Ratigan Rips Apart Bernanke's Biased And One-sided Defense Of The Fed; More Perspectives From Sen. SandersSubmitted by Tyler Durden on 11/30/2009 - 13:53
A follow-on interview by Dylan Ratigan of Senator Sanders confirms what everyone knows, that Bernanke is "part of the problem. The middle class in America is collapsing. We've seen incredible greed and recklessness and illegal behavior on Wall Street. This guy was running the ship and he didn't see it, and he allowed it to happen. Bernanke served in the Bush administration as Chairman of his economic advisors in 2005. The people last year voted for change and it makes no sense to me that President Obama is reappointing somebody who was appointed by Bush, who is a conservative republican, who missed the boat on the most significant economic crisis since the Great Depression. We need a whole new direction in the Fed and in our economic policies. A direction that stands up for change not for the rich, not for the top 1%, not for the giant financial institutions, but for the working class and the middle class of this country, and nobody, but nobody thinks that Ben Bernanke is that person."
Willem Buiter Picked By Citi In First Round Of Chief Economist Draft, Promptly Adopts "Bianco-esque" Party LineSubmitted by Tyler Durden on 11/30/2009 - 13:37
With Citigroup's latest Chief Economist addition in the face of one Willem Buiter who earlier ironically had said that "Citigroup [was] a conglomeration of worst-practice from across the financial spectrum" now facing much more pro-cyclical scrutiny, it is not surprising that earlier he promptly picked up the party line and stated in a Bloomberg TV interview that Dubai is "not systemically significant." The jury is still out on what the full fallout of the massive CRE collapse in the middle east, which is basically what Dubai was a levered play on, will cost the developed world. Nonetheless, one does get flashbacks to many other short-sighted pundits (some long since gone from the public arena, others who are about to be renominated for Fed Chairman positions) who claimed that subprime was also comparably contained. Time and a few hundred billions in additiona bailouts will determine if Citi's new macro brain is proven right.
The chart below, courtesy of CreditTrader, demonstrates that the sovereign credit spread between BRICs and PIIGS (Portugal, Italy, Ireland, Greece and Spain: the Eurozone's weakest legacy links) continues converging. The market is now fully expecting the next risk flaring event to occur deep within the bowels of Europe. And with the ECB's head stuck firmly up its rear end, and in fact threatening it is preparing to raise rates, the Stardust has started a line on the number of months before the break up of the European Union experiment becomes a fact.
After the first repo test was a complete failure, the FRBNY has decided to try one more time. However, unlike the large test conducted before, this time the Liberty 33 "plan to conduct a series of small-scale, real-value transactions with primary dealers." Anything coming from the New York Fed that has the "real value" stigmata attached to it makes one wonder if April 1 came late this year. We can not wait to report on the near-certain failure that this particular round of repo tests will once again be proven to be, as banks simple can not wait to onboard the toxic filth they so graciously have handed to US taxpayers over the past six months.
Goldman Believes Two-Thirds Of Financial Losses Realized, Completely Ignores Derivatives And FAS 166/167Submitted by Tyler Durden on 11/30/2009 - 12:05
"Bad loans = big losses" Golaman's most recent quantification of bank losses begins objectively enough, yet promptly devolves into yet another cheer fest for the financial system. GS promptly rehashes its estimate of "only" $2.1-2.6 trillion in bank losses, slighty adjusting the composition of loans it believes will go bad, while completely ignoring the onboarding of off-balance sheet liabilities (FAS 166-167) as well as any and all potential losses in the derivative realm, where Goldman itself is on the hook for tens of trillions in gross notional. The only thing missing from this fluff piece is a Conviction Buy rating on Goldman itself (but the Conviction Buy on toxic credit card and real estate debt laden BAC, JPM and COF is certainly present).
Looking at the mudslinging campaign going among economic strategists, one would think the presidential elections are early (and for once we may just elect someone who understands something...anything... about the economy). First we had Rogers and Roubini, and now it appears that the Bull-Bear combo of Saut-Rosenberg is next to take center stage.
