Archive - Dec 16, 2010

Visa, which over the past several months, has become one of the darling momo names, shows just how stocks take the escalator on the way up, and the elevator on the way down. The reason, is that per the just released statement by the Fed, Ben Bernanke will cap interchange fees which will directly impact Visa and Mastercard's top line. And another shocker: per a just released note from JPMorgan, the Fed may end up cutting 80-90% of debit fees chages by the credit card companies.

Today at 2:30 pm the Fed will hold its first open to the public and telecasted board meeting. But before readers get excited (except for shareholders of Visa and MasterCard) nothing of particular significant will be discussed. The topic of the meeting will be "proposed rules governing debit card interchange fees and routing" and nothing that actually has a bearing on the future of the nation. On the other hand, based on the just released statement which recommends proposing two alternative frameworks for determining 'reasonable and proportional' interchange fees, V and MA are certainly being impacted. Nonetheless, for all who wish to see the Fed's board member live and in action, this is your chance.

Starts with a D-ends with an E...

We have long pleaded that with a DV01 of almost $1 billion, all of it unhedged, the Federal Reserve is massively exposed to portfolio losses (courtesy of the Fed's recent transformation into the world's largest hedge fund) should interest rates commence rising. Well, sure enough after a well over 1% rise in rates in the past few months, and specifically since the advent of QE2, once the market started calling the Fed's bluff for further monetary easing, the losses incurred by the Fed are sufficiently large to where people should start asking questions. John Lohman quantifies just how substantial the unrealized portfolio damage to the taxpayer balance sheet has become since Ben Bernanke top ticked rates almost to the dot with his launch of QE2.

I bet that either you, or someone that you may know, weren't privvy to the TARP 2.0 tax payer funded bailout right under your noses, and the government released the evidence buried in one of over a dozen spreadsheets featuring over 70,000 transactions, with the incriminating one featuring over 340,000 cells and over 10,000 transactions. We at BoomBustBlog suppose they thought no one would be good enough at Excel to ferret it out, or maybe they believed we were all just numb over hearing a trillion here, a trillion there. You know, after a while it starts to add up to real money.

Now consider that the real price of oil, when measured as global output vs. global demand on a historic basis should be closer to $60 a barrel than $90 and you have a TRILLION DOLLAR annual scam going on and our joke of a government does NOTHING to prevent it. Oh wait, I'm sorry, they do something...

Just Reuters headlines for now, which indicate that the presumed smooth sailing of the tax bill in Congress may be a little more complicated than initially presumed: "Obama tax cut bill hits snag in US house as democratic leaders delay preliminary vote." It appears that Democratic representative McGovern calls house delay on tax cut bill a little bump, not fatal, and that a vote is expected later today.

The expert-networking arrest noose is starting to tighten. And as we have been claiming for a while while there will be numerous side arrest, the core target of the investigation are most likely one or a handful of key asset managers. Bloomberg discloses some additional details on today's arrest of four so far non-core individuals: "Four people who worked at technology companies were arrested by agents of the Federal Bureau of Investigation as part of a long-term insider trading probe. A fifth person has pleaded guilty." We wonder how long before some or all of them appear on CNBC and various other media outlets and claim their innosence, potentially adding an obstruction of justice charge to their resume.

Before I get into it, I want people to understand that the use of Prozac in the title should not be taken literally. There are many people out there that really do have serious mental issues and medication is useful in helping their condition. As I hope is clear, “Prozac” is a metaphor for all of the brainless endeavors that have become such an integral part of many Americans’ lives. Such activities destroy the soul of humankind and play directly into the hands of the ruling elite that wish for you to be dumb, ignorant animals easily manipulated, corralled and sheared. There is a reason that plantation owners used to forbid slaves to learn how to read and write. They understood that an ignorant person is much less likely to resist their enslavement. The same is true in America today, where an unthinking and DEPENDENT person is unlikely to resist.

Next up: sub-junk rating for Greece: "Moody's says that a multi-notch downgrade would be possible if it concludes that there is an increased risk that Greece's debt-to-GDP ratio will fail to stabilize in the next three to five years, or that there is a greater risk that EU support will turn out to be less strong after 2013 than the rating agency had previously assumed." The rating agency also takes full aim at the core, and has put debt issued by 24 German banks on possible downgrade review: "Moody's Investors Service has today placed on review for possible downgrade the ratings of 246 subordinated debt securities together with the subordinated tranches of the relevant debt programs issued or guaranteed by 24 banks in Germany (including one Irish subsidiary of a German bank). This follows the German parliament's approval of the German Bank Restructuring Act, which will become legally effective as of 1 January 2011."

Some odds and ends from a CBO report on our debt.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 16/12/10

We are a little late on this one, but there is a hearing in progress in which Tim Geithner is answering various questions by the Congressional Overight Panel on what the impact of the foreclosure crisis will be on home prices. An amusing episode that just occurred was Geithner's unwillingness to answer the simple question of whether foreclosures will result in higher or lower home prices.

Possibly the most insane development in a year of nothing but insane developments from a financial standpoint was the idea that somehow the Euro was saved as a currency because the IMF leant even more money to various European countries that were already over-indebted.

Consider that these countries already owed too much money… so the IMF (indirectly the US) leant them even more.