Explosive Ingredients

Amazingly it was 50 degrees here today and very sunny. It was almost like a spring day. Went for a walk and that was great in January.

Apple Blowout Earnings
Apple (AAPL) once again blew out the house on earnings. The numbers continue to be staggering, and growing. Even the most aggressive estimates I had seen were way off. 13 Billion in net income for past quarter and revenues grew to 46 Billion. You cannot even fathom such a thing.

Now it may be time to get re-acquainted with the excellent site, Things Apple is Worth More Than on Tumblr. I need to start making updates as Apple is now surging higher. Suggestions welcome anytime!

Explosive Ingredients

Thermite Reaction

Markets are running higher since mid December. Earnings have been good, and Apple just blew it up. Tomorrow the FED meets and will start their effort to be even more clear on their plans. It's an explosive mix.

Articles and rumors ran around in December that the FED was prepared to buy anywhere from 600 Billion to 1 Trillion more in mortgage backed securities in another round of QE. With markets running hot and oil still near $100 more QE may be a bit aggressive from the FED. That said measured inflation is still zero and there is Euro market drama in the wings. I do not discount that Boom Boom Bernanke may pull the trigger yet again in another effort to ignite animal spirits.

So is more FED buying priced in here or not? It's a close call, but I think there is a feeling that more help is on the way. At a minimum some kind of re-investment program like before (QE light) is in play. Anything else could set off a run higher that will have real legs. If the FED sticks with just keeping rates low until 2050 the market action from there is going to tell me a lot about how strong things are.

Have a good night.

Limited Choices

Just a few quick hits this evening.

But I Thought High Frequency Trading was a Minuscule Part of Business?
A while back when some harped on the HFT games being played in the market (I used to post C stock graphs that moved liked oscillation waves) all the big banks ran out and claimed that HFT was a very small part of their business model and not really that important. Of course I believed them, HA!

I bring this up because once again someone has been bagged trying to steal this useless code that makes no difference:

The Next Sergey Aleynikov? Employee Arrested For Stealing HFT Trading Algorithms From Soc Gen
Samarth Agrawal was arrested today for stealing high frequency trading (HFT) algorithms from Soc Gen, according to Courthouse News.
In an amazing case that could be bigger than Goldman's alleged algo-thief Sergey Aleynikov, it looks as though Agrawal tried to steal complex algos from Soc Gen and give them to a competing financial institution.
HFT trading operations are very secretive about their algos. Everyone at a Mankoff Company HFT conference we were at recently jumped when someone mentioned the purpose of one particular algo he had learned of. None of the traders we later asked would give us any other examples of the algos they use.
"It's proprietary information," we heard repeatedly.

If this is such a small fry, why all the fuss? I think you can figure it out for yourself.

Greece to Get a Really Long Term Extension
Extend and Hope may well be the new way to tackle structural issues. With Greece about ready to enter the IMF bailout deal, Sudden Debt has a nice write up on what will probably happen:

Most Likely Scenario for Greek Debt Crisis
I expect, therefore, a voluntary debt swap i.e. swapping bonds coming due over then next 5-10 years for longer maturities, maybe with a self-amortization feature, along with the IMF/EU funding package. The voluntary feature will likely be there to avoid triggering a credit event under CDS terms, but if structured properly most everyone would want or have to participate - a.k.a. a shotgun marriage.

For example..
Concurrently, the Greek government could enact more revenue-enhancement measures (that's what new taxes are called, in beffuddle-the-masses speak), probably a real estate ownership tax. Such a tax could easily raise 5 billion euro/year (current debt service runs at 12-13 billion/yr) and, crucially in a country where tax avoidance is the national sport, would be nearly impossible to avoid.

Take that tax money, segregate it into a special account administered by a Paris Club-type of group, earmark it for the sole benefit of those accepting the debt swap with first-lien bonds and voila..

The key element in such a deal will be to structure it in such a way as to minimize immediate stress in the balance sheets of major Greek debt holders, i.e. foreign and domestic banks, plus pension funds. Given the generously stretchy accounting rules for banks holding sovereign debt, it shouldn't be too difficult.

Hard to argue with any of that. Does this not make the Greek debt Crisis more of a long term refinance deal? How long until many countries roll their debts out 20, 30, 1000 years? Who knows, and who cares. Expect a monster rally on this deal should it go this way.

Apple (AAPL) is Huge
Is Apple really a 225 Billion dollar company? How much useless crap can people buy anyway? Don't bother telling how awesome this stuff is, I don't need any of it (gadgets of all sorts not just Apple ones) and really no one else does either. Each to his or her own, but that is an amazing market cap.

Limited Choices
Here is what it feels like to be faced with "Financial Reform" in American politics:
-Democrat Bill (mainly by C. Dodd) is crap and will not do anything at all. Argues that regulators will regulate if given more regulatory powers like all the ones they did not use the last time
-Republican Bill (a few players) argues no more regulation but end too big to fail, which we all know is crap. Remember George W Bush: "I had to chuck my free market belief in order to save it". This means bailouts forever as well.

What do you do? I guess as of writing there is some kind of bipartisan package which may come online, but it will be terrible as well.

This is the best our so called "best and brightest" can do for us? Two inadequate Bills? A nice photo op, hand shakes all around, and press releases saying all will be well. You know when we have real financial reform? The S&P500 will drop 30% in 2 days, that's when. When the financial sector rallies after one of these bills gets passed you KNOW they are crap legislation.

You get what you deserve, and I am sure we will.

Have a good night.