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Morning Dew

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Please don't shoot the messenger, just see both sides of the globalization trade and the inherent implications.

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"Oh I like this one... One dog goes one way, the other dog goes the other way, and this guy's sayin', "Whadda ya want from me?'"
--
Tommy DeVito

  • Boo wrestled the benefit of the doubt from the bulls yesterday as a function of the broken levels in the S&P and continued laggage in the banks.

  • S&P 1530 is new resistance in the former while BKX 115 (200-day) and BKX 116 (resistance, from where we broke) is the poke of the piggies.

  • So you know and so you see, China rallied 3% overnight while India (and the potential double top we discussed yesterday) slipped fitty bips.

  • The G8 is taking place in Germany as world leaders noodle the global landscape. While the early vibes have downplayed recent acrimony, one of two roads must be taken. We'll either see a continued transfer of wealth abroad (as a function of the falling dollar) or isolationism (and nationalization) will percolate. Please don't shoot the messenger, just see both sides of the globalization trade and the inherent implications.

  • I'll again point to Professor Bennet Sedacca 's recent ramble on the global bond markets. In a finance based economy, this has massive implications. I don't know if there's anything magical about 5%+ yields on the 10-year but if those charts play out, there is further meat to that bone.

  • Google and Apple held their bid yesterday, which helped quell the ursine swell. The former broke out above GOOG 513, which Hoofy can use to define his risk if he wants to play. The latter is jammin' in front of the i-phone, so expect further volatility into June 29.

  • There are also rumors of a split in Google, which is fueling speculation. As Television's JeffMacke implied last night, I think you'd likely find a similar mindset if you Google "1999." Not to say it doesn't happen-and not to say it won't jack the stock-but be conscious of the risks of invisible catalysts.

  • "Prof. Cooper was ahead of this InterContinental Exchange (ICE) yesterday. But just wanted to add one thing. The options board has an inverted skew such that the higher the strike, the higher the volatility (for those near the money). That's a pattern that was common in the bubble years, but unusual yesterday." Professor Adam Warner on this morning's Buzz (position in ICE).

  • The Spanish Fly? Some smart Spaniards are playing Matador to this particular bull run.

  • It's baaaack! Having dropped almost $100 beans, the Federal Trade Debt is slowly creeping back up ($50 billion in the last week alone). The old record for those watching at home is $8.893 trillion. (Thanks Minyan Neal)


Minyan Mailbag

Toddo,

So I noticed yesterday that one of the guys on Minyanville said that the hedge funds were as invested as they ever get. How does he surmise that? And if that is the case is it then up to the individual investor to take us higher?

Also, any tip on the next hot emerging market that no one has found? Business Week had a cover story about Emerging Markets a few issues ago...but I think all of their info is already scooped.

Thanks, Minyan Terry

MT,

I'm not sure who said that (I read it too) but it's somewhat academic. The number of hedge funds is close to an all-time high and, by extension, (leveraged) exposure has never been higher. I don't have insight as to which side of the ride they're on but I have a strong sense that the short side is light.

Along those lines, I'll also offer that this is one bubble that has yet to pop. We've seen isolated incidents and a few high profile snafus (all of which, should be noted, coincided with an uptick in volatility) but nothing to derail the massive rush to participate in the industry. Given the intricate derivative weavings of our financial fabric, this remains a risk (not a catalyst).

Finally, with regard to the emerging market jinx, I'll note that the move to the upside has been pretty correlated around the globe and across asset classes. It stands to reason that when emerging markets decline, they won't do so in a vacuum. Food for thought as we edge through contra-hour and eyeball the interns.

-Toddo

R.P.

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