What’s Movin’ Markets – FRIDAY, August 29th

  • ‘Israel reaches strategic decision not to let Iran go nuclear’ (Jerusalem Post)
  • Oil Rises, Heads for Biggest Weekly Gain in Two Months as Storm Shuts Rigs (Bloomy
  • Dell Declines After Saying U.S. Technology Slump Has Moved to Europe, Asia (Bloomy
  • ECB Council Member Bini Smaghi Says Inflation `Too High,’ Must Be Lowered (Bloomy)
  • European Confidence Drops More Than Forecast; Inflation Rate Falls to 3.8% (Bloomy) 
  • Spanish Retail Sales Decline for Eighth Month as Economic `Crisis’ Deepens (Bloomy
  • U.K. Consumer Confidence Remained Near Record Low in August, GfK NOP Says (Bloomy
  • Merrill Losses Over 18 Months Wipe Out Quarter of Profit Over 36 Years (FT)
  • Fannie Mae, Freddie Mac Share Declines Hurt Employees Paid in Stock (NYT)
  • Fukuda Plans to Spend $18 Billion on Program to Stimulate Japanese Economy (Bloomy
  • FDIC Adds Office Space In Dallas, Ready For More Bank Failures (Bloomy)
  • Iraq Bonds Safer Than Ohio Bank Debt Stung by Subprime Losses, Yields Show (Bloomy)


What’s On OUR Minds:

While we realize it’s gonna be a shortened session today ahead of the long weekend THEREFORE it’s our aim NOT to bore you. Here anyways. First we’d like to give ourselves some sort of hat-tip for yesterday’s thoughts which actually couldn’t have proved any more on the money – the idea to be short the 5yr either outright or against 30s, was a good one. Hopefully in these quiet and trying times we’re faced with, one thing is a gimme. We’re here sluggin’ it out through thick and thin (volume) trying to help generate a bit of alpha … As our colleague in Seattle, Mo, often says … it takes a village. These days, he couldn’t be any more spot ON.


Moving on then to something we sortof learned yesterday (and mentioned in our Bloomberg UPDATE)  – The SEC considering changing some of it’s rules with regards to Corporate America’s earnings reports … regulating the USofA back to prosperity seems as good an idea as leveraging UP a CDO with some sort of Super SIV, then putting it out in the RP market, taking THAT money, buying some Asset-Backed CP which you can then reverse back OUT to The Street and turn THAT in for money to buy some money-market equivalent municipal bond product, called an Auction Rate Security … Sorry for THAT but when we saw some other self-proclaimed ‘big brains’ (the guys who get invited onto the TV and out to Maine to hang w/Kotok and Liesman and McCulley) are reflecting our very same sentiment – well we couldn’t help but bring THAT to you here, in this space. It comes from Barry Ritholtz’s blog, The Big Picture … it is fully linked and attached just below (WITH video from Bloomy and story from WSJ):



SEC Proposal: Abandon US Accounting Rules


Barry Ritholtz Aug 28, 2008 7:00 PM – Show original item


What this country really needs is less transparency in earnings reports, and more wiggle room for corporate reporting:

click for video



We are governed by utter idiots . . . (emphasis OURS)




“The Securities and Exchange Commission signaled the demise of U.S. accounting standards, kicking off a process Wednesday that could ultimately require all publicly listed American companies to follow an international model instead.Introduced in two steps, the shift could eventually cut costs for companies and smooth cross-border investing. At the same time, investors worry it will create confusion, especially during the transition. Other critics worry that the international system offers too much wiggle room for companies, compared with the more precise rules enshrined in U.S. standards.

The SEC’s proposal would allow some large multinational companies to report earnings according to international accounting beginning in 2010. The SEC estimates at least 110 U.S. companies would qualify based on their market capitalization, among other factors. The agency also laid out a road map by which all U.S. companies would switch to International Financial Reporting Standards, or IFRS, beginning in 2014, at the expense of U.S. Generally Accepted Accounting Principles, the guiding light of accountants for decades.

The proposals will be open for public comment for 60 days and could be finalized later this year.”


