Frontrunning: June 30
by Zero Hedge - June 30th, 2010 8:58 am
Courtesy of Tyler Durden
- The $5 trillion rollover (Reuters) – good of Reuters to pick up on this theme. We wrote about this is November, and the number is not $5 trillion, it is $15 trillion
- Yet another jobs miss: ADP comes in at +13,000 on expectations of +60,000 (Bloomberg)
- Scrutiny of Goldman’s board focusing on silence over conflicts (Bloomberg)
- As expected, Alex now a hurricane (Bloomberg)
- “Not only is Elena Kagan perhaps the most unqualified person to ever be nominated to the Supreme Court, but she is a neoliberal globalist hack who had the silver spoon of privilege surgically implanted in her Kagan rectum at birth” – All in the Family; The Globalist Kagans of Brooklyn (American Everyman)
- Putin rips Russian spy bust (WSJ)
- Why Obamanomics has failed (WSJ)
- Todd Harrison: Where we’ve been and where we’re going (Minyanville)
- Krugman spits in the faces of imaginary bond vigilantes (NYT)
- JP Morgan talks its massively underwater BP book, sees someone buying BP instead of waiting for bankruptcy. Lehman – Barclays anyone? (AP)
- Beware twitterers: SEC attacks fraud on Facebook, twitter (Securities Industry)
- Crazy treasury bulls get it right (Barrons)
- With federal stimulus funds running out, economic worries grow (LA Times)
- Psychic octopus picks Germany to beat Argentina (Reuters)
Facebook
Twitter
LinkedIn 
del.icio.us
DiggWhich Way Wednesday – Pattern Recognition Special
by Phil - June 30th, 2010 8:27 am
Head and shoulders, knees and toes.
Sorry, I can’t think head and shoulders without adding the second part thanks to the darned Wiggles, which my kids were raised on – better than Barney, at least… The head and shoulders investors care about is the chart pattern (from the Chart Store) and, frankly, I could make a knees and toes case by extrapolating the left side of this disaster (which was actually a great bull run but would not be as much fun if we flip it).
TA is all about symmetry and pattern recognition, two things that are hard-wired into the pleasure center of the animal brain to help us develop cognitive skills early in life. Humans love finding patterns – it makes us happy. In this particular case, the fact that stocks go up and down and then get overbought and then get oversold as they correct to the mean has been cleverly identified by one primate (and I hope he gets a copyright fee) as a "head and shoulders" pattern and all the other media primates gather around the great obelisk and they howl and shriek at you every day and they cast their bones and make proclamatiotion as to what it foretells.
Unfortunately, Technical Analysis has so many devout followers that it often becomes a self-fulfilling prophesy. Even worse (and certainly more significant) than the head and shoulders pattern is the coincident "death cross" or "dark cross" that is being formed on our indexes (see yesterday’s post) as the 50-day moving average falls below the 200-day moving average, as indicated on this chart from Barry Ritholtz:
Mary Ann Bartels, Chief Bone-Caster at BAC, made the follwing prediction about the pattern she was seeing:
June 23, 2010 marked the 1-year anniversary of last June’s bullish Golden Cross of the 50-day moving average above the 200-day moving average. This Golden Cross signal preceded a 12-month return of 22.4% on the S&P 500. The average 12-month return for the 42 Golden Crosses that have occurred since 1928 is 9.6%. More importantly, the June 23, 2009 signal occurred during the NBER recession that began in December 2007 and Golden Crosses associated with recessions show a much stronger average 12-month return of 19.5%. The average 12-month return for the S&P 500 over the same period is 7.2%…
The bearish counterpart of the Golden Cross is called a Dark Cross. This signal
…
Flagstar Bank: The Good, The Bad & The Ugly
by Zero Hedge - June 30th, 2010 8:27 am
Courtesy of bmoreland
This week’s “The Good, The Bad & The Ugly” from BankRegData.com reviews Flagstar Bank.
Flagstar (FBC) is the nation’s 65th largest Bank with $14.3 Billion in Assets. They operate approximately 165 branches in Michigan, Indiana and Georgia. With this footprint, it probably comes as little surprise that they are somewhat struggling. You can see a review of Texas Ratio by state for Community Banks here.
The data for the following tables and charts comes from the FDIC Call Reports and the spot review is not intended as advice. BankRegData holds no positions in any bank stocks nor has financial backing from any institution.
The Good: Tier 1 Capital Ratio
With another capital raise in the first quarter, Flagstar saw an increase in their Tier 1 Capital Ratio to 16.68%. While going to the markets again for more money might not necessarily be a good thing, they are sitting on $1.343 Billion in Tier 1 Capital.
