Rumors That Will Never be Proven Can be Fun
Throughout history there have been rumors. Some have been true, others false, but what is always a fact is that rumors captivate people's interest. Whether it was the Plunge Protection Team (the PPT, true), Goldman Sachs High Frequency Trading programs (true), Billions in bearer bonds stopped at the Italian border (true they were found, bonds likely fakes) or Treasury threatening BAc CEO Ken Lewis (true at some level) these things can take on a life of their own. Tonight brings another juicy morsel.
Zero Hedge, yes the same blog endlessly targeted by CNBC for hit jobs to boost their own ratings, has a possible major story up this evening. This tale is so big that I can say with full confidence the audio tape in question will never be heard. Ever.
Be that as it may, enjoy a rumor that is captivating:
"This Call Is Being Recorded For Quality Service"
You would think that, having run an investment firm of his own, the likes of Steve Rattner would realize that many hedge funds, particularly trader-centric firms (and which aren't?) record their calls. Apparently, that detail escaped him during the Chrysler bankruptcy fiasco.
Zero Hedge has been told that at least one of the firms that were purportedly threatened with dire action by the likes of the IRS, SEC or White House Press Office (Rattner obviously confused the placid Robert Gibbs with Helen Thomas here) if they did not support the administration-backed spoonfeeding of the UAW, has the threats on tape. Oops.
We didn't buy that Rattner resignation story in the first place, but how sad a state of affairs would it be if an Obama Czar used as the "cover story" for a resignation, allegations of fraud at their private equity fund because the truth was much worse?
Now it is in no way clear this story has any merit, but if I use my own internal compass and think about the whole situation for a minute I would be shocked ONLY if this were not true.
That said, this story is too big to surface, so that audio, if it exists will not see your Ipod any time soon. Still fun to speculate in something other than stocks!
US Treasury: All Your Liquidity Belongs to US!
Next week is going to be interesting on many levels. The dynamic to watch is going to be the Treasury auctions, which alone will try and push $250 Billion bucks onto "investors" with a huge weekly debt sale. How big, again? Market Ticker has this write up (hat tip reader Watchtower):
HOLY !@#!! Treasury Auction Schedule
Let's see if I can count this up....
70 day CMBs, $30 billion (tomorrow)
13 week Bills, $32 billion (July 27th)
26 week Bills, $31 billion (July 27th)
52 week Bills, $27 billion (July 28th)
2 year Notes, $42 billion (July 28th)
5 year Notes, $39 billion (July 29th)
7 year Notes, $28 billion (July 30th)
19 year, 6 month TIPS (reopened), $6 billion (July 27th)
That's two hundred thirty-five billion dollars over the next week!
Almost one quarter of a trillion....... geejus.
I would say you can cross the $6 Billion in TIPS off the list as the author of the blog Illusion of Prosperity hearts TIPS and will buy the entire issue! (Kidding Mark!!!)
This kind of money drain will have to impact some market someplace. The liquidity situation next week may be strained.
I would also like to add that do not bother trying to get an up to the minute release of the bond auctions. They will ALL go off very well, spectacular even. The participation will be at all time highs, and foreign buying will be jacked as well. How do I know? Because IT HAS TO BE THAT WAY. The FED will provide any funding the markets will not, so please do not start writing items like "if the bond sales are bad, or even fail" because they will not. You were warned, but be ready for a market run up when the sales go well. If anyone can find some free cash anywhere in the world. Now what about those reserves parked at the banks that are causing all that deflation.......Hmmm. Very interesting.
Reflections on the Bull Market
This blog has been termed a "doom and gloomer" with a "bearish" type of stance since I started writing over two years ago. I would characterize this site as a sarcastic, witty, biting commentary on all things that do not add up in the modern US economy, but that's just me. I do have a vested interest in a market that goes up. I have a 401k just like many folks do. The company that administers the plan has 3 types of funds to invest in:
Those are the choices. My employer has an excellent (really amazing actually) 401k matching plan that matches with CASH your allotments up to a very nice percentage. So I use this vehicle as my proxy for the "very aggressive" portion of my personal investment portfolio. So in theory I like a rising stock market as much as the next guy.
Side note: Beware employers that match with company stock. I know plenty of people that use their 401k as their main investment vehicle and their company matches with stock, then the employee also does the employee stock purchase plan and that is just too much money riding on the results of one company. My 2 cents.
Where we differ is that I care about the "how and why" and not just the direction of the markets.
I would love a bull market built on earnings growth, rising wages fueling demand, job creation in sustainable industry, and economic confidence based on well researched prospects for balanced expansion.
Now ask yourself, is any one element of those criteria met by the current market run?
Take a day like today. The indices were running wild all day and closed almost right at the highs. So what was the big impetus for the move higher (turn off your understanding of manipulation for 1 minute)?
We are told that existing home sales went up from May to June (as they do every May to June since the invention of the school year) and that home prices went up, at least marginally. That sounds great, and we could parse those number for a while, but there is no need.
Today we heard from Microsoft (MSFT), UPS (uh, UPS), Amazon (AMZN), and McDonalds (MCD) which all said in no uncertain terms that sales are still falling, shipments are falling, unemployment numbers are still historically very high, and not even chicken mcnuggets can garner a bid.
So in the face of this data, am I to believe that people that are not buying a computer, shipping things from Amazon and Ebay, nor eating many quarter pounders, are out buying houses instead?? You have got to be kidding me.
I would ask all involved to think for a quiet minute on just who is buying all these REO sales and foreclosure sale homes that are the bulk of sales. Take a minute, I will be here.
Welcome back! Have your answer?
There may well be a few, but leading candidates are:
-Newly born "real estate investors" looking to make a quick flip. These are the same as the old ones and they will just as quickly default on loans as soon as they are under water enough (which is not much). Call me this November and we will see.
-New first time buyers lured into a market that has never looked cheaper to them, because they first entered into the market in 2006 or later. They think this is the bottom. They need a better starting reference point!
As a "moronic blog", as CNBC has coined many of us (I am sure they have no idea I exists but I speak for us all), I would ask their best analyst to square that basic purchases are going down, unemployment is at decades long highs, but home sales are going up? Try it, I would love to see the logic.
I really do not have more to add other than right now feels like late 2000 and mid 2006 to late 2007 to me. Everything is good, and the bad is not applicable. There are some thinking the MSFT and AMZN after hours release will hurt the market tomorrow. It will indeed, for about an hour. I fully expect another 1% day to the upside tomorrow, momentum is a strange thing.
Along the macro type of thinking, I would suggest very strongly (almost ask you) to take a look at The Automatic Earth's author Ilargi's opening statements in his missive from today. I went back to it multiple times, and I still find it very moving, well worth your time.
Read the Whole thing.
Have a good night.