Archive - Oct 12, 2009

Developing story: The Chicago baseball team is the first to file for bankruptcy since 1970. The filing will facilitate the team's sale to Incapital's Tom Ricketts for $900 million. This development has been expected for a while, and follows on the Tribune's Chapter 11 filing earlier this year.

Topics covered include: 1. Mortgage servicing rights; 2. Early stage delinquencies; 3. Credit card chargeoffs (5.5%-6% at Citi would require a new capital raise, CapitalOne hitting 10%); 4. Fed subsidies to banks that expire into 2010; 5. The Commercial Real Estate "mirage"; 6. Trillions of dollars in off-balance sheet vehicles (what happens to these securitizations eventually); 7. JPM's downward management of expectations; 8. BofA's provisions and chargeoffs

Latvia, Sweden, the Netherlands, and now EU-member country Romania: the European periphery is ablaze, even as the Euro is at 52 week highs. It would be joke if it really wasn't so sad. Clariden Leu reports that "Romania's parliament looks set to topple the minority government on Tuesday in a no-confidence vote ahead of a November presidential election and raises fresh concerns over the country's IMF aid." For a country, whose financial future is closely tield with IMF goodwill, this could well be a catalyst event: "Economists warn about the impact of political standoff on fiscal reforms and budget cuts needed to ensure the International Monetary Fund continues to disburse aid from its 20 billion euro anti-crisis package."

Some marginal and long overdue divergence between bonds and loans, with the Sealy negative basis again being the most notable event. Loans tightened by 10 bps to 391 bps, while bonds widened by the same amount to 716 bps. Looking at the weekly comparison chart demonstrates that the bulk of activity is due to general noise, resulting from equity market carryover, while the two actual movers were Cenveo loans wide by 245 and Mediacom, which tightened by 372 bps. At this point expect the credit complex to continue being a derivative of the algo trading dominated equity market which grinds higher on imaginary volume breadth.

And you thought the FDIC had its hand full in the US (even though the ominous "lack" of failures this past Friday prompted many to ask whether or not the FDIC has any funds left to even take over the hundreds of upcoming bank failures). As of this morning, well-known Dutch bank DSB Bank, which gives loan to lower-income people, has been put into "curatorship" (another words for taken over by its respective central bank), after its clients staged a full-blown bank run. This is probably not good news for the former secretary of finance Gerrit Zalm, who was previously CFO of DSB and is currently CEO of ABN/AMRO.

"The IMF’s Q2 COFER data show that central banks are increasingly reluctant to accumulate USDs. EM central banks appear much more aggressive than in the past in shifting out of the USD into other G10 currencies. This makes it likely that USD pressures will mount as, increasingly, the currency’s buyers of last resort are reticent buyers." - Barclays Capital

In a decision as shocking as Friday's surprise peace prize win, President Obama failed to win the Nobel Memorial Prize in Economic Sciences Monday.

While few observers think Obama has done anything for world peace in the nearly nine months he's been in office, the same clearly can't be said for economics.

The president has worked tirelessly since even before his inauguration to wrest control of the U.S. economy from failed free markets, and the evil CEOs who profit from them, and to turn it over to wise, fair and benevolent bureaucrats.

Some ominous moves out of the Hang Send and the Shanghai Composite overnight which may have everything to do with the latest piece from Caijing, which notes that according to banking sources September lending by China's four largest banks was the lowest so far this year at a paltry 110 billion yuan (from 166 billion in August), while the Bank of China disbursed a miserly 3 billion down from 72.2 billion in August.

• Watch for another 2009 market high today with no market volume
• Sunoco, Valero shut refineries as winter no match for fuel glut (Bloomberg) even as oil goes higher (Reuters)
• Iceland shrinks 8% as prices increase 11% in deepest recession (Bloomberg)
• Writedowns on mortgage servicing make even JPMorgan vulnerable (Bloomberg, h/t Paul)
• A path to downward mobility (WaPo)
• Mating in London means 4,000 people meet over price for metals (Bloomberg)

• Asian stock markets mixed on Monday before a string of US earnings reports this week.
• Australia to expand lifeline for residential mortgage-backed securities by $7.2B.
• British PM Gordon Brown to announce sell-off of public assets.
• Central banks flush with record reserves are snubbing dollars in favor of euros, yen.
• China shares mixed on profit-taking and pressure of IPOs.
• Crude oil rises for third day as demand may increase on economic recovery.
• Oil rises above $72 as investors eye US company earnings this week.
• Derivatives regulation proposals in US House move closer to Obama's plan.