BofA Merrill Lynch Fund Manager Survey Finds Risk Appetite at Highest Point Since April 2006

With almost all asset classes ( Dow 10.100, S&P 500 1100, N100 1780, Dax 5860, FTSE 5250, Oil $ 80 etc ) at new highs it looks like the herd mentality is once more rampant ( fueled in large part from the $ Carry Trade - €/$ 1,50 - & "Quantitive Easing" see also Speaking Of A Money Illusion........ ). Nice to see that after one of the biggest rallies in decades finally the "smart money" ( unlike the retail investor ) is getting more bullish..... As a contrarian it seems lots of folks are "all in"...... Another UPDATE: It remains to be seen if last hour drop from Wednesday was only a minor glitch in the Matrix..... Very telling that this (!!) "bulletproof" strategy seems the only relevant parameter that is important.... until it stops working ....;-) UPDATE: Taking todays ( Oct. 26th ) action into account i think this was more than a minor glitch in the MATRIX... There is now a reasonable chance that this guy will get the upper hand for some time to come..... At least all the "Cash On The Sidelines" ( sarcasm ) has now the opportunity to step in. Add to this that "Wall Street Finest" have only a sell rating on 5 percent of all stocks and the potential for some extra SCHADENFREUDE is not getting smaller.... ;-)

Da gerade heute praktisch alle Vermögenswerte nahe Ihren Jahreshochs ( Dow 10.100, S&P 500 1100, DAX 5860, MDAX 7450, TECDAX 775, FTSE 5250, Öl $ 80 ) notieren ( dank des$ Carry Trades invers zum $ - €/$ 1,50 - versteht sich, sowie dank des sog. "Quantitive Easing" , passend zum Thema Speaking Of A Money Illusion........ ) sieht es in der Tat einmal mehr so aus als wenn der Herdentrieb praktisch alle Marktteilnehmer infiziert hat... Da paßt es gut ins Bild das auch gerade jetzt die Big Boys ( ganz im Gegensatz zu dem Kleinanleger ) nach einer der größten Kursexplosion der letzten Jahrzehnte endlich Ihre Vorsicht über Bord geworfen haben und zum Teil massiv Ihr Risiprofil erhöht haben... Man könnte auch sagen das sie "all in" sind... Erneutes Update: Es bleibt abzuwarten ob der starke Abverkauf in der letzten Handelsstunde vom Dienstag nur ein kleiner Fehler in der Matrix gewesen ist... Wenn man sich aber die anscheinend momentan gängige "Strategie" (!!) ansieht wie die Märkte "funktionieren" sagt das einiges über Robustheit der Rally aus......;-) UPDATE: Nach dem heutigen ( 26. Oktober ) erneuten Abverkauf handelt es sich wohl um mehr als nur einen kleinen Fehler in der Matrix..... Es ist nun nicht unrealistisch das dieser Typ bis auf weiteres die Oberhand gewonnen hat ...... Immerhin ermöglicht dieser noch kleine Rückschlag ja den angeblichem "Cash On The Sidelines" ;- ) sich endlich massivst in den Aktienmarkt einzukaufen.....Wenn man jetzt noch bedenkt das die "Analysten" lediglich 5% der Aktien mit einer Verkaufsempfehlung versehen haben dürfte das die mögliche Schadenfreude nicht gerade mindern..... ;-)

H/T RobotTrader

BofA Merrill Lynch Fund Manager Survey Finds Risk Appetite at Highest Point Since April 2006 as Double-Dip Recession Fears Fade Marketwatch

--Investors See Brighter Corporate Profits on Horizon - Shift from Cash to Equities

Investors' risk appetite has reached its highest point in more than three years amid continued optimism about the prospects for a global economic recovery and rising corporate profits, according to the BofA Merrill Lynch Survey of Fund Managers for October

Investors are increasingly confident that the threat of a double-dip recession is waning. A net 65 percent of respondents believe a global recession is unlikely in the next 12 months, up from 47 percent a month earlier.

A net 72 percent of respondents believe the outlook for corporate profits will improve in the next year, up from 68 percent a month earlier.

The survey also shows asset allocators shifting out of cash and into equities as risk appetite grows. Their cash positions are at their lowest level since January 2004. A net 7 percent of respondents are underweight cash in October, compared to a net 10 percent overweight a month earlier.

