Tainted Alpha

A lot of action on the earnings losses and economic announcements front. So, let’s start. Initial jobless claims came at 512k vs. 523k consensus and 530k the week before. Finally some improvement, but still at some 170k job losses a month.

Markets, off-course, cheered the data. All major indexes ended with nice gains of a 2% and more. We will see if the positive action continues after the tomorrows  unemployment figures. Could be, consensus on non-farm payrolls is pretty low at 175k job loses, I think we could manage to beet that.

Chart 1. S&P 500

Non-farm productivity came at 9.5% vs. 6.3% consensus and 6.6% last month. Unit labor costs were lower 5.2% vs. expected 3.9% and 5.9% last month. I see nothing good in this figure, people will consume less if they earn less. No mater how high company margins are.

Natural gas in storage rose 29 billion cubic feet last week. The consensus was at 25 billion cubic feet. The total stock is at all time high. No slack for the commodity or for the natural gas producers.

Chart 1. Working Gas in Underground Storage Compared with 5-year Range

Fannie Mae posted disastrous figures  reporting a net loss of $18.9 billion in the third quarter, compared with a loss of $14.8 billion in the second quarter. Bad results pushed Fannie Mae to request another $15 billion from the government. SEC filing. Bloomberg Story: Fannie Mae Posts Loss, Plans to Sell Tax Credits.

Continuing with Fannie Mae. WSJ brought an article on Fannie Mae renting (almost) foreclosed homes to (almost) foreclosed home owners, betting on improved prices later on and keeping homes of the market so increased inventory doesn’t affect prices. No comment from me. WSJ story: Fannie Mae to Rent Foreclosed Homes Back to Borrowers.

Chart 3. VIX

VIX continued its slide, pushing last’s week ugly spike into distant memory. Maybe a possibility to cheaply reenter short SPX trade.

Short look to the Europe. Bank of England moved even closer to destroying the pound. My number one short idea in the currency arena. Reuters story: Bank of England expands quantitative easing, holds rates steady.

ECB on the other hand maybe is signaling some sort of tightening of easy money. Reuters story: ECB takes first step towards exit, more due in Dec.

Bank of England, European Central Bank, Fannie Mae (FNM), Initial Jobless Claims, Natural Gas, S&P 500, VIX

This entry was posted on Thursday, November 5th, 2009 at 6:11 pm and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.