World economy talk

[uls]

^^^

the USG is finally convinced speculators are responsible for rising oil price

last year ko pa sinasabi yan

[tidus1203]

Auto parts maker Lear goes bankrupt!

http://finance.yahoo.com/news/Auto-p...&asset=&ccode=

Get ready for more job losses in the coming months!

[Monseratto]

The recession is still chugging along. Official unemployment figure in the US may break 10% early next month. So-called "green shoots" are just weeds after all...

Guess what? Economy still stinks

NEW YORK (CNNMoney.com) -- Stocks plunged Tuesday, falling to two-month lows, as fears that the market has gotten ahead of any economic recovery were ramped up ahead of the start of the quarterly reporting period.

Stocks have been inching lower since mid-June as a three-month stock market rally has lost steam.

"This is a very tough recession," said Scott Armiger, portfolio manager at Christiana Bank & Trust Company. "It's not going to be short and shallow like in 2001. We're more than 18 months into it and there doesn't seem to be a catalyst to turn things around."

Underscoring the depth of the recession, a report Tuesday from the Mortgage Bankers Association showed delinquencies on credit cards and other loans jumped to a record 3.23% in the first quarter. That was a modest rise from the previous quarter.

Yen Rises to Five-Week High Against Dollar on Recession Concern

July 8 (Bloomberg) -- The yen rose to a five-week high against the dollar on speculation the global recession will sap U.S. corporate earnings, prompting Japanese investors to sell overseas assets and bring money home.

[uls]

sell

oil falls below $63 ($62 flat as i'm editing this)

dow down 161 last night, s&p down 17

JPY strengthens

VIX up

risk aversion

--

market wrap

Equities

Equities finished lower after the American Bankers Association said that US consumer loan delinquencies rose to record 3.23% in Q1 and investors took a cautious stance ahead of the upcoming US earnings season. Also weighing on indices was lower WTI prices which in turn put energy blue chips under pressure as the oil and gas sector led the declines in the S&P 500 for much of the session. Elsewhere, Microsoft (-2.89%) traded lower, after it disclosed a warning related to a serious security flaw it hasn’t yet fixed. Later in the session saw prices briefly move off lows after Alcoa (+1.69%) said that demand in the US and Europe had bottomed, and even began to gain in some areas. However, the move higher was not sustained and indices headed lower in the closing hour to print new lows. Finally, at the closing bell DJI closed down 1.94% at 8163.60, S&P 500 closed down 1.97% at 881.03 and NASDAQ100 closed down 2.51% at 1408.78.

Fixed income

Treasuries finished higher as risk aversion trades caused prices to trend to the upside for much of the session. Supply concerns were overshadowed by weaker stocks with investors seeking refuge amid worries that Q3 earnings will disappoint. However, the advance in prices was capped at 117.120 and in spite of strong demand at the USD 35bln 3y note auction saw prices retrace some of the earlier gains. Finally, at the pit close T-notes finished up 13+ ticks at 117.085.

from email, sorry no link

[uls]

The recession is still chugging along. Official unemployment figure in the US may break 10% early next month. So-called "green shoots" are just weeds after all...

a number of pages back, i said the US banks stress test wasnt stressful enough

the unemployment rates (baseline and adverse scenarios) used in the stress test were too conservative

yep, those green shoots...

haha

recovery my a$#

[uls]

sensya na ha...

my fascination for the moment is stuff about program trading

Manipulation?
http://blog.themistrading.com/?p=164

We have talked extensively on our blog and in our white papers about the power of high frequency trading and program trading. We have noted that these trading strategies can move the market quickly during the trading day. We have always suspected that there have been certain major players that can dominate this space. Now comes the case of the stolen proprietary trading code from Goldman Sachs.

http://www.bloomberg.com/apps/news?p...d=axYw_ykTBokE

Most interesting in this Bloomberg article is the following statement by Assisitant U.S, Attorney Joseph Facciponti:

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said

Is this an admission by Goldman Sachs that there is the possibility of manipulation in the market? Does anyone think that this is the only program in the world that can “manipulate” markets? With all the programmers in the world, we can only imagine how many more manipulative programs are out there. Now here is the best part according to the assistant U.S. Attorney:

The proprietary code lets the firm do “sophisticated, high- speed and high-volume trades on various stock and commodities markets,” prosecutors said in court papers. The trades generate “many millions of dollars” each year.

