- Egan-Jones takes dim view of Morgan Stanley’s health (Dealbook, hat tip Ubu)
- Faith based economics (John Mauldin via Ritholtz)
- So much for the Volkswagen- Porsche merger (Bloomberg) [next stop much wider CDS]
- Another former NY Pension overseers in Cuomo’s probe (Bloomberg)
- Joseph Cassano: the man with the trillion dollar bounty (Times Online)
- Investor sentiment: Is more bulls a good thing? (Technical Take)
- The long pain in Long Beach (WSJ)
- The play (Finem Respice)
- The ungovernable state (Economist)
- Yet another amusing interview with Myron Scholes (NYT)
- FHLB shortages papered over (OptionArmageddon)
- Obama budget chief: signs economic free fall over… [You were expecting?] (Reuters)
by ilene - May 17th, 2009 8:44 pm
Courtesy of Mish
Here is the pertinent snip:
Crude Oil Daily Futures
Because of the contango shown on the left, it may be cheaper to buy crude now, assuming one has storage, and storage costs are low enough.
Of course, whether it is wise to stock up now depends entirely on where prices head from here.
Regarding contango, a friend just pinged me with this comment:
"Nordic American estimates that up to 80 VLCC’s (Very Large Crude Carrier) are currently used as ‘floating storage’. I have heard from a shipping company in Hong Kong that they think it is even more, as China has apparently hired many of the old single hull ships to use as floating storage until it can build enough storage facilities on land. There’s a lot of oil ‘floating about’, literally."
Please see first link for more discussion of contango and oil prices.
Iraq Calls Floating Storage Unwise
Inquiring minds are now reading Iraq Says Storing Oil in Tankers ‘Unwise;’ OPEC May Cut Output.
Iraq, holder of the world’s third- largest oil reserves, said storing crude in floating tankers was “unwise” and OPEC nations may need to make further production cuts, assuming demand continues to drop this year.
“We don’t think it’s a wise economic decision” to produce oil from secure underground fields then pay to store it in floating tankers, Iraqi Oil Minister Hussain al-Shahristani said yesterday in an interview at the Dead Sea in Jordan at the World Economic Forum. “Future generations can benefit from it better than we can, if we don’t need it.”
Speculation that oil demand may fall further than expected because of the recession were “bad news,” he said. “OPEC will have to reconsider its production levels again,” assuming consumption does continue to
by ilene - May 17th, 2009 8:04 pm
Courtesy of Mish
The White House’s budget director says the economy has almost bottomed out and the sense of economic free-fall is over.
Peter Orszag (OR-zag) says that as the economy improves in the months ahead, the nation’s budget will run lower deficits. He also says that the Obama administration’s financial assumptions are going to be updated because of higher-than-expected unemployment rates.
The budget director says President Barack Obama is committed to changes in the health care system this year. Orszag says the president’s plan to provide health care to millions of uninsured Americans would not add to the federal deficit in the short term, and actually reduce it in coming years.
Upfront Costs Complicate Obama’s Health Care Plan
Let’s take another look at Cost of Health Care Plan Soars; Obama might Renege on Campaign Promises.
Costs are emerging as the biggest obstacle to President Barack Obama’s ambitious plan to provide health insurance for everybody.
The upfront tab could reach $1.2 trillion to $1.5 trillion over 10 years, while expected savings from wringing waste and inefficiency from the health care system may take longer to show.
Details of the health legislation have not been written, but the broad outlines of the overhaul are known. Economists and other experts say the $634 billion that Obama’s budget sets aside for health care will pay perhaps half the cost.
I responded with …
So Obama has a plan, and that plan is an estimated 50%, $634 billion in the hole at the outset (the estimated amount over 10 years). However, government programs are always much more expensive implemented than proposed. Therefore, a more resaonable estimate of costs might be 2-5 times greater than proposed. And even if by some miracle the costs come in as expected, the world’s most expensive healthcare system is about to get much more expensive.
This is not a plan, it’s a nightmare.
Can I see the math?
I would like to see how providing health care to millions of uninsured Americans will not add to the federal deficit.
More Free Lunch Keynesian Nonsense
Free lunch theories are coming out of the woodwork (or rather every corner of academia). Latest up to bat is Alan Blinder,
by ilene - May 17th, 2009 7:43 pm
Courtesy of Corey at Afraid to Trade
There’s an epic struggle (maybe not that intense) to hold the rising 20 day EMA on the S&P 500; the battle has already been lost on the NASDAQ. Let’s take a very quick look at this level and what it might mean.
Just a quick, laser-focused intraday update to state that the 882.49 level ($88.41 in the SPY) MUST be held as support for the bulls for any hope of higher prices in the short term. A failure here, particularly a close beneath this level should we get a push to new lows intraday, would be devastating and would set-up an almost certain test of the 50 day EMA just beneath 860.
One thing to note is that volume has been light on the retracement pullback which is slightly bullish, though volume has been steadily trailing off since it peaked in early March (a non-confirmation of bullish higher prices).
