Archive - Mar 11, 2010

Earlier today political corpse Chris Dodd said that he would proceed with unveiling a financial reform bill on Monday without Republican participation, in a humiliating blow to Bob Corker, who was most recently seen doing all he could to help his Wall Street colleagues make sure the Volcker plan would never see the light of day. Yet with recent rumors out of Washington that not only is the Volcker plan alive and well, the double whammy for Corker may be coming any day. So what does the Tennessee Senator do? He joins the Fed bashing brigade. Among his remarks from his conference given today after his was "fired" by Dodd, was the observation that the "Fed will have its wings clipped in reform" and that the "Fed is lobbying hard to protect its marble buildings." No doubt Senator: it is people like you who make Fed (and broader Wall Street) lobbying efforts quite easy. We hope that you and all your other bought and paid for colleagues in the Senate can learn from Senator Kaufman, whose speech on financial reform we already posted earlier, but which needs to be read and understood by all who are serious about regulatory reform, instead of puppets like Chris Dodd who huff and puff, yet only want to secure a friendly donation paycheck from his core Wall Street constituency, well into his retirement days.

RANsquawk 11th March US Afternoon Briefing - Stocks, Bonds, FX etc.

Here comes the first municipal Hail Mary: Detroit is attempting to sell $250 million in debt, while disclosing in the associated prospectus of the possibility of filing for Chapter 9 bankruptcy protection. The kicker as Bloomberg News reports - no recent financial statements are available. In fact, Detroit is providing investors with a a financial statement from June 30, 2008, with a fiscal 2009 report "expected" to be complete by May 31. To say that a lot has changed in the past two years for the city whose unemployment some say is in the double digits with a 3 handle,would be an understatment. Yet we are confident that having no access to actual financials will not stop investors who in their feverish quest of Return On Capital are completely forgetting about the Return Of Capital concept.

More postcards from a post-austerity Greece where 10,000 protesters take to the streets. Pick the CDS speculators out.

The older I get the harder it is to stop myself from getting too jaded, and too cynical. It is an even harder task these past few years, as I am not only working against the natural cynicism of age, but also the fact that we have all had a front row seat to the greatest financial meltdown of our generation. Too many books have chronicled all the insiders who have benefitted from this meltdown, and there are no shortage of government officials whose hands are dirty (gander at Fannie and Freddie’s lobbying recipients, and payroll lists). Occasionally, though, we get a glimpse of something good. Genuine. Void of self-interest. Today Senator Kaufman will speak on the floor about financial reform in general. We were lucky to have met the man and his staff, and to see raw energy and concern for the public good at work is rare and inspiring. The Senator is not running for re-election. All that he has done, and is doing, is because he feels it is right, and he cares about America, and its proper priorities. Agree or Disagree? Not even the point. Watching him and his staff in action makes me see how harmful lobbying is as an activity, and how bad multi-term government officials are. If we want change, maybe we should limit Senators to serving one 6 year term, or two 4 year terms MAYBE. No exceptions.

After just 5 days of relative quiet, a rumor of a Greek 3 Year bond issue is pushing GGB spreads higher over in Greece. 2 Year yields have jumped by 22 basis points to 4.91%, with concerns about the short-end of the curve are pushing the long-end wider as well, with the 10 year drifting wider. Selling in bonds has caused CDS spread to also widen, meaning that the latest round of CDS scapegoating is expected to commence in a few short minutes.

America's labor unions are finally waking up from their deep slumber and noticing the vast schism in American society between the haves and the have nots. The catalyst: Wall Street's $16.2 billion bonus pay day. As a result Richard Trumka, head of the AFL-CIO, the nation's largest union organization, and a firm supporter of the transaction tax which was proposed in late 2009 and then promptly buried after some serious lobbying by Wall Street, will announce today "two weeks of protests aimed at Goldman Sachs Group Inc., the most profitable securities firm in U.S. history, and the country’s five other largest banks. The AFL-CIO says it plans 200 events covering all 50 states, starting March 15." Summarizing the mood of increasing populist aggression across the nation against Wall Street's uber-wealthy is labor professor at UC Berkley Harley Shaiken: “Wall Street has become a symbol of greed run amok, and what labor is doing here is seeking to demonstrate that it is speaking for working families generally, union member or non- union member.” Strikes in Greece have already paralyzed the country. Will America soon follow?

Hedge funds are not seeking to dictate economic affairs. Rather we are preoccupied by price. A market-based economy like ours requires a pricing mechanism to allocate resources and ensure that we all prosper. Get it wrong and we endure the calamity of the technology bubble and the sleazy debacle of the American mortgage crisis. It's not that hedge fund managers are bitter and seek to wreak havoc. It's just that we believe that recurring and periodic recessions reveal the economy's winners and losers. And through our endeavours, hedge funds attempt to discover the identity and inadequacies of the poor businesses. During hard times, such businesses typically go bust, allowing us to make an investment profit by betting on that eventuality, and ensuring that successful and prudently managed businesses prosper. - Hugh Hendry

• Bring back the capitalist model (Washington Times)
• Initial claims at 462,000, higher than consensus, continuing claims higher by 37,000; snow not implicated (Bloomberg, Reuters)
• Naked swap crackdown in Europe rings hollow without Washington (Bloomberg)
• Volcker rule gets lift in Senate amid reform talks (Reuters)
• Greeks strike over budget cuts, stocks decline (NYT, Bloomberg, Reuters)
• China inflation surges (Bloomberg, Reuters)

• Asian bourses turn lower after release of higher-than-expected Chinese inflation data.
• Bank of Korea keeps key interest rate at record low as economic growth slows.
• China inflation, production accelerate, adding pressure for stimulus exit.
• Chinese property prices were 10.7% higher than a year earlier in February: Govt agency.
• Federal Reserve gets a new look as regulator of largest, riskiest firms.
• Japan's Q4 GDP grew at an annual 3.8% pace - lower than the prelim reports of 4.6%.
• Oil falls below $82 in Asia as traders look for US crude demand to match growing economy.
• US Senate passes $150B bill for jobless aid, tax breaks.

RANsquawk 11th March Morning Briefing - Stocks, Bonds, FX etc.

Picture China right behind Greece as the target of the market vigilantes.

Evidence seems to be mounting that we are headed towards some sort of implosion in the paper Gold market, and perhaps the currency/bond markets in general. Got physical Gold?

RANsquawk 11th March Morning Briefing - Stocks, Bonds, FX etc.

Investing in Russia is a double edged sword. Shareholder rights are virtually unknown. Cross the government, and they’ll through you in jail. But the land of Lenin and Red Square has the cash to finance a serious growth spurt. GDP is flipping from a -7.9% rate in 2009 to an expected 3.2% this year. Russians have no credit card debt, no home mortgages, and terrible housing, but the resource wealth to buy what they need. Just watch out for the knock on the door in the middle of the night.(RSX)