Bloomberg: Vitol Reclassified by CFTC as `Non-Commercial’ Trader, WSJ Says

Posted on August 20, 2008 @ 1:01 pm (Wednesday) by WARREN MOSLER

Seems the liquidation may be ending, but just guessing.

Vitol Reclassified by CFTC as `Non-Commercial’ Trader, WSJ Says

by Alexander Kwiatkowski

(Bloomberg) Vitol Group was reclassified by the Commodity Futures Trading Commission as a “non-commercial” trader, the Wall Street Journal reported, citing people it didn’t identify.

The U.S. regulator changed the status of “one of the largest traders” in July, without identifying the company, the newspaper said. People familiar with the matter have now named the trader as Vitol, according to the Journal.

The change meant that bets by non-commercial traders, or speculators, represented half or more of all outstanding crude oil futures contracts on the New York Mercantile Exchange, the newspaper said.

Vitol hasn’t been contacted by the CFTC or by Nymex with regard to its trading status, a Switzerland-based company official said today by phone, declining to be identified. Vitol remains classified as a commercial trader, the official said.

Vitol “is not in the business of taking large positions speculating on the rise or fall of market prices,” the company said in a May statement on its Web site.

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Bloomberg: Paulson continues weak USD policy

Posted on August 20, 2008 @ 10:49 am (Wednesday) by WARREN MOSLER

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Seems Paulson is still blocking foreign CBs from accumulating USD financial assets. This is a negative for the USD and a negative for US real terms of trade.

It does support US exports and reduces the need to add to domestic demand, even as US consumption remains low.

Yuan Rises Most in 3 Weeks After Paulson Calls for Appreciation

by Kim Kyoungwha and Belinda Cao

(Bloomberg) The yuan climbed by the most in three weeks after U.S. Treasury Secretary Henry Paulson urged China to let its currency appreciate to curb inflation and deter Congress from introducing trade penalties. Bonds gained.

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2008-08-20 US Economic Releases

Posted on August 20, 2008 @ 10:34 am (Wednesday) by WARREN MOSLER

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MBA Mortgage Applications (Released 7:00 EST)
MBA Purchasing Applications (Released 7:00 EST)
MBA Refinancing Applications (Released 7:00 EST)
MBA TABLE 1 (Released 7:00 EST)
MBA TABLE 2 (Released 7:00 EST)
MBA TABLE 3 (Released 7:00 EST)
MBA TABLE 4 (Released 7:00 EST)

MBA Mortgage Applications (Aug 15)

Survey	n/a
Actual	-1.5%
Prior	-1.5%
Revised	n/a

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MBA Purchasing Applications (Aug 15)

Survey	n/a
Actual	314.0
Prior	315.2
Revised	n/a

Been flat for several weeks now.

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MBA Refinancing Applications (Aug 15)

Survey	n/a
Actual	1034.5
Prior	1074.6
Revised	n/a

Still drifting lower.

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MBA TABLE 1 (Aug 15)

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MBA TABLE 2 (Aug 15)

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MBA TABLE 3 (Aug 15)

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MBA TABLE 4 (Aug 15)

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A stinging indictment of the financial sector

Posted on August 19, 2008 @ 5:08 pm (Tuesday) by WARREN MOSLER

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The financial sector facilitates private sector deficit spending that helps sustain output.

Without it, the government has to increase its deficit spending to sustain output.

Bottom line, all else equal, a less effective financial sector means lower taxes.

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2008-08-18 Weekly Credit Graph Packet

Posted on August 19, 2008 @ 5:00 pm (Tuesday) by WARREN MOSLER

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Moving sideways.

IG On-the-run Spreads (Released 5:02 EST)
IG6 Spreads (Released 5:02 EST)
IG7 Spreads (Released 5:02 EST)
IG8 Spreads (Released 5:02 EST)
IG9 Spreads (Released 5:02 EST)

IG On-the-run Spreads (Aug 18)

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IG6 Spreads (Aug 18)

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IG7 Spreads (Aug 18)

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IG8 Spreads (Aug 18)

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IG9 Spreads (Aug 18)

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2008-08-19 US Economic Releases

