Summary Bank Results Recap

• Morgan Stanley Q4 EPS $0.14 versus analyst estimate of $0.42; Revenue $6.8 billion vs Est. of $7.8 billion   
• Bank of America Q4 EPS ($0.60) versus analyst estimate of $(0.52),
  Revenue of $25.4 bn vs Est. $26.9 bn; $10.1 bn in loss provisions
• Wells Fargo Q4 EPS $0.08 versus analyst estimate of $0.01; $25 bn in loss provisions - $500MM increase

Both Morgan Stanley and Bank of America join JPM in revenue misses: so much for the fabled revenue recovery in Q4.

Guest Post: Media And Political Hysteria Over Yemen Hides A Deeper Strategic Matrix of Long-Term Importance

US and Western European political leaders have begun to focus on Yemen as a source of projected instability and as a haven for jihadist terrorism against the West.

This simplistic and overly narrow view has largely been a reaction to media reporting of the links of alleged (and unsuccessful) Nigerian-born terrorist bomber, Umar Farouk Abdulmutallab, to a radical Yemeni group, and to intense ongoing fighting between insurgents and Yemeni and Saudi government forces on the Yemen-Saudi border.

The reality is far more complex and far-reaching.

Insider Selling Outpaces Buying By 24 Times In Last Week

What is there to say about the endless barrage of insider sales that hasn't been said for 9 straight months before. Insiders are selling into the neverending rally, as domestic mutual funds have no equity inflows, yet stocks somehow miraculously keep rising, providing yet more attractive exit price points for directors and insiders. In the past week insiders bought $18 million worth of stock and sold $419 million. There is no way to spin this data. There were no notable buyers, while Nelson Peltz was vacating HNZ shares with a vengeance, selling $30 million worth of the canned food maker. Ralph Lauren also apparently wasn't too hot on Polo's Spring/Summer collection.

Hedge Fund Launches And Re-Openings Surge; Top December And Notable 2009 Hedge Fund Performers

Notable 2009 performers:

• Paulson Credit: 34%
• York: 45%
• Maverick: 24%
• Moore Global: 22%
• Tudor: 15%
• Brigade: 40%
• Davidson Kempner Distressed: 45%
• Brevan Howard: 19%

PIMCO Sells $37 Billion In Treasuries, Adds Bunds, MBS And Cash As Total Return Fund Hits Record In December

Congratulations Bill Gross: PIMCO's flagship Total Return Fund closed December at $202 Billion, representing $70 billion in net inflows, more than the combined inflows of the prior three years. December also saw a curious reshuffling of TRS' portfolio: Gross sold a whopping $34 billion in Treasuries, bringing the total to $64.6 billion from $101.7 billion in November. And while the bond manager surprisngly added $10 billion in MBS (now accounting for 17% of holdings) after selling $95 billion in MBS to the Fed in the previous 10 months, for the first time (probably ever) PIMCO's holdings of Treasuries and MBS accounted for less than half of total holdings. As was previously noted, Bill Gross notably increased his non-US Developed country bond holdings by $22 billion to $32.3 billion, which is a direct result of his recent purchases of German Bunds.

Roubini Blasts Faulty Fed Monetary Policy

Joseph Mason from Roubini Global Economics has written an interesting analysis of Fed monetary policy, focusing on the Fed Fund rate as the primary tool of economic intervention, in which concludes that the Fed's traditional weapon for moderating the business cycle is becoming increasingly irrelevant, and has reached a point where the traditional central bank arsenal could be considered irrelevant. By analyzing historical data of rate tightening into and during recessions, coupled with loosening interventions, Mason observes that by "reducing rates before recession may both add to the speculative fury that will (eventually) necessitate the (potentially larger) downturn and leaves no room to lower rates in order to address lagging effects like unemployment." If correct, and if the excess reserve phenomenon currently witnessed, which is purely a function of negative implied interest rates per the Taylor rule, is unable to force the economy into a recovery mode, the Fed will be left with absolutely no additional mechanisms to facilitate monetary expansion, resulting in an impotent Federal Reserve, whose only function would then become to fund balance sheet shortfalls at major financial institutions. And if there is a an actual empirical point arguing that the Fed no longer needs to exist, in addition to all the rhetoric we have witnessed over the past year which implicates the Fed as merely a proxy vehicle for banker status quo perpetuation, this could very well be it.