Morning Audibles 3.25.10 - Sobriety Checkpoint

"FUN"ding... As it turns out, isn't so much "fun" after all...



In recent months, Fed Chariman Ben Bernanke has been dropping hints that rates could go up later this year. In addition, the Federal Reserve, of late, has been reducing its purchases of mortgage-backed securities from Fannie Mae and Freddie Mac, and has 'still' not said it will extend those purchases past the end of March.


Those purchases have kept interest rates artificially low for months. What's the takeaway here? A game of chicken, if you ask me. In anticipation of an end to those MBS purchases, by the FED, the yield curve has gotten increasingly wider. Despite the decision to extend the first-time homebuyer tax credit through April 30, 2010, recent months have brought an unexpected drop in pending home sales. This is unwelcome news for a government, and a Fed that were expecting those markets to "auto-correct" (not that anyone 'outside' the beltway ever expected that to happen anyway - but beltway insiders live in their own fantasyland). 


The takeaway is painfully obvious. That is, that the entire system still only exists on life support by whatever money the government goes into debt to spend to support it, and by the money that the Fed prints to monetize it. The Treasury Department, (trying it's best to fund spending on top of spending by this goverment), has found that there is little interest, of late, in rolling over short term debt for a measley .02 return. (in Bills). Treasury is therefore having to look farther up the curve to fund this insatiable appetite of spending (turns out Obama paying for everyones gas and mortgages is costlier than the former community organizer would have ever imagined). The bond market now seems set to turn this into a "game of chicken". They're basically saying, "let's see how much you want to pay to come play in our yard". Since the US government has already heaped on an amount of debt that it's not likely to be able to service, the idea of ratcheting up even only a few hundred basis points more seems out of the question. So 'something' has got to give.


All this comes at a time when Washington is going to have to start considering OTHER spending or 'stimulative' proposals as well (such as a JOBS BILL, aid to states and local governments who are insolvent [time to break out those blue and red maps again to see which areas are in MOST DIRE need], and probably yet another extension of unemployment benefits). You know, elections are coming up in the fall. They're on SOMEBODY's mind I'm sure.


There are not many good options here, but the simplest idea, of course, would be to tank the equity markets for a bit. A couple of weeks of this could chase enough "risk" assets into the safety of T-Bills so that the government could go on "extending & pretending" servicing its debt for a few months. At that point, I'm sure Bernanke would have to come out and announce another round of MBS purchases in the $600bln range, and perhaps another round of Bond purchases depending on how the roll over rates on short term bonds (which haven't looked so hot as of late) go. Here's a recent picture of the Capital Beltway if you haven't been around these parts in awhile.



With the problems in Europe putting the Euro on shaky ground, it would seem to me that now would be the perfect time to orchestrate this type of shell game...


- Blame the stock market correction on Europe and it's problems (& deflect from your own structural problems).
- Let the Euro find a new level
- When the Euro finds its new level, Bernanke can fire up the printing press again
- Commodities ought to rebound at that point (but need to take a deep hit in the process)
- Hopefully, if orchestrated correctly, you'll be able to keep the plaster on the walls until November. At that point, one of two results occur:
1. You win (because people are still fooled into thinking things are alright, or because now you've 'scared' them into relying on YOU for all their needs)
2. You lose (and whatever 'austerity' that comes from that, and the PAIN that goes with it can be blamed on the 'other guy' because the effects will happen on their watch).


I'm not saying that any of the above will happen (it may, it may not). I'm just presenting the most logical scenario (but as we know, "logic", "politics", & "capital markets" don't often collide in the same sentence).


So for now, CV is basically saying that this will only be a "garden variety" sobriety checkpoint.

You're doing it WRONG!
You're doing it RIGHT!

383 comments:

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CV said...

I'm not buying into any strength in equities this morning...

The Euro may go ahead and backtest 1.34, but when that fades, it'll be curtains...

Not much scary out there in my eyes (for bears)...

'Green' may only last for the morning...

call me ahab said...

fascinating stuff here-

"Dell Denies Discussing China Shift With Indian Prime Minister" Bloomberg

Indian Prime Minister Manmohan Singh said the following to India’s Planning Commission on March 23-

“They [Dell] would like to shift to safer environment with climate conducive to enterprise with security of legal system,” Singh told the plan panel. “So I think this is an area where there are immense opportunities,” he said in the speech."

now being denied- but no doubt it was said- backlash against China's censoring and technology stealing ways?

This on top of Google's actions and GoDaddy's decision to stop registering domain names in China to protest cyber attacks and censorship-

highly intriguing

Bruce in Tennessee said...

Now that Germany has imposed its will, and the IMF will impose its will on Greece, I was wondering what you guys (and gals) thought will be the outcome of the Piggies?.....

AmenRa said...

How come the DoL hasn't released the new ETA report? Are there some changes they want to make after the MSM has reported the numbers?

karen said...

