Monday, January 18, 2010

A Slow Start

It's been a somewhat slow start to the week, which in many ways reflects the slow start to the year. Perhaps in this world of bonus limits, bank supertaxes, and the like, punters don't feel like getting stuck in until after MLK day? Perhaps, but it's dubious. The relative inaction is rather more likely a product of uncertainty an the imperfect information with which punters are armed.

Earnings season will kick off in earnest this week (Macro Man counts 65 companies), but market reaction to last week's ostensibly solid numbers was curious, to say the least. After what seems like eons of markets reacting with a positive spin to datapoints of all description, the abject performance of equities in the face of ostensibly solid INTC and JPM reports was curious, to say the least. (Perhaps they are sctaching their heads how these big guys can notch up effective tax rates of 12% and 15%, respectively, when Joe Twelvepack pays a helluva lot more?)

Regardless, Friday was one of the highest non-expiry volume days of the past few months, which could suggest that if markets rouse from their lethargy, it will be to fall. A break of the recent uptrend line could encourage the fast-money crowd to help it on its way.
Then again, maybe the relatively slow start to the year is simply a Western phenomenon. The news has been flying out of China fast and thick, whether it be surging trade values, a suprising RRR hike (which evidently is not a sign of monetary tightening), or a rumoured increase of the stamp duty on equity trading.

Regardless, the volume in China-linked trading has been substantially higher (on a relative basis) to that of developed markets; observe how the recent fall in the Hang Seng, for example, has been accompanied by one of the highest concentrations of trading volume in the last six months.
Will all of this be sufficient to rouse macro punters from their lethargy? Maybe, but more clarity on the Fed (and more attractive pricing on trades that people would like to have, but don't) would have a more obvious impact on trading volumes and the general interest level. Judging from Friday's London afternoon, where many macro punters (your author included, sadly) were giggling Beavis and Butthead-style over a rather amusing name in the Bloomberg people directory, the slow start to the year has a bit further to go yet.


Anonymous said...

True, we all giggle like naughty schoolboys at these names. This well known, (and I believe genuine), letter always brings a smile to my face and is just the tonic required when I'm having my lungs ripped out by markets.

(don't go there if you're easily offended)

Redundant CityBoy said...

January equity options expired on Friday. That will explain some of the increase in volumes.

Anonymous said...

For fans of the unfortunately named Japanese chap, please dial up the following profiles on Bloomberg:

BBDP 15406786


BBDP 16510248

Don't shoot the messenger!

Anonymous said...

I'm a lumberjack and I'm ok, I work all night and I sleep all day


Gary said...

MM -- lets assume for a moment that JPM and INTC earnings really were solid and not the product of pro forma adjustments.

How are we supposed to know? I mean to say that the earnings have been such bullsh!t for the last two years that no sane person would make any substantial bet on a reported recovery.

Does anyone actually believe GM, FNMA, FHLMC, AIG, or several of the big US/UK/European banks are on going entities without on going taxpayer support? Its one thing for day traders to throw a hail mary pass, but what economically motivated player would buy this toxic waste?

And as incumbents in the US and UK governments attempt to point the finger at "anybody except me", we are learning that Paulson/Geithner's bailout of Goldman Sachs -- I mean AIG -- was not entirely on the level. I, for one, am shocked, just shocked.

So whenever this "V" recovery happens for real (not yet IMHO), why would anyone believe it?

Macro Man said...

Gary, this issue is obviously not "are these earnings kosher or not", or "why should I believe them." To me, the issue is "when is it safe to take the other side", aka "when will the market collectively call BS". As my own rather checkered tactical equity track record from last year can attest, answering that question can be a difficult one.

Anonymous said...

It’ll turn safe when the economically motivated player says the other side is now illegal.

Gary said...

Tmrw (Tuesday) there is a special election in Massachusetts to fill the seat of Ted Kennedy. While many people assumed that the Democrats could run Genghis Kahn and still win by a landslide -- recent polls suggest the race is either neck and neck, or else the Republican has a slight edge... and this is Ted Kennedy's seat.

Even in ultra liberal Massachusetts, Obama's trillion dollar rob the taxpayer to bailout utter failures has little support... and yes, I know Bush had similar policies to Obama's, but people hated him also.

Obama's health care fiasco is proving the final straw for many. The problem with the US health system is cost, not access. No one believes that spending trillions more and putting Congress in charge is going to control costs. Add in various religious issues (abortion) and government is legally prohibited from running health care.

