The Big Picture

---

• Congressman Grimm: Corporations are the Heart and Soul of our Public
• Thursday Reading List
• Ugly Chart of the Day: Silver
• Sequencing the North by NorthWest Crop Dusting Scene
• Consumer Sentiment Remains Gloomy
• Come Get Your Sausage Right Heahhhh!
• Economic Data: Initial Claims, PPI, Inflation
• Hunting for Afghan Gold
• FT’s Wolf: Ultimately, China Does What’s “Convenient”
• 2 emails and zero calls, Street still bullish

Congressman Grimm: Corporations are the Heart and Soul of our Public Posted: 12 May 2011 04:30 PM PDT Direct quote from Congressman Grimm of New York (R-NY) on why a whistleblower bill should be watered down to protect corporate interests: Grimm (R-NY): "…but I wanna just strongly disagree with my colleague from NY that has left and it's this idea that the whistleblower we're protecting is the public. And that corporate America is not. That's a fundamental problem that we have of ideology. These corporations, a lot of the plumbers and all the different unions and teachers and every other person in America, they're invested in these companies. Their pensions are invested in these companies. It's corporate America that's providing all the jobs that we all talk about, creating jobs, who do you think is creating these jobs? This is where America works. This is where America invests. These corporations are the heart and soul of our public… So to think that we're pitting corporations against the public is just is this demonization that has to stop. The idea that we want these companies to succeed, not at the expense of a whistleblower, that's drawing a divide that is not there." Grimm’s comments come 1 hour 11 minutes into video Hat tip: Manal Mehta Branch Hill Capital This posting includes an audio/video/photo media file: Download Now

Thursday Reading List Posted: 12 May 2011 01:15 PM PDT Here is what is on my Instapaper: • Matt Taibbi: The People vs. Goldman Sachs (Rolling Stone) • Fixing Japan's Fiscal Mess (The Diplomat) • Special report: What triggered oil’s greatest rout (Reuters) • Grantham: Sell riskiest investments now (Market Watch) • Bill Black: Why CEOs Avoided Getting Busted in Meltdown: (Businessweek) • The Death of the McMansion (Slate) • Doctors trade integrity for insurance company profits (SF Gate) • Boehner's Views on Economy Contradicted by Indicators, Studies (Bloomberg) • Sense of justice built into the human brain (PLOS Biology) • The Dogs of War: Beloved Comrades in Afghanistan (NY Times) What are you reading?

Ugly Chart of the Day: Silver Posted: 12 May 2011 10:39 AM PDT Fascinating pair of charts showing the carnage in Silver via SLV. If the $35.76 level is not retaken, and relatively soon, its lights out for the poor man’s Gold. That could bode poorly for the shiny yellow metal as well. > Daily Silver Chart click for ginormous graph > Silver 30 Minute Chart (2 Weeks)

