• Well, That’s a V-Shaped Recovery
    Posted by on September 28th, 2009 at 3:44 pm

    I often like to look at how the Morgan Stanley Cyclical Index (^CYC) is performing relative to the S&P 500.
    The past year has been a dramatic ride. Cyclicals led the market down, the led them back up. Here’s the CYC divided by the S&P 500.
    image856.png
    If the equity market is correct, perhaps we’re in for a V-shaped recovery.

  • Zeroing in on Zero Hedge
    Posted by on September 28th, 2009 at 2:13 pm

    Joe Hagan profiles the financial blog Zero Hedge in New York Magazine. In the past, I’ve defended Zero Hedge from attacks on its decision to use a pseudonym. And that defense, incredibly led to me being attacked on CNBC!
    Well, now we know that Dan Ivandjiiski is the man behind Tyler Durden:

    (A) 30-year-old Bulgarian immigrant banned from working in the brokerage business for insider trading. A former hedge-fund analyst, he’s also a zealous believer in a sweeping conspiracy that casts the alumni of Goldman Sachs as a powerful cabal at the helm of U.S. policy, with the Treasury and the Federal Reserve colluding to preserve the status quo. His antidote? A purifying market crash that leads to the elimination of the big banks altogether and the reinstatement of genuine free-market capitalism.

    While many of the posts are excellent, more than a few are—as the passage above suggests—completely off the fringe. They’re poorly reasoned, paranoid and highly conspiratorial.
    I wondered why could there be such a difference in the quality of the posts. Apparently, Ivandjiiski is merely the leader but there are up to 40 different people who write under the name Tyler Durden.
    I have to agree with Felix, the Durden cell should be broken up. Again, I have no problem with the use of pseudonyms, but we should know which pseudonym wrote what so readers can skip over the Grassy Knoll stuff.
    I think ZH’s success underscores the fact that the blogosphere is biased toward sites that express moral outrage. Criticizing people is, apparently, far too tame. No, you need to explain why your opponents are evil. In fact, they’re doubly evil because they know they’re evil yet they do nothing about it. Now that’s evil!
    I guess a lot of folks aren’t happy unless they’re upset. And with that we go to today’s poll question: Should we increase welfare payments to illegal immigrants?

  • Michael Moore: Jesus Wouldn’t Play the Stock Market
    Posted by on September 28th, 2009 at 1:05 pm


    As to the Jesus’ financial views, I’ll have to defer to those with greater Biblical knowledge. The only financial stand I know Jesus had was his expelling the money changers from the Temple.
    But I don’t follow the argument that investing in the stock market is itself immoral. In fact, I think preventing capital from getting to prospective entrepreneurs is morally questionable.

  • The Five Most Overpaid CEOs
    Posted by on September 28th, 2009 at 12:26 pm

    CNNMoney.com lists the five most overpaid CEOs. They are:
    Michael Jeffries, Abercrombie & Fitch
    James W. Stewart, BJ Services Company
    Brian Roberts, Comcast Corp.
    John Faraci, International Paper
    Eugene Isenberg, Nabors Industries
    Once again, I didn’t make the list.

  • My Thoughts on HR 1207
    Posted by on September 28th, 2009 at 12:24 pm

    I want to address the issue of HR 1207 and the Fed audit. If I were in Congress, I would support the bill. I say this even though I find the much of the pseudo-populist impulse behind the bill repellent.
    I’ve read Mr. Alvarez’s testimony and I think he makes several good points. The problem is that too much of the argument relies on scenarios that are too distant from coming about.
    The crux of his argument is that all these bad things will happen once a full audit is allowed. Yes, they could happen but it’s not clear that these are immediate dangers.
    I’m still curious as to what the conspiracy crowd expects to find out. Matt Taibbi writes: “It’s becoming abundantly clear that at some point we’re going to start to hear details about monstrous front-running operations involving the major banks on Wall Street.”
    Hmmm. Call me a doubter on that. And if the Fed has been trying to manipulate the market, I’m afraid they’re not doing a very good job.

