Get Your Convergence Hats Out
by Zero Hedge - August 31st, 2010 10:46 am
Courtesy of Tyler Durden
Time to short the ES, long the AUDJPY. With nothing except momentum (and grotesquely mutated at that) working right now, the recent batch of horrible news only managed to push stocks about 8 points rich to intrinsic. It seems the beta chasing levered play is getting exponential, with corerlation desks now applying multiple of leverage to underlying correlations that were not there before, explaining the disproportionate surge in the ES compared to the move in AUDJPY. Which is why for those willing to test out today’s increasingly broken market, the time to put today’s FX-risk convergence trade on is now.
P.S. Whatever you do, don’t look at the massacre happening right now over in EURCHF land.
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DiggGoldman’s Take: Confidence Number Weaker Than Headline Indicates As Rise Was All Due To Hopium Consumption
by Zero Hedge - August 31st, 2010 10:36 am
Courtesy of Tyler Durden
Confidence Higher; Chicago Lower; Both a Bit Softer than Headlines Suggest
BOTTOM LINE: Confidence index rises modestly, but all in expectations. Consumers’ assessment of labor market conditions is actually slightly worse. The Chicago purchasing managers’ index weakens in line with expectations in August, as indexes for new orders and production fall.
US-MAP
Conference Board confidence index 0 (3, 0), with -1 judgmental adjustment for composition of detail.
Chicago purchasing managers’ index 0 (4, 0)
KEY NUMBERS:
Conference Board confidence index up 2.5pts to 53.5 in August vs. GS 51.5, median forecast 50.7.
Chicago pm index down 5.6pts to 56.7 in August vs. GS 58, median forecast 57.
MAIN POINTS:
1. The Conference Board reported a 2.5-point increase in its index of consumer confidence, to 53.5. Although this was better than generally expected, the composition of the change was soft. In particular, the gain was all in expectations; the index of present situation fell to 24.9 from 26.4. Moreover, the split between those seeing jobs as plentiful vs. hard to get widened to -41.9% of the respondent sample from -40.7% (revised from -41.5%) previously. As a result, we have judgmentally adjusted the US-MAP reading to show no significant surprise, with the composition offsetting the better-than-expected headline.
2. The Chicago purchasing managers index fell by 5.6 points to 56.7 in August. The details of the report were in line with the weakened headline, if not a bit softer; the sub-indexes for new orders and production both declined considerably (by 9.4 points to 55.0 and by 7.4 points to 57.6, respectively) while order backlogs and employment fell modestly (by 1.4 point to 56.2 and by 1.1 point to 55.5). The supplier deliveries index rose from 59.4 to 61.2. The index of inventories – which does not enter the headline number – fell 4.3 points to 46.5.
Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected
by ilene - August 31st, 2010 10:33 am
Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected
Courtesy of Tyler Durden
Paul Farrell’s take on Jeremy Grantham’s recent essay Seven Lean Years (previously posted on Zero Hedge) is amusing in that his conclusion is that should Obama get reelected, his entire tenure will have been occupied by fixing the problems of a 30 year credit bubble, and if anything end up with the worst rating of all time, as the citizens’ anger is focused on him as the one source of all evil. "Add seven years to the handoff from Bush to Obama in early 2009 and you get no recovery till 2016. Get it? No recovery till the end of Obama’s second term, assuming he’s reelected — a big if." Also, Farrell pisses all over the recent catastrophic Geithner NYT oped essay, which praised the imminent recovery which merely turned out to be the grand entrance into the double dip: "In his recent newsletter, "Seven Lean Years Revisited," Grantham tells us why expecting a summer of recovery was unrealistic, why America must prepare for a long recovery. Grantham details 10 reasons: "The negatives that are likely to hamper the global developed economy." Sorry, but this recovery will take till 2016."
For those who have not had a chance to read the original Grantham writings, here is Farrell’s attempt to convince you that Grantham is spot on:
But should you believe Grantham? Yes. First: Like Joseph, Grantham’s earlier forecasts were dead on. About two years before Wall Street’s 2008 meltdown Grantham saw: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it’s bubble time. … The bursting of the bubble will be across all countries and all assets … no similar global event has occurred before."
Second: The Motley Fools’ Matt Argersinger went back to the dot-com crash of 2000: Grantham "looked out 10 years and predicted the S&P 500 would underperform cash." Bull’s-eye: The S&P 500 peaked at 11,722; it’s now around 10,000. Factor in inflation: Wall Street’s lost 20% of your retirement since 2000. Yes, Wall Street’s a big loser.
