Sept 11.
–Small net changes in interest rate futures. AAPL had a reversal and closed down 2.6% so SPX closed lower. Today’s news includes 3 year auction, followed by tens and bonds on Wednesday and Thursday. There was a new buyer of 15k TYV 134c for 8 at the end of the day covered 132-25 to 25.5; Oct 133 straddle closed strong at 1’03. Vol bid in front of Thursday’s FOMC announcement? Not in dollars, October red midcurve 9962 straddle was sold 5k at 7.5. Breakeven on the Oct TY straddle is about 12.5 bps with 11 days to go vs 7.5 bps on EDZ13 with 32 days.
–Another $1T fiscal deficit for the US (though better than last year) with August awful at -$192B. According to Washington Times, Soc Security spending +6% and Medicare +4%. Long bond yield keeps looking as if it wants to surge higher, but can’t quite decide…weighing unsustainable fiscal trends against Federal Reserve monetization (which should ultimately be inflationary as well).
Below is about Chicago…just an aside.
–Chicago teachers strike is entering its second day. It’s amazing that agreement couldn’t be reached given that Obama is from Chicago, the mayor Rahm Emanuel was Obama’s Chief of Staff, and the Sec’y of Education Arne Duncan ran Chicago’s school system. According to press reports, one of the main sticking points isn’t money (the school board offered 16% raise over 4 yrs), but reliance on testing scores as a performance measure for teachers. The union contends that it’s unfair to teachers in impoverished areas, and I would have to say I’m sympathetic to that argument…cold and hungry kids that have bullets whizzing around them might not test well. (~350 murders in Chicago through August). I have to say that even I am surprised by some of the stats in these news articles:
(Reuters) More than 80 percent of Chicago students qualify for free lunches because they come from low-income households, and Chicago students have performed poorly compared with national averages on most reading, math and science tests.
Today, just 19 percent of the teaching force in Chicago is African American, down from 45 percent in 1995, the union says; organizers fear that shift means fewer teachers have deep roots in and passion for the communities where they work.
About 42 percent of the city’s 400,000 public school students are black and 87 percent are low-income, according to district figures.
http://www.reuters.com/article/2012/09/10/us-usa-chicago-schools-analysis-idUSBRE8890VS20120910
A Tale of Two Cities….