A net 38 percent of panelists are overweight equities, up from 27 percent in September. Technology, Energy, Materials and Industrials are the favored sectors for asset allocators in October with investors still shying away from financial
stocks.

Investors seeing value in Europe hits eight-year high

Asset allocators are showing a growing conviction that global corporate profits will post double digit earnings growth, the survey shows. A net 39 percent of panelists think profits will rise by at least 10 percent in the next 12 months, up from just 25 percent in September.

Optimism about Europe is pronounced in the October survey. A net 30 percent of global portfolio managers see eurozone equities as undervalued relative to other regions, the highest reading since April 2001

. A net 9 percent of panelists want to overweight the region in the next 12 months, up from 7 percent last month. This contrasts with Japan, which a net 20 percent of investors regard as the least attractive region a year ahead.

The change in sentiment coincides with a shift in investors' appetite for European financials. Investors are overweight European banks for the first time since June 2007, courtesy of greater confidence in bank balance sheets and profitability trends.

"Europe is emerging phoenix-like from the ashes as confidence in its banks boosts overall confidence in European equities," said Gary Baker, head of European equity strategy at BofA Merrill Lynch Global Research.

> Read this twice...... ;-)

> Das sollte man zur Sicherheit zweimal lesen....... ;-)

Chinese confidence rebounds: U.S. dollar confidence sinks

Confidence in the prospects for the Chinese economy and emerging markets in general remains robust. A net 49 percent of respondents think China's economy will strengthen in the next 12 months, up from 35 percent in September. A net 36 percent of respondents also said they would most like to overweight emerging markets in the next year.

Continuing weakness in the U.S. dollar has resulted in a growing number of respondents who believe the dollar is undervalued. A net 20 percent of panelists regard the currency as undervalued, compared to one percent a month earlier. Japan's economic outlook is marked by a growing number of asset allocators who view the yen as overvalued. A net 34 percent of respondents believe it is overvalued, compared to just 21 percent last month.

"Confidence in Chinese growth has rebounded but worries over a U.S. dollar crisis are on the rise. The dollar is seen as undervalued and the yen as very overvalued, suggesting that central bank intervention in currency markets in coming months could soon prove successful," said Michael Hartnett.

A total of 229 fund managers, managing a total of US$616 billion, participated in the global survey from 2 October to 8 October. A total of 195 managers, managing US$384 billion, participated in the regional surveys.

> It feels like my blog headline "Bubbles Are Normal And Non-Bubble Times Are Depressions...." is the new mantra among central banksters...... ;-)

> Ich fürchte immer mehr das meine Blogüberschrift "Bubbles Are Normal And Non-Bubble Times Are Depressions...." weltweit alle Zentralbankster erfaßt hat....... ;-)

UPDATE:

90% Of Fund Managers Think The Market Will Go Up Clusterstock

Maybe the street has become a bit too bullish afterall.

90% of institutional investors believe that the S&P500 will rise to 1,200 by the end 2011 according to a survey by The Markets. 75% then expect it to hit 1,500 by the end of 2013, and 75% believe that the market already bottomed earlier this year. The survey covered 103 invesors in 20 countries.

We don't necessarily disagree with these views, but naturally find it disturbing to find such a strong consensus on market direction. It sets off our contrarian alarm loud and clear.

From Paul Tudor Jones, who reports in his third-quarter letter to investors

While many of our surveys of aggregate hedge fund positioning would say net long exposure has rebounded to late 2007 percentages (though on a smaller base), and mutual fund cash/asset ratios have come in significantly, markets continue to trade as if most are not satisfied with their current commitment to equities.

Fall 2009 Big Money Poll Results Out: Only 13% Are Bearish, 70% Are Beating S&P, As Taxpayers Get Hosed ZH

On economic matters, 72% of respondents believe the recession has ended, and an amusing 52% believe there is no chance of a double dip recession. It is scary that over half of the "sophisticiated community" thinks that Fed can succeed where so many central planning administration have failed before.

Uh-Oh: Economists Say Recovery, Market Gains Solid BR

Nearly four of five economists surveyed by USA TODAY say the stock market rally since March is heralding a sustainable recovery.

