Hey, didn't we just get a Fed gift last Tuesday?
Wow, this is getting to be a weekly thing with Ben, he is such a swell guy! Of course it's easy to be generous when you are giving away other people's money (in this case, our children's) but people sure do love to get free cash. Thank goodness the Fed gave JPM $30Bn yesterday to make sure all the wealthy bondholders of BSC and all the HNW individuals and hedge funds who invest in them get out whole while selling the retail shareholders down the river.
Our man Cramer was all over the place on BSC but rather than point out his shenanigans myself I'll point you to this excellent summary from Don Harrold, who straightens out Cramer's BS quite nicely. I feel for Cramer, the financials are confusing and we've been in and out ourselves. Yesterday we were left with naked GS in our LTP and a new mildly bullish spread on LEH as we call a hopeful bottom on the financials.
We had a fantastic day yesterday and the futures market is so bright, we've gotta wear shades as of 8:30 despite the PPI coming in hot, up 0.5% (6.4% year over year) and even the Core PPI is up 0.3%. Housing starts are off just 0.6% but Building Permits Fell 7.8% and this would usually be considered bad but, as you can see from the picture, it's raining money today.
Unfortunately, all that cash will buoy the commodity bulls, who we had on the run yesterday and we NEED those commodities to sell off or today's PPI numbers will seem mild by the end of the year. The Fed cannot keep putting liquidity into the system while we spend $110 per barrel x 20M barrels a day ($2.2Bn per day) on something we burn up. Oil is the ultimate disposable and no more jobs are created when we spend $800Bn a year (at $105) than we have when we spend $450Bn a year (at $60) but it does create a $350Bn trade deficit and it does take $350Bn out of the pockets of US consumer and $1.4Tn out of the pockets of global consumers. Pretending this isn't a crisis is the crime this administration should be tried for!
Asia made a mild recovery with the Hang Seng getting back 300 points and the Nikkei bouncing 176 points, both 1.5% on the day. The Shanghai Composite was not so lucky, with a 4% drop as China is setting a very tough 4.8% inflation target (down from 9% last year) that indicates a lot of tightening ahead and they immediately raised reserve requirements in the first volley of their war on inflation.
Not wanting to let Ben have all the fun, the ECB dropped $39Bn on their markets this morning as banks in Asia (and Japan still has no Central Bank Chief) and Europe are simply not lending to each other with everyone wondering who the next BSC will be. Europe is responding very well to the stimulus and the markets there are up close to 3% as of 9am and none of the EU banks seem to be in any real danger, this is just a sentiment issue.
We still aren't seeing any real moves to shore up the dollar, which is why oil is back up this morning as a 1-point rate cut is widely expected this afternoon. The dollar touched 70.70 in yesterday's trading and finished the day at 71.44, a total disaster that no one even bothers mentioning anymore!
LEH and GS both came through with beats and it looks like we will have a super open but expectations are very high for the Fed so we will be using the profits from our index putters to roll up our April and May index puts ahead of the Fed and rolling the putters higher as the market gains on us. It will be very easy to disappoint this market at 12,250 so let's watch that level today.
All in all, things look pretty exciting today so we'll ride this little wave until it breaks on us but we know we want to be covered into the weekend regardless so we're only concerned with getting good prices on our April rolls for the next two days, not the price of our March callers.
Looks like another fun one ahead!