Anything that artificially boosts earnings is great for America . . . “ (emphasis OURS)


Have a GREAT long weekend and as always … be safe out there …PS, COULDN’T PASS THIS ONE UP — THANKS JOSH! THIS IS JUST DOWNRIGHT FUNNY … IF you haven’t seen this one yet, well, we urge you take just a couple of moments, sit back and enjoy … this is NOT GreenDay and this is what NOT to say to yer wife … HOPEfully the link works! Let us know.  



Items Of Interest:


Bloomy’s Econ Calendar August 29th


Bloomy’s Fed-speak Calendar August 29th


GPs Key Econ Indicators (August 19th, 2008) -> Our “Economic Graph Package” is used by some of our clients to include in their monthly or quarterly reports. We have most of the major economic indicators included to give an accurate snapshot of the economy.


GPs 5yr & Under Summary (August 25th, 2008) – > This is our chart package we call the “One to Five Year Daily”. It tracks agency bullet spreads to Treasuries, date to date, to compute the real maturity spread levels (in basis points) out to five years. We track agency callables against agency bullets and Treasuries. We compare equal maturity dates when tracking these spreads because the effective durations of callables are not stable. So over time we have a consistent methodology that we use to determine “value”. Please give us a call for more in depth explanation.


GPs Index Spread Summary (August 19th, 2008) -> We use certain Merrill Lynch indices, which are described at the top of each graph, to try and determine optimal entry and exit points for each sector. Though the indices should have similar durations, they commonly don’t match precisely so we’ve included the green line (which should be read off from the right axis) to allow you to take the curve into account when looking at historical spread relationships.


GPs Daily Pivots (August 29th, 2008) The pivot point is essentially a mechanism for analyzing the short-term supply and demand factors affecting the market. It has limited applications for long- term decision making. Professional futures floor traders, also known as locals, are the biggest proponents of the pivot technique. Scalpers, brokers, market makers, and other short-term traders also use the technique, while upstairs or longer-term traders occasionally look at the pivot for ideas of what the floor traders are doing. The pivot point is basically the weighted average price of the previous trading day, calculated as the average of the previous trading day’s high, low, and closing prices. It represents the major point of inflection each day. Unless there has been significant market news between the previous trading day’s close and the current trading day’s opening, locals often try to test the near term support, resistance, and pivot point. For example, many floor traders cover their shorts and go long into the pivot level if the market opens above the pivot point and starts to sell off.


McCulley of PIMCO – waxing poetic as only HE can about Jackson Hole and the Fed NOT tightening despite the ‘inflation nutters’ … even THO ‘real FedFunds’ is negative, it NEEDs to be … one of his BETTER reads and ONLY 4pgs …


StreetStuff – Weekly, August 25th

StreetStuff – Daily, August 29th

  • DB: Soft income figures dim economic outlook
  • DB: Housing activity stabilizing, but prices still declining
  • BofAs Situation Room: On August 27, MBIA and FGIC announced an agreement for MBIA to reinsure $184 billion net par outstanding of U.S. public finance bonds. In exchange, MBIA will receive net unearned upfront premiums of $741 million. According to the New York State Department of Insurance, the companies are expected to file an application for approval on September 2. As a result, MBIA stock rose $4.17 today, to $16.15, and CDS tightened 4 points to 22 points upfront + 500 bps running (mid)
  • Lehman: The FDIC – An Overview and Implications for Treasury Supply and the Curve
  • Rosy/ML: couple of offerings that we thought appropriate to leave in yer laps over the weekend – 1st on what HE suggests will be a large NFP ‘benchmark revision’ (thinking -500k!) … ALSO a note on yesterday’s GDP, where WE echoed his very same sentiments, about taking the large ‘print’ with a grain of salt …


Technicals – Daily, August 29th

  • JPM: Cash Tens: Sustain Range behind 3.765-3.76% July-Aug Yield Lows
  • CSFB: Rolling the long, place the stop/reverse below 114-16. Square longs on strength to 116-13/15. Below 114-16 would see a top for a decline to 114-02/00 initially.
  • ML:  While the US backend remains resilient but stalled, modest front end losses are reflecting late August bullish fatigue
  • CitiFX – while the focus of the report is on USD/Yen (and implications for stocks and bonds) these guys specifically on rates seem to be in the same camp as US – “We retain our bias towards lower yields and in particular are closely watching good support levels on U.S. 2 and 10 year yield charts (which we suspect will give way)”


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