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).

Below are some links of interest for 8/13/09, just in case you missed them. Some have already been posted to Twitter.

• Imports were up in June, in part due to a spike in oil prices. Exports were also up in June. On a year-over-year basis, exports are off 22% and imports are off 31% (Calculated Risk).

• The duration of unemployment chart is getting scary, and at record levels (Trader's Narrative). Can you say jobless recovery?

• Statistics indicate a recovery with no jobs, no pay increases, and therefore no increases in tax receipts for struggling state and local governments (Washington Post).

• As of April, less than 13% of the largest 1,100 hedge funds had reached their high water mark, while more than 18% were more than 30% off their peaks (WSJ). Even after the recent market run, more then 70% of hedge funds have not recovered from 2008 losses, making it difficult for firms to generate extra fees, pay bonuses, and retain talent.

• Natural gas hedges that locked into higher prices helped a number of companies report better than expected earnings, but this could be harder in the future if speculators have a more difficult time participating in the market going forward (WSJ). This is certain to affect "cash-flow certainty" for companies, affecting not only their ability to manage risk, but their ability to provide some level of stability to consumer energy prices.

• Even if the efficient market hypothesis does not get in your way, it is not that simple to technically and fundamentally trade your way to being "really" rich, ......., but "merely" rich is possible (Abnormal Returns).

• If revenue growth is to have a V-shaped recovery, shouldn't CapEx spending increase? Zero Hedge looked at the data. Not only is CapEx spending not increasing, it is continuing to fall.

• The Baltic Dry Index has been down nine of the last ten trading days (The Financial Ninja). There is suspicion that China has pretty much completed their commodity restocking.

• World stock market capitalization is up another $4 trillion in July (Carpe Diem).
  

• Are option flash orders the next big thing to worry about (WSJ)? Maybe not (Daily Options Report, here and here).

• Has the no volume bear market rally finally ended? The Pragmatic Capitalist believes so, and lays out the case why. The 50% move in the S&P 500 is somewhat typical for a secular bear market rally - declining volume, low quality asset gains, little leadership, and the move has been swift. With no volume confirmation, negative seasonal trends, no real catalysts in view, and extreme bullish sentiment, the market may be ready for a correction.

• Don Fishback ran some numbers and found that the average return of the S&P 500 during earnings season was -0.11% (Don Fishback's Market Update, HT marketsci tweet). So why are stocks and index options more expensive going into earnings season? It could be explained by how far each period's returns deviate from the average. In fact, market returns during earnings season do not really resemble a bell curve.

• During the second half of July, the NYSE experienced a 10.27% decline in short-selling positions not closed out, while the Nasdaq had a more than a 5% fall in short interest (WSJ).

• In a challenge to iShares, Vanguard has filed a registration statement with the SEC to offer seven bond index ETFs, illustrating in part current trends, and how investors are looking more towards corporate bonds (Bull Bear Trader). While some investors are simply chasing returns, others are looking for new ways to diversify away from equities.

• The natural gas ETF, UNG, has decided to not issue new units on worries of new stringent CFTC rules (WSJ). The shortage of shares may continue to cause the fund's value and price to diverge.

• Actively managed quantitative strategies currently account for 9% of all U.S. equity AUM, as automation is becoming a competitive necessity (FINalternatives).

• A forthcoming academic paper from SUNY professors Greg Gregoriou and Razvan Pascalau suggests that the optimal number of underlying hedge funds within a fund of hedge fund portfolio may actually be as low as 6-10 (All About Alpha). Among other conclusions, the paper demonstrates empirically that the number of hedge funds included in a FoF has a negative and significant impact on the volatility of returns, while having less of an impact on actual returns.

• Bob Prechter of Elliott Wave International is quite sure the next wave down will be bigger and the March lows will break (The Big Picture).

• After calling the bottom in March, Doug Kass is bearish again (TheStreet.com) since cost cuts and fiscal stimulus are limited, cost cuts threaten the consumer, the net worth of individuals has been damaged, the credit shock will continue, the outcome of the Fed monetarist experiment is uncertain, a housing recover will be muted - there are no other drivers right now, commercial real estate is just now entering its downturn, municipalities may not provide the necessary economic stability, and taxes will be rising, along with health and energy bills, further hurting the consumer.

• Money managers collectively have 18.5% of the long portfolios in the Financial sector, 16.8% in Technology (Bespoke Investment Group). Utilities and Telecommunications round out the bottom at 3.0% and 2.9% respectively.

• S&P 500 YTD returns by sector (Value Expectations). Technology, Consumer Durables, and Basic Materials are leading the way with 39.73%, 36.77%, and 32.82% average returns, respectively, while the Financial and Utility sectors are bringing up the rear at average returns of 10.81% and 5.87%, respectively. The Applied Finance Group's Value Expectations (VE) interface provides sector expectations for the S&P 500 (Value Expectations).
  

• From the latest update of the four bear recovery comparison (check out the chart at dshort.com), it appears that the S&P 500 lows in 1974 and 2002 market sustained recoveries. The Dow low in 1929 failed 11 months later. The current market is now 47% above the March 9 low, and has outperformed the 1974 and 2002 rebounds over the same period. Doug Short ask: Will the rally continue to show resilience? That is the question.

