Posts filed under “Think Tank”

Baby We Were Born to Run

“In the day we sweat it out in the streets of a runaway American dream,
at night we ride thru mansions of glory in suicide machines, sprung from
cages out on highway 9, chrome wheeled, fuel injected and steppin out
over the line.” Sorry but knowing that each and every one of us own a
piece of GM and ahead of May vehicle sales today I couldn’t help but
sing Springsteen’s ‘Born to Run’. May SAAR is expected to total 9.4mm vs
9.3mm in April and would be 300k above the Feb level which was the
lowest since Dec ’81. April Pending Home Sales are expected to rise .5%
when the 30 yr mortgage rate averaged 4.95% according to Bankrate.com.
The average 30 yr mortgage rate today reached 5.32%, the highest since
Feb 10th and is up 32 bps in a week. Geithner in China basically said
that China still loves us and our treasuries. After a failed 40 yr Gilt
auction back in March, the UK successfully completed one today with a
bid to cover of 2.3.

Category: MacroNotes

We’re All “Dogs of the Dow” Investors Now

Good Evening: Grappling with an already confusing investment climate, investors were treated today to a GM bankruptcy filing and a scorching stock market rally. To the list of firsts previously set during the 2007-2009 bear stock market, we can now add the Chapter 11 filing of a current Dow component, the steepest 2-10 year yield…Read More

Category: Markets, Think Tank

Federal Agencies Propose Rule to Implement S.A.F.E. Act Mortgage Loan Originator Registration Requirements The Federal financial institution regulatory agencies are together issuing for public comment proposed rules requiring mortgage loan originators who are employees of agency-regulated institutions to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E….Read More

Category: Credit, Federal Reserve, Think Tank

Inflation, growth and stock market performance

Continuing my point last week on REAL vs NOMINAL returns in stocks, the happy, go lucky days of the 2nd half of the 1990′s was best described with the famous buzzword ‘goldilocks,’ with the connotations of strong growth and low inflation with the Maestro running the show. The combination allowed P/E multiplies to rise at…Read More

Category: MacroNotes

C&I loans/decoupling

In the context of the debate of whether banks are lending or not to businesses and/or is the demand for loans still falling, Friday’s data from the Fed for the week ended May 20th has commercial and industrial loans falling to the lowest level since June ’08 and is down for 9 of the past…Read More

Category: MacroNotes

Income and Spending

April Personal Income rose .5%, much better than expectations of a drop of .2% while Spending fell .1%, .1% better than forecasts. The revisions to March were modest. The factor in the surprise gain in income was related to the Government’s stimulus plan where transfer payments rose smartly and there was also reduced personal current…Read More

Category: MacroNotes

The Briefing (bad fiction)

