Wednesday, June 28, 2006

Minyan Mailbag

Anonymous said...

Great Blog and Great Site! Quick question: in regards to the paid subscription for Minyanville.com, what benefits (other than "buzz and banter") does a subscriber get over a non-subscriber?

Thanks in advance!

We said...

Subscriber's gain access to the Buzz and Banter, Minyanville's signature product. Aside from the great community we take pride in at Minyanville, The Buzz and Banter is truly our bread and butter. We have so many brilliant contributors here, many of whom are executives of their own hedge funds and research firms. With nearly 100 posts per day, they are able to relay their insights to your desktop via the Buzz and Banter in real-time. By following the flow of the markets via the buzz, you'll get actionable investing ideas and learn how to be a more fiscally fit investor.

Also, in furthering our community at the ‘Ville, we are working to generate new networking opportunities among subscribers so we can not only learn about our fellow Minyans, but learn from them.

I’d say you get what you pay for, but you get more. Plus a Free Trial never hurts.

Monday, June 26, 2006

Monday Morning Quarterback

www.minyanville.com


Good morning and welcome back to the flickering pack. On the heels of my quick Colorado jaunt—and before I scoot to jury duty this morning to satisfy my civic responsibilities—I wanna scribble some dribble as we begin our fresh five session set. As I’ve been sans screens for a few days (and will likely be in a similar situation for a few more), I share this fare with hopes that some beneficial vibes resonate. These are critically important times in the land of flickering ticks and take me at my word that I’ll be back in the saddle—and back on the Buzz—as quickly as I can.

The Denver Chronicles

I hosted two town hall chats on Thursday, the first with the good folks at the CFA and the other with the kind peeps of the AAII. While the former were decidedly professional and the latter was skewed to the individual subset, I walked both through my process of metric assimilation when viewing the financial dew. In doing so, I ranked the four pillars of our metric mix in the following order, offering vibes on each that I must summarize due to the space constraints of this column.

  • Structural: We spoke about the “dollar vs. asset class” dynamic, offering visual validation that gold, crude and stocks have traded “monolithically” against the greenback. We touched on the simultaneous ‘flations and the higher costs of things we need coexisting with the lower cost (and pricing pressure) of things we want. We discussed the difference between legitimate economic growth and debt induced demand, how total debt in our country is more than 300% of GDP and how that will manifest in the years ahead. And we monitored the compression that’s prevalent in our derivative-laden financial fabric and discussed how that’ll play out in the current state of globalization.


To see the rest of Todd's pillars, read the full article

Good luck today.

R.P.

Thursday, June 22, 2006

Have You Heard the Buzz?

We recently launched a new and improved version of our most coveted product, The Buzz and Banter. "The Buzz" provides real time market analysis from 30 of the brightest minds on Wall Street. Access relevant, interesting, and witty commentary from the industries most respected prefessionals, conveniently at your desktop.
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Access the Buzz and Banter at minyanville.com/buzzlanding

Wednesday, June 21, 2006

Phantom of the Market

By Todd Harrison
www.minyanville.com

On the heels of a hellacious six week span, the bovine held their ground yesterday and planted seeds of a much needed "higher low." The ability to create a technical catalyst or, at the very least, hold the June lows is the first step towards putting this process of price discovery behind us. As anyone within spitting distance of the mainstream media can tell you, it hasn't been the best of times for financial assets. Stateside Equities, Europe, Asia, India, Stockholm, metals, crude--it's synchronized swimming at its finest, monolithic movement that has been a mirror image of the U.S dollar. I've long opined that our Federal Reserve must make a choice between a strong dollar or firm asset classes. That script is being screen tested each day as we sift through the other side of globalization.

While I was quite cautious into the May 10 FOMC meeting, I've been buying dips in the metal and energy complex and balancing my portfolio with a spate of autumn puts in the financial sector. For those with an active eye, I've set my short side "stops" above BKX 108 and XBD 205, which is technical resistance for the banks and brokers. The risk to that approach is that charts take a back seat to structural forces when the wheels fall off the wagon. Indeed, if we're to assimilate the four primary metrics of fundamentals, structural, technicals and psychology--in the context of a bubble of hedge funds chasing quarter-end performance--it's quite possible that the path of maximum frustration will flummox those reliant on traditional trading approaches.

I won't pretend that all is well in the world or that the worst is behind us. I'm simply looking to shake shekels from the tree and pocket them before the Phantom returns to his rightful home. Who is this Phantom I speak of and what does he want? For me, it's a simple yet unpleasant answer...
Read the full article

Thursday, June 15, 2006

Five Things You Need to Know: Rent, In(de)flation, Close Encounters, Ford Meets Lassie, Magna Carta

By Kevin Depew
www.minyanville.com

Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:


All About the Rent!

While everyone has a handle on "core inflation," and rising gasoline prices, and so on and so forth, few seem to be focused on a key component of CPI, Owners' Equivalent Rent. Oh, hey there, Mr. Roper! What, Chrissy didn't give you the check? I'm sure she just forgot.
The core CPI yesterday came in with its third 0.3% monthly increase.
Look at the numbers: year-on-year inflation is now up 4.2% from 3.5% previously. Yikes!
However, while one key element in the inflation rise is (naturally) energy, another perhaps more important component is Owners' Equivalent Rent (OER), up 0.6% on the month.
What is OER? OER measures the rent homeowners can obtain for their houses. OER makes up a whopping 30% of the core CPI.
Why is OER rising? Partly, because potential home buyers are now finding it easier to rent than buy houses.

