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Saturday, September 24, 2022

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Tuesday the Market Saw Fed

Woo-Eee!  The Fed rides in to save the day!

The Fed has, (as predicted by me, but who listens to me anyway) has announced a coordinated effort with foreign CBs to inject $200Bn in additional liquidity into the markets in the form of increased reciprocal currency swaps and extended overnight lending rates to effectively 28-day lending rates – something they are calling "Term Securities Lending Facility."  Call it what you want, it's FREE MONEY!

I am so relieved!  I got very nervous yesterday when TXN warned after hours as I went out on a very long limb at 2:30 when I said to members: "I’m taking out my callers right now (the ones I am up more than 50% on) and looking to roll down here so this will be the last time before I give up and it will cost me a lot if I’m wrong about this but I’m just not seeing a rationale to how oil can be at $108 if the economy is so awful or how can the economy be so awful if oil is at $108 (and Elliot Spitzer can afford $5,000 hookers)?"

While our Governor may be playing with hookers it's pimp-daddy Bernanke who's shaking his money maker for the financials (and we just bought XLF calls yesterday too!).  This is so great and the Dow is up over 200 points pre-market.  Is it wise?  Is it just?  No – but it sure is fun while it lasts.

The bad news is this will punch oil through the $110 mark but I talked about my concerns there in yesterday's wrap-up but today is party day and we're going to ignore the fact that our trade deficit got worse and I will take a moment to point out right now the the new and horribly disfigured Rupert Murdoch's Journal, at 8:50 pm, with the Dow up 221 points and 20 minutes after the Fed announcement has the following headlines on their on-line front page:

New York Gov. Eliot Spitzer apologized to the public and to his family, but didn't directly address reports that he has been involved in a prostitution ring. Spitzer has been identified as one of the ring's clients cited in a legal complaint and officials said his involvement was caught on a federal wiretap.  8:48 a.m.

 

Inflationary pressures around the globe are adding to pressure on the U.S. dollar as central banks from China to Chile choose to fight rising prices by letting their currencies appreciate.  7:52 a.m.

 

The U.S. trade deficit widened to $58.20 billion in January as the price for oil set a new record, but the shortfall was smaller than expected, with exports making their largest climb in six months.  8:43 a.m.

Stock Futures Creep Higher

Stock futures pointed to opening gains, though downbeat corporate outlooks and rising oil prices served as reminders of a limping economy.  8:31 a.m.

DOOM and GLOOM people, DOOM and GLOOM is being sold to you and the Journal has taken to coming on like a telemarketer for the Great Depression of 2008.  It's no wonder short positions are approaching record levels and so many people are simply giving up and walking away from the markets.  What Mr. Murdoch's agenda is, it's hard to say – this is why we used to be careful about who controlled the media in this country – neither foreigners or Billionaires should be allowed to own them as Billionaires are a nation unto themselves and allowing a man who controls more wealth than a million individual people to control the media is no different than handing your press over to foreign despots.

Now I would love to sit here and tell you I was right and we have hit a bottom but there is nothing natural about what is happening this morning and we have to be VERY careful and pay attention to what sticks as the morning wears on.  We have to look out for signs of profit taking as well as signs that some of the gains we see may be nothing more than a short squeeze but, on the other hand, maybe I was right and all that money we saw on the sidelines is now ready to go to work as the Fed gave the strongest signal yet that they are going to defend Dow at 12,000 and the S&P at 1,300.  Best of all, they finally found a way to do it without further crushing the dollar.

We don't really care what happened in Asia (up a point) or Europe (up 2% and still going) this morning as everything changed with the 8:30 announcement.  Japan said adieu to Fukui's replacement as the Opposition party rejected the Prime Minister's choice.  China's CPI jumped 8.7% in February  and 20 people died and 150 were wounded in the Pakistani bombing of the day – business as usual in Asia.

In case you were wondering why the Fast Money crew on GE's CNBC pushes water as an investment so much – GE just announced it will be investing $5Bn in energy and water projects in Asia, Latin America and the Mideast as they further diversify away from the US – very slick!

The big news in Europe is someone gave Societe General $8.4Bn so all is well over there and even EADS turned a profit so they were predisposed to rally even before our Fed announcement.

This is a very good time to read the now finished Long-Term Virtual Portfolio review as those bargains are looking pretty hot right at the moment.  TMA is up 75% pre-market and that ship has sailed and going long is probably best for those of you not crazy enough to follow me into short-term plays the past few days.

Like I said, let's not go declaring victory just yet and I'm just going to roll up my April index puts, buy out my putter and enjoy the ride on the long side, these are the gifts that the market chooses to bestow on us once in a while, let's not squander them!