Sequencing the North by NorthWest Crop Dusting Scene Posted: 12 May 2011 10:00 AM PDT From the 1959 American thriller film directed by Alfred Hitchcock, starring Cary Grant, Eva Marie Saint and James Mason, and featuring Leo G. Carroll and Martin Landau. (North by NorthWest IMDB) > The image above of the crop dusting plane chasing down Cary Grant in Alfred Hitchcock’s North by Northwest remains one of the most iconic in all of moviedom. That this is so more than 50 years after its theatrical release only goes to show the visionary power and mastery of craft that Alfred Hitchcock brought to film making. (You can see a 4:23 long sequence at YouTube; but they do not allow embedding) Sometime ago, I went to an exhibit at the Block Museum of Art at Northwestern University in Chicago. It was filled with original notes, drawings, and other artifacts from Hitchcock’s work. I was reminded of this when thumbing through my copy of “Casting a Shadow: Creating the Alfred Hitchcock Film” by Will Schmenner and Corinne Granof, which accompanied that show. The film is a classic take on mistaken identity, with Grant playing a New York advertising executive mistaken for a government agent by foreign spies. The famous Crop Dusting sequence discussed up top is where we learn how far the spies are willing to go to get rid of Grant, but we also see that he has more survival skills than they bargained for. The book is a Cinephile’s delight, filled with all manner of delightful insider info to how Hitchcock actually made movies. One of my favorite pieces of Hitchcock lore from the book is below: It is the Cinematographer’s camera angles for the the crop dusting sequence. All 61 bullet points (below) represent a specific camera angle, a specific shot, as detailed below: > CONTINUITY FOR CORP DUSTING SEQUENCE, SCENE 115, 1. High Shot – Bus arriving – Man out. 2. Lonely figure (Sketch 3) (Shot Monday, Slate 211) 3. Waist Shot – Thornhill looks about him in four directions. a. Process plate for all Thornhill's Close Ups. 4. a. P.O.V. Through wide fence onto plowed field. (Shot Mondaym Slate 203X b. P.O.V. Empty road from where bus came (Shot Monday, slate 201) c. P.O.V. Wast Brush (Shot Monday, Slate 202X) d. P.O.V. Corn Field (Shot Monday, Slate 204X) e. P.O.V. Empty road ahead (Shot Monday, Slate 210X) 5. Closer Shot – Thornhill glaces at west with satisfaction and then looks up road expectantly. 6. Car (Mercury) coming down road left to right. Whips by. Whip Shot (Shot Monday, Slate 208) 7. Semi Close Up. Thornhill's head whips around. He turns back and looks up road. – Nothing. His expression changes as he hears a car and turns back in the direction of the previous car. 8. Second Whip Shot – Limousine coming along at not too fast a pace. Again car whips by. (Shot Monday, Slate 209X) 9. Semi Close Up – Thornhill's head turns with changing expression from slight apprehension to normal expectancy. 10. P.O.V. As the limousine is well down the road a truck comes. It approache at fast speed and whips by right to left. 11. Wind of rushing truck causes Thornhill to step back a shade. Overlap truck whizzing by. Shoot all alternates with and without dust. 12. Full figure of Thornhill standing lonely once more. There is a chugging sound off – he takes a step forward. (Shot Monday, slate 216) a. Closer shot of Thornhill as in #12. 13. P.O.V. Green sedan is turning around from corn field. (Shot Monday, Slate 213) 14. Waist Shot – Thornhill as he watches green sedan and reacts to action in #15. 15. P.O.V. Sedan comes to stop, man gets out. Wife inside, turns car. Man is left standing alone as sedan goes away. INTERCUT THIS WITH THORNHILL WATCHING ALL THIS. (Shot Monday, Slate 213) 16. Semi Long Shot two men isolated. One, one side of the road opposite the other. (Shot Monday, Slate 213) 17. Semi Close Up – Thornhill looking across at man. He dusts himself off. 18. Semi Long Shot – The man from Thornhill's P.O.V. He looks back to Thornhill. (Shot Monday, Slate 213) 19. Mendum Shot – Thornhill come to decision. He crosses the road diagonally. Camera panning with him until the man comes into picture right of screen – 21 for dialogue scene. a. Bus approaching to intercut dialogue scene #19. (Shot on Monday, Slate 215) 20. P.O.V. of Airplane. 21. Back to shot of two men (Waist). Bus pulls up to stop. Farmer gets on bus which pulls away. Thornhill left looking off at crop duster plane. 22. The crop duster is making turn on left-hand side of screen. 23. Waist shot – Thornhill watching it. 24. Plane coming nearer, and nearer, and nearer to camera. 25. Reverse – Thornhill viewing with alarm. 