The increase has also had the benefit of lowering their Texas Ratio from 227.75 to 165.88 – primarily through an increase in the denominator as Nonperforming Loans increased for the 12th straight quarter.
The Bad: Nonperforming Loans
A full 15.70% of Flagstar’s loan portfolio is either 90+ Days Past Due and/or on Nonaccrual. The number is three times their peer group at 4.79%. It is important to note that they have $487 million in Government Guarantees (mostly from GNMA) which brings their NPL rate down to 10.46%. The Adjusted NPL rate of 10.46% is up from 9.41% and places them in the 92nd percentile relative to peers.
Nonperforming Loans by Loan Portfolio:
- At 11.48%, Commercial Real Estate is down from 15.90%
- Home Equity Loans have ticked back up to 2.75% from 2.48%
- Yes, Construction & Development is at a NPL rate of 52.65%
Another concern is the fact that Flagstar’s Early Stage 30-89 Days Past Due delinquency rate has climbed for the second straight quarter to 2.89%. In terms of absolute dollars they have 15x as many NPLs as they did 3 years ago. Where do you get the staff to work all this inventory?
Hire?…
In Advance Of Today’s Bread And Circuses, Joe Cassano Edition
by Zero Hedge - June 30th, 2010 8:26 am
Courtesy of Tyler Durden
In advance of today’s most recent theatrical lashing on AIG, and Goldman’s involvement with the broke insurer, this time before the Financial Crisis Inquiry Commission, the NYT’s Gretchen Morgensen and Louise Story revert to their favorite topic: regulatory and administrative capture in the context of the AIG bailout, whose sole purpose was to risk taxpayer funds in order to rescue a few megabanks. In a well-timed piece, the two reporters don’t share much new (after all, with a plethora of smoking guns already out there and blatantly ignored by the regulators, there is little one can add), although we do learn that as part of the waiver, AIG was forced to sign a waiver indemnifying the very banks on the receiving end of the bailout parade.
When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.
Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents. The documents, reviewed by The New York Times, provide the most comprehensive public record of how the Federal Reserve Bank of New York and the Treasury Department orchestrated one of the biggest corporate bailouts in history.
There is little at this point that can shock or even surprise the dulled minority of the US public who actually cares about the collapse of US society and its replacement with a corporatist (or rather Wall Streetist) hydra. We are sure this topic will be covered for an hour or two, then Goldman’s Gary Cohn will receive a wrist slap, will be told never hope for another bailout again, then allowed to go back to his hedge fund…
Daily Highlights: 6.30.10
by Zero Hedge - June 30th, 2010 8:04 am
Courtesy of Tyler Durden
- API reported a decline of 3.4M barrels in US’ oil stockpiles.
- Asian markets stay in the red but pare early losses.
- Australia reportedly close to mining-tax compromise.
- Consumer Confidence grows in Euro zone, ebbs in UK.
- IMF chief: No double-dip for global economy; defends G20 focus on deficit reduction.
- Japanese stocks fall to seven-month low as US consumer confidence drops.
- U.K. housing prices edge up 0.1% in June.
- Aaron’s to close office-furniture ops, cuts 2010 profit view.
- BP, Transocean told to alert US to acts that deplete assets.
- CACI issues in-line guidance; sees FY11 revs of $3.25-3.40B (cons $3.34B).
- Cisco plans to offer a tablet PC that caters to business users in Q1 of 2011.
- Emerson Electric Co. sweetened its offer to buy Chloride Group Plc to $1.5B.
- Enbridge to invest $500M in 250-megawatt Colorado wind energy project.
- General Mills reports in-line, posts Q4 EPS of $0.41. Revs fell 2.1% to $3.57b. Guides FY11 EPS below consensus.
- Google awaits fate in China as internet license deadline looms.
- Ping An Insurance in talks to merge banking unit with Shenzhen Development.
- Sanofi-Aventis to acquire TargeGen Inc., a privately held U.S. biopharmaceutical co.
- Sealy Corp. swings to Q2 profit as revs rise 6.1% to $316.5M.
- Standard Chartered to invest $500M in China’s AgBank IPO.
- Sumitomo Mitsui to acquire a 4.5% stake in India’s Kotak Mahindra Bank for $295M.
- Tesla Motors shares soar 41% in market debut.
- Unify Corp and Daegis to merge; UNFY will pay ~$38M.
Economic Calendar: Data on ADP Employment Change, Chicago PMI & Crude Inventories to be released.
Earnings Calendar: AM, APOL, AYI, CBK, GRO, LNN, MON, SJR, SWHC.
