Archive - Dec 2010

A little-known program to aid the economy by distributing money to bloggers is gathering support in the White House and Congress. In the bruising fight to see which party can give away more borrowed money, Republicans and the Obama administration hammered out a compromise on the White House plan to pay "qualified" bloggers $100 per post, up to $100,000 each. The Obama administration had originally included income limits in its "Web Entrepreneur Program" (WEP) legislation, but Republicans forced the White House to drop the stipulations which would have limited payments to bloggers who earned more than $250,000 annually.

AP reports that Marc Madoff, the son of Bernie, was found hung in his apartment. While it is early to speculate into the causes of death, it is a distinct possibility that the recent pick up in activity by Irving Picard may have some impact. Then again, as lately the big banks have been on the receiving end of Picard's actions, there does seem to be a disconnect, unless of course Mark had incriminating evidence against some of the recently high profile defendants such as JPM and HSBC. Keep in mind that Bernie turned himself in as a means to protect his children and family, or so went the official story.

Just an update for those interested to see the change in market expectations of Fed Funds rates implied by treasury spots and forwards Pre-QE2 versus Post-QE2.

Of course, there are many critics of the Fed who say the second round of quantitative easing is wrong and even harmful. "The failure of QE2 doesn't worry me. It's the success that worries me," says Vitaliy Katsenelson of Investment Management Associates.

A few things on my mind.

Every banksta down on Wall Street Liked CDOs a lot...--
But the Grinch, who lived in a Greenwich trailer, Did NOT!

When it comes to China, few people are as erudite (if somewhat biased) as CLSA's Chris Wood. Below we present his latest thoughts on the world's most populous country, which after tonight's inflation news is sure to be in the headline news for at least a few days, or at least until an iPad 2 prototype is shockingly stolen from Apple's offices. And according to Wood, tonight's Chinese news are, in the grand scheme of things, not all that material: "GREED & fear is not about to change the current view on China
since the view here remains sanguine on the near-term perceived risk of
higher CPI “inflation”. Still the issue of the fast developing
non-banking financial sector needs to be watched closely; most
particularly how the regulators respond to it since any aggressive crack
down will have negative market implications. In the longer term,
if the growing breed of financial entrepreneurs continue to find ways
around the rules, that might ultimately make policymakers consider a
more market orientated policy where interest rates are set by the
market. But that would have major political implications as it would
mark a fundamental departure from the command economy model. All this is
just another way of saying that there are limits as to how long China
can continue to run its weird hybrid of command economy and private
sector economy. But for now at least GREED & fear is going to give
Beijing the benefit of the doubt that the game can continue in 2011
since the empirical evidence continues to support it."

The much awaited Chinese CPI and PPI have been released: CPI came at 5.1%, on top of the whisper number, but higher than the official consensus of 4.7%, and the highest number by far in over two years. PPI beat by 100 bps, printing at 6.1%, compared to 5.1%. This "data" should be sufficient to negate the impact of last night's RRR hike and force the PBoC to raise its interest rate, as if the Chinese central bank does not act, one would wonder why the Politburo would allow the release of data which would only enflame the domestic inflation scare even more.

What happened to American companies that paid solid wages and provided employees with solid pensions? Oh well, at least public sector pensions continue paying out nice benefits...for now.

There’s no question that the last thirty years have been very good to the bond market. In fact, the chart above may even paint the picture of what could be called the Great Bond Bull Market with price moving inverse to yield. While I have been writing for months about thinking the “bond bash” is coming to an end, I think we may have seen the true beginning of that end this week with the 10-Year Treasury yield spiking almost 40 bps higher in just three days to an intra-day high of 3.33% from 2.95%. And what might have been the impetus to bring about this potential end to the bull market in bonds? Interestingly, the most obvious possibility is also all but impossible and perhaps the reason why many seem to be surprised by the 95 bps or almost 1.0% move up in the 10-Year on an intraday basis in less than two months.

With the new medium of mass communication in all matters financial and economic having been recently discovered to be cartoons (as the penetration of written text discussing such arcane topics as the Fed, debt and addition ends up being trapped within a very narrow echo chamber), we present the latest and greatest 3 minute summary, which even a third grader will understand, of what is gradually becoming accepted as the most troubling social, economic and political development in America - record social, income and wealth inequality... and its very disturbing consequences, which at last check have resulted in some form of social upheaval in almost every situation.

Today's CFTC data reveals some interesting inflection points. First, looking at the perishables, there seems to be a resumption in bullish sentiment, especially in coffee and corn. This is to be expected as the last week saw an inflation scare which prompted many to expect a fresh rise in commodities (despite concerns of year-end profit taking which has materialized pretty much as anticipated in the year's best performing asset class - precious metals). Where things get more interesting is looking at the various parts of the Treasury curve: after 3 weeks of rather indiscriminate selling, net spec contracts in both the 2 Year and the 10 Year have seen a modest resumption in buying, although that previously most beloved part of the curve - the 5 Year is still unable to find a base. Although the 5 Year is still the only bond that has a net positive spec balance: all others are now negative. In other words, where we go from here is pretty much a crapshoot, as this is nothing more than a coincident indicator in the latest volatile asset. Lastly, looking at currencies, we see an interesting trend - after the USD saw a substantial pick up in the past two months as Europe faced its second sovereign bankruptcy (but has for now been buried under the rug), bearish sentiment is coming back again. Yet unlike before when there was a rather obvious inverse relationship between the EUR and the USD, this time the deterioration in USD sentiment has metastasized to the Yen, and the Euro (the CHF has been rather insulated, which is as expected, as the currency continues to to be the last ditch safety currency and thus less volatile to sovereign insolvency risks).

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 10/12/10

Courtesy of another no-news day, punctuated by another low volume stock levitation and Bernie Sanders' 7 hour and continuing speech, we return to our theme of childish humor in presenting random Bloomberg ID screengrabs.

Lessons learned from understanding the "Wash, Rinse, Repeat" cycle, fueled by "Infinite Fiat", provided by The Ben Bernank. And finally figuring out how the stock market works. By running with the herd of institutions which have inside information on which way the Fed, the U.S. Treasury Department, and the Washington Plutocrats want to push stocks. It is the key to survival if you trade for a living.