Archive - 2009

RANsquawk 8th December US Late Morning Briefing - Stocks, Bonds, FX

Unemployment may or may not be a lagging indicator (it sure won't be once BLS emails are "hacked" by enterprising Russians) but the Moody's loan upgrade/downgrade ratio is about the surest countertop indicator available anywhere. And now that Upgrades have surpassed Downgrades for the first time in ages, watch out below.

RANsquawk 8th December US Morning Briefing - Stocks, Bonds, FX etc.

Is it time for the liquidity bulls to panic? At $180 million probably not, but while rates can't really go down (chukle, chukle Uncle Ben), this number can only go up. As a reminder, the first repo test was a 3 day term, this one is 8 days. Long way to go before the collateral is the same bankrupt stocks that the Fed accepts in its tri-party repo agreements.

Such a bearish appearance must be the result of the rose-colored glasses affirmative action thing at GE Capital: we have yet to see what the Comcast policy vis-a-vis unbiased content is. Nothing substantially new from Meredith - same focus areas of concern including toxic mortgages on the Fed's balance sheet, non cash flow generating "assets," and consumer, consumer, consumer (apparently she has not read the David Bianco piece either - after all the US consumer now accounts for 100% of Kindle revenues and 0% of US GDP, or so Merrill will soon want you to believe). Yet withComrade Sam making sure all is good for ever (the alternative, just like falling housing prices in your average S&P model from 2005, simply did not compute at the most recent 5 year plenary session), is there any reason to worry about anything? After all the debt auction carnival begins afresh again today at 1PM with $40 billion in 3 years. So long as those keep getting gobbled up without a glitch, all shall be well.

In addition to having become the biggest joke on trading desks the world over, the AAA rating of both the US and the UK is now starting to bother Buffett baby (soon to be step child) Moody's. It's "Aaa Sovereign Monitor" released today is all about the cautionary language that we have grown to love and expect from the toothless rater. This time however, it is what is between the lines that is most substantial: while Moody's will never go ahead and directly downgrade the U.S. for fear of the mutually assured apocalypse such an action would create (or so Blankfein and Bernanke tell us), an exhaustive read of this report indicates that Moody's thinks the U.S. and the U.K. deserve to be anything but AAA. Full report attached.

• A lonely voice against the Fed now leads a chorus (WaPo)
• Fitch takes the first step: downgrades Greece to BBB+, outlook negative (Bloomberg)
• More legal troubles for BofA: this time for CEO-in-waiting Greg Curl (Reuters)
• A view of things to come: Japan announces brand new $81 billion stimulus packake as recovery, ratings collapses (Bloomberg)
• Greek debt poses a danger to common currency (Spiegel, h/t Alexis)
• Hedge funds win profit on Chicago sewer debt at public expense (Bloomberg)

The FTSE chart is identical to what happened over Thanksgiving (absent the 5 hours of downtime of course): FTSE 100 down 1.6%, FTSE Eurofirst 300 down 1.7%, And as if having all its bankers depart and its CT office look like a ghost town, RBS is now getting freshly clobbered. In US futures, computers with massive REIT positions are short circuiting.

I don't want anyone to think this is a Goldman bashing exercise. I actually admire their prowess. Not for operational excellence (as many mistakenly consider them to have when not adjusting accounting returns for risk), but for the way they seem to get away with murder, time after time. You gotta give it to them. I want readers to take time to go through the anecdotal evidence here and decide if it is more profitable to invest with Goldman, or actually attempt to put your bid in to get a slice of that $19 billion, middle class taxpayer funded, regulator protected bonus pool.

• Asian shares were mostly lower Tuesday with bank stocks weighing on some markets.
• Bernanke reaffirmed plans to keep interest rates near zero for "an extended period".
• Bernanke sees 'formidable headwinds' for economy on tight credit, job woes.
• China’s stocks fell for the first time in three days, led by raw-material producers.
• Consumers shed debt for the ninth month in October, but at a slower rate.
• Dubai stocks tumble most in world on Nakheel debt restructuring concerns.

This morning is sovereign morning here on Zero Hedge. Having looked into Dubai the United Kingdom, and Moody's non-assessment assessment of the Aaa gang, we explore the popular notion that treating with deep skepticism the economic pronouncements released by the sovereigns of developed, "western" economies (or their nearest approximation) is something for the "tin foil crowd." Despite the tremendous temptation presented to sovereigns in their role as not only issuer and regulator of debt, but the supervising authority overseeing financial reporting (and the absence of an authority empowered to enforce creditor's rights) it apparently seems quite beyond comprehension to wonder if a bit of rose colored lensing isn't being applied.

Large public pension funds in New York, California and Ohio are looking increasingly to alternative investments in hedge funds, private equity and emerging markets in a global hunt for yield, senior managers and trustees said. What does this mean for the rest of us?

What might we discover in an audit of the Federal Reserve? Well, let's ask Her Majesty's Treasury, which, imagine this, actually released details of the assets dumped from the holding tanks of Royal Bank of Scotland into the cesspool of the United Kingdom's "Asset Protection Scheme." As a bit of background, perhaps you might frame things thus: RBS is to APS as Citi is to TARP (probably stuck in it for life). (That would make Lloyds Goldman, we suppose).

Not to be left out of the party, Morgan Stanley yesterday issued "A Closer Look at Dubai's Debt."  True, they figure that GRE's (government-related entities) are saddled with about 116% of Dubai's GDP in debt, true, if the government shifted implicit support to explicit support for these entities interest expense could account for a third of government spending very quickly, granted, total public sector debt looks like 140% of GDP (assuming no major GDP falloff of course) yes a 40-50% haircut would be required to have a meaningfully effectual impact on the debtor's predicament, but you should be selling five year credit default swaps on Dubai debt because Morgan Stanley is buying things really aren't so bad.

RANsquawk 8th December Morning Briefing - Stocks, Bonds, FX etc.