Is The PIIGS Moment Of Fracking Approaching? S&P Joins Sovereign Risk Brigade, Downgrades Greece To BBB+Submitted by Tyler Durden on 12/16/2009 - 13:46
More bad news for a troubled Greece. More bad news for a troubled Greece. And all this happening even as finance minister George Papaconstantinou says that Greece "is not banking and not operating under the assumption" that the Hellenic country will be bailed out by its Eurozone neighbors. He has certainly studied the Dick Fuld script well.
Too Bigger To Fail? St. Louis Fed Warns Over Concentration Of Risk In Ever Growing, Ever Fewer "Big Banks"Submitted by Tyler Durden on 12/16/2009 - 13:37
One of the numerous adverse side-effects of the horrendous policy decision to start bailing out each and every risky bank, and thus allowing no more risk in any investment (for the time being), has been the very simple observation that massively mispriced risk has gotten concentrated to an unparalleled degree among very few players. The population of Big Banks has been massively trimmed (Goldman thanks everyone for allowing them to have massive Fixed Income bid/ask spreads) and now a mere five banks account for the bulk of loans, deposits, and derivative exposure. When the economy is faced with another Lehman event at some point in the future, when bailing one of the Big 5 is no longer feasible, the delayed consequences which have so far been successfully swept under the rug, will come back in time and bury any positive legacy that the Man Of The Year may have created. One indication that this time may be sooner than most think comes out of the St. Louis Fed itself, which has released a paper titled "The evolving size distribution of banks" in which it highlights the expected: big banks are getting bigger, and are holding a record share of all rosky assets. When the asset repricing moment occurs, absent an apriori renewal of Glass-Stagall, look for the inevitable moment of complete House Of Cards collapse.
Recently, an extended analysis by Shadow Stats' John Williams evaluated the risk of a hyperinflationary episode as one which has the potential to come as soon as next year. Somewhat in support of this theory yesterday's read of PPI came in above consensus, indicating that inflation may indeed be coming. Yet today's CPI data, whose core read came in at 0.0%, may have just poured a whole lot of cold water over Williams' thesis. Nonetheless, at the end of the day Williams may be right: the question remains - if and when the excess reserves start hitting the broader currency (as the Fed is scared shitless to withdraw liquidity on its own), we may experience a transition from deflation to inflation so rapid, that is has no historic analog. At the end of the day deflation will likely be the name of the game for quite some time, until such point as "Man of the Year" Bernanke finally flips (the turbo print switch on), and any pretence of prudent monetary policy is thrown out of the window. At that point, look for the stock market to promptly go to 36,000 followed by an even faster drop to 0, all the while the dollar gets hyperdeflated (Zimbabwe redux). With the Administration set on not losing the midterm elections by a landslide, don't expect much in terms of economic experimentation at least until 2011. At that point, all bets will be off as the Fed will likely have at most 2 more years of shelf life before both its, and thus Wall Street's, life support are forcefully yanked out.
Citigroup: “Today we announced a series of transactions to repay the $20B of TARP outstanding and terminate the asset guarantee we received from the U.S. Government.”
Translation: I am sick of working for $1 per year.
Wells Fargo is repaying their $25Bn TARP loan. That makes WFC the last of the big boys to be done with the emergency loan program, just one year after it started. At this point $161Bn of the $245Bn lent out will be repaid with WFC raising $10.4Bn in a stock sale to get out from under the government’s thumb - just in time to pay out the Christmas bonuses. I won’t go off on a rant about how stupid it is for the banks to borrow and dilute in order to pay big bonuses and further punish shareholders by reducing earnings – it won’t matter anyway, any bank but C that announces they are done with TARP gets a nice boost as it indicates they can go back to raping and pillaging as usual in 2010.
While Bernanke is preparing to hit the TV circuit (after hiring Obama's exhausted teleprompter team) to cash in on his Time Warner accolade, even as he is set to do nothing at all about the liquidity bubble forming in every aspect of the economy, the much more logical and efficient country of Norway is doing the right thing, and in making sure its economy does not overheat, has raised interest rates by 0.25% to 1.75%. The target rate: 1.25%-2.25%. In other news: Goldman Sachs is not moving to Oslo.