Package of Condos Auctioned for $25.9 Million.. Original cost to developer, $100 Million, Owed banks $53 million. Is this a market to market event for the banks? Or one of those off-balance sheet line items..

Bruce in Tennessee said...

http://www.thereformedbroker.com/2010/03/23/blogs-winning-the-battle-for-financial-influence/

"An interesting study was conducted that asked a group of individual investors of various ages about what sources of information influences them most in terms of finance.

Don't fall out of your chair, but blogs beat every other news/opinion source from newspapers to magazines to tv to radio to financial advisors."

....see chart....

CV said...

@Bruce

Obviously Lloyds algos are illiterate...

That and/or, they watch Cramer & Dick Bove...

call me ahab said...

our future?

"Despite Massive Debt, UK Clings to Services" CNBC

"Britain operates one of the largest welfare states in Europe. And that, it seems, is just fine with many of the British.

Despite the worst recession since World War II, many people here show little appetite for shrinking a system that eats up half the nation’s economic output, more than in Portugal, Greece or Spain — all of which are trying to push through painful cuts. Indeed, as Britain’s Labour government confronts a yawning budget deficit, public sector workers are mobilizing to head off any reductions in wages or jobs."

and our woeful path in that direction-

the new America-

"Give me comfort or give me death"

gotta roll- all have a great day!

karen said...

get this: "Bank of America will start writing down mortgage principal owed by thousands of underwater home owners in what The Wall Street Journal dubs “the mortgage industry’s boldest move yet” to address the nation’s foreclosure problem.

But for BofA’s balance sheet, the move is a drop in the bucket.

Morgan Stanley analyst Betsy Graseck estimates that the cost of the principal reductions is “immaterial” to BofA because the vast majority of the $10 billion pool of loans that are eligible for the write downs are not carried on the bank’s balance sheet."

http://blogs.wsj.com/deals/2010/03/24/bofas-principal-writedowns-what-took-them-so-long/

Bruce in Tennessee said...

Ahab:

I read that too, early this morning, and with the questioning by former members of the political class yesterday as to whether Britain would have enough money to pay the interest on its debts...?

It seems to me once Leftback left the country, they went to hell in a handbasket...

AmenRa said...

EUC -329k or another 329k with no benefits. Idle hands are the...

Nic said...

Hello!
SocGen has a good article on gold (also at Marketfolly):
http://www.scribd.com/doc/28817188/When-to-Sell-Gold-SocGen

"Eventually, there will be a crisis of such magnitude that the political winds change direction, and become blustering gales forcing us onto the course of fiscal sustainability. Until it does, the temptation to inflate will remain, as will economists with spurious mathematical rationalisations as to why such inflation will make everything OK (witness the IMF’s recent recommendation that inflation targets be raised to 4%: IMF Tells Bankers to Rethink Inflation –WSJ). Until it does, the outlook will remain favorable for gold. But eventually, majority opinion will accept the painful contractionary medicine because it will have to. That will be the time to sell gold."

CV said...

@karen (9:28)

Not that article specifically, but that concept was part of the reason I was late getting a thread up this morning...

I'd started out penning some ideas of some of the proposals being batted around on mortgage resets. Then I got on the subject of bond purchases...

Somehow it morphed into "bills vs. equities so I decided to split it in two (trashed the original idea)...

I'm going to revisit it later...

CV said...

Actually, since I'm on the subject, I'm going to put a TABLE onto the end of this thread, to show you what some of the effects would be (and thus WHY BofA, & other banks might start doing this)...

Essentially, the plan works, but it opens up a lot of 'moral hazard' issues...

But when has this country worried about MORAL HAZARDS recently?...

I-Man said...

Morning all,

Damn Karen, were you the first one up on the entire west coast this morning?

CV said...

@karen

I'm going to take it down (and use it later)...

But take a look at the table I put up in the end of the thread...

This is an illustration of some of the effects on a $200,000 mortgage...

As you can see, the only REAL impact is going to occur when a few of these ideas are combined...

- Principal reductions
- extensions
- Lowering rate to 3%

The problem with lowering rates though is the government itself is spending so much money on all its own pet projects that it competes in the lending trough for what could possible make the lower rates available...

Anyway, that's the sketch...

I-Man said...

Excellent forecast CV...

"- Blame the stock market correction on Europe and it's problems (& deflect from your own structural problems).
- Let the Euro find a new level
- When the Euro finds its new level, Bernanke can fire up the printing press again
- Commodities ought to rebound at that point (but need to take a deep hit in the process)
- Hopefully, if orchestrated correctly, you'll be able to keep the plaster on the walls until November."

McFearless said...

Here's the thing, I've done enough financial plans for various households to know that getting that monthly payment all the way down to $500 is still not going to be enough. Lets keep in mind that a lot of these households in this position have saved exactly $0 for many years now, perhaps well over a decade. Getting your expenses reduced is only step one.

That said, man I feel like i've time warped back to 07.

McFearless said...

I actually think that the bond market is starting to show us that the rest of the world isn't going to accept us trying to deflect issues by blaming Europe, or....China.