Third: What’s ahead for the seven lean years? Wall Street will keep losing. Argersinger: "Grantham predicts below-average economic growth, anemic corporate-profit margins, and other
…
Consumer Confidence Jumps To 53.5 In August From 51.0; Stocks Explode As Confidence Is 23 Points Below 5 Year Average
by Zero Hedge - August 31st, 2010 10:06 am
Courtesy of Tyler Durden
Consumer confidence comes in at 53.5 in August versus 51.0 in July: somehow the fact that the economy officially double dipped in the month was lost on the 6 or 7 top CEO respondents in the Conference Board rolodex. Just one word can explain this one: Lol. At least the idiots at the CoCo retardo institute made their tail wags dog shell game seem just a little credible by declining the read on the job plentiful from 4.3 to 3.8, and there was even a decline in the jobs hard to get category from 45.8 to 45.7… but somehow confidence was higher. Enjoy your bizarro day trading.
Below is the chart of consumer confidence coming in 23 points below the 5 year average. Green shoots indeed… if by confidence one measures just how sure consumers are they are about to get royally raped.
Chicago PMI Misses Expectations, Plunges From Prior Print… Futures Surge
by Zero Hedge - August 31st, 2010 9:53 am
Courtesy of Tyler Durden
The Chicago August PMI just came out at a new 2010 low of 56.7, missing expectations of 57.0, and a plunge from the prior read 62.3. The decline was across all key subindices, with Employment (55.5), New Orders (55.0), Prices Paid (57.2), and Production (57.6) all coming in below the prior prints. And yes, this was a miss, which makes it a little odd and embarrassing trying to explain to dramatic surge in the AUDJPY (and its derivative, stocks) the second this number hit the tape: almost as if someone will do anything in their power to prevent a plunge in the market on this day of ongoing weak data, especially since the NY ISM came in at a one year low earlier, confirming the double death of the economy.
AUDJPY reaction to disappointing news. Someone explain this to us… and to Brian Sack, who seems to consistently confuse the buy and sell (lol) buttons.
From DJ on NY ISM:
“NEW YORK, Aug 31, 2010 (Dow Jones Commodities News Select via Comtex) --New York City business activity continues to slip further in August from its May blazing pace, according to a report released Tuesday.
The Institute for Supply Management-New York’s Current Business Conditions index fell to 55.6 from 59.4 in July. It was the lowest reading since 54.5 in August 2009 and well below the 89.9 hit in May.
An index reading above 50 indicates a faster pace of activity and less than 50 indicates a slower or contracting rate.
The report also showed businesses scaling down their expectations. The Six-Month Outlook index fell to 58.4 from 69.6 in July.
The subindexes were weak. The ISM-NY’s employment index fell to 50.0 from 51.5, and its purchasing volume index slowed to 54.3 from 59.4. The Prices Paid index fell to 43.2 from 48.5.As with other economic reports, the ISM-NY numbers are decidedly weaker than reports earlier in the year. The disappointing numbers point to U.S. economic growth far slower in the second than in the first, when real gross domestic product grew at an annual rate of about 2.6%.
For its special monthly question, the ISM-NY asked about access to financing. The results showed working capital shortages remain a concern. Among the respondents reporting a problem, 12% face difficulty obtaining financing, 40% have shortfalls
…
The Oxen Report: As Summer Closes, We are Loving the Shorts
by David Ristau - August 31st, 2010 9:22 am
Hello all. Ah the fairness of the market. Record record profits, beat revenue and EPS estimates, guide in-line moving forward, and drop 3%. Or, you can be our upcoming pick and further your losses, guide below, beat EPS estimates, and have no turn to profit in sight…and jump 4%. Makes sense right. This is one of the main reasons why I feel that buying is not for me right now. I am holding our Buy to Overnight to start the morning at least for a little bit. I want to see what it can do.
Otherwise, we are avoiding all buys. This market is just atrocious…
Short Sale of the Day: Energy Conversion Devices (ENER)
Analysis: We are avoiding the buys today, and we are looking at a short that can complement what appears yet another sliding downwards day. Today, we have Energy Conversion Devices (ENER). The company is energy convertor company that supplies materials, tools, and consulting for renewable energy companies mostly in the solar industry. The company, this morning, reported an earnings beat with a loss of 0.48 per share. The company was expected to be at -0.60. One year ago, however, the company was at -0.37. Further, the company guided below what was expected mobing forward. Yet, the stock is up nearly 4% in pre-market trading. Why?
I am not sure, and that is why it is a great short sale candidate. The stock has lost a lot of value moving into earnings, and it did not have a ton more downside prior to this morning. The 4% movement puts it into a short term overvaluation, and I do not think its earnings are strong enough to support such valuation.
