Themis Thoughts August 17th, 2010

Ray Bradbury wrote Fahrenheit 451, Something Wicked This Way Comes, and Dandelion Wine. He also gets when it comes to politics. In the LA Times yesterday he said, “Our country is in need of revolution,” because our government has gotten too big and far-reaching. He is mad at Obama for not pushing more for a base on the moon, and he has described President Clinton as a (rhymes with) “Knithead”.  But one thing he said in yesterday’s LA Times grabbed me most:

“We have too many cellphones. We’ve got too many Internets. We have got to get rid of those machines. We have too many machines now.”

http://latimesblogs.latimes.com/herocomplex/2010/08/ray-bradbury-is-sick-of-big-government-our-country-is-in-need-of-a-revolution-.html

Cisco, of course, disagrees. We also disagree, as do most of you I imagine. Well not completely… We think technology can absolutely improve lives, productivity, and welfare, provided it’s use is governed with wisdom and perspective. And leaders are needed that provide that wisdom and perspective.

Joe and I get a lot of heat from the industry, but make no mistake, we get pats on the back that keep us going like you wouldn’t even know. We are blessed to have many A-list pro’s in our industry that tell us that our market structure opinions echoes theirs, although quite a few of them acknowledge that they need to remain in the background, given the conflicts of where they work. From talking to them however, we don’t think they will stay as quiet as Team HFT wants them to be. They are leaders, and they understand that our entire financial system works when one word permeates every layer: Trust. And they understand that Trust and Truth go hand in hand, and that spin, PR, and lobbying can’t bury the truth forever, nor can they buy time indefinitely.

Regarding the issue of trust again, we all have watched the 13 or 14 week migration away from US Equities and US Equity ETF’s  in the ICI data. May 6^th was about 13 weeks ago. Combine the lack of trust in our markets post May 6^th with the bizarre correlations among risky assets, and it is easy to see why the markets are being vacated by investors. Volumes on stock desks yesterday were about 35% below their 20 day moving averages, already a low number to begin with.

Incidentally, I read this statement/editorial on Zero Hedge yesterday afternoon, and it made me think:

“This statement captures the problem better than most: stocks, and their liquid, synthetic, nouveau-CDO cousins, the ETFs, continue to trade higher on ever greater vapors, as the underlying asset base is increasingly devoid of cash. And when the margin call-based liquidations set in, and they will, stocks will collapse more violently, and with far greater amplitude than they did on May 6 (incidentally a date which is an anniversary of the real Hindenburg disaster). Only in retrospect will the current record correlation levels be perceived for the loud alarm bell they truly are.”

It is easy to “get” the cautious thing going into September, given the last few years.

Where we left off 4:00pm EST:

DJIA                                             10,302.01                                             -01.14

S&P500                                        1,083.90                                             +00.13

NASDAQ 100                               2,187.87                                             +08.39

Futures now at 7:30am EST:

DJIA                                             10,324.00                                           +51.00

S&P500                                        1,084.20                                             +07.10

NASDAQ 100                              1,830.00                                           +10.25

Key Data out today:

07:45:                                     Goldman Same Store Sales

08:30:                                     Housing Starts

08:30:                                     Producer Price Index

09:15:                                     Industrial Production

Since the prior close, some key stories:

–              Toms River going to Little League World Series.

–               POT gets bid from BHP.

–           European Stocks rise on Earning (Carlsberg and Weinberger).

–              German Investor Sentiment declines to 16-month low. But then again when has their sentiment ever been bubbly?

–           Japan struggles to rise, although the rest of Asia started soft but finished higher. (China, HK, Korea Kospi)

–           Despite China slow-down concerns, $AUS is strengthening.

–           Gold remains strong.

–           Paulson bought 1.1 million GS in the 2q.

–           Templeton’s Mobius says Global Recovery is well in place, as he gets on his G5 and attends a cricket match in Singapore (just kidding; bright guy!)

–           Aug 5^th SEC Kaufman letter that we sent out yesterday is getting press today (see Bloomberg).

–           BNY’s Nicholas Colas talks of how retail investors, wary of the lockstep high correlation among all stocks, commodities, metals, and bonds, are favoring less risky assets. “Trust” anyone?

–           Delaware River Port Authority (NJ and PA) is weighing curbs on Nepotism and Conflicts of Interest. Go Christie!

–           Carianne Howards, ex enrollee in the Art Institute of Ft.  Lauderdale, a for-profit college owned by Goldman Sachs, now strips at a topless club, because the degree isn’t worth it.

Earnings:

Pre-open:              ANF, HD, TJX, WMT, SKS

After Close:          ADI, JKHY, LZB

Significant Movers This Morning:

POT +26% (BHP takeover bid), PEIX +13.4% (earnings), URBN +3.9% (earnings), A +3% (earnings), DIET +2.8% (earnings), BEE +2.4%, HIG +2%, FISV +2%, GFRE +1.6% (earnings), RINO +1.1% (earnings) RICK -8.7% (earnings), MNKD -8% (offerings), PWRD -6.2% (earnings), CPIX -5.9% (earnings), TOO -4.8% (secondary), DCTH -3% (secondary).