Bernanke will soon discover there is more that exists than the monetary ledger, his beloved inanimate object.

Keep pulling the levers idiot.

I-Man said...

And I'm sure you've seen this already, but just in case:

February Hugh

http://www.eclectica-am.com/pdf/EAMF/reports/EAMF1002.pdf

McFearless said...

The jump this morning put us right at the top of Dan's EDT formation, after 10:30 and into Friday's close should get real interesting.

karen said...

I-Man, I couldn't sleep : (
Got up at 3AM I think..

CV said...

@I-Man

I think part of the 'limbo' here (or the LATEST limbo), is the following:

I think most expected to be able to get through the 1st quarter (end of March), with marginal gains... As if to say, "ok we recovered from the January swoon, were back to 1150, don't panic, we're right on track, don't sell your stocks"...

But nobody expected these T-Bill purchases to be so weak. Add in all the spending (and now with HC being passed), and the YC getting steeper, it's like... "Holy crap" can we make it until March 30th with the market up here...

So that's why it keeps getting pushed above and beyond... The selloff (to scare money back into bills) is going to have to be steep. But it could get rolling very quickly, and March 31st is starting to look like the door on one of those Alfred Hitchcock movies that keeps getting farther and farther away as you're running towards it trying to grab on...

So equities keep making these incremental bumps to prevent a run to the exits until the quarter gets booked...

It could even 'run-on' until after the April NFP gets reported...

In any case, that's kind of my MO for now...

Anonymous said...

Natty is selling off today. under U$D 4.

karen said...

CV, saw your chart... i think i get your point.. and if the price of $gaso were to drop.. what a difference that could make to the monthly budget!

CV said...

@McF (9:55)

Perhaps you're correct...

But you'd better believe that the lawmakers in Washington, bank CEO's, and Fed flunkies are just going to look at a table like that and say...

"Gee whiz... this looks swell - let's try this for awhile - and then go drink another toast to our genius"...

Nic said...

What's keeping you awake Karen?

I-Man said...

Anyone ever trade MNKD?

CV said...

@karen

Of course the UNINTENDED CONSEQUENCES of all that would be as follows:

- Some people would see it as a lifesaver and be very happy

- Others, who are adverse to such things, out of a sense of duty, would see others getting a handout and basically change their opinion... They'd just start defaulting themselves (which would invite yet another wave of losses to be absorbed (eventually more government borrowing and eventually higher taxes)...

This Administration will have proved, once and for all, that once to start down the path of bailouts, you've created a snowball (rolling down the hill) of socialism...

And eventually it leads to what ahab described above (in UK), and in other parts of Europe...

McFearless said...

C,

Having looked at a number of politicians personal finances, of course that's what they are going to think/do.

Also, we already saw all this before, I'm just stating the obvious at 9:55, remember last year all the workouts and then something like 80% of people were falling behind a few months later anyway.

It's just not as simple as lowering one bill. Especially if you are unemployed.

Bruce in Tennessee said...

I know must of you have seen Cool Hand Luke...

I don't think I have gotten my mind right about the 10 year bond yield...no pullback or anything? Hmmmm....

Bruce in Tennessee said...

I deliberately chose to spell most...must.

NOT a typo..

I-Man said...

FXI should be on deathwatch...

Could it really be so simple as to short this 3rd lower high?

karen said...

Nic, something dumb that i did.. it will fade eventually. i hope!

CV said...

@ben

Reducing the principal should have an effect on the ability to sell the house though...

In some way, it may act as a market clearing mechanism to a small degree...

Bruce in Tennessee said...

Macro Man this morning...the Chinese....and US debt...maybe they are mad this time..

karen said...

on the ten year.. the 52 week high yield was June 11.. 4.014 or so.. then the spx dropped from 956 to 869..

CV said...

@I-Man (FXI)

I might counsel a "waver" on that as it might just be a abc zigzag...

CV said...

@karen (10:26)

good catch... remembering that...

Leftback said...

LB is going to make the same call as yesterday. Go long the Treasury complex and short the Spooz about 12.30pm. I am pretty confident that this trade will work better today than it would have yesterday...

Surely there is no way they can allow the 7y auction to be a disaster?

Nic said...

@Karen :)

karen said...

fxp is interesting today.. it normally doesn't diverge so much from the spx..

CV said...

@karen

Also... "the man from PISA strikes again"...

.09 from 956 = 869.96

From 1150? (January)

.09 from 1150 = 1046.5 (market retraced to 1044.5)

As she stands now...

.09 from 1176.71 = 1070.80 (That would probably meet a rising 200 day moving average line in about 4-5 weeks from now...

Just saying...

Leftback said...

FXI really is saying SHORT ME... I-Man, can't help but agree.

Leftback said...

"the man from PISA strikes again"

are you saying Fibonacchi's tower was leaning?

I-Man said...