This is why intraday traders might have been confused as to why price seemed to hold a floor at the 882 level – it’s because the higher timeframe players are battling it out for supply/demand control of this level. Intraday traders are best served by anticipating key levels like this on their intraday charts.
Watch this level very closely going into the weekend and beyond.
by ilene - May 17th, 2009 7:09 pm
From The Sunday Times, Times Online – a fascinating look into the world of AIG and Joseph Cassano.
By Tim Rayment
Excerpt: This is Joseph Cassano. He is the multimillionaire trader accused of bringing down the insurance giant AIG — and with it the world’s economy. So is he a criminal, an incompetent or a scapegoat?
They were frightened for a long time, then suddenly they were angry. For millions of Americans, anxiety about a jobless, debt-laden future turned to disbelief when it emerged that AIG, the company at the centre of the world’s financial crisis, was handing out £300m in bonuses. It was the superpower’s Sir Fred moment. Just as Britain reacted with fury to the disclosure that Sir Fred Goodwin’s pension pot had been doubled as his bank neared collapse, so the US was shocked. The death threats came soon after. “I want them dead!” said one of a stream of messages that caused AIG staff to travel in pairs, park in well-lit areas, and dial 911 if followed. “I want their spouses dead! I want their children dead! I want their children’s children dead! I want the earth upon which they have walked salted so nothing will ever grow again!”…
Can one man in London really be to blame for the collapse of capitalism?
Until now, the economic crisis has been seen as a giant intellectual error, and AIG’s multimillionaire employees in England were simply the people who made the biggest mistakes. The first to own up to misjudgment was Gordon Brown’s friend Alan Greenspan — once so revered in his role as America’s central banker that to be photographed with him was as flattering as being seen now with President Obama. “I have found a flaw,” said Greenspan, referring to his free-market philosophy, after the banks started falling over. “I don’t know how significant or permanent it is. But I have been very distressed by that fact.”
Others have repeated this innocent-sounding explanation for the wrecking of so many lives…
There is, however, an alternative reading. This says that the furore over bonuses is a convenient distraction from the real causes of the crisis, which go to the heart of how the world is run. There is dishonesty
by Zero Hedge - May 17th, 2009 6:24 pm
Tyler Durden’s Weekend Reading
by ilene - May 17th, 2009 4:39 pm
Courtesy of Tyler at ZH
"There can be no doubt that besides the regular types of the circulating medium, such as coin, notes and bank deposits, which are generally recognised to be money or currency, and the quantity of which is regulated by some central authority or can at least be imagined to be so regulated, there exist still other forms of media of exchange which occasionally or permanently do the service of money. Now while for certain practical purposes we are accustomed to distinguish these forms of media of exchange from money proper as being mere substitutes for money, it is clear that, other things equal, any increase or decrease of these money substitutes will have exactly the same effects as an increase or decrease of the quantity of money proper, and should therefore, for the purposes of theoretical analysis, be counted as money.
In particular, it is necessary to take account of certain forms of credit not connected with banks which help, as is commonly said, to economize money, or to do the work for which, if they did not exist, money in the narrower sense of the word would be required. The criterion by which we may distinguish these circulating credits from other forms of credit which do not act as substitutes for money is that they give to somebody the means of purchasing goods without at the same time diminishing the money-spending power of somebody else. This is most obviously the case when the creditor receives a bill of exchange which he may pass on in payment for other goods. It applies also to a number of other forms of commercial credit, as, for example, when book credit is simultaneously introduced in a number of successive stages
by ilene - May 17th, 2009 4:24 pm
A Portuguese website reports that authorities are investigating an attempted transfer of 50 billion dollars (36.6 billion euros) from JP Morgan Chase in what might where result would be the biggest fraud ever, rivaling the Ponzi scheme of Bernard Madoff.
According to the webste, Publico, the scam transfer was attempted by an unidentified woman, who presented a bank in Lisbon with an interbank contract for the transfer of 36.4 million euros.
The Bank of Canada is also investigating the case, according to official sources, which indicated that the process followed for the department of supervision "of the institution led by Vitor Constâncio, confirming also that the way the case is similar to other attempts at fraud detected by the authorities in Portugal.
Contacted by Lusa, PJ’s official source said, however, "is not considered appropriate to comment on specific situations," goes to disclose data on situations of the kind found in recent years in Portugal.
As the amount involved, 50 billion dollars (36.6 billion), is far superior to any other similar case ever found in Portugal, confirmed to the Lusa the supervisor of banks.
Even if there is a limit to transfers of money from abroad to Ireland and vice versa, the amount is so high that it would do for five lines of high-speed train in Portugal or ten airports in Lisbon.
If the operation was carried out, would be transferred to Portugal twice the value of the 20 largest Portuguese stock exchange. "An amount ever seen, is in the Portuguese market or in any place of reference of the world," said a banking source to Lusa. Indeed, it is not every day that are transferred 50 billion dollars from one country to another and, as another source of market, "seems to play. The value is completely abnormal."
by ilene - May 17th, 2009 1:12 pm
The next day, General Motors too served walking papers to about 20% of its existing network of dealers.
