In Case You Missed Them - Some Links of Interest (8/14/09)

Below are some links of interest for 8/14/09, just in case you missed them. Some have already been posted to Twitter.

• U.S. foreclosure activity hits a new record in July, increasing 7% from June and 32% for the year (Financial Times). The increase is being blamed in part on a lifting of previous foreclosure moratoriums.

• Retail sales fell 0.1% in July, even with the Cash for Clunkers program being considered - although August may include more data (WSJ). There were large declines in housing-related retailers and electronic stores. Stripping out autos, retail sales dropped 0.6%. Yet, there were some gains. Auto and parts sales increased 2.4% in July. In addition to autos, health and personal care stores, restaurants and bars, clothing, and mail order and Internet retailers were also up.

• The Federal Reserve plans to conclude its purchases of $300 billion in U.S. Government debt by the end of October (WSJ), in what may be both an admission that the Fed believes that the worst is over, and also a way to begin allowing long-term rates to move up, even as it plans to keep short-term rates near zero for the foreseeable future.

• Unemployment duration just keeps getting longer, even in good times (The Financial Ninja). This is increasing the need to emergency unemployment compensation (second The Financial Ninja article).

• Hotel occupancy fell 7.5% to end the week at 65.9%. RevPAR (Revenue per available room) for the week decreased 16.5% (Calculated Risk). Given that peak travel time is passing us by, this is not good news.

• When looking at quarterly report for Regions Financial, one wonders if the company is insolvent, even though the government says it is well capitalized (Bloomberg). Of course, that has not stopped investors from valuing the company near $6 billion. Meanwhile, looking at CDS market, 5-year protection written on Region's tier-2 debt is trading at spreads of 722bp over swaps (Reuters - Felix Salmon). What this implies (to Salmon) is "that bonds are the new stocks, and stocks are the new call options." Bonds are now giving you a high return for high risk. On the other hand, stocks run the risk of being wiped out entirely in return for the leveraged possibility that your investment could multiply in value in a matter of months. Of course, none of this seems to bother the stock or its investors. In the face of the Bloomberg story, the stock was up 7.9% Thursday, along with a 3.1% increase in the KBW Bank Index - much to the amazement of Michael Panzner (Financial Armageddon).
  

• Weak retail sales data caused an early correction in the futures market Thursday morning, but the market still rallied back on essentially no news (The Pragmatic Capitalist). This comes as rail data was also weak (second The Pragmatic Capitalist article). Is the market resilient or complacent? Is the move just short-covering and/or hedge fund managers trying not to get left behind?

• Based on available trading data, there seems to be a disconnect in short interest volume readings. The BATS short volume reading is accounting for over 46% of total volume, much more than the short interest data disclosed by the NYSE and Nasdaq ( Zero Hedge).
  

• Bespoke Investment Group has a list of the most heavily and least heavily shorted Russell 1,000 stocks. Chipotle Mexican Grill (CMG), and not surprisingly, AIG, top the most shorted list. CMG is still up 46.35% YTD. Of interest is that the average 2009 change for the most heavily shorted stocks, i.e., more than 20% of float, is 26.23%, almost double the gain for the overall market.
  

• In general, as the market has been moving up, the short interest ratio on the S&P 500 has been dropping, signaling a possible topping formation (The Disciplined Investor).
  

• The Pragmatic Capitalist worries that a weak hurricane season could cause crude oil prices to fall, dragging the stock market with it.

• The Coppock Curve technical indicator is continuing to rise and act bullish (Trader's Narrative). Then again, the S&P 500 would have to fall 200 points below 780 for the curve to stop climbing, so we could get the much talked about August/September correction before continuing to move higher later in the year, as some are expecting.
  

• The ratio of insider buying to selling transactions is 10 to 136 ($60.1 million buys to $1,146 million sells). There have been over $2.1 billion in insider sales over the last two weeks (Zero Hedge).

• Looking at inter-market returns YTD, crude oil is the best performer in 2009 - up almost 60%, followed by the Nasdaq - up 27% YTD, and the CRB Commodity Index - up 15% YTD (Afraid to Trade). The S&P 500 has risen 11% during the same period.

• In what seems to be daily hedge fund data, the Financial Times takes its turn reporting how traditional strategies such as equity long-short and convertible arbitrage continue to be the best hedge fund strategies for the year. Emerging market and fixed income arbitrage strategies are also doing well. Dedicated short sellers, not surprisingly, are getting killed. As the market continues to trend, black-box commodity trading advisers (managed futures) are once again generating interest after what has been a difficult year (Reuters). Anyone seen a SuperFund commercial lately?
  

• Looking at a recent 13-F, the John Paulson portfolio is heavily weighted towards three sectors: gold, financial stocks, and health care (The Pragmatic Capitalist). This basically results in three bets on seemingly different macro themes, possibly betting on re-inflation (gold, health care), while at the same time speculating on a recovery (banks).

• Researchers Mokoaleli-Mokoteli, Taffler, and Agarwal test whether sell-side analysts are prone to behavioral errors when making stock recommendations, as well as the impact of their investment banking relationships on judgment. The authors find that new buy recommendations on average have no investment value, whereas new sell recommendations do have value, although it takes time for the information to be assimilated by the market. Interesting research, and somewhat intuitive - or at least it should be. It looks like buy recommendations involve selling, and sell recommendations involve selling, ......., just different kinds (Bull Bear Trader).
  

• The MarketSci blog provides a nice breakdown of the quant analysis blogosphere into three components - situational analysis, mechanical strategies, and academic thinkers - and provides references for each.
  

• New Morningstar 5-star stock: SunPower Corporation (SPWRA).