Godzilla-sized stimulusReading Too Much Into Bond Rallies And The Gambler’s Fallacy

A Citigroup Equity strategist says don’t read too much into the recent bond rally: “We think [the reason for falling yields is] pretty technical…Look at jobs, auto sales, planned capital expenditures — none of that is indicative of something ominous in the economic data…the justification for the bond rally has been driven by technical factors like people covering short positions.”  Meanwhile, Mohamed El-Erian has a thesis on the recent bond market surprise (US and German 10-year government bonds are very low and the yield curve is flattening): “First, persistent concerns about the failure of American and European growth to ‘lift off’…have been amplified in recent weeks by spreading worries about ‘lowflation.’…Second, central banks have signaled continued willingness to repress interest rates longer in order to stimulate growth and reduce the threat of deflation…Third, market positioning has turbocharged economic and policy factors…the recent yield moves have triggered market stops, forcing them to buy bonds to limit their mounting losses.”  Meanwhile, Morgan Stanley is warning of municipal bonds’ high vulnerability to being blindsided, and suggest “reducing credit risk in a number of sectors, including hospitals, states, tobacco, and transportation.”  Merrill Lynch disagrees: “we remain bullish on rates, bullish on Muni/Treasury ratios, and bullish on credit.”  Furthermore, “we think if the ECB does deliver its promised rate cut and possible eventual QE, it should provide a good support for global markets.”  Also, the worries about a market correction seem to get louder the longer we go without a market correction.  Meanwhile, here’s a brush up on Gambler’s Fallacy.

Homeowners And Homebuyers: “You Go First”

Housing is stuck in a bit of a chicken or the egg dilemma:  “when inventory shrinks and prices move higher, it makes it even more difficult for a buyer to upgrade to a larger home.  And if they can’t buy, they can’t sell, reducing the number of lower priced, starter homes…demand is so high that real estate agents are actively seeking people who are willing to sell.  ‘You get letters in the mail asking if you’re interested in selling…People knock on your doors.’”  Furthermore, “the competition for the homes that are available is so intense that buyers need to bring plenty of cash to the table.”  Which is a problem for about 19 million homeowners: “At the end of the first quarter, some 18.8% of U.S. homeowners with a mortgage — 9.7 million households — were ‘underwater’ on their mortgage…In addition to homeowners who are underwater, roughly 10 million households have 20% or less equity in their homes, which makes it difficult for them to sell their homes without dipping into their savings.”  Furthermore, “the least expensive homes — those in the lower third of the price spectrum, which first-time home buyers are most likely to be shopping for — are much more likely to be underwater than higher-priced homes.”

Tech Buzzwords: The Fog, P2P Lending

Forget the Cloud; the Fog is the future (alt): “Modern 3G and 4G cellular networks simply aren’t fast enough to transmit data from devices to the cloud at the pace it is generated, and as every mundane object at home and at work gets in on this game, it’s only going to get worse.  Luckily there’s an obvious solution: Stop focusing on the cloud, and start figuring out how to store and process the torrent of data being generated by the Internet of Things (also known as the industrial internet) on the things themselves, or on devices that sit between our things and the internet…The bottom line is, we just have too much data.  And we’re just getting started.”  I’m predicting a “Clear-Skies” disruptor in the big data/cloud computing realm to appear sometime soon, you heard it here first.  Meanwhile, “the global credit meltdown may have shattered public faith in mainstream financial institutions by those like her in need of funding, yet it could not have come at a better time for the fledgling and fast-growing P2P loan industry (alt)..Just like a bank, P2P loan sites check the credit history of borrowers, charging more to those who have a history of defaulting on loans.  But unlike banks they use new technology to keep their overheads low, and rates are largely determined by the people who lend the money.”

USA: Credit Suisse Pleads Guilty In Felony Case

What’s surprising here isn’t that Credit Suisse is guilty of helping rich Americans pay fewer taxes; it’s that they plead guilty to a felony charge.  Attorney General Eric Holder says “this case shows that no financial institution, no matter its size or global reach, is above the law.”  The SEC, however, doesn’t really agree: “Last week, the [SEC] also voted to grant Credit Suisse a temporary exemption from a federal law that requires a bank to hand over its investment-adviser license in the event of a guilty plea.”  Also, “authorities agreed to announce the plea after the markets closed in the United States, preventing the bank’s stock from plummeting.”  Furthermore, “the plea deal will not require the bank to turn over the names of its American account holders.”  So anyways, shares in Credit Suisse (CS) opened +1.00% this morning, nothing to see here…

Global: Chinese Hackers Show Humans Are Weakest Security Link

In case you missed it, the United States indicted five Chinese military officials yesterday for stealing trade secrets from Alcoa, Westinghouse Electric, Allegheny Technologies, U.S. Steel Corp, the United Steelworkers Union and SolarWorld.  Wanna know their elaborate cyber-hacking scheme?  “By sending employees false e-mails purported to be official messages, hackers were able to trick them into divulging user names, passwords and other sensitive information.”  Apparently they call it “spearfishing” in the hacker biz.


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