This morning the credit rating agencies tried to pretend that they are still relevant - that anything they say matters - that they are not woefully behind credit downgrades in 100% of all cases.  In essence Moody's said, "If the major players in the world, including the U.S.A. and U.K., do not get their financial houses in order, we will take them down a peg...a WHOLE PEG."

Moody's makes the case that the global economic recovery remains "fragile" in several large, advanced economies, most of which have also implemented the most aggressively expansionary fiscal and monetary policies, which is not a good thing in the long run. I guess the folks at Moody's aren't die-hard believers in the Keyensian miracle. "This exposes governments to substantial execution risk in the implementation of their exit strategies, which could yet make their credit more vulnerable," Arnaud Mares, senior vice president in Moody's Sovereign Risk Group and the main author of the report, said in a st... more

Supposedly, Lehman Brothers was trading toxic assets back and forth with other respectable Wall Street fixtures to produce cleaner balance sheets and healthier periodic reports for their shareholders.  How were they doing this?  Through a legitimate accounting procedure called Repo 105 transactions, which we will get to in a second. 

Data was manipulated, top executives reportedly closed a blind eye and lawsuits may be looming.  Before we get to all that though, let’s talk about what a Repo 105 transaction is and how they are tainting the reputation of top Wall Street executives.

What is a Repo 105 Transaction?

A Repurchasing agreement (the Repo stand... more

It's not the fourth or fifth rumor in a long line of unfounded rumors, this time it is different: it's for real.  Although the European Union (EU) apparently had to drag Germany to the bailout table quite reluctantly, the EU got it done for Greece.  It is now officially bailed out.

According to The Guardian, The eurozone has agreed a multibillion-euro bailout for Greece as part of a package to shore up the single currency after weeks of crisis, the Guardian has learnt.

"There have been quite intensive preparations under the eurogroup. We have the ways and means to do it," said the senior official, asking not to be named because of the subject's sensitivity.

"It will be a co-ordinated approach of bilateral contributions [between EU governments] ... A bilateral contribution can be a loan or a loan guarantee. The guarantees will facilitate the kind of funds potentially needed in this context."

It is estimated that Greece may need as much as 5... more

The rollover from the recent March 2009 contract to the new June 2010 started today.  The March contract will continue to trade through this coming Thursday, however, the majority of the "roll" normally takes place on the first 2-days: Thursday and Friday.  As you witnessed today while trading, the low volume dispersed over two contracts for several days makes for slow and thin trading.  Today's trade was slow & thin indeed, until late in the day when the market spiked into the close.

Weekly unemployment claims came out this morning and to nobody's surprise, they were very high once again.  It's no longer a shock because every week it is very high and since it is expected to be bad, it no longer matters.  Isn't that great?  Initial jobless claims totaled 462,000 in the March 6 week, about what was expected and driving up the four-week average by 5,000 to 475,500 for the highest level since November when claims first broke below 500,000.

Later, the 30-YR IOU... more

I have recently written about some wild things happening in the housing market thanks to government intrusion.

Do you remember "Cash for Caulkers" when  I said...President Obama proposed a new program Tuesday that would reimburse homeowners for energy-efficient appliances and insulation, part of a broader plan to stimulate the economy.

There was also the White House idea of "homes for the unemployed."  The old notion of renting is so old-school now and the failure of the HAMP program.

There is a now another new idea from the White House: Pay homeowners to sell at a loss.  Is there anyone at the White House who has any clue on housing?  How many hundreds of billions of dollars need to be wasted before they just let the market fix the problem on its own?  From the NYT  http://www.nytimes.com/2010/03/08/business/08short.html?pagewanted=1&src=twr

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep d... more

Today's market gapped open lower this morning and caught an early bid, which is not abnormal.  Buying below the prior day's perceived value area is shrewd, if you believe the lower open is a bargain.  This often leads to an early rally that fizzles out near the Globex high, or the prior day's low, which ever comes first.  What happens far less often, however, is an excruciatingly slow but persistent one-way rally.  The latter happened this morning.

If you traded today you were surely wondering what on earth was driving the buying.  After all, there was no news - no economic data - the entire day.  Never fear, the rumor mill is here!

Our old friend from CNBC, Charlie Gasparino, is now at Fox Business News (FBN) and is still "reporting" the same half & non-truths.  Today's were rumors of Shitibank shaking off the government overlord, presumably because it is healthy enough to be on its own (bulls*it...caugh...bulls*it) and some new anti-shorting regulations.<... more

There was absolutely NO trading today with just a 4.50-point total range in the S&P500 futures.  Because of that I thought I would do a quick follow up on yesterday's bank loss/balance sheet issues.

Yesterday I wrote "As I have written before, these banks are marking UP their real estate portfolios to roughly no loss.  In the make believe world of make-it-up-as-you-go-along accounting, banking execs are legally allowed to mark the portfolio to what they believe the homes will be worth in the future and if they don't go broke in the interim, then the swindle will have worked."  I forgot to write that YOU, the taxpayer, is funding the fraud.