Any of you cultured cats ever eaten here?

http://en.wikipedia.org/wiki/The_French_Laundry

CV said...

If anyone is following me on these FIBOS... It appears to me that .09 has been the "garden variety - correction du jour" (for the deeper types)...

So to me, it would make sense if those pullback percentages actually LINED up with something significant...

There is still an obvious GAP to fill on the SPX at 1076...

Assuming a .09 (EXACT) re-tracement, SPX would need to get to 1183 to retrace that much and EXACTLY get supported at that window...

Things don't have to line up perfectly, but I think were near the point where it could happen at any minute...

McFearless said...

@C,

Perhaps it does, but if rates are going up the principal reduction gets scuttled if the goal is to help it clear at equilibrium, it is then more costly to borrow and remember the tax credits are fading out.

As for FXI, I'm still way in the China short camp.

Cool Hand Luke, cool movie, but the hard boiled egg eating scene makes me sick.

Leftback said...

I think AT went to the French Laundry once. LB has been to a Chinese Mexican place and a Greek Chippy in his home town.

Nic said...

I wish I-man, I have his cookbook (complicated but great pictures)

karen said...

I-Man, I have not but I took a number of fotos of the place! The street is probably the closest I will ever get, laughing.

Leftback said...

Mustards Grill is a great place for those visiting the area, with an awesome wine list and excellent food for the budget-minded traveller... LB has wined and dined there many times on a number of consulting gigs.

Leftback said...

Growing up in England in the 1960s made LB appreciate every single meal he has eaten in his life. Since then, I mean.

Nic said...

Ha LB I agree, English boarding school did that for me.

I-Man said...

My sister got to meet Thomas Keller yesterday in Atlanta, and she said he was very nice.

CV said...

@McF

I realize that... But I'm leaning towards the idea that ANY 'clearing' mechanism has to help with what's coming up... Namely, a new wave of defaults when the big wave of option ARM resets starts kicking in for the next 24 months...

Banks are already hoarding as much RESERVE cash as possible to keep themselves (ahem, clears throat) solvent in the process...

The less of these things that they'll be left holding the bag on, the better... Of course, the FED will be there to play a "repo 3 card monty", when necessary, but the less of that they have to do, probably the better... After all, Obama would prefer to see Benron only print money for his own little projects that has his name on them...

F*** this cleaning up old messes s***!

I-Man said...

I thought the guys story was pretty cool, and really liked the look of the building. The menu looks amazing. (Ahem, so does the price tag...)

Leftback said...

2s10s is at 277 bps as buyers creep into the short end.

Seriously, Nic, I bet I-Man and Bruce in Tennessee would enjoy bangers & mash, toad in the hole, bubble & squeak, steak & kidney pie with mushy peas and of course spotted dick for afters. It was years before LB realized that fish weren't rectangular.

McFearless said...

The French Laundry is no Chick-fil-A

CV said...

@I-Man

I heard everything on the menu "tastes like chicken" :-)

McFearless said...

That beacon of light Citi running at a nice clip today. On the way to $16!

McFearless said...

Chick-fil-A demands only the most sophisticated palates.

Mannwich said...

Here we go again. I could probably leave for 6 hours, come back, and the markets will still be pinned to/near the number it's at now......

Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

Mannwich said...

@ben: Bove says the banks could all "quadruple by '12". How is this man is even taken seriously anymore? Must be the professorial, Ben-esque beard?

AmenRa said...

LB

quote: "It was years before LB realized that fish weren't rectangular."

LMAO

CV said...

@LB (10:57)

Square fish?

Apparently... they're in the process of "working on it"

http://square-fish.com/Untitled-1.png

CV said...

@Jeff

Maybe he meant to say they would "quadruple their losses"...

You have to read the fine print...

CV said...

@McF

re: citi

Didn't you hear? The government is apparently "selling their stake in Citi"... So it appears they've asked Lloyd and Jamie to do a little frontrunning ahead of time to fetch a more favorable price...

CV said...

@McF

Chick-fil-a is a DAMN FINE establishment!

Nic said...

I agree LB but that's what we grew up with. British food today seems to be doner kebab and chicken tikka massala.
I have a well developed aversion to "mystery meat" these days.

Leftback said...

Perhaps Bove means the number of banks could quadruple if the TBTF are broken up?

karen said...

NLY lowered their dividend, btw.. stockholders are acting as if rates are going up and selling it down a bit more today..

72bat said...

@ i-man
closest i ever got was dining at "├ętoile" at domaine chandon across hwy 29 in yountville.
pretty choice cuisine, though not $175 (+ 19% gratuity) for a veggie meal - lol

CV said...

@Amen

Now that I kno you're in the 'hizzy'...

What's the WEEKLY 3lb reversal on VIX?

I-Man said...

I ate enough Chic-fil-a in college to last a lifetime.

And even though I rarely eat meat these days, it does sound kind of good...

Until I think about the babylon commercial farming of chickens, cows, and pigs... and then it doesnt sound so good anymore.

CV said...

