The Wise Investor - March 2010, Monthly Newsletter From Sundaram BNP Paribas Asset Management
Submitted by Tyler Durden on 03/05/2010 - 16:31Deep thoughts from T.P. Raman, Managing Director of Sundaram BNP Paribas Asset Management (and others).
- Comments: 5
- Reads: 5,749
Non-Revolving Credit Rises By $7 Billion As Revolving Credit Dips Yet Again
Submitted by Tyler Durden on 03/05/2010 - 16:09The January G.19 statement is out, and confirms that consumers are buying ever more cars on credit, as if we didn't know this. Non-revolving credit, which is basically comprised of car loans increased by about $7 billion to $1.592 trillion, even as revolving credit continued declining, hitting $864 billion, down from $866 billion. Obviously, the market, which the last time the G.19 was released bounced, regardless that credit then declined by $4 billion is now bouncing again, not really sure why, but just tagging along with the computers. And the computers may very well be right: with the government soon expected to foot all consumer credit card losses in addition to GSE and financial firm toxic asset losses, why not just max it all out, after all mortgage payments are now about 6 months in arrears and nobody from the lender bank gives a rat's ass. Out of sight is out of balance sheet impairments. Credit is back, baby. And not like anyone will ever ask you to repay it.
- Comments: 24
- Reads: 2,621
Main Greek Opposition Party To Vote Against Austerity Measures
Submitted by Tyler Durden on 03/05/2010 - 15:31The primary Greek opposition party to the ruling Panhellenic Socialist Movement (PASOK, which currently has a Parliamentary majority) has announced in Greek daily Ekathimerini that it would vote against the Austerity bill, thereby splitting a tenuous and brief period of consensus with the ruling party. The conservative New Democracy, which controls a mere 91 Parliamentary seats (out of 300 total) has said it "will only back certain articles of the draft law when it is voted on in Parliament today." Just more political posturing, or a catalyst for even greater social unrest? Keep an eye out on the euro for hints (so far, none).
- Comments: 39
- Reads: 3,257
Sovereign CDS Ban On Deck; Next Up: Any EURXXX Short Recommendation To Land You Straight In Jail
Submitted by Tyler Durden on 03/05/2010 - 14:51“We must succeed at putting a stop to the speculators’ game with sovereign states. We can’t allow speculators to be the profiteers of Greece’s difficult situation. Derivatives must be curbed.” - Angela Merkel
- Comments: 71
- Reads: 3,850
As Extended And Emergency Unemployment Benefits Finally Begin Expiring, A Much Different Employment Picture Emerges
Submitted by Tyler Durden on 03/05/2010 - 14:31
The following very interesting analysis from Goldman focuses on an issue long-discussed on Zero Hedge and elsewhere, namely what happens when those millions in unemployed currently collecting unemployment insurance, finally start to roll off extended and emergency benefits, as terminal benefit exhaustion sets in, even with ongoing governmental unemployment stimulus programs. Goldman's estimate: approximately 400,000 people will no longer have the backdrop of so-called "government jobs" in which workers receive on average $1,200 a month for doing nothing. "If the rate of exhaustion continues at the current pace, this implies over 400,000 workers will exhaust their benefits in some months, even if Congress continues to extend the current, more generous, unemployment program." What this means for the economy is, obviously, nothing good: "Assuming something on the order of 400,000 exhaustions per month, at an average benefit of $1200 per month, this implies roughly $0.5 billion in lost monthly compensation compared with a scenario in which there are no exhaustions. If the relationship between exhaustions and initial claims 16 to 17 months prior (the maximum benefit period in most states) holds constant, the pace of exhaustions is likely to stay elevated for several months, implying several billion dollars in cumulative lost compensation." Couple this with front-loaded tax refunds, also previously discussed on Zero Hedge, and the "consumer-driven" economy in next few months is sure to see a rather substantial shakedown. Absent a dramatic increase in (c)overt Obama unemployment stimulus, is the extend-and-pretend phase of the bear market rally about to end?
- Comments: 102
- Reads: 11,460
Barney Frank Backtracks On GSE Statement, Realizes Put Foot In Mouth Yet Again
Submitted by Tyler Durden on 03/05/2010 - 14:30“To reiterate, I continue to think that it would be a mistake for Congress to take action that formally conferred on Fannie and Freddie debt the legal status of debt issued by the Treasury. But nothing in that position prevents Treasury from acting as it thinks best with regard to its obligation to provide stability to the housing market and the financial system.” - Barney Frank, Post Appendage In Mouth
- Comments: 35
- Reads: 3,003
Afternoon Fun: Remixing The Fed
Submitted by Tyler Durden on 03/05/2010 - 14:00A few days ago the Cleveland Fed released one of the most pathetic attempts at pandering public support in the form of a video clip that apparently was created by a special ed detention brigade. Today, we present a remix of the very same clip, whose message we believe is much more relevant to our current economic situation.
- Comments: 26
- Reads: 2,971
Does Expiration Of Liquidity Facilities Mean A Steeper Curve?
Submitted by Tyler Durden on 03/05/2010 - 13:47
As the Fed is ever-so-gradually shifting toward a tightening posture, many have wondered what will Bernanke's actions mean for the bond curve. With various liquidity facilities set to expire this month, and the recent discount rate hike already having been priced in, there has so far not been a muted response by the bond market, although over the past few days we have seen an odd tendency, albeit minor, for curve tightening. We say odd, because as Morgan Stanley points out, the Fed's actions, coupled with an unwillingness to actually hike rates, should be one benefiting ongoing steepening. Then again, the problem with that logic is that at this point going steep is like buying Greek CDS today: it pretty much means sloppy hundreds, with very few greater fools left over (and without the opportunity to arb a naked-short position via another nearly busted GGB auction). The silver lining is that at least the government will not go after you with an arrest warrant: after all the government wants nothing else more than a vertical yield curve. A brief analysis by MS details the argument for why steepening makes all the sense in the current environment where the long-end is looking increasingly shaky courtesy of marginal liquidity contraction, all the while risk-flaring episodes such as those in Dubai and Greece will likely keep the short-end well bid for months, if not years, to come.
