Archive - Dec 27, 2009

The Treasury/FHFA announcements regarding the Agencies were bungled. I wonder if anyone is going to pay a price for this.

Not even Christmas is safe from cost cutting, or so it seems when comparing this year's New York Stock Exchange Christmas dress-up to last year...

The energy debate is about to ruin your life.

• Nigeria quick to point out supposed would be bomber snuck into country. (Scammers? Sure. Bombers? Niger[ia], please!) [reuters]
• Mousavi's nephew reportedly killed in Iran.  [reuters]
• Gordon Brown sucks at economics.  ("The shadow [cabinet] knows.") [timesonline]
• 2009: South Korean group wins $40 billion UAE nuclear reactor deal.  (2011: South Korean group writes off $36 billion in UAE receivables) [reuters]
• French group reportedly overbid by $16 billion.  (French management contract stipulated that reactors could only work for 30 hours per week)

I am here to weigh in on the marketing battle over GGP's value in, and out of bankruptcy. The players in question: Ackman/Pershing Square - long the stock, Hovde Capital Advisors - short the stock, and Reggie Middleton's BoomBustBlog. I currently have no position in GGP, but received many requests to weigh in on who is right on this rush to recreate the propaganda power of the sell side banks. And the winner is...

2010 will be a year of major transformations, punctuated by the following key escalating divergence: i) on one hand, the ongoing contraction of the US consumer will accelerate, because even as the stock market ramps ever higher (and on ever decreasing trade volume a 2,000 level on the S&P while completely incredulous, is attainable, but will benefit only a select few insiders who continue selling their stock at ridiculous valuations), household wealth will at best stagnate (as a reminder, an increase in interest rates "withdraws" much more household net worth, due to implied house price reduction, than any comparable boost to the S&P can offset), ii) on the other hand, China, which is faced with the ticking timebomb of continuing the status quo and hoping that US consumers can keep growing the global economy, or alternatively, looking inward at its own consumer class, and shifting away from its historical export-led model. The one unavoidable side effect of this prominent departure would be a renminbi appreciation, and a logical drop in the US currency, once the US-China peg if lifted (a theme opposed recently by SocGen analysts, who see the inverse as likely occurring). The main question for 2010 and beyond is whether this will be a gradual decline or a disorderly drop. And behind the scenes of all the bickering, jawboning and posturing, this is precisely what high level officials from both the US and China are currently negotiating. This will be one of the major themes that defines the next decade. Another phrase to describe this process is the gradual drift of US into a nation that is aware it is no longer the primary economic dynamo of global growth as China eagerly steps in to fill that spot.