Thursday, February 28, 2013
FW: You want answers?
From: DAVID ZERVOS (JEFFERIES & CO., INC) [mailto:dzervos2@bloomberg.net]
Sent: Thursday, February 28, 2013 9:49 AM
To: John Broussard
Subject: You want answers?
As our beloved colonel/chairman took the stand this week, nerves in the market were frayed. News of Italian election chaos and the sequester were splashed across the screens. Spoos had been pounded, the Yen was rallying and you could hear the screams of pain from levered traders across the globe (many of whom sent me agitated bloomberg messages).
Markets needed some soothing words from the man who sits on that wall and guards us against deflation. Markets needed their fix. Not more QE per se, but a statement from our chief dealer that the pain medication will be there for a good long while. And like clockwork, he delivered. He sat on that chair both as a military leader and a psychologist. He soothed our nerves. He told us it was going to be ok - he had our backs. The meds are working he said - just look at housing and stock prices. And don't worry about when I take you off the meds - ill do it slowly, I have a plan, trust me I'm your colonel, and your doctor.
And as we all heard the joyous message that the meds will continue in ample supply, and that our doctor has the tools to wean us off them when the time comes, we went back out to the markets and bought every dip in sight - spoos, nikkei, estoxx...bring em on! We went back to that wonderful cocktail party with the luxury of not knowing what our colonel knows. After all we cannot handle the truth.
Of course we always have to worry when he takes the stand. It could be that some punk Congressman (aka Kaffee) forces him to admit he ordered a code red. Forces him to say - "look, I'm just printing dollars, killing savers, bailing out debtors, redistributing wealth and debasing our currency. Yes, I admit it, I ordered the code red on the USD". But Corker, Duffy and Hensarling are no Kaffee. Their questions were pedestrian, no match for our colonel who shot them down with sniper like precision. It was a performance to remember from Ben. And the markets celebrated!! Spoos and blues 4EVA baby!! Good luck trading.
Upcoming travel schedule:
Mar 5 Boston
Mar 25 Milwaukee
Mar 26-27 Chicago
Apr 8-10 Atlanta
Apr 24-26 Puerto Rico
Apr 29-May 1 LA
May 8-10 Bermuda
Jefferies archives and monitors outgoing and incoming e-mail. The contents of this email, including any attachments, are confidential to the ordinary user of the email address to which it was addressed. If you are not the addressee of this email you may not copy, forward, disclose or otherwise use it or any part of it in any form whatsoever. This email may be produced at the request of regulators or in connection with civil litigation. Jefferies accepts no liability for any errors or omissions arising as a result of transmission. Use by other than intended recipients is prohibited. In the United Kingdom, Jefferies operates as Jefferies International Limited; registered in England: no. 1978621; registered office: Vintners Place, 68 Upper Thames Street, London EC4V 3BJ. Jefferies International Limited is authorised and regulated by the Financial Services Authority.
Ý---
Sent From Bloomberg Mobile MSG
-------------------------------------------------------------------------------
Jefferies archives and monitor messages. This message is confidential. This message may be produced to regulators or civil litigants. Jefferies accepts no liability for any errors or omissions arising as a result of this transmission. In the United Kingdom, Jefferies operates as Jefferies International Limited; registered in England: no. 1978621; and Jefferies Bache Limited; registered in England: no. 114226; registered office for both: Vintners Place, 68 Upper Thames Street, London EC4V 3BJ. Jefferies International Limited and Jefferies Bache Limited are authorized and regulated by the Financial Services Authority. If you received this transmission in error please contact the sender.