  • Get Your Resumes Ready
    Posted by on September 28th, 2009 at 11:54 am

    Goldman Sachs is hiring.
    It must be part of some plot.

  • Gambling on Zombie Stocks
    Posted by on September 28th, 2009 at 11:41 am

    The LA Times writes that investors are speculating on busted stocks like Lehman and Washington Mutual that are still trading.
    Shares of Lehman have nearly quintupled in the last four weeks despite having some business problem. Some of those problems include having no business or employees.
    Still, did I mention the stock? Boo-yah!!
    big.chart092809.gif
    These folks are literally buying shares that are worth less than the paper they’re printed on. If you’ve ever needed clear-cut proof against efficient markets, this is it.

  • WaPo Rewrites History
    Posted by on September 28th, 2009 at 11:23 am

    The Washington Post runs a very deceptive article today claiming that community groups warned the Federal Reserve about subprime loans and the Fed repeatedly ignored them.
    In fact, the groups were complaining about the interest rate charged on the loans, not on the subsequent housing bubble. The Post writes: “Subprime mortgage lending sneaked up on the Federal Reserve.”
    Not at all. The Fed knew about subprime and fully encouraged it. Here’s Greenspan quoted four years ago in, of all places, The Washington Post:

    “Where once-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately,” he said in a speech. “These improvements have led to rapid growth in sub-prime mortgage lending; indeed, sub-prime mortgages account for roughly 10 percent of the number of mortgages outstanding, up from just 1 or 2 percent in the early 1990s.”

    That’s not all. In June, Connie Bruck wrote in the New Yorker:

    In 1992, a landmark study by the Federal Reserve Bank of Boston made it clear that there were systemic underwriting issues relating to the treatment of African American and Hispanic borrowers. Policymakers called upon the mortgage industry to change their practices and redouble their efforts to better serve minorities and underserved communities.

    If the community organizers had their way, the bubble would have been far worse, and their communities would be far more disorganized.

  • Earnings Revisions At Two-Year High
    Posted by on September 28th, 2009 at 10:18 am

    Bespoke notes that analysts are becoming more bullish:

    Our daily tracking of analyst revisions for stocks in the S&P 1500 shows that over the last four weeks, 578 companies in the S&P 1500 have seen their earnings estimates increase, while 389 have seen their numbers cut. This works out to a net of 189, or 12.6% of the index. As shown in the chart below, this is the highest level since at least the start of 2008 (red line), and is a major improvement off of where we were six months ago, when the net earnings revision ratio was closer to “-50%”. While analysts are typically thought of as being behind the curve, so far this year they have done a good job of leading the market. When equities bottomed in March (blue line), analyst revisions were already well off their lows of the year.

    I should add that analysts aren’t so much as increasing their earnings estimates, they’re softening the earnings plunges. Still, it’s how bull markets start and it’s another reason why this isn’t a bear-market rally.

  • Taleb Watch
    Posted by on September 28th, 2009 at 10:03 am

    Joe Weisenthal spots bigmouth Nassim Taleb in the news again.

    “Bernanke, Geithner and Summers didn’t see the crisis coming so why are they still there?” Taleb told a group of business people in Hong Kong. Bernanke is like “a pilot who didn’t see a hurricane,” he added.

    Joe shrewdly notes, “We thought prediction was basically impossible.” Not only is Taleb’s comment silly, which they usually are, but this time Taleb’s metaphor shows a fundamentally misunderstanding of what a central does. And as far as predictions go, Taleb isn’t doing so hot. Just five months, he was saying that today’s crisis is “vastly worse” than the Great Depression.
    Now that it looks like the recession has past, the GDP numbers will soon reveal how far off the market Taleb was. He also chimed in on financial regulation.

    Many people, such as traders, benefit from these black-swan events and it’s up to regulators to ensure rules and disincentives are in place to discourage them from triggering these occurrences, he said.

    That’s exactly the wrong approach. The problem is that our regulators have tried to design a system that’s impossible to break. Instead, their focus should be on making a system that’s easy to fix.