RECENT RATING ACTIONS
SAFEWAY INC (SWY)
MANPOWER INC (MAN)
HESS CORP (HES)
BNP PARIBAS (BNP FP)
SMITHFIELD FOODS INC (SFD)
GENERAL MILLS INC (GIS)
BROWN-FORMAN CORP (BF/A)
MICRON TECHNOLOGY INC (MU)
REVLON INC (REV)
XTO ENERGY INC (XTO)
NOBLE CORP (NE)
EXPEDIA INC (EXPE)
Data provided by Egan-Jones Ratings and Analytics
Parsing Through The ECB’s Elimination Of €310 Billion In “Excess” Liquidity
by Zero Hedge - June 30th, 2010 7:33 am
Courtesy of Tyler Durden
Today’s 3 Month Long-Term Refinancing Operation saw a surprisingly low €132 billion in bid interest on behalf of 171 banks. The transaction which is the key bridge to the rolling-off of the 1 Year €442 billion LTRO which matures tomorrow, was expected to see demand for between €150 and 200 billion, yet missed even the low end as the bulk of excess cash had been used for arbitrage opportunities which would be eliminated with the new, shortened maturity. On the other hand, the 171 banks that did participate in the transaction will likely be stigmatized as it means they are likely locked out of the traditional interbank lending market, which has a comparable 3 month rate of 0.76%. On the other hand the LTRO has a fixed 1% rate: the banks are hardly paying the additional 24 basis points because they like JC Trichet so much. Alternatively, we are convinced that none of the 171 banks will fail the most recent scam that is taking Europe by storm, namely the Tim Geithner-inspired “Stress Test”, which just like in the US, have already seen their first mandatory leaks of information. Furthermore, the €310 billion in liquidity that is leaving the system is precisely the amount Barclays’ analyst Joseph Abate predicted would depart: “Market attention is focused on how much of the €442bn stays at the ECB and how much leaves the program: currently there is about €300bn “surplus” liquidity in the euro area market, and so a full rollover is not theoretically needed.” In fact, the lower the roll, simply means that a greater the number of government securities have been pledged elsewhere: “Obviously, the more government securities pledged, the more likely it is the 3m replacement LTRO will be considerably smaller than the €442bn rolling off.” In other words, the ECB’s recent willingness to accept any garbage as collateral has skewed the usefulness of this liquidity transition operation as indicative of absolutely anything.
As Bloomberg reports, no matter how this data is spun, it will likely result in a spike in short term lending rates:
Today’s loans may see short-term market borrowing costs rise as there is less excess cash in the system, Commerzbank AG analysts said. With “excess liquidity vanishing,” monetary conditions are “perceived to be tightening,” said Christoph Rieger, an interest
…
RANsquawk European Morning Briefing – Stocks, Bonds, FX etc. – 30/06/10
by Zero Hedge - June 30th, 2010 6:35 am
Courtesy of RANSquawk Video
Ferguson, Roubini vs. Krugman: Slowdown or Depression for The U.S.?
by Zero Hedge - June 30th, 2010 5:31 am
Courtesy of asiablues
By Dian L. Chu
Paul Krugman, a strong supporter of fiat money, is obviously having a major distress over the G20 push to cut deficits in half by 2013, and stabilize the soaring U.S. debt. In his latest New York Times column, Krugman not only criticizes austerity measures, but also asserts that we are in the early stages of a third depression as a direct result of the spending cut.
Perhaps because Krugman beat him to the punch with this ultimate Doomsday op-ed piece, on this very rare occasion, Dr. Doom--Nouriel Roubini--is actually a lot more optimistic about the economy in the United States when he spoke with CNBC last night. (watch the clip here.)
Roubini – No Recession in The U.S.
In The Kudlow Report, Roubini says he does not see a double-dip recession in the U.S. Rather, the U.S. will experience a slowdown of around 1.5% GDP in the second half of this year, after growing 3% in the first half, he says.
At the same time, keeping up with his Dr. Doom reputation, Roubini does see a recession coming in the euro zone and Japan. There is a risk of a contagion effect to the U.S., which could lead to further correction in stock prices with a double-dip in Europe, Japan “falling off the cliff”, and evidence of a slowdown in China.
Meeting Krugman sort of halfway, Roubini thinks fiscal austerity is needed in Greece, Spain and Portugal, whereas countries like Germany, Japan, China, should be doing fiscal stimulus.
Ferguson Worries about Europe Banks & U.S. Fiscal
Roubini’s view is also shared by Harvard University professor--Niall Ferguson--who told CNBC in a separate interview that
“Right now the picture is definitely bleaker in Europe than it is in the US….I agree with Nouriel on this, it’s not as if the US economy will contract, it will grow at a slower rate.”
In addition to the debt woes in Europe, Ferguson is “nervous” about European banks, which were more leveraged than US banks. He noted the European governments do not have “very deep pockets” as most people have assumed, and Greek crisis revealed the limit of this largesse.
