"The Fed must curtail its emergency credit and financial market support programs, raise the federal funds rate target from zero back to a more normal level, probably between 3.5 and 4.5 percent, and restore its balance sheet to pre-crisis size and configuration." Kansas City Fed President Tom Hoenig
Total Non-Seasonally adjusted insurance claims (consisting of Initial, Continuing and EUC claims) hit another record of 11,268,100. Make of this data what you will. We are confident the objective, mainstream media will find a way to spin this favorably (it can only go down from here... of course, unless it doesn't).
"We now have a financial system that is completely based on moral hazard...Crazy things happen when you have financial system like that... The conventional wisdom is you can't have back to back major financial crises. I think we're going to push that, we're going to have a look and see whether that's true. The next 12 months could really be exciting... But we are setting ourselves up for an enormous catastrophe." - Simon Johnson
The latest observation on our depressing economic reality, behind the glitzy headlines and the 3D TV screens, comes from Bloomberg's Jonathan Weil who rightfully asks "if AIG executives repeatedly claimed the stock was worthless, how do the executives, auditors, regulators, and, ultimately, the government, still have the balls to indicate the company's stock has any intrinsic value, both its publicly traded version and its book equity." Weil also joins the long list of people who wonder, just what the hell is the SEC's function in this day and age, when publicly-traded companies, many of them government backstopped, can disclose anything and everything they desire, even when such disclosure is flawed and purposefully misleading (see Bank of America and the earlier piece on a lying Tim Geithner and the very same AIG) with absolutely no repercussions. It is all really getting just far too depressing for US taxpayers to even be indignant. Maybe that has been the point all along...
Next week's Treasury auction schedule has been announced: next week will see a total of $159 billion in new gross issuance, consisting of $74 Billion in 3, 10 and 30 year Bonds, with two reopenings (10 year and 30 year).
In a pathological example of nearly clinical hypocrisy, PIMCO's Bill Gross yesterday dedicated 4 meandering essay pages full of polemical ramblings to the characterization of America's sad political and financial hybrid reality. Yet the billionaire's saddest message is precisely the self-deluded aggrandizement that Gross decries yet willfully takes advantage of every single day. Because after bemoaning the fate of America's broken political system, and ridiculing the Federal Reserve's kleptocratic-friendly ways, it is precisely people like the PIMCO chairman that are most guilty of taking advantage of every single loophole presented to them, even as they criticize just this activity. This, beyond all the petty trivialities that Gross discusses, is precisely what is most wrong with America - at this point everyone, and especially Mr. Gross, knows too well that the wealth transfer from the middle class to the elite 1% of society will not end until such time as America itself defaults. Yet having the very people that benefit the most from this, write non-apologetic letters in which they criticize the very system that lets them walk home every day with an extra zero in their bank account simply due to their special connections within this very broken system, is beyond reproach.
- Asian stocks rise, led by carmakers, banks; Copper gains, bond risk falls.
- Australian retail sales rose 1.8% in November - the most in eight months.
- China’s central bank said it will target “moderate” loan growth in 2010.
- Dollar near 3-week low on signs global rebound gaining momentum.
- Oil pulls back below $83 in Asia after cold weather sparks 20 percent rally since December.
- Spot iron ore delivered to China rose to the highest in more than a year amid “panic buying” by steel mills.
RANsquawk 7th January Morning Briefing - Stocks, Bonds, FX etc.
"As we look to December data (reported this Friday) if the seasonal adjustment multiple returns to anything in the range of historical norms it should provide a huge lift to the reported m/m change. In quantitative terms a return to the 1996–2008 average would create a seasonal lift of 431K to the as-reported m/ m change. In comparison the 1996–2007 actual December m/m change (unadjusted) was 116K. Put differently, if this was an average December for job creation and the adjustment factor returns to a historical average we would see a non-farm payroll print of +316K on Friday." - Stifel Nicolaus
SEC Hearing On HFT, Dark Liquidity And Sponsored Access Next Wednesday Will Achieve Absolutely NothingSubmitted by Tyler Durden on 01/06/2010 - 17:31
The SEC's highly overpaid bureaucrats will have to wake up early next Wednesday and read all the Goldman Sachs pamphlets on what a bid ask spread is, what predatory algos are, and why HFTs have hijacked the market in order to sound somewhat intelligent at a "Sunshine Act" hearing on high frequency trading, dark liquidity and sponsored access. Being insufferably worthless Wall Street puppets, the hearing will achieve nothing, and will be followed by a Sunset Act hearing in a few years, where a post mortem of all that could have been accomplished, but wasn't, will be eulogized, together with aremembrance of America's once alive capital markets.
Just as yesterday we shared the top 10 groputhink reasons for the rip in 10 years from 3.84% to 3.75%, so today we provide 10 possible justifications for the round trip back to 3.83%. Most likely, none of this is true or relevant, but we have to fill posts with content, even if it is complete bullshit.
Today's action is more of the same: aggressive selling on the far end of the curve has pushed the 2s30s to steep to quite steep levels yet again. In the meantime, the Mortgage spread is down to 64 bps, a 52 week, if not all time tight spread. Soon the Fed's purchases of MBS will make the mortgage market "safer" than 10 years. The 30 year MBS is already trading well inside of comparable Treasuries. So beside the constant and unrelenting market insanity, all is normal.
The Committee emphasized that it would continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. A few members noted that resource slack was expected to diminish only slowly and observed that it might become desirable at some point in the future to provide more policy stimulus by expanding the planned scale of the Committee’s large-scale asset purchases and continuing them beyond the first quarter, especially if the outlook for economic growth were to weaken or if mortgage market functioning were to deteriorate.