Auction Day

by Larry Levin

Not only was today a real auction day (TSLF), but the S&P futures traded up and down like we were at a Texas cattle auction, rather than in the S&P pit. Every time a rancher brought a fatty into the pit, the S&P exploded - they were bidding up that heifer. But ranchers scared the heck out of buyers at approximately 9am, 12:10pm and 2pm, which is when they brought out their Calista Flockhart lookalikes. And that's when they auctioned the bids downward, like a rock thrown from the CME’s roof into the Chicago River...temporary freefall.

Before the auction results were known, the Clear Channel Communications buyout was the top story again. Apparently a judge in Texas still believes in contracts: he ordered banks to fund the proposed $19 billion buyout of the radio broadcaster. Imagine that, making the banks abide to their original agreements. It's too bad that sort of thinking doesn't apply to other areas...like investment contracts tied to the housing market (politicians want to freeze interest rates for 5-years) and homeowners that bit off more than they could chew. Now that things have gone sour for the latter, they want all kinds of contract "rewrites" and bailouts.

Buyers were also snapping up futures before the open because of the "great" (read feeble) GDP data. It was a whopping 0.6%! It boggles the mind that people out there were so excited over this pathetic economic data that they aggressively bought the futures. Apparently the thought was, "Pfheew, at least it's not negative." Here's a thought - if your portfolio manager was one of these clowns - fire him/her.

The market's buyout enthusiasm from the CCU news, however, was checked by the realization that terrorist are still thriving. If they can't attack us directly, they'll try to hurt us economically. This morning brought word that "insurgents" in Iraq blew up a major oil pipeline, sending crude oil futures soaring. How long will it take for this oil to come back online?

The result of the Federal Reserve's new term security lending facility (TSLF) was announced today around 1:20pm (CST). This was the second time those Texas ranchers brought in the fat cattle, which auctioned the bid much higher. Major U.S. investment banks and broker-dealers submitted bids for 28-day loans of $86.1 billion of Treasurys, with the Fed accepting $75 billion, for a bid-to-cover ratio of 1.15.

That certainly wouldn't be bullish had it been an auction for 30-Year bonds, but it was considered good for the TSLF because that meant maybe the investment banks didn't really need the money. Ok, maybe. But what would the spin had been if the TSLF had a bid to cover ration of 3.0? I'm guessing it would have gone something like this, "This is very bullish because the banks are getting all the liquidity they need." Heads I win, tails I win.

But in the end the so-called good GDP data, the fat cattle, and the TSLF auction couldn't keep the market up. Technology stocks proved a burden too large to bear today. The NASDAQ was weak after business software maker Oracle Corp. posted worse-than-expected fiscal third-quarter sales and issued a cautious forecast. Meanwhile, data suggesting that Google Inc.'s revenue from Internet users' clicks could slow also raised worries about tech stocks. Both were hammered.

But that wasn't all folks. A "rumor" of a potential Bear Stears Part-Deux ran through the pits today. The rumors were that the fourth largest U.S. investment bank, Lehman Brothers, could see a run on the bank similar to that of BSC. Its stock was hammered nearly 10% lower.

Kerrie Cohen, a spokeswoman for Lehman Brothers, said, "There are a lot of rumors in the marketplace that are totally unfounded. We are suspicious that the rumors are being promulgated by short sellers of our stock that have an economic self interest."

Of course, it's the short sellers fault. It's always the big bad short sellers fault. I think Bear Stearns spokespeople said the same thing. Who knows if it's true, but if the CEO goes on television to say LEH is financially sound, be afraid....be very afraid.

Real Time Trading Signals*for

Trade Date: 3/27/08

E-Mini S&P Trades*
(before fees and commissions):


1) VA buy @ 8:35am at 1344.25 = -2.00 & -2.00

2) PP sell @ 8:45am at 1345.00 = +1.00 & b/e

3) VA buy @ 9:15am at 1339.00 = -2.00 & -2.00

4) FT sell @ 9:30am at 1334.00 = -1.00 (1 lot)

5) OTF sell @ 10:05am at 1336.00 = -2.00 (1 lot)...-10.00

E-Mini Russell Trades*
(before fees and commissions):


1) Sell @ 8:42am at 700.6 = +.5 & b/e

2) Sell @ 1:37pm at 699.5 = b/e & b/e...+$50


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