Archive - Oct 2010

In case you haven't had enough, just a bit more Ben bashing

Today's $21 billion 10 Year bond closed, as expected, without a glitch, which is normal as the Primary dealers and the Directs once again account for nearly 60% of the take down. The 2.475% high yield was the lowest in 2010, and approaching the lowest on record from early 2010. Yet what was most troubling is that like in yesterday's 3 Year auction, both the Bid to Cover and the Indirect participation have started to decline. At 2.99 the BTC was the lowest since the May 2010 auction, following which every BTC was over 3. Additionally, and more troubling, the Indirect takedown was just 41.5%, a major drop from last auction's 54.7%, which caused both the Primary Dealer back up bid, and the Direct take downs, to jump materially, to 47.8% and 10.7%, respectively. Since the 10 Year should be one of the most preferred spots on the curve for foreign investor interest, the sudden drop is certainly troubling, and may be an early shot of how China plans on retaliating for recent trade war escalations in the US.

The inception of the mortgage fraud crisis has been extensively documented by pretty much all media outlets now. The question that everyone is grappling with is what happens next. Janet Tavakoli writes in with some suggestions, more at the thought experiment level, as to what the next steps in fraudclosure/fauxclosure may be.

What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale, in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost? This is the game that is being played today.

The NBER tried to pull a fast one on America a few weeks back when out of the blue it concluded that the recession ended in June 2009. Alas, Google Trends shows otherwise. The attached chart demonstrates the average use of the terms "food stamps", "I need a job", "unemployment claim" and "government assistance" via google trends. Either Americans are really clueless and are completely unable to get the memo that it is now all clear to spend, spend, spend, or the BLS, as John Lohman has suggested, aka the US version of the Ministry of Truth has infiltrated the corpulent and proud NBER Ph.D.s flagbearers.

JPMorgan Chase's CEO says the bank has stopped using the electronic mortgage tracking system used by major financial institutions. Lawyers have argued in court proceedings that the system is unable to accurately prove ownership of mortgages. And after the effective foreclosure moratorium is about to cripple the RMBS market, here comes the collapse in CMBS.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 13/10/10

The Maricopa County Sheriff's Office bomb squad is at the Palo Verde Nuclear Generating Station investigating a suspicious package. The plant is on lockdown right now and access to and from the station has been halted while the package is examined. The lockdown is causing some traffic issues on Interstate 10 right outside the plant.

The Department of Finance released their latest economic and fiscal budget projections up until 2015, and to no one’s surprise, it is extremely optimistic. There are many positive data points in the report, highlighting the positive employment situation, the strong fiscal position ‘relative’ to other G-7 nations, and solid growth in GDP.

Officials in 49 states have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners. Alabama was the only state not to join the investigation. "This group has the backing of nearly every state in the nation to get to the bottom of this foreclosure mess," Iowa Attorney General Tom Miller, who is leading the probe.

What has 60% of the nation’s residential mortgages but 0 employees?

We present today's thoughts by Art Cashin on the coming hyperinflation (and no, it does not mean very high inflation - it means a complete and total collapse in the monetary system - which is what Ben Bernanke is attempting to achieve), without commentary.

Before I release my opinion of JPM's most quarterly results, I want to demonstrate the risk that banks take in releasing provisions to boost accounting earnings in this environment. After reading this in its entirety, JPM shareholders should be infuriated at JPM management's actions, which are sure to be reversed in the near to medium term. It is not as if the accounting earnings boost has fooled anyone and lifted the stock, which is currently down on an up day.

Given the global surge that is going on in all asset classes, the (PCY), with its generous 5.82% yield, has to be on the menu in a yield hungry world. One of the great ironies in the international capital markets is that emerging nation balance sheets are so healthy because the West refused to lend to them for so long. Take a look at the (ELD) where you get the a double play: a continuous cycle of credit upgrades lead to lower interest rates, higher bond prices, in appreciating currencies.

That David Rosenberg is very much against QE2 is no surprise (although for such a bond bull he should be exalted) - he knows all too well that the cost/benefit analysis of QE2 just does not make sense: to pick a few bps in GDP in exchange for trillions in new debt (while letting the bankers send the CRB to imminent all time record highs) is simply moronic, and positions US society one step closer to civil war if not worse. Of course it is this kind of truthy candor that cost him his job at BofA. What we are more surprised by is that the "other" Rosenberg - a/k/a Chief Credit Strategist Jeffrey, and the smartest person left at the bank, has just released one of the most scathing reviews from a TBTF bank on the topic of (at least) doubling bank reserve, and that it will do absolutely nothing beneficial, now that lack of liquidity is no longer the economic threat, and if nothing else, will lead to much more bubble creation. As he says: "the costs of further QE2 in the form of raising the risks of asset bubbles - now in emerging markets as opposed to housing - should provide greater ballast against the gusts blowing in the direction of further liquidity provision." Alas, it is too late, and Bernanke will stop at nothing in his attempt to destroy America, absent several million iPitchfork-friendly, very angry, and very hungry people showing up at the doorstep of the Marriner Eccles building.