@LB

Or perhaps ol Dickt was just getting his "root words" mixed up...

Perhaps he was thinking about the QUADrillions it'll take to bail them out the next time...

Mannwich said...

Whoops, wrong. Up, up, and away like a beautiful balloooooonnnnnnnn......

McFearless said...

@C,

I heart Chick-fil-A....seriously. I go once a week, I'm real high end like that....I love everything about that place.

@Manny,

I don't really get the Bove thing either. Still, I do stop and wonder why Soros and Paulsen own millions of shares of C each. This really is the best movie I've ever watched.

I-Man said...

Spotted dick, huh?

Not sure I even want to see that... sounds more like a medical concern.

Nic said...

What time are we selling spooz again? ugh.

I-Man said...

Gettin pretty close to that 1183...

AmenRa said...

27.31 on the VIX for a reversal. Unless it makes a lower weekly close then it will be 18.13.

karen said...

$bkx making new high.. financials love the prospect of rising rates because..

they can make more money not lending and to unqualified borrowers and they can pass off more non-performing loans to the fed?

now, i personally think the higher rates thing is a non-starter.

CV said...

@I-man

"Until I think about the babylon commercial farming of chickens, cows, and pigs... and then it doesnt sound so good anymore."

---

Yeah, but these central bankers & politicians don't see it that way... THEY think it's a better idea to INFLATE the world economy to the brink of outlandish consumption... You know, to save the votes of fat bellied pension recipients...

When you ratchet it up to the next level, that BABYLON COMMERCIAL FARMING is going to become MEGA-GALACTIC BABYLON...

After all... Peggy doesn't just want her gas and mortgage paid... She wants her 12 piece bucket too...

Nic said...

spotted dick: http://upload.wikimedia.org/wikipedia/commons/8/89/Spotted_Dick_Wikimeet_London_2005.jpg

karen said...

ben, what did you say you'd do at dow 11k? cuz we need to prepare for that..

I-Man said...

LOL Nic...

That doesnt look so bad I guess...

CV said...

@I-Man

I did a FURTHER on 1183...

If we were to pull back (say to 1071 - a .09 from there)... Then ramp again, and extend...

From 1300

.09 retracement = 1183

DL is a GENIUS!

I-Man said...

I dont think there is a single ETF on the planet that pisses me off more than the RTH.

F*cking ridiculous.

72bat said...

a little help for non-brits struggling with the naming of british "food"
the very best of british
e.g., "Faggot - Never knock faggots until you have tried them! They are a traditional British delicacy, meatballs wrapped in a casing of intestine. Delicious! The best known commercial brand is Brains Faggots."

Mannwich said...

@ben: Paulsen owns a ton of BAC as well, doesn't he? Maybe we should just jump on board the toxic train for a while?

McFearless said...

Karen,

Oh, I think we see 11k at this point.

I made the comment about two weeks ago that it would have been better to think about how people would rush back into the banks right at the top of Primary 2. Seems it's starting to play that way.

I-Man said...

@ FXE

You talkin loud buy you aint sayin nuthin.

CV said...

@McF

Paulsen & Soros owning Citi...

Seems like REPO 105 is played out in a lotta different ways...

I'll hold yours while you hold mine... We'll all feel good in the end...

I-Man said...

but.

Grrr.

I-Man said...

I really hope that wasnt some kind of freudian slip.

McFearless said...

Manny,

Yeah, I think he does have a ton of BAC as well.

As for jumping on board, I don't mind going long, but I'd rather just stick to trading something like SPY on the long side. That's just me though.

CV said...

@LB

BUCKY truly is Rodney Dangerfield...

He's over there yelling... "Look at me... Look at me... I just told a funny joke & I'm going to go higher"...

No respect!

McFearless said...

Now the EDT is looking very smart, triangles are the last move....we'll see.

McFearless said...

Alright folks, I feel as though I'm about to make a stupid trade, walking away for a few hours, see you all later.

CV said...

@McF

If you walk away and the market reverses, then you'll be FOREVER branded...

The baton will have passed from Manny to you! :-)

Leftback said...

SPX 1200 next if we see shorts covering here...

Selling just before and after the auction is the general idea. Otherwise we will see a moonshot this afternoon.

Leftback said...

Russell 700 is what the piggy doesn't want to see. LB will sulk and change icons if that happens.

I-Man said...

117 is calling, SPY...

mcHAPPY said...

I hope this keeps going higher next week too. Won't be around for a week and really don't want to miss the opportunity to short.

Also glad yesterday heeded the advice of "when in doubt, do nothing."

Mannwich said...

Wow, TLT diving again. Might we finally break that ~88 level? I think this could be that time.

CV said...

@LB

"SPX 1200 next if we see shorts covering here"

Is there a "short" left on the planet?

I-Man said...

Yep, that was a good call McHap.

karen said...