26. Objective Shot – STUDIO-Plane diving down on Thornhill, who ducks to ground. NOTE: PLANE REQUIRED FOR THIS SHOT, LOOKS OFF 27. Plane rising away from its dive and going away from us. 28. Fulll Figure – Thornhill rises to his feet – looks after the plane and looks about him desperately wondering where he can go. He is suddenly rooted as he sees. 29. P.O.V. Now coming towards him in line with the farmer's road. 30. Medium Shot – Thornhill, thoroughly alarmed dives off into ditch, camera panning him. He crouches down as plane is making a dive. 31. STUDIO SHOT – Plane makes a dive over Close UP Thornhill in ditch. Wheels go through rop of picture. Thornhill watching. 32. P.O.V. Plane going away again. 33. Medium Shot – Thornhill gets out of ditch and runs toward an approaching car. He tries to stop (by Robertson sign) but car goes on. 34. Close Shot – Thornhill looking after departing car. He looks off and sees …………………….. . 35. P.O.V. Plane turning and coming down above road apposite farmer's road. 36. Waist shot – Shooting over Thornhill's shoulder – plane is approaching him. Thournhill turns and runs toward camera. Camera tracks back. We now have a picture of Thornhill running with occasional frantic glances over his shoulder as the plane approaches him. The plane gains on Thornhill and dives close to him as he drops to ground out of picture. 37. STUDIO SHOT – Thornhill drops onto side road as the wheels again go above him. Bullets hit the road between Thornhill and camera. (Process plate required) 38. Alternate – See sketch 39 for alternate shot taken on as Thornhill funs under passing wheel. (Process plate required) 39. Close Shot – Thornhill rising in road. He looks off and sees ……… . 40. Long Shot – Corn as Sketch 41 41. Medum Shot – Shooting East Northeast. Thornhillm after looking at corn field, rises and dusts off,. Plane to right in the background in beginning to make a right to left sweep in a forward turn. (Wing over) 42. Closer shot. Waist hight – Starting with stationary camera. Dolly profile shot of Thornhill running with 203 glances over his shoulder left to right. After short run of camera, camera stops and Thornhill runs out of picture. 43. P.o.v. Dolly Shot – Camera moving backwards as though Thornhill seeing plane beginning to make a turn to come towards Thornhill. (Shot with 50 m.m. and 35 m.m lenses) 44. Thornhill dives from left to scene full figure and dives onto ground (Back field) 45. Flash – Skimming shot of leaves moving as Thornhill dives into the corn and weaves short way through it. The shimmering stops and the corn stays still. 46. Medium Shot – Thornhill lying doggo without any movement in the corn. 47. Objective Shot – Long shot the plane diving towards the corn and turning away. 48. Close Shot Thornhill – A dolly of set in his face but still lying doggo. 49. Long Shot – corn tabbed in the corner of the picture. The plane turns and now comes toward camera again. This time it starts to exclude dust. It swerves toward camera secluding dust. 50. STUDIO SHOT (Sky backing) – Close shot Thornhill – Roar of plane overhead. Thornhill's expression changes as asphyxiating dust falls all around him. He begins to cough and sneeze, etc. Camera dollies into close up shot. He needs air. He rises out of corn, takes a deep breath and goes off. 51. Long Shot – From corn field view point. In far distance is double gasoline truck with ocrn in foreground. 52. Close up Thornhill dives out of picture, camera left ( Studio Shot) 53. Double for Thornhill – Long Shot – Shooting towards the highway. The flying fall of Thornhill diving toward the highway and in the distant truck approaching. 54. Flash – Sky Shot – The plane circling after the corn dusting failure. This should be shot at a reasonable distance away. 55. Semi Long Shot – Thornhill diving onto the roadway, braces himself against the advancing truck which is only a short distance from him. He watches it frantically at the same time looking desperately off screen to the right. 56. Flash – The plane coming down the highway after Thornhill. 57. Medium Shot – The frantically waving arms of Thornhill. 58. The truck advancing on him as it swerves with a screech of brakes. 59. Thornhill (Double) losing his nerve, tries to dive away and slips between the wheels of the truck. 60. Flash – Low Shot of the plane scooping down with the big wheel in the foreground, coming to a screech and the plane dives at the same moment. 75 m.m lenses 61. Miniature Impact ~~~ Artwork, Cinematographers notes from Casting a Shadow: Creating the Alfred Hitchcock Film by Will Schmenner and Corinne Granof.

