A few thoughts late in the day...

* The VIX goes green!  A miracle!  I can't remember the last time I saw it peak its head into green territory.  I'll be reading the options guys for their take, like Bill Luby and Adam Warner.

* Things may have gotten overdone to the upside intraday.  The $CSCO "news" was the ultimate non-event and then the fireworks started when $AIG, $FNM, $FRE and the rest of the government-assisted training bra gang took the wheel.  A blow-off was almost preordained once that nonsense got started.

* Howard once said that when the market is trending, you can't think.  I completely agree and the late day sell-off gives me a chance to concentrate on what's working, what isn't and what I'm missing. 

* I've gotten really good at tuning out the whole regulatory reform debate.  I'm amazed at how hard it is for people to get how little it matters right now.  Nothing will happen on banking reform until late summer - until tough talk is needed as window dressing for the elections. 

I was going to work late tonight, but on second thought, its too nice nice out here in NY. 

Cheers, thanks for reading today.

I plucked a bud off the cherry blossom tree in front of my house yesterday.  Although the outside of it was gnarled and winter-brown, inside was the the soft, moist green of a honeydew melon.  So much potential inside of that little brown bud - a setup for the imminent pink and white explosion that engulfs my tree every spring.

Talking to traders everyday, I continue to hear the term "Setup". 

This is a noun that denotes a technical formation, usually the harbinger of a profitable trade.  In a market with hundreds of stocks exhibiting bullish setups, it is hard not to think of the hundreds - thousands - of buds that will shortly burst with the colorful pageantry of renewal.

And technical analysts do not have exclusivity on the concept of setups.  Many fundamental and quantitative setups are being crowed by the practitioners of the those sciences art forms.  "How about the fact that $800 billion in cash still resides on the balance sheets of US corporations just waiting to be put to work?" asks one.  "Or what about the fact that the dollar value of U.S. company takeovers is up 46% to $144 billion this year?" asks another.  And what of the record number of biotech drugs in the pipeline and the new development of passive money managers embracing activism to improve stock returns?" inquires the chorus.

This can be taken away from us in a moment - in the time it takes for a black, threatening thundercloud to appear on the horizon - but for now, it is ours. 

Technical Setups, Fundamental Setups, Quantitative Setups - all are apparent in this tape.  But more importantly, there is a Qualitative Setup, one that may trump all the rest:  The people I work with and trade with and invest with here in New York and across the country are smiling again.  Smiling on the way to work and smiling on the way home. 

Ear to ear.

Setup City is in full bloom.

"To whom it may concern: It is springtime.  It is late afternoon." - Kurt Vonnegut

Bruce Berkowitz (Fairholme Funds) on why he's buying Citigroup ($C).  (Fortune)

New York is the most important city for superheroes.  (NYT)

Lindsay Lohan is suing E*Trade for $100 million over the "milkaholic" baby commercial.  (Gawker)

Must-read: Rick Bookstaber comes out swinging against the "off-the-wall gold bubble".  (RickBookstaber)

Happy anniversary to a major market bottom - and a major market top.  (TBP)

Sex.com domain up for auction on March 18th.  (NYP)

Here are ten rules for enjoying the stock market.  (HowardLindzon)

Get your checkbooks out, Mark Madoff is back in business!  (Dealbreaker)

Greece needs to swallow its pride and call in the IMF Ghostbusters already.  (Bloomberg)

Complacency and 2 other risks for the market right now.  (PragCap)

Godzilla started blogging - in Haiku form.  A must read.  (Godzilla.Tumblr)

Here's my short list of who should've been in attendance, and then I'll send you over to Reuters for the lowdown on the actual meeting...

Bloggers / Treasury wishlist:

Chris Whalen (The Big Picture)

Adrienne Gonzales (Jr Deputy Accountant)

Tom Brakke (Research Puzzle)

Bill Singer (BrokeAndBroker)

Mark Thoma (Economist's View)

Gregor Macdonald (Gregor.US)

Paul Vigna (DJ MarketTalk)

Michael Pento (Greenfaucet)

Anyway, these are the (non-anonymous) bloggers that I'd love to have seen get the chance to ask the right questions for us.  Oh well, maybe next week they'll invite in USA Today and Readers Digest.  Whatever.

Read Also:

Bloggers @ Treasury (Felix Salmon)

Driscoll is calling this event the Data Singularity. 

