In a note earlier, JPMorgan expressed its concerns at the burgeoning cash balances held by banks which anticipate major writedowns in the future, and are fortifying themselves appropriately. "Key changes seen thus far in 4Q for large banks are the slowdown in growth in securities and the large 28%qoq increase in cash, while loans continue to decline at a little faster rate led mainly by C&I loans and also to some extent residential mortgages. We expect this shift will hurt net interest income into 2010." When the worm turns, look for this cash to evaporate promptly as massive upcoming losses need to be funded, and as equity raises will be out of the question, banks better pray they have enough cash in store for the really rainy days.Also, somehow the term "Too Big To Fail" was lost in translation, and according to JPM is now defined as " Flight To Quality."
Some indicative Chrysler-Fiat car sales in November 2009:
Sebring 3,044 (5%)
300 1,918 (-44%)
PT Cruiser 310 (-91%)
Cherokee 3,085 (-41%)
Viper 43 (-30%)
Durango 29 (-98%)
Philly Fed's Plossner Is First Fed Member To Publicly Disagree With Bernanke, Calls For Interest Rate Hike, Warns Fed Could Lose CredibilitySubmitted by Tyler Durden on 12/01/2009 - 13:57
And so the political wrangling over the Fed's role (and utility) is spilling over in the form of internal dissent. Earlier, Philly Fed President Charles Plossner became the first Fed member to call for interest rates hike "before unemployment or other measures of resource slack have diminished to acceptable levels." His full speech, which humorously compares monetary policy to the philosophy of hockey great Wayne Gretzky, is attached. The first shot in the bow of internal monetary policy disagreements has been fired: will the other Fed presidents, and ultimately the Chairman himself, stop the folly of their excess liquidity ways before it is truly too late?
Administration Preparing More Home(renter) Owner and Builder Subsidies Under The Guise Of "Home Energy Improvements"Submitted by Tyler Durden on 12/01/2009 - 12:12
The Obama administration, one-upping Helicopter Ben, will next start "accidentally" paradropping worthless $100 trillion denominated dollars out C5 Galaxy planes. At this point any pretense of fiscal responsibility is dead and buried. The administration is dead set on subsidizing every single part of the economy until the bubble pops. Next up on the agenda Cash For Revolutions/Pitchforks.
Some notable tidbits from Rosie's am piece: "We just came across a Bloomberg News article quoting an official from the state-owned Assets Supervision and Administration Commission (Ji Xiaonan, the Chief) as saying “we recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years.” China’s reserves, after a 76% buildup since 2003, currently stand at 1,054 tons, so we are talking here about the prospect of some pretty heaving buying in coming years." You have one guess what 9,000 incremental tons of gold demand will do to price: here is a hint "If China moves towards 10,000 tonnes, well, that would end up taking the gold price to $2,623/ounce if our calculations are in the ball-park."
ISM survey respondents claim the collapse in the dollar is their number one concern; others see hope in more Cash For Clunker programs. Please address your complaints to TheMonetaryTigerWoods@treasury.gov
SocGen On Life, The Universe And The Impending Burst Of The Biggest Central Bank Created Bubble In HistorySubmitted by Tyler Durden on 12/01/2009 - 10:49
SocGen report highlights:
We have just had the worst decade’s performance for equity investors on record
On a ten year view, equities may indeed prove to be a good investment
The lesson from Japan is that while de-leveraging plays itself out, the global economy will
remain extremely vulnerable
US equity valuations did not reach revulsion levels in March this year
Government bonds are now an extremely poor investment
Gold hits $1,199.43 overnight, a whisper away from the limit cover orders at $1,200 that will take gold to the stratosphere and will prove to Sideshow Fred that gold is the real deal, and that the Fed has lost control of excess liquidity.
- No QE yet - Japan to provide more cheap loans, Y10 trillion worth (Bloomberg, AP)
- AIG reduces government borrowings by $25 billion, by giving gov't more preferred shares (AP)
- Support best podcaster on the web and vote for The Disciplined Investor (TDI)
- In wake of Dubai, trying to predict the next blowup (NYT)
- Sultan Sooud Al Qassemi: This is not the end of the road for Dubai (FT)
- Gross: The Lehman Brothers of the Persian Gulf (Slate)
RANsquawk 1st December Morning Briefing - Stocks, Bonds, FX etc.
The man who singlehandedly destroyed Iceland, will not rest until he keeps repeating the same failed Keynesian experiment hoping for a different outcome, thus defining, as Einstein would say, insanity. Being a former Fed member, we would expect nothing less of Mr. Mishkin.
- Australia raises interest rates by 25 bps to 3.75% as economy rebounds.
- Auto loan delinquency rate rises in 3Q but some states improve, hinting at recovery.
- Bank of Japan leaves benchmark interest rate at 0.1%.
- Bank of Japan said it will provide 10 trillion yen in short-term loans to commercial banks.
- China’s manufacturing grew last month at the fastest pace since April 2004- HSBC survey.
- Dubai, Abu Dhabi exchanges fall for 2nd day after Dubai World debt bombshell announcement.
The earlier announcement of a 25 bps rate hike by the RBA was not a big surprise. What was, however, was the knee-jerk reaction by both the USD and the JPY, and specifically the relative sizes of said jerk. As both currencies are funding currencies to AUD longs, the relative reactions provide a good, if crude, way to quantify the relative concentration of shorts in any givencurrencies (USD and JPY). Then again, it may merely indicate that tonight's USD-trading night shift at Goldman had much more Red Bull than the OZ one. In either way, both the initial knee jerk reaction as well as the subsequent follow through, indicate a roughly 50-100% greater concentration of dollar than yen-based shorts: in other words: the carry ratio funded in USD and JPY is between 2:1 and 3:2.