Market Talk

- Spain’s recent decision to publish stress-test results of local banks comes as ECB resisted releasing other results on individual European banks, Yves Smith notes at naked capitalism, which could “increase frictions among an already fractious eurozone leadership group,” Yves Smith says. “”Ooh, this might get ugly.”

- S&P 500 remains above its 200-day moving average, but portfolio manager Roger Nusbaum says he wouldn’t be surprised if it quickly reversed course. He thinks it wise to buy a double short ETF to stay defensive. “The possibility of a whipsaw always exists with this strategy but I believe it is a very effective way to avoid the full brunt of ‘down a lot’ which is a very important objective for us.”

- The Gulf oil spill may actually prove a “godsend” for President Obama, as he should be “thanking BP, not demonizing it,” Jeremy Warner writes.

- Initial jobless claims disappoint. But “looking forward over the next few months we must keep an eye on what influence the Gulf of Mexico disaster will have on jobs,” Peter Boockvar notes. “But it doesn’t seem to have been an impact in this report as the states leading the rise were not down south.”

- The threat of social security insolvency is “unvarnished nonsense,” FusionIQ CEO Barry Ritholtz says. Social Security is merely a target of “persistent fear-mongering” as deficits increase and baby boomers start retiring.

- “The negative news in the housing market is beginning to pile up even faster than I suspected,” Pragmatic Capitalism notes. Toll Brothers (TOL) warns of weakness ahead and housing starts are declining amid the removal of the home-buyer tax credit. “Move over Europe. We have bigger problems to deal with here at home over the next 18 months.”

- Investors haven’t seen a real sideways market in a while, Bill Luby notes on his VIX and More blog. Still, he expects the S&P 500 to trade in a 1040-1219 range for a “surprisingly long period.” If that happens, “options selling strategies are likely to perform well, particularly if high volatility persists,” Luby adds. “This means covered calls may soon be back in vogue, with more advanced traders looking at the likes of straddles, strangles, butterflies and condors.”

- BP CEO Tony Hayward’s approach in a hostile congressional hearing is fairly straightforward. He “isn’t interested in winning anything, here, he’s just interested in letting the hearing time out by being infuriatingly passive and unhelpful,” Reuters blogger Felix Salmon opines. “He’s simply letting the attacks come, refusing to show any spark of humanity or willingness to engage.”

- Fannie Mae (FNM) and Freddie Mac (FRE) plunged yesterday amid surging volume after the government-sponsored enterprises said they plan to de-list from NYSE. That breaks the prevailing trend, says FT’s Alphaville. In the past, low-priced stocks, like FNM, FRE, AIG and Citi (C), generally rose on spiking volume. “In short, de-listing clearly equals the end of a unique high-frequency arbitrage opportunity for some.”

- Leaving the White House yesterday, Hayward looked a lot like the big-bank heads after their November 2008 meeting with then President Bush when they agreed to accept TARP, Peter Atwater says at Minyanville. Similar to bank CEOs, “Hayward had just been voluntold to turn over $20 billion” to Uncle Sam. Voluntold? Urban Dictionary says it’s “used in reference to an unpleasant task to which you have been assigned by your boss,” Atwater notes. He’s no BP defender, “but being voluntold feels very unsettling to me,” especially as it now seems more norm than exception.

Our colleague Matt Phillips over at MarketBeat exults in the fact that Fannie Mae and Freddie mac are finally being delisted, which makes sense, since they stopped being real, actual companies the day the government took them over.

From MarketBeat:

First things first. Fannie and Freddie aren’t real companies. The total equity in the two companies is a negative $146.9 billion, according to Bose George, an equity analyst covering the mortgage and housing sectors for Keefe, Bruyette & Woods. In short, these are government-owned zombie entities that would have been shut down by regulators long ago, if the regulators didn’t own them.

At one time there was a solid base of institutional shareholders for these firms. But that changed a long time ago, when the underpinnings of these entities was fatally disrupted by the subprime crisis. In short, any investors are long gone. “It’s largely day traders, I don’t think it’s people that care about the fundamentals that much,” George said of those who own the shares, in a quick chat with MarketBeat.

