Archive for September, 2010

“As a reminder, QE1, when completed, resulted in the repurchase of roughly $1.7 trillion in Treasury and MBS/Agency securities. It is thus safe to assume that the Fed’s QE2 will likely amount to roughly $1.5 trillion in outright security purchases. However, as we will demonstrate, this is far from the whole story, and the actual marginal purchasing impact will be substantially greater… What is very important to note, is that as Bank of America’s Jeffrey Rosenberg highlights, a material drop in rates, which is now practically inevitable, is certain to cause a surge in mortgage prepayments of agency securities: “Our mortgage team highlights a 100 basis point decline in rates would raise the agency universe of mortgages refinanciability from currently about half to over 90%.” ”
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“For all those who thought last week’s “dramatic” improvement in the ratio of insider selling to buying from 650:1 to “just” 290:1 was a sign things are turning and insiders may soon be selling only 100 or so times more stock per week than buying, we have some bad news. According to Bloomberg, the latest ratio of insider selling to buying was 1,411 to 1.”
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“As part of positioning for the Presidential election of 2012, a bill to audit America’s gold could play havoc with the Federal Reserve. The bill will not be seen as an audit of the FED’s operations in general – only an audit of America’s gold, which has been justified by the FED in its supposed capacity as a trustee. It is the issue of the FED as trustee, not the FED as a lender, that will be the heart of the audit… Any attempt by the Federal Reserve to argue that it must not allow the United States Congress to see if there is really any gold in its vaults is going to be a very difficult public relations exercise. ”
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“After watching the movie, I realized why the right-wing Rupert Murdoch could be comfortable enough releasing the latest from the nominally left-wing Oliver Stone… Now, Stone sees greed everywhere, and there ain’t much we can do about it. ”
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“Wall Street created fake demand for their hottest product – mortgage-backed securities called collateralized debt obligations [2] – in the two years before the financial meltdown. Their activity increased banker bonuses but ultimately made the crisis worse… we found 85 instances during 2006 and 2007 where two CDOs bought pieces of each other’s unsold inventory. These trades, which involved $107 billion worth of CDOs, approximately a fifth of the market, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other.”
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“The biggest part of that strategy is for Treasury to begin converting its $49 billion preferred stake into common stock for sales by the first half of next year, said the people, who declined to be identified because the negotiations are private.”
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I didn’t want to go after the man who thinks bankers should always be bailed out, but never imprisoned… the man who handles FASB like most people handle a Suggestion Box… the man who got investors to embrace pretending as part of a financial strategy… the only adult male to make Elizabeth Warren check YES on waterboarding.

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Hedge Funds Diesel Price

Hedge Funds Continue to Raise Bets on Rising Diesel Price

Hedge funds have raised bets to the highest point in six weeks that the price of diesel will increase. The trades are likely stoked by the doubling of US diesel exports to Europe.

Hedge funds and other large speculators increased bullish wagers on heating oil, a proxy for diesel, by 58 percent the week ended Sept. 21, the U.S. Commodity Futures Trading Commission said in its weekly Commitments of Traders report.

“We’re seeing strong industrial production data in Western Europe,” said Hamza Khan, an analyst at the Schork Group in Villanova, Pennsylvania. “That’s a good indicator for intermodal transportation demand like trains and diesel trucks, especially in Europe given how much more dependent they are on diesel than we are in America.”

Germany, Europe’s largest economy, bolstered diesel consumption in the region as the country avoided the sovereign debt crisis that plagued nations in the euro area, including Greece and Ireland. European demand for diesel and heating oil strengthened in September as refineries halted for maintenance and German consumers stocked up before winter. Source

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Tags: hedge funds diesel bets, hedge funds diesel fuel, hedge funds diesel, hedge funds, hedge funds diesel trades

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David Tepper Equities

Video Interview: David Tepper Ups Equities Allocation

As I noted in last week’s article on the interview of David Tepper, Appaloosa Management has become one of the most impressive hedge funds in the industry. Tepper’s fund made $7 billion in 2009 largely by buying shares on the bet that struggling banks would recover. Now, Tepper appears to be favoring equities. Here is the first part of his two part interview with CNBC.  If you are reading this via RSS or e-mail, click here to watch this video:

Here is the second part of the David Tepper interview:

Related to: David Tepper Equities

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Tags: David Tepper Equities, David Tepper Equities investments, David Tepper Investments in Equities, Appaloosa Management Asset Allocation, Appaloosa Management David Tepper Interview

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“Probably the most important fact that economists and investors are ignoring is that QE2 will be accompanied by the prerogatives of QE Lite, namely the constant rebalancing the Fed’s balance sheet for ongoing and accelerating prepayments of the MBS/Agency portfolio. ”
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