, the CFTC announced that it is seeking public comments on whether the Carbon Financial Instrument listed for trading by the Chicago Climate Exchange performs a significant price discovery function. As the CFTC has lately faced substantial public scrutiny over the potential abuse of its marketplace, it is prudent to carefully evaluate the impact of yet another market that may be abused by several key players.
From the press release:
CFTC Seeks Public Comment on its Notice of Intent to Determine Whether the Carbon Financial Instrument Listed for Trading by the Chicago Climate Exchange, Inc., Performs a Significant Price Discovery Function
Washington, DC – On August 14, 2009, the U.S. Commodity Futures Trading Commission (CFTC) issued a Notice of Intent, pursuant to the authority in Section 2(h)(7) of the Commodity Exchange Act (Act) and Commission Rule 36.3(c)(3), to undertake a determination whether the Carbon Financial Instrument (CFI) listed for trading on the Chicago Climate Exchange, Inc., (CCX) performs a significant price discovery function.
“The CFTC’s significant price discovery function authority helps to promote transparency and guard against fraud, manipulation and other abuses,” CFTC Chairman Gary Gensler said. “This is the second use of our new authority, and we will continue using it to promote market integrity.”
The Commission is undertaking this review based upon its initial evaluation of information provided by CCX, which indicates that the CFI contract appears to satisfy several of the statutory criteria for a significant price discovery determination. Following issuance of an order determining that a contract traded on an exempt commercial market (ECM) such as CCX performs a significant price discovery function, the ECM must within a prescribed time period, with respect to that contract, come into compliance with core principles mandated by Section 2(h)(7)(C) of the Act and other statutory provisions applicable to registered entities. These provisions would subject the ECM’s contract and market participants to the Commission’s position limit and emergency authorities and large trader reporting requirements, among others.
Commission Rule 36.3(c)(3) became effective on April 22, 2009 and establishes the procedures under which the Commission will make and issue its determination whether a specific transaction, contract or agreement traded on an ECM serves a significant price discovery function. Those procedures specify that the Commission will publish notice in the Federal Register that it intends to undertake a determination whether a particular contract serves a significant price discovery function and to receive written data, views…
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SP Futures Hourly Chart 9:45 AM with the SP Weekly Chart
by Chart School - August 17th, 2009 7:28 pm
SP Futures Hourly Chart 9:45 AM with the SP Weekly Chart
Courtesy of Jesse’s Café Américain
So far this is merely a pullback from a consolidation, and a likely distribution top in the making as insiders continue to take profits on their ponzi pump in US equities.
We signalled ‘defensive’ last week, and that the risk reward in the market was dangerous, and we exited or hedged all longs. Time to Get Defensive
Now we wait to see if this is just a pullback from a consolidation, with a subsequent rally to new highs, or a break in the market slightly ahead of our forecast target. We have been looking for a 3% pullback first, and then a rally to the final high for the year.
The obvious level to watch is the neckline.
Bear in mind that these 100 million dollar men on Wall Street make their pay by taking investors, and the economy, for rides up and down in stocks, commodities, and just about any other market they can push using the leverage of their taxpayer supported funds.
The SP Weekly Chart show that a rally back to 1014 on the cash market represents an approximate 38.2% rally from the bottom. This number is one of the key fibonacci numbers watched by traders. The next stop higher would be 50%.
[click on charts for larger views]
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Dave’s Daily
by Chart School - August 17th, 2009 7:15 pm
Dave’s Daily Market Comment, August 17, 2009
Our son made me watch this gruesome movie, The 300, but the above line from it reminded me where the S&P 500 is presently (near 975) and a line bulls must defend. But, that’s looking at daily charts whereas longer term weekly and monthly charts may have a more tolerant feel and we’ll look at those further below.
It does seem that an accumulation of overbought conditions; an absence of positive news (or, even bad news to spin as positive); bullish fatigue noted here last week; heavy insider selling; and, more importantly, investors doing some old fashioned reasoning (ya know, bad news is really bad news) finally caught up with markets today.
I did note discomfort with things last week as rallies were feeble and selling seemed more intraday dominant then headlines would lead you to believe.
Volume today was heavier to the downside than previous up days which isn’t a good sign but has been the hallmark of this market for some time now. Breadth was decidedly negative although, as this is being done, it doesn’t appear as a negative 10/90 day.
More of Dave’s Daily here >>.
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Fed Says Banks Continue To Tighten Lending Standards
by ilene - August 17th, 2009 7:00 pm
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Fed Says Banks Continue To Tighten Lending Standards
Courtesy of Tom Lindmark of BUT THEN WHAT
Banks aren’t loosening their purse strings at all. In fact, it looks like they’ve decided to put their pocket books away for the foreseeable future.