And those that have been dealing in these shares have basically been playing a giant game of hot potato, so much so that at points during rally off the March 2009 lows, Fannie and Freddie — valueless companies! worse than valueless! — made up some of the heaviest volume of any stocks.

The next step will be for the federal government to further acknowledge reality and add these behemoths to its balance sheet. But we won’t hold our breath for that one.

- It’s been a sweet six weeks for S&P 500. Index hasn’t had a 1% pullback, either on a single or multi-day basis. And, according to Bespoke, there have only been 10 other periods since 1990 in which the index went at least 40 days without a 1% decline.

- Breaking up the nation’s biggest banks doesn’t come without costs. “In evaluating the benefits of busting up the big guys, we shouldn’t lose sight of the possibility that this is also a strategy that could carry very real costs,” according to Atlanta Fed’s macroblog.

- In its eight page letter to shareholders, Goldman Sachs (GS) denies it bet against clients.

- Recent consumer spending reports suggest “signs of pent up demand being satisfied slowly but surely,” Barry Ritholtz notes. Data isn’t as cheer as the bulls believe, but it’s also not as dire as the pessimists proclaim. Ultimately, “a slow, painful recovery still awaits us.”

- It’s mindboggling that Fannie Mae (FNM) and Freddie Mac (FRE) aren’t included in Sen. Chris Dodd’s financial regulatory reform bill. “This denial is so egregious,” NYU’s Regulating Wall Street blog says, especially since both are involved in more than half of all US mortgages.

- Recent economic news seems to be trending in right direction. Unfortunately, housing doesn’t fall into that category as sales, starts, prices and builder confidence have all weakened this year, Economist’s Free Exchange notes. “A weak housing sector will be a drag on employment, and so long as employment growth lags, recovery is in doubt.”

- Bebo, Digg exemplify “hot going cold” in Silicon Valley. “At one time Digg and Bebo could do no wrong,” Kara Swisher says. “Now, no right.”

- Apple (AAPL) will likely introduce its mobile ad platform tomorrow at its iPhone developer event. And, ironically, Google (GOOG) can’t wait, Peter Kafka writes.

- Amazon’s (AMZN) Kindle may be coming to Target (TGT). Tech blog Engadget posts a picture of a Target inventory form showing a listing for the e-reader. Blog says Kindle could hit stores April 25. “Is this Amazon’s first response to Apple’s (AAPL) iPad?” Jay Yarow ponders at Silicon Alley Insider.

- Twitter investor Fred Wilson says the microblogging’s platform and ecosystem is at an “inflection point.” Silicon Alley Insider reads between the lines and wonders if Twitter “could buy or build its own photo-uploader and mobile app, squashing third-party developers in its way.”

- Mark Hulbert says some are drawing the wrong lessons from this week’s market anniversaries.

- The view from the bottom. Our MarketBeat bud Matt Phillips compiles some quotes from market watchers when stocks were bottoming out this time last year.

- “As we celebrate the one year birthday of the current bull market, a key characteristic that still looms one year in is the lack of conviction and confidence in the economic outlook for those on Main Street versus the more optimistic view of those who work on Wall Street,” Peter Boockvar writes.

- Wards of the state enjoy a nice day. Citi (C), AIG, Fannie Mae (FNM) and Freddie Mac (FRE) all rally.

- Small business owners now say conditions will be worse six months from now. “It’s not a pretty picture,” Economist’s Free Exchange blog says. “The problem is clearly not labor supply. Rather, the economy’s principal job creators are seeing too little demand to justify increases in hiring. That’s the drag on recovery.”

- Cisco (CSCO) says faster router “will forever change the Internet? Does the announcement live up to hype? Shares close flat at $26.13.

- Government has bailed out the banks, now it’s time to bail out our nation’s schools, former labor secretary Robert Reich says.

- An improved Web browser on Amazon’s (AMZN) Kindle is long overdue, MediaMemo blogger Peter Kafka notes. “At this point having a wireless device that only grudgingly accesses the Web makes no sense. And it certainly won’t fly once Apple’s (AAPL) iPad ships next month.”