Always searching for a positive inflection point to upgrade the living daylights out of, Goldman now sees major upside in steel stocks, with X making the Conviction Buy (aka GS Prop Desk Conviction Sell) list.
- Dubai World's debt not guaranteed by government (Bloomberg)
- Taxing Wall Street today wins support for Keynes idea of 1936 (Bloomberg)
- How many FSB chimps does it take to make a Systemic Risk candidates list: where the hell is Citi? (FT)
- Ferguson: An empire at risk (Newsweek)
- How Fannie and Freddie sank in the subprime quicksand (IBD)
- Bernanke starts Fed debate early (WSJ)
RANsquawk 26th November Morning Briefing - Stocks, Bonds, FX etc.
- Asian stocks, currencies rise on optimism Dubai World losses won't spread.
- Bernanke says legislation limiting Fed independence Would 'impair' economy.
- China’s stocks rose after government pledged to maintain stimulus policies next year.
- India's GDP accelerates to 7.9%, may spur stimulus withdrawal.
- Japan's Fuji denies ruling out intervention in foreign exchange markets.
- Stocks in Dubai fall the most in a year on concern Dubai World may default.
Japan Preparing To Launch Quantitative Easing; What Are Three Lost Decades Among Hyperdeflationary FriendsSubmitted by Tyler Durden on 11/30/2009 - 00:06
A stunner to end the Black Friday news flow. It appears the race to the hyperdeflationary bottom just shifted into overdrive.
On December 3rd, senators will have to decide: will they vote with their conscience, or with Wall Street's checkbook. Bernie Sanders has made his choice: "No, I absolutely will not vote for Mr. Bernanke. He is part of the problem. He's the smartest guy in the world, why didn't he do anything to prevent us from sinking into this disaster that Wall Street caused and which he was a part of? No, I will not vote for Bernanke to stay on as chairman."
The National Retail Federation has reported that the average Thanksgiving spend has declined from $372 in 2008 to $343 in 2009, as more shoppers sought out rock-bottom 5 am bargains: the estimated number of bargain hunters increased from 172 million to 195 million.
Tobin Tax Opponents Are Ignoring The Real HFT-Induced Trading Toll; Why VWAP Is A Gold-Mine, But Not For YouSubmitted by Tyler Durden on 11/29/2009 - 14:47
Empirical data suggests that High Frequency Trading, and VWAP algos in particular, introduce numerous adverse selection and increased liquidity shortfalls relative to non-HFT trading strategies. The ultimate cost of currently existing HFT-mediated market tolling may far surpass any proposed transaction tax, implying trading costs may in fact be reduced as a Tobin variant removes the externality features associated with adverse HFT market-dominant algorithms.
Guest Post: Par Value During the Black Plague: Treasuries are Financial Teflon. Silver Makes Pretty SpoonsSubmitted by Tyler Durden on 11/29/2009 - 11:18
Silver has its place. It’s an industrial metal, has a nice correlation to equities, and has been used as money for thousands of years, which gives it a kinky personality. But don’t think that silver currency (or gold standard) is an effective way to handcuff government theft. As long as there have been silver coins circulating, there was a crooked Mint debasing them to its advantage. The “Tungsten Effect” is the rule, not the exception. Historically, the most common metal in coinage was lead. This is simply the nature of things. Cash of any kind exhibits exponential decay, a half-life. Real safety is found in paying your taxes.
The strongest discipline imposed on a state is not connected to its currency. Iron discipline stems from credit. The government bond market is the crown jewel of any state. A state will torch its constitution before it lets its bond market get crushed. It’s like choosing to repair a ruptured jugular instead of getting a facelift. So Treasury paper credit risk shouldn’t be a worry to anyone right now. As long as the United States is around, there will be Treasuries paper earning income, however meager. Let me say this in another way: if the Treasury market goes, so the does the U.S., and pretty much everything else with it. Wait… did I just feed the beast?