- Did U.S. Tax Policies Increase Economic Inequality?
- 10 Thursday PM Reads
- Those MF Global MFs!
- The Small-Large-Europe Disconnect
- Rickards: The Next Global Crisis, Currency Wars, Have Already Begun
- Dudley again talking QE3
- The Housing Crash Was Caused by MTV Cribs
- Today, SPX in gold terms at March ’09 lows
- Nevada AG RoboSigning Indictments
- 10 Thursday AM Reads
Posted: 17 Nov 2011 04:00 PM PST
Posted: 17 Nov 2011 01:30 PM PST
Here is your afternoon train reading
What are you reading?
Posted: 17 Nov 2011 11:30 AM PST
We have a good friend with money tied up in the MF Global debacle.
As of November 1st, he had close to $100K in his "segregated" futures account with no open positions (BR: Not FU money, but real cash nonetheless). He says the MF Global website is shut down and the phones don't ring when he calls. This guy was a "big swinging Richard" at one of Wall Street's biggest firms and now trades his own account.
Here is his letter of rebuke to MF Global, which he passed on to us. Can you tell he is a little peeved?
Posted: 17 Nov 2011 11:00 AM PST
The Small-Big/Domestic-International Disconnect
I tend to focus my attention on market internals through relative price ratio analysis to identify if certain consistent messages are occurring beneath the market’s surface. Intermarket analysis, which attempts to look within and across markets, requires analyzing not just a single sector or asset class, but several to see if investors are consciously or unconsciously sending messages through price movement.
This has certainly been a tumultuous year because of lingering fears over Europe, but despite the volatility, the S&P 500 as of writing has essentially gone no where (SPY, the S&P 500 ETF, is literally up about 0.08%). The Russell 2000 (IWM), however, for the year has fared worse, down about 5.9% and strongly underperforming. If you believe that markets here in the U.S. have been suffering because of economic concerns over the Eurozone, that spread differential should not make any sense.
Consider the following. From a market-cap perspective, small-cap stocks (IWM) tend to be more sensitive to the domestic economy than anything happening overseas. Intuitively this should make sense because globalization is driven by the biggest and most cash-rich companies in the world. In contrast, large-cap stocks (SPY) actually have quite a bit of exposure to overseas markets, with some estimates suggesting about half of the S&P 500′s revenue coming from outside the U.S.
Well wait a minute – if the volatility is being caused because of Eurozone recession/depression/implosion concerns, then why are large-cap companies which have so much exposure to revenue coming from overseas markets outperforming small-cap companies which are more sensitive to the U.S? Could it be that broad market averages are unjustified at these levels given conflicting messages from Europe, Emerging Markets, and U.S. small-cap stocks?
Michael A. Gayed, CFA is Chief Investment Strategist at Pension Partners, where he structures portfolios. Prior to this role, Michael served as a Portfolio Manager for a large international investment group, trading long/short investment ideas in an effort to capture excess returns. In 2007, he launched his own long/short hedge fund, using various trading strategies focused on taking advantage of stock market anomalies. Michael earned his B.S. from New York University, and is a CFA Charterholder.
Posted: 17 Nov 2011 10:48 AM PST
Posted: 17 Nov 2011 10:30 AM PST
It of course remains to be seen what the FOMC decides to do, if anything, at the Dec 13th meeting but Fed Vice Chairman Dudley again is laying QE3 on the table. “I am deeply unhappy with the current forecast of prolonged high unemployment, and will continue to review whether there is more that we could do that would bring more benefit than cost.” “We could purchase more longer term financial assets…If additional asset purchases were deemed appropriate, it might make sense to do much of this in the MBS market. This would have a greater direct impact on the housing market and would be less likely to disrupt market functioning compared with further purchases in the Treasury market.” Currently, the average 30 yr mortgage rate is 4.02% according to bankrate.com, just 2 bps from multi decade lows. Notwithstanding this extraordinarily low rate, for those that can get it, Dudley is of the same mindset of Bernanke and Yellen on policy and it’s this extremely dovish trio that are calling the shots. In terms of the market, whether its noise of super committee standstill or something else, the moves today will be exaggerated due to SPX option expiration tomorrow where the open interest is large at the 1200 line.
Posted: 17 Nov 2011 09:29 AM PST
I want to respond broadly to some of the advocates who still seem to be missing the concept of Proximate Cause. We can substitute all sorts of things in the general statement “The housing boom and bust was caused by ____” — but only if you don’t care about things like proximity or statistical validity.
Indeed, if I were to ignore the hard data and focus on the squishy narrative, I end up with tracing the blame to one simple source: MTV Cribs.
The series showcased the huge, luxurious homes of the rich and famous in music, film, and sports. It was watched by young, easily influenced kids who would soon be out on their own, buying Cribs that they themselves could not afford.
Even worse, MTV Cribs was imitated by lots of other property porn shows on HGTV (Designed to Sell, House Hunters, Dream House, Extreme Homes) or TLC (Trading Spaces), or the Discovery channel.
But it all traces back to Cribs . . .
<Sarcasm Mode Off>
Posted: 17 Nov 2011 08:15 AM PST
I’ve done this analysis before in the past and while most people look at the stock market strictly in nominal terms, I still believe it’s always important to have perspective in terms of its value in other currencies. With the move lower in gold (another currency) today to a two week low and the S&P’s around 1235 after yesterday’s selloff, the S&P 500 priced in gold terms is at the exact same level seen on March 6, 2009 when the SPX cash hit 666 intraday. Then, one ounce of gold bought 1.41 times the SPX and today it does as well. Money printing and the debasement of fiat currencies can cover up many ills and make things look better than they really are in terms of purchasing power.
Posted: 17 Nov 2011 08:00 AM PST
Below are the first criminal charges brought in the foreclosure fraud scandal. Every state Attorney General will take note of what Nevada AG Catherine Cortez Masto just did.
We’ve read the indictment, and those 606 charges are no joke. Just open it up to any page and you’ll see what was going on. A likely probability is that Nevada AG Masto is starting by going after mid-level employees, with the intent to flip up the chain.
According to the WSJ, the charges were brought against Lender Processing Services employees. As Yves Smith explains, LPS handled much of the foreclosure mill network used by the big banks.
Indictment (First Page)
Posted: 17 Nov 2011 07:00 AM PST
Late to the office due to some chores that had to be dealt with. Here is what I was reading on the way in:
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