THE DOT - if this turns orange or red be alert

Friday, September 11, 2009

Brainstorming Friday - sell stocks into this strength

1. Morgan Stanley back to the Mc Kinsey trip which resulted from its merger with Dean Witter and brought the Investment banker into tier 2 which did not work out at all and that was the reason why Mack who was fired in that process of the merger was brought back. Must be a deja vu for Mack it happens all over again as Gorman is again from Mc Kinsey and a broker expert from Merrill who orchestrated the takeover of ( joint venture for now) the Smith Barney Broker force of Citibank.
I doubt that Gorman is the man to restore the Morgan Stanley culture he rather will change it to a new Merrill culture as Morgan is a non Jewish zone mostly it missed the boat completely due to lack of insider information - I due doubt that MS has lesser 'talent' - they just do not have axcess to the inside ring Goldman has developed over 2 decades. Once Morgan was part of the bigger JP Morgan before the Stegall Act and part of the most powerful inside ring. Since the takeover by the WASP it has run its course and especially the last 2 decades it lost plenty of its grip and Mack made plenty of bad calls in the good times as well as in the bad ones. To be a tough arrogant SOB does not make one a good manager as most manager rather do not earn their merits but are placed their to work for a bigger circle of insider and not the stockowners.

Excerpt
Mack Steps Down as Morgan Stanley’s Chief Executive (Update1)

By Christine Harper

Sept. 11 (Bloomberg) -- John Mack, who struggled to return Morgan Stanley to profitability after surviving the worst financial crisis since the Great Depression, will turn over his chief executive officer title to Co-President James Gorman.

Mack, 64, will step down at the end of the year and remain chairman of the New York-based bank for at least two years, he said in an interview yesterday. Gorman, 51, will become CEO and Walid Chammah, 55, co-president with Gorman since 2007, will relinquish that role and remain chairman of Morgan Stanley International in London. The changes take effect Jan. 1.

In more than four years leading the firm, Mack sought to improve profits and repair divisions that appeared under former CEO Philip Purcell. Mack’s strategy of boosting trading risks backfired in 2007 when bad bets led to the firm’s first quarterly loss. While the company survived the financial crisis that devastated some rivals, Morgan Stanley has lost money since the third quarter of 2008 and reined in trading even as Goldman Sachs Group Inc. earnings hit an all-time high.

2. We are now in the sell area for the SPX and I do recommend to lighten up up stocks heavily if you can trade you may hold some very speculative sectors as a bit more is due in some financials as Deutsche bank has still a potential up to 55 just to give one example and oil needs to push up towards 78/80 giving more scope to the XOİ sector as well. Some are doing the right thing already

Excerpt from zerohedge

$5.1 Billion In Outflows For Domestic Equity LT Mutual Funds Over Past Month


As CNBC guests will be so quick to admit, the money on the sidelines is indeed not sitting still: it is fleeing! Even as the market has gone up by 4% over the past month, flows in domestic long-term equity mutual funds have become increasingly more negative. The total amount withdrawn is over $5 billion, and last week alone saw a -$3.2 billion outflow, according to Investment Company Institute.

Not only does this refute claims of any presumed sidelines money stoking the rally, but it emphasizes the question mark over who it is that, with Swiss watch precision, keeps gunning the market at 3:30 pm sharp every day, while the volume keeps declining progressively (except of course for those days in which the market tanks such as last Tuesday - Chart 2).


3. Some camouflage moves on the so called bonus pools but the irony is that the banks may be glad to have an excuse to cut down bonus payments as those are roughly 50 % of all expenses so they will have a better profit situation in the 4th and 1st Q's which could raise the stock prices briefly hence the executives can unload old stocks from former bonus payments which is overall a far bigger share than 1 years pay reduction after all. That has been accomplished anyway as the average stocks in the financial sector have doubled thanks to the great work of the FED for their real employers Wallstreet.

excerpt zerohedge

Correlation Of S&P 500 Performance With Fed Monetization Activities Since Start Of QE


The chart below requires no substantial commentary suffice it to say that since the launch of the Fed's Quantitative Easing, aka Monetization, program, the value of the Total Securities Held Outright on the Fed's Balance Sheet has increased by $917 billion- from $584 billion to $1.5 trillion. This has been accompanied by an almost linear increase in the S&P 500 Index, from 721 at QE announcement on March 18 to 1033 yesterday. This $917 billion in extra liquidity, instead of igniting an inflationary spark, as the QE program was designed to do, is now (metaphorically) sloshing around bank basements. As a reminder: the most recent reading of Total Deposit Reserves was... $886 billion dollars: An almost dollar for dollar match with the increase in Securities Held Outright of $917 billion. And instead of this excess money hitting broader aggregates such as M2 or MZM, it is held by the banks, who proceed to buy securities outright on their own, either Treasuries or Equities. Apply the proper "money multiplier" to get the monetary impact on the S&P 500, as a result of the banks not lending these excess reserves, and instead simply speculating with it, and you will likely get the increase in the market cap of the S&P since the launch of QE.

QED.

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