Freaky Friday Potpourri: The Calm Before the Storm
By Todd Harrison Jul 10, 2009 8:05 am
Second Quarter Earnings Get Ready to Rock
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It’s summertime on the island of Manhattan. The sun is shining, tank tops are in vogue and city slickers are coming out of the woodwork (making their way to job interviews).
It’s almost enough to make you sit back and enjoy the journey. That’s precisely what we should be doing but this pesky mess continues to serve as grains of sand in our collective mechanism.
That’s the thing about what we’ve seen. This no longer a financial crisis and it’s more than an economic one. It’s now airborne…and social. Everywhere you look and most everyone you speak with have money on the brain.
Old habits die hard, I suppose, as do old debts.
As we edge into the final fifth of this freaky week and prepare for the avalanche of earnings on the other side of our requisite respite, the following vibes are top of mind:
- California IOU’s are gonna be regulated as a form of municipal debt?
- Why can’t I shake that scene from Dumb and Dumber?
- Not to be master of the obvious but if Goldman Sachs (GS) warned that their computer code could "manipulate the market in unfair ways," what does that imply about Goldman's usage of the code in the first place?
- I know, I know, that's sorta like bad mouthing the United States of America but please remember, it's not only our right to question the establishment, it's our responsibility.
- Goldman (and the other banks) will likely post massive earnings next week. If they jack 'em higher in response to the report, I'll look to fade (read: make sales) as 1) earnings are rear-view and balance sheets are forward looking and 2) vols will shrink faster than George Costanza after a dip in a cold pool.
- There is a bull case for the banks—it involves easy money, government guarantees and "old tricks" (seriously, have we learned nothing?)—so see both sides, define your risk and operate through the lens of discipline over conviction.
- Note that when the dollar dropped to session lows yesterday, the tape legged higher. Coincidence? I think not...
- S&P 875-955. Mr. Valentine has set the price.
- All else (the dollar) being equal, I sense we'll see a southbound break. I would note, however, that given where we are, what I'm seeing and how I'm operating (opportunistically with a scalpel not a sword), I'm currently more bearish than short (always honest).
- Da Vinci? Seeing both sides (have we mentioned that's important?), Minyan Mark Eckelberry notes that the DJIA held at 8808, the all-important 61.8% Fibonacci retracement.
- East End Minyans who wanna support an awesome cause and log some vibe time with Minyan Dougie Kass and I are invited to join us on August 22nd.
- Crank Alert! Starting next week, I'll begin my 6:00 AM kickboxing for the first time since last year's knee surgery. So if I get...how shall I say, edgy...around 1:00 PM on Tuesday's and Thursday's, you'll know why.
- Minyans far and wide are chiming in with anecdotal input regarding the "tuition squeeze."
- Inflation in what we "need" indeed, not to mention little things like healthcare.
- And then there's this...
- Following up on the upcoming bank earnings, our peeps on the street tell us that they're not seeing shorts in the group. There's been some long selling, they say, but a minimal short base (following the 100% rally off the March lows). If traders are looking to short strength on the heels of what is widely perceived to be stellar earnings...
- Is there anything wrong with a Summer Hummer on a slow day?
- While big beta, by and large, traded with a bid yesterday, Apple (AAPL) was noticeably lagging. Should the bears twitch and flip the switch, Newton's law of gravity will likely kick in rather quickly. The 50-day rests below at $134ish but Boo is quick to note 1) it already broke the uptrend from the March lows and 2) the 200-day is all the way at $107.
- More food for thought regarding the true unemployment rate hovering around 20%.
- Some tunage. Just 'cause we care.
- Enjoy the weekend, Minyans, for you’ve most certainly earned it!
R.P.
No positions in stocks mentioned.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
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Reply
2009-07-10 10:21:34
sneaky beasts
The rise in Delaware's tuition, you will note, was "necessary" since the State had committed to more financial aid for the impoverished. In other words, it's about redistibution of wealth. Sneaky, isn't it ?
2009-07-10 11:27:14
Andrew Weil and the long view
Todd,
Forget the kick boxing, get a permit instead and open fire.
D&D.... nice!
Forget the kick boxing, get a permit instead and open fire.
D&D.... nice!
2009-07-10 12:09:00
Tunage?
One of the best Rock'n Roll song and possibly bands ever! Long live the Queen!
2009-07-10 13:11:26
Dead cat Splat!!
Have real estate prices bottomed?
Statistics say that 65% of our working population makes less then 35.000 a year but everyone knows that the majority of these folks don't make even half of that. The medium price of a home these days is in the 170.000 range and financed at about 5% for 15 year makes your house payment above 1000 a month. Add taxes and insurance and up keep and we are looking at 1200 a month on a medium price home. If most folks are making 17.500 a year and house payments are 1200 a month that would mean that before taxes folks have to spend more than 75% of their paycheck on shelter. Pundits of the world say you should spend no more then 25% of your paycheck on housing. If first time buyers can't afford to get into the market then the other 35% of our population most likely won't be able to afford to move up. A catch 22 x 2.
