Archive - Nov 14, 2009

The biggest topic in the upcoming week will undoubtedly be the escalating debate over whether the People's Bank of China (PBoC) will relent to Obama's persistent pleading, and in addition to de-pegging, allow the renminbi to appreciate against the dollar. The debate is simple: the US needs the dollar to hit the bottom of the currency stack post haste, and for that to happen, China's currency needs to appreciate. This is merely in keeping with the Fed's current strategy of inflating assets at all costs via monetary manipulation as both fiscal and "consumer" based attempts to increase prices have largely failed (record unemployment may be a lagging economic indicator but it is a very much coincident wage-deflation indicator). It is in this environment that the PBoC has been sending mixed signals, with a variation of the "party line" language in its Thursday release being read as a prompt that China is willing to play Russian Roulette with over 1 billion increasingly unhappy citizens in the biggest communism-capitalism experiment in history. Yet as the Telegraph pointed out today, there is absolutely no risk (so far) of any accelerating renminbi appreciation becoming the policy course for China. So for a slightly more than "soundbite" level evaluation of the pros and cons of "de-pegging", we present the following curious piece of fiction from none other than paperback experts Morgan Stanley, and specifically its Chief Asia strategist, the mellifluously named Qing Wang.

Zero Hedge's Inkmaster John Redmann contemplates the question of "National Prowess."

The Pension Benefit Guaranty Corporation on Friday said its potential exposure to future pension losses had increased to about $168 billion in fiscal 2009. The PBGC's ongoing deficits will require another massive bailout down the road. That's why Uncle Ben will let this bubble blow for as long as he possibly can.

Let’s say there are 100,000 barrels of oil in the world and 10 are sold each day and they are shipped from various places in various amounts but generally there are, at any given time, 30 days of oil at sea (300 barrels). If I am taking straight delivery, I would contract with the producers to deliver me 1 barrel of oil per day for a year or 5 years or whatever for $50 a barrel. My interest is to have a steady supply and the producers interest is to have a steady demand. He wants to charge as much as possible, I want to pay as little as possible.

The updated Goldman Sachs 13F is out. With 10,244 security holdings, amounting to $180 billion in gross exposure, split among 7 institutional investment managers (Goldman Sachs & Co; Goldman Sachs Asset Management; Goldman Sachs International; Goldman Sachs AG; Goldman Sachs Execution and Clearing; The Ayco Company; Goldman Sachs Trust Company), it presents an interesting picture of Goldman's core equity positions. The bulk of the security holdings are held at GS & Co. ($94.5 billion of market value), followed by Goldman Sachs Asset Management ($80 billion of market value). Furthermore, Goldman breaks down holdings based on value of Calls and Puts, in addition to underlying stock.

Wherever his spirit rests, Benjamin Franklin must be livid. When the hardearned savings of ordinary people are looted to enrich greedy bankers, and when they are told that this process is necessary to make America prosperous again, no wonder so many citizens have displayed so much anger at “Tea Parties.” - Coxe Report

The one must read report this weekend.

→ Washington's Blog.