The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

What a bizarre, day — the delayed reaction to the FOMC, Bernanke’s testimony,  the Japanese Deflation story. The market continues to stay above 900 (6.25.09 close = 920.26).

The Summer is finally here — and the sun actually came out.

Then Farrah and Michael Jackson.

Weird.

Even GM seems to have a hit with their new Camaro.

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Rather than detail any of these, lets open the floor to your ideas, links, and questions.

What say ye ?

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As you have requested, The Big Picture is now available on the Kindle:

http://www.amazon.com/gp/product/B002E19Y8W

What was kinda weird is that I have no control over the pricing, availablility, etc.

“The biggest obstacle to Volcker’s reform agenda is Summers”

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There is a long article at Bloomberg very much worth reading about Tall Paul: Volcker Gets Less Than He Wants in Curbing Wall Street Excesses.

Consider the following:

“If Volcker is at one end of the spectrum arguing for tougher financial rules, Summers and Geithner are at the other. Summers pushed for deregulation while Treasury secretary under President Bill Clinton, advocating the repeal of the Glass- Steagall Act, which had separated investment and commercial banking for more than 60 years. Geithner was president of the Federal Reserve Bank of New York during a period when banks ratcheted up their leverage.

Both men are proteges of Robert Rubin, a former Clinton Treasury secretary who served on Citigroup Inc.’s board from 1999 until this year and has been criticized for allowing the bank to pile up $544 billion of derivatives and securities before it became the recipient of more government assistance than any other bank. Rubin declined to comment.”

When it comes to regulatory reform, the Geithner Summers pairing are the phlegmatic duo.

And, they epitomize why Team Obama’s economic legacy will likely amount to very little in terms of lasting change or significant legislation.

O may aspire to FDR’s greatness and legacy, but it is wildly obvious that when it comes to either economics or financial regulations, O is no FDR.

What is it that Volcker wants?

-Impose capital requirements on trading parties, people familiar with his thinking say.

-Make bigger banks smaller

-Reduce the role of an overstretched Fed

-Force Derivatives to be traded on exchanges

-Transparent investor prices of Derivatives;

-More-aggressive capital reserve requirement

-Bigger role for exchanges.

Of course, major Wall Street banks, (such as JPM and Goldman Sachs) ALREADY sent a letter to the New York Fed supporting less supervised clearinghouse.

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Previously:
Obama Reform Plan Fails to Fix Whats Broken (June 18th, 2009)

http://www.ritholtz.com/blog/2009/06/obama-reform-plan-fails-to-fix-whats-broken/

Obama to Dramatically Reshape FOMC (June 23rd, 2009)

http://www.ritholtz.com/blog/2009/06/obama-dramatically-reshape-fomc/

Source:
Volcker Gets Less Than He Wants in Curbing Wall Street Excesses
Yalman Onaran
Bloomberg, June 25 2009

http://www.bloomberg.com/apps/news?pid=20601109&sid=atBbIcvSgrFs#

The $27b 7 yr note auction and last of the week was solid (as were the prior two this week) as the yield was about 1-2 bps below where the when issued was priced right before and the bid to cover of 2.82 was the highest since they were reintroduced in Feb and above the average of 2.29 in the prior four auctions. The level of indirect bidders totaled 67.2% well above the average but is apples to oranges now in comparison as the Treasury has altered how they calculate the number. The Treasury comes to market in two weeks with a 3, 10 and 30 yr. With the Fed’s QE policy still firmly on track based on yesterday’s statement and no change in fiscal policy in DC, we have to wonder why there is such strength and whether it’s because of new concerns with economic growth or something else. Either way, the Treasury sales were a success this week.

Our critique yesterday of the lobbying efforts of the commission sales people’s organization (Realtors and Mortgage brokers) included letters from these groups to their members and public officials.

Be sure to see these Lobbying Letters from the NAMB and the NAR here:

NAR Urges 18 Month Moratorium on Appraisal Reform

Mortgage Broker’s Anti-Appraisal Reform Lobbying Effort

Realtor’s Anti Appraisal Reform Lobbying Effort

Commercial paper outstanding for the week fell by a sharp $47.5b and totals $1.15 trillion, the lowest since at least Nov ’00 that data is out and down from the record high of $2.22 trillion in July ’07. The decline was led by a $44.3b decline in nonfinancial CP to $108.7b, a 29% drop from the prior week, by far the biggest drop since ’00. While the decline reflects in part the sluggish economy as short term funding needs continue to shrink due to the lack of compelling investment opportunities, there has been a continual push on the part of corporate CFO’s of industrial co’s to push out the term of funding and thus be less subject to the vagaries of the short term CP market. Financial company CP, which makes up most of the overall CP market, saw a gain of $18.2b to $564b, a 7 week high, and is a cheap source of funding for banks with a steep yield curve. Asset backed CP continued its big decline, falling by $21.3b.

Peter Boockvar

Managing Director

Equity Strategist

Miller Tabak + Co.

Office: 212-370-0346

Fascinating chart showing the total level of Equity in Household Real Estate from 1952 – 2009.

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click for bigger chart

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Source: Bianco Research

I am very jazzed about this: Earlier this week, we unveiled version 3.0 of the FusionIQ quantitative software, and there are a number of new features, upgrades to the software and improvements to the analytics.

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Heatmaps

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Advanced Technical Charting

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Ticker Cloud

Overall changes:

1. You can apply IQ rankings to Sectors, Groups and Subgroups;
2. The advanced java applet technical charting is filled with more indicators, trend line drawing, annotation ability, etc.
3. Ability to control universe settings by market cap, volume or price constraints
4. Ticker Cloud
5. Heatmaps
6. Weekly Economic overviews

Further, it was requested that any notification of new site publications be “pushed” to subscribers in real time — that has now been done.

The next major upgrade 3.5 will roll out an active community and wiki around the various ways to use IQ, including tricks and unique algorithms created by users.

On Monday, we looked at the impact of the Exhaustion Rate on Continuing Unemployment Claims (See Continuing Claims “Exhaustion Rate” and Exhausted Claims part II). Those charts and tables made it clear that Continuing Unemployment Claims were dropping not due to folks getting jobs, but simply using up all of their benefits.

Wednesday, we learned of a) record credit card chargeoffs and Increasing minimum Credit Cards payments from 2% to 5% at Chase.

Now, lets see what happens if we can put those two together:
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Unemployment Exhaustion Rates and Credit Card Charge Offs

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I suspect we can do the same studies with Unemployment Rates also .  . .

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Hat tip Shawn!

Ahead of Bernanke’s 10am testimony on the Bofa-Merrill deal where he and Paulson are being accused of strong arming Ken Lewis to follow thru with the deal on its original terms, it hit me the striking similarity in looks that Bernanke has with Frank Pentangeli (without the beard), the character in Godfather II that went to Congress to testify against Michael Corleone.

http://www.americanrhetoric.com/images/godfather2pentangeli.JPG

http://johngaltfla.com/blog2/wp-content/uploads/2008/04/Bernanke460.jpg

Nothing good will come out of this and hopefully it ends without any repercussions as the market doesn’t like uncertainty and understands the extraordinary circumstances of late fall. Initial Claims are expected to total 600k which would be the lowest since late Jan but Continuing Claims are expected to tick higher after last week’s surprise drop. The 7 yr note auction is also key this afternoon, especially on the heels of the Fed’s decision to make no changes to their QE policy.

Peter Boockvar

Managing Director

Equity Strategist

Miller Tabak + Co.

Office: 212-370-0346