So have home prices bottomed? No ffen way!
Scuttlebutt is that the stimulus money which was suppose to create jobs is being siphoned off by State and County Governments to shore up their finance deficiencies and to keep government workers working. That is to say the hell with the private sector and the Millions of people that are out of work AGAIN! Everyone knows you can't fire a government worker and when working for the government your first to the Government teat when it comes to social benefits, wages, and retirement plans. Its time for an old fashion Boston Tea Party but lets toss the Government workers into the bay this time. Maybe Arnold should rethink his bleeding heart liberal attitude towards illegal's swarming into our country. If California goes down the tubes it would be the world's sixth largest economy going teats up!
It's time the Republicans quit Sniveling about losing the elections and cross the Isle to be a part of the solution. If we don't get everyone on board working together to solve this biblical sized problem then we had better fire all our Politicians and recede to Canada before all the illegals vote us into Mexico.
I tried to buy 3 million dollars worth of Certificates of Deposit but the bank would not accept my IOU's to pay for them! What's up with that?
The 65% of American workers who make less then 35.000 a year (that was before another 6.5 million were laid off and does not count the 15 million who gave up looking for work after 30 million illegal's flooded into our country to work under the table. Let's not forget the 12 million Nixon gave pardon to. Most of them are working for the Government now.
You bleeding heart liberals like Arnold and you Thieving Bankers and Wall Street thieves have a wonderful day.
JPM
Statistics say that 65% of our working population makes less then 35.000 a year but everyone knows that the majority of these folks don't make even half of that. The medium price of a home these days is in the 170.000 range and financed at about 5% for 15 year makes your house payment above 1000 a month. Add taxes and insurance and up keep and we are looking at 1200 a month on a medium price home. If most folks are making 17.500 a year and house payments are 1200 a month that would mean that before taxes folks have to spend more than 75% of their paycheck on shelter. Pundits of the world say you should spend no more then 25% of your paycheck on housing. If first time buyers can't afford to get into the market then the other 35% of our population most likely won't be able to afford to move up. A catch 22 x 2.
So have home prices bottomed? No ffen way!
Scuttlebutt is that the stimulus money which was suppose to create jobs is being siphoned off by State and County Governments to shore up their finance deficiencies and to keep government workers working. That is to say the hell with the private sector and the Millions of people that are out of work AGAIN! Everyone knows you can't fire a government worker and when working for the government your first to the Government teat when it comes to social benefits, wages, and retirement plans. Its time for an old fashion Boston Tea Party but lets toss the Government workers into the bay this time. Maybe Arnold should rethink his bleeding heart liberal attitude towards illegal's swarming into our country. If California goes down the tubes it would be the world's sixth largest economy going teats up!
It's time the Republicans quit Sniveling about losing the elections and cross the Isle to be a part of the solution. If we don't get everyone on board working together to solve this biblical sized problem then we had better fire all our Politicians and recede to Canada before all the illegals vote us into Mexico.
I tried to buy 3 million dollars worth of Certificates of Deposit but the bank would not accept my IOU's to pay for them! What's up with that?
The 65% of American workers who make less then 35.000 a year (that was before another 6.5 million were laid off and does not count the 15 million who gave up looking for work after 30 million illegal's flooded into our country to work under the table. Let's not forget the 12 million Nixon gave pardon to. Most of them are working for the Government now.
You bleeding heart liberals like Arnold and you Thieving Bankers and Wall Street thieves have a wonderful day.
JPM
2009-07-10 20:40:48
Missing the mark
"This no longer a financial crisis and it's more than an economic one."
Todd,
I cannot believe that your statement above is true. All the government, Fed and banks have done to the financial crisis is TRY to hide through gerrymandering rules, lying, cheating, stealing, and lying some more.
ALMOST NONE of the toxic assets have been taken off the banks' balance sheets.
Debt across the system is even HIGHER than it was at the start of this crisis. Here, I cite another blogger that has the statistics:
On Consumer Debt: "In 2004 consumers held $2.191 trillion. At the peak, they held $2.582 trillion. Today, less than three quarters later, they have cut back by an astounding $62 billion dollars in total, or a whole 2.36% - an absolutely inconsequential amount."
On Bank credit instruments: "Let's start with this (click for full screen) http://www.federalreserve.gov/releases/z1/Current/accessible/l1.htm
That's total credit market instruments, all sectors, and it is still rising. In fact, it is rising fast - very fast! Currently at $52.9 trillion dollars, up from $50.7 1Q 2008, and up from $31.9 trillion in 2002. (For those who argue this isn't "very fast", what was the GDP growth, all-in, during that same period? Less than the 4% that credit expanded, right? That's the problem, in a nutshell - its called exponents!)"
"European banks are still geared at 30, 40 even 50:1. Go look up the leverage ratios for Deutche Bank, among others. Make sure you're sitting down. Our own banks have refused to take their SIV and other off-balance-sheet garbage back onto their balance sheets, and thus are intentionally understating their leverage ratios. Fannie and Freddie are still geared at over 80:1, although under conservatorship."
