Archive - Jan 2010

The most recent broker to realize that private risk does not exist as a result of global moral hazard is Deutsche Bank, which is actively promoting ta long risk/short sovereign CDS trade. That is happening as IG13 trades at its all time record tights of 77 bps. In other words, buying an index of 125 investment grade credit provides less than 1% of incremental risk return. Pretty soon the ABX trade will be buying IG. Until then, however, the only risk continues being that of sovereign balance sheet, courtesy of onboarding of virtually all private sector risk at the Central Bank and via other backstop mechanisms.

"The Fed must curtail its emergency credit and financial market support programs, raise the federal funds rate target from zero back to a more normal level, probably between 3.5 and 4.5 percent, and restore its balance sheet to pre-crisis size and configuration." Kansas City Fed President Tom Hoenig

Total Non-Seasonally adjusted insurance claims (consisting of Initial, Continuing and EUC claims) hit another record of 11,268,100. Make of this data what you will. We are confident the objective, mainstream media will find a way to spin this favorably (it can only go down from here... of course, unless it doesn't).

The stock market’s performance over the next decade will be very similar to the one since 2000: the WSJ appropriately named it “the lost decade.” Stocks will go up and down (setting all-time highs and multiyear lows), stagnate, and trade in a tight range. At the end of this wild ride, when the excitement subsides and the dust settles, index investors and buy-and-hold stock collectors will find themselves not far from where they started in 2000.

Do your best Mister Mister and lament with Boeing Co. as they report that customers ordered a paltry 142 commercial jets in 2009.

"We now have a financial system that is completely based on moral hazard...Crazy things happen when you have financial system like that... The conventional wisdom is you can't have back to back major financial crises. I think we're going to push that, we're going to have a look and see whether that's true. The next 12 months could really be exciting... But we are setting ourselves up for an enormous catastrophe." - Simon Johnson

Presented without commentary. Just don't call it a bubble.

Do SunSPARC workstations colocated at the NSYE have a preference as to what day they gap up the market? We attempt to answer this question, in addition to pointing out a very strong pattern on Employment Situation Fridays.

The latest observation on our depressing economic reality, behind the glitzy headlines and the 3D TV screens, comes from Bloomberg's Jonathan Weil who rightfully asks "if AIG executives repeatedly claimed the stock was worthless, how do the executives, auditors, regulators, and, ultimately, the government, still have the balls to indicate the company's stock has any intrinsic value, both its publicly traded version and its book equity." Weil also joins the long list of people who wonder, just what the hell is the SEC's function in this day and age, when publicly-traded companies, many of them government backstopped, can disclose anything and everything they desire, even when such disclosure is flawed and purposefully misleading (see Bank of America and the earlier piece on a lying Tim Geithner and the very same AIG) with absolutely no repercussions. It is all really getting just far too depressing for US taxpayers to even be indignant. Maybe that has been the point all along...

Next week's Treasury auction schedule has been announced: next week will see a total of $159 billion in new gross issuance, consisting of $74 Billion in 3, 10 and 30 year Bonds, with two reopenings (10 year and 30 year).

It is pretty clear that officials and the likes of Tim Geithner were directly involved in editing documents that would eventually become public disclosures by AIG in the form of SEC filings.  To the extent these filings were knowing material omissions or misstatements of fact Tim, along with executives at AIG, should be heading to jail, right?  Well, not necessarily.  As we wrote two months ago, there is at least one little hitch that permits firms to cook the books and skate off after the fact.

RANsquawk 7th January US Morning Briefing - Stocks, Bonds, FX etc.

The price action around these key levels needs to be followed closely as we are in an area where new trends develop.