Interdum stultus opportuna loquitur...

Wednesday, January 02, 2008

USRant: What's That Burning Smell?

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

Although I have not yet finished preparing the proper version of the USRant for 2008, today was interesting enough to encourage me to crank out some 'scheizola' (as Jim Dunn used to call it) for the Yank markets.

Imaginez-vous... before the open, futures were up a tad, and as a result places like Bloomberg were babbling on about the market rising in anticipation of the ISM (formerly NAPM) manufacturing Index and the Fed minutes... waxing lyrical... for the sole reason that the futures were already green.

Then the ISM survey came in much weaker than expected - at 46-and-a-bit as opposed to expectations of 52-and-a-bit. (As if anybody ought to give a flying crap about the ISM survey - it correlates with nothing whatsoever in the real economy).

Anyhow, anything that falls short of expectations causes coniptions in the post-CreditCrunch markets (before you mount your keyboard, I do not believe we are 'post'-Credit Crunch... but the entire MainSwamp is trying to give the impression that it was all in subprime mortgages, and that it's over).

Once the ISM number stank, bond markets spiked upwards - and some time later I pointed out as an afterthought that the 10 and 30-year bonds ought to be shorted sometime between now and Friday. Thereafter, the bond softened a tad, but firmed in late trading... it's still a screaming short, because every man and his dog is long the stupid thing, thinking that people no longer require compensation for inflation risk, when they're investing money for a 30-year period.

The Fed minutes were the usual pointless waste of ink and manpower - blah blah things are surprisingly weak... "surprising"? In a world where the government has poured money into the sands of the Middle East as if money was the blood of Iraqi children? Where's the surprise, when the US government is spending like a sailor on crack? When the US dollar index is the victim of the now-global mistrust of a profligate government?

Oddly enough, the Fed did not pump vast amounts of repo crack into the banking system in anticipation of the misery-laden ISM numbers (the Fed knows about economic stats beforehand, don't kid yourself). No, the Fed only pumped in a lousy $2.69 billion in Treasury-backed overnight repurchase agreements: the rest of the $14.25 billion repurchase operation was primarily in Mortgage-backed ($5.37 billion) and Agency-backed ($6.19 billion) - consistent with the near-terminal condition of (a) the mortgage market; and (b) agencies like Fannie Mae and Freddie Mac, which are both hollower than the US Social Security Trust Fund (which has been completely emptied by government borrowing, off-the-accounts).

The Dow kept falling throughout the session - punctuated only by the release of the aforementioned Fed minutes. it was the standard "move 50, try to stabilise, drop another 50, try to stabilise, bounce 50, stop in your tracks... " and so on until the market was looking 13000 in the face (having opened above 13250). And of course the bounce between the 'tease break' of 13000 and the close was... wait for it... yep you guessed it, 50 points. In 20 minutes. Then it dropped 25 points... in four minutes.

Gold broke its all-time (nominal) record high during the session; Oil broke the $100 mark (also a nominal record) during the session; a move back above 1.48 in the Euro (not yet happened) would herald 1.5000 and 1.6000 in weeks; the US Dollar Index still has a 75 handle...does that look like a global vote of confidence as far the US is concerned? I point out also that all of these things were the subject of prior Rants... 

By the close, the Dow was showing a fall of just over 220 points (1.67%) at 13046.6. Only one Dow component rose - Pfizer (PFE, +0.17 to $22.90 on volume of 38.7 million shares), while the average fall in the other 29 components was almost 2%. Needless to say, declining volume in Dow stocks swamped advancing volume - to such a ludicrous extent that I can't be bothered doing the calculation.

The broader S&P 500 Index dropped 21.19 points (1.44%); quite a bit better than the Dow. Like the Dow, advancing volume in S&P components was absolutely swamped by declining volume. 

The volume skews were almost to the extent that a decent contrarian would buy the after-market in the S&P futures just for a punt at a pop-recovery (say, five or six futures points). To be honest though, the longer-term RantLook for the US is so staggeringly negative that for the present I am not remotely interested in trying to scalp a bit of a pop after an awful day.

The Nasdaq Composite and Nasdaq100 indices fell about the same percentage as the Dow (NComp -42.65 (1.61%) to 2609.63 ; NDX -35.22 (1.69%) to 2049.70). It is surprising that the Nasdaq indices held up as well as they did relative to the Dow, since the Dow's Energy components (XOM in particular) were somewhat insulated by the pop in oil prices.

As I mentioned earlier today, the "full works and jerks" version of the USRant will be up and running sometime tomorrow (US/European time). As I have now introduced a ludicrous requirement for spell-checking it is not a given that the USRant will be available within a half-hour of the close (as this one was), but it will certainly be available well before the Oz market open.

And it will have tables, which are obviously missing from this "USRant Lite".