Two Cases Against Inflation

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.

Whitney Tilson Fund Update

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.

Frontrunning: April 5

• 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)

Net Yen Shorts Surge Even As Euro Shorts Hit Fresh Record, And Cable Sentiment Near Record Negative

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.

William Black: "If The Obama Administration Continues This Way, It's Going To Have A Record Disaster At The Mid-term Elections"

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."

Michael Burry Demolishes The Fed's Self-Perceived Infalliblity, Discusses The Cost Of "Extend And Pretend"

The recently (in)famous Michael Burry, writes a blistering op-ed for the NYT, in which he implicitly asks one simple question: just how dumb are Alan Greenspan and Ben Bernanke? The man who foresaw it all, subprime crisis, banking system collapse, counterparty risk, CDS scapegoating and emerged from the second coming of Great Depression 2.0 a much wealthier man, has so far had exactly zero invitations to share his insight with Washington's Wall Street proxy legislators, and, in addition, has had his forecasting skills called a "statistical illusion" by the very same Greenspan who took the economy to the brink, and whose successor is now doing just that in the second doomed great reflation experiment. At this point one has to be an immaculate idiot (read Chairman of the Fed) not to see, that what the Fed is doing with the pursuit of the same catastrophic monetary policy which failed the first time around, and will fail now, is pushing us straight into the abyss, from where America just barely managed to crawl out in 2009 via $3 trillion in additional public debt issuance to date (a number which will likely hit $10 trillion within the next 5 years, to result in a debt-GDP ratio of approximately 200% when including the GSEs). It has gotten so bad that even Fed governors are begging Bernanke to stop the madness before it is too late: a first sign of internal mutiny. Alas, just like when everyone ignored Michael Burry, who laughed into the face of conventional groupthink in the mid-2000's (which by definition is always wrong, and will be this time around as well), so will Wall Street and its proxy, Washington D.C., ignore that which is all too obvious until it is once again too late. Hopefully by then intelligent and very rich life on Mars will be discovered, cause there will be no one left to bail out not just the US, but the world.

With Massive Money Market Outflows (And Little Reinvestment) Are Consumers Funding Spending Habits Via MM Liquidation?

In its attempt to reignite the credit and risk bubble, the administration will stop at nothing from getting mom and pop to throw their zero interest earning Money Market funds away and to invest it all into shares of Apple and Amazon stock. Yet while holdings in money market funds are literally evaporating (down 8.5% as a % of total assets in the past 3 months alone), the proceeds are going not into stocks, but into IG and HY bonds (to a marginally greater extent), but mostly into Government Bonds. The greater population is betting an increasing amount of its life savings that David Rosenberg is right, and that Jim Grant, and all the other Bond bears, are wrong. In the week ended March 31, 2010, $32 billion in Money Market funds was pulled, according to Lipper/AMG, the third biggest outflow since the collapse of Lehman brothers. Year To Date, a massive $274 billion in money markets has been withdrawn, yet under $200 billion has been reinvested, of which $100 billion has gone into All Taxable Bonds (i.e., non IG, HY, Bank, EM, and Global debt) implying Treasuries are the primary investment class for the broader population by a massive margin. What about the $80 billion delta? Have investors pulled $80 billion from money markets without reinvesting, simply to purchase any and all deferred products and services? Has the government converted money markets into piggy banks for simple purchases, instead of a source for pushing stocks higher? Of course, with cash in MMs earning nothing, Americans would rather extract at least some intangible joy from owning a one-day fad like the latest iToeclipper from Steve Jobs, then see their cash do nothing (and hope that the deflationists will be proven correct at some point in the (not so) distant future). Too bad the levered and unlevered cash flow from that Kindle or the iPad is zero at best and worst.