RISE OF THE MACHINES

hehe

if you are a retail investor, you are trading against machines

Markets are a zero sum game - somebody wins and somebody loses. Where do you think these “many millions of dollars” are coming from? They are coming from you - the average retail investor and the large institutional investor. These programs are taking advantage of real order flow and are siphoning off small profits throughout the day that belong in the pockets of the retail investor and the traditional money manager.

and the USG won't do anything about it

So, who is out there to protect you from these “machines” and their army of programmers? One would think the SEC has your back. But what did they have to say about high frequency trading. According to an article in the WSJ (http://online.wsj.com/article/BT-CO-...18-707189.html )

The Securities and Exchange Commission believes institutional money managers are “sophisticated” enough to trade against the machines without further regulation.

“We don’t want to curtail liquidity,” said Gene Gohlke, associate director for the SEC. Gohlke said it’s up to the managers themselves to make sure other traders aren’t manipulating their models.

[uls]

on the subject of speculation in energy commodities...

there's an ETF called United States Natural Gas Fund (UNG)

yahoo finance:

The investment seeks to replicate the performance, net of expenses, of natural gas. The trust will invest in futures contracts on natural gas traded on the NYMEX that is the near month contract to expire. It is nondiversified.

guess what happened?

Natural Gas Fund Says It Has Run Out of New Shares
http://www.bloomberg.com/apps/news?p...d=aBs7t3LFX2Z0

July 7 (Bloomberg) -- The United States Natural Gas Fund, the largest exchange-traded fund in the fuel, said today that it has run out of new shares as it awaits government approval to issue more units.

The fund applied with the U.S. Securities and Exchange Commission to register 1 billion new shares on June 5. The wait will temporarily halt the fund’s recent growth. Outstanding shares have increased to 281.4 million, more than eight times the level at the start of the year.

The flood of money into energy futures has raised concerns among regulators that investors are influencing the price of fuel. The Commodity Futures Trading Commission said today it may clamp down on oil and gas price speculators by limiting the holdings of energy futures traders, including index and exchange-traded funds.

[uls]

what happened last night:

equities:

Equities surged lower on concerns that Q3 earnings will be disappointing and on worries that the economy was still in dire condition. The pessimistic view on the economy put weight on WTI prices, which fell to USD 60 mark. Elsewhere, financials underperformed as investors speculated that strong results posted by banks last quarter were unsustainable and Q3 will see further write downs. Final stages saw indices stage a rally; however S&P 500 was unable to recover earlier losses and traded in the red. At the closing bell DJI closed up 0.18% at 8178.41, S&P 500 closed down 0.17% at 879.56 and NASDAQ100 closed up 0.48% at 1411.53.

Alcoa – Q2 loss per share USD 0.26 vs. Exp. loss per share USD 0.38, Q2 revenue USD 4.2bln vs. Exp. USD 3.93bln. Says the capital plan for 2010 calls for a further 50% reduction to USD 850mln. Says has saved USD 1bln in procurement savings through H1.

fixed income:

Treasuries were on a firm upward trend as investors sought refuge on the back of continued speculation that Q3 earnings will reveal profits have fallen. Prices continued to advance following a stellar USD 19bln 10y note auction that showed extremely strong bidding and high participation from foreign investors. Finally, at the pit close T-notes finished up 1 point 10+ ticks at 118.195.

(email, no link)

there was a very sucessful 10Y treasury auction last night

so successful that there was $3.28 chasing every $1 of treasury

Treasury Auctions $19 Billion In 10-Year Notes
http://www.tradingmarkets.com/.site/...ALERT/2411068/

(RTTNews) - The Treasury Department announced the reopening of a 10-year bond sale Wednesday, in which it auctioned $19 billion of the security.

The auction featured a bid-to-cover ratio, which is a measure of the demand for the security, of 3.28. It also featured a stop-out rate of 3.365 percent.

The last 10-year notes auction, which took place on June 10, featured the sale of $19 billion of the security. It also featured a bid-to-cover ratio of 2.62 and a stop-out rate of 3.990 percent.

