Archive - Nov 2009

The path for Andrew Cuomo is now clear.

The pressure on both Geithner and Bernanke is finally reaching a crescendo. Fixing the US economy would start with the departure of Geithner (forced or otherwise) and the full audit of the Fed. Everything else is smoke and overleveraged, uncollateralized mirrors (perfectly acceptable in the Fed's discount window). An interview by Dylan Ratigan of Ryan Grim and Naomi Klein makes this point loud and clear. The castration of Ron Paul's bill must not occur if America does not want to end up in the same financial collapse gutter it found itself in 2008. Mel Watt and others have to look beyond their immediate financial gain and consider what is critical for the American people.

Rep. Kevin Brady of Texas tells Geithner it is time to pack up. The entire nation of the United States (ex. Goldman Sachs and several other nationalized banks) agrees.

Not a bad time to allocate the last big bonus on Wall Street to as many people as possible. According to Down Jones, "Chief Executive Lloyd C. Blankfein and President Gary D. Cohn said in the email that those named helped the bank survive the financial crisis. They also said the new managing directors will be integral to our service to clients, the strength of our reputation and the long-term success of the firm." God's anointed acolytes are multiplying. There is no information yet if a Textron-made (GS: Conviction Buy) Cessna jet with an autopilot program for a one way trip to [Venezuela, Colombia, Brazil, Argentina] is included in the promotion package.

Dear Chairman Frank, Ranking Member Bachus, and Members of the Committee,

During the past two years, the Federal Reserve dramatically changed its operating procedures. Instead of simply setting interest rates to influence macroeconomic conditions, it rapidly acquired a wide variety of private assets and extended massive secret bailouts to major financial institutions.

The bigger the equity fund outflow, the better the outperformance of the market. Or so it seems based on ICI data. Last week posted the 13th straight equity fund outflow since the beginning of August: the total outflows amount to over $36 billion, and yet the S&P has increased by over 11% over the time period! With ever decreasing relative volume, and thus an ever increasing impact of the marginal purchaser, the question of who on earth is buying should be addressed to 33 Liberty Street, Floor 9.

As more and more pundits go for the whole "anchoring" thing and throw around numbers anywhere between $6,300 and -$0.99 per ounce as what the price for an ounce of gold should be, we present some actual data which demonstrates core supply and demand trends in the gold market. The World Gold Council's latest "Gold Demand Trends" quarterly update has been released, with the key message being that while end customer demand is collapsing (gee, the consumer must not be drinking Timmy's Kool-Aid just yet), "the central bank sector presents a positive story, with the underlying trend of improvement expected to remain intact. As with private investors, central banks are looking for diversifiers, and in particular, ways of diversifying their dollar exposure." Nuff said.

We'll have whatever Timmy is drinking. Even as Mr. Geithner, in prepared congressional testimony, claims that the economy is "recovering", the MBA announced yet another record number of mortgage delinquencies. At over 14%, the number of American homeowners either in delinquency or in foreclosure was an all-time record in September, representing a ninth straight quarterly increase. According to the AP: "The Mortgage Bankers Association's quarterly report adds to fears that the housing market's recovery could be thwarted by the continuing surge in home loan defaults, especially as the unemployment rate keeps rising. Lost jobs, rather than the shady loans made during the housing boom, are now the main reason homeowners fall into default." Our hope is that maybe Mr. Geithner will also testify also as to what particular brand of Kool-Aid he drinks when he makes such baseless and irresponsible statements.

With everyone focusing on Bernanke's liquidity pump and its favorable near-term consequences on US stock markets, which have shifted from a leading indicator to a liquidity indicator, one of the true decopulings, and not in the mythical China-US realm, as both those countries are joined at the vassal hip in perpetuity, has been the Nikkei's divergence from global equity markets, and from the S&P 500 in particular. In fact, over the past several months the Nikkei has been underperforming the S&P dramatically. As deflation has once again gripped Japan, after two decades of failed Bernanke-style policies, it is only a matter of time before it becomes all too clear that the Japan experiment is doomed to be repeated by the US, with the same deplorable results.

The market mogul's latest thoughts.

SocGen extended view on how to protect yourself against economic collapse as world debt doubles in 10 years:

Sell the dollar

Buy government bonds

Cherry pick equities and commodities

• Ron Paul and Jim DeMint: Americans deserve a transparent Fed (WSJ)
• Goldman's lost glister (FT)
• Hoyer says financial transaction tax "on the table" in Congress (Bloomberg)
• South Korea banks told to hold liquid foreign assets to prevent repeat of last year funding crunch (Bloomberg, h/t Adam)
• Weil: Wells Fargo needs TARP more than it admits (Bloomberg)
• Evans-Pritchard: Is $6,300 fair value for gold (Telegraph)

• Asian stock markets mostly higher Thursday, gold hits another record high.
• China Commercial Aircraft to build homegrown C919 jetliner in Shanghai.
• China shares rise for 5th day on hope domestic consumption will drive new growth
• Euro lower at $1.4880 in European morning trade; Fed comments that rates may stay low.
• Equities in Brazil came under addln pressure on a 1.5% tax on trades in its ADRs.
• French 'Big Loan' to spur growth raises concerns over skyrocketing debt, deficits.

Yesterday, I commented on Goldman's CMBS offering through the government's leverage program known as TALF. I was very nice and diplomatic, yet despite that I still received what I would consider, inappropriate feedback. Okay, let's take the politically correct gloves off - they never fit me anyway. This deal probably flew because Goldman Sachs underwrote it. Goldman thrives off of brand name value primarily. Contrary to mainstream media inspired belief, they are not better than everybody else at everything. I posit, they are probably not better than anybody else at anything other than marketing and lobbying.

Inkmaster of Zero Hedge, John Redmann explores the problem of post-liquidity clean-up.