Let's Make a Deal

A last minute deal was made to extending the Bush Tax Cuts to everyone, including the millionaires, in exchange for the republicans signing off on extending unemployment benefits - both where were set to expire December 31.

The election results served to turn up the heat on the Administration and the Democrats. Time’s up, and this last month is critical to set the stage for any potential “positive spin” on what was or wasn’t accomplished before the GOP takes control.

The Moment of Truth had Arrived.

The republicans threw their weight around and the Obama Administration was forced to play the game. With the threat of losing all possible chances of recovering from a shaky first 2 years at the helm, President Obama knew his first step to turning the economy (and his legacy) around lies in the extension of unemployment benefits.

Unemployment extension would buy the Administration time to establish traction in the recovery, and give time for another round of stimulus programs to take effect.



In reality, the unemployment extension would buy the Administration time to establish traction in the recovery, and give time for another round of stimulus programs to take effect.
May the force be with you Mr. President.

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K. Reilly
Cohn-Reilly Report / News Flash

California: A Cry for Help

California Governor Schwarzenegger declares a state of emergency. Why now, why did the governor decide that this was the time to make this declaration. We have been reading about the depths of California's fiscal troubles for 18 months. It was clear where the state was headed, but the governor waited until now. Imagine is Bush or Obama has waited as the country slid further into a fiscal and economic whole, where would we be.

I am sure there are issues that made the decision more complicated that those of us on the outside could see, but I am appalled to say the least. I can only imagine what Californians are thinking. See video below

If there is any force left, may the force be with you too Schwarzenegger.

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K. Reilly
Cohn-Reilly Report

Inside the Insider Trading

Another Insider Trading Scandal is Uncovered

The hedge fund sector is a little on edge lately, due to the investigation that inspired the recent flood of subpoenas received by the top companies. If what is suspected is actually true, it appears to be a massive, long-term program of trading fraud that brings to mind images of organized crime during its heyday, back in the 1950s. If charges are formerly brought down it will undoubtedly send trimmers throughout the trading community.

The hedge fund sector is a little on edge lately, due to the investigation that inspired the recent flood of subpoenas received by the top companies. If what is suspected is actually true, it appears to be a massive, long-term program of trading fraud that brings to mind images of organized crime during its heyday, back in the 1950s. If charges are formerly brought down it will undoubtedly send trimmers throughout the trading community.

The last thing the financial markets need is another fraud scandal. This case brings to mind the ultimate rogue Wall St. trader, Gecco, played by Michael Douglas for the Movie "Wall Street". We could really do without the resurgence of fraud and unethical behavior in this industry, as our economy and the American people struggle out of the financial hole.

The Manhattan U.S. Attorney’s office sent out subpoenas to major hedge fund companies, including giants such as Capital Advisors and Citadel, Janus Capital Group and Wellington Management, one of the largest institutional – investment firms. Further, the FBI questioned a Global Research, LLC account manager in an effort to gain clarity on the relationship Global Research has with the hedge fund community and what role they may have played in the insider trading scam being investigated. The Wall Street Journal reported that Apple analysts were also being "dragged" into the investigation. The 3-year investigation concerns an expert-network firm that leaked nonpublic/proprietary information to the Hedge Funds and others. The details are still to come, but it does not bode well for the public perception.


Check an interview about the perception of systemic fraud, particularly insider trading in hedge funds.




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K. Reilly
Cohn-Reilly Report / News Flash

A Call to Action

Ben Bernanke indicated that the sluggish economy and other economic markers make the case for “ further action”. The Fed Chairman warned that the next move would depend on the incoming data on the economy. Other Fed official are weighing in indicating they are looking for more “quantitative easing”, but most on Wall Street anticipate the Federal Reserve to purchase long-term Treasury bond as a step toward monetary action.

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K. Reilly
Cohn-Reilly Report / News Flash

Mortgage Saga Rages On

Seeing Red:
Why Anemic Income Statements Anticipated.

The fallout from the foreclosure debacle will lie heavily on the banks, who will be forced to take back more and more faulty loans. A Federal Reserve official, Chris Whalen, was quoted as saying this could cost the biggest banks upwards of $50 billion to buy backs of problem loans.

Fannie Mae and Freddie Mac who guarantee 90% of the mortgage loans in the Unites States, will have no choice but to exercise their right to force loan originators to repurchase erroneous or fraudulent loans. Income statements for mortgage underwriters are not going to be a pretty sight for the next 2 quarters, particularly the 4th quarter . It will be interesting to who will push the limits of creative accounting in order to spread out the bad news over time, to avoid the possible ramifications of reporting larger than anticipated losses

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K. Reilly
Cohn-Reilly Report / News Flash

Toxic Mortgages Haunt Goldman

Meanwhile, Toxic Mortgages continue to haunt Goldman Sachs. Barely recovering from the poor publicity derived from an SEC investigation which ended in a settlement, Goldman is facing another law suit. The tainted Golden Goose of the Investment Banking industry was hit with a suit from a German Bank concerning a pool of mortgage assets sold to them in 206.

According to the Wall Street Journal, the suit alleges that Goldman failed to fully disclose the risks underlying the mortgage back securities. According to court documents, the suit contends that Goldman knowingly dumped collateralized debt obligations on their subsidiary LBBW Luxemburg, even though they saw signs that the market was tanking.

