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sick and bored
May. 14th, 2010 12:37 pmI'm sick, tired, bored, and achy, and sitting at home. And bored. Did I mention the bored part? I'm bored. I might have econ later but my head hurts and right now I'm too tired. Entertain me?
May. 14th, 2010
set it off with a feather
May. 14th, 2010 08:45 pmGood evening, Cascadia! Another exciting week in the markets wraps up. Lemmie cut to the chase: a lot of the commentariat are talking up about this being a good week because markets ended up across the five calendar days. That's a load of crap. This was a crazy week. Bull markets do not act like this. They simply do. not. We're whipsawing back and forth from drunken intervention to drunken intervention. Day traders aren't leaving money on the table overnight anymore because they don't trust their reaction times and they don't trust the markets not to spike randomly overnight.
We opened the week with what might as well be a market reset, or a crash up. On the NASDAQ, where all issues start trading at once, it's 100% gap upwards; on the S&P 500 and DJIA it looks like partly a gap up and partly a rapid climb, but that's just an artefact of the staggered opens on the NYSE. It's just an over-weekend pop straight up. It's organic like high-fructose corn syrup is organic. From that pop, we had a down week, and a pretty bad one, down around 2%, closing about half the de facto jump. Volatility is crazy, there's huge intervention in the Russell 2K all week... aaaaaand then there's the Euro.
Don't underestimate the desire (and possibly the ability) of the ECB and member countries to try to patch this up. You're seeing Paul Volker talk a lot about the possible 'disintegration' of the Euro (more here) and that can't be ruled out; there's renewed talk of the UK walking away from parts of the EU agreement(!) after several EU ministers told the UK not to expect help in a Pound Sterling crisis, Zero Hedge reports on mind-boggling futures action, Republicans in Congress have whipped together an anti-Euro-bailout bill (which is mostly posturing, but does reflect sentiment), news reports say France threatened to pull out of the Euro (denied), persistent rumours say Germany is preparing to jump back to the Deutschmark - pretty much everybody is betting against the Euro at this point.
Which is exactly the time when you get the kind of snapback surprise that takes your head off. I don't know what's going to happen this weekend; but I do know that the member states of the EU invested a whole hell of a lot in getting this thing off the ground, and that kind of monumental effort has a lot of momentum. They might let it devalue; I'm hearing targets of Euro-USD parity. But if they can keep this thing alive, they're going to. If the carry trade falls apart, they won't be able to, and it's all going to go straight to hell. It was testing multiyear lows against the US dollar into the close today.
But where is this all coming from, I hear you ask. It's the debt crisis that never went away. I've talked about the problems of governments taking on all this bad debt, in these bailouts funded by valueless securities being exchanged for T-bills and the like, and how the difference between the US of 1933 and the US of 2010 is that the US balance sheet was in comparably good shape - and Roosevelt could spend lots of money and inflate the economy. But this time government balance sheets are also badly corrupted, and, well, we're all talking about sovereign debt crises and defaults. This is all fundamentally deflationary in the long term, as fungible credit gets annihilated.
Todd Harrison at Minyanville has this to say:
US Consumer Sentiment rose to 73.3 in May, a modest increase. Retail sales climbed 0.4%. First-time jobless claims are being reported as "falling to" 444,000, except that's comparing revised to unrevised; all things equal, it was flat. US manufacturing rose 1% in April, but oil futures are cratering going into summer, which isn't all US dollar strength. China is getting worried about a 'hard landing' and going into recession, and reportedly is considering easing monetary policy. Videogame sales plummeted in April. TiVo shares got suckerpunched on a setback in their patent battle with Disk Network.
Calculated Risk has an interesting post up about structural reductions in mobility in the US, traceable directly to the housing collapse. They think it's hurting the recovery. But hiring is starting to pick up, as is reflected in the consumer sentiment numbers. Illinois is "broke, and can't pay its bills" as California governor Arnold Schwarzenegger announces plans for massive budget cuts. "During the press conference, Schwarzenegger compared California to Greece. Ouch."
Four banks (so far) on the FDIC Friday hit list: Midwest Bank and Trust Company, Southwest Community Bank, New Liberty Bank, and Satilla Community Bank.