> Needless to say that i agree almost 100 percent with this guy & Geremy Grantham....

> Kann nicht oft genug wiederholen das ich zu fast 100% mit diesem Typen & Geremy Grantham übereinstimme.....


JGLetter_ALL_3Q09 -

Investors Are More Enthusiastic About The Industry's Future Than Bank Executives Are.....

With insider buying at ZERO this is quite an understatement..... But it is definitely good news for the taxpayer....... Let´s hope that not too many pension funds got involved in the latest offerings.....This is especially true when you see some other ( now former ) "strategic" investors are slashing their holdings ( see here & here )......

Wenn man bedenkt das kein einziger Bankinsider seit dem Stresstest eine einzige Aktie gekauft hat dürfte die Überschrift gelinde gesagt ne kleine Untertreibung sein..... Immerhin sind das gigantische Nachrichten für den arg gebeutelten Steuerzahler..... Bleibt nur zu hoffen das nicht allzu viele Pensionskassen an den letzten Aktienemissionen teilgenommen haben.... Das gilt umso mehr wenn man bedenkt das ehemalige Ankerinvestoren Ihre Bankenbeteiligungen im großem Stil auf den Markt schmeissen ( siehe hier & hier )......

WSJ

Banks are having an easy time dialing for dollars.

J.P. Morgan Chase & Co., Morgan Stanley, American Express Co. and regional bank KeyCorp said Tuesday they sold a combined $8.7 billion in common stock. That pushed the total value of shares sold by the 19 financial firms that were stress-tested by the government to at least $65 billion since the results were announced May 7.

At the 15 stress-tested banks that have raised capital by selling stock to the public, no senior executives have recently reported buying shares themselves

I have to repeat what i have said in early May...

Let´s hope that the banks that have passed the test are able to attract as much "smart money" as fast ( window of opportunity probably short lived ) as possible...The taxpayer needs a break.....

Kann nur meinen Kommentar vo Anfang Mai wiederholen.....

Bleibt zu hoffen das zumindest die Banken die den Test bestanden haben in der Lage sind genügend "Smart Money" schnell genug ( befürchte das die Bedingungen nicht dauerhaft so gut sein werden ) einszusammeln.... Der Steuerzahler kann dringend etwas Hilfe gebrauchen .......

What's a C.D.O.?

I second what FT Alphaville has to say. Maybe they should send the link to all the "smart money" guys that are holding all this stuff so that they finally understand what they are holding.....

Ich kann mich nur FT Alphaville anschließen. Man sollte diesen Link all denen schicken die Besitzer dieser Papiere sind damit Sie endlich begreifen was für eine halsbrecherische Konstruktion den Weg in die Bücher gefunden haben und warum es täglich vorkommen kann das aus AAA über Nacht Junk werden kann. Ich denke da ganz besonders an ein paar deutsche Landesbänker......

Far and away one of the best graphics we’ve seen. Kudos to Felix Salmon and the people at Portfolio

Make sure you click here to start the interactive beauty!

Laßt euch dieses Schmuckstück nicht entgehen und klickt hier um die interaktive Schönheit zu betrachten.

It remains to be seen if the write down from Royal Bank Of Scotland is enough.... Maybe the age of the CDO portfolio is an explanation why they still value the mezzanine tranche with 70 percent..... The same CDO in 07 would be definitley close to zero....

Bin gespannt ob die Abschreibung der Royal Bank Of Scotland genug sein wird.....Evtl. ist ads bereits fortgeschrittenen Alter des CDO Portfolios ja die Erklärung dafür das die Mezzanine Tranche immer noch mit 70% bewertet wird. Ein CDO mit Baujahr 2007 würde wohl eher bei null notieren......

At 30 November, GBM's exposure to these super senior tranches, net of hedges and write-downs, totalled £1.1 billion to high grade CDOs which include commercial loan collateral as well as prime and sub-prime mortgage collateral, and £1.3billion to mezzanine CDOs based predominantly on residential mortgage collateral. The CDOs are largely based on ABS issued between 2004 and the firsthalf of 2006

And with news like this Surge in Auto-Loan DelinquenciesIs Latest Trouble for the Economy via the WSJ it should be clear that the problem is spreading to all parts of securitisations.

