The Greek Deal
On the Greek “fix”, LTRO, haircuts and the new central bank tools. Video below.
Biderman Market Theory’s Two Bullish Distinctions
From Trim Tab’s Biderman.
The Biderman Market Theory has two key distinctions and both of them are bullish for US stocks over the near term. The first distinction is that all markets have two types of participants, the house and the players, and the house always has an advantage over the players. In the stock market the house are the public companies. The house, as evidenced by the 3000 largest US public companies, in February for the first time since we started tracking monthly float six months ago shrank the number of shares outstanding at a 1.3% annual rate, compared with a 1.3% share growth rate in January and a 3% annual growth rate in the number of shares last October. Video below.
News That Matters
Ft.com
The largest debt restructuring in history was heading for a successful outcome last night as Greece looked set to see a participation rate of close to 95 per cent for its €206bn bond exchange, the FT reports http://ftalphaville.ft.com/thecut/2012/03/09/915561/greek-debt-swap-support-close-to-95/
The London Stock Exchange is close to agreeing a takeover of LCH Clearnet, with an announcement possibly as early as Friday morning, the WSJ says. Talks between the two have been difficult and could still founder at a late stage. http://ftalphaville.ft.com/thecut/2012/03/09/915581/lse-close-to-lch-deal/
George Osborne is looking to raise taxes on the pension contributions of the highest earners in this month’s Budget, in a move which will release funds to help low earners escape the tax system but antagonise some Tory MPs, http://ftalphaville.ft.com/thecut/2012/03/09/915591/pension-tax-breaks-on-osborne%e2%80%99s-radar/
Deutsche Bank, whose chief executive decried the stigma of tapping ECB three-year liquidity last month, has borrowed at least €5bn and as much as €10bn from the latest LTRO, the FT reports. Investors briefed by the bank’s finance director and investor relations executives say it was persuaded by the economics of the financing to abandon its concerns. http://ftalphaville.ft.com/thecut/2012/03/09/915491/deutsche-tapped-ltro-cash/
Balance Sheet Instabilities
Some thoughts on the too big to fail balance sheets. From Golem XIV.
So far in Propaganda Wars we have looked at the Bank’s version of reality in which the banks were blameless victims of unscrupulous and fiendishly clever paupers who ‘took’ loans from the banks against the bankers better judgelment and will. In the next part we began to turn the tables and attack the banks where they feel they are strongest – in how they manage risk. We began with “Netting Out”, where Liabilities and Assets are supposed to cancel each other out leaving the bank, no matter how huge its balance sheet, no matter how seemingly exposed to losses, just this side solvent at all times. I suggested this sort of cancelling out is fine on paper but in reality is more akin to people trying to swap sides in a rowing boat. I further suggested that this was why, despite the lovely graphs showing how it would all “Net Out”, in the event, nearly all the major banks went bust and had to be bailed out. (Full article here).
Will the Dow fall 4 000 points?
People laughed at Joe Granville some weeks ago when he perdicted the DOW would fall 4000 points this year. Then, all of a sudden, markets sold off hard, while volume and vol exploded. The buy the dip investors are still trying to buy the dip, but this bounce is losing steam. Silver is currently reversing the move, and about to enter negative territory on the day. Let’s see if all markets reverse down today. Meanwhile, time to review what Joe Granville actually said a few weeks ago. Video below:
After the bounce comes….comparison to 2011
The sell off was just a bump in the road then? With people suddenly experiencing more volatility, many investors are suddenly caught in the greed and panic mood yet again. The sharp sell off caught many by surprise, and while some have trimmed their longs, others still engage in chasing the market higher.
The Trader suggested yesterday that the sell off resembles last year’s action. With everybody having learnt over the past months, buy the dip, we are getting that perfect “panic” buy bounce. Now, let’s see who gets the upper hand here.
Chart comparison below.
The New iPad
Guest post by Azizonomics.
“Now that Apple’s market capitalisation is larger than $500 billion — and more than the GDP of some developed countries — I have been intending to write an iBubble exposition, going even further into the evidence that Apple is spectacularly overvalued.“
But today, Apple provided perhaps the strongest evidence that while I do not expect to see Apple’s share price to collapse any time soon, the company is — in terms of innovation — gradually running out of steam.
Bring out the Bears
The bears are getting frustratedly bearish. From The Telegraph;
The blistering asset rally of 2012 has run ahead of economic realities in Europe, America and China. It is exhibiting symptoms of a schizophrenic market, with technical indicators flashing signs of exhaustion.
Graham Secker from Morgan Stanley said it is rare for global stocks, oil prices and government bonds to rise in lockstep, and such exuberance becomes a “very reliable sell signal for stocks” once speculators join the party.
Equity long positions on NASDAQ have reached 1.5 standard deviations and long bets on oil are at an extreme of 1.9, according to data from the Commodity Futures Exchange Commission. This is occurring at a time when yields on 10-year US Treasuries are still at 1.96pc, signalling depression, deflation, or both.
The historical relationship between bonds and equities has completely broken down over the past six months. “You can’t have a sustained period where equities are going up, while bond yields are flat or trending down,” said Mr Secker. (Full article here).
News That Matters
Ft.com
Vince Cable has warned Britain’s banks that the economic recovery is “being imperilled” by a “yawning mismatch” between demands for finance from small business and the banks’ reluctance to lend, http://ftalphaville.ft.com/thecut/2012/03/08/913711/banks-jeopardise-recovery-warns-cable/
Germany’s economic rebound, which has helped counter gloom created by Europe’s debt crisis, was set back in January by an unexpectedly sharp fall in industrial orders, especially from beyond the eurozone, http://ftalphaville.ft.com/thecut/2012/03/08/913651/german-industrial-orders-fall-sharply/
The US Treasury plans to sell AIG shares worth up to $6.9bn in the latest stage of a gradual selldown of the 77 per cent stake it still owns in the insurer after its $180bn bail-out in 2008. AIG shares have risen 27 per cent so far in 2012, http://ftalphaville.ft.com/thecut/2012/03/08/913611/us-treasury-to-sell-7bn-of-aig-shares/
Private investors holding more than €100bn in Greek bonds have declared publicly they will participate in Greece’s huge debt restructuring, clearing a key hurdle that makes it likely that history’s largest sovereign default will proceed as planned, http://ftalphaville.ft.com/thecut/2012/03/08/913551/investors-help-athens-over-bailout-hurdle/
Interest rates set by banks for savings and loans products are no longer dictated by the Bank of England’s base interest rates and will continue to rise regardless of Thursday’s decision by the bank’s rate-setting committee, http://ftalphaville.ft.com/thecut/2012/03/08/913531/savings-and-loans-rates-no-longer-tied-to-boe/
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