Archive - Sep 29, 2009

All global economic problems today are rooted in the existence of Central Banks and their commitment to an application of destructive Keynesian economic theories to our global monetary system that simply has not worked for the better part of this century. Within the realm of academics, monetary policy, politics and media, there is a persistent refusal to acknowledge the primary role Central Banks undertake in artificially creating boom-bust cycles that would not occur in such severe fashion were Central Banks simply willing to step out of the way and allow free market forces to operate.

With the exception of a few, many retail/apparel stocks are back to - or in some cases even higher - than their pre-bubble valuations. Someone remind me, unemployment is where, again?

A lot of hedge funds are hurting but most are doing well because they're riding the Beta Express up while charging alpha fees to their investors. Take it from me, hedge funds are no no panacea. And in many cases, they are pure con artists peddling snake oil.

More tough talk from a Fed Governor. The problem with talking tough is if you do not back it up with action you look soft. If that is the way this plays out the weak link is still the dollar. If they raise rates as they say they will it is going to dramatically increase the cost of funding the mega-trillions of short term debt that Geithner has floated on our behalf.

So Does the Future Look as Good as the Past? Not in a million years. The Bubble fuelled car sales numbers of 2000-2007 now look to be permanently relegated to the rearview mirror. Since March 2009, amidst all the cries of a V-shaped economic recovery and a booming stock market, car sales have lagged badly. For almost all months of 2009, with the exception of July and August U.S. car SAAR has been stuck in the mid to high 9’s, their lowest levels in a decade. Now that the July-August cash for clunkers is gone, car sales are trending back to their low 9’s trajectory.

The FDIC's attempts to lure away Goldman's Managing Directors has so far met with mixed to quite mixed success...

How many times can one of the world's worst-managed and toxic-laden companies be on the verge of bankruptcy? As long as Obama is president, one could answer "in perpetuity" although CIT may finally be on its last breath. According to the WSJ: "The fate of CIT Group Inc. was hanging in the balance Tuesday as the large commercial lender readied a plan that would likely hand control of the company to its bondholders" and "Under either the scenario of a bond exchange or a bankruptcy, the shares in CIT would lose all or most of their value." In other news, Jim Cramer does not understand how debt-for-equity works

According to Nielsen, CNBC's annual decline in total September viewership was a massive 37%: the worst YoY performance in 2009. The decline in the demo audience also hit a high of 27%. The dilemma for Jeff Immelt is the following: do CNBC pundits keep pumping GE (which everyone ignores, as CNBC's credibility is practically nonexistent), or, at the expense of marking a few hundred billion assets at GECC to fair market value, incite another major market crisis. Perhaps, just perhaps, if the later were to occur, CNBC would have some chance of salvaging its prior year numbers. Although with CNBC now spending hours a day advertising GE engines, it seems like external advertisers couldn't care less: after all, GE is subsidizing its own station by selling them ad space. Business schools have a word for that: vertical integration. Sane people have another word: biased reporting.

An attempt to explain some pretty strange AXP call action.

Currently, the great market debate seems to center around two chief concerns: Have stocks jumped ahead of the economic recovery? And if so, are they setting up for a big correction? To better gauge the real economic condition, I typically like to look at commercial trade related indicators to verify just how good or bad business is doing. One of the most ignored leading economic indicators is probably freight volume. A review of some key freight indices should provides a much more sobering picture of the US economy.

It would appear that employees of the NY Post can do more than merely plant stories and spread unfounded rumors. Some of them actually do investigative work. Case in point - John Crudele, who has compiled FOIA reports to create a chronological narrative of Hank Paulson's speed-dialing in the days after the Lehman collapse, in a piece titled "The secret to Goldman Sachs' good fortune." The net result: more communication between Paulson and Blankfein during the heart of the crisis than anyone else (including then-President Bush), with the only exception of Ben Bernanke. Just what were these two people talking about so frequently in the two days when the Dow made an 800 point round trip? And just who was leaking the rumors that ultimately were based on information sourced by Hank Paulson himself? Crudele's chronology presents a relevant framework for analyzing just who the critical decision-makers are in US financial markets. Hopefully one day phone transcripts will be released and the full picture of just what information Blankfein was getting straight from his former boss can be reconstructed.

Normally, I look past the Chicago ISM reports, but that may not be so wise to do this time as tomorrow’s number may give us a big clue as to what to expect from the Sept ISM report as well as the Sept NFP report. Moreover, a rotten Chicago ISM for September can give a nice kick in the head to equities and a shot in the arm for treasuries.

"This country's founders built an ingenious system of checks and balances for a reason: to ensure that no special interest or group could use government power to commandeer the creative and economic wealth of our nation to their own ends. How much longer must we live in a country where the citizens are subservient to the banks, health insurance companies and any other special interest able to control our government at the expense of our the most basic principles of fairness, our future as a nation and, as a result, our freedom?" - Dylan Ratigan

Pretty boring day overall, looked as if the entire fund complex honed in on CIT to jam that stock in the last minute Hail Mary play in order to "make the quarter". Simultaneously, bond yields plunged again, to make certain that the next container ship of U.S. Treasuries is sent overseas on schedule.

The gig may be up for what was to many a sure thing. Cover a position. Get a few extra points, do a favor and make a deal. The once very lucrative area and niche player known as Securities Lending may be changed forever.