A bid-to-cover ratio measures the amount of bids received for every dollar worth of security being auctioned. The higher the ratio, the higher the level of demand.

investors go hide in treasuries again like Q4 last year

the JPY strengthened further last night

oil fell to $60

flight to safety is back

[tidus1203]

I am waiting for oil to drop to $57 then we can go in again...

[emanzano]

Different commodities have different supply-demand dynamics and different investor appetite. And people prefer to use GOLD and OIL (the investors favorite vehicle) from inflation protection rather than agricultural commodities because those markets are more liquid and dynamic...

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." - Warren Buffett

...been some time since i've been here.

I also have the same view about gold. To me it's no different from FIAT money - their values depend on the strength of the promise backing them up.

Oil i understand. Gold, never did.

[uls]

lately i found gold price to be quite unreliable as a gauge to what's going on

since last year, gold bugs have been saying gold price will pass $1,000 and go to $1,200 and beyond

but gold is stuck in the nine hundreds for quite some time

[uls]

more on the natural gas ETF UNG

U.S. Natural Gas Fund Grows to Record on Demand Surge
http://www.bloomberg.com/apps/news?p...d=am2P1gXCKsKY

July 8 (Bloomberg) -- The United States Natural Gas Fund expanded today to the largest position in its 27-month history as investors snapped up the last of its shares and it awaited government approval to issue more units.

As of early today, the exchange-traded fund owned the equivalent of 124,926 natural gas futures contracts on the New York Mercantile Exchange. The number of shares outstanding reached a record yesterday, rising 14.5 percent to 322.3 million, more than 10 times the total at the start of the year, and worth $3.97 billion.

The fund’s natural gas position, spread across swaps and futures on the Nymex and the ICE over-the counter-market, equals the equivalent of 86 percent of the open interest in natural gas futures on the NYMEX.

the size of UNG is distorting the market

“The size of their position is so big that it creates distortions in the market,” said Olivier Jakob, managing director of PetroMatrix in Switzerland. “And that doesn’t mean it just drives prices up. It can also drive prices down.”

when UNG sells the near month contracts before they expire, to buy the following month's contracts, the sell off (or roll over) causes the price of the near month to fall, while causing the price of the following month's contracts to rise

As the fund reaches the roll period, it has to sell its position in the near month contract, depressing the near-month price, Jakob said. It also has to buy a commensurate position in the second month, pushing that price up, and widening the contango. Jakob said that natural gas prices will only begin to rise when the fund shrinks its position.

that also happens with the price of crude oil when USO (the oil ETF) buys and sells oil futures contracts

[uls]

from Reuters wires earlier: (London time)

12:00 RTRS-BANK OF ENGLAND SAYS LEAVES QE TOTAL UNCHANGED AT 125 BLN STG

12:00 RTRS-BANK OF ENGLAND HOLDS KEY UK INTEREST RATE AT 0.5 PCT

12:00 RTRS-BANK OF ENGLAND SAYS LEAVES QE TOTAL UNCHANGED AT 125 BLN STG

12:00 RTRS-BANK OF ENGLAND HOLDS KEY UK INTEREST RATE AT 0.5 PCT

No more QE (for now), no rate change

good for GBP

best performing currency tonight

[uls]

oil falls below $60

$59.88 as i type

[tidus1203]

from Reuters wires earlier: (London time)



No more QE (for now), no rate change

good for GBP

best performing currency tonight

Yeah but the GBP is like what 1.65ish to 1.66ish last week so we barely recovered half of the losses last week and early this week... The Yen is the best performer in the past 2 weeks in my view...