Und mit Meldungen wie diesen Surge in Auto-Loan DelinquenciesIs Latest Trouble for the Economy dürfte auch bald der nächste Pfeiler der Verbriefungskredite mehr als nur leichte Schlgseite bekommen....

First came housing loans and the subprime-mortgage crisis.

Now, signs of stress are creeping into another key consumer area: auto loans.

Delinquencies in the auto-loan market are ticking up to their highest level in several years. Lenders are tightening terms in some cases, and interest rates have risen from the rock-bottom levels of a few years ago. About $575 billion in loans for new and used cars are made annually, according to the National Automotive Finance Association.

About 4.5% of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9% the previous month,according to a Lehman Brothers survey of companies servicing these loans. That is the biggest one-month jump in at least eight years. Lehman says 12% of subprime borrowers, who have poorer credit records, were delinquent on their 2006 auto loans as of September. That is the highest level since 2002 and up from 11.1% the previous month.

Wary of Risk, Bankers Sold Shaky Mortgage Debt

The real reason for the mess was that the so called sophisticated investors (institutional investors like pension funds, banks and hedge funds ) have done no research and obviously would be ready to win the casting for the sequel of "dumb & dumber"... Nobody was forced to buy this toxic waste and everybody with common sense ( that´s the problem) could see this coming from a very long distance. And they often call themselves "smart money"......

Niemand von diesen sogenannten institutionellen Investoren wie z.B. Pensionskassen, Banken, Hedge Fonds, Versicherungen, staatlichen Investmentfonds usw. ist gezwungen worden diesen Schrott zu kaufen. Jeder mit gesundem Menschenverstand ( da liegt wohl auch das Problem) konnte schon von weitem erkennen das diese Sache übelst ausgehen muß. Wenn man aber anscheined null Research macht und das Hirn ausschaltet braucht man sich nicht zu wundern wenn die Zeche zu zahlen ist..... Schmunzelt beim nächsten mal also wenn die Medien mal wieder vom "Smart Money" sprechen......


NYT As the subprime loan crisis deepens, Wall Street firms are increasingly coming under scrutiny for their role in selling risky mortgage-related securities to investors.

Many of the home loans tied to these investments quickly defaulted, resulting in billions of dollars of losses for investors. At the same time, many of the companies that sold these securities, concerned about a looming meltdown in the housing market, protected themselves from losses.

One big bank that saw the trouble coming, Goldman Sachs, began reducing its inventory of mortgages and mortgage securities late last year. Even so, Goldman went on to package and sell more than $6 billion of new securities backed by subprime mortgages during the first nine months of this year.

Of the loans backing the Goldman deals for which data is available, nearly 15 percent are already delinquent by more than 60 days, are in foreclosure or have resulted in the repossession of a home, according to data compiled by Bloomberg. The average default rate for subprime loans packaged in 2007 is 11 percent.

“There is a maxim that comes to mind: ‘If you work in the kitchen, you don’t eat the food,’” said Josh Rosner, a managing director of Graham Fisher, an independent consulting firm in New York.

The New York attorney general, Andrew M. Cuomo, has subpoenaed major Wall Street banks, including Deutsche Bank, Merrill Lynch and Morgan Stanley, seeking information about the packaging and selling of subprime mortgages. And the Securities and Exchange Commission is examining how Wall Street companies valued their own holdings of these complex investments.

The Wall Street banks that foresaw problems say they hedged their mortgage positions as part of their fiduciary duty to shareholders. Indeed, some other companies, particularly Citigroup, Merrill Lynch and UBS, apparently did not foresee the housing market collapse and lost billions of dollars, leading to forced resignations of their chief executives.

In any case, the bankers argue, buyers of such securities — institutional investors like pension funds, banks and hedge funds — are sophisticated and understand the risks.

Wall Street officials maintain that the system worked as it was supposed to. Underwriters, they say, did not pressure colleagues on trading desks or in research departments to promote securities blindly.

Nevertheless, the loans that many banks packaged are proving to be increasingly toxic. Almost a quarter of the subprime loans that were transformed into securities by Deutsche Bank, Barclays and Morgan Stanley last year are already in default, according to Bloomberg. About a fifth of the loans backing securities underwritten by Merrill Lynch are in trouble.

