Archive for April, 2009

Overallotment: April 30

Tyler Durden’s Overallotment: April 30

  • Stress test results delayed as conclusions debated (Bloomberg)
  • Fed likely to offer 5 year TALF loans soon (Bloomberg)
  • Buffett faces a grilling from investors (FT)
  • Banks believed to be holding 600,000 foreclosure properties off market (InvestorCentric)
  • P&G forecasts "buyer’s market" in advertising (FT)
  • Swiss bank refuses US tax request (BBC)
  • The 1980 Chrysler bailout (Ritholtz)
  • Swine flu breaks out in 11 countries, shutting schools, offices (Bloomberg)
  • SEC probing Schering trades (WSJ)

Lastly, some good late day thoughts from BTIG’s Mike O’Rourke

“One great problem that we have before us is to preserve the rights of property; and these can only be preserved if we remember that they are in less jeopardy from the Socialist and the anarchist then from the predatory man of wealth. It has become evident that to refuse to invoke the power of the nation to restrain the wrongs committed by the man of great wealth who does evil is not only to neglect the interest of the public, but is to neglect the interests of the men of means who acts honorably by his fellows."

Teddy Roosevelt, May 30, 1907

While Roosevelt’s comments made in the months preceding the panic of 1907, were not responsible for the panic itself, they fueled investor fears in the midst of a bear market a century ago. Today, following six months of vilification of the banking industry it appears there may be a new target for the Administration’s populist ire “While many stakeholders made sacrifices and worked constructively, I have to tell you, some did not. In particular a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout.” Apparently, the talks between the Administration and Chrysler’s lenders were acrimonious and unsuccessful. From the moment the news [hit] the wire that Chrysler would be filing for bankruptcy, the Administration immediately directed the blame at the hedge funds who were senior creditors.

At least in the case of banks a large degree of the Presidents statements were simply rhetoric. As we’ve seen several times in recent months the problem is that once the President commences a populist campaign Congress begins stampeding out

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Oh Yes, That Flu Pandemic Thing

Courtesy of Tyler Durden

Oh Yes, That Flu Pandemic Thing

Looks like Bloomberg is treating the Swine Flu… pardon, the H1N1 issue a little more seriously than our green shooting friends at CNBC. For your convenience, presenting the H1N1TOTC (and H1N1TOTD) index – your friendly tracker of global infections as disclosed by the WHO.



Highlighting The Quants’ Failed Attempts At Leveraging

Courtesy of Tyler at ZH

Highlighting The Quants’ Failed Attempts At Leveraging

As the chart below shows, quant funds attempted to leverage five times in the month of April only to fail every single time. In the meantime the higher trading volume on both the leveraging and deleveraging phase was welcome to brokers like JPM and UBS (and maybe MS?). Net result, the quant performance numbers will be horrendous, as they did not succeed to catch up with their losses as the market went against every single quant factor in existence except for momo high frequency traders who played the simplest of all possible reversion patterns while the market squeezed progressively higher. As ZH reported, the pain at RIEF last week was already likely beyond fixing: this week’s update will only make for some low calorie cake icing.

(for new readers, I recommend you read up on the attached labels to get a sense of the problem)



SPY After Hours Deja Vu

Courtesy of Tyler at Zero Hedge

SPY After Hours Deja Vu

In a replay of yesterday, Morgan Stanley advertised 30 million SPY shares traded at 6:42 pm. Curiously UBS also posted a significant accumulation block, larger than yesterday’s, and indicative of some serious Prime Broker activity.

Whether this was merely ETF creation by the good folks at MS or some much more serious ongoing problems at PDT it is still unclear… Or at least until M/N and L/S quant desks have to report month end numbers. Not surprisingly DB is nowhere to be found: maybe that has something to do with the fact that their quants will soon be following in the quiet footsteps of Boaz Weinstein.