Then Obama put Nancy Pelosi in charge of the project. This horrible woman wants to promote democracy by pushing through a program that the majority does not support, and she is negotiating the details behind closed doors. No Republicans, and more importantly no Main Street Americans are allowed to see how our money is going to be pissed away on a program we don't support.

So Obama finds himself racing to Massachusetts to try to save a Congressional seat that should be a lock. Its not obvious he can save the seat at all, and if he does it will be by very narrow margins.

Congress's immediate answer is to thumb their nose at Massachusetts voters and pass their disaster without Senate approval. Its barely a legal idea, and it sure isn't ethical or democratic. The approval it got before was achieved by openly bribing members of Congress, particularly Nebraska. Now all the other crooks-- I mean Congress members -- want a bribe also.

At this point, Obama has backed himself into a corner. Heads, his #1 policy initiative fails. Tails, it passes by blatant corruption. Either way, Obama comes off looking like a poor imitation of Karl Rove -- and a failure.

Investors should care because once Obama is a lame duck President, he won't have the political capital for more / continued bailouts.

Without taxpayer bailouts / support, all the skeletons will start falling out of bank closets

Anonymous said...

When is a hike not a hike? When the reserve balances before the hike were greater than those required after the hike. Bubblicious.

Anonymous said...

Rest assured these continued bailouts are quite independent from presidency.

Anonymous said...

Gary and Anon 3:48

There haven't been any true "bailouts". First, nothing has been fixed. Second, a bailout paid for with debt is more properly called a "postponement" (at least until the debt is paid)

There is a basic problem with having the political few take out debt in the majority's name -- and unlike most of what is going on now, there is legal precedent for dismissing the faux debt

The legal term is "odious debt" -- and courts in both the UK and US have for centuries held that this debt is not enforceable

When the short sighted creditors of the US/UK realize this, the banker's dream of raiding the national treasuries will be squashed

leftback said...

"So whenever this "V" recovery happens for real (not yet IMHO), why would anyone believe it?"

We've already had the "V", Gary. Remember that every "W" begins with a "V". The downturn in the double dip may be sharper than expected.

MM, I expect you would like the rugby song about the Umegooli bird and the Wherethefuckawi tribe...

Gary said...

LB, we already had the "V"? Sorry I must have blinked and missed it :)

Bob_in_MA said...

On China's reserve requirements, Patrick Chovanec has a post up on prospects for Chinese inflation and in it he links to a paper by Josh Greenwood on the PBoC sterilization programs. When the PBoC soaks up dollars to maintain the peg, it needs to sterilize the monetary expansion by selling bonds. A lot of the people predicting a bust in China point out the bond program has only accounted for 35-75% (depending who's doing the figuring) of this Yuan printing. Greenwood says the increases in bank reserves also work to sterilize this conversion.

I'm not sure this makes sense, but the whole thing is beyond my ken. (Interestingly, although Greenwood disputes whether there's been enough sterilization, he comes to the conclusion the sterilization itself will will lead to problems, and gives examples of other Asian countries experiences.)



On another topic discussed here, the Massachusetts Senate by-election tomorrow is a big deal. If the Republican Brown wins, or even comes close, the Democrats up for election this year will be scared $hitless and there will be no substantial new stimulus spending. This is definitely an election about spending and deficits (and not a referendum on health care as the Republicans want to depict.) Massachusetts already has a health care system with things like penalties for those not buying insurance.

This is the bluest state in the Union. In one election, that included a Senate seat, a House seat and 20-odd state and local offices, there were maybe 3-4 Republicans on the ballot here. The Democratic Senate and House candidates were unopposed. There have been recent Republican governors, but that's been as a check on the abuses of a one-party state.

Gary said...

Bob_in_MA -- ObamaCare is just about spending and deficits, and has precious little to do with health care.

Everyone in the US can already get health care. Doctors take the Hippocratic oath, and in most states a doctor would lose his/her license if they refuse to give emergency care (not elective boob jobs and such). If there is any denial of care, it is a very isolated incident.

Everyone can also buy insurance already. Insurance is about pooling risk; it is not about having others pay for an existing condition.

Small businesses do not offer insurance because it COSTS TO MUCH.