 

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troy- science is a few years away from creating life, if they havent already- totally designed from the ground up

Xian – scary as that is to me, it’s probably true, but the scientists didn’t create the laboratory, they didn’t create the sub-structures (you know – atoms or even a lot of the molecular structures), and they’ve been working for centuries using the building blocks that were there all along.  While this might allow some scientists to think they are playing God, there are others who have a greater reverence for what’s been there all along – e.g. geneticist Francis Collins.  Even Einstein, who was never said to have developed a belief in a personal God once remarked to a young physicist: "I want to know how God created this world, I am not interested in this or that phenomenon, in the spectrum of this or that element. I want to know His thoughts, the rest are details."   What exactly he meant by this is debatable, but for those of us a few rungs lower on the road to figuring it all out (I would certainly put myself in that category) to be absolutely convinced that there is no evidence of a God is clearly to hold steadfastly to belief system that requires its own series of leaps of faith.  

I’ve been reading up on the Term Securities Lending Facility that was announced today. Let me start by saying that those of you who went long BSC this afternoon TOOK A HUGE RISK AND SHOULD THANK BERNAKE FOR SAVING YOUR BUTTS!
There are quite a few reports, such as this one:  tinyurl.com/2m4nv5 suggesting that BSC was facing immediate liquidity problems, and that today’s announcement was tied to this emergency.
 
The TSLF is basically a massive expansion of the TAF and FAF. It does more than the TAF because it allows firms that aren’t depository institutions (like MER) to enter into quasi-repo agreements like depositories do (except they only get treasuries which they then have to swap with another bank for cash). And as we knew this morning, the TSLF expands the junk that the Fed is willing to take to include private agency MBSes and similar private-label "AAA securities". It’s basically a sterilized intervention to promote liquidity, which tells us that there must be serious liquidity problems at certain banks.

Here’s something pretty important long-term, I think (this is being discussed over at Interfluidity). There is almost no way the Fed will be able to "nationalize" these bad securitized debts that it’s holding as collateral. The reason is pretty obvious (once pointed out): the Fed can’t force liquidity onto the banks without losing control of the Fed Funds Rate. So the banks will have to keep their crap somwhere on their balance sheets. If the Fed were to "erase" this bad collateral, the effect would be a huge infusion of money, and they would lose control of the FFR.
 
So this is almost certain to be temporary. It is very likely NOT going to be "paid for" by the taxpayers, barring an act of Congress PLUS some massive liquidity withdrawal by the Fed to compensate. The Fed is crucially limited in the size of its liability side by what the bank reserve balances can handle. One estimate puts the Fed down to about $300-$400bn of remaining "sterilization" capacity at this point.

sakiko – ha!  glad you liked.  Same to you xian.  Truly up there with Louie Louie and the like as one of the all time hardest songs to understand. 
 
Potato Wave…
 
Mark

I’m not going to talk about predicting the future again, because I’m sure we’ve all heard this discussion enough.
Re: http://www.philstockworld.com/newsletters/members/2008/03/11/tuesday-the-market-saw-fed/#comment-124899
Film – What are 76% and 62% retracements? Why are these numbers so important?

Tomorrow at 10:30 we get the oil inventory numbers. It will be interesting to see them, with consumption falling 1% to 3% regionally. In order to compensate for falling consumption, there will probably be an increase in the SPR purchases.

After all, we the taxpayers will be footing the bill for this support of Bush’s oil friends.

I’ve got a few puts on USO in the quiver, just in case supply/demand prevails.

Japan Nikkei is sharply up :

13040.63
382.35
3.02%

troy- i think the concept of god needs to b revisited- perhaps not abolished, but something more along the lines of the quotes from einstein: toning down god’s human/personal attributes and intensifying the natural ones (physical constants and relationships of phenomena, etc).
 
just the graphical depictions of god that r so common in religions say we have a long way to go

Look’s like ya’ll had a great day.  I sit strapped to these computers watching all, except for today.  Attended a silly "trading conference" as a supposed trading expert.  So much for missing the best up market in a few years.  Surprising enuff…still OK due to all the hedging.  But sure wudda been fun!!!
 

David – Are inventories released at 9:30 or 10:30… I’m confused with day light savings time.

DM – those numbers are used in the Fibonacci Retracement tool (cult), and is another thing a trader can believe in.
 
While I was dismissive, as usual, depending on how many people believe those numbers, and where they measure from, and how they vote that risk capital, these numbers become "more real".

DM – BTW, you use Prophet on TOS… the Fib Ret overlay is the fourth icon from the right on the bottom toolbar, build 1070.