Consumer Sentiment Remains Gloomy Posted: 12 May 2011 08:30 AM PDT > “High gas prices, rising inflation, and increasing financial troubles has taken a toll on consumers.” That is according to the Consumer Reports Sentiment Index, which they began publishing not too many months ago. CR reports the index fell in May to 45.7 from 50.2 As the map above shows, however, the net result is somewhat unevenly distributed. One caveat with consumer sentiment — it tends to be coincidental, and not forward looking. > Source: CR Index: Consumers are more gloomy and stressed out Mandy Walker May 10, 2011     http://news.consumerreports.org/money/2011/05/cr-index-consumers-more-gloomy-stressed-out-sentiment-down-decline-financial-difficulties-employment.html

Come Get Your Sausage Right Heahhhh! Posted: 12 May 2011 07:10 AM PDT > Steve Chiotakis was a casualty of the financial crisis; he lost his job as a stock-broker in Frankfurt. Shed no tears for Steve, however, for he has entered into the Exchange Business: the Sausage Exchange Business, to be exact! He invested his $80,000 in savings, and has opened a lunch stand in the heart of the financial district where he used to work. He now served stressed out bankers, brokers, and exchange workers sausage lunches and fries named after the major indices, like the Dax, The Nikkei and the barbeque-flavored Dow Jones. His story is here: In Frankfurt, From Stocks to Sausages. His story makes us smile, until we are reminded of all the parallels with stocks and sausage in our domestic US stock markets. Let me explain: Once upon a time in America there was a marketplace where all types of order flow interacted. This was in the recent past (we are not taking you back to the 1988 specialist system, mind you; we are talking recent electronic trading history). What was neat about this place was the simplicity and intuitiveness of its inner workings. The electronic marketplaces typically utilized a price/time priority pecking order for simplicity and fairness. For example, if two orders to buy IBM for $50.00 were sent into an electronic book, they would be executed based on who was there first. If reserve books were utilized, then the visible portions would be eaten through in an intuitive manner. Orders were sent directly to these electronic exchanges, and they were meaty. Like steak! Spreads were relatively narrow (a few pennies), order execution times were measures in sub-seconds, and perhaps as long as a second or two. Average trade sizes were fairly robust (think a few thousand shares versus 116 shares). Liquidity flourished, and even so in crossing systems that complemented the visible electronic exchanges, such as ITG's Posit, or Instinet's Crossing Network (I wonder how Jim Ross is? He was a real nice guy). They were not called dark pools then, although those were the closest things to dark pools that any trader today will ever see. Is your memory jotted? Good. Now let's take a look at what we have nowadays. There is no simply phrased order (i.e. Buy 50,000 IBM at $50.00, or Sell 6,400 COMS at $16.75) that gets sent to an electronic exchange. Meaty orders instead enter a Sausage Grinder that cuts them up, shreds them into tiny pieces, and delivers them to a nebulous cloud of 14 "exchanges" and dozens of "dark pools". But they are not delivered directly to this cloud. No No! They are sent through "routes".  These routes are broker routes, as well as exchange routes, mind you. For institutional traders and retail traders, they work kind of like this: -       An institutional trader will typically use the algo of his/her choice, where it will be sent through an obstacle course of Select Liquidity Partners, Enhanced Liquidity Partners, Preferred Liquidity Partners, Dark Liquidity Partners, and even BFF Liquidity Partners, before they make their way to a protected exchange, to interact with other public orders seeking liquidity. The orders are all just dripping wet with liquidity we like to call the sweaty handshakes. The Liquidity Partners are of course all internalizers and DMM's, and the hierarchy of Liquidity Partners where the institutional order is sent depends on who is rebating the algo provider the best, and/or charging the least for execution. Time/price priority means nothing in this cloud. And when the order finally gets to the public markets, or the 65% of it that hasn't been nibbled, dark internalizers step ahead of the order by a thousandth of a penny, or co-located HFT firms beat the order to its intended price by a microsecond. -       A retail order is just flat out sold to the highest bidding internalizer, who will pay for that retail order because they will make money on the order. No cloud. Just instant conflict-of -interest. Just instant sausage. By the way Direct Edge updated some route for the month of May yesterday. From the Direct Edge website: Inside the May 2011 Release. -       EDGA will get a new routing strategy, called "ROBB" (no we did not name it; they did!) which automatically receives your algorithms order, and sends it through EDGA, BX, and BYX. -       EDGA will also get "ROCO", which takes your delivered algo order and routed it though EDGA + BX + BYX + CLC + MPM. Simple right? -       Direct Edge also improves "ROUC" so that your order routes through the DirectEdge book + CLC + MPM + other low priced destinations. -       To standardize the behavior for non-IOC orders, ROUD, ROUZ, ROBA, ROBX, ROBY, ROPA, IOCX and IOCT will be updated so that any remaining shares returned from the Router will interact with liquidity on the book and then post to the book, subject to re-pricing.  All other non-directed strategies already behave this way. Simple? Want to look at NASDAQ's routes? The routes from BATS? How about those from good old NYSE/Arca? Every route is a point of contact between an order and the market place, which is teeming with 60-70% HFT's that are owned by brokers, who own exchanges, who own dark pools and other exchanges, which are owned by different brokers. Simple? Why are you incurring slippage? Why are you leaking? It's the "liquidity", silly! Sausage. It's what's for dinner!