A new low in SRS because:

Vacant O.C. offices at 18-year high
March 25th, 2010, 1:37 am by Jon Lansner
It’s been 18 years since this many offices in Orange County are empty this quarter — a stark reminder of the downturn’s extended fallout.
A preliminary estimate of local rental conditions by Grubb & Ellis shows 20.1% of offices are empty — the highest rate since 1992, by this math. That’s roughly 17 million square feet of vacant offices, says Grubb’s Anthony Tran. Or, the equivalent to maybe 800 floors of cubicles.
The office market has been hammered by failing businesses (for example, properties tied to Downey S&L and John Laing Homes hit the market recently); a sagging local job market; and an ill-timed expansion by local landlords, Tran explains. Financial troubled of those property owners — in several cases involving foreclosure proceedings on local office buildings — makes the situation worse. Such distressed properties are difficult to fill up with new tenants. With all the empty space, rents for office space has tumbled in levels not seen since the early 2000s.

karen said...

and the good news:

Tran thinks the worst might be behind the region’s office market. The bleak employment picture should improve, creating demand. And office owners’ financial woes will be resolved, giving new property managers clearance to lease up the space. Tran thinks a market bottom may have already occurred; and if not, it will likely hit by summer.
“We don’t know of any other major spaces going on market,” Tran says.

CV said...

@Manny (11:57)

You know my thoughts on that, I've said that 'technically' I think it can break that and go lower...

However, I wouldn't be surprised to see the June '09 level hit and hold...

KAREN, you mentioned above about the 10 year yield having touched over the 4% yield in that EXACT time period...

SPX 956 went to 869... (all at the time the 10y was at 4, and TLT was 87.56)...

If these "stars" line up again:

- same levels on TLT & 10y
- 1083 SPX...

I'd say we're looking at 1076 city...

Mannwich said...

@karen: But if we just ignore everything bad, is it really there? Apparently not, at least not right now.

Mannwich said...

We seem to be "making our own reality". Mass delusion is a powerful drug. I wonder how long it can continue?

I-Man said...

I just had a funny thought...

How funny would it be if we all coordinated a date to return to TBP in masse...

I think it would be cool if we all just showed up one day, and tape talked like we never left... just for a day to see how all the new folks react.

Maybe CV could launch a pirate healthcare debate or something and really stir the pot.

Just TOL.

CV said...

If all of what I just posted coordinates with a VIX dip under 16...

Man, I think I'm IN on that one...

I-Man said...

I'd probably only think of something like that at a major turn in the tape, so make a note of it.

CV said...

@I-Man

Sampling the 'floral arrangements' again, I see :-)

That's cool!

I-Man said...

LOL... I'm not that hardcore C.

There's no way I could do my job irie... I'd be walking around here paranoid as all get out.

I'm sure there are folks that partake in other things, that fit well with their high energy sales persona...

But aint my cup of tea.

karen said...

How to lose $222 Million in RE

CV said...

@karen

Or the simpler version...

How to lose millions in RE... Answer: Invest in it.

I-Man said...

Ahh, whats 220 mill amongst friends anyway?

AmenRa said...

1oYR currently has a weekly 3LB reversal (trading above 38.62) and the 30YR will start trending on the weekly 3LB if it closes above 47.02.

I-Man said...

The funniest part about that is the shot of the dude putting pearls around his girl's neck...

Gimme a break, thats so OC.

CV said...

Quick poll here to shake everyone out of their doldrums...

Last 5 "earnings seasons"... Quick hit... Markets up or down (on knee jerk), and after a month...

No fair peeking (just go off the top of your recollection)... Phrase answers this way...

Knee jerk (up/down/flat)... Month later (up/down/flat)...

Let's hear it (no peeking)...

I-Man said...

I'll play...

Knee jerk up, down after a month.

CV said...

and do it like this...

Jan09
Apr09
Jul09
Oct09
Jan10

karen said...

actually even funnier is that essex properties plans to rent them out at $3k a month... all 349 of them:

"The towers, the fourth tallest buildings in the county, are being converted from condos to apartments, with the average rent expected to be more than $3,000 a month."

CV said...

@I-Man

do all 5

I-Man said...

Need a real laugh though???

Look at a FXE 1min

CV said...

@karen

the only one STUPID enough to pay $3000 a month to live in a condo (and could afford the rent( would probably be a retired Orange County sanitation worker)...

Which probably explains why OC goes in and out of bankruptcy...

Bruce in Tennessee said...

Lefty! The 10 year has touched 3.87. Son! Has somebody rolled old Rod Serling out of his casket?

I knew India should never have raised a quarter point....

I-Man said...

Whats that?

I hear something...

Its a quiet chant now... but getting louder...

Do you hear it? They're chanting:

"Bucky... Bucky... Bucky..."

CV said...

@I-Man

FXE - It's like I said this morning... FXE might go and backtest 134...

But since Goldman Sachs, yesterday, did a 180 on that (going from BUY to SELL)... GS now has a STOP LOSS on that sell set at 1.35...

Who was it, that great philosopher #43 that once said...