Demetrius Michael – The inventories are at 10:30 Eastern Time according to Briefing.com.  No mention of Eastern Standard Time, which would compensate for daylight savings.  I’ll watch for a release just in case.  Thanks… 

xian – sounds like an interesting discussion for later – agreed.  thanks to you as well for engaging.

nice- 25min video, big picture discussion on emerging markets- russia, africa, middle east, s. america, asia. examines political environments (including US), consumer growth, intra-regional trade (ie decoupling), financial markets.
global natural resources and ag talk- good stuff-
 
says US financials "have been attacked by the bears" (HSBC)
Mark Mobius, who oversees $47 billion in emerging-market equities as executive chairman of Templeton Asset Management Ltd, talks with Bloomberg’s Francine Lacqua in London about the U.S. and global economies, Federal Reserve monetary policy, the outlook for the financial industry and his investment strategy.
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vcyVOUTPRgbM.asf

I have a question about liquidity/money supply as it relates to inflation.  The Fed is pumping money into the financial system at an alarming rate (causing inflation).  At the same time Trillions of dollars of paper and real estate equity is evaporating (causing deflation).  In order to assess the true currency base, how should we account for the real estate and market losses against the money supply increase as we attempt to project how much inflation will occur as a result of the interaction of the two forces?  
 

Thanks Sakiko and David.. Though sakiko why do you say you were dismissive. You sound like you believe in them now lol.
I see the phophet chart icon, very cool. It’s magnetic, which is very nice.

DM, Try astrology for predicting future… (only half kidding)
http://www.billmeridian.com/articles-files/history-fin-astro.htm

"Millionaires don’t use astrology, billionaires do!" J.P. Morgan

Even Jeff Mackey on Fast Money was talking about "not trading during the Mercury Retrograde period" (Jan 28- Feb19)

Thanks RD2.0, will read the article in a bit.

 I don’t know crap about developing apps for the iPhone or any other platform, but I LOVE what I am reading from people who do.  I hope Steve Ballmer is right:  http://www.youtube.com/watch?v=hadxBZWxNrs

dm- what’s up? u think things r fundamentally changed (ie fed buying $200B of bad paper and sort of "forgiving" these things for a few years)?
 
i think a real tell will b bad news from a bank (or econ data) that gets bought- also, commodity/USD good news.
 
 

film- so AAPL replaces MSFT to a large extent?

film- u think balmer does yayo b4 these scenes? or is it just being at the top of MSFT?

test

Asia Markets : Wednesday, March 12, 2008

(The following is from WSJ; please cross check with other sources to confirm.)

Japan*
12861.13
202.85
1.60%

Hong Kong*
23422.76
427.41
1.86%

DJ Shanghai*
456.61
-13.93
-2.96%

S.Korea*
1658.83
17.35
1.06%

India*
16311.37
188.22
1.17%

Baltic Dry Index (BDI)
-64
8560
 

 
 
 
 

*close
 
 
 

This is DB (in case display name not yet resolved)
Good Morning Phil, Good morning everyone.
UK is up 1.5%. Dollar a bit weaker against the pound. (My money is in the US for a lot longer I think !)

USO Strategy,  Many Thanks… 

Australia, Japan Lead Asian Market Rally

Asian stocks advanced Wednesday, though markets gave back some gains, after the U.S. Federal Reserve, in a joint effort with other central banks, said it would add up to $200 billion in funds to help resuscitate strained credit markets.

Japan’s Nikkei closed 1.6 percent higher. The market fell from early highs on worries the move would not solve all credit woes. South Korea’s KOSPI finished up 1.1 percent, off highs, but supported by financials and shipbuilders. Australian shares rose 2.4 percent, led by financial firms. But the market ended well off early highs on doubts that the Fed’s action would provide a lasting solution to credit problems. In markets still trading, Hong Kong stocks jumped more than 2 percent as investors cheered coordinated moves by global central banks to inject liquidity into credit markets.

Chinese stocks bucked the rally and were trading over 1 percent lower as concern about monetary tightening caused them to underperform foreign bourses, which surged in response to foreign central banks’ new plan to inject funds in global credit markets.

Euro Markets Follow U.S., Asia’s Rally

European markets followed rallies in the U.S. and Asia, opening broadly higher Wednesday, as a coordinated move by central banks to boost liquidity raised investors’ hope of an end to the market’s funding pressures. The move allows financial companies to use a broader base of securities as collateral, including mortgage bonds that have declined in value subprime crisis began.

In the previous session, the Dow Jones Industrial Average’s fourth-largest point gain on record.

In Europe, the banking sector was the best performer after the liquidity boost and  a report from Belgian newspaper De Standaard that Fortis is in talks with China’s Ping An over a $3.07 billion deal to boost the bank’s solvency.

