The Big Picture

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• 10 Wednesday PM Reads
• US Sentiment Market Review
• Fisker Surf Plug-In Hybrid
• Visualizing US/China Trade
• Fantasyland yesterday, delusion today
• BofA/Merrill Lynch Merger: How Did a Private Deal Turn Into a Federal Bailout
• Bring on the Drachma TARP
• James Bianco: More Than 50% Chance of U.S. Recession
• Email of the Day: Thoughtful vs Dogmatic
• Aug Retail Sales, PPI

10 Wednesday PM Reads Posted: 14 Sep 2011 01:30 PM PDT Here are the latest additions to my Instapaper for the ride home: • Tim Geithner, Who Has Never Been Wrong About Anything, Rallies Markets (WSJ) • Tax receipts & the Economy (Dr. Ed’s Blog) • Nasar: How to Prevent Economic Crises (Bloomberg) • Warning on Firms’ Pressure Warning on Firms’ (WSJ) • That IPO Pop? Majority of 2011 U.S. Listings Are Underwater (WSJ) • The Perils of Chasing Buffett (Deal Book) • Meet Bank of America Merrill's New US Stock Strategist, Savita Subramanian (WSJ) • Can you believe Wall Street? (Market Watch) • 8 Star Trek Gadgets That Are No Longer Fiction (Mashable) • U.S. Probe Lays Gulf Spill Blame on BP, Contractors (Scientific American) What are you reading? >

US Sentiment Market Review Posted: 14 Sep 2011 12:30 PM PDT Source: Kevin Lane, (FusionIQ) IQ Outlook , September 14, 2011 Kevin Lane: We sit in the camp that requires more definitive proof from price action before we stick out nose out of the foxhole. In our view it is better to be a bit late, once the move has been clearly established, than to jump into the fray with both feet without limited evidence and then hope for the best. Most charts are still in wide trading ranges and until they are resolved (up or down) it's best to let everyone else churn themselves around in the volatility. We would continue to focus not on the bad news, but rather how the market reacts to it because it's not the news but the reaction that counts . . .

Fisker Surf Plug-In Hybrid Posted: 14 Sep 2011 12:00 PM PDT Source: The Fisker Surf Plug-In Hybrid Is A Sports Car For The Whole Family Fast Company, September 13, 2011

Visualizing US/China Trade Posted: 14 Sep 2011 11:45 AM PDT click for ginormous chart Source: Visual News

Fantasyland yesterday, delusion today Posted: 14 Sep 2011 11:38 AM PDT A Greece spokesperson is saying the following after the call with Merkel and Sarkozy, *GREEK BUDGET DECISIONS WILL SHIELD ECONOMY, STATEMENT SAYS, *GREEK BUDGET DECISIONS IN RECENT DAYS WILL HELP MEET TARGETS, *GREECE DETERMINED TO CARRY OUT ALL ACTS TO MEET BUDGET PLANS. GREECE TO MEET 2012 FISCAL TARGETS, PRIMARY SURPLUS WITH NEW MEASURES. Bottom line, Greece is likely going to get its next 8b euro tranche in 2 weeks but apparently Merkel, Sarkozy and Papandreou still don’t like paying attention to the bond market where the 1 yr yield in Greece is yielding 141.8%, the 2 yr is yielding 74.5% and the 10 yr is yielding 25.7%. This says of course that the only lifeline the Greek government has is thru the generosity of its neighbors as they have almost zero chance of paying back in full all that is owed. I mentioned Merkel being in fantasyland yesterday and delusion is the word today that comes to mind after seeing these Greek headlines. One would think at this point that Greece would want a more pronounced debt restructuring in order to slash their debt instead of playing this game of pretend because they’re afraid to hurt the feelings of bondholders.

BofA/Merrill Lynch Merger: How Did a Private Deal Turn Into a Federal Bailout Posted: 14 Sep 2011 10:00 AM PDT via Scribd: BofA Merrill Lynch How Did a Private Deal Turn Into a Federal Bailout

Bring on the Drachma TARP Posted: 14 Sep 2011 09:30 AM PDT EU versus US: Equity Market Caps vs. Bank Assets > Hat tip Zero Hedge > Here is what Jefferies chief market strategist David Zervos had to say: The bottom line is that it looks like a Lehman like event is about to be unleashed on Europe WITHOUT an effective TARP like structure fully in place. Now maybe, just maybe, they can do what the US did and build one on the fly – wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs – one for each country. That is going to require a US style socialization of each banking system – with many WAMUs, Wachovias, AIGs and IndyMacs along the way. The road map for Europe is still 2008 in the US, with the end game a country by country socialization of their commercial banks. The fact is that the Germans are NOT going to pay for pan European structure to recap French and Italian banks - even though it is probably a more cost effective solution for both the German banks and taxpayers. Where the losses WILL occur is at the ECB, where the Germans are on the hook for the largest percentage of the damage. And these will not just be SMP losses and portfolio losses. It will also be repo losses associated with failed NON-GERMAN banks. Of course in the PIG nations, the ability to create a TARP is a non-starter – they cannot raise any euro funding. The most likely scenario for these countries is full bank nationalization followed by exit and currency reintroduction. Great stuff . . .

James Bianco: More Than 50% Chance of U.S. Recession Posted: 14 Sep 2011 09:00 AM PDT

Email of the Day: Thoughtful vs Dogmatic Posted: 14 Sep 2011 08:59 AM PDT From an anoymous reader: “Have you ever considered switching from thoughtful to dogmatic?  It’s a lot easier and you make more friends.  Plus, sometimes they send you free bumper stickers in the mail.” I found that to be hilarious . . .

Aug Retail Sales, PPI Posted: 14 Sep 2011 08:00 AM PDT Aug Retail Sales were light relative to expectations by a few tenths. Headline sales were flat and up just .1% both ex auto’s and ex auto’s/gasoline. Core spending, which also takes out volatile building materials, was flat. Also, July was revised lower. Sales of vehicles/parts, furniture, clothing, restaurants/bars and at department stores all fell. Sales rose for online retailers, sporting goods, health/personal care, electronics, and food/beverages. Bottom line, huge market turmoil had an obvious impact on retail sales at the same time job hires remain lackluster. Aug PPI was flat headline and up .1% ex f&f, both .1% below estimates. Y/o/Y though saw a PPI rise of 6.5% and core gain of 2.5%. A .4% fall in wholesale car prices and just a .1% gain in trucks helped to keep a lid on the core rate and a 1.1% rise in food prices was offset by a 1% drop in energy prices. CPI is out tomorrow and will be more of a focus for the markets.

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