And that's it. Hopefully I'll be better enough tomorrow to go to the U. District Streetfair! Have a good weekend, everybody.
We opened the week with what might as well be a market reset, or a crash up. On the NASDAQ, where all issues start trading at once, it's 100% gap upwards; on the S&P 500 and DJIA it looks like partly a gap up and partly a rapid climb, but that's just an artefact of the staggered opens on the NYSE. It's just an over-weekend pop straight up. It's organic like high-fructose corn syrup is organic. From that pop, we had a down week, and a pretty bad one, down around 2%, closing about half the de facto jump. Volatility is crazy, there's huge intervention in the Russell 2K all week... aaaaaand then there's the Euro.
Don't underestimate the desire (and possibly the ability) of the ECB and member countries to try to patch this up. You're seeing Paul Volker talk a lot about the possible 'disintegration' of the Euro (more here) and that can't be ruled out; there's renewed talk of the UK walking away from parts of the EU agreement(!) after several EU ministers told the UK not to expect help in a Pound Sterling crisis, Zero Hedge reports on mind-boggling futures action, Republicans in Congress have whipped together an anti-Euro-bailout bill (which is mostly posturing, but does reflect sentiment), news reports say France threatened to pull out of the Euro (denied), persistent rumours say Germany is preparing to jump back to the Deutschmark - pretty much everybody is betting against the Euro at this point.
Which is exactly the time when you get the kind of snapback surprise that takes your head off. I don't know what's going to happen this weekend; but I do know that the member states of the EU invested a whole hell of a lot in getting this thing off the ground, and that kind of monumental effort has a lot of momentum. They might let it devalue; I'm hearing targets of Euro-USD parity. But if they can keep this thing alive, they're going to. If the carry trade falls apart, they won't be able to, and it's all going to go straight to hell. It was testing multiyear lows against the US dollar into the close today.
But where is this all coming from, I hear you ask. It's the debt crisis that never went away. I've talked about the problems of governments taking on all this bad debt, in these bailouts funded by valueless securities being exchanged for T-bills and the like, and how the difference between the US of 1933 and the US of 2010 is that the US balance sheet was in comparably good shape - and Roosevelt could spend lots of money and inflate the economy. But this time government balance sheets are also badly corrupted, and, well, we're all talking about sovereign debt crises and defaults. This is all fundamentally deflationary in the long term, as fungible credit gets annihilated.
Todd Harrison at Minyanville has this to say:
The question we must ask ourselves is this: given the European Union screamed "ALL IN!" and pushed their chips on the table last weekend, what happens if the market calls their bluff into this weekend? One thing for certain, for capital market constructs around the world, the stakes have never been higher.A roundup of some news items: Remember that announcement of massive mortgage fraud in Alberta, et al? The RCMP and Calgary police are investigating. There had been initial reports that they were going to consider it a civil matter, but now not so much.
US Consumer Sentiment rose to 73.3 in May, a modest increase. Retail sales climbed 0.4%. First-time jobless claims are being reported as "falling to" 444,000, except that's comparing revised to unrevised; all things equal, it was flat. US manufacturing rose 1% in April, but oil futures are cratering going into summer, which isn't all US dollar strength. China is getting worried about a 'hard landing' and going into recession, and reportedly is considering easing monetary policy. Videogame sales plummeted in April. TiVo shares got suckerpunched on a setback in their patent battle with Disk Network.
Calculated Risk has an interesting post up about structural reductions in mobility in the US, traceable directly to the housing collapse. They think it's hurting the recovery. But hiring is starting to pick up, as is reflected in the consumer sentiment numbers. Illinois is "broke, and can't pay its bills" as California governor Arnold Schwarzenegger announces plans for massive budget cuts. "During the press conference, Schwarzenegger compared California to Greece. Ouch."
Four banks (so far) on the FDIC Friday hit list: Midwest Bank and Trust Company, Southwest Community Bank, New Liberty Bank, and Satilla Community Bank.
And that's it. Hopefully I'll be better enough tomorrow to go to the U. District Streetfair! Have a good weekend, everybody.