More Wall Street Bashing After Cramdown Amendment Defeated

Courtesy of Tyler Durden at Zero Hedge

More Wall Street Bashing After Cramdown Amendment Defeated

In what is becoming a daily anti-Wall Street litany from the administration, there was more blasting of banks, this time courtesy of Rhode Island Democrat Sheldon Whitehouse who called banks "greedy, stubborn and unreasonable." His Obamaesque remarks came on the heels of the defeat of the cramdown amendment in the senate after a 51-45 vote, which curiously had 12 Democrats voting against the proposal.

The Cramdown measure would have allowed bankruptcy judges to cut mortgage terms and help underwater borrowers avoid foreclosure. As such the vote down is a victory for banks and credit unions who said a passage of the amendment would have led to an increase in loan costs.

And, not surprisingly, another Democrat took the liberty to promote the upcoming Main Street – Wall Street heavyweight title match just that little bit further. Senator Richard Durbin, Illinois Democrat, sponsor of the original legislation and the chamber’s second-ranking Democrat said "These bankers who brought us into this crisis are literally shunning and stiff-arming the people who are facing foreclosure."

Apparently in addition to TurboTax, the current administration needs a refresher course on contract law.

Bet regardless, the defeat of the cramdown bill is a defeat to the Obama administration, which has now lost the battle of chicken every single time it has pushed a creditor to the brink and is looking weaker and weaker. Durbin, however would not let it go – the bank who would have been impacted the most from the Cramdown passage are JPM, Wells Fargo and Bank of America who "are surviving today because of taxpayers’ dollars." Quid pro quo Clarice?

Of course nobody cares about the other side of the argument. “The cram-down measure would have increased the cost of buying a home for all Americans, and that is the exact opposite
result that everyone is working towards right now,” said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable.

But than again what is wrong in having the entire nation pay for the ridiculous greed of a few million fiscally irresponsible potential voters, living way beyond their means, buying vacation homes in Florida and Lake Tahoe, and maxing out their credit cards to buy that 3rd 50 inch plasma TV screen for the second bathroom.


Extreme Home Makeover Depression Edition II

What a waste; file this one under bizarro world. – Ilene

Extreme Home Makeover Depression Edition II

Courtesy of Mish
This post is an update of Extreme Home Makeover Depression Edition where banks acquired brand new homes in foreclosure processes, the homes were not quite finished and the banks razed these homes rather than fix code violations.

Extreme Home Makeover Depression Edition Part 3
A peek inside the homes before they were demolished

Extreme Home Makeover Depression Edition Part 5
Part 4 is not yet available
Home Demolition

There you have it. Brand new nearly completed homes have a negative value because of regulations and are therefore destroyed.

From "Vision Victory" …

The homes were once owned by developer Mathews Homes and picked up by Guaranty Bank in Irvine via foreclosure. Guaranty Bank in Irvine is paying for the destruction of them. 4 model homes and 12 almost finished homes are being demolished. The person running the machine in the video says there are another 20 homes in Temecula California to demolish, about an hour away.

By Patrick Thatcher, staff writer for, Daily Press 

Victorville- The housing collapse is taking a literal form for one bankrupt housing development. Four model homes and 12 nearly finished spec homes at Bear Valley Road and Highway 395 are being demolished.

The developer filed bankruptcy about 18 months ago and the foreclosed property went to Guaranty Bank in Irvine.

A Guaranty Bank official, Real Estate Officer Dean Smith, said they were facing daily fines from the city of Victorville if they didnt do something with the homes and property that not up to code. He said it was a choice of pumping their own money into property site improvements and additional money to bring the home up to code or tear down the 16 homes.

Smith said the bank is not in the building or land development business and because of the current housing market does not see anything happening with the property for at least five years.

Our only option is to either proceed with putting more than a million bucks into the land, which we’ve already taken a huge hit on and lost a lot of money, or, we tear down the houses, Smith

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Dave’s Daily


Dave Fry’s ETF Digest, April 30, 2009


April 30, 2009

There is no end to spin coming from Washington no matter the speaker or party. That’s surely what you can believe in.

Markets closed with whimper today after being up substantially earlier in the day. What’s good about bankruptcy? Or, what’s good about more government aid to a crummy company building crummy cars? Sure we must save jobs but you can rest assured many layoffs will still result.

