Archive - Dec 2010

We should be ecstatic that the Department of Justice is finally prosecuting fraud, right?

Unfortunately, it's just a p.r. stunt going after small fish and leaving the big criminals untouched ...

The person who according to many, if not all, has been the most destructive presence in Obama's economic advisory team, and is luckily getting out of the White House soon, has decided to remind the world yet again of his worthless and capital destructive presence, throwing out yet another Mutually Assured Destruction bomb. As Reuters reports, citing the man who almost destroyed Harvard's endowment, and subsequently, America, "Failure by Congress to pass a tax deal in the next couple weeks would "materially increase" the risk of the economy stalling and a double dip recession." And just to make sure that people don't forget him as the person who was 100% confident that a stimulus is the response to everything, he also added that Obama would like to see the Build America Bonds program extended.

Next time you swing by the White House, remember to tell your now desperately insecure president that he has your support, or else we may get another temper tantrum like the one yesterday. It appears that now none other than the White House has the (in)security issues of a 14 year old girl. In what has to be the epitome of a surreal joke, the official White House website has released a list of actual individuals and institutions (among these, shockingly, the New York Times, Market Watch, Harvard and, no shit, Bank of America) who have voiced their "statements of support on the framework agreement on middle class tax cuts and unemployment insurance." Oddly, nowhere in this list is even a passing mention of the Zero Hedge reminder that just the tax cut extension portion of the deal is likely to boost the deficit, and thus the US funding need, by $5 trillon over the next decade. In other news, the market is up because consumer confidence is higher... and consumer confidence is higher because the market is up. The adventures of Alice through the looking glass have nothing on America's blind meanderings through the depression zone.

This past Sunday on the CBS program “60 Minutes”, Americans received a massive dose of mendacity from our Fed Chairman. Mr. Bernanke’s shaky delivery, and even shakier logic may cause faith in America’s economic leadership to evaporate faster than the value of our dollar. In particular, Bernanke delivered two massive distortions...

Reuters headlines that Maryland Democrat, and ranking member on the House Budget Committee, Christopher Van Hollen is saying "I'm not sure that this bill can pass in this form in the House of Representatives." Is this just the start of political bickering within the democratic party?

From the same folks at Money Choices who brought to you: "Gold 101: Who's Got It And Who's Finding It" now comes the 101 lesson in silver: world silver production by country. While his may not come as news to many, the bulk of production comes out of three distinct countries: Peru, Mexico and China. And with the price of the metal having surged more in the past several months than virtually any commodity, suddenly the producers may find themselves with substantial leverage to dictate terms of delivery: think of what happened to Rare Earth Minerals when China blocked exports briefly. With the US not even in the top 5 of world production, could we soon see the formation of yet another cartel, especially when one considers that unlike gold (so the thinking goes), silver also has industrial uses?

Peace on Earth, Good Will Towards Ben...

Today's $26 billion 10 year auction has priced and while it was not the complete rout many had expected, it did tail, pricing wide of the WI, at 3.34%, which is 70 bps compared to a month earlier, and the highest yield since the May 3.548% auction. Bid To Cover came at 2.92, on the low side of all 2010 auctions. In terms of participation, Indirect take down dropped from 56.6% last auction to 44.4%, which was low, but has been worse in 2010 (29% in January), as Directs stepped up again and bought 11.4%, with the balance of 44.2% of course purchased by the Primary Dealers. We expect at least a small part of this issue to be monetized by Brian Sack in as little as two weeks. Lastly, those hoping for a respite from blowing out rates better pray that Democrats manage to squeeze the Build America Bond provision in the tax rate extension, or else the bottom will fall out of the muni market, forcing Bernanke to unleash QE3: the broke state version.

The Federal Reserve is America's Fourth Branch of government and Ben Bernanke is, in effect, the economic czar of the country. The Fourth Branch? The Fed and the Fed alone has the power to determine how much money should be in the economy. Such vast power over our lives makes the Fed a de facto fourth branch of government. Yet, its powers are not defined by the Constitution, and neither the chairman nor senior officials are elected by the people.

Janet Tavakoli shares a presentation she prepared for the Federal Housing Finance Agency Supervision Summit earlier today, in which she attempts to explain to politicians how banks made fraud into a "business model" and how the damage can be repaired. It may not be easy: as she says, MBS became a "widespread interconnected ponzi scheme" - "Securitization professionals at several financial institutions knowingly bundled fraud riddled loans into RMBS. New investors needed to pay-off old investors. To delay being busted, they escalated and sped up the fraud. This required more “complexity” and the involvement of more cronies. Many CDOs and virtually every CDO-Squared were more fraud to cover-up fraud." Of course, the same can be said about the global economy, as now everyone is aware that the global Keynesian system is nothing less than Madoff's scheme taken to the infinite degree. But nobody will ever go to jail for that. For any remaining questions on the motives, the schemes, the payoffs, and, most importantly, the players, both the protagonists and the bribed co-stars, the below presentation attempts to answer all. And, unfortunately, Ms. Tavakoli's suggestion for how to fix this, which is remarkable precisely the same one we have been espousing since our advent, will never happen as it means the end of the Ponzi and the elimination of trillions in generationally stolen middle-class wealth.

Banks, especially the ones which lend to most US businesses were devastated by the credit bomb. Their recovery is crucial for economic recovery. Are they thawing or freezing? What is the current status of credit in America?

WikiLeaks has teased the genie of transparency out of a very opaque bottle, and powerful forces in America, who thrive on secrecy, are trying desperately to stuff the genie back in. The people listed below this release would be pleased to shed light on these exciting new developments.

How far down the U.S. has slid can be seen, ironically enough, in a recent commentary in Pravda (that’s right, Russia’s Pravda): “What WikiLeaks has done is make people understand why so many Americans are politically apathetic … After all, the evils committed by those in power can be suffocating, and the sense of powerlessness that erupts can be paralyzing, especially when … government evildoers almost always get away with their crimes. …”

So shame on Barack Obama, Eric Holder, and all those who spew platitudes about integrity, justice and accountability while allowing war criminals and torturers to walk freely upon the earth. … the American people should be outraged that their government has transformed a nation with a reputation for freedom, justice, tolerance and respect for human rights into a backwater that revels in its criminality, cover-ups, injustices and hypocrisies.

In a slightly unorthodox note to his readers, "Sovereign Man" Simon Black looks at the next potential escalation in the Julian Assange trainwreck, which may soon become a diplomatic fiasco all on its own, and without the need for leaked cables: it turns out that Australia is now seeking to strip Assange of his passport. However, there courtesy of a recent loophole, Assange has applied for UK citizenship (British mother). Will the UK - America's staunchest supporter, follow through with its laws, and grant the Australian a passport now that even his own nation seeks to betray him? As Black points out: "There are two important lessons in here for all of us: 1. Like Julian Assange, you never know when your own government will stand ready to "sell you out." Prepare accordingly. 2. Though you may have looked at all avenues for obtaining a second citizenship based on your family background and place of birth, it pays to constantly review the laws. Governments are always tinkering with them. Usually this is a bad thing... but as Tim's shining example shows, sometimes it works to your advantage." Lastly, one never knows when the proverbial TSHTF, and as such one should always be aware of all options should living in the US become, shall we say, problematic.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 08/12/10

Confused what the upcoming rate hike in China means for the domestic economy (if reports of an imminent rate hike are to be believed), bursting of the global credit bubble aside? Luckily, here is JPM's Jing Ulrich (no relation to Lars) with all the charts one needs and then some to make some sense out of the most complicated and misrepresented control economy in the world.