• New Morningstar 5-star stocks include Cisco Systems (CSCO), ExxonMobil (XOM), and Regions Financial (RF).

• American Association of Individual Investors (AAII) sentiment survey results (as of Aug 6): Bullish 50% (rose above long-term average of 38.9%), Neutral 14.84%, Bearish 35.16% (rose above long-term average of 30.0%). It looks as if investors are jumping off the fence.

• Even though the Dow Theory is giving bullish signals - since both the Dow Industrials and Dow Transports are moving above previous significant highs, signaling that the primary trend is bullish and stock price are likely to move higher - the signal may not have occurred since the corrections that followed the May and June highs failed to retrace even one-third of the rise since the March lows. As mentioned Monday, Jeff Saut just thinks it is a contrarian indicator.
  

• Points taken from the battle of the Dr. Doom's (Bull Bear Trader) and the recent Nassim Taleb interview on CNBC (Bull Bear Trader).
  

Below are some links of interest for 8/12/09, just in case you missed them. Some have already been posted to Twitter.

• According to Boston Consulting Group, institutional investors will demand "innovations" such as alternative investments, i.e., hedge funds, private equity, infrastructure, commodities, absolute return, and quantitative products, among others (All About Alpha). The group also mentions that "Perhaps the foremost trend in actively managed products is the continuing shift out of long-only equity allocations."
• Why have hedge funds underperformed the markets? Apparently, some managers are taking money off the table and proceeding with caution after several months of gains (Investment News). Even with good performance this year, hedge fund fees continue to slide (Wealth Bulletin).
• The Fed exit strategy will amount to paying interest on balances held by banks at the Fed (Bearish News). Essentially, when it comes time to tighten policy, the Fed can raise the rate paid on reserve balances as they increase their target for the federal funds rate. Of course, this will in a sense continue to reward the banks for past failures.
• After two years, some believe that we have failed to learn the three lessons taught by the economic downturn: imbalances in global trade and finance have real consequences, debt brings risk, and globalization does not manage itself, but needs guidance (Telegraph UK).
• China's economy slowed a little in July as large banks rein in lending, with volume of new lending in China dropping 77% from a month earlier, as fears of bubbles persist (Financial Times). Chinese exports fell 23% from a year earlier (Bloomberg). Singapore is not slowing down, with GDP spiking 20.7% (The Straits Times).
  
• General Motor's Volt could be a game changer if it gets the 230 miles per gallon that is being advertised - as long as you stay close to home (WSJ).
  
• The KBW bank index hit an 8 month high, up 144% from the March lows (Carpe Diem).
  
• The Congressional Oversight Panel is warning that smaller banks, which hold a greater concentration in commercial real estate, have the potential for much higher defaults going forward (Calculated Risk). Some small banks will need to raise significant capital (Zero Hedge).
  
• Can the PPIP be used to explain the strong rally in AA-rated CMBS (Clusterstock)? Is a new toxic asset bubble around the corner?
• From Comstock (by way of The Pragmatic Capitalist), deleveraging will continue to take a major toll on the U.S. economy and could wind up producing a couple lost decades, not unlike what Japan has experienced over the last 20 years.
• Brazil's coming rebound (Fund My Mutual Fund).
  
• What about the technology sector? Jim Farrish believes that while short-term there is the reason to tighten stocks, long-term (6-18 months) the sector is still in a bullish uptrend (greenfaucet). Any current correction may be an opportunity to add.
  
• Crude oil and gold both bounce of Fibonacci retracements (market folly), for those of you that care about crude, gold, or trading patterns/sequences.
  
• The housing mess is not yet over (The Big Picture). Zillow.com mentions that almost one-quarter of mortgage holders are underwater, with the figure rising to 30% by mid-2010 (Bloomberg). Ginnie Mae and FHA are becoming $1 trillion subprime guarantors, not unlike taxpayer owned Fannie Mae (WSJ).
• More details on Goldman Sach's amazing winning streak (Here Is The City News). Apparently, Goldman lost money on only two trading days during April, May and June. They also made more than $50m on 58 of the 65 trading days in the period, and at least $100m on 46 days. Amazing.
• The Baltic Dry Index has fallen for its 9th straight day (The Big Picture).
• We are all traders now (Trader's Narrative). The average holding period for a stock on the NYSE continues to fall.
  
• NYSE Bullish Percent Index and NYSE Percent of Stocks Above 200 Day MA Index are near 3 year highs (ES and EC Futures Analysis).
• A look at the importance of normalizing put/call ratios, whether they are going up or down (Quantifiable Edges).
  
• Short are decreasing as the average stock in the S&P 500 had 4.97% of its float sold short by the end of July (Bespoke Investment Group), the lowest level since January 30th. The reduction in shorts represents a decline of 17% from the peak levels in July 2008.
• September can be a cruel month for stocks (WSJ).
• Is the money supply (M1) a good indicator for short- and medium-term stock market behavior (CXO Blog)? Maybe not.
• Obama's derivative plan (WSJ).
• Greg Mankiw provides some wonky talk about carbon taxes (Greg Mankiw's Blog).
• Gamma decay and smiles for levered options (Quantivity).
• VIX calls attract some attention (VIX and More).
• Finally, an interesting link (at least to me) of the changes in WSJ dot portraits (Reuters - Felix Salmon).