Volume? Well, it’s confusing. Most sources report volume being heavy; however, looking at many ETFs there wasn’t much volume at all. So, I’m suspicious of these reports. Breadth wasn’t anything special one way or the other.

Now let’s not have the Obama acolytes descend upon us for finding his words regarding Chrysler Orwellian. The headlines will read that April 2009 was the best market month by performance since March 2000. That seems ominous to me since the following month that bear market began in earnest.

This commentary is brief since we have house movers on the scene and I’ve lost (sigh) my big PC with multiple screens.

Have a great weekend!

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, QQQQ, XLF, XLI, XLB, XLY, IYR, DBC, USL, XLE, DBA, MOO, DBB, EFA, EEM, EWJ, IFN, EWH and FXI.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at

Money Morning’s Bank Stress Test Says These Three Banks Are the Strongest

By Martin Hutchinson
Contributing Editor, Money Morning

Money Morning’s Bank Stress Test Says These Three Banks Are the Strongest

Why wait for the U.S. Treasury Department’s bank stress test when Money Morning can highlight the four secrets that will let you separate the winners from the losers in the U.S. banking system?

Call it the "Money Morning Bank Stress Test."

Back in February, I looked at the Top 12 U.S. banks, to determine whether it was really necessary – as U.S. Treasury Secretary Timothy Geithner was proposing at the time – to devote the enormous sum of $1.5 trillion of our money to bail them out. I came to the conclusion that such a huge bailout was unnecessary, and that only a few of the Top 12 banks seemed in any danger of collapse. Fortunately, policymakers and the market have now come to agree with me.

With banks’ first-quarter figures now out, it seems a good time to take another look. Since, at reader request, I had added Fifth Third Bancorp (Nasdaq: FITB) to the Top 12 (I have written on Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS), now technically banks, separately), meaning that we now, here, have a "Top 13" list of banks – a bit smaller than the list of 19 the government has stress-tested.

[I'm aware of the hang-ups and superstitions involving the number "13." But I'll brave the bad luck, as I can't believe that number will stay at 13 for more than a few months; at the bottom end of the quality spectrum, there are clearly a few banks that need to be put out of their misery.]

All of the financial institutions discussed here have been subjected to Treasury Secretary Geithner’s "bank stress tests" and we are told they have all passed, with one exception (more information is due to be released Monday). That is hardly compatible with the government stance – of just two months ago – that another $1.5 trillion would be needed. I would suggest that the truth is somewhere in between the two extremes: Most of these banks are in reasonable shape and can be expected to recover on their own, but a few need to be put out of their misery.

For the U.S. Treasury Department to buy up "toxic
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Job Pessimism Picking Up Again

Courtesy of Tyler Durden

Job Pessimism Picking Up Again

Some 3rd derivative fun – as the chart below shows, the differential between those who see "Jobs Not So Plentiful" and "Jobs As Plentiful" is not only consistently high, but has demonstrated the first rise since October 2008: quite a bearish signal for jobs. Put this in your 2nd derivative green shoot pipe CNBC.