- Comments: 15
- Reads: 2,467
Guest Post: Mind the Capital Gap - No Relief for Austria's Banks
Submitted by Tyler Durden on 03/05/2010 - 12:57While clueless politicians and bankers have still not come up with decisions that could turn around the economy, Mr. Market may soon force them into action. Greece may dominate headlines these days, but this buys other equally distressed Eurozone economies time to fly under the radar. Market talks center around the PIIGS (Portugal, Ireland, Italy, Greece, Spain) these days. While they fill headlines there is one Eurozone country that may be a stealth ticking bomb: Austria.
- Comments: 18
- Reads: 3,675
Will The US Devalue The Dollar?
Submitted by Tyler Durden on 03/05/2010 - 12:38It is well-documented by economists at SocGen and elsewhere, that the world has now entered a race to the currency bottom. Ongoing recent actions by the BOJ, ECB, SNB and all relevant central banks have made this a near certainty. Yet the biggest question mark is how the US will approach the imminent dollar devaluation (and with many trillions in debt overhang needing to be rolled over, the Fed has two options: accelerated inflation or dollar devaluation) - will it be a gradual process or rapid and unexpected. A paper by Darryl Robert Schoon analyzes the various forces at play when evaluating the probability of a dollar devaluation. "Capitalism cannot function unless its constantly compounding debt is serviced and/or paid down. Today, the US, the world’s largest debtor, can no longer pay what it owes except by rolling its debt forward and borrowing more, what the late economist Hyman Minsky called ponzi-financing, financing common in the final stages of mature capital systems...We are in what Stephen Roach, Chairman of Morgan Stanley Asia, calls the end-game, the resolution of past monetary excesses and imbalances, excesses and imbalances that reached never-before-seen heights in the last decade." Nothing too surprising for regulars, yet a good summary of the dilemma facing the monetary authority of the United States.
- Comments: 153
- Reads: 9,229
EURJPY Back To Perfect Correlation With The Market
Submitted by Tyler Durden on 03/05/2010 - 11:58
Risk on - short yen for euros, buy stocks. Rinse, repeat. EURJPY back to 1.000 correlation with the S&P. Algo signals working AOK.
- Comments: 21
- Reads: 2,671
Barney Frank Rebuffs GSE Reform Efforts, Says Fannie And Freddie Bondholders Will Not Be Made Whole
Submitted by Tyler Durden on 03/05/2010 - 11:51The latest update in the ongoing GSE drama comes from Barney Frank who during a conference of black, Hispanic and Asian Realtors
in Washington said the following: “Please don’t think this is federally guaranteed, I don’t
think it is, I don’t think it should be, I don’t feel any
obligation to bail you out.” Well, that comes almost two year two late after the government already made all GSE lenders whole. Barner's posturing is merely in response to Republican efforts to account properly for GSE liabilities which, courtesy of their conservatorship status, are explicitly backed by the government. Of course, should the GSEs be put on the budget, the US debt/GDP, as pointed out previously on Zero Hedge, would surge by nearly 50%, from 90% to 140%. But Barney Frank, just like Peter Orzsag, is all about semantics.
- Comments: 29
- Reads: 3,025
Absolute Return Partners Discusses The Economy, The Market, And The Retirement Lottery
Submitted by Tyler Durden on 03/05/2010 - 11:24My parents were lucky, because they started saving in earnest in the early 1980s, at the outset of what would become the biggest bull market of all times and, by the time the bull market came to an end in 2000, they were home and dry. In that 20 year period, a global equity portfolio generated an annualised real return of just over 13% in dollar terms, equivalent to a total inflation-adjusted return of about 850%! Unfortunately, not everyone has been that privileged. My generation has only been saving for the last decade or so, and we are still under water. $100 invested in April 2000 is worth about $77 today in real terms. I, together with hundreds of millions of other baby boomers across the world, am now chasing whatever returns I can find to ensure that my retirement can be enjoyed in relative comfort. But the force is not with us. The equity market continues to be a dangerous place and the value of our property has also fallen precipitously. - Niels Jensen, Absolute Return Partners
- Comments: 12
- Reads: 4,125
Real Unemployment Rises 0.3% To 16.8%, Non-Seasonally Adjusted Number Near All Time Highs
Submitted by Tyler Durden on 03/05/2010 - 10:58
With economic optimism back over the U-3 data, which was "surprisingly" not impacted by mid-winter snow (but as Art Cashin says, a horrible number would have been seen as a buying catalyst due to the "non-recurring" nature of snow in February), many seem to have missed that real unemployment, or the BLS' U-6 series actually climbed by 0.3%, to 16.8% from 16.5% in January. Additionally, the Non-Seasonally Adjusted U-6 number was barely changed, and was flat at 17.9%, just a hair away from January's record 18%.
- Comments: 79
- Reads: 11,438
Morning Musings From Art Cashin
Submitted by Tyler Durden on 03/05/2010 - 10:22Pretty much sums it up: "Payrolls and the dollar likely set the tone. Athens’ streets may also influence. Stay very nimble."
- Comments: 10
- Reads: 3,252