"Fool me once, shame on you, fool me twice, um, um, we won't get fooled again"

CV said...

@I-Man

What would scare the crap out of me would be if the Euro went down to 1.29, and yet equities stayed elevated with no correction...

I wouldn't know WHAT to do...

Mannwich said...

Whither the "one trade" meme? Looks that way to me.

Nic said...

I really think the AUD is a better indicator lately CV & China sensitive

DL said...

CV @ 11:18

Gee, thanks.

(You'll be trashing me next week, I'm sure).

Leftback said...

If the 7y auction isn't well bid... everything will be out the window.

It's THE END OF THE WORLD AS WE KNOW IT...(and I feel fine)

This would be time for the TLT calls, are you up for it, C?

Leftback said...

A repeat of yesterday would be too obvious. Surely can't happen.

mcHAPPY said...

@Manny

Short term - definitely, we've already hit 82.

Long term - definitely not. In time this will be seen for what it is - hype.

I-Man said...

@ C 12:27

Read the new Marty?

Nic said...

If this auction doesn't go well I think we see a proper shit-show

CV said...

@DL

Trashing? Instead I'm saying that you're the only one who's been right thus far...

Nic said...

Or perhaps perversely strong to kick everyone where it hurts ...

Mannwich said...

@cv: DL's been right a lot about the market over the past year. I tip my cap to him.

Mannwich said...

@lb: I think that means it surely WILL happen.

Leftback said...

Nic @ 12.35 - right. Doesn't feel like today is the day, but - got dry powder at the ready for an equity puke if it comes ...

Mannwich said...

Mannwich is seriously thinking about starting to go pick up some nickels in front of the steamroller, as that steamroller's engine appears to have stalled.

Nic said...

I was told that if you look at the tails on the 5y auctions vs the tails on the 7y auctions that follow, they're normally negatively correlated... so crap 5yr normally portends a good 7yr

Leftback said...

"perversely strong to kick everyone where it hurts"

Except LB who has covered... this has actually happened. We had a very sad and tepid 10y in Jan followed by a vigorous slurping of the 30y.

Leftback said...

"..so crap 5yr normally portends a good 7yr"

Exactly. TLT calls, C..? You know you want to..!

CV said...

@LB

I suppose I could hide in the April 90's...

karen said...

BofA to forgive some mtg debt and take the poll at the end of the article..

Normally, forgiven debt is considered taxable income.. but these days, who knows.. this is giving the phrase "The Madness of Crowds" (from the book title) new meaning.

DL said...

Mannwhich @ 12:38

I think you just "rang the bell" for the top (at least with regard to the coming 8-10% correction).

I-Man said...

@ LB and CV

I'm with yall in spirit... you know I would.

mcHAPPY said...

http://www.marketwatch.com/story/france-germany-back-imf-role-with-greece-reports-2010-03-25

At least there will be a blueprint for aid to the rest of the PIIS.

Now wait a few hours for a new report denying this.

Mannwich said...

@DL: That's the spirit! I now spite thee market.

CV said...

@DL

You're turning Jeff into a schizo...

Mann"WHICH"? :-)

Nic said...

Apr09, 5y tail - 0.1bps, 7y tail - 1.0bps
Jul09, 4.9, -3.6
Aug09, 1.3, -0.6
Sep09, 3.1, -1.1
Oct09, 0.8, 2.1
Dec09, 0.6, -0.5
Feb10, 1.5, -0.7

CV said...

@Jeff

If you want, you can start a business...

All of us will chip in and buy you a ticket to Tahiti or something...

Get you the hell out of here for awhile while equities correct... :-)

Mannwich said...

And Roubini weighs in on prospects for U.S.-China trade war. Seems to me, we're already in one, no?

http://www.huffingtonpost.com/2010/03/25/nouriel-roubini-50-chance_n_512913.html

Mannwich said...

@cv: But like the dollar trade, that one hasn't worked in a while either.

Mannwich said...

@cv: Well, I think may be already at schizo levels or worse, so DL could be "right" yet again! Way to go, DL!

Leftback said...

Wow. Data... that's a major negative r(squared) for that series.

Where is LB's yen repatriation and carry unwind?? Late to the office...

Leftback said...

Bruce's baiting of LB about USTs usually precedes Treasury strength....

I-Man said...

I'll tell you where my head is at...

$500 for a roundtrip ticket to St Thomas from SFO.

Man that seems cheap...

Bruce in Tennessee said...

Lefty...now don't get touchy. I had no idea you were both ugly and red-headed. My deepest apologies....

DL said...

A full-blown trade war with China would make all you short-sellers rich.

karen said...

watching tnx drop as tee time approaches..

Nic said...

Did you watch krudlow last night about how pressuring china to devalue would trigger a trade war which would be VERY bad for America if the middle class could not get cheap stuff in Walmart anymore. sigh ...

karen said...

and the $xad hasn't really gotten up off the mat.

Leftback said...

