Archive - Jan 21, 2010

Goldman reported a blow out EPS number today on a minor miss to revenue: this was mostly due to a substantial cut to employee compensation accrual, which went down from an annualized accrual of $20 billion previously to $16.193 billion for FYE 2009. In fact in Q4, Goldman reported a negative expense to compensation and benefits of ($519) million compared to $5.351 billion in Q3. Did Rahm have some tete-a-tetes with Lloyd recently? With 32,500 FTE, per employee compensation was $498,153. We will provide bonus numbers for some key individuals in the days ahead.

After the double dip in new home sales and NAHB confidence, we are starting to see the beginning of the end of the improvement in firings: initial claims in the week ended January 16 came in at 482,000, higher than the estimate which expected a number of 440,000, which was supposed to be an improvement from the prior week's 446,000. The good news was that the spread between seasonally adjusted and non-seasonally adjusted insured unemployment rate tightened by 20 bps from 110 bps to 90 bps (3.5% SA vs 4.4% NSA). But by far the worst news was EUC, or Emergency Unemployment Compensation, which as even Mr. Liesman acknowledges now is important, which shot up by a stunning 652,364 to 5,654,544. The end-beginning of the year transition sure caught the DOL offguard. The combination of initial, continuing claims and EUC for the most recent period is a record 10,701,794 Seasonally Adjusted or a whopping 12,021,880 Non-Seasonally Adjusted. The double dip is here, and unfortunately for Obama, he is all out of stimulus bullets.

I was not going to bother to comment further, but after hearing pundit after pundit attack Obama for the bank levy and Glass Steagal 'lite', after banks allegedly paid their dues... I just couldn't take it anymore. This short-term memory-itis is driving me nuts!

You asked for more, more, more Bob. You got it.

"I would expect to see a move in S&P thru 1080, 1030 and into the 950/1000 range over the rest of Q1. In this move credit does badly, esp. weaker rated credit, and govvies do well, as does the GBP and the UST. Why? Because the market will be pricing for lower grwth, and tighter money + smaller deficits esp in the UK and US)." - Bob Janjuah

• China money market rates rise after economic growth, inflation accelerate.
• China’s Q4 GDP grew at the fastest pace since 2007, at 10.7%.
• Crude oil trades below $78/bbl on concern China may take steps to curb growth.
• Gold pares advance as Dollar rallies after China growth spurs curb concern.
• Japanese demand for bank loans dropped the most in more than 5 years on lower spending.
• Most Asia stocks fall, Chinese swap rate rises on concern growth to slow.
• Obama to propose rules on proprietary trading to reduce bank risk taking.

For this edition of Join My Fantasy Accounting League, how about a brief thought experiment for the early morning Zero Hedge Reader?

According to the SEC’s complaint against Gen Re, filed in U.S. District Court for the Southern District of New York, a foreign subsidiary of Gen Re entered into two sham “reinsurance” transactions with AIG in 2000 to improperly allow AIG to reverse the declining reserve trend and falsely report additions to both loss reserves and premiums written. Senior officials at Gen Re helped AIG structure the two sham transactions. The contracts show reinsurance transactions that appeared to transfer risk to AIG, but the transactions did not transfer risk.

Here is a glimpse at an internal debate between BoomBustBlog analysts on the merits of the China bubble short, and its comparison on the merits to a short in the EU and CEE contries. It appears as if the China bubble thing is about to heat up.

Forget the Isle of Man, Cayman Islands, Nauru, Liechtenstein, and like havens. The World Securities, Exchanges, and Financial Rules Commission is being planned by the Europeans and the Obama Administration. This is the theme of the World Economic Forum Annual Meeting in Davos.

A tidal wave of fiat paper currencies is now flooding the world financial system at an increasingly alarming rate. Pull a dollar bill out of your wallet and it’s as limp as ever. Linear growth in supply will get overwhelmed by a Malthusian, exponential growth in demand. The seventh in a series of seven on The Mad Hedge Fund Trader’s Annual Asset Allocation Review. (GLD), (DGP),(ABX), (SLV), (PALL)