On financial WMDs (aka derivatives): "The Bank of International Settlements (BIS) says that the total amount of outstanding derivatives has reached a nearly-incomprehensible $1.28 quadrillion dollars. Oh, and this does not include derivative positions related to the commodity markets. Further, the outstanding amount has increased at a double-digit percentage rate over the last 12 months."
And, of course, Uncle Sam: "Through April 30, the government has made commitments of about $12.2 trillion and spent $2.5 trillion.
Our total outstanding public debt is about $6 trillion, up by a full trillion in the last year, and we're on-plan to add $1.8 trillion to our public debt this fiscal year - that's a 30% increase . . . ."
If THIS is not a FINANCIAL crisis, WT heck is? Just because Bernanke, Paulson, Timmy and the Gang (as in mobsters) have tried to hide the wreckage via smoke and mirrors, and a lot of questionable if not completely illegal slights of hand to get it out of the mindscape of our ADD republic, does not mean that the financial crisis is over. With numbers like these, not by a long shot. A REALLLLLLLLLLLLLLY LOOOOOOONNNNNNNGGGGGGG-- mean like decades long--shot
Todd,
I cannot believe that your statement above is true. All the government, Fed and banks have done to the financial crisis is TRY to hide through gerrymandering rules, lying, cheating, stealing, and lying some more.
ALMOST NONE of the toxic assets have been taken off the banks' balance sheets.
Debt across the system is even HIGHER than it was at the start of this crisis. Here, I cite another blogger that has the statistics:
On Consumer Debt: "In 2004 consumers held $2.191 trillion. At the peak, they held $2.582 trillion. Today, less than three quarters later, they have cut back by an astounding $62 billion dollars in total, or a whole 2.36% - an absolutely inconsequential amount."
On Bank credit instruments: "Let's start with this (click for full screen) http://www.federalreserve.gov/releases/z1/Current/accessible/l1.htm
That's total credit market instruments, all sectors, and it is still rising. In fact, it is rising fast - very fast! Currently at $52.9 trillion dollars, up from $50.7 1Q 2008, and up from $31.9 trillion in 2002. (For those who argue this isn't "very fast", what was the GDP growth, all-in, during that same period? Less than the 4% that credit expanded, right? That's the problem, in a nutshell - its called exponents!)"
"European banks are still geared at 30, 40 even 50:1. Go look up the leverage ratios for Deutche Bank, among others. Make sure you're sitting down. Our own banks have refused to take their SIV and other off-balance-sheet garbage back onto their balance sheets, and thus are intentionally understating their leverage ratios. Fannie and Freddie are still geared at over 80:1, although under conservatorship."
On financial WMDs (aka derivatives): "The Bank of International Settlements (BIS) says that the total amount of outstanding derivatives has reached a nearly-incomprehensible $1.28 quadrillion dollars. Oh, and this does not include derivative positions related to the commodity markets. Further, the outstanding amount has increased at a double-digit percentage rate over the last 12 months."
And, of course, Uncle Sam: "Through April 30, the government has made commitments of about $12.2 trillion and spent $2.5 trillion.
Our total outstanding public debt is about $6 trillion, up by a full trillion in the last year, and we're on-plan to add $1.8 trillion to our public debt this fiscal year - that's a 30% increase . . . ."
If THIS is not a FINANCIAL crisis, WT heck is? Just because Bernanke, Paulson, Timmy and the Gang (as in mobsters) have tried to hide the wreckage via smoke and mirrors, and a lot of questionable if not completely illegal slights of hand to get it out of the mindscape of our ADD republic, does not mean that the financial crisis is over. With numbers like these, not by a long shot. A REALLLLLLLLLLLLLLY LOOOOOOONNNNNNNGGGGGGG-- mean like decades long--shot
2009-07-10 20:49:47
Dead cat Splat!!
JM,
While I love the idea of "Its time for an old fashion Boston Tea Party but lets toss the Government workers into the bay this time."--particularly the part about throwing the government workers into the bay. I say to heck with the Tea Parties--the Berries don't seem to care anyway--and let's cut straight to the Revolution.
Vive Le Independence!! Down with Tyranny!!
While I love the idea of "Its time for an old fashion Boston Tea Party but lets toss the Government workers into the bay this time."--particularly the part about throwing the government workers into the bay. I say to heck with the Tea Parties--the Berries don't seem to care anyway--and let's cut straight to the Revolution.
Vive Le Independence!! Down with Tyranny!!
2009-07-11 00:54:10
"Investors who stuffed themselves on a constant diet of asset appreciation for the past quarter-century will now be enclosed in a cage featuring government-mandated, consumer-oriented fasting. This trend promises to persist for a generation at a minimum. We are certainly headed for the stag in terms of growth, we'll grow at 1-2% for a long long time." ~ Bill Gross Pimco.
PS. Anything below 2% is considered recession.
PS. Anything below 2% is considered recession.
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