The Economies of Sale
Not to get too technical or political about it, it’s better for these manufacturers and what remaining dealers are left that there will be fewer stores selling the goods. Why? Less competition. In a struggling business that’s competitive enough with namely Japanese brands like Toyota and Honda out there; no need for other mom and pop domestic shops to whittle down the prices so Joe Blow can get the best deal he can on an American car, with his Edmunds.com invoice printed in hand. It’s just not profitable, for any business, uncompetitive product or not.
Which leads me to the other facet of the car sales equation- factory support. Truth be known, a lot of dealers live and die (well, obviously!) by the factory, the manufacturer itself. Incentives, programs, marketing, floor-plans (how most new cars are loaned and supplied to the dealer’s lots), are all dictated by the manufacturer. Dealers, in most cases, supply the brick and mortar, the staffing, the used cars, the insurance, the local marketing and stuff like that; most new cars you see on the lots are loaned to them- by the factory, in an agreement that largely favors the manufacturer. Every day the car sits, doesn’t sell, is costing the dealer money like an accruing debt. It’s taken into account when they sell the car. Ever wonder why they want to show you a car in the back, covered in dust? It’s to cut a lingering loss.
The manufacturers set the bar every month for each region, each sales district. Dealers large and small strive to meet the demands of the floor-plan, so that they can get their unit spins- bonus money put on each car sold, which can amount to a significant “P” to the monthly P/L report, often times this money makes their month. It’s a bonus, and they’ll give away the store, sometimes even at a loss so
by ilene - May 17th, 2009 1:06 pm
Courtesy of John Mauldin
In this issue:
Can I Have Some More of that Data, Please?
The Fault, Dear Brutus, is Not in Our Stars
Is Unemployment a Lagging or a Leading Indicator?
An Unsustainable Trend in Debt
Some Thoughts on the Health Care Problem
Why does government data need to be revised so often? Is it conspiracy, as some claim, or is it methodology? And if it is methodology that leads to faulty data, then why not change the methodology? Is unemployment a lagging indicator, as conventional wisdom suggests? We look again at the underlying assumptions to suggest that things are not always the same. And finally, we look at unsustainable trends, fiscal deficits, and health care — there is a connection.
Can I Have Some More of that Data, Please?
One of my regular reads is the blog The Big Picture. They featured a short piece by Michael Panzner this week. He put together some rather interesting data and then asked a question, which gives me an opportunity for discussing government data. Let’s see what he had to say, and then I will make my comments.
"Many market-watchers claim that U.S. economic statistics are increasingly being revised downward in subsequent periods, suggesting that the figures initially being reported by Washington are "puffed up," so to speak, most likely for political purposes.
"Well, I went back and had a look at the differences between the reported and revised data for various series, including monthly retail sales, nonfarm payrolls, industrial production, and durable goods orders, to try and figure out if the cynics are right.
"Using data from Bloomberg, I calculated whether the revised data for each month was lower than the first-cut estimate. Then I tabulated 12-month running totals for each series to see if there has been some sort of systematic bias (in other words, whether the pattern of monthly downward revisions was trending higher instead of undulating up and down).
"To make the comparisons easier, I subtracted the 12-month tally as of May 2002 (an arbitrarily chosen date) from the monthly totals for all four economic series so that the starting point for each would be the same — zero.
by ilene - May 17th, 2009 1:03 am
Courtesy of rdan at Angry Bear.
Brett Steenbarger at Trader Feed has an interesting take on rules of the market for the current decade of market of stocks.
In the chart, I’m looking at a moving window of 60 days and counting the number of days within that window that either have 2/3 or more of stocks traded as advances or 2/3 or more as declines (NYSE issues only). So we’re looking at relatively one-sided days in which advances lead declines (or vice versa) by a ratio of roughly 2:1 or better.
In 2000 and 2001, such one-sided days were the exception; because stocks traded in quarter point increments, many issues remained unchanged. The ratio of unchanged stocks to advancers and decliners has steadily fallen over the years. Now, out of over 3000 issues traded, it’s unusual to have 100 unchanged stocks; in 2000, over 500 unchanged issues were the norm.
Interestingly, the ratio of unchanged issues to total issues traded has fallen significantly since July, 2007, so it’s not just decimalization that has led to the shift. Program trading and the inclusion of more stocks in baskets that are traded--not to mention the inclusion of more stocks in ETFs (including leveraged ETFs)--may well account for this phenomenon. Small cap issues are no longer a market backwater.
The average number of issues traded daily since 2000 has actually fallen. Nevertheless, there is far more money--and far more money managers--chasing the same returns. It does, indeed, appear that they are chasing returns in part by chasing each other. Incredibly, we’re getting close to the point where nearly half of all trading days are relatively one-sided…
Continue here: Herding Behavior and One-Sided Market Days