The Fed’s quarterly report on bank lending standards was released today and it confirms what just about everyone knows, the banks are getting stingier. Here are some details from MarketWatch:
Banks were still clamping down on lending to businesses and consumers over the past three months, and they said they planned to keep their credit standards tight for at least a year, the Federal Reserve reported Monday.
In its quarterly survey of banks’ senior loan officers, the Fed said lending standards got even tighter for almost every type of loan, from prime residential mortgages to commercial and industrial loans. The survey covered May, June and July.
Banks have been tightening their standards for various types of loans for more than two years. For residential mortgages, banks have tightened their standards for 11 straight quarters by increasing requirements for down payments, interest-rate spreads, or credit scores.
In the most recent survey, no banks reported easing their terms for residential real estate loans, commercial real estate loans, or consumer credit cards. Less than 4% of banks said they had eased terms on commercial and industrial loans and for home-equity loans.
Given that the FDIC is going to need some more capital to shore up its insurance fund that has been depleted by bank failures, I suppose it’s worth asking whether we truly want banks to be pumping money out the front door. It seems that tightening is in order at this particular time and perhaps the banks’ response tells us something about the economy that reams of government statistics fail to reveal.
Banks, particularly smaller banks, tend to have a fairly good sense of the condition of the local economy in which they operate. You can learn a lot from lunch or golf with the local plumbing and heating contractor or a beer after work with one of your retail clients. Just maybe, these banks are hearing and seeing things that tell them lending into the current environment isn’t the wisest business plan at this moment.
Another part of the study also caught my attention:
The Fed asked the banks when they thought their policies would get back in line with their long-term…
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Market Update - Equities and US Dollar
by Chart School - August 17th, 2009 6:44 pm
A welcome to another fine chartist today - Binve. Binve’s work can be found at these two sites: Market Thoughts and Analysis and binve’s CAPS Blog.
Market Update - Equities and US Dollar
Courtesy of Binve
Time for a more in-depth examination of the equity markets and the US Dollar. As I have talked about in the past (and is abundantly obvious to anybody who has been watching the market longer than 5 minutes), the US Dollar and Equities have been inversely correlated. Or put another way, the weakening US Dollar has been fueling the rally since March. Analysis of this "bull market" (used very loosely) equity rally necessarily requires an examination of the US Dollar, and where it might be headed.
Before I delve into this current analysis of the Equity Markets and the US Dollar, allow me to provide some background material so you can understand where I am coming from:
Some More Wave A Thoughts - Aug 13 - My preferred EW count
A Look at Some Indicators - Aug 14 - Daily and hourly indicators as well as CPC
SPY Price and Volume - Aug 14 - Examination of Price/Vol "Energy Levels"
There is a Reason You Don’t Take Hot Air Balloons Up 3 Miles - Aug 11 - Market update post
Do Your Part to Help End the Current Bull Market. Become a Bull! - Aug 9 - In-Depth Market Analysis. Both FA and TA. Highly Recommended!
USDX Count Update and Thoughts - Aug 12
Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow up on the Gold Blog. - Jun 17 - In-depth analysis of the US Dollar and inflationary/deflationary pressures
Equities - EW count of SPX
Here is my longer term Primary / Intermediate scale count:
[click on charts for larger views]
Drilling down into Wave A of the final zigzag. Per my preferred count (Some More Wave A Thoughts) last week, I believe Wave A has ended. Here is an update on the subsequent price action. New price move is clearly outside of the channel. Wave 1 and Wave 5 (minute) are roughly the same size with a clear extended 3rd. Move looks complete.
The reasons why I still like this count:
1. NDX and COMPQ (the "leaders") made new highs on Aug 12. This (IMO) is the true end of Wave A
2. The overshoot on the SPX on Aug 7th was unconfirmed by NDX and COMPQ. I believe this is a B wave within Wave 4 (B waves are often unconfirmed), driven…
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IS THE RECOVERY BUILT ON QUICKSAND?
by ilene - August 17th, 2009 6:39 pm
IS THE RECOVERY BUILT ON QUICKSAND?
Courtesy of The Pragmatic Capitalist
For the first time in months, the foundation of the 50% rally is being called into question. There is no doubt that the March bottom in the stock market was largely driven by government intervention. What the government was relying on with this plan, however, was that they could buy enough time to get the consumer back on their feet. Recent data, however, is beginning to show signs that the consumer is just as weak as they’ve ever been and showing little to no signs of recovery.
As we’ve been quick to point out, the real underlying components of this recovery have been questionable at best. Rail data continues to come in incredibly weak, retail sales have shown almost no signs of recovery and corporate earnings have shown no signs of organic growth (i.e., the no revenue recovery). Governments around the world are running short on time as global stimulus plans begin to lose their gusto heading into Q3 & Q4 of 2009.
