Archive - Dec 2009

"When I asked Ken Lewis, Bank of America’s CEO, about why he had not disclosed the mounting losses to shareholders before the shareholder vote, he told this Committee that he relied on the advice of counsel. Protecting shareholders is often, in the final instance, the practical responsibility of corporate General Counsels and their outside counsel. The Subcommittee’s investigative findings demand the question, “Where were the lawyers?” The glaring omissions and inaccurate financial data in the critical November 12 Forecast
make Bank of America’s decision not to disclose to shareholders unsupportable. Furthermore, the flaws in the forecast document were so obvious that they should have alerted the attorneys to the necessity of a reasonable investigation before making a decision on Bank of America’s legal duties to disclose. The apparent fact that they did not mount such an investigation makes the decision not to disclose Merrill’s losses to shareholders an egregious violation of securities laws." - Dennis Kucinich

A 5th sequential revese repo test conducted by the Fed, indicates either unprecedented posturing by the printer leprechaun or some legitimate concerns about pulling the trillions in banker slush funds floating around and propping REITs around 200% higher than fair value. What was odd about this reverse repo test is that for the first time, the Fed accepted Agencies, and specifically $180 million in a 2 day operation, as collateral. There is still a long way to go before the Fed is willing to reverse repo bankrupt stocks and Goldman bonus pool IOUs: the same assets which the banks have repoed out from the Fed (at par value no less...) We only partially jest about the bankrupt companies part, but since nobody except the Fed Chairman can correct us on what the haircut, and what the assets in the discount window are (the particular data is what Ron Paul is trying to get public), we will continue claiming that the Fed is allowing banks to collateralize worthless assets at 100 cents on the dollar, until such time as there is an actual fact that would refute such claims. At that point we will even gladly issue a retraction. Auditing the Fed would seem like a fair price.

Economic data adjustment/recasting/proforma expert, and the government's favorite mouthpiece (aka CNBC Senior Economic Reporter/Producer), Steve Liesman, apparently has never heard of EUC. In the clip below we were much amused as the COMCASTIC ones were trying to make yesterday's Dept of Labor data into something positive, when instead the influx of 328k into EUC programs weekly, demonstrated the complete lack of hiring and the roll of hundreds of thousands from continuing into EUCs on a weekly basis (592k in the last two weeks alone). Please see 2'40" in the attached clip.

Trying to read between the lines of BOJ doctrine, even as the Yen continues rising contrary to what the economic data out of Japan time and time again suggests it should be doing, Morgan Stanley is out with a report that attempts to quantify the probability of a Yen intervention. And even though there has been no official instances of intervention since 2004, MS feels that "increased JPY strength from current levels is increasingly likely to trigger official FX intervention." As this relates to the economy caught in the biggest deflationary vise in the last two decades this does not surprise us very much.

RANsquawk 11th December US Morning Briefing - Stocks, Bonds, FX etc.

• Must read from Taibbi: the real Sellout (Obama's that is): (Rolling Stone)
• Ireland, Greece may leave Euro, Standard bank says (Bloomberg)
• IMF witholds $3.5 billion loan to the Ukraine(NYT)
• Do we really need a systemic regualtor? (WSJ)
• Even with fewer people spending, somehow more people are spending (Bloomberg)
• KKR: Omaha on the Hudson (BusinessWeek)

While the recent Goldman announcement may sound good to some, it entirely misses the point of the outrage of the many who actually realize what is going on. Further, it fails to go far enough. What Goldman needs to do is to go back to its partnership days where it was their capital at risk (all of it) and not the shareholders.

• Asian stocks rise as China industrial output, US jobs boost confidence.
• Bank of Korea raises 2010 GDP growth forecast to 4.6% - fastest pace in three yrs.
• Chain-stores are holding bigger markdowns in reserve trying to gauge how long shoppers will wait for better deals to emerge.
• China industrial output rises 19.2% - more than estimated as recovery strengthens.
• China new loans top economists' forecasts, money supply rises by record.
• EU leaders say stimulus should stay in place until the “recovery is fully secured.”

RANsquawk 11th December Morning Briefing - Stocks, Bonds, FX etc.

There were fireworks in Ottawa on Thursday, and I am not talking about the Afghan torture backspin which leaves Tories squirming. Almost five months after revealing their disastrous FY2009 results, PSP Investments held its first ever annual public meeting in Ottawa.

After we posted our preliminary thoughts on the Z.1 "Flow of Funds Accounts of the U.S." report earlier, we had the chance to dig deeper through the data in the governmental cash flow report. To our surprise we uncovered some dramatic data revisions whose presence highlights the recent "consumer resurgence" in a very different light. The key finding is that the government has been chronically overrepresenting Household Net Worth in original publications, and subsequently revising the data dramatically in order to hide the fact that consumers' wealth is nowhere near as impressive as originally represented. Putting a number to this statement: a $2.1 trillion downward revision in just one quarter.

A Detailed Technical update of the BKX Bank-Index, Crude Oil, Gold, US Dollar, Google, NASDAQ Composite, S&P Cash and DJIA Cash

No dramatic photos, but the statistics are dramatic ...

Spreads were tighter in the US today as the ten-day swing cycle in IG has once again reached channel tights. Overnight outperformance on a weakening dollar was stymied by a weak jobless claims number that stalled the performance in the US after a decent open. Breadth was very positive though in credit as roll thoughts continue to weigh (positively) on IG names with tighteners outpacing wideners by almost 6-to-1.

Goldman on Dubai (12/01/2009) "Dubai Doubts & Implications on Fina [sic]" (1:03 hour mp3 file). h/t: Hedged In