- “The biggest banks in some European countries today are already too big to save,” former IMF chief economist Simon Johnson says. “Unless we take immediate and real action to reduce the power – and size – of our largest banks, we are heading in exactly the same direction.”

- Monetary policy and unemployment: Should the Fed have done more? Mark Thoma ponders.

US stocks finish slightly higher, but not by much, and jump through a lot of hoops before settling essentially unchanged. And given that this is the ’09 rally’s birthday, well, it’s oddly appropriate now, isn’t it?

DJIA adds 12 to 10564 after rising as much as 60 early. S&P 500 inches ahead 2 to 1140, Nasdaq Comp gains 8 to 2341. NYSE volume’s high. Dollar rises on warnings about European credit quality.

It’s a strange, jittery day. Dow crossed 10600, the S&P came within a percent of the January high of 1150, a line in the sand that many see as the demarcation between a new leg in the bull market, or a tumble back to something much darker. And it got weirder from there.

Citi, AIG, Fannie and Freddie all surged seemingly out of nowhere. The rumor mills were creaking, but the likely culprit seems to be a Fox Business report from Charlie Gasparino that the feds are mulling selling their Citi stake. But something spooked the shorts, and as much as we respect Charlie, we have to wonder.

Cisco ends absolutely flat at $26.13, not up or down even a penny, after making a big deal out of its new router.

What a difference a year makes.

As investors celebrate the bull market’s one-year anniversary, US stocks are up yet again today, although there’s some curious trading occurring in some beleaguered financial stocks.

Several government-owned financials, including Citigroup (C), experiencing big gains after Fox Business reported the government’s discussing plans to sell its 27% stake in the bank, perhaps as soon as the next three months. Citi was recently up 6.4% at $3.79. AIG, Fannie Mae (FNM) and Freddie Mac (FRE) also seeing big gains.

The curious trading today largely symbolizes much of the trading experienced since March 2009. The Dow Jones Industrial Average sank to a 12-year low on this day one year ago, as pessimism was running rampant through the market. With the Dow trading around 6500, there was little hope that good times were on the horizon.

Fast forward one year later and investor sentiment has definitely shifted for the better, prompting a 60% rally. While jitters about the recovery’s sustainability still exist, investors for the most part feel much better about the economy’s prospects than they did a year ago.

Continue reading…

- An increase in temp hiring is usually an early sign of recovery, but that trend hasn’t lived up to expectations, so far, in this purported recovery, Financial Armageddon blogger Michael Panzner says.

- EU appears to have a financing package in the works for Greece, but the “main goal seems to be to buy time — hoping for better global outcomes — rather than dealing with the issues at any more fundamental level,” Peter Boone and Simon Johnson write.

- Even as Google (GOOG) continues to grow and faces further antitrust scrutiny, it in no way deserves an Italian court conviction of three executives for privacy violations, Kara Swisher notes. Lesson: don’t get into any legal tangles in Italy.

- Asset allocation looking trickier ahead. “This isn’t a shock, but more of it is probably coming, meaning that a new set of challenges await for managing asset allocation relative to the trend for much of the past 12 months,” James Picerno says.

- “The Republican base is fired up. The Dem base is packing up,” says Robert Reich, former labor secretary in the Clinton administration.

- Apple’s (AAPL) iPad availability may be limited for its expected launch later this month as production delays could lead to tighter inventories, Digital Daily blogger John Paczkowski says.

- Credit default swaps are more toxic than most realize, Yves Smith writes at naked capitalism. “The more we can to contain this product the better, but I am afraid it will take another meltdown to teach us the lesson we should have learned from the last one.”

- “Is it any wonder that Republicans have suggested the bailout of Fannie and its sibling Freddie Mac ‘will almost certainly be the most expensive of the financial crisis’”? FT’s Alphaville says. “And given that the other contenders to that dubious crown include AIG and the US car makers, that’s saying something.”

- AOL continues its radical remake, selling Buy.at – an affiliate marketing company it bought two years ago – to Digital Window. “Another marker in [CEO] Tim Armstrong’s campaign to undo just about every part of the old regime at AOL,” Peter Kafka writes.