The stock is definitely going to have trouble maintaining its gains because of its guidance and the fact that it is a trader’s stock. It is below $5, so a lot of institutions stay away from the stock. Therefore, I expect a lot of profit taking to be done since short term traders are involved.
Technically, the stock was in the pits, but a gain of 3-4% will really change the short term picture of this stock. It will become a bit oversold, fair valued, and move near its 50-day moving average. All that will give it a temporary ceiling, and it will either break through or fall. I am thinking after…
Case Shiller Comes In Better Than Expected; House Prices Increase… As Of Two Months Ago
by Zero Hedge - August 31st, 2010 9:13 am
Courtesy of Tyler Durden
The two month delayed Case Shiller index came in at 4.4% for Q2, after having fallen 2.8% in the first quarter. Nationally, home prices are 3.6% above their year-earlier levels. In June the Y/Y change for the Composite 20 portion of the index was 4.23% on expectations of 3.6%, with the previous 4.61% revised to 4.64%. Again, as this index shows how the economy performed almost a quarter ago, this can and should be completely ignored. Furthermore, the non-seasonally adjusted index came in at a far more somber 2.3% increase, but this number too is irrelevant. Obviously, nobody has explained the definition of lagging indicators to the computers trading the SPOOs, so this headline was enough to push futures a few handles higher, even though we have much more coincident data that show just how bad housing has been in July already. But who cares. Just give Atari an excuse to do its positive feedback loop thing.
More from the release:
Data through June 2010, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index rose 4.4% in the second quarter of 2010, after having fallen 2.8% in the first quarter. Nationally, home prices are 3.6% above their year-earlier levels. In June, 17 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up; and the two composites and 15 MSAs showed year-over-year gains. Housing prices have rebounded from crisis lows, but other recent housing indicators point to more ominous signals as tax incentives have ended and foreclosures continue.
Even at Marquis Trump Properties, Your Lyin’ Eyes are Belying the Real Estate is Bottoming Mantra
by Zero Hedge - August 31st, 2010 8:55 am
Courtesy of Reggie Middleton
Last year I took the readers of my blog through a visual tour of the condo market in NY from Chelsea Pier to Prospect Park Brooklyn. Even the born and bred NYers were flabbergasted. See (again) “Who are ya gonna believe, the pundits or your lying eyes?”, “Who are you going to believe, the pundits or your lying eyes, part 2″. Well, things aren’t looking much better a year later. They are still doing construction next to sites that still can’t sell out their inventory next to sites that are falling into disrepair due to unpaid maintenance charges, next to sites that owe the city money, next to… You probably get my drift by now.
Well, the WSJ reports…
Trump SoHo, the flashy 46-story downtown hotel and condominium, is taking another unusual step to boost sluggish condo sales—offering substantial discounts to buyers who have already signed contracts but not yet closed.
These discount offers run to around 25% of the agreed-upon purchase price, according to documents reviewed by The Wall Street Journal. They’re being used as a special encouragement to convince buyers who might be getting cold feet to close their deals.
Discounts are being offered to prod Trump SoHo buyers to close.
Rodrigo Nino, president of Prodigy International, the sales and marketing company for Trump SoHo, declined to discuss the size of the discounts or how many buyers have accepted them. He said Trump SoHo “is not unilaterally offering concessions. The requests have been handled on a case-by-case basis.”
Even taking into account these markdowns, Mr. Nino added, “the average net closing price is in excess of $2,500 per square foot.”
The price cuts aren’t the first measure Trump SoHo has taken to get committed buyers to close on their deals. The developers, the Sapir Organization and Bayrock Group, are putting together a plan to offer direct financing to potential buyers who can’t secure enough credit to purchases condos. Mr. Nino said the program would be implemented “shortly.”
Granted, the condotel market experienced its own mini-bubble which is still being deflated, but it is only a microcosm of the larger condo glut. After benefiting from government bubble blowing, commercial and residential real estate should continue on its downward trajectory until true equilibrium…
How Has BoomBustBlog Research Done For 2010?
by Zero Hedge - August 31st, 2010 8:47 am
Courtesy of Reggie Middleton
Crains NY ran a happy, go lucky article today:
The stubbornly dismal economy means at least one thing: an extended stay in the spotlight for a handful of star analysts whose defining characteristic is their extraordinary bearishness. And, of course, their accuracy.