Wednesday, February 27, 2013
Dow Jones 73 points away from all time high
Dow Jones 73 points away from all time high
Description | Ticker | Last | CHANGE | % Chg Today | Pct Chg 1Yr |
| | | | | |
STOCK MARKETS | | | | | |
Dow Jones Industrial Average | INDU Index | 14091.210 | 191.0800 | 1.3747 | 8.5261 |
S&P 500 Index | SPX Index | 1518.330 | 21.3900 | 1.4289 | 11.0277 |
NASDAQ Composite Index | CCMP Index | 3175.401 | 45.7540 | 1.4620 | 7.0391 |
Russell 3000 Index | RAY Index | 903.980 | 13.2300 | 1.4853 | 11.1401 |
Russell 2000 Index (Small) | RTY Index | 913.000 | 12.9500 | 1.4388 | 10.4166 |
S&P 400 Mid Cap Index | MID Index | 1105.850 | 17.7000 | 1.6266 | 12.2326 |
S&P 600 Small Cap Index | SML Index | 466.570 | -2.3100 | -0.4900 | 9.6866 |
TREASURIES | % Yield | | | | |
3 Month Treasury | 0.1065 | | -0.0050 | -4.5455 | |
6 Month Treasury | 0.1319 | | -0.0050 | -3.8462 | |
2 Year Treasury | 0.2422 | 100.016 | 0.0000 | 0.0000 | |
5 Year Treasury | 0.7787 | 99.867 | 0.0156 | 0.0156 | |
10 Year Treasury | 1.9014 | 100.898 | -0.1797 | -0.1778 | |
30 Year Treasury | 3.1064 | 100.406 | -0.5000 | -0.4955 | |
ENERGY | | | | | |
Crude Oil, Brent Index | Brent Crude | 111.990 | -0.7200 | -0.6388 | -3.3489 |
Crude Oil, Louisiana Lt. Sweet | LA Lt Sweet | 113.000 | -0.3300 | -0.2912 | -9.7900 |
Natural Gas, Henry Hub Index | Nat Gas | 3.421 | -0.0350 | -1.0127 | -3.6891 |
PRECIOUS METALS | | | | | |
Spot Gold $/oz | GOLD | 1595.300 | -18.5500 | -1.1494 | -9.7314 |
Spot Silver $/oz | SILVER | 28.945 | -0.4550 | -1.5476 | -18.2197 |
CURRENCIES | | | | | |
Euro | EUR Curncy | 1.314 | 0.0074 | 0.5666 | -1.9631 |
Japanese Yen | JPY Curncy | 92.210 | 0.2300 | 0.2501 | -12.6003 |
British Pound | GBP Curncy | 1.516 | 0.0032 | 0.2116 | -4.2214 |
Swiss Franc | CHF Curncy | 0.931 | -0.0011 | -0.1181 | -3.3634 |
Canadian Dollar | CAD Curncy | 1.023 | -0.0031 | -0.3021 | -2.3556 |
Chinese Yuan | CNY Curncy | 6.227 | -0.0029 | -0.0465 | 1.1980 |
FOREIGN INDICIES | | | | | |
FTSE 100 INDEX | UK | 6325.880 | 55.4400 | 0.8841 | 6.9365 |
CAC 40 INDEX | FRANCE | 3691.490 | 69.5700 | 1.9208 | 7.2655 |
DAX INDEX | GERMANY | 7675.830 | 78.7200 | 1.0362 | 12.0625 |
NIKKEI 225 INDEX | JAPAN | 11253.970 | -144.8400 | -1.2707 | 15.7430 |
HANG SENG INDEX | HONG KONG | 22577.010 | 57.3200 | 0.2545 | 4.1371 |
Tuesday, February 26, 2013
It's The Economy Stupid: David Zervos
However Zervos did pen this gem: "...if you are going to run with bulls, you will occasionally have to take a horn in rear!"
And this one: "And if you don't seize these opportunities you will be left behind hugging your trash can in the kitchen like Charlie Sheen"
And here are some definitions to help you:
LTRO: The European Central Bank's long-term refinancing operation
Spoos: S&P 500 futures
USDJPY: U.S. dollar and Japanese yen currency pair. AKA "the gopher".
John Broussard
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury
Ph: 225-342-0013
-----Original Message-----
From: DAVID ZERVOS (JEFFERIES & CO., INC) [mailto:dzervos2@bloomberg.net]
Sent: Tuesday, February 26, 2013 10:18 AM
To: John Broussard
Subject: The important stuff and the fluff
The markets continue to be driven in the short term by a lot of noise. People are focusing on the UK downgrade, Italian elections, Cypriot bailouts, LTRO paydowns, the US sequester and Charlie Sheen's twitter pictures during the Oscars. All of these "focal points" have about the same long term relevance for financial asset prices - nil!