[uls]

yep the JPY has strengthened a lot this month

---

what happened last night:

equities:

Equity indices were buoyed by better than expected earnings from Alcoa (-2.43%) which raised hopes that the demand for commodities will soon pick up. Also aiding to the move higher was lower than expected initial jobless claims data; however continuing claims came in higher again. Elsewhere, Goldman Sachs (+3.36%) traded among the leading gainers in the S&P 500 index after Bank of America (1.1%) upped the price target and raised Q2 share view. Initial trend lower was reversed after World’s Bank Zoellick said he sees no double-dip recovery scenario. As a result saw indices creep higher throughout the rest of the session though give back some of those gains in the last hour of trade. Finally, at the closing bell DJI closed up 0.015 at 8183.17, S&P 500 closed up 0.35% at 882.68 and NASDAQ100 closed up 0.24% at 1414.98.

fixed income:

Treasuries finished lower after tracking a fall in their European counterparts following news that the BOE were to keep the size of their QE program unchanged. Also, early on Treasuries came under pressure on market chatter that the USD 11bln 30 year note auction later in the session would not be met with high demand. However, those concerns proved to be unfounded after the results revealed decent bidding and higher than expected indirect bids. In spite of this the T-notes ticked lower and at the pit close finished down 25 ticks at 117.275.

(email, no link)

---

wow... quite fast ha...

GM Set to Exit Bankruptcy
http://online.wsj.com/article/SB124715504549018481.html

The new General Motors Co. is poised to exit Chapter 11 protection as soon as Friday morning, and to emerge as a leaner, more focused company after only 40 days in bankruptcy court.

The quicker-than-expected reorganization could represent a major accomplishment for the Obama administration, which committed $50 billion to GM as part of its bailout of the U.S. auto industry.

The chances of a sustained turnaround hinge on a revamped board of directors the government has installed, in particular the new chairman, Edward E. Whitacre Jr. The former AT&T executive was hand-picked by the government's auto task force. He was charged with keeping a tight watch over GM management and its performance, something the administration believed the previous board didn't do enough of.

[tidus1203]

Regarding GM, eh ano mangyayari duon sa bad company where they throwed all the bad assets at? Who will take the losses, someone has to take it... Losses don't just evaporate they can just be transferred.

[uls]

yep

GM investors and creditors take the losses

shareholders are wiped out

creditors will have to wait years to get paid

GM's unwanted assets (like unwanted plants and other stuff) will be sold off to pay creditors

[uls]

What happened last night:

equities:

Equity indices fell on the back of lower U. Michigan data which heightened concerns that the economic recovery will be prolonged. Elsewhere, downbeat interim update from Chevron (-2.66%) weighed on energy peers, after it said that the downstream results are projected to be much lower than Q1. On the flip side, tech stocks performed well after Goldman Sachs (-0.94%) upped price target on Apple (+1.58%) and Google’s (+0.98%) Q2 EPS estimate was raised at RBC Capital. Equities lacked any real direction for much of the session with NASDAQ100 trading marginally higher. Finally, at the closing bell DJI closed down 0.45% at 8146.52, S&P 500 closed down -0.40% at 879.13 and NASDAQ100 closed up 0.34% at 1419.84.

fixed income:

Treasuries finished higher after lower than expected U. Michigan data weighed on equities and caused a flight to safety in US government debt. Later in the session, a further bid in T-notes was prompted by another move lower in equities as investors fretted over the next weeks earnings. After trending higher for much of the session the closing stages saw T-notes give back some of the earlier gains. Finally, at the pit close T-notes finished up 26+ ticks at 118.220.

risk aversion/flight to safety

[uls]

asia markets down again

Kirin may merge with Suntory

oil below $60 as i type

usd/jpy 92.53

everyone risk averse parin

---

money goes hiding in treasuries again

Treasuries Record Demand Damps Concern Supply to Grow
http://www.bloomberg.com/apps/news?p...d=axFsV5datzIM

July 13 (Bloomberg) -- Bond investors across the country are snapping up 10-year Treasury notes as expectations for a U.S. economic recovery this year disappear.

Firms from New York-based BlackRock Inc. to Franklin Templeton Investments in San Mateo, California, are turning more bullish a month after yields on Treasuries rose to the highest since October. Declining consumer confidence, falling stocks and unemployment climbing toward 10 percent has overcome concern that record auctions of government debt will overwhelm demand. Barclays Plc estimates $1.1 trillion more sales by the end of the year, on top of the first half’s $963 billion.

The gap between yields on 10-year Treasury notes and two- year securities narrowed to 2.40 percentage points from a record 2.81 percentage points on June 5 as investors took advantage of relatively cheap longer-term debt. The so-called yield curve typically widens when investors anticipate a recovery because they demand more compensation for the risk that growth will spark inflation.