There’s Albert Edwards, a London-based analyst from France’s Société Générale, who believes the Standard & Poor’s 500 will sink to 450, a sickening 57% drop from its current level. There’s David Rosenberg, chief economist at Toronto money manager Gluskin Sheff, who warns that deflation is going to pull down the U.S. economy for years.
And then there’s the New York star of this gloomy show: Reggie Middleton, a Brooklyn entrepreneur who turned to analyzing global markets after a stint buying and renovating apartments in Fort Greene and Clinton Hill. (See “Prophet of doom,” April 19.)
Bad as things may be for the economy, Mr. Middleton warns that they’re poised to get much worse. Prices of real estate, stocks and bonds are all headed for serious falls… Wages will decrease, unemployment will increase. Fun, eh?
…
The culprit, Mr. Middleton says, is Washington. The bank bailouts, nationalization of Fannie Mae and Freddie Mac, and other interventions during two presidencies prevented the market from bottoming out in 2009 like it should have, he says. Now that the economy is weakening again and the heavily indebted U.S. government has fewer rescue options, the reckoning is coming. Markets of all kinds in the United States and Europe will get hit—hard.
“In my opinion, the amount of risk in the system is even higher than in 2008,” he says, adding this rare dash of hope: “2013 might be a good time to start taking a look at buying assets again.”
Mr. Middleton has been startlingly accurate in the past. He forecast the collapse of the housing market in 2007, and in early 2008 warned of the demise of Bear Stearns weeks before it happened. Earlier this year, he said that Ireland’s finances were in terrible shape long before Standard & Poor’s got around to downgrading that nation’s credit rating.
For those of you who don’t follow my blog, Mr. Elstein (the article’s author) was referring to:
- The Housing Market in 2007 (as it turns out, I was actually
…
Frontrunning: August 31
by Zero Hedge - August 31st, 2010 8:38 am
Courtesy of Tyler Durden
- Waldo spotted: secondary accounts of Zhou’s whereabouts come streaming in as a panicked China can not put enough pictures of him on the PBoC site, Japan can not confirm his existance loudly enough (Bloomberg), Stratfor now reports defection has been refuted (Stratfor), and Washington Post confirms no sightings of Zhou in downtown D.C. (WaPo)
- Gold Rallying to $1,500 as Soros’s Bubble Inflates (Bloomberg)
- Steve Keen – Bernanke’s blind spot (Business Spectator)
- Ireland Seeks to Wean Banks Off State Guarantee (FT)
- China should act if property market defies cooling (Reuters)
- Japan Defends Economic Policy Steps as Yen Strengthens Anew, Stocks Slide (Bloomberg)
- US Housing woes compound job fears (FT)
- Bernanke’s song & dance act in Jackson Hole (Post)
- The Paradox of the Zero Bound (Hussman)
- Bank of Japan takes fresh stimulus steps (except for actually taking any real steps, the SNB can do that) (FT)
- Australia’s Gillard warns of political gridlock (Reuters)
- No improvement in eurozone unemployment rate (10.0%) despite transitory export-boom. It’s all downhill from here (WSJ, FT)
- US pay law branded ‘logistical nightmare’ (FT)
- Hungary `Can’t Afford’ to Delay Deficit Cuts, EU’s Rehn Says (Bloomberg)
- Ozawa May Drop Out of Race Against Kan for DPJ President, Mainichi Says (Bloomberg)
- Titan Capital Joins Black Swan’s Taleb in Raising Bets on Crash (Bloomberg)
- The idiocy will soon be over: Dell will likely not overbid for 3Par (Reuters)
- Ignore Talk of a Housing Tax Credit ‘Revival’ (WSJ)
Economic Data:
- Euro-Zone CPI Estimate for August 1.6% – in line with expectations Consensus 1.6% Previous 1.7%
- Euro-Zone Unemployment Rate for July 10.0% – in line with expectations Consensus 10.0% Previous 10.0%
- Germany Unemployment Change (000′s) for August -17K – lower than expected Consensus -20K Previous -21K
- Germany Unemployment Rate (s.a) for August 7.6% – in line with expectationsConsensus 7.6% Previous 7.6%
- Switzerland UBS Consumption Indicator for July 1.860 Previous 1.795
- UK GfK Consumer Confidence Survey for August -18 – higher than expected Consensus -24 Previous -22
- UK M4 Ex OFCs 3M Annualised for July 5.6%Previous 6.8%
- UK Net Consumer Credit for July 0.2B – higher than expected Consensus 0.0B Previous -0.1B
- UK Net Lending Sec. on Dwellings for July 0.1B – lower than expectedConsensus 0.7B Previous 0.5B
- UK Mortgage Approvals for July
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