Paul Brodsky & Lee Quaintance run QB Partners, a private macro-oriented investment fund based in New York.

~~~

QB ASSET MANAGEMENT
May 2009

The New Yorker magazine has maintained long preeminence among literate types by wrapping usually good writing in an old-world sensibility. While one may agree or disagree with its varying points of view, there is no doubt that the cascade of usually well-chosen words merely seek to rise to the level of profundity its cartoons seem to express so easily.

We found the one below while visiting the “ON THE MONEY” exhibit at the Morgan Library and Museum (January 23 to May 24). It was drawn by Joe Mirachi and published in March 1980 during a period of massive price inflation and rising interest rates (brought about by years of massive government produced monetary inflation). Mr. Mirachi’s barflies knew that such highfalutin terms were only fancy expressions for dollar devaluation. “TO THE DOLLAR – AS WE KNEW IT!” Indeed.

to-the-dollar

Or consider Lee Lorenz’s depiction of the dubious nature of government statistics (on the following page). This cartoon appeared in the New Yorker in March 1976, almost two decades before the Bureau of Labor Statistics began playing with the consumer price index by subjectively substituting, re-weighting and placing a hedonic value on consumer goods and services. As the cartoon’s subjects imply, (and as our essay last month proclaimed), some things never change.

We were so inspired by the unthreatening manner in which these gadflies are able to expose economic elephants in the room that we felt obliged to give it a shot. Alas, our crayons failed us. Lacking the necessary talent (and imagination) to even attempt the creation of poignant cartoons, we instead sought to assassinate the high art of literary fiction. Mr. Updike, we are sorry you’re gone but happy you won’t see this:

The Briefing
bad fiction

The narrow hallway had been going on endlessly, curving gradually down and to the left like a giant underground corkscrew or one of those ramps we drive around in parking garages. At last we were coming to a door, another 100 yards or so down. My mysterious escorts and I had been walking at a pretty good clip for a long time, descending deeper and deeper. We hadn’t passed any doors since we entered the hallway and it occurred to me that the entire tunnel’s function was to arrive at the one we were now approaching. We must be, what, 100 feet below the basement of the White House by now?

The only sounds over the last ten minutes were our footsteps and the occasional soft sound of fresh air flowing through small vents in the floor. I had grown accustomed to mysterious people walking behind me, usually in some sort of security detail. But these were older, patrician men dressed in classic business suits and without the tell-tale earpieces of security guards. They had appeared in the room off the White House kitchen suddenly and, it seemed, from nowhere. Each gave me only a faint acknowledgment of my presence, which was unusual, though I must admit refreshing. These four men were the only ones with me. Even Johnny, my newly assigned “body man” was given the morning off until I went back to the transition team’s hotel.

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Category: Think Tank

China is still the boss

China is once again proving that it’s the most important country in the world right now both in terms of its own growth as the 3rd biggest economy in the world and also its impact on commodity prices and the subsequent benefit that it gives to a variety of emerging markets that produce them. Both…Read More

Category: MacroNotes

The King Report: SPX Manipulation ?

> > Trading sources allege that JP Morgan bought 2500 SPMs near the close on Friday. >

Category: Legal, Think Tank, Trading

Words From the (Investment) Wise 5.31.09

30-mei-v1

Source: CXO Advisory Group

In addition to the major stock market indices rising for a third consecutive month, some of the other milestones achieved during the past week were the following:

• The S&P 500 Index rose by 5.3% in May for a three-month performance of +25.0% – the biggest three-month gain since August 1938.

• The Dow Jones Industrial Index advanced by 4.1% and 20.4% for May and the three-month period respectively – its largest three-month return since November 1998. (The last straight three-month gain was from August to October 2007, when the Index reached its bull market peak).

• The US dollar declined to a five-month low against the euro, losing 6.6% during May. The buck’s declines was even more pronounced against high-yielding currencies such as the Australian dollar (-9.4%) and the New Zealand dollar (-11.3%).

• The yield spread between two- and ten-year Treasury Notes reached a record 275 basis points on Wednesday before narrowing to 254 basis points by the close of the week.

• The Reuters-Jeffries CRB Index increased by 13.8% during May – its best monthly gain since 1974.

• The Baltic Dry Index – measuring freight rates of iron ore and bulk commodities – climbed every day in May to post its biggest monthly advance (+95.6%) on record.

• The price of West Texas Intermediate Crude recorded its largest monthly increase (+29.7%) since March 1999.

• Silver surged by 26.8% for the month – its strongest performance for 22 years. (Gold bullion advanced by 10.2% during May, and platinum by 8.2%.)

Back to long-term bonds. According to the Financial Times, Mike Lenhoff, chief market strategist at Brewin Dolphin Securities, said: “Bond markets may be telling us to expect inflation but, more importantly, I think they are telling us that policy makers the world over will succeed with their efforts to reflate the global economy.

“The trend of yields on corporate debt has been down, and that on Treasuries up, implying diminishing risk premiums – which is just what you would expect if markets are banking on recovery.”

The week’s performance of the major asset classes is summarized by the chart below.

30-mei-v2

Source: StockCharts.com

The MSCI World Index (+1.7%) and the MSCI Emerging Markets Index (+6.6%) last week added to the previous week’s gains to take the year-to-date returns to +5.4% and a massive +36.3% respectively.

Although the major US indices experienced declines on Monday and Wednesday, the weekly scoreboard ended in positive territory, as seen from the movements of the indices: S&P 500 Index (+3.6%, YTD +1.8%), Dow Jones Industrial Index (+2.7%, YTD -3.1%), Nasdaq Composite Index (+4.9%, YTD +12.5%) and Russell 2000 Index (+5.0%, YTD +0.4%).

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Category: Markets, Think Tank