Archive - Nov 2009

Market volatile (on low volume of course, the norm) after consumers no longer confident that stock market bubble will be sufficient to offset the lack of jobs. U Michgian reported consumer confidence dropped to 66 from 70.6 prior and 5 points lower than expectations of 71.

According to AMG Data Services the abandonment of moral hazard concerns and the pursuit of risk in every form has resulted in an all time record inflow into taxable bond funds (IG and HY). The January through October total amount of inflows of $315 billion dwarfs the $60 billion for the comparable period in the prior year and is double the prior full-year record of $153 billion from 2007. The High Yield bond subset has also been on fire clocking in at $32 billion YTD versus $2.6 billion in HY outflows during the first 10 months of 2008. At the credit crisis peak, money outflows surged to -$45 billion, however for the past three months have inverted into consistent $40 billion + inflows every month since August.

Let’s hope that Barofsky did not rely upon Blackrock for uncovering problems. Blackrock was involved in disturbing activity as a CDO manager. Among other things, Blackrock Financial Management was CDO manager in some horrific 2007 vintage CDOs such as Pacific Pinnacle CDO ($1 billion; closed 1/1/07; Event of Default 2/4/08); Pinnacle Point Funding ($2B closed 6/7/07; acceleration 12/13/07); Tenorite CDO I ($1 B closed 5/11/07; liquidation 2/7/08); or Tourmaline CDO III ($1.5 billion closed 4/5/07; Event of Default 3/31/08).

• Jamie Dimon Op-Ed: No more "Too big to fail" (WaPo)... riiiiight
• Big business tells Congress: "Frightening" new proposal could "destroy" Wall Street (The Hill)
• Yuan "straightjacket" risks inflating China bubbles (Bloomberg)
• Hedge funds can't mess up worse than Bob Rubin (Bloomberg)
• U.S. states sell $9.5 billion of bonds; Connecticut boosts deal (Bloomberg)
• Barofsky says TARP "almost certainly" will bring loses to U.S. (Bloomberg)

• Asian stocks fall, government bonds rally as oil drops; Yuan forwards rise.
• China this year rejected requests to build 47 projects worth 200B to curb excessive capacity.
• Copper prices falls as dollar gains for second day, stockpiles at six-month high.
• Dollar falls versus Krone, Aussie; Europe GDP growth optimism spurs yield demand.
• European Stocks Advance; Richemont, British Airways, Iberia Shares climb
• Eurozone out of recession after 0.4% growth
• FHA reserves fall below legal limit

It is easy to forget that the United States Government and its citizens have distinctly different relationships with the law. While citizens and corporations look at statutes to see what they are prohibited from doing, governments must look to statutes to see what they are specifically authorized to do. In effect, the United States must ask for permission rather than beg for forgiveness when undertaking action. As one might imagine, this has a very particular effect on how the lawyers that work for the general counsel's office of various government agencies and departments go about doing their job.

I just received this email and thought my readers may find this of interest. DDR is the company that was featured in the "bailout" post (Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!), a must read if you haven't done so already.

Friedrich von Hayek might have thought so. Hayek worried that during times of crisis the government would assume so much control that it would eventually have a negative impact on the economy and eventually turn all the people into serfs. My hope it that through sites like Zero Hedge we can help wake people up and avoid such an undesirable fate.

Earlier today, Goldman came out with a harbinger piece on why a second stimulus announcement is essentially a formality. The administration has already promptly forgotten the lessons from the recent elections which were a failure for the Democrats, and a resounding vote against incremental deficit spending. The people spoke, and they will have no more of it. Alas, Obama is now stuck: any action he does to create jobs and to rope consumers back into the clearance sale stores, will be met with increased political disapproval and risk of a major failure at both the mid-term and next presidential elections. Yet, courtesy of his economic think tank, he can not leave the status quo as the current situation leaves the economy on an untenable course of 12%+ unemployment. In this case the lesser of two evils is moot as both have the same likelihood of making the "change you can believe in" campaign one for the history books prematurely.

Technical Profiles of 8 Key Stocks: AIG, BIDU, CAT, CELG, DRYS, IBM, GS, SKF

Total Federal Reserve balance sheet assets for the week of November 11 of $2,146 billion ($1 billion lower compared to the prior week's $2,147 billion).

With an asset allocation of 45% in public equities and 11% in private equities - by far one of the more aggressive asset mixes among the large pension funds - it's all about beta. If equity markets tank next quarter, so will CPPIB's performance.

The owners of this Las Vegas staple probably invested all the club earnings one day into daytrading LVS or WYNN, and by the looks of things, busted out. In other news, Las Vegas is thriving and business is doing really hot.

Economic observations courtesy of Fed Fund futures, and the Taylor Rule, imply that not only is the economy now worse than it was before the Fed embarked on the colossal monetization ploy that is QE, but that rampant deflation courtesy of a much worse economic picture than presented by the government, will force the Fed to launch QE 2.0 imminently. The probability of a Fed Fund increase for a long, long time is zero.

This is aimed at those banking execs that believe that they will be better off hiding losses than taking them now and preempting the guaranteed higher losses to come in the future. Yes, the US is Japan - the "19 year" lost decade, redux!