Posted on August 19, 2008 @ 4:07 pm (Tuesday) by WARREN MOSLER

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ICSC-UBS Store Sales WoW (Released 7:45 EST)
ICSC-UBS Store Sales YoY (Released 7:45 EST)
Redbook Store Sales Weekly YoY (Released 8:55 EST)
ICSC-UBS Redbook Comparison TABLE (Released 8:55 EST)
Producer Price Index MoM (Released 8:30 EST)
PPI Ex Food & Energy MoM (Released 8:30 EST)
Producer Price Index YoY (Released 8:30 EST)
PPI Ex Food & Energy YoY (Released 8:30 EST)
PPI TABLE 1 (Released 8:30 EST)
PPI TABLE 2 (Released 8:30 EST)
PPI TABLE 3 (Released 8:30 EST)
Housing Starts (Released 8:30 EST)
Building Permits (Released 8:30 EST)
Housing Starts TABLE 1 (Released 8:30 EST)
Housing Starts TABLE 2 (Released 8:30 EST)
Housing Starts TABLE 3 (Released 8:30 EST)
ABC Consumer Confidence (Released 17:00 EST)

ICSC-UBS Store Sales WoW (Aug 19)

Survey	n/a
Actual	0.1%
Prior	1.1%
Revised	n/a

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ICSC-UBS Store Sales YoY (Aug 19)

Survey	n/a
Actual	2.4%
Prior	2.6%
Revised	n/a

Doing just fine, especially considering the financial sector is gone.

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Redbook Store Sales Weekly YoY (Aug 19)

Survey	n/a
Actual	1.3%
Prior	1.5%
Revised	n/a

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ICSC-UBS Redbook Comparison TABLE (Aug 19)

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Producer Price Index MoM (Jul)

Survey	0.6%
Actual	1.2%
Prior	1.8%
Revised	n/a

Up more than expected.

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PPI Ex Food & Energy MoM (Jul)

Survey	0.2%
Actual	0.7%
Prior	0.2%
Revised	n/a

Core nudging up a touch…

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Producer Price Index YoY (Jul)

Survey	9.3%
Actual	9.8%
Prior	9.2%
Revised	n/a

Just a little blip up that’s starting to make the 1970s look tame.

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PPI Ex Food & Energy YoY (Jul)

Survey	3.2%
Actual	3.5%
Prior	3.0%
Revised	n/a

Cute little break out here too.

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PPI TABLE 1 (Jul)

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PPI TABLE 2 (Jul)

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PPI TABLE 3 (Jul)

Karim writes:

PPI for July up 1.2% and 0.7% ex-food and energy

Core driven by cars and trucks the past 2mths (seems out of line w/cpi data) and medical

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Housing Starts (Jul)

Survey	960K
Actual	965K
Prior	1066K
Revised	1084K

A bit higher than expected, and last month revised up.

Averaging out the last couple of months or so to smooth the NY situation indicates a leveling off and probably a bottom.

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Building Permits (Jul)

Survey	970K
Actual	937K
Prior	1091K
Revised	1138K

Down, but last month revised up. Same as above.

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Housing Starts TABLE 1 (Jul)

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Housing Starts TABLE 2 (Jul)

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Housing Starts TABLE 3 (Jul)

Karim writes:

Starts fall 11% after upward revision to June (now up 10.4%)

Noise in data still surrounds multi-family due to change in NYC building code (multi-family dropped 23.6% after rising 41.3% in June)

Single family drops another 2.9% after 3.2% drop in June and now down 39.2% y/y

Same story with permits, down 17.7% m/m after 16.4% rise in June

Single family permits down 5.2% m/m after -3% in June and down 41.4% y/y

Multi-family down 32.4% m/m after up 52.2% m/m in June

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ABC Consumer Confidence (Aug 17)

Survey	-50
Actual	-49
Prior	-50
Revised	n/a

very low, may be bottoming, confidence being hurt by inflation.

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AP: Foreclosure digestive process at work

Posted on August 19, 2008 @ 12:23 am (Tuesday) by WARREN MOSLER

Prices stabilizing as volumes increase:

SoCal home prices fall in July, sales up

by Elliot Spagat

(AP) A research firm says Southern California home prices fell 31 percent in July from last year, while the number of homes sold hit its highest level since March 2007.

