Who [Bought|Sold] How Many Treasuries In 2009?

Yesterday we first pointed out the rotation at the top of foreign US debt holders, with China selling $34 billion in USTs (shifting to a longer duration exposure by selling Bills and buying Bonds) to a new total of $755 billion, and giving up the top US debt holder position to Japan, which with $769 billion in UST holdings regained the top spot for the first time since August 2008. Overall, total foreign debt holdings in 2009 increased by $538 billion, with two unexpected buyers emerging in the face of Japan and the UK, which combined accounted for 58% (or $314 billion) of all 2009 purchases. We say surprising, because it has been long publicized that both countries have their own internal funding issues to grapple with: Japan an uncontrollable deflation and a demographic shift, which would make JGB's a better buying proposition than chasing micro yield in the US, while the UK is engaged in its own version of Quantitative Easing. With the BOE taking on excess supply one wonders how the UK can spare the dime to purchase our own debt (of which we have plenty more to issue in the future)?

Euro "Creator" Robert Mundell: Greece Is Not Biggest Threat To Euro, Italy Is

Nobel-winning Columbia professor Robert Mundell, considered the "father of the euro" provides some biased views on his creation, and how it is impacted by Greece (spoiler alert: this will only make the EMU stronger). To be sure, he sees no risks of Greece spillover into the broader eurozone, and in fact is calling for the adoption of the euro by Britain. Probably not worth holding your breath on that one. What he does highlights is that Greece is not the powderkeg - Italy is. This is inline with Bank of America and others' warning that the biggest concern in the eurozone crisis is indeed the Boot. "I think it would be very difficult to bail Italy out. I think we have to make sure that whatever is being done to Greece, and possibly to Portugal and maybe Ireland has to also save Italy. Italy has got to be worried...Right now I think they should let the euro ever, for the next 10 years, rise above $1.40." We are confidence Bernanke and Shirakawa will miss that particular memo.

Frontrunning: February 17

• Greece loses EU voting power in blow to sovereignty (Telegraph)
• Goldman Sachs didn't disclose swap, investors "fooled" (Bloomberg)
• BofE rate setters voted 9-0 to halt QE (Telegraph)
• Deja vu: Dubai World said to present restructuring plan in March... 2010 or 2999? (Bloomberg)
• Walgreen to buy Duane Reade for $1 billion (Reuters)
• UK unemployment jumps to highest since 1987 (Bloomberg)

Daily Highlights: 2.17.10

• Asian stocks, currencies rally on improved earnings, global growth outlook.
• China cuts US Treasury holdings by most (-4.3%) in decade; Japan buys more debt.
• Hong Kong Exchange expects more IPOs from overseas to tap China investors.
• Japan's Service demand fell 0.9% in December, biggest slide in nine months.
• Oil trades above $77 after advancing as Euro strengthens against Dollar.
• Treasuries decline on speculation US Housing, Production rose last month.
• Treasury says new loans by 11 TARP banks rose 13% in December.
• U.K. unemployment claims jump to highest since 1997.

Musings On Monetary Mendacity

The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct. What began as a routine report before the Senate Finance Committee Tuesday ended with Bernanke passionately disavowing the entire concept of currency, and negating in an instant the very foundation of the world's largest economy. "Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we…if we…" said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. "You know what? It doesn't matter. None of this—this so-called 'money'—really matters at all." "It's just an illusion," a wide-eyed Bernanke added as he removed bills from his wallet and slowly spread them out before him. "Just look at it: Meaningless pieces of paper with numbers printed on them. Worthless."

ABC Consumer Comfort Index Drops Again As "88% Of Respondents Think Economy Is Still In A Recession"

The one index that just refused to correlate to the market, and the UMichigan Index, and the Confidence Board, was released today, and once again hit a 2010 low of -49. The index has been in a -48 to -49 range for the past five weeks. The primary reason for this week's drop was due to a 6 point decline in the personal finance component, from -6 to -12, the lowest reading since December 6, with not much change in the other two readings: National Economy and Buying Conditions. It is somewhat confounding that this index persistently "refuses" to go up with all the other self-reinforcing confidence indices out there.Maybe this is the reason: from the report "Eighty-eight percent think that the economy, despite what economists say to the contrary, is still in a recession."

I Will Take That EPS Beat With A Shaker Of Salt Please

A just-published study covering nearly 500,000 corporate results over 27 years found how companies “round up” their numbers to beat their estimates fractionally knowing that the fast-money momentum players will trade the stock price higher. On average, it only takes $31,000 in quarterly net income to beat estimates by a penny, which can be handled easily by a tweak to inventory valuation. The report also showed that companies that find ways to “round up” are also the ones with the highest propensity for re-statements in the future. Well worth a read and hopefully ends the nonsense that we see in the media and Wall Street reports over the extent to which financial results are meeting or beating pre-conceived EPS projections. - David Rosenberg