- Corporate insiders are sending fairly positive signals about the market, NYT says.

- The best journalism in 2009.

- Chill out, Geithner bashers. Lots of chatter surrounding the Treasury Secretary’s future, but Reuters blogger James Pethokoukis says the “Geithner must go crowd” needs to be patient.

- Taxing big banks is important because it shows that the Obama administration recognizes reckless risk-taking in the financial sector is “dangerous and undesirable,” Simon Johnson says. But a bank tax is no substitute for transparent regulation.

- Still, elements of the bank tax seem to make sense. “Just because a policy is popular doesn’t necessarily make it a bad idea. And this one makes a lot of sense,” Felix Salmon says.

- Probably not a coincidence that some of the most innovative companies have their founders actively involved in strategic decisions, VC Fred Wilson notes. “The founder factor is a huge intangible force in companies and is most often for the best.”

- Citi (C) CEO Vikram Pandit’s absence at Financial Crisis Inquiry Commission hearings certainly didn’t go unnoticed.

- What are the odds that Congress approves Obama’s bank tax? Views vary widely.

- One year later, time to start grading Yahoo (YHOO) CEO Carol Bartz’s performance. She backed up her tough talk, earning herself an A- in Kara Swisher’s book.

- Fannie Mae (FNM) and Freddie Mac (FRE) bailout costs are pretty astounding.

- Strong 30-year sale buoys Treasuries.

- Maybe Google’s (GOOG) China threat isn’t necessarily about a moral stance, because it comes four years too late, TechCrunch says.

- Economists react to today’s disappointing retail sales data.

Here’s the first linkfest of the new year, folks. Hope you enjoy, and please let us know in the comments what else you guys are reading.

- Historians and economists will remember 2009 as the year Wall Street roared back to prosperity while Main Street continued to languish, says former labor secretary Robert Reich. “If 2009 has proved anything, it’s that the bailout of Wall Street didn’t trickle down to Main Street,” he says.

- Newspaper stocks more than doubled last year, but Newsosaur blogger Alan Mutter says time will tell whether booming times are head for the batter industry, or if this is merely a dead-cat bounce.

- Financial stocks continue to lag, but don’t worry. Bespoke Investment Group says it’s better to focus on broader measures of the rally’s health rather than a specific sector.

- Stocks kick off the new year on a high note. Still, the market remains “overbought and tactically vulnerable,” Minyanville CEO Todd Harrison says. Keep an eye on the dollar, financial stocks and market breadth as “intuitive near-term tells.”

- Get ready Apple fanboys, something big is coming in the end of January. Is a tablet announcement in the offing? And will it overshadow CES?

- Corporate insiders continue to remain overly bearish on the market’s prospects.

- It’ll be tough for fixed income to top 2009′s gains.

- Mark Thoma wonders whether the Fed caused the recession?

- Taibbi’s at it again: Fannie, Freddie, and the new red and blue.

- World’s tallest skyscraper opens in Dubai. Could it mark a turning point for Dubai’s fortunes?

Feel like you're being taken for a ride?

I am not a beat reporter, and I have pity on the beat reporter who has to hand their editor a line like this:

“GMAC has been conducting a strategic review of its business and evaluating options to address the challenges in its mortgage operation.” The spokeswoman said GMAC wants to prepare itself to repay the U.S. government.

That is the explanation GMAC, the finance arm of General Motors and one of the poster children for the credit crisis, gave for borrowing another $3.5 billion from the U.S. government, as reported by Dan Fitzpatrick and Deborah Solomon in the Journal. The outfit, already in 12 large to the US government (and we do mean large,) came back to the gate for another $3.5 bil, which apparently is just part of their “strategic review.”

Now, a beat reporter can’t report GMAC’s words, and then comment in the story that the words are the most ridiculous they’ve ever heard. It doesn’t work like that. The beat reporter has to report who, what, when, where and why. It’ s left up to people like, well, like me to provide the analysis, the interpretation, the color, if you will. So, here goes.

I call Shenanigans!

Continue reading…