MDA DataQuick said in its report Monday that the median price for new and resale homes and condos dropped to $348,000 last month in the six-county region. That’s down from the market peak of $505,000 in July 2007 and down slightly from $355,000 in June.

The report says a total of 20,329 homes and condos were sold during the month, up 13.8 percent from July 2007 and up 16.7 percent from June.

It says foreclosures accounted for 43.6 percent of all resold properties last month, up from 7.9 percent in July 2007 and a revised 41.8 percent in June.

2008-08-18 US Economic Releases

Posted on August 18, 2008 @ 9:15 pm (Monday) by WARREN MOSLER

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NAHB Housing Market Index (Released 13:00 EST)
NAHB TABLE 1 (Released 13:00 EST)
NAHB TABLE 2 (Released 13:00 EST)

NAHB Housing Market Index (Aug)

Survey	16
Actual	16
Prior	16
Revised	n/a

What has been looking like a bottom is now again softening, but it’s so low seems it will go mostly sideways before it goes up.

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NAHB TABLE 1 (Aug)

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NAHB TABLE 2 (Aug)

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AVM Repo Commentary

Posted on August 15, 2008 @ 6:49 pm (Friday) by WARREN MOSLER

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Good report, thanks, and another example of blood flowing around the clot.

Scorecard:

Financial sector in a shambles
A2 GDP now forecast at 3% or more helped by tax cuts/rebates

So as the financial sector worsens the government can cut taxes to sustain output and growth.

Seems like a good trade off to me – cut taxes and shut down the financial sector!

Report from Jeff:

Not only has this become a major focus of the Repo market and gotten some regulator attention, but it has gotten a lot of interest and questions from AVM Repo Commentary readers. I am speaking about Direct Repo or non-Traditional Repo. So, I will explain the concept further. This is the expansion of the Repo market to improve liquidity by pairing collateral providers directly with cash providers. This enhances the liquidity typically provided by the broker/dealers (who pair collateral providers with cash providers among themselves in the interdealer broker market and BrokerTec). These broker/dealers are currently balance sheet constrained due to: reduced capital and difficulty raising capital; taking on their SIVs’ collateral ; taking on their ARS collateral; and management directive to reduce balance sheet and reserve it for assets with higher ROA than repo. The broker/dealers are actively financing their collateral with the Federal Reserve, but have little dry powder to take on collateral from typical Repo collateral providers. This has a ripple effect in the Repo market, causing not only the collateral providers to scramble for financing but also the cash providers to eventually have trouble finding enough Repo collateral offered by the broker/dealers. The first ripple is already being felt by the market and the second ripple may now be showing up. So, the Repo market is evolving to transact Direct Repo between the cash providers and the collateral providers, which helps the broker/dealers, who still want to sell collateral to clients but don’t have the room on their balance sheet to then finance that collateral. It also, logically, compresses the bid/offer spread, which has widened dramatically due to the new ROA guidelines at most broker/dealers. As an example, Agency MBS pools have a 50bp bid/offer spread 1month (as opposed to the traditional 10bp) and Investment Grade Corporates have a 70bp bid/offer spread 1month. Direct Repo could result in significant savings for both the cash provider and the collateral provider. Other terms, such as length of trade and haircut, may also be more favorable to both sides in Direct Repo. Obviously, both the cash provider and the collateral provider would have to do Credit analysis of their counterparties, but they do that already with their broker/dealers as counterparties. Also, Direct Repo can be done as Triparty Repo, reaping the benefits of that product (no fails, less administrative work, third party pricing, third party oversight, etc.) So, this Direct Repo does not replace traditional Repo through broker/dealers, but just picks up the slack in the market, reduces the balance sheet bottleneck, and helps the broker/dealers continue to do business without having to turn away Repo clients. Anyway, I don’t want to bore you any further, so if you would like more information of how AVM Solutions can provide Direct Repo and pair cash providers with collateral providers, as well as broker/dealers, give me a call or an email.

COLLATERAL PROVIDERS CASH PROVIDERS

Hedge Funds Money Funds

Asset Managers Money/Investment Managers

Credit Unions Credit Unions

Central Banks International Banks

Thrifts/Community Banks Municipalities

Pension Funds Seclending Agents (Reinvestment)

Seclending Agents Corporations

Beneficial Owners Broker/Dealers

Regional Dealer clients.