From The Dataspora Blog:

In a nutshell, the Data Singularity is this: humans are being spliced out of the data-driven processes around us, and frequently we aren’t even at the terminal node of action. International cargo shipments, high-frequency stock trades, and genetic diagnoses are all made without us.

Absent humans, these data and decision loops have far less friction; they become constrained only by the costs of bandwidth, computation, and storage– all of which are dropping exponentially.

The result is an explosion of data thrown off from these machine-mediated pipelines, along with data about those flows (and data about that data, and so on). The machines all around us — our smart phones, smart cars, and fee-happy bank accounts — are talking, and increasingly we’re being left out of the conversation.

Anyone attuned to the behavior of the stock market of late is well aware that we are often watching a grown-up version of BattleBots.  I read somewhere that automated, algorithmic trading had doubled as a percentage of all US trading activity in the last decade and I'm hardly surprised.

His discussion will give you chills about what this means for us, but you will also begin to divine opportunity if you can get your mind right on the possibilities.  A fantastic read.

Source:

The Data Singularity is Here (Dataspora Blog)

The principle impediment to the widespread adoption of Cloud Computing is the fear over security - and rightfully so. 

To entrust an outsourced service or system with customer and employee data, inventory and supply chain intel, and executive communications would give virtually anyone pause, despite the cost savings and efficiency so inherent in the cloud approach.

And while technological solutions will present themselves to assuage the trepidations of chief information officers, the only true fix is time.  Companies need to get used to the concept of having data and applications hosted outside of their own server closet. 

The Economist grabbed an interesting allegory from an executive at EMC ($EMC) which gives us some perspective:

Take the monetary system. In his address to the annual RSA Conference on computer security held in San Francisco on March 2nd, Art Coviello, president of EMC’s security division, noted how civilisation started with barter, then invented coins to make money more portable—even though people still had to carry their wealth around with them physically. The first step in the virtualisation of wealth came with the introduction of paper money. These promissory notes, with no intrinsic value, forced people to deal with the concept of attestation—certifying that something is genuine. And with that, the advent of financial instruments such as stocks, bonds and mutual funds created ways of sharing wealth—so that when one person wasn’t using it, another could.

What's interesting is that there is not much difference in adoption rates between small/midsize business and major corporations - the cloud is compelling all comers, regardless of size.  As time goes by, people will become accustomed to accessing tools and information held on virtual private networks, just as they have with using paper (and now digital) money.

Source:

Cloudy With a Chance of Rain (The Economist)

Stuff I'm Reading this Weekend...

The Goldman Sachs VIP List: Stocks with the most hedge fund ownership.  (MarketFolly)

Warren Buffett has beaten every single mutual fund over the past 45 years.  (WSJ)

Charles Kirk:  One of the keys to becoming a better trader is to have fun.  A great post.  (KirkReport)

John Mauldin: Welcome to the Future.  (InfectiousGreed)

Clark Hoyt on the rampant plagiarism problem in modern journalism.  (NYT)

Insider buying returns to the stock market.  (PragCap)

Some encouragement for the disillusioned Wall Street pro from Barry.  (TBP)

Desperation has pushed California's treasurer to pitch state bonds with Google Adsense - on Zero Hedge!  (ZeroHedge)

Are mainstream media bloggers not getting the part about linking to others?  (FelixSalmon)

Econobloggers need their crisis back.  (UltimiBarbarorum)

25 Boom States (and 25 states that aren't coming back).  Where does your home state fall?  (DailyBeast)

...And the Oscar for Best Left-For-Dead, Obsolete Company That Turned Out To Be Neither Dead Nor Obsolete goes to:

Tivo ($TIVO)

...And the Oscar for Most Pointless And Heart-Wrenching Round Trip Back To The Lows goes to:

First Solar ($FSLR)

...And the Oscar for Great Trading Stock, Horrible Company goes to AIG ($AIG):

...And the Oscar for Best "I Wish I'd Never Been Born" Performance goes to:

US Natural Gas Fund ($UNG)

...And the Mickey Rourke Comeback Of The Year Achievement Award goes to:

Ford Motor Company ($F)

A group of economists collaborate to create one master Financial Conditions Indicator which will be made up of 44 sub-indicators that are blended together.  Kind of like The Precious.

