Monday – August 31st, 2009

CNBC: Futures Fall, Tracking China’s 6% Selloff

WSJ: Commercial Real Estate Lurks as Next Potential Mortgage Crisis
WSJ CREDIT MARKETS: Peak Theory in Government Bonds

Last but NOT least, our favorite h’line of the day ALSO from WSJ:

Home Barbering Grows in Recession


AND NOW a note from our resident Relative Value expert, Ani:


It’s about the 7% decline in Chinese stocks this morning. It is blamed on what should be old news like lock-up period expiring on new issues increasing the supply of stocks this week. We see it as the ongoing correction to the massive gain in the Shanghai composite this year. In that sense, it is a China-specific move, with the rest of the world inching only slightly lower. However, this does mean that the bid in the US short end will be sustained over the next few days. The 2 year gets noticed when it dips below 1%. We need some positive data from the data-heavy week to turn this around. That also means US stocks need that positive data to break further higher. Until then, the onus is on the (stock) bulls to prove their case … We just hope this is a precursor to a more active week than the last.


Trades: We remain long EDU0, admittedly lucky this morning with the Chinese drubbing. We are officially out of the relative trades of the month- 2-3-5 fly, and 7-10 flattener. Please call for our next RV bets.


The perfect end to a few days off? Here’s a couple of visuals and while they may NOT seem related, they really are sorta the same thing. First the Chinese stock market:




Next up is a visual (hope you had breakfast already) of how my weekend ended … Here’s what Nate The Great thought of me keeping him out late for dinner at a neighbor:




Seems as though Nate might have KNOWN something about what was gonna happen when the Chinese stock markets opened up?? Donno. Still investigating … Early on though, the Asian stock markets were much better bid. Nikkei had an early lead – UP over 2.2% (more than 200pts) and finished DOWN 40pts. Right. Good times. China then put an exclamation point ending the session DOWN almost 7%.


We can only offer that we’re sort of shocked today’s month end BID continues to be the gift that keeps on giving. We’ve been talking about it since the beginning of the month and, well, it’s finally here. We THOUGHT it could have been in the prices several times over. The market now only has stock-prices to key off of and given we’re entering into the Sept/Oct time-frame which spooks many ‘out there’, we understand where the bid for bonds is coming from.


We’ve  NOT much more to add at the moment, that generalities do not cover. We will NOT then waste a moment more of your time here and now. We’ll update our webpage and/or our Google Market Commentary (call for more details and/or try clicking HERE and refreshing throughout the day) as conditions warrant.


Have a GREAT start to the day and the week.




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