The most alarming government intervention has not been in the U.S., however. China, one of the primary drivers of the global recovery, could be building a recovery on quicksand. Deloitte is out with a recent report detailing this intervention and the potential unsustainability of the government induced recovery:
Though the economy is forecast to grow above 8 percent in 2009 — it is likely to happen — there are significant vulnerabilities in the system. Much of the growth is being driven by the state and very little by consumers. For any sustained recovery, and because external markets still remain weak, domestic consumers must eventually become center stage in the recovery process, something yet to happen. Though car sales are up significantly, the high number is because of the base effect as well as government subsidies — it means car sales will falter sooner or later. Large swathes of migrant workers lost their jobs (they don’t show up in official unemployment statistics) and haven’t found new ones; the retail sector is at risk once subsidies on appliances are withdrawn.
As I type, Asian stock markets are all down 3%+. U.S. stock futures are down 1%. The so called “recovery” has been powerful thus far, but will almost certainly sink beneath the sand if the consumer does not find their footing. Thus far, there are little to no signs of this occurring.
Source: Deloitte
…
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Q2 2009 Corporate Defaults More Than Double 2008 Total
by Zero Hedge - August 17th, 2009 6:33 pm
Courtesy of Tyler Durden
The second quarter of 2009 set a new record for the number of corporate defaults, with 82 non-financial events of default, consisting of 16 names in media and entertainment, 15 in autos and 15 in natural resources, according to a new report published by S&P. The total amount of defaulted debt was $254 billion, far larger than the $102 billion spread among 69 defaults in all of 2008.
Of the second-quarter defaults, the largest portion (about 42%) resulted from distressed exchanges, 28% from missed payments, and 27% from bankruptcies. Distressed exchanges occur when a borrower offers creditors securities or cash in exchange for their debt claim that are worth less than the nominal present value of their original claim.
S&P is still predicting a record amount of speculative-grade defaults over the next 12 months, with an expected peak around Q1 of 2010, hitting a total of 13.9% of issuers some time in mid-2010.
This reflects our expectation of continued weak economic conditions and tight credit markets, although we do expect the credit markets to continue to ease somewhat through year-end.
As Zero Hedge has discussed extensively in the past, the predominant category of default event has become distressed exchanges.
As previously mentioned, distressed exchanges continued to account for a significant number of corporate defaults during the quarter. The new securities will often have different coupon rates, changes to the maturity term, or a change in a sinking funds (i.e., cash redemption) schedule. We consider distressed exchanges to be tantamount to default.
Not surprisingly, the sector hit the hardest was autos after the massive GM and Chrysler defaults, whose impact has been materially mitigated via taxpayer cash filling the gap.
Several sectors saw the most significant number of defaults during the quarter: automotive, media and entertainment, gaming and leisure, and natural resources. Three of the defaulted issuers with large debt balances were automakers: Ford Motor Co. (about $46 billion in rated debt), General Motors Corp. (GM; about $21 billion), and Chrysler Corp. (about $9 billion). Media and entertainment and gaming and leisure combined accounted for 15 defaulted borrowers, including issuers with large rated debt balances such as Harrah’s Entertainment Inc. ($25.6 billion) and R.H. Donnelly Corp. ($7.6 billion). Of the defaults mentioned, Ford and Harrah’s were distressed exchanges, while Chrysler and GM filed for Chapter 11 bankruptcy protection.
And here is punchline: the impact of declining cash flows for the non…
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Ratio Call Spread Suggests Bullish Sentiment on Cabot Oil & Gas
by Andrew Wilkinson - August 17th, 2009 5:53 pm
Today’s tickers: COG, HPQ, ALGN, VIX, WLP, UNH, CVX, & OIH
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Is This the Start of the Big One?
by ilene - August 17th, 2009 5:53 pm
Is This the Start of the Big One?
By Yves Smith at Naked Capitalism
I don’t believe in market calls, and trying to time turns is a perilous game. But most savvy people I know have been skeptical of this rally, beyond the initial strong bounce off the bottom. It has not had the characteristics of a bull market. Volumes have been underwhelming, no new leadership group has emerged, and as greybeards like to point out, comparatively short, large amplitude rallies are a bear market speciality.
In addition, this one has had some troubling features. Most notable has been the almost insistent media cheerleading, particularly from atypical venues for that sort of thing, like Bloomberg. Investors who are not at all the conspiracy-minded sort wonder if there has been an official hand in the "almost nary a bad word will be said" news posture. Tyler Durden has regularly claimed that major trading desks have been actively squeezing shorts. There have been far too many days with suspicious end of session rallies.
The fall in the markets overnight, particularly the 5.8% drop in Shanghai, seems significant in combination with other factors… continue here.
*****
Image from Op-toons Review (funny site, check it out)
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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