Archive - Sep 24, 2009

Earlier today we bet against the Goldman Sachs - Fed complex, claiming that either Bank Of America or Goldman Sachs would end up being the underwriter for the Spirit Aerosystems $300 million bond offering. We were right.

An irony of Shakespearean proportions is unfolding as I write this: the Town Hall discourse revolves around complaints government is getting too big, yet in the quieter halls of the US Supreme Court corporations are on the verge of capturing the largest swath of power since they were ruled legal persons. Let’s take a closer look before we wake up in an Orwellian distopia.

Total Federal Reserve balance sheet assets for the week of September 23 of $2,133 billion ($44.5 billion higher compared to the prior week's $2,088 bn), and this time just $41 billion shy of the all time high of $2,174 billion recorded on April 22

What do you have to do to make $675,000 at Freddie Mac? Not much. Why is the gigantic piece of dead wood hiring big buck talent? Big money politics, of course.

NOTE: AFTER I WROTE THIS ADDITIONAL DETAILS CAME OUT: KARI GOT A $2MM BONUS AND A GUARANTEE OF $3.75MIL!!!!

It's amazing how a year after the worst financial crisis in post-war history, when hedge funds were closing the gates of hedge hell, things have not changed on Wall Street.

The price correlation between equities and bonds of late has some argue that typically, if equities are trending higher, then bonds would head lower, and yield would be higher, due to concerns of higher inflation. So, the fact that bonds and equities in general are both firm seems to beg the question - which rally would end first - equities or bonds?

Spreads widened for the second day in a row, as weaker than expected existing home sales trumped a headline beat for initial claims swinging risk assets from a good start to a weak middle. Stocks drifted further down most of the day except for a late day cover rally (for the daytraders) which credit hardly took part in as IG went out near its wides and SPY dropped close to its low after-hours as RIMM lowered its Q3 revenue outlook (so much for top-line growth coming to the rescue).

"… excess savings flowing in from Asia and the reckless lowering of interest rates by the Federal Reserve Board; the relation between executive compensation, short-term profit goals, and risky lending; the housing bubble fueled by low interest rates, aggressive mortgage marketing, and loose regulations; the low savings rate of American people; and the highly leveraged balance sheets of large financial institutions." - Richard Posner

Tomorrow's testimony before the House Financial Services Committee by Federal Reserve General Counsel Scott Alvarez, followed by Thomas Woods, Jr of the Mises Institute will be most interesting because it will discuss the topic that is so near and dear to everyone's heart: HR 1207, or Ron Paul's Audit the Fed" bill, which is the culmination of the Congressman's life efforts to unmask the Federal Reserve. With the congressional vote on HR 1207 approaching soon, and the bill already having an absolute majority, its passage is a mere formality.

Tsunami fizzles, turns out to be a storm in a teacup. Alas, so is RIMM's guidance.

Updated (as expected), from The Street:

Jim Cramer

RIMM

9/24/2009 5:03 PM EDT

RIMM giving you a chance to buy the Mobile Internet at reduced prices as i said could happen in my video today with Alix Steel.

Some charts courtesy of the DOE demonstrating just how deep the energy, and by implication, the overall economy slump is, relative to prior years.

And the Fed finds a way to screw everyone over yet again. Contrary to expectations that the Fed will use reverse repos to remove excess liquidity (which, by definition, such an action would) it appears that Bernanke's wily scam is to push even more money out of money market funds and into capital markets. Even though banks currently have about $800 billion in excess reserves which the Fed is paying interest on, and which would be a damn good source of liquidity extraction as the Fed considers to shrink its ever expanding balance sheet, the Chairman is rumored to be considering money market funds as a liquidity source. Reuters points out that the Fed would thus have recourse to around $4-500 billion, and maybe more, of the $3.5 trillion sloshing in "money on the sidelines", roughly the same amount as MMs had just before the Lehman implosion.

If they don't turn around this tape in the next day or so, Bernanke and his court will be disgraced and the O-Team will be on the phone begging for more alphabet soup programs, monetizations, bailouts, nationalizations, and other assorted "Fiat Flinging" to avert catastrophic deflation.

Some gloomy predictions direct from the horse's mouth (how did CNBC allow such a bear on? No prescreening of hedge fund manager guests?)

Something is definitely off here. Usually the market would follow a move in the Yen-Euro carry in lockstep. Not today.