Archive - Dec 2009

And there goes Copenhagen, another climatic bust...

Fannie offers up a lump of coal for the holidays.

What?  Tired of the in-laws already?  What are you talking about?  With the massive, climate change induced winter storm bearing down on the East, they haven't even arrived yet.  (Maybe this global warming thing is a net positive utility delta after all).  Well, Radio Zero is here for you (as long as the fiber stays up in the storm).

Listen here: http://72.13.86.66:8000/listen.pls thanks to the mind-blowing generosity of EGI Hosting.

5 more banks and $1.38 billion more into the red for the FDIC. That makes 138 so far, and a good start to Failure Friday.

Here's a roundup from today's news ...

Obama emerges triumphantly from negotiations in Copenhagen having secured a 2 degree cap on world temperature.  Of course, this implies a sea level increase limit of seven to nine meters.  Having successfully commanded the tide to remain out, Obama and the United Nations have broken new ground in assuring climate status quo through international agreement.  (Oh, and several programs directed at the mass redistribution of wealth to non-democratic kleptocracies were also outlined in the lobby during intermission cocktails).

Even though we presented Don Coxe's report in full earlier, we wanted to recapitulate his thoughts on gold, as we believe they deserve a post of their own. With gold having become, as we expected more than half a year ago, the most discussed and volatile asset class to accompany the latest Fed inflated bubble, Coxe's view is a welcome addition to other such notable perspectives from the likes of Jim Grant, David Rosenberg, Dylan Grice, Goldman Sachs and many others.

"In a world in which nearly all paper money has problems, and in which the sheer supply of paper money is expanding far faster than global GDP, gold has its best claim as a constituent of foreign exchange reserves since Bretton Woods booted it out sixty-five years ago." - Don Coxe

A week ago we posed several questions to Goldman managing directors Lucas van Praag and David Viniar. Earlier today we received a broad response. We present it in its entirety for our readers. We will provide our counter-response shortly.

Wait, wasn't RMBS supposed to be safe now that it is all on the taxpayer's balance sheet? Moody's just said no, and put 4474 jumbo RMBS tranches on downgrade review. Furthermore, the firm raised its loss estimates as follows: 3.8% for 2005 securitizations, 8.0% for 2006 securitizations, 10.9% for 2007 securitizations and 12.3% for 2008 securitizations.

"A year ago, we thought that recovery for the financial system and the
economy would be characterized by massive, sustained deleveraging. The
Crash had starkly shown the devastation that runaway deleveraging at a time
of shrinking liquidity could inflict on financial assets and the economy.
The fragility of the financial system in 2007–8 came, in large measure, from
the migration of a model of financing from the so-called shadow banking
system into the daylight version. The new stars of the Street were overlevered
hedge funds and private equity firms. They drove the bull markets in complex
new mortgage products, flawed-model derivatives—and in compensation
for the brashest bettors. So profitable were they, that they were able to hire
elite investment bankers and traders from the Big Banks—and to supply the
justification that the big bonuses paid by the big banks were necessary to
keep their biggest producers.
In retrospect, Wall Street should have tried to follow the advice of the Tenth
Commandment, rather than of Long-Term Capital Management and Enron." - Don Coxe

Sorry, not much happening today other than Hi-Fi Robots sparring with each other and various Teenage Mutant Ninja traders exchanging blows with each other on specific stocks. And, of course, the wild shanks and cranks related to OpEx.

The near term concern for gold is that they may be under pressure until they can get past the Jan 8 US jobs report, because it is that jobs report that sent a signal to market participants that a so-called US jobs market is healthy for the US dollar. The strong US jobs report scattered and plundered gold mkt speculators who were taken to the woodshed that day. That Dec 4 jobs report is why gold bulls may have to exhibit patience until nearly the next jobs report.

For the first time ever, the combined risk of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) is greater than that of the developing BRICs. China is now well on its way to global domination and risk-haven status. Renminbi reserve currency anyone?

Developing.

Update: Back up now

As was pointed out yesterday, Morgan Stanley's massive Real Estate empire is starting to unravel building by building. With a building here, five buildings there, the shareholder pain, and the writedowns start accumulating. But it was not always makeshift tears and walking away from buidings when your equity is underwater. In those long ago days of 2005 it was hope and bubblemania. Which is why we dug up various Morgan Stanley Real Estate Fund documents and materials, exposing the firm's delirium just as the peak in the real estate bubble was about to set in.