atp’s posterous

--- article complet @ http://ftalphaville.ft.com/blog/2008/09/05/15636/market-capitulation  ---

DJIA - 2.99%
S&P -2.99%
Nasdaq -3.2%
Nikkei - 2.75%
Hang Seng -3.12%

Before the market opens here in London, a little something from yesterday — issued to SocGen clients before the rout. From Albert Edward, the french bank’s resident ultra-bear:

****Alert****Economic and equity market meltdown imminent****Alert***

Last week saw the publication of Q2 US whole economy profits data. They were shockingly bad. Core measures of profitability are in free-fall and have now reached a tipping point, where corporate activity could easily implode. We have also reached the point where companies give up ‘manipulating’ their profits higher and admit they are actually in free-fall. A combination of economic and reported profits slumping will catalyse the next equity downleg.

Edwards compares the current situation to 2000, and uses an interesting phrase: corporate capitulation. Edwards notes also though, that the dollar is currently propping up the US market, again in a similar situation to 2000.

All this ties neatly with the notion that the spate of good news about the US economy was unfounded. Edwards, though, cautions against being overweight in Europe.

If the US equity market slumps through next year, the high beta markets of Europe will decline even faster, even if their profits outperform the US and even if they are cheaper.

Point to note: While Edwards sees the crash as imminent, Teun Draaisma at Morgan Stanley - who also sees an earnings recession shortly hitting home - thinks that we’re already at the bottom.

--- quoi, la crise pourrait réellement s'étendre de wall street à main street?!? quoi, la contagion a déjà lieu?!? (et dire que l'article date déjà de 30 jours!) article complet @ http://www.nypost.com/seven/07302008/news/regionalnews/crisis_puts_ny_in_sell_hell_122211.htm via MM---

Warning of an approaching economic calamity, Gov. Paterson yesterday called an emergency session of the state Legislature - and raised the specter that New York may have to sell off roads, bridges and tunnels to close a massive budget deficit.

In a rare televised address, the Democratic governor cited "private-public partnerships" involving the sale of state assets - widely condemned by critics as fiscal gimmickry - as one way to stem a tide of red ink brought on by the sagging economy and woes on Wall Street.

"We can't wait and hope that this problem will resolve itself," Paterson said. "These times call for action, and today I promise you there will be action."

Profit-tax collections from the state's 16 biggest banks, which were at $173 million in June 2007, fell to $5 million last month, Paterson noted. That's a shocking 97 percent plunge. But the governor's five-minute speech offered few specific solutions to a three-year budget deficit. The gap has ballooned to $26.2 billion from $21.5 billion - a whopping 22 percent increase - in just 90 days.

Next year alone, the state expects to face a budget deficit of $6.4 billion, up from a projection in March of $5 billion.

Paterson promised to examine ways to trim the state work force and consider deeper budget cuts beyond the 3.3 percent he ordered after taking office this spring.

[…]

"One gets a little concerned when 'selling off state assets' and 'budget deficits' get mentioned in the same sentence," said Elizabeth Lynam, a state policy expert with the Citizens Budget Commission.

"If it's used to close a budget gap, it's a one-shot. It's doesn't help you in the long run. It's a fiscal gimmick."

Mayor Bloomberg last night praised Paterson's effort "to tackle the serious problems we face" this year.

"The governor demonstrated that he is ready to stand up to the interest groups that will no doubt protest before the State House, just as they took to the steps of City Hall earlier this year," Bloomberg said.

US 2Q GDP growth at 3.3 per cent? Laughable.

Most economists were expecting the number to come in somewhere around 1.9 per cent. When the data was released yesterday from the Bureau of Economic Analysis, everyone was suddenly scrambling for explanations.

The figure is “simply not credible” writes Yves Smith.

The below chart is from a post by Barry Ritholz at the Big Picture. In blue it shows the inflation measure used in adjusting for real GDP. In red, it shows the CPI (regarded by most as a conservative measure of inflation). As you can see, the two rather strikingly diverge.

In fact, the BEA is marking inflation at 1.2 per cent, which is literally incredible.

It’s interesting to note the historical points at which the two series diverge, with the CPI much higher. It’s usually on the brink of - or during - recessions. In other words, when good news about the economy is most needed.

--- voici enfin des solutions concrètes et "taxpayer friendly" pour sauver les financials! article complet @ http://macro-man.blogspot.com/2008/08/saving-financials.html ---

At the heart of the Macro Man Plan is that financial institutions adopt the incentive programs offered by other service industries such as retailers and minor league baseball. To encourage ongoing business relationships, banks and agencies (and maybe even the odd hedge fund or two) should offer the following suite of incentives to potential counterparties:

1) Loyalty cards. In a scheme familiar to supermarket shoppers around the world, counterparties would be issued with loyalty cards and accrue bonus points for each transaction that they conduct. Once certain thresholds are reached, these could be redeemed for goods at the bank's affiliate partners, such as Amazon, Tesco, Wal-Mart, etc. In exchange, these latter firms would receive free investment banking advice.

