Archive - 2009

Remember all that pooh-poohing when the gulf states were talking about their own currency? About how silly that would be? That it would never happen? Yeah well, sort of looks like it might. True, there is a deep and very comfortable denial in the United States such that the country can spend anything it wants, pump debt to any level it likes, play whatever games it wishes with the way it counts spending, and still enjoy the benefits of a reserve currency indefinitely. That denial may be just about ready to hit reality.

Wells Fargo is repaying their $25Bn TARP loan. That makes WFC the last of the big boys to be done with the emergency loan program, just one year after it started. At this point $161Bn of the $245Bn lent out will be repaid with WFC raising $10.4Bn in a stock sale to get out from under the government’s thumb - just in time to pay out the Christmas bonuses. I won’t go off on a rant about how stupid it is for the banks to borrow and dilute in order to pay big bonuses and further punish shareholders by reducing earnings – it won’t matter anyway, any bank but C that announces they are done with TARP gets a nice boost as it indicates they can go back to raping and pillaging as usual in 2010.

While Bernanke is preparing to hit the TV circuit (after hiring Obama's exhausted teleprompter team) to cash in on his Time Warner accolade, even as he is set to do nothing at all about the liquidity bubble forming in every aspect of the economy, the much more logical and efficient country of Norway is doing the right thing, and in making sure its economy does not overheat, has raised interest rates by 0.25% to 1.75%. The target rate: 1.25%-2.25%. In other news: Goldman Sachs is not moving to Oslo.

One of the things that spooked the market yesterday was not so much any concerns of tightening language in today's FOMC statement, as much as a rumor that the Fed was planning on bumping up the discount rate. Krishna Guha, in a blog post, wondered, "might the Fed raise the discount rate at this week’s policy meeting? I think this is a possibility and should be considered as a risk factor. But I would not include a discount rate increase in my base case forecast for the meeting." The key reason for this would be the increasing desire of the Fed to "draw an increasingly sharp distinction between liquidity policy and monetary (interest rate) policy in the spirit of the ECB’s separation principle at this meeting and in subsequent communications." Yet the question remaind: is the Fed about to hike the Discount Rate?

• An unwelcome spotlight falls on SAC Capital (NYT)
• The middle class collapse (HuffPo)
• Congress punts problems to 2010 (Politico)
• As Goldman thrives, some say an ethos has faded (NYT)
• US gave up billions in tax money in deal for Citigroup's bailout payment (WaPo)
• 10 years of booms, busts and bubbles (MarketWatch)

• Asian stocks rise, led by Japanese financial companies; Dollar strengthens.
• Australia's Q3 GDP grew 0.2%- showing growth momentum isn't yet self sustaining.
• FDIC in 2010 plans to add more than 1,600 staffers, mostly to handle bank failures.
• India to levy antidumping duties of as high as more than 3x the value on some Chinese telecommunication equipments.
• Senate rejects plan to import low-cost drugs.
• Sugar jumps to highest price since 1981 in New York on deficit concerns.
• US Industrial output rises 0.8% - most in three months as recovery gains speed.

RANsquawk 16th December Morning Briefing - Stocks, Bonds, FX etc.

We bask in the generous glow of Abu Dhabi's merciful gift to Dubai. Hey, wait a second!

A pension fund for fire and police officers has sued the board of Goldman Sachs, seeking to stop the investment bank from paying out billions of dollars in bonuses to the bank's staff. Will larger public pension funds join in on the lawsuit? I wouldn't count on it...

Uh, so remember when we were, like, gonna buy $7.5 billion in Citi stock? Yeah so, maybe not so much. In fact, since we have you on the phone, how about you pay us $4 billion just because?

Carbon trading is a scam. But soot can be reduced COST-EFFECTIVELY, which not only will do a lot in regards to climate (if the world is warming - see Project Mayhem's writings), but will also be good for the health of those who live in China, India and other areas getting mugged by the gunk.

"Late last week, Nouriel Roubini, the current go-to bubble diviner, published a report entitled, “The New Bubble in the Barbaric Relic that is Gold”. The report is scheduled to be released to the general public tomorrow, December 15. We have read the report and we disagree with its conclusion. In fact, our ongoing analysis indicates gold’s terminal value in this cycle will be multiples higher than current pricing." - QB Asset Management

In a poll on Fox News, with over 163 thousand people voting, the vast, vast majority, or 99% of poll respondents are against raising the debt ceiling, claiming "This out-of-control spending is outrageous and irresponsible." (at least Obama will get time to sneak in another 50-60 stimulus bills before China says "no mas"). We are not sure just how scientific this sampling is, but we would give it the benefit of the doubt with these kinds of numbers. Remember - the Senate is about to raise the debt ceiling from $12.1 trillion to something like $14 trillion. This means that the Senate is about to go against the wishes of 99% of America. How the Administration hopes to moderate the unprecedented political fallout that is sure to follow such an action is far beyond our meager analytical skills.

"Gold is used for many purposes, including as a reserve asset, as an investment, and for use in electronics, automobiles, and jewelry. Thus, fluctuations in the price of gold can reflect changes in demand associated with any of these uses, as well as changes in supply. In monitoring the price of gold, the Federal Reserve must attempt to interpret which of these factors is responsible for its fluctuations at any point in time. One of the ways we do this is by consulting other indicators of market sentiment. A number of measures of expected future inflation in the United States, including measures taken from inflation-protected bonds and surveys of consumers and professional forecasters, have been well contained. Accordingly, increases in the price of gold do not appear to reflect increases in the expected future of U.S. inflation. " - Ben Bernanke