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K. Reilly
Cohn-Reilly Report / News Flash

NY Fund Mgrs Dodge Tax Increases

Hedge funds can breathe a sigh of relief as the expected State tax increase was voted down by State lawmakers.The controversial tax increase was to target out-of-state fund managers, which could have lead to an exodus to nearby states, namely Connecticut._____________
NY State lawmakers did manage to finalized the $136 billion budget, approving a final piece of legislation that will raise about $1 billion through a array of tax hikes and other measures. These measures are anticipated to cover the over $9 billion in deficits.

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K. Reilly
Cohn-Reilly Report / News Flash

Internaltional And Domestic Market Clips

Europe: Corporations Brace for tighter credit
Unlike US corporations, the majority of the companies in Europe heavily depend on banks for financing. Most of Europe’s banks passed the stress test, but have a steep hill to climb with respect to raising several billions in capital to fund new lending. It looks as though European banks have won the battle, but the war rages on.
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Wall St. Journal reported that the financial-overhaul law may force public firms to toughen up on “clawback” rules, and make executives repay improperly awarded incentive compensation.
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Maket was inspired today, with a little help from news about BP’s CEO stepping down, and Housings sales, which spiked 24% in June, following slump in May
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Cohn-Reilly Report / News Flash

Major Dow Components Boost Market

AT&T, UPS and Caterpillar beat analyst estimates and reported strong revenues to propel the market over 200 points higher yesterday. Today, although McDonalds, Honeywell and Ford did equally well, the market is struggling to remain in the black in early trading. Let's see if the bulls can continue the rally by the end of the day

Cohn-Reilly Report / News Flash

Historic Reform Bill Passes

Congress managed to pass a sweeping overhaul of Financial Regulations Thursday, thereby securing for a 3rd major (hard-fought legislative victory for President Obama, amid his lowest approval rating since taking office.

The president is expected to sign the bill sometime next week. Obama is quoted as saying "I'm about to sign Wall Street reform into law, to protect consumers and lay the foundation for a stronger and safer financial system, one that is innovative, creative, competitive and far less prone to panic and collapse"

K. Reilly
Cohn-Reilly Report / News Flash Check out the new Music and Art Forum on BlogSpot! "Its a refreshing departure from economics. it's like life's little desert snack."doARTorDIE

July Mini Rally, with Low Trading Volume

On the heels of positive earnings reports from Alcoa and CSX, kicking off the new earnings season, the markets are up for the 6th consecutive day, around 6%. Traditionally, as reported in a prior post, July is a good rally month for the markets. I would call this a mini-rally because of the uncertainty going forward.

Technically, all the major indexes are overbought - stiff resistance is ahead as the price levels near the 20, 50 and 200 day moving averages. Also, the rally is on lower than average volume, which shows a lack of conviction. Still, if earnings continue on an upbeat note, we should expect the rally to follow suit, barring any major new negative
economic news.

C. Cohn
Cohn-Reilly Report / News Flash

DOW Gains: 3-Straight Days

Housing industry takes a back seat to unemployment, which seem to be a factor in the market movements in the past week. Though it is surprising that the higher than expected unemployment claims did not cause a negative reaction from investors. When asked about the three straight days of gains many traders opine that the market gains has been driven by program trades. They may have a point. The DOW closed up The Dow rose 120.71

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K. Reilly
Cohn-Reilly Report / News-Flash

Summer Rally Continues

On the heels of positive earnings reports from Alcoa and CSX, kicking off the new earnings season, the markets are up for the 6th consecutive day, around 6%. Traditionally, as reported in a prior post, July is a good rally month for the markets. I would call this a mini-rally because of the uncertainty going forward. Technically, all the major indexes are overbought - stiff resistance is ahead as the price levels near the 20, 50 and 200 day moving averages. Also, the rally is on lower than average volume, which shows a lack of conviction. Still, if earnings continue on an upbeat note, we should expect the rally to follow suit, barring any major new negative economic news.


C. Cohn
Cohn-Reilly Report / News Flash

Unemployment Declines, and Impact of Slow Job Growth

125,000 drop in non-farm payrolls, biggest decline since October 2009. Unemployment lowers to 9.5 %, however this was due to 652,000 leaving the labor force and are no longer being counted. Bright spot - 83,000 new private sector jobs created. Economists report overall slowing in job growth and predict unemployment rate could creep up to 10% in the coming months. Average hourly wages were lower. Market reaction - dollar dropped against the Euro, oil fell in anticipation of slower growth, major indexes were little changed at the open but ended moderately down at the close.

C. Cohn
Cohn-Reilly Report / News Flash

June Jobs Report Shows a Mixed Picture

125,000 drop in non-farm payrolls - biggest decline since October 2009.
Unemployment lowers to 9.5 %, however this was due to 652,000
leaving the labor force and are no longer being counted.
Bright spot - 83,000 new private sector jobs created.
Economists report overall slowing in job growth and predict
unemployment rate could creep up to 10% in the coming months.
Average hourly wages were lower.
Market reaction - dollar dropped against the Euro, oil fell in
anticipation of slower growth, major indexes were little changed
at the open but ended moderately down at the close.

C. Cohn
Cohn-Reilly Report