What’s Movin’ Markets – Wednesday, November 26th

  • Thai Army Chief Seeks Early Election, Asks Demonstrators to End Protests (Bloomy)
  • China Central Bank Cuts Interest Rates to Support Slowing Economic Growth (Bloomy)
  • U.K. Consumer Spending Falls Most Since 1995, Investment Drops Amid Slump (Bloomy)
  • German Import Prices Drop Most Since Records Began in 1962 on Cost of Oil (Bloomy)
  • U.S. Mortgage Rate Drops Most in Seven Years With Push From Fed Debt Plan (Bloomy)
  • Fed Risks `Spitting in the Wind’ With $800 Billion Pledge to Thaw Lending (Bloomy)
  • Deutsche Bank Swap Lures County Desperate for Cash as U.S. Budgets Crumble (Bloomy)
  • Toyota Suffers First Credit Rating Cut in 10 Years Amid Slump (Bloomy)
  • Japanese Corporate Bond Default Risk Holds at More Than Twice 2008 Average (Bloomy)
  • Dividends Disappear Fastest Since ’58 as Citigroup, Genworth Conserve Cash (Bloomy)
  • Obama to Name Former Fed Chief Volcker to Head Economy Advisory Board (WSJ)
  • Thanksgiving Tale Resonates in Year of Crisis: Commentary by Caroline Baum (Bloomy)


Whats On OUR Minds:

Dear Friends,
Thank you for your loyalty over the previous year. Without you, we would not be what we are. So on this special day, we want to let you know how much we truly appreciate you and are thankful that you are the one who helps us achieve our dreams. We are here sincerely wishing you all the best during this holiday season. May the joy and peace of Thanksgiving Day be with you today and always! Happy Thanksgiving Day!

Best Regards,

Saul & Steve

Moving on then …

Timing is everything and yesterday’s note and thoughts could NOT have been more timely and appropriate if we tried. It was as IF we were handed the script for the day well in advance and as much as we’d like to you to believe that was the case, well, as pops always said, it’s better to be lucky than good. What do we mean? Aside from thinking about duration grab-A-thon, we sent the following note out re 10s/Bunds shortly after Tsy/Fed announcement:


“10s/Bunds picture with some (fibo) levels … we’re stuck and wanna be part of this move created by Fed and Tsy programs. They are buying MBS and debentures and talk about timing! Month end with large extension trade as it were, now you’ve got the convexity guys with their underpants in a knot, or soon to be. Donno where any more significant yld ‘triggers’ might be (ie if 10s get back to 3%?) but 10yr Treasuries are already @ 3.13% … they were @ 3.25% when program details hit up on the wires! Again, donno but would think this more a US story as last we checked Fed’s not buying stuff denominated in Euro? Maybe laying out groundwork for other govt action? Maybe stocks get too much MoJO — still seems like path of least resistance right now, though, is for US OUTperformance … Curiuos what YOU think …”



Now that we’ve all but broken our arms by patting ourselves on the back, we need to dissect what the heck happened yesterday and flesh out IF there’s something tradeable for longer than the next 6mins! Yesterday, we mentioned being frightened about what potentially was on the other side of the edge that we were all collectively being pushed to. We’ve gotta say that now, having had a real good look at both the plans of the Treasury and Fed as well as the market’s reaction, well we’re not that frightened anymore. Check out the story in the bullets above re the mortgage rates having largest one day drop in 7yrs!


We’d ALSO note that we’re mostly UNDERWHELMED by the equity markets response. If ever there was a day that could have been perceived as GREAT news – yesterday WAS IT. We’d also argue that the news was more important for the credit markets and they traded accordingly.


On a day like today, especially AFTER yesterday’s duration grab-A-thon brought to us by Hank and Ben and their new purchase programs, we’ve got very little to add. Profit-taking might very well be the order of the day. Selling would NOT be our first trade on the longer end of the curve BUT we’d look to the front end as initially having hit the wall … Take for example the 3mo T-Bill … current market quote = 0.00 / 0.00. Folks, if yer trading or investing in the 3mo, let’s take a 5min break and smoke em if you got em. Really … CHILL!