As early as January 2006, Greg Lippmann, Deutsche Bank’s global head of trading for asset-backed securities and collateralized debt obligations, and his team began advising hedge funds and other institutional investors to protect themselves from a coming decline in the housing market.

“He was really pounding the pavement,” said one hedge fund trader, who asked not to be identified because it could jeopardize his relationship with Wall Street banks.

Mr. Lippmann’s trade ideas — documented in a January 2006 presentation obtained by The New York Times — were not always popular inside Deutsche Bank, where the origination desk was busy selling mortgage securities. In the fall of 2006, Mr. Lippmann pitched bearish trades to the bank’s sales force at the same time the origination desk was bringing them mortgage deals to sell to clients.

Last year, Deutsche Bank underwrote $28.6 billion of subprime mortgage securities, according to Inside Mortgage Finance, an industry publication. In the first nine months of this year, the bank underwrote $12 billion.

Goldman Sachs also moved early to insulate itself from potential losses. Almost a year ago, on Dec. 14, 2006, David A. Viniar, Goldman’s chief financial officer, called a “mortgage risk” meeting. The investment bank’s mortgage desk was losing money, and Mr. Viniar, with various officials, reviewed every position in the bank’s portfolio.

The bank decided to reduce its stockpile of mortgages and mortgage-related securities and to buy expensive insurance as protection against further losses, said a person briefed on the meeting who was not authorized to speak about the situation publicly.

Goldman, however, did not stop selling subprime mortgage securities. The bank, like other firms, retains a piece of the securities it sells. A Goldman spokesman said the firm was not betting against the mortgage securities it underwrote in 2007.

Like Goldman, Lehman Brothers also started to hedge its huge inventory of home loans in the second quarter of this year, concerned about poor underwriting standards. But Lehman also continued to sell mortgage securities packed with shaky loans, underwriting $16.5 billion of new securities in the first nine months of 2007. About 15 percent of the loans backing these securities have defaulted.

At the center of the boom in mortgages for borrowers with weak credit was Wall Street’s once-lucrative partnership with subprime lenders. This relationship was a driving force behind the soaring home prices and the spread of exotic loans that are now defaulting in growing numbers. By buying and packaging mortgages, Wall Street enabled the lenders to extend credit even as the dangers grew in the housing market.

Not all banks continued to expand their subprime business. Credit Suisse, which had been a major player in 2005, pulled back aggressively, with its underwriting down 22 percent in 2006, compared with 2004.

But other Wall Street banks, pushing to catch these market leaders, reached out to subprime lenders. Morgan Stanley, which expanded its subprime underwriting business by 25 percent from 2004 to 2006, cultivated a relationship with New Century Financial, one of the largest subprime lenders. The firm agreed to pay above-market prices for loans in return for a steady supply of mortgages, according to a former New Century executive.

“Morgan would be aggressive and say, ‘We want to lock you in for $2 billion a month,’” said the executive, who asked not to be identified because he still works with Wall Street banks.

Loans made by New Century, which filed for bankruptcy protection in March, have some of the highest default rates in the industry — almost twice those of competitors like Wells Fargo and Ameriquest, according to data from Moody’s Investors Service.

Fremont General and ResMae, which also had high default rates, were big suppliers of loans to Deutsche Bank. Merrill Lynch had a close relationship with Ownit Mortgage Solutions, which filed for bankruptcy in December. Merrill also acquired another lender, First Franklin, for $1.7 billion in late 2006.

“The easiest way to grab market share was by paying more than your competitors,” said Jeffrey Kirsch, president of American Residential Equities, which buys home loans.

What is clear is that home loans were highly lucrative to Wall Street and its bankers. The average total compensation for managing directors in the mortgage divisions of investment banks was $2.52 million in 2006, compared with $1.75 million for managing directors in other areas, according to Johnson Associates, a compensation consulting firm. This year, mortgage officials will probably earn $1.01 million, while other managing directors are expected to earn $1.75 million.

> Can´t believe that after Ben Stein vs Jan Hatzius this is the second time i´m defending somewhat the banks. :-)

> Kann selber kaum fassen das ich nach Ben Stein vs Jan Hatzius bereits zum zweiten Mal binnen weniger Tage einige Banken verteidige. :-)