Michael Gracie

The rally that wasn’t

• Jim Cramer called the end of days. He’s widely considered such a dope that whenever he says something peoples’ first reaction is to fade his advice.
• The Federal Reserve is now letting non-financial enterprises step up to the trough. I give credit where credit is due around here - Nouriel Roubini called this one last week on the RiskMetrics webcast.
• More credit: Henry Blodget and Company have been saying web advertising would take a hit, and they’ve been saying it for a while. You can continue to question the thought, but while you’re pondering Facebook’s COO says the web needs a new business model (albeit late), and VCs are still trying to sell free. Results from the second half of this year will certainly shed some light on the subject, but I wouldn’t bet against the Alley Insider right now.
• The rich are hurting too, and “the rich” includes institutional investors like pension funds. Take their actuarial perspective towards funding, throw in an alternative investments market including hedge funds and private equity (that have either gone neutron or can’t find an exit with flashing neon signs), and then lop on top an S&P 500 that has (as of today) been flat for a decade, and you’ve got a recipe for retirement ugly.
• Bad credit: Mortgage equity withdrawals closed in on zero for the second quarter of this year. I’ve heard more than a few stories about equity lines of credit being shut down even when there has been no drawdown at all. The good part of this is people won’t be digging themselves deeper into debt at a time when they should be concentrating solely on getting out. The bad part of this is that the consumption-based economy will suffer. For the rest, there’s always eBay and Bill Me Later.

And last but not least…

• Government gives handouts, but previously hat-passing Wall Street is now going to say no thanks? No wonder there was so much pork in the bailout bill. Congress can’t seem to get much right, and their timing is just as bad. Good thing they’ve got the blame game to fall back on.

Adieu.

Quote via Reuters, as noted by Paul Kedrosky:

The moves by NYSE and Nasdaq OMX come at a time when the exchanges are seeking to generate as much revenue as possible from market data, which now makes up for a larger share of revenue than equities trading. At Nasdaq, market data generates 20 percent of revenue, while at NYSE, the figure is 14 percent.

Call me Mr. Skeptic today, but something is amiss here. While a Kedrosky blog commenter asked “where’s the trading revenue data,” I’m more inclined to wonder about the rest…

Based on the Reuters statement, if data is a greater percentage in both cases, then at the NASDAQ data revenue plus trading revenue must be equal to or less than 40% of total revenue, while at NYSE the two combined would be equal to or less than 28%.

Where does the other 60% and 72% of revenue, respectively, come from?

Trading Rule #1: Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position.

Yep. Number two would cut losses quickly, and number three would be double up on your winners. Even casual casino gamblers can win, if they do this while understanding and following game fundamentals.

UPDATE: The deal is now underway - it’s an all equity transaction at a hair under one share of B of A for each five shares of Countrywide priced out at around $7.20. CFC fell to $6.33 by the end of the day today, which could suggest some think the transaction will wind up more dilutive to B of A shareholders than management does. Meanwhile, Robert Shiller is questioning the whole deal - you can’t help but believe such skepticism has a solid foundation attached when it comes from him.

Yesterday, the Russian stock exchange was shut down by a mysterious virus. Around the same time, we find that Russians were selling the WMF exploit on the “black market” for four grand a pop.

Maybe Russian investment bankers should create a publically listed security for computer exploits. Hackers would quit screwing with the trading systems, because their portfolio would depend on its function?

Hong Kong travel agents have created a secondary market for hotel rooms, but it lacks an electronic platform. If the progress that has been made in the last decade with trading technologies is any indication, someone will jump on this soon.
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For those of you that think instant messaging attacks are no big deal, catch this…

Yesterday, a new strain of W32/Kelvir worm worked its way into the Reuters news agency’s secure enterprise IM platform, forcing it offline. It could not have come at a worse time for Reuters.
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