Economic Data: Initial Claims, PPI, Inflation Posted: 12 May 2011 07:02 AM PDT Initial Claims above 400k for 5th straight week For a 5th straight week Initial Jobless Claims printed above expectations, this week totaling 434k vs the estimate of 430k and last week was revised up by 4k to 478k. The 4 week average is now 437k vs 432k last week and its the most since Nov. While the Labor Dept said Alabama saw a jump in the filing for claims because of the tornados, they said it didn’t have much of an impact on the national figure. Continuing Claims were 56k higher than expected and were up 74k from last week. Extended Benefits fell by 43k. Bottom line, Initial Claims are now above 400k for a 5th straight week and points again to a recovery that is still lackluster. Inflation took bite out of retail sales April Retail Sales ex auto’s and gasoline rose just .2%, below expectations of up .5%. It’s still up 5.2% y/o/y and sales just ex gasoline was also up .2%. The volatile category of building materials rose .1%. Dept stores, restaurants/bars, sporting goods, health/personal care, furniture and electronics saw sales declines but rose in clothing, food/beverages, motor vehicles/parts, and online retailers. Bottom line, inflation took a bite out of April sales as gasoline station sales rose 2.7% m/o/m and 21.5% y/o/y. PPI above expectations Headline PPI rose .8%, .2% above expectations and the core rate rose .3% for a 2nd straight month, .1% higher than estimated. This brings the y/o/y gain to 6.8%, the highest since Sept ’08 and the core rate is now up 2.1% y/o/y, the most since Aug ’09. The headline gain was mostly led by energy which saw prices up 2.5% m/o/m while food was up .3%. Helping to boost the core rate was a .5% rise in passenger car prices and .6% gain in truck prices. Inflation in the pipeline was robust as intermediate goods prices rose 1.3% m/o/m, 9.4% y/o/y and crude goods prices rose 4% m/o/m and 23.7% y/o/y. In term of the market reaction to the hotter than expected wholesale inflation, the market focuses much more on the CPI out tomorrow with the Fed solely focused on the core component. Also, the sharp drop in commodity prices of late eases some of the pressure for now.

Hunting for Afghan Gold Posted: 12 May 2011 06:56 AM PDT Fascinating story in Fortune about a JV in Afghanistan by J.P. Morgan (JPM) and the Pentagon seeking to tap the country’s vast mineral riches: “Investing in conflict zones is often thrilling, but the great commodities rush that J.P. Morgan and the Pentagon are trying to spark in Afghanistan creates a risk/reward equation of a different magnitude. It’s extreme at both ends. When J.P. Morgan launched its Afghan initiative in 2010, violence was at its worst since the American-led occupation began in 2001. The Taliban have made a point of killing Westerners and have specifically said they would attack any companies involved in mining. Before our trip to the mine was done, our group would get a taste of the insurgents’ ability to strike violently and unpredictably. Then there’s the Afghan infrastructure — or rather, there isn’t. Big mines need power, lots of it. Outside of cities, only 15% of Afghanistan is electrified. The mountain roads — ungraded and often without guardrails — are perilous, I learned the hard way, particularly in winter. Seat belts? No one bothers. You crash, you die.” > > Source: J.P. Morgan’s hunt for Afghan gold James Bandler Fortune, May 11, 2011 http://management.fortune.cnn.com/2011/05/11/jp-morgan-hunt-afghan-gold/

FT’s Wolf: Ultimately, China Does What’s “Convenient” Posted: 12 May 2011 06:42 AM PDT ~~~ Source: FT's Wolf: They May Listen to U.S. but Ultimately China Does What's "Convenient"

2 emails and zero calls, Street still bullish Posted: 12 May 2011 05:23 AM PDT If there was any indication to me of where the Street lies in their positioning, still bullish or at least not bearish, yesterday was it. After officially getting bearish, I got all of 2 emails and ZERO phone calls on my note. I digress. China again raised reserve requirements just a day after the 5.3% CPI print and higher than expected loan growth. Before the move the Shanghai index closed at a 3 month low and copper is now at a fresh 5 month low. Oil fell at 4am after the IEA cut its 2011 oil demand forecast due to the response from higher prices. Indonesia left rates unch as expected but South Korea is forecasted to hike tonight. In Europe, Finland will go along with the Portugal bailout after a deal was reached within their gov’t and the Portuguese 2 yr yield is falling to a 3 week low. Greek unemployment hit 15.9% in Feb from 15.1% in Jan and Euro zone IP in March unexpectedly fell .2%. AAII: Bulls 30.8 v 35.5 Bears 35.5 v 31.9

You are subscribed to email updates from The Big Picture To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610

.