Themis Thoughts and SEC Flash Crash Anticipated Recommendations
Even a straight-talking, non-nonsense guy like Gov. Chris Christie couldn’t stop the inevitable. Moodys (the same guys who gave a AAA rating to those toxic CDO’s a few years ago) finally lowered their outlook on New Jersey to negative. Finally, all the years of mismanagement, fraud and underfunding of pensions is catching up with our state. It’s hard to believe that one of the highest taxed states in the country is also the third most indebted state. Do higher taxes really solve the problem or do they just give the government more money to waste and mismanage?
The correlation story keeps getting more coverage. Even CNBC picked up on it the other day. In this morning’s WSJ (http://online.wsj.com/article/SB10001424052748704190704575489743387052652.html?mod=WSJ_business_LeadStoryCollection), they ran another correlation story where they quote some frustrated money managers about the problem. “It’s unbelievably frustrating, it’s enough to drive you crazy” said a Neuberger Berman money manager. “Stock picking is a dead art form” says Jim Bianco of Bianco Research. The WSJ said: “More and more investors aren’t bothering to pore through corporate reports searching for gems and duds, but are trading big buckets of stocks, bonds and commodities based mainly on macro concerns. As a result, all kinds of stocks—good as well as bad—are moving more in lock step.” So, what has happened to stock picking? Is the problem now that we have too many ETF’s (over 1100) and these ETF’s are now controlling stock prices due to the legions of high frequency traders who arb them all day? Is that what investing has become? Are we now all just part of “ETF Nation”?
In a little while we are going to be sending our clients a report titled “What the SEC Staff Will Likely Recommend in Reaction to the May 6th Flash Crash”. This paper will detail what we think the SEC staff will propose as ways to prevent another Flash Crash. More importantly, the paper will also recommend solutions that we think the SEC should be recommending but will not get to this time. Please look for the paper in your inbox in the next few hours. And as always, send us your thoughts and comments.
Where we left off 4:00pm EST:
INDU 10,662.42 -76.89
SPX 1,124.83 -9.45
CCMP 2327.08 -7.47
Futures now at 7:30am EST:
Key Data out today:
8:30: Durable Goods -1.0%
8:30: Durable Goods Ex Trans +1.0%
10:00 New Home Sales +295k
Since yesterday’s close, some key stories:
– Gold prices climb above $1300/oz and USD craters
– Happy Oktoberfest – German business sentiment rises from 106.7 to 106.8 (est was 106.4)
– Grab a Guinness. Irish CDS rate continue to skyrocket.
– After 23 years and many movie lines quoted at many bars, Wall Street 2 opens today.
– Need a new kicker for Fantasy Football? Democrats punt on voting to extend Bush tax cuts to after election day.
– S&P warns on GMAC ranking as foreclosure s suspended (but Ally Bank has some cool new commercials)
Significant Movers This Morning:
NKE +5.6% (earnings), AMD +3.4% (earnings), NVDA +2% (Oracle may acquire chip makers), NFLX +1.6% (deal with NBC), FINL -10.2% (earnings), CPB -1% (downgraded by MS), SHAW -1.6% (downgraded by JPM)