In corporate news, Standard Life beat forecasts in 2007 with a 43 percent rise in profit boosted by its cost-cutting program and strength in UK pensions. Shares opened more than 5 percent higher. But the company warned that 2008 could be a challenging year. And Lufthansa said 2008 operating profit will rise despite higher fuel costs and financial market unrest.

UK Chancellor of the Exchequer Alistair Darling is widely expected to downgrade growth targets in his first budget and to ignore calls from business for wholesale changes to the country’s tax system.

FTSE : +1.39 %
CAC  : +1.58 %
DAX  : +1.3 %

Oil Prices Hold Steady at $108
Oil prices steadied on Wednesday after hitting a record near $110 overnight, as investors grappled with a boost to the dollar after the U.S. Federal Reserve and other central banks pumped fresh funds into the financial system.

U.S. crude [ 109.09    0.34  (+0.31%)] for April delivery fell 5 cents to $108.70 a barrel in the Asian session, coming off the record $109.72.
London Brent crude [ 105.27    0.02  (+0.02%)]  edged lower, down from an all-time high of $105.82.

Oil prices could face pressure from a drop in demand this year, with the International Energy Agency saying world oil demand would be less than expected in 2008 due to an economic slowdown and high oil prices. The agency added in its latest monthly report that demand remained buoyant in China and the Middle East, and only a severe world recession would send oil below $60 for a sustained period.

The U.S. Energy Information Administration was also bearish on demand, revising downwards its previous forecast of world oil demand growth in the second quarter. But OPEC would defend oil prices should they fall to $80 a barrel, Venezuelan energy minister Rafael Ramirez said. In the United States, crude stocks were expected to grow by 1.7 million barrels in the week to March 7, a Reuters poll showed ahead of the weekly U.S. inventory data due later on Wednesday.

Gasoline stocks were expected to show a small build, with distillates to fall.

Dollar’s Rally on Fed Measures Proves Short-Lived

The dollar eased back towards record lows versus the euro on Wednesday as a pick-up in risk appetite prompted by central bank measures to boost liquidity petered out. On Tuesday the Federal Reserve lifted short-term funding to primary dealers to $200 billion and allowed them to use a wider array of mortgage debt as collateral. Central banks in the euro zone, Britain, Canada and Switzerland also took action. This sparked a rally in equity markets and set the dollar up for its biggest one-day percentage rise versus the yen in nearly seven months.

On Wednesday investors were more skeptical, doubting whether the central bank measures could solve problems in the economy or the credit market, so they took profits on the dollar’s gains. The dollar fell 0.3 percent against a basket of six major currencies to 73.039, edging towards a record low of 72.462 set at the end of last week.

It also eased against the yen [103.21    -0.17  (-0.16%)   ] but stayed well above Friday’s eight-year low around 101.40 yen.
The euro [ 1.5371    0.0035  (+0.23%)   ] was up on the day against the dollar.

"Were the Fed to do another 75 bps next week, with the commentary so far from the ECB still hawkish, it would probably hit the dollar and send (the euro) over $1.55. We don’t think it’s topped out just yet," said McMahon at Credit Suisse.  With the euro still up more than 5 percent since the start of the year, investors will be looking for any comments from policymakers on exchange rates.

Gold eases as Fed liquidity plan boosts dollar, equities
Gold eased in early trade as the dollar remained slightly firmer against the euro, supported by yesterday’s news that the Federal Reserve is to inject fresh liquidity into the credit market. With the major European stock markets opening in the black this morning and the dollar remaining a touch firmer, gold has eased back further from the all-time high of 992.90 usd an ounce it reached last week.

At 9.14 am, gold was trading at 970.20 usd an ounce against 974.50 usd in late New York trade yesterday. Silver followed gold’s path lower to trade at 19.46 usd an ounce against 19.66 usd yesterday. Among other precious metals, platinum sank to 2,007 usd an ounce against 2,045 usd, while palladium slipped to 479 usd compared to 494 usd at the close yesterday.

DB,  to change your public name look below and click on your "Logged in as" name.  Read the menu on the left of the screen.  Change your name and save it.  The save box is on the right.  Hope it works for you…

Phil,
EK in 25 KP:
Is there any hope to save these or should we try to get the nickel and forget about them? (Not forgetting the 1/2 must sell after DD).
Thanks!

Phil,
25 KP: BA Apr 80s
These are still naked in my acct – Apr 75s are now 2.5 and the May 75 roll costs 2.8 – are you still planning to roll with full cover ?

sakiko – re: yesterday’s parsing/10KP question, i’d say no because that line was addressed to an individual (alex) which phil usually designates with a hyphen at the beginning of the sentence.  I think Phil usually starts actionable items with the actual ticker name right?  Your point is taken though, there would have to be rules for the parser to automagically pick up on.

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