Archive - 2009

What was once considered a pipe-dream could become reality: after decades of dictatorship, war and international sanctions, Iraq's massive oil reserves are set to be tapped proper and the country once known for two overflowing rivers could be crowned oil king.

Well, you sort of knew it was coming in some form or another.  That form happened to be the Banking Integrity Act of 2009.  Think of it as "Glass-Steagall II."

For the unwashed, and among other things, the original act created the FDIC and separated the practice of "investment banking" and "commercial banking."  The concept was intended to avoid the conflicts of interest that purportedly arose when the same Wall Street shark was responsible for both the growth of your long-term savings and the sale of securities (underwritten by self-same shark's bank, most likely).  It's effect was, as might be imagined, debatable.

Bloomberg reports today that the concept is, once again, making the rounds and points us to a document on Thomas.

Feed the ducks while they're quacking

The administration sure is learning how to take advantage of the Ritalin addicted, holiday sales overbonanza'ed (1% increase over last year's gruesome December performance surely must be terrific news) public. Not only did Obama hope the whole Fannie/Freddie BS would slip by unnoticed even as he paid the failed public servants over at the nationalized-in-perpetuity GSEs an insane amount of money, but this week the Cottonelle experts over at 1500 Pennsylvania Avenue tried to sneak a $118 billion in coupons and another $57 billion in bills, a total of $175 billion pieces worth of one-ply bidet replacements, for the last weekly auctions of the "noughties" (yes, apparently that is the name to this most recent lost decade, set to end in a few days. But don't worry Ben Shalom will be around to make sure its bubblicious legacy persists for much, much longer).

For purists, we acknowledge that the decade does in fact not end until December 31, 2010, but we are sure the Senate will pass a provision in the final Financial Regulatory Reform bill adjusting the Gregorian calendar to seal all the "bad, bad financial stuff" deep under the rug of a past never to be repeated, with only hope, sweet smelling roses and manna from heaven remaining on deck.

• Morgan Stanley sees the 10 year at 5.5% in 2010, Goldman Sachs at 3.25% - someone's prop desk is going to get spanked (Bloomberg)
• Tanker freight rates to drop 25% as 26-mile long line of idled tankers runs out of fumes (Bloomberg)
• Deflationary side effects: Japan Finance Minister admitted to hospital (Bloomberg)
• Ferguson - The decade the world tilted east (FT)
• Summers - The man who blew up Harvard's portfolio, has set his sight on the US next (WSJ)
• Buffett doing the patriotic thing and firing 21,000 employees of companies that did not get taxpayer bailouts (Bloomberg)

If we tackle all flawed arguments against gold on the basis of logic and from the perspective of understanding that from time to time, bankers execute artificial schemes to depress the price of gold to serve their own purposes, then it should be quite simple to ignore your local politician and economist when they tell you that you shouldn’t buy gold because it is a bubble.

So, now the buy side becomes the sell side?!?!?!
I am here to weigh in on the increasingly popular marketing battle over GGP's (General Growth Properties) value in, and out of bankruptcy. The players in question are Ackman/Pershing square - long the company's stock, Hovde Capital Advisors - short the stock, and Reggie Middleton - the original player! [and the first guy to call GGP's downfall two years ago at $55 with an investment grade rating and multiple sell side buy recos!] Being an early mover who was right, and having no position in the stock now gives me a position of credibility to pick a winner in this fight. And the winner is...

The Treasury/FHFA announcements regarding the Agencies were bungled. I wonder if anyone is going to pay a price for this.

Not even Christmas is safe from cost cutting, or so it seems when comparing this year's New York Stock Exchange Christmas dress-up to last year...

The energy debate is about to ruin your life.

• Nigeria quick to point out supposed would be bomber snuck into country. (Scammers? Sure. Bombers? Niger[ia], please!) [reuters]
• Mousavi's nephew reportedly killed in Iran.  [reuters]
• Gordon Brown sucks at economics.  ("The shadow [cabinet] knows.") [timesonline]
• 2009: South Korean group wins $40 billion UAE nuclear reactor deal.  (2011: South Korean group writes off $36 billion in UAE receivables) [reuters]
• French group reportedly overbid by $16 billion.  (French management contract stipulated that reactors could only work for 30 hours per week)

I am here to weigh in on the marketing battle over GGP's value in, and out of bankruptcy. The players in question: Ackman/Pershing Square - long the stock, Hovde Capital Advisors - short the stock, and Reggie Middleton's BoomBustBlog. I currently have no position in GGP, but received many requests to weigh in on who is right on this rush to recreate the propaganda power of the sell side banks. And the winner is...

2010 will be a year of major transformations, punctuated by the following key escalating divergence: i) on one hand, the ongoing contraction of the US consumer will accelerate, because even as the stock market ramps ever higher (and on ever decreasing trade volume a 2,000 level on the S&P while completely incredulous, is attainable, but will benefit only a select few insiders who continue selling their stock at ridiculous valuations), household wealth will at best stagnate (as a reminder, an increase in interest rates "withdraws" much more household net worth, due to implied house price reduction, than any comparable boost to the S&P can offset), ii) on the other hand, China, which is faced with the ticking timebomb of continuing the status quo and hoping that US consumers can keep growing the global economy, or alternatively, looking inward at its own consumer class, and shifting away from its historical export-led model. The one unavoidable side effect of this prominent departure would be a renminbi appreciation, and a logical drop in the US currency, once the US-China peg if lifted (a theme opposed recently by SocGen analysts, who see the inverse as likely occurring). The main question for 2010 and beyond is whether this will be a gradual decline or a disorderly drop. And behind the scenes of all the bickering, jawboning and posturing, this is precisely what high level officials from both the US and China are currently negotiating. This will be one of the major themes that defines the next decade. Another phrase to describe this process is the gradual drift of US into a nation that is aware it is no longer the primary economic dynamo of global growth as China eagerly steps in to fill that spot.

While we focus on the financial tsunami, it's good to take a step back and remember that real natural disasters strike everywhere around the world, leaving children orphaned and destitute. Please take the time to read about Petra Nemcova's inspirational journey to do something about real tsunami survivors.

• Son of Nigerian banker apparently tries to blow up Delta's EHAM -> KDTW.  (419 BLAM?) [reuters]
• Supposed Delta bomber apparently has al Qaeda ties.  (Explains why he was going to Detroit) [reuters]
• ...and has been known by U.S. officials as a terrorist associate for two years.  (Explains why he was going to Detroit) [AP]
• As they hit 5%, and when they think no one is listening, Freddie whispers that 30-year rates could climb to 6% in 2010. (Rahm: "No big thing.  Just sayin' is all.") [reuters]