The
National Multi Housing Council reports
that affordability in the nation's hottest housing markets has been eroding for some time and US rents overall are up 5% year-over-year.
Meanwhile, in South Florida vacancy rates are so low that some landlords are raising rents as much as 28 percent, according to McCabe Research & Consulting, the
Wall Street Journal
reported earlier this week. That sounds like inflation, right? Read on...

Alas poor Inflation. I knew him, Horatio.


"A Modest Rise Still Amplifies Inflation Fears
," the New York times reports. Special Bonus: The Times article mentions Paul Volcker and Alan Greenspan in back-to-back paragraphs!
Hard to blame them. The core CPI yesterday came in with its third 0.3% monthly increase, all but guaranteeing a Fed rate hike of another 25 basis points at the June 29 FOMC meeting.
Year-on-year inflation is now up 4.2% from 3.5% previously.


We looked at OER above. Sure enough, rents are rising. But, according to Merrill's David Rosenberg, OER is also rising due to a more bizarre and complex factor: natural gas prices.
Falling natural gas prices have, ironically, added to the increase in OER because the government subtracts utility prices from the calculation.

According to Rosenberg, if you exclude the OER component, then core CPI rose a mere 0.17%. (Yo, that's a typo, right? You meant 1.7%.) No, that's not a typo. 0.17%.
So, while the market is reportedly focused on inflation, Minyanville's Todd Harrison this morning noted
the real Phantom of the Market
: Deflation. "Who is this Phantom I speak of and what does he want? For me, it's a simple yet unpleasant answer, the type of discussion that nobody wants to have until we actually see his shadow. He is Deflation; painful, all-consuming, watershed Deflation."
The risk is that if we are at the end of the credit cycle, and what appears to be inflation is simply the result of secular monetary hyperinflation from central banks, then the inevitable unwind of that credit cycle - a saturation of risk appetite becoming risk aversion and a decrease in time preferences - will find the Fed possibly raising rates into the teeth of a deflationary unwind. Just thinking out loud here.

C'mon Everybody! Ford Needs Our Help!


Speaking at the Competitiveness Forum
, Ford's president of the Americas Mark Fields asked the federal government for help to "level the playing field" for domestic automakers in the U.S. market.
Hey Lassie!
Woof!
What is it Lassie? What's wrong?
Woof!
Ford? What about Ford?
Woof!
Ford fell in a well?
Woof!
Oh, Timmy fell in a well. But what about Ford, Lassie? Is Ford in trouble?
Woof!
What!?! Ford's gonna close 14 plants and lay off somewhere between 25,000-30,000 workers! What do we do Lassie?!
Woof!
Ford wants us to level the playing field? What does that mean? Handouts? Bailouts?
Woof!
Oh. Tax credits.
Woof!
No!!! Oh Lassie, don't tell me Ford's healthcare costs have crippled the company!
Woof Woof!
Ok, Lassie. You run back to Ford and tell them first thing, stop making all those useless cars. Second close all the plants, they're not going to need them. Third, get them to change their name to Ford HMO... and round up as many doctors and nurses as you can! I'll go get the taxpayers!
Read the full Article

Wednesday, June 14, 2006

The State of the Art

By Todd Harrison
Minyanville's News & Views

Editor's Note: This is a revamped look at the the state of the financial arena. This article was originally published last year and has been updated to reflect current market trends. Enjoy!

"It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another." Gordon Gekko

You don't have to be a big hitter to see that Wall Street has forever changed. What was traditionally an exclusive club of power players and money makers became a household hobby when technology made enablers of the mainstream. In the storied history of the financial markets, the rate of change has been nothing short of remarkable. The last ten years revolutionized an industry once known for clubby relationships and handshake agreements. The next ten years will forever alter the structural DNA as the old guard chases an ever-evolving digital world.

When I started at Morgan Stanley, I arrived at my turret while the skies were still dark and transcribed our derivative positions by hand. As ancient as it sounds, the risk management approach was that arcane. We "paired" single stock positions into hand-written strategies in an attempt to manage the complex components of our collective risk puzzle. That meticulous process was standard practice on the Street as traders relied on an acquired acumen and scribbled T-accounts to base million dollar decisions. It was an innocent approach to an intricate machination, where inefficiencies were commonplace until arbitrage emerged to capture risk-free returns.

I remember when we started pricing over-the-counter products and would "win" business by 30, 40 or 50 volatility points (a subjective assignment of valuation). Customers could "collar" their stock and lay off risk without the requisite footprints and we gladly facilitated the orders. Technology companies also awoke to write naked puts in lieu of stock buy-backs. If their short options were exercised, their cost basis was cheaper than it would have been in the open market. If not, the premium expired worthless and the income slipped through a tax-free loophole. Microsoft did it. So did Dell. Intel too. They were happy campers and our firm was a profit machine as the wheels of capitalism continued to grease a seamless coexistence. In time, as other sell-side players entered the market, the relative edges rounded and...
Read the full Article

R.P