Archive - Dec 2009

Here is a proposal that WOULD create jobs and stimulate the economy. It is very big and therefore would be effective. It would also be revenue neutral, something that no other plan can claim. What do you think?

RANsquawk 3rd December Morning Briefing - Stocks, Bonds, FX etc.

"We would not be surprised to see more sovereign debtors make unilateral announcement of debt moratoriums and/or restructurings, perhaps including even oil rich Venezuela. We notice in that regard that Venezuela’s lider maximo, Hugo Chavez, is preparing to nationalize the few remaining private banks of that nation, usually a good indicator of an approaching sovereign debt default."

$48 billion over 30 years, and it's just the beginning. Don't say I didn't warn you...

Gold is now the primary beneficiary of any and all dollar weakness (much more so than stocks or any other asset class) and any and all incremental excess liquidity. We hope members of Senate who read this post present the charts below and ask the Fed Chairman at what point will his debasement of America end.

Matt Taibbi gives an in-depth presentation unmasking the Wall Street crony advisors that whisper in the President's ear daily, the political push-pull that ended up gifting Tim Geithner his current job, as well as an analysis of the brains behind it all- former Goldmanite, Robert Rubin.

Tomorrow's Bernanke reconfirmation hearing just got more interesting, courtesy of Vermont Senator Bernie Sanders who has stated he will put a "hold" on the Bernanke confirmation process, meaning the Senate will need to amass 60 votes in order to override and proceed with the confirmation process. Yet as the NYT notes: "though the Senate has been paralyzed by similar blocking tactics on countless other issues, Mr. Bernanke probably has enough support in both parties to clear the 60-vote hurdle." It is time to call your Senators and remind them that at best only 21% of Americans favor Bernanke's reappointment.

Heck of a job, Larry, Tim and Ben...

In addition to paying back its $45 billion portion of TARP, the Bank, in what will be Ken Lewis' last act, will also raise incremental capital. $18.8 billion of new "common equivalent securities" to be issued, or the equivalent of 1.2 billion shares. And even as the firm is set to payout humongous bonuses ala Goldman, the firm will not touch its $44.5 billion in TLGP backed issues.

Rosie makes the case for double gold, emphasizing foreign CB purchases and peak gold. And as the race for the currency bottom accelerates, Rosie discloses the production of global fiat currency "up by 150%" coupled with no incremental dollar production, he expects gold to explode. Also is somewhat skeptical on the dollar carry trade, which due to being the most crowded trade in the room, will likely not see an orderly unwind when such unwind finally occurs.

A while back in on our subscriber site, we penned a discussion trying to put the whole “mountain of money” thesis into perspective. The bottom line is that there is less than meets the eye, especially as that applies to households and corporations. Simply put, the private sector does not appear to have meaningful cash resources when the data is looked at relative to both current asset values (of equities) and relative to historical behavior of households and corporations to be a hugely powerful force in terms of moving financial asset prices. Yes, this is the same US private sector now engaged in deleveraging of a magnitude whereby the year over year change in private sector credit balances has entered negative territory - a first in the sixty years of available data! Of course we all know that at the moment, the mountain of money that is influencing markets and the economy is coming from none other than the Fed/Treasury/Administration. And quite the mountain it is.

Only one little problem though. Once you’ve “taught” investors you’ll provide the money, and keep on providing it in spades at even the first sign of trouble, how do you stop doing that at ever increasing rates without risking market values themselves in big way? Start to take away the money candy and the terrorist banks (commercial and investment) will tell the Fed the world is about to come to an end. They’ll pull the pin on themselves and supposedly take everyone else with them unless the Fed comes across. It will be fascinating to watch the Fed ultimately be forced to stop the free money game. But that’s a story for “tomorrow”. Unfortunately, at least as per the numbers we see, there will be no mountain of money at the household or corporate level to pick up the slack when that day arrives.

Another side effect of excess liquidity and computerized stock markets has been the divergence between stock and credit indices. As the chart attached demonstrates, since the beginning of August we have seen a very rangebound market in roll-adjusted Investment Grade spreads, represented by the CDX IG (inverted axis to keep it apples to apples with stock moves), while the equity market in turn has been on a unstoppable tear ever higher, as captured by the SPY. In fact, even as the IG has been making higher "lows", the SPY has gotten completely detached from the underlying economic reality of which credit seems to be at least partially cognizant, and ploughs ever higher on nothing else than goodwill and excess liquidity. Now, not only has the S&P bubble diverged with the Nikkei as presented earlier, but with underlying US credit metrics themselves.

Everyone knows how traders have been chasing or selling stocks based exclusively on the action in the EUR/USD. Today, banks and oils were selling off most of the day as the EUR/USD was grinding back down to 1.50. However, there were a lot of greyhounds running today chasing the momentum meatball, signaling a slight "glitch" in The Matrix, meaning that we might be on the verge of breaking out to new highs, which may force many to jump back into the pool for the year end print.

Foreign Policy magazine has just come out with its list, “The FP Top 100 Global Thinkers." They rate the intellectual giants, the Big Thinkers, the Big Brains of our current world. It is the most pompous fluff piece that I have seen in, well, quite a while. It just brims with a lack of intellectual rigor, reason, and good scholarship. It is a kind of Parade magazine feel-good fluff that we see in many of these types of lists. And it is grist for my vitriolic mill. You will be sadly disappointed.