"I had no idea you were both ugly and red-headed."

and short.... extremely short, fat and stumpy..... and yet irresistibly effervescent and charming...

Bruce in Tennessee said...

I hear Sandra Bullock is looking....

Nic said...

Good luck LB & CV

Mannwich said...

@Nic: It would be bad for HIM and others in the rentier class. The middle class? Since when does Sir Goldilocks give a rat's ass about the middle class?

I-Man said...

She's already coming to St Thomas with I-Man Bruce...

Nic said...

Ooops ... 4.5bps tail

DL said...

Nic @ 12:58

I’m more with Niall Ferguson on this than Fred Bergsten.

(I want my cheap stuff at Walmart).

Leftback said...

Not good. Equity market is not going to like this once this sinks in....

Bruce in Tennessee said...

I-Man! You obviously have the sauve debonair manner that Sandra is now looking for. I have tried to give Lefty hints about American hotties, but he seems to be looking for the Margaret Thatcher type....I guess you can't get England out of the old boy....

Bruce in Tennessee said...

Leftback said...
Not good. Equity market is not going to like this once this sinks in....

March 25, 2010 1:05 PM

...Lefty, I am a simple salt miner, but that is exactly how this strikes me too...

Leftback said...

The worst appears to be over for the long end... LB still wouldn't go near the short end with any of Bruce's extensive range of barbecue implements.

30y mortgage rates, Alt-A, Option-ARM, banks - it's all related.....

Nic said...

I'm getting that mid-January feeling two weeks of drifting and then the drop.
Perhaps they won't engineer a big crash to fix this, just another 9% to shake it all out again.

Leftback said...

XLF at a 12 month high... government about to sell C to JOHNNY.
10y rates tickling 3.90%? JNK, HYG, EEM, FXI not making new highs?

Sell em LLOYD ???

mcHAPPY said...

Don't worry everyone! According to MarketWatch, "Bulls Aboard Ben's Wagon."

My question is: where is he taking us?

a) Up, up, and away?
b) Over a rocky road?
c) Down the side of the cliff that has many sharp rock formations protruding all the way down to the barren valley below?
d) Who cares anymore?

Bruce in Tennessee said...

Bought a little more AMAT...we'll see

I-Man said...

Big orders starting to trickle through on SPY...

I think this sucker pressure drops.

DL said...

New Al Qaeda tactic: boob bombs

(Fitting female homicide bombers with exploding breast implants)

http://tinyurl.com/ydrqh52

Mannwich said...

@Bruce: I think Sandra's main requirement is nice teeth. That probably excludes the Brit, no?

Leftback said...

Austin Powers already battled the fembots.....

Banks have had a great week. Sell em...?

Mannwich said...

Closing on in DOW 11K. 14,5K by year-end?

Leftback said...

Q1 performance anxiety...? Only four more trading days for managers to goose those numbers. April 1, new fund flows. Then April 2, markets closed, jobs numbers. April 5, markets re-open.

Mannwich said...

FXP holding up throughout all of this.....hhhmmm, canary in the coal mine?

Leftback said...

BTW, JNK is having a fine time today, so it's risk-on, transfer of wealth from taxpayers to corporates again. Business as usual.

Mannwich said...

FXE just went red again. 132.92.

Lord Blankfiend said...

We call it REVERSE ROBIN HOOD day here at 85 Broad..

One of the wags on the desk calls it ROBBIN' the 'HOOD. (Apparently, you see, a 'HOOD is where the lower echelons live, and ROBBIN' is like stealing. Anyway, that was just a chuckle for some of us in the C-suite at GS).

Bruce in Tennessee said...

Manny,

Now for all I know Lefty would give Brad Pitt a run for his money. I really can't figure out whether he looks more like George Clooney or Barney Google. Perhaps some day he'll post his pic with some sweet young thing....

By the way, I know you have seen this...

http://finance.yahoo.com/news/Deere-says-health-care-law-apf-995481132.html?x=0&.v=10

OMAHA, Neb. (AP) -- Deere & Co. said Thursday that changes to the health care law signed into law this week will raise related costs this year by $150 million.

The biggest U.S. maker of farm equipment became the second major company in as many days to say it would take a charge for fiscal 2010.

Deere and Caterpillar Inc., which reported that it would record a $100 million charge Wednesday, say the health care overhaul President Barack Obama signed Wednesday will make a subsidy the companies receive for retiree drug coverage taxable in 2011.

Both companies said it was a one-time charge as they adjust to the new level of expected taxes.

Deere and Caterpillar were among the 10 companies that sent a letter to Congressional leaders in December warning of cost increases. Others were: Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon, Xerox Corp., Public Service Enterprise Group Inc., and Met Life Inc.

karen said...

$xad at low of day, too.. it may get interesting by the close.

Nic said...

It could have been worse LB, you could have been long bunds or gilts today ;)

karen said...

the all one trade doesn't appear to be working very well.. could just be noise.. i see crude dropping as the dollar "surges" (wishful exaggeration.)

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