Sequenom takes a swan dive

Today’s tickers: SQNM, YHOO, XLY, XLI, GMCR, NWL, PFE & UBS

SQNM Sequenom, Inc. – Shares of the diagnostic testing and genetics analysis company have plummeted by more than 75%, crashing through the 52-week low for the stock of $6.19, to arrive at the current price of $3.68. The catastrophic decline stems from SQNM’s announcement that the launch of its SEQureDx test for Down syndrome is now delayed due to findings that employees of the company had mishandled crucial test data supporting the product’s validity. The news of the test’s delay does nothing to help the fact that the firm’s first-quarter loss widened to 29 cents per share, and Sequenom received a number of downgrades today including a rating of ‘underperform’ from ‘market perform’ by an analyst at Oppenheimer & Co. Option investors reacted to the bearish move on the stock by picking up 1,500 protective puts at June 2.5 strike price for an average premium of 41 cents apiece. In the near-term May contract, traders shed more than 4,200 calls at the May 5.0 strike for 39 cents each. Investors who were long put options at higher strikes were able to make a killing today by selling the protection. For example, it appears that one trader originally purchased about 3,500 puts for 2.00 apiece on April 1, 2009, and today sold the lots for 6.80 each. The profits garnered on such a trade amount to 4.80 per put option sold. On the flip side, investors who appear to have held a short put position at higher strikes were faced with deep in-the-money premiums. One investor who looks to have sold 3,500 puts at the May 12.5 strike for about 1.20 apiece back on April 1, 2009, today was forced to close out the short position by paying a premium of 9.00 each for the put options. This transaction results in a loss of 7.80. Option implied volatility on the stock sky-rocketed as high as 239% up from yesterday’s reading of 91%, but has since tapered off to the current value of 195.5%.

YHOO Yahoo! Inc. – The global internet brand has experienced a modest 1.5% rise in shares today to stand at $14.27. Options activity was slightly more bullish today with more than 3 call options traded to every put in play on the stock. Optimistic investors targeted the June contract where more than 11,100 calls were purchased…
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Zero Hedge

Explosion Hits Russia's Largest Virus Lab Which Houses Plague, Smallpox, Ebola And Other Deadly Viruses

Courtesy of ZeroHedge View original post here.

A sudden explosion at a Siberian virus research center on Monday reportedly left the facility engulfed in flames, according to several Russian news outlets. 

Firefighters and other emergency personnel were dispatched to the "Vector Institute" located several miles from Novosibirsk - an emergency which was upgraded "from an ordinary emergency to a major incident," a...

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Phil's Favorites

The future of work will still include plenty of jobs


The future of work will still include plenty of jobs

Even though the future is unknown, Canada’s employment rate has risen steadily from 53 per cent in 1946 to more than 61 per cent today. (Shutterstock)

Courtesy of Wayne Simpson, University of Manitoba

There is now widespread anxiety over the future of work, often accompanied by calls for a basic income to protect those displaced by automation and other technological changes.

As a labour economis...

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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Insider Scoop

New Relic Cuts 2020 Sales Guidance, Announces Changes In Management

Courtesy of Benzinga

New Relic (NYSE: NEWR) has reaffirmed its second-quarter guidance and cut its sales guidance for fiscal year 2020 from $600 million-$607 million to $586 million-$593 million.

The company’s chief technology officer, Jim Gochee, and chief revenue officer, Erica Schultz, have resigned. New Relic also named board member Michael Christenson as its chief operating officer. Christenson joins from his ... more from Insider

The Technical Traders

Metals are following downside sell off prediction before the next rally

Courtesy of Technical Traders

It is absolutely amazing how the precious metals markets have followed our October 2018 predictions almost like clockwork.  Our call for an April 21~24 momentum base below $1300 followed by an extensive rally to levels above $1550 has been playing out almost like we scripted these future price moves.

Now that the $1550 level has been reached, we are expecting a rotation to levels that may reach just below the $1490~1500 level before attempting to set up another momentum base/bottom formation.  And just like clockwork, Gold has followed our predictions and price is falling as we expected. Just look at our October 2018 chart where we forecasted the price of gold...

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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 


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Kimble Charting Solutions

Bond Yields Due For Rally After Declining More Than 1987 Stock Crash

Courtesy of Chris Kimble

U.S. Treasury Bond Yields – 2, 5, 10, 30 Year Durations

The past year has seen treasury bond yields decline sharply, yet in an orderly fashion.

This has spurred recession concerns for much of 2019. Needless to say, it’s a confusing time for investors.

In today’s chart of the day, we look at a longer-term view of the 2, 5, 10, and 30-year treasury bond yields.

Short to long term bond yields are all testing 7 to 10-year support levels as momentum is at the lowest levels in a decade.

A yield rally is likely due across the board after a recent decline that was bigger than the stock crash in 1987!

If yields fail to ral...

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...

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The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.


The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:


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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...

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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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About Phil:

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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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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