Even though compared with the euro zone, the economic picture in the U.S. does look relatively better; Ferguson said the horrendous fiscal situation means the US is likely to be faced with tough measures to cut the deficit over the longer term.
My Take - Difficult Balancing Act
Based on my biflation analysis, I believe the risk of deflation, not to…
ECB Shuts off Liquidity, Spanish Banks Scream Murder; Spain and Greece Will Both Default
by ilene - June 30th, 2010 4:05 am
ECB Shuts off Liquidity, Spanish Banks Scream Murder; Spain and Greece Will Both Default
Courtesy of Mish
For just under a year, the ECB has offered €442 billion to encourage lending. Instead, and easily predictable, the program did not increase lending and did nothing more than allow weak banks to roll over debts.
The program is now ending and Spanish banks are screaming about the ECB’s "obligation to supply liquidity".
The Wall Street Journal has part of the story in ECB Walks a Fine Line Siphoning Off Its Liquidity.
The European Central Bank is scrambling to reassure markets that Thursday’s expiration of a €442 billion ($547.46 billion) bank-lending program won’t destabilize the financial system, even as banks across the region remain wary of lending to one another.
The ECB introduced the 12-month lending facility last summer to encourage private-sector lending and ensure adequate liquidity within the 16-member currency bloc. Since then, the program, which represents more than half the ECB’s liquidity operations, has become a lifeline to banks in Greece, Spain and other countries hit by the region’s debt crisis.
The cost of borrowing euros in the interbank market rose to an eight-month high Monday, as banks prepared for the one-year loan’s expiration. The euro slid on worries that repayment will expose Europe’s financial system to new threats. Yields on German bunds, seen as a haven, fell.
Some investors worry that vulnerable euro-area banks, unable to borrow in the interbank market, could have difficulty replacing that funding, despite repeated assurances from the ECB that it will provide funds on similar terms, albeit for only three months, beginning Wednesday.
"We are confident that this very large financial transaction can take place without disruptions," ECB governing council member Ewald Nowotny said Friday.
Spanish Banks Whine About the "Obligation" to Supply Liquidity
The Financial Time reports Spanish banks rage at end of ECB offer.
Spanish banks have been lobbying the European Central Bank to act to ease the systemic fallout from the expiry of a €442bn ($542bn) funding programme this week, accusing the central bank of “absurd” behaviour in not renewing the scheme.
One senior bank executive said: “Any central bank has to have the obligation to supply liquidity. But this is not the policy of the ECB. We are fighting them every day on this. It’s absurd.”
Another top director said: “The ECB’s policy is that they
…
What the Revised 1st Quarter GDP Numbers Really Mean
by ilene - June 30th, 2010 3:35 am
What the Revised 1st Quarter GDP Numbers Really Mean
Courtesy of Rick Davis at Consumer Metrics Institute
On June 25th the BEA quietly revised its measurement of GDP growth for the first quarter of 2010 down for the second time, this time to 2.7%. The newly revised growth estimate nearly matches the Consumer Metrics Institute’s original projection for the first quarter, which was 2.62%. The big difference is that the Consumer Metrics Institute’s projection (based on our Daily Growth Index) was available on November 30, 2009 — seven months ago.
Because the Consumer Metrics Institute’s Daily Growth Index only lags the real-time consumer economy by several days and has a day-by-day time resolution, the Daily Growth Index can also tell us something totally missing in the BEA report: that the newly revised GDP ‘freeze frame’ picture captures a moment in time when consumer demand was dropping at a rate of about .08% per day. This means that the difference between the revised GDP and our original projection represents only a single day of economic change. But more importantly, our Daily Growth Index shows the dynamics of the economy at the point in time when the BEA ‘still picture’ was taken.
One other important note should be made about the June 25th BEA release: in it the BEA also increased the inventory component within the 2.7% number from 1.65% to 1.88%. That means that the net-after-inventory-adjustments number was less than 0.9%, and over two-thirds of the reported aggregate growth was from relatively unpredictable inventory swings.
If factories were unwittingly growing inventories during the first quarter in the face of what was really slackening consumer demand, the official GDP numbers for both the second quarter and the third quarter (to be released 4 days before the U.S. mid-term elections) could be interesting, since factories could very well over-correct again — but in the opposite direction.
Because Friday’s BEA release mirrors our Daily Growth Index from November 30th, the index’s subsequent course provides some insight into where the economy has been heading since then. Roughly half a quarter later (on January 15th, 2010) the index fell into net year-over-year contraction. During the nearly two quarters since then the index has been showing mild but continued contraction. When that contraction is charted along with similar contraction ‘events’ from 2006 and 2008 it can be seen that 2010 is shaping up as…
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(