No one believes this stupid lie from democrats that the DMV can control costs on any subject ever. Every single bit of evidence says the government will make the problem cost MORE -- even Obama says his program will cost $900 billion MORE.

We have been hearing for decades how the government is going to fix Amtrak, the post office, control military costs, etc. BULL SHIT

No one doubts the health care system needs reform (the one in Massachusetts does too). It needs to be affordable, its cost inflation needs to be brought down to no more than GDP growth

Otherwise, its just debt and deficits as far as the eye can see

As for the Massachusetts vote being a referendum on ObamaCare -- blame Nancy Pelosi and Harry Reid. If they weren't trying to force through a stupid idea that 60% of the country opposes, Obama would not need 60 votes in the Senate.

ObamaCare is dead on arrival, for the simple reason that the country cannot afford it even if it were a good idea. Out of control costs is already the problem, and ObamaCare is slated (even by its supporters) to cost MORE than the status quo

CV said...

Whether we've had the "V" or not already... I'd say we've moved on are are about to work on the "lambda"

CV said...


They "booed" Ben Nelson out of a pizza parlor in Omaha last Friday.

See, you can be sleazy and take kickbacks all you want, but when it comes down to getting 86'ed from pizza joints, you'd better take a hard look at your politcs!


Gary said...

CV2 -- not sure I understand your last sentence ... but it just goes to show that the vast majority of "independent" voters (those who are unaffiliated plus those who have no hesitation to vote against party lines whenever it suites them) have absolutely little interest in this ObamaCare stupidity, and zero interest in bankrupting our great grandchildren.

No one except partisan nut-cases believes the lie that government is going to control costs on any subject. Period. Amen. End of discussion. No one wants to hear a bunch of bull about how this time is going to be different now that openly crooked politicians are running the show.

Health care costs need to be fixed -- but bankrupting the country and perverting what little political process there is with IN OUR FACE bribery is not what America is supposed to be about.

We can't afford the current health system; so we sure as hell can't afford something that costs even more.

And having a witch force through a change that is opposed by 60% of the population -- using open and in our face bribery, augmented with more deals reached behind closed doors?

That's not about health care or bankruptcy -- that's just un-American and morally WRONG

I am happy to hear Nebraskans boo'd that crooked politician out of the pizza shop -- gives me hope.

Bob_in_MA said...


I don't think you understand my point. In Massachusetts we already have a state program that pretty much encompasses everything in the bills before Congress. If you make up to three(?) times the poverty level, your insurance payment is subsidized. If you don't have insurance, you lose your tax deductions. Businesses over a certain size must provide insurance. Insurers can't discriminate, except on age and for smokers. People here have been pretty happy with it, it really hasn't been controversial.

For my wife and I, who buy our own insurance, the net effect was to go from paying an absurdly high amount for insurance, to paying the same amount but now having prescription coverage. Still an idiotic system, but somewhat cheaper.

Brown had a full-page ad in our local paper today and it stressed the spending and deficits. I saw a piece in the NYTimes on the race and some of the Brown supporters said they supported the state program.

CV said...


"I am happy to hear Nebraskans boo'd that crooked politician out of the pizza shop"

That's what I'm sort of referring to... In their Ivory Towers, politicians can just toe the party line and seemingly get away with it...

But it's when they go home and face an angry mob that someone "gets religion"...

Anyway, great "popular culture" stories like that are great... The media, bloodsuckers that they are thrives on anything that is simply to understand and REALLY REALLY juicy...

Americans don't have time for discussions and debates, but they love hearing about people getting booed out of pizza parlor



Gary said...

Bob, I have quite a few friends who live in Springfield and Boston -- so I am familiar with Massachusett's system. I think you should be a little more honest.

First, the plan was proposed and passed by Mitt Romney, the last Republican governor -- so you are wrong to claim opposition to ObamaCare is partisan

Second, the plan has gone markedly over budget -- which is hardly a surprise given the cost controls Massachusetts demonstrated with the Big Dig in Boston -- original cost $2.7 billion; "final" cost (not including repairs already needed) was $14 billion.

Massachusetts' health care system hasn't gone quite as over budget as the Big Dig -- but it went way over budget.

So if our current health system is unaffordable, and the liars in Washington admit the new system will cost at least $900 billion more (over the first 10 years) -- its just stupid to suggest ObamaCare is going to be affordable.

This isn't a partisan thing -- this is an effort by honest Americans not to go bankrupt and not to have a corrupt government