One of the things that spooked the market yesterday was not so much any concerns of tightening language in today's FOMC statement, as much as a rumor that the Fed was planning on bumping up the discount rate. Krishna Guha, in a blog post, wondered, "might the Fed raise the discount rate at this week’s policy meeting? I think this is a possibility and should be considered as a risk factor. But I would not include a discount rate increase in my base case forecast for the meeting." The key reason for this would be the increasing desire of the Fed to "draw an increasingly sharp distinction between liquidity policy and monetary (interest rate) policy in the spirit of the ECB’s separation principle at this meeting and in subsequent communications." Yet the question remaind: is the Fed about to hike the Discount Rate?
- An unwelcome spotlight falls on SAC Capital (NYT)
- The middle class collapse (HuffPo)
- Congress punts problems to 2010 (Politico)
- As Goldman thrives, some say an ethos has faded (NYT)
- US gave up billions in tax money in deal for Citigroup's bailout payment (WaPo)
- 10 years of booms, busts and bubbles (MarketWatch)
- Asian stocks rise, led by Japanese financial companies; Dollar strengthens.
- Australia's Q3 GDP grew 0.2%- showing growth momentum isn't yet self sustaining.
- FDIC in 2010 plans to add more than 1,600 staffers, mostly to handle bank failures.
- India to levy antidumping duties of as high as more than 3x the value on some Chinese telecommunication equipments.
- Senate rejects plan to import low-cost drugs.
- Sugar jumps to highest price since 1981 in New York on deficit concerns.
- US Industrial output rises 0.8% - most in three months as recovery gains speed.
RANsquawk 16th December Morning Briefing - Stocks, Bonds, FX etc.
"Late last week, Nouriel Roubini, the current go-to bubble diviner, published a report entitled, “The New Bubble in the Barbaric Relic that is Gold”. The report is scheduled to be released to the general public tomorrow, December 15. We have read the report and we disagree with its conclusion. In fact, our ongoing analysis indicates gold’s terminal value in this cycle will be multiples higher than current pricing." - QB Asset Management
In a poll on Fox News, with over 163 thousand people voting, the vast, vast majority, or 99% of poll respondents are against raising the debt ceiling, claiming "This out-of-control spending is outrageous and irresponsible." (at least Obama will get time to sneak in another 50-60 stimulus bills before China says "no mas"). We are not sure just how scientific this sampling is, but we would give it the benefit of the doubt with these kinds of numbers. Remember - the Senate is about to raise the debt ceiling from $12.1 trillion to something like $14 trillion. This means that the Senate is about to go against the wishes of 99% of America. How the Administration hopes to moderate the unprecedented political fallout that is sure to follow such an action is far beyond our meager analytical skills.
Bernanke Adopts Decoupling, Discusses Gold, Does Not Think $1,200 Gold Is A Direct Affront To All Things KeynesianSubmitted by Tyler Durden on 12/15/2009 - 19:04
"Gold is used for many purposes, including as a reserve asset, as an investment, and for use in electronics, automobiles, and jewelry. Thus, fluctuations in the price of gold can reflect changes in demand associated with any of these uses, as well as changes in supply. In monitoring the price of gold, the Federal Reserve must attempt to interpret which of these factors is responsible for its fluctuations at any point in time. One of the ways we do this is by consulting other indicators of market sentiment. A number of measures of expected future inflation in the United States, including measures taken from inflation-protected bonds and surveys of consumers and professional forecasters, have been well contained. Accordingly, increases in the price of gold do not appear to reflect increases in the expected future of U.S. inflation. " - Ben Bernanke
Sen. Jim Bunning Releases 70 Responses By Bernanke As More Organizations Come In Support Of Pittman CrusadeSubmitted by Tyler Durden on 12/15/2009 - 18:12
More Mutual Assured Destruction from Ber Bernanke: "Without addressing every specific item, I believe that the release of much of the information requested would inhibit the policymaking process or reduce the effectiveness of policy and thus would not be in the public interest."
In other news Dow Jones, New York Times, the Associated Press and Reuters all have enjoined Bloomberg in demanding that Federal Court uphold the previous decision by the NY Supreme Court, seeking the Fed to disclose confidential bail out information.