Otherwise, in that we’ve NOT much else to add, we’d offer following attempt at humor and the following video and picture as they just seem fitting at the moment:


Finally, as we all await NEXT weeks Big 3 auto plan, the following SNL video clip offers a preview:


IF above YouTube thingy did NOT work, click HERE for link to another site that has same video. YES, it’s worth it and you HAVE to stay with it until the bitter sweet end for Barney’s closing comments…

ALSO – New “Spread the Wealth” pencil sharpener.  Every US taxpayer will be mailed one of these with the new 2008 IRS tax forms. Be a-watching’ in your mail box!


Items Of Interest:

Bloomy’s Economic Calendar November 26th

Bloomy’s Fed-speak Calendar November 26th

GPs Key Econ Indicators November 17th, 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 November 24th, 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 November 17th, 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 November 26th, 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.

StreetStuff – WEEKLY November 24th

StreetStuff – November 26th

  • DB: New facilities help, but troubled assets remain
  • DB: Global Economic Perspectives – The Spectre of Deflation – Plunging oil and easing food prices are yielding a dramatic turn in headline inflation in key countries. Moreover, recession is likely to exert a drag on core inflation. With both headline and core inflation dropping-the former possibly even into negative territory for a few months-talk of deflation is likely to rise over the coming year.
  • BofAs Situation Room: Today’s Term ABS Loan Facility (TALF) program effectively leverages the TARP funds, turning $20bn of that into upwards of $200bn of purchasing power. Critically for banks accessing the program, the non-recourse nature of the loan and no re-margining suggest the potential for a zero risk weighting and an exclusion from leverage capital purposes much as in the AMLF. That could remove the balance-sheet constraint – a key reason for the freeze in these markets – but those conditions and others have not yet been specified. TALF contributes to financial system repair necessary to make QE effective.
  • MLs Rosenberg: Back to the toolbox (as defined in 2002) – The Federal Reserve continues to follow the playbook laid out in the 2002 Bernanke speech (which we noted back in our August 2008 piece entitled What’s left in the Fed toolbox?) as they announced a two part program to “increase the availability of credit for the purchase of houses” and also announced a program designed to help restart consumer lending via the ABS market.
  • GCM:  Margaret Kerins, CFA – What are the implications of Fed Purchasing Agy Debt/MBS? Steve Stanley, just generally smart dude – New Fed Liquidity Programs

Technicals – November 26th

  • JPM: Dec Tens: Quickly Retest the 121.255 Nov 20 High, as Bulls Control; Cash Tens- Accumulate longs in the 3.35-3.50% zone, for a move to interim new highs through 2.99%. Partial 1/3rd long reached at 3.35% Mon; Twos: Now 50% Long at 1.25%. Add 50% near 1.40%, for medium term new highs through 0.96%. Next regular report on Dec 3
  • BarCap: Ready, aim, misfire – November surprise – We were simply wrong and overestimated the bearish potential. Rather than price lower, it seems that the market is going to unwind the bullish extremes in a range for both price and yield. The recent low at 119-08 and the 121-25/122 (recent high and handle) are likely to bookend trade.
  • CSFB: Holding a long from 119-20/10. Add at 119-30/20, stop below 119-00. Square longs on strength to 122-05/10, reinstating above, for 124-00. Below 119-00 and re-try a long at 118-20/10, stop below 118-05.
  • UBS: Still More Bullish While Trading Above 12.185, Breaks of 121.255 The Trigger to 122.13; Current Recommending Positions: Long at 119.14 targeting 124.00 with stops at 119.05. I will add to this recommendation on a close above 121.255.  Current YTD All Market Trade Recommendations P&L: +32.45%
  • ML: UST resilient digestion and bullish extension risk into Q4; Equity and FX consolidation, but risk averse technical themes intact; US 10yr poised to extend below 2.985/3.000%; 2/10yr flattening targets

In Press NOW:








We’d offer some reading material while Tom The Turkey is in the oven and the pre-game isn’t on yet … and IF you don’t wanna watch the parade. Click on picture for link TO article if you did NOT see the article from the other day … it’s ONLY 12,000 words and it is an EXCELLENT read:


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