What will go into The One True Indicator?

For example, the FCI will include the price of the Wilshire 5000 stock index, the interest rate spread between the 10 year T Note and the 3 month T Bill, the total quantity of all commercial paper outstanding and a Michigan credit availability survey or two.  These 44 data points and readings will come together to give us one number by which to judge the entire financial picture.

I've only skimmed the paper itself (55 pages) but economists and policy wonks may want to really dive in, the downloadable PDF is below:

New FCI

Hat tip - Econbrowser

The phone rang this morning...

TRB:  Hello?

Johnny Upside:  YOOOOOOOOO!

TRB:  That you, Johnny?  You almost busted my eardrum!

JU:  Sorry buddy, just really excited, its been a minute since I've gotten at you, Josh!

TRB:  I know, and things were so peaceful...

JU:  Kid, I am blowing up right now - for real - just had my best 2 months ever back to back!

TRB:  Cool, still in the cash for gold game?

JU:  Hell naw, I'm not trying to compete with every PTA president with a scale - I cashed out of that gold thang right after Christmas.

TRB:  So what are you up to?

JU:  Swaps, TRBizzle!  Credit Default Swaps is my new sh*t.  I'm shorting entire countries, yo!

TRB:  Ah, like Greece and Spain because of their high debt loads?

JU:  I guess, yeah.  But I don't really look at stuff like debt load or, um, like GDP to Productivity.  I'm just finding all these weird-ass countries in Europe and buying the CDS contracts.

TRB:  Don't you need to be registered with the International Swaps and Derivatives Association and be super-accredited?

JU:  Yeah I know!  But I met this chick at The Box last week who had the hookup.  They think I'm like a global hedge fund or whatever.

TRB:  Johnny, those contracts you're buying to short all these countries are like insurance - and paying those premiums is a pretty expensive "negative carry" - are you sure this is a good idea?

JU:  Guy, don't you read all those sites with the crazy Bloomberg charts?  Everybody's f*cked, man!  Just saw a slide show that was called "17 Reasons The World Will End Before 2012" on some website and, like, half the pictures were of the Acropolis.

TRB:  OK, sound logic I guess.  How could I argue with that?

JU:  Don't argue, brah, just get on board!  I got a call about some ridiculous place called Lapland that has public bonds, we're gonna piledrive 'em to nothing!

TRB: I think Lapland is where Santa's reindeer come from.  That may or may not be an actual country - I'm not sure - so be careful.

JU: I'm getting as short as Scottrade's Institutional Margin Desk will let me.

TRB:  Hang on...you're trading credit default swaps with a Scottrade account?  Dios mio.

JU:  That's right, brother, just tearin' it up.

TRB:  Are you at all concerned about the recent investigations into hedge funds shorting foreign currencies or sovereign debt and perhaps generating instability in the affairs of tens of millions of innocent citizens of those countries?

JU:  I don't think you understand...I'm a HEDGE fund, I can do whatever I want as long as I'm generating alpha.  I've always wanted to say that.  Besides, I'm not gonna move any currency markets with my buying or selling.

TRB:  The question is not you moving a currency market.  Rather, it is what happens when 200 or 400 hedge funds with massive amounts of leverage decide to create a market perception that, for example, there is a run on a country's sovereign debt or bank deposits.  Then what?

JU:  Can't blame me and Paulson for the fact that these countries are out to lunch financially.  The people living there wouldn't be so vulnerable if they weren't joining unions at 8 years old and retiring at 45.  Plus taking organized naps at 3 o'clock in the afternoon on weekdays after a 2 hour lunch feast and a pack of cigarettes.

TRB:  Ah, blame the victim.  You must have learned that from your fraternity's "The Morning After the Party Handbook".  Classy.

JU:  Yup, which is why I'm swappin' it up forreal right now!  This is my sh*t!

TRB:  Well thanks for calling Johnny, for some strange reason, I just got mildly bullish on Europe.

JU: No doubt, cub scout.  Be good.

Read Aso:

http://www.thereformedbroker.com/2009/07/14/johnny-upside-ill-buy-your-gold-dog/

http://www.thereformedbroker.com/2009/03/23/johnny-upside-im-all-about-distressed-assets-yo/

http://www.thereformedbroker.com/2009/01/05/interview-with-johnny-upside-fund-of-fund-of-funds/