For all who doubt the Obama administration will raise tax rates into the stratosphere in the very near future, here is a chart created by dshort.com which compares the total level of debt to GDP with Federal tax brackets over the past century. The correlation between the two is unmistakable. Unless the administration promptly finds a way to reduce the massive amount of debt that it continues to issue (in March alone the US Treasury issued a massive $333 billion in net debt), tax rates will have no option but to spike to levels not seen since the 50's. And that means a tax bracket for the highest earners of about 90%... You didn't think socialism comes cheaply now did you?
The just completed 3 Month and 6 Month Bill auctions were the weakest ones conducted so far in 2010. Out of 14 auctions conducted so far across both maturities this year, the 3 Month closed at the highest rate seen since December, at 0.175%, coupled with the lowest Bid To Cover over the same period, coming in at 3 month low of 3.6.The same is true for the 6 Month: the closing high rate of 0.265% was the highest in 2010, combined with the weakest Bid To Cover YTD, at 3.63. Direct bidders once again came in to save the day.
The 10 Year is on the verge of breaking the 4% resistance, last seen in June 2009. This follows today's auction of 3 Months (0.175%) and 6 Months (0.265%). At last check we were a few thousandths away from the important psychological level, even as oil is surging.
As Zero Hedge first reported, the Fed is beginning its meeting discussing whether or not to hike the Discount Rate in a few minutes. The meeting is closed to the general public. We will bring you any decision reached by the Fed members as soon as one is disclosed (if any).
Wikileaks Releases Video Depicting US Military Slaying Of Dozen Iraqis Including Two Reuters EmployeesSubmitted by Tyler Durden on 04/05/2010 - 11:14
Wikileaks has released a classified video leaked by "a number of military whistleblowers" which depicts "the indiscriminate slaying of over a dozen people in the Iraqi suburb of New Baghdad -- including two Reuters news staff." Full video attached - warning: video is very graphic.
Today Rosenberg releases yet another piece that scratches the veneer off the government "data" and finds that the less presentable truth is always beyond just skin deep.
Today's two anti-inflation perspectives come from the creme of the crop of establishmentarianism, and two of those who had no inkling the biggest financial crisis in history was about to hit until long after it did, one of whom was responsible for creating it, and the other, responsible for using up taxpayer funds to stay in business: Moody's and Morgan Stanley. Despite the firms' track records, the thoughts presented merit presentation in this most critical of debates.
The payroll data Friday was roundly trumpeted as a sign the economy was advancing strongly. White House advisor, Larry Summers, is quoted in a headline projecting that the economy had achieved “escape velocity”. The concept, we suppose, is that the economy is finally free of the recession gravity that has been holding it back. The 162,000 jobs added were the best in three years. But the number was below the consensus and well below the more optimistic estimates that blossomed late Thursday. The primary negative in the report was a drop in hourly earnings. That is a rather rare occurrences with some mild deflationary implications. Another negative was the length of unemployment for so many folks.
Whitney Tilson's T2 rose 4.6% in March, and 10.1% in Q1, primarily due to its GGP holdings. Also, Iridium appears to still be in business and generating returns for T2. Other longs include such non-blue chips as Borders, Winn-Dixie, Resource America and Yahoo. The fund's short book seems to not have done so well, with key names Lululemon, DineEquity and MBIA surging during the period. The one bright spot on the short side was Palm.
RANsquawk 5th April Morning Briefing - Stocks, Bonds, FX
- America: time to rebalance (Economist) - somehow we don't see America becoming a massive producing/saving powerhouse ever... But that's just us
- Bernanke shuts down printint press - "America must walk without crutches on gangrenous legs" (Telegraph)
- Inflation fears cut two ways at the Fed (WSJ)
- Goldman openly defies Volcker Rule as it buys stake in Ganek's Level Global (Bloomberg)
- Greece and California - Debtor states (New Yorker)
- PIMCO's battling brains (LA Times)
- Joe Cassano to sneak by with no charges filed against him (WSJ)
- It's ponzimonium in the gold market (HuffPo)
- When stocks stop moving like a herd (NYT)
- Asia stocks, commodities rise as US employment data lifts recovery view.
- California hotel foreclosures climb as unemployment curbs business travel
- Construction spending in U.S. declines to seven-year low amid foreclosures
- Crude oil climbs to 17-month high amid signs of global economic recovery.
- Manhattan apartment sales double as buyers seek bargains after price drop
- Mortgage rate on 30-Year fixed U.S. home loans rise to 5.08%
- Service industries in US probably grew at fastest rate since June 2007: Bloomberg survey.
The carry trade rout is accelerating, even as the euro keeps hitting new spec short records. After the prior week's (March 23) net short exposure hit a new record of -74,917, net euro shorts hit a new all time record of -85,326. This is occurring even as the cable saw last week's record shorts of -71,624 tighten marginally to just -67,073. Yet the biggest stunner was the whopping collapse in Yen net short positions, which moved from +10,161 to -30,866: the biggest net short in the Japanese currency since 2007. This is happening just in time for the Yen to hit fresh 7 month lows against the dollar, as the Yen is back to being the funding currency for all carry trades. The one currency which is openly being sold by its central bank, the CHF, saw shorts increase by 5.5k from -1,088 to -6.540.
With the US economy expected to drop to third place, behind China and India, with almost virtual certainty, by 2050, emerging markets, especially those that have a positive trade balance with the US, not just BRICs, will play an increasingly important role, especially now that the US trade deficit has become extremely politicized. Attached is a useful snapshot of the key emerging market trends, particularly in the context of waning economic powerhouses such as the US and Japan. As the authors observe: "The overriding common interest of China, India, Russia and the developed world is to find technological and political solutions to the challenges of energy security, climate change and the rebalancing of global demand. But free trade and free capital flows did not in fact survive the replacement of the UK by the USA as the world’s leading economic power, and this directly contributed to the Great Depression and huge undershoot in global equity returns of the 1930s. History warns that this could happen again, despite a strong common interest in “mutually assured prosperity.” However, this is just another way of saying that it is macro factors rather than micro ones that are most germane to the valuation debate. When people assert that the market is overvalued, they are really expressing their skepticism about the future of US productivity growth and/or the future of globalization. Logically enough, the reverse is also true: if you believe in the potential benefits of accelerating technological change and the dramatic rise of the emerging world, then the next decade for US equities is likely to be a bright one."
William Black: "If The Obama Administration Continues This Way, It's Going To Have A Record Disaster At The Mid-term Elections"Submitted by Tyler Durden on 04/04/2010 - 16:51
In this must watch Real News Network interview with William Black, the outspoken critic of all that is wrong and broken with the current system spares no words to once again denounce the (purposeful) ineffectiveness of the administration, and rightfully predicts that with Obama's current track record of inactivity in dealing with the corruption and criminality at the nexus of finance and politics, there will be a massive loss for Democrats at the upcoming mid-term elections. In Black's words: "We knew as soon as we saw Summers and Geithner that the finance side of the administration would be a disaster, but we hoped that political side would be preeminent and say a) this is substantively wrong to continue get in bed with finance and b) it's terrible politics. The democratic party will be crushed if it does this. The political side has failed to get involved. This is one of those rare things where doing the right thing is really good politics, so support candidates that will actually do the right thing. And if the Obama administration continues this way, it's going to have a record disaster at the mid-term elections. There's going to be a massive loss of democratic seats."