In the end, there are only three primary drivers of asset prices globally - Ben, Mario and their new buddy Haruhiko - the rest is fluff! This does not mean that USDJPY cannot airpocket 2 figures on a lazy New York afternoon; or that spoos can't drop 25 points on European political uncertainty and heated fiscal policy banter from DC. Grinding rallies and sharp sell-offs are the basic ingredients of a bull market. And if you are going to run with bulls, you will occasionally have to take a horn in rear! That's why we always carry a little first aid kit with us full of blue eurodollars. They always ease pain from the inevitable piercings.
But as we move forward on this path to a reflationary recovery, it is critical to maintain a view of the forest for the trees. Central banks are diluting the value of fiat currency. And more physical cash will chase the same set of real assets. This in turn will drive asset prices higher and generate our much discussed reflation trade! Whether the Italians elect a comedian/criminal as their PM, the Cypriots haircut some Russian oligarchs or there is 8 billion less per month spent on a handfull of bloated US government programs does not matter. All of these "focal points" are about as important as what was going through Charlie Sheen's head while he was hugging trash can in his kitchen.
Ben is on a mission, Mario will do whatever it takes and Haruhiko is the guy who called for a 3 percent inflation back in 2002. So what should we look forward to? Well, Ben is on center stage today in front of Congress to give us his usual dovish quack. Unemployment is too high, inflation risks are contained, the Fed has the tools, and the Fed will use the tools to deliver a reflationary outcome. And importantly, the costs of a larger balance sheet do NOT exceed the benefits. He has delivered this unwavering message for over 4 years now, why would he change? And Mario already did his heavy lifting after the last ECB meeting with a warning on Euro currency strength and downside risks. The Euro has in turn obeyed with a little help from Silvio and Beppe. Finally, we have Hirohaku. All indications are that this staunch critic of past restrictive BoJ policies is about to join the printing party. I really enjoyed Jon Hilsenrath's piece on this subject on Monday's journal - http://online.wsj.com/article/SB10001424127887323699704578323950460067178.html?KEYWORDS=Hilsenrath - especially because it referenced our last piece on growth wars.
The G3 central banks are all engaged in the same policy. They are using their domestic portfolio balance channels (aka printing presses) to reflate risk assets. They are of course risking significant future inflationary pressures, but that's an issue for another day. These two facts are all you need to know. To get caught up in Italian politics, Cypriot haircuts, UK downgrades or US fiscal policy is missing the big picture.
I know that many folks have to focus on minute by minute pnl swings. It's just the way our business has evolved. In a way its a shame that so many investors spend their entire day deciding whether to cut, add or sit on some levered position! Cut, add, sit...cut, add, sit....ugh! A money manager for a very large pocket of unlevered assets once said to me - "the day I worry about the pnl on one of my trades over the next 3 months is the day I leave this business". Unfortunately, the market is not dominated by folks with that luxury. Thus, most traders will have to go read some god awful mumble on Italian coalition formation, the house of deputies, the upper house.....yadda, yadda, yadda. Whenever I try to read that stuff it reminds of 1994-1996 with Berlusconi, Prodi, D'Alema and Dini. We bounced around from right, to left, to independent with a crisis at every turn. Italian markets swooned while the bull market in US risk assets ripped!! Some things never change.
In the end, I'm going to keep my eye on the long run prize and stay focused on the important drivers. The large money manager has the right approach. The day to day is noise. The big picture is amazingly clear. Of course it will not be a one way ticket to reflationary paradise without a few bumps on the road. But don't be confused by the occasional setback. These are normal. These are opportunities. And if you don't seize these opportunities you will be left behind hugging your trash can in the kitchen like Charlie Sheen. Good luck trading.
It's The Economy Stupid: Housing Rise
Home Prices in 20 U.S. Cities Increase by Most Since 2006
Home prices in 20 U.S. cities rose in the 12 months to December by the most in more than six years, a sign the housing-market recovery is strengthening.