Specifically, one of the bank data were as follows...

   * Waterford Bank, Germantown MD: $155.6 million in assets, $156.4 in insured deposits.  They were "underwater" by $800,000, right?  Wrong:  Estimated loss, $51 million.  That is, the assets of $155.6 million were overvalued by approximately 30% at the tim... more

Friday's Jobs data came and went without a surprise - to me anyway.  There were only a few possibilities for its outcome...

  1. Better than expected?  Higher
  2. As expected?  Higher
  3. Worse than expected? Higher
  4. Much worse than expected?  Lower for 5-minutes, then higher.

The BLS reported 36,000 job losses with the unemployment rate holding at 9.7%.  However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is how unemployment feels to the average Joe on the street, which is 16.8%.

With this "great" news, the markets rocketed higher.

On several over occasions in the past I have written about the (bankrupt) FDIC taking over insolvent banks on Friday afternoon's.  T... more

There isn’t much to say today. This week’s miserable trading environment will
fortunately come to a close soon. All eyes are on Friday’s monthly
“employment situation” data, which I believe is more appropriately called the
“job loss” report.

In case you missed it, the White House is already giving excuses for an
anticipated poor data point. Just a few days ago Larry Summers said – in
essence – that if the jobs figures are bad, blame it on the weather. That’s right; Mr. Summers and others believe that hundreds and hundreds of thousands of jobs would have been otherwise magically tallied were it not for the snow. Yeah, right!

The Federal Reserve picked up that line of hooey too. In the recent Beige
Book, it cited “snow issues” at least six times to explain how would have been
better.

Finally, you can bet the ranch that every bobble head in the lame stream media, as well as every analyst on Fraud Street, will be crowin... more

The CME Group acquires 90% of the Dow Jones Index business to expand opportunities in the equity index space.

The History of the Dow Jones

The Dow Jones Industrial Average, up until February 2010, had been managed and owned by Dow Jones, a subsidiary of Rupert Murdoch’s News Corporation.  The Index, created by Charles Dow in 1896, was originally made up of 12 stocks and acts as a benchmark to measure the performance of the stock market. 

Currently, the index includes 30 stocks and has become a benchmark used around the world.  Many futures contracts traded at the CME Group are based on the Dow Jones Industrial Average (DJIA).

On February 10, 2010, it was announce... more

Consumer confidence is measured by the Consumer Confidence Index and acts as a benchmark in determining economic health.  When the index is low, the markets react but how?  Read on to understand what the index is based on, what impacts the numbers and how the market is affected.

 What Is the Consumer Confidence Index?

The Consumer Confidence Index (CCI) is a benchmark to determine the degree of optimism consumer’s express about the economy based on their spending and savings.  It is a key element in determining economic health considering it makes up 70% of economic activity.

The Conference Board, an independent economic research organization, started the CCI in 1967.more

I ended yesterday’s missive with “Next up, 100-year mortgages.”  I was wrong.  Next up is government housing for the unemployed, thus further distorting the housing market.  If this is forcefully passed, for all intents & purposes, Uncle Sam is your landlord – excuse me – overlord.

 In “A Dark Day for the Mortgage Industry” Paul Jackson describes it all.  http://www.housingwire.com/2010/03/01/a-dark-day-for-the-mortgage-industry/

If the Mortgage Bankers Association was hoping to show that it’s in touch with the needs of the mortgage servicing industry – and taxpayers, too – a proposal unveiled at last week’s servicing conference in San Diego may quickly have shot that notion to the ground.

MBA president and CEO John Courson used the show’s opening remarks to announce that the trade organization was backing what it called a “Bridge to HAMP” proposal... more

Housing is a very large part of the US economy so when housing reports are
released, people tend to pay attention. Increasing housing starts equate to a
great deal of economic activity some of which would include; construction
labor of all types, heavy equipment sales, wiring, lumber, concrete, paint,
appliances, carpet, furniture, legal advice, as well as support staff for the
aforementioned groups. Clearly, when this sector of the economy stagnates, it
gets people’s attention.

Up to this point, however, there hasn’t been a major nationwide housing
recession. Because it hasn’t happened before doesn’t mean it cannot happen,
yet that was the delusion that ran rampant from Main Street to Fraud Street.
Otherwise extremely intelligent people actually thought that their home would
go up in value, perhaps at 15% per annum…FOREVER. Main Street wanted to
“get rich quick” while Fraud Street was willing to give anyone who could... more

The following story is a good primer for tomorrow’s email, which will also be
about housing. In today’s missive we hear what Karl Denninger has to say
about Freddie Mac finally refusing to purchase toxic mortgages.

Gee, what took you so long?

