Archive - 2009
What went awry at CalPERS is a textbook case of poor pension governance. And it's not just CalPERS. Reckless greed and sheer stupidity pervades the wider pension industry. Please read this comment carefully so you too are made aware of how pension investments can go awfully wrong.
A question to ask? Who knows, we may learn something. Blog economics.
Our friends at GATA have had enough of the Fed's, and other Central Banks' alleged (and with so much circumstantial evidence presented both at Zero Hedge and elsewhere, that in this case "alleged" is just a term only a lawyer could love) manipulation of gold prices, and have taken Bernanke's monetization, manipulation and money making unlimited liability company to task ("M4 ULLC"). We are overjoyed that yet another entity has followed in the footsteps of our dear late friend Mark Pittman in taking on the one organization that represents all that is irreconcilably broken with the current economic and financial system. We wish GATA much success, and hope that ever more wronged counterparties will seek remedies from the Fed's consistent and blatant wealth transfer from America's Middle Class to the uber-wealthy, Wall Street-originating oligarchy.
The federal government said Wednesday it will take majority control of
the troubled auto lender GMAC, providing another $3.8 billion in aid to
the company, which has been unable to raise from private investors the
money it needs to staunch its losses.
GMAC, which already has
taken $12.5 billion in direct federal aid along with other forms of
government support, is the largest lender to General Motors and
Chrysler dealerships and to their auto-buying customers.
Prepare for "no cash until 2099" offers at a GM dealer near you. Free rear spoiler stickers of Marx, Engels and Lenin included with every purchase of a CTS-V.
Some recapitulating thoughts on High Frequency Trading, in the year in which HFT probably became the primary market dynamic, courtesy of Themis Trading's Joe Saluzzi. "A NYSE study done recently indicates that spreads shrunk and liquidity was increased in large cap names, but in the small to mid-cap names it is just the opposite: liquidity has shrunk and volatility has increased because now you have predatory action." Yet with everyone trading just a few key stock purely on momentum trends, and everything else rising or falling on the beta wave, nobody will care until, again, it is too late.
It is only fitting that one of the most schizophrenic years in recent capital markets history should close with a $5 million CMB auction pricing at 0.000%. And so the circle of chasing risky and risk-free assets with equal passion is now complete. Even as high yield bonds have returned over 50% YTD, investors can't get enough of parking cash in yield free US government-backed pieces of paper. Many have claimed this phenomenon is indicative merely of capital allocation ahead of January 1. Well, that is in a few hours. And with the next 4-week Bill/CMB auction likely to take place within a week, we will promptly see if this is indeed the case. If we end up with another 0.000% soon, then the structural problems at the near-end of the curve will end up being much worse than most have expected.That, and negative 1 month rates coming a-plenty.
"This is just another bailout of the financial system, because the tens of trillions of dollars already committed are not nearly enough."
Key Theme In Interview With ShadowStats' John Williams - (You Guessed It) Hyperinflation And The Death Of The US EconomySubmitted by Tyler Durden on 12/30/2009 14:38 -0400
Q: "What can we do to avoid hyperinflation? What if we just shut down the Fed or something like that?:
A: "We can't. The actions have already been taken to put us in it. It's beyond control. The government does put out financial statements usually in December using generally accepted accounting principles, where unfunded liabilities like Medicare and Social Security are included in the same way as corporations account for their employee pension liabilities. And in 2008, for example, the one-year deficit was $5.1 trillion dollars. And that's instead of the $450 billion, plus or minus, that was officially reported." - John Williams
You don't really expect to see huge spikes in large ($1 billion plus AUM) bond funds absent some significant fixed income news (or perhaps, internal scandal). So what's going on with the PIMCO High Income Fund (NYSE:PHK) today?
Update: Volatility study added.
Update #2: It appears a Zero Hedge post back in March may solve the mystery of the tactical nuking of PHK. We are beginning to suspect a bit of naughtiness in the form of insider trading.
This depression will be a classic deleveraging, or resolution of debt. Debt will either be paid back or defaulted on. Since a lot can't be paid back, a lot of it will have to be defaulted on, which will make a lot of money disappear, which will make many people a lot poorer. President Obama will be faced with a basic choice. He can either make the situation worse by offering more bailouts and similar moves aimed at stopping the deleveraging process - that is, continue what he has been doing, only perhaps twice as much, which may crash the system more rapidly - or he can recognize the larger trends in The Long Emergency and begin marshalling our remaining collective resources to restructure the economy along less complex and more local lines. Don't count on that." - James Howard Kunstler
"We have been forecasting and monitoring USD strength for weeks now. Our main focus has been on GBPUSD, EURUSD, and AUDUSD for which we had the most convincing technical arguments for a sell-off. Today USDCAD is joining the band." - Nic Lenoir
Nuclear energy makes the greatest comeback of all time. Not your father's nuclear power plant. Better start practicing your “hustle.”
Yesterday's most recent data from the Conference Board's Confidence Index recapitulates very well the Economic Inquisition purgatory that living in America has become: pain and suffering now, coupled with the promise of salvation and financial bliss at some point in the future. Of course, on a long enough timeline we are all dead, so it is only fitting that the administration, whose slogan had something to do with tangible change, is gradually encroaching on the Catholic Church's turf in an all out war for the souls of America's taxpayers as tangible becomes increasingly ephemeral and, well, intangible (save for unemployment and the wads of electronic cash deposited in Goldman Sachs' employees bank accounts - both of those are all too real). While the CBCC number came in at about the expected reading of 52.9 (from 50.6 in November), all of the "improvement" in confidence came from rosy future expectations, which rose to a two year high of 75.6 (from 70.3 previously). As for the present: current conditions plunged to another record low of 18.8. Never before has the differential between present pain and future hope been so wide.
It is often assumed that what preoccupies military planners is their attempts to define the shape of future warfare so that they can adequately prepare equipment and doctrine ideal to meet the threat. Evidence, however, shows that what most occupies their attention is how to adapt existing force structures and systems to react to emerging conditions.
The vast bulk of their attention, inevitably, is on the massive capital investment in weapons systems which last, often, a half-century — longer than the span of most political eras — and force structures and doctrine which have accumulated over decades, or longer. There is little scope for innovative, clean-sheet thinking, and even when that occurs, there is little ability to bend the vast bulk of the military and national machinery to the emerging requirements.
My Spanish bank and real estate thesis looks to be panning out, disrupted by that hellish bear market rally. We shall see how accurate it is as the Spanish banks start to liquidate inventory.