The S&P/Case-Shiller index of property values increased 6.8 percent from December 2011, the biggest year-to-year gain since July 2006, after advancing 5.4 percent in November, a report showed today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 6.6 percent advance. Nineteen of 20 cities showed gains.
Near record-low borrowing costs and gains in employment are fueling demand and boosting property values as the number of houses on the market drops and foreclosures ease. The improvement is shoring up household net worth and confidence, which may underpin consumer spending even as an increase in the payroll tax reduces take-home pay.
Affordable borrowing costs are attracting buyers with adequate credit. The average rate on a 30-year fixed mortgage was at 3.56 percent in the week ended Feb. 21, close to the 3.31 percent in November that was the lowest in data going back to 1972.
Friday, February 22, 2013
It's The Economy Stupid: Uncertainty at the Fed
Bill Gross’ Tweets
Gross: Bond Vigilantes are no more. Central bankers are the masters of the universe but the question is: Are they vigilant?
Gross: Fed will never sell what they now own but will stop buying more @ some point. Question is when? Growth dependent. We est. Jan 2014.
Gross: Fed minutes: “Many” participnts concerned abt furthr asset purchases. 85bln/month appears 2 be @ risk later in 2013 if economy improves
Well, to this market participant it is clear to me that there is a wider divergence of opinions (dissent?) amongst the Fed’s members. Gross is just stating what bond managers have been saying for some time. The Fed selling what they own now is going to be a problem, they are not likely to be able to pull that off without disrupting the market. So the Fed will probably have to hold the great majority of what they own for some time. The more likely path is that they simply stop buying more bonds and sell what the bonds they own over time. So they will likely sell trillions of dollars in bonds over time. That has longer term negative connotations for bond market values, and favors more risky assets such as stocks.
There is a bond holder (The Fed) who owns TRILLIONS of dollars in bonds that you know they are going to sell at some point in the future. That is not good for bond values. DO NOT bet against The Fed.
John Broussard
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury
Thursday, February 21, 2013
It's The Economy Stupid: CPI & Jobless Claims
Economic Event | Period | Economic Survey | Actual Reported | Original Prior | Revised Prior |
Consumer Price Index MoM | JAN | 0.1% | 0.0% | 0.0% | |
CPI Ex Food & Energy MoM | JAN | 0.2% | 0.3% | 0.1% | |
Consumer Price Index YoY | JAN | 1.6% | 1.6% | 1.7% | |
CPI Ex Food & Energy YoY | JAN | 1.8% | 1.9% | 1.9% | |
Consumer Price Index NSA | JAN | 231.938 | 232.108 | 231.475 | 231.526 |
CPI Core Index SA | JAN | 230.300 | 230.280 | 229.601 | |
Initial Jobless Claims | FEB 16 | 355K | 362K | 341K | 342K |
Continuing Claims | FEB 9 | 3150K | 3148K | 3114K | 3137K |
Okay, my first impression is: No Big Deal
Why you ask?
CPI is still under 2% (no inflationary pressure)
Initial Jobless Claims are still running around 350K per week, Continuing Claims still running around 3150K (no great job growth)
So, nothing has really changed.
We are still stuck in neutral. With a zero interest rate policy. We really are starting to look like Japan.
Wednesday, February 20, 2013
It's The Economy Stupid: Housing, Building, Producing
Economic Event | Period | Economic Survey | Actual Reported | Original Prior | Revised Prior |
Housing Starts | JAN | 920K | 890K | 954K | 973K |
Housing Starts MoM% | JAN | -3.6% | -8.5% | 12.1% | 15.7% |
Building Permits | JAN | 920K | 925K | 903K | 909K |
Building Permits MoM% | JAN | 1.2% | 1.8% | 0.3% | 1.0% |
Producer Price Index MoM | JAN | 0.3% | 0.2% | -0.2% | -0.3% |
PPI Ex Food & Energy MoM | JAN | 0.2% | 0.2% | 0.1% | |
Producer Price Index YoY | JAN | 1.5% | 1.4% | 1.3% | |
PPI Ex Food & Energy YoY | JAN | 1.7% | 1.8% | 2.0% | |
Housing Starts Weaker
Building Permits Stronger
Producer Prices Higher
Any questions?