Archive - 2009
Where is my new economy? Kiss that assembly line job goodbye, and keep taking those Mandarin lessons
The latest in the 2010 forecast series comes courtesy of MF Global. Unlike the trite cheerfest from the sellside bankers (who can blame them, their jobs depend on optimism) which we have been largely ignoring, this piece is certainly worth five minutes of your reading time.
- Asia commodity stocks, metals gain on China demand; Japan bank shares drop.
- Beaten by cable and the Web, broadcast TV looks to build a new business model.
- Build America Bond subsidy shift to fuel $130 billion in sales.
- Dollar trades at almost two-month high versus Yen on US recovery outlook.
- Fed proposed selling interest-bearing term deposits to banks, to drain some of the liquidity.
- Gold declines, snapping four-day gain as dollar rise saps investor demand.
- Oil closes in on $79 a barrel in Asia after US cold-snap drives energy futures higher.
Two months ago Bloomberg's Jonathan Weil brought up the very relevant topic of fair value divergences on bank balance sheets courtesy of SFAS 107 and lax accounting firm standards (some more lax than others). Zero Hedge immediately followed up on this theme and presented a comparative analysis of various bank asset shortfalls, speculating that certain accounting firms are doing their best to do an Arthur Andersen redux for Generation Bailout.
On October 15 we said: "Just what about the economic environment has given Citi auditors KPMG the flawed idea that the bank's loan can be easily offloaded with virtually no discount? And just how much managerial whispering has gone into this particular decision. If one assumes a comparable deterioration for the Citi loan book as for the other big 4 firms, and extrapolates the 2.8% getting worse by the average 1.5% decline, one would end up with a 4.2% Book-to-FV deterioration. On $602 billion of loan at Q2, this implies a major $25 billion haircut. Yet this much more realistic number is completely ignored courtesy of some very flexible interpretation of fair value accounting rules at KPMG. Maybe Citi and its accountants should take a hint from Regions Financial CEO Dowd Ritter who carries the FV of his $90.9 billion loan book value at a 25% discount." Today, finally, after a two month delay, these two articles seem to have finally made the inbox of the financial gurus at the Wall Street Journal, which, in an article named "Accounting for the bank's value gaps," says: "can investors count on consistency when it comes to bank accounting? As many banks struggle with piles of bad loans, it appears some auditors are being stricter than others when assessing their true value." Way to be on top of that ball WSJ/Mike Rapaport. Nonetheless, we are happy that this very critical topic, is finally starting to get the due and proper, if largely delayed and uncredited, attention it deserves.
The World's Biggest Bond Fund Is Moving Aggressively Into Corporate Holdings, Away From Government-Insured RiskSubmitted by Tyler Durden on 12/29/2009 06:37 -0500
As we pointed out two weeks ago, PIMCO has been preparing for 2010 by selling out its legacy "safe" MBS and Treasury holdings, and shifting largely to cash. Furthermore, the recent hirings of corporate and distressed asset managers indicates that the traditionally Treasury heavy asset manager is set to become the world's biggest fixed income hedge fund, focusing on IG, high yield and distressed investments. As PIMCO is a critical manager in numerous government bailout programs, we can only hope that the firms' Newport Beach Chinese Walls are better at keeping secrets than the characters in assorted O.C. legacy "reality" shows. The below presentation by PIMCO's Mark Kiesel indicates why PIMCO will soon be one of the primary actors in future official creditor committees in the upcoming wave of corporate bankruptcies (yes, shockingly assets do have to create cashflows for companies to avoid bankruptcy).
- And the government fails again at curbing excess executive pay at nationalized and bankrupt financial black holes: AIG GC Anastacia Kelly, whose prior experience includes bankrupt failures, WorldCon and Fannie Mae, to get millions after all (WSJ)
- Prepare for a Yemen invasion: The Peace Prize winner is setting the stage for the next war (Bloomberg and WSJ)
- War on Wall Street as Congress sees returning to Glass-Steagall, and not a moment too soon (Bloomberg)
- The Fed's latest gimmick to pretend it cares about withdrawing liquidity: Interest bearing term-deposits (NYFed)
- Prepare for a Keynesian hangover (WSJ)
- Turning to Buffett, Bogle and Buddha for wisdom on how to invest (MarketWatch)
- Robert Reich: Wall Street bailout - the great sideshow for 2009 (LA Times)
The top five shorts of the decade, the new champion and my take on the possible implications, partly supported by Dr. Marc Faber.
Federal Reserve conducting covert Treasury monetization, John Williams warns of U.S. hyperinflation, UN producing bullion coins as world currency, Pakistani government enters political crisis, Lieberman offers to personally hunt down terrorists in Yemen, massive regional war approaches.
Wall Street real estate fund investors have essentially given an implicit, cost free "call option" on the real estate market to the big banks. This cost free call incentivized the banks to do as many big deals as fast they could during the CRE bubble, and allowed them to profit even when the deals went bad (as many of them have and inevitably will due to the bubble prices, leverage, expanding cap rates and a negative fundamental/macro outlook). Most observers will be shocked to see the disparity in the returns between the bank, as the fund manager, and their investors. Well, I present to you, "shock" in the form of a blog post!
Today's market action was rather uneventful, however "lazy" days like today can often provide highly accurate and effective trading signals as a direct result of price immobility within narrow ranges. With a practical knowledge / understanding of technical analysis, one can utilize such signals to profitably scalp futures, stocks and ETFs with ease.
The Abu Dhabi Investment Authority and CPPIB are reportedly planning to make a joint bid for EDF Energy, the giant U.K. electricity distribution network owned by France's Electricité de France.
In this 12.28.09 edition of the Fibozachi Technical Update (FTU), we present 10 technical profiles of Gold, Silver, the US Dollar Index, the VIX, the BKX (Bank Index), GS (Goldilocks), SKF and the Cult of Cupertino, er, crAAPLe, er, (snap crackle) AAPL.
True, the decade is not really over, but no one called 1930 the "last year of the 20's," and given the reflective mood that seems to grip all of Western society whenever a year ending in "9" draws to a close, well, we thought we'd better embrace the trend now so that when some idiot with a pair of glow-in-the-dark "2010" glasses with holes in the zeros for his eyes tries to convince us to watch Roy Scheider over and over again in a celebratory, all-day, marathon screening of "2010," well, we can say we gave at the blog.
Instead, and in conjunction with your many suggestions, we took the opportunity to go back over Zero Hedge's posts and see what moved you, with an eye towards getting a sense of what Zero Hedge wants to read. The results were quite interesting. We thought readers would find it engaging both as a sort of "year in review" post, and, perhaps, in finding old material missed the first time around (or before the discovery of Zero Hedge).
Happens every year end. The fund managers dress up their portfolios with the "must own" stocks for the year end statement print in order to avoid getting sacked for picking the wrong plays in 2009.
For some reason Zero Hedge is prone to take a great deal of heat (both directly radiated and reflected) whenever we opine on the (rather obvious to us) prospect that interest rates might actually (quelle surprise) rise in this environment. Today, rather than engage in "we told you so" gloating, or endure the repetitive pleadings of commentators that this or that Treasury auction was really a success if you just look a little deeper at the figures, we'll just quote Bloomberg quoting other fixed income observers on today's auction of two years, in an article "ambiguously" titled "U.S. 2-Year Yields Highest Since October After $44 Billion Sale."