McLean, VA – Freddie Mac (NYSE: FRE) announced today that on or about September 1, 2010, the company will cease purchasing and securitizing interest only mortgages, including Freddie Mac Initial InterestSM fixed-rate and adjustable-rate mortgages. Additional information will be provided to Freddie Mac Seller/Servicers in an upcoming Single-Family Seller/Servicer Guide bulletin.

Interest only mortgages, including Freddie Mac Initial Interest mortgages, provide for interest-only payments for a specified period of time beginning with the first monthly payment after the note date, and principal and interest payments on a fully amortizing basis for the remainder of the mortgage term.

These "vehic... more

Exhilarating yet terrifying

That’s how I would describe those first few days as a commodity trader.  You are bombarded with emotions, nerves and information as you begin your trading career.  However, there is no need to panic- in fact, don’t panic at all because it will only ruin your chances of becoming a successful trader.

Your subconscious doesn’t know the difference between what is real and what is imagined.  So if you panic, those imagined thoughts will trick your mind into preventing you from becoming a better trader.  However, if you visualize yourself being successful and profitable, your mind will believe those thoughts and work to achieve those goals.  

more

Well, well, well, today was an interesting day indeed. It was a tug-of-war of
sorts, with apathy pulling against very…VERY…bad data. Luckily for the
fearless apathetic lot amongst us who couldn’t care less about cascading
sovereign debt defaults on the world’s doorstep and increasingly horrific job
losses, a hero emerged. Someone started a rumor that one company among the tens of thousands listed on the exchanges would be buying back shares – a stock split – and the market E X P L O D E D.

As an example, the March S&P futures gapped open much lower due to the
poor economic data (coming later) and quickly put in a low at 1084.70. From
there the high frequency traders (HFT) took over and churned the markets back and forth slowly for the entire morning and early afternoon session, thus
keeping fear at bay. Additionally, when the market did swoon a bit, Golden
Slacks supported the market by buying large size in the big S&P pit.<... more

Controversy has erupted over High Frequency Trading.  But what exactly is High Frequency Trading?  And, how is it affecting you as you venture into the futures markets and begin your trading career? 

What is High Frequency Trading?

Since the early 90’s and the advent of the Chicago Mercantile Exchange’s Globex platform, trading has evolved from the trading pits to electronic screens.  Trading went from hand signals that took under a minute to place orders, to milliseconds via automated trading systems that match buyers and sellers electronically. 

High Frequency Tradin... more

There has been a raft of interesting data recently. I find it interesting because it has been rather bad, far worse than economists expected in fact, and yet the market has continued to go up on apathetic volume. Of course, this is no longer surprising. What is definitely surprising though is how these economists can hold a job.

Which profession is it that you can be continually WRONG yet keep drawing a salary? Answer: meteorologist and economist. Hell, even the weather man gets it right far more often than economists. These economic soothsayers will always give you a straight and precise answer; however, you always know that it’s wrong.

The recent data to be off by varying degrees are found below.
1) Economists predicted S&P Case-Shiller home prices to
show gains. The data actually showed housing prices
continuing to fall; -0.2% last month.

2) Economists predicted consumer confidence to have
only dipped mildly from the prior mont... more

I have often mentioned the massive, colossal, gigantic…LACK of volume on all days other than bearish days.  According to volume data that I collect daily from the NYSE, equity volume on rally days is approximately 30% to 40% less than that of bearish days.  The market is somehow continuing to advance on an ever slimmer amount of volume.

Some may wonder – what’s the problem?  Well, if this worked forever, we’d expect to see a +175 point Dow rally with only 100 shares traded on the NYSE, and I’m sure we’d all say that’s impossible.  In normal non-government (central bank) backed markets, when higher prices choke off volume, prices reverse for a while.  New information is needed for another rally attempt; anything new that the bulls can cling to to drive it up is embraced, but something is definitely needed.  The markets need this additional support; without it, the rally reverses.

The market and volume is a little like my buddy Fat Max.  Fat Max is a wide metal t... more

I could only imagine what transpired over the past few days: The Phone Call!

Tax- Cheating-Timmy: “Dang, those last few IOU sales we issued from the Treasury didn’t go so well.  I better get Bernanke on the phone to rig this, ah-hem, fix this.”

“What was the number over at the Fed again?  Oh here it is.”

…call…ring…ring…

Tax- Cheating-Timmy waits patiently for the line to be answered when he hears: “Welcome to the answering service of the Federal Reserve.  Press #1 to continue in English.  Press #2 to continue in Spanish.  Press #3 for tailored bailouts.”  Tax- Cheating-Timmy mashes the phone with his palm and shrieks for someone to pick up.

Tax- Cheating-Timmy: “Hello, is Ben available?”

Fed flunky: “Ben who?”

Tax- Cheating-Timmy: “Ben who?  Ben Bernanke.”

Fed flunky: “Ber..nan..keeee?  Doesn’t ring a bell.  You sure you have the right number?  We give away free money to banks here.”

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