2) Buy one, get one free! Lehman, Merrill, Fannie and Freddie: maybe you could sell more (or, more to the point, any) of your RMBS portfolio if you offered potential counterparties a "buy one, get one free" deal. Think about it......

3) Free oil! For every ticket that generates more than $250k worth of VAR, offer counterparties one free barrel of oil. When your £170,000 sports car only gets 11 mpg, every little helps....

4) A free T-shirt with every ticket! Every time you trade with bank X, they send you a free T-shirt! In fairness, this would really only appeal to very junior traders fresh out of university, but hey; we at Macro Man Industries want to cover every demographic.

5) 1000 free shares of stock with every trade! Every time you trade with Bank X, they'll give you 1000 shares of their stock absolutely free! You win by getting free stock, they win because the infinitesimal revenue that they book from each trade will labeled as "new capital" on the balance sheet, and they can announce to the world that they have raised yet more capital from eager investors. Of course, if the stock price goes down, then you incur a mark-to-market loss. On second thought, maybe they should offer free puts on 1000 shares with every ticket....

Elsewhere, a brief follow-up to yesterday's post. One of the things that Macro Man does in his real job is to run indicators that attempt to determine which fundamental themes are driving currencies at any point in time (don't ask, he's not going to be more specific than that.) And what's interesting about the recent dollar move is that none of the fundamental themes that traditionally drive exchange rates has been in play during this dollar move.

This morning he quantified this into a combined "thematic strength" indicator, wherein a high reading indicates that currency markets are trading very thematically, and a low reading suggests that so-called fundamentals are not driving FX.

And what we can observe is that this is the least thematic market since the summer of 2003. It appears to have been micro (idiosyncratic decisions and/or momentum), rather than macro, that has driven the recent dollar rally. So if you've struggled to understand why the buck is up, don't worry; it's taken a lot of people by surprise.

--- trop drôle: un ex-BOE enflamme le débat lors de la paisible retraite montagnarde annuelle de la fed,  article complet @ http://www.bloomberg.com/apps/news?pid=20601087&sid=ayUAEYi51WG0&refer=home ---

Former Bank of England policy maker Willem Buiter sparked the biggest debate at the Federal Reserve's annual mountainside symposium, saying the central bank pays too much heed to the concerns of financial institutions.

``The Fed listens to Wall Street and believes what it hears,'' Buiter said yesterday in a paper presented to the Fed's conference in Jackson Hole, Wyoming. ``This distortion into a partial and often highly distorted perception of reality is unhealthy and dangerous.''

Buiter said the Fed's emergency lending programs are too generous. The U.S. central bank is making up to $200 billion of its Treasuries holdings available to primary securities dealers, and $150 billion of funds through auctions to commercial banks. In addition, banks are able to borrow directly from the Fed.

``You don't let your borrower determine the value of the collateral offered to you,'' Buiter said. ``That's just crazy.''

Buiter also reiterated his argument that central banks can fall prey to ``regulatory capture'' by financial institutions, growing too sympathetic to their needs when setting rates.

--- article complet @ http://bigpicture.typepad.com/comments/2008/08/analysts-profit.html

"At the start of the year, profits at banks, brokers and insurance companies were projected to rise 22 percent in 2008, according to the average estimate of analysts surveyed by Bloomberg. They're now expected to decline 48 percent." >

How bad are fundie analysts as a group? Well, as the chart up top shows, the earnings forecasts of Wall Street Analysts "missed the mark by the biggest margin in at least 16 years last quarter," according to Bloomberg data.

How often did the Street get it right? Try 6.7% for the companies in the S&P500 Index in Q2. That's the  worst showing since Bloomberg began tracking this data way back in 1992.

While some blame the credit crunch, Oil, and Housing as the problem, a more likely source of error is Reg FD. Analysts have been increasingly wrong since the adoption in October 2000 of Regulation Fair Disclosure. The regulations barred CEOs and CFOs from giving the inside dope to the outside dopes. No more whisper numbers to favored bankerd or their pet analysts.

What does this mean to investors? Well, traditional Wall Street Research seems to be of minimum value to investors. Its no surprise that the fastest growing form of analytics  (yes, I am talking my own book here)  is quantititive -- no C-level execs needed. 

2yr us swap spread ajdh: de retour sur les hauts de mars.  apres s'être tiré stearns, j'imagine qu'il s'agit mtn de se taper lehman. ouh mais quel veinard cet us taxpayer!