Archive - Mar 19, 2010

Congress is pretending to be investigating yet more criminality out of Goldman and out of the New York Fed, and specifically the nexus where the two streams intersect (aside from private room meetings at assorted Financial District restaurants) - Goldman's very own/the Fed's very ex-own, Stephen Friedman. We can't wait to see how quick before this investigation quietly disappears. Pay particular attention to rhetorical question #13: " 13. Has the Federal Reserve investigated whether Goldman Sachs or Mr. Friedman benefitted financially from Mr. Friedman serving as Chairman of the Board of the New York Fed?" Duh.

This paper explores the subject of a possible housing bubble in Canada. It examines a diverse array of factors that may have contributed to the rise in house prices in Canada. The paper evaluates each factor individually and determines the health of the Canadian housing market using common valuation techniques. Results suggest that economic fundamentals in Canada provide little explanation for the Canadian house price dynamics. Market fundamentals have become insignificant in affecting house prices, and the price-momentum conditions characteristic of a bubble now exist. The extreme decoupling of the market prices from the underlying fundamentals suggests an upcoming correction in housing prices in Canada.

It had been a little quiet without Alan Grayson these past few months. Too quiet. The Florida Democrat is now back with a bang after sending a letter to the representatives of the AIG Credit Facility Trust demanding that all AIG emails over the past decade be made public, as well as all company models and internal accounting documents. Yet it is the flourish of the narrative, which reminds one of Dan Loeb in his iconoclastic prime that is the centerpiece of the most recent, and every other letter. Where else can you find pearls like: "It is beyond outrageous that this company, which taxpayers capitalized after Wall Street used it as a slush fund, hides nearly all relevant facts from its owners, the public." We are most enthused by Grayson (and others) finally picking up on a key theme - if you want something analyzed independently and objectively, just open it up to the broader public, and screw all corrupt internal commissions. Crowdsourcing is the only way to get anything done these days. Also, the crowd wonders, is it too late to replace the top two posts in the current administration with Grayson-Kaufman (in alphabetical order)?

• The start of the great unwind? JGB yield curve steepens asbig buyers faith dented (Reuters)
• Markets spooked as Greek rescue plan crumbles (Telegraph)
• Nobel winning economist extraordinaire responds: Steve Roach goes batty (NYT)... it's going to be a slow news OpEx
• Latvia government collapses amid economic crisis (Telegraph)
• China tries to cool yuan dispute with US (Reuters)
• Stop losses see Sterling heavy in European Trade (Market News)
• Lehman's auditor goes blind from all the cooking (Bloomberg)

A recent joint poll by Responsible-Investor.com, the Network for Sustainable Financial Markets and AQ Research, showed more than 90% of investment professionals believe moral hazard has increased. And yet, global pension funds and wealth funds who manage trillions of dollars have not taken the lead to push for financial reforms. Why do they acquiesce, and not push for meaningful post-crisis reforms?

• Asia stocks rise as US reports boost confidence in recovery; Yen weakens.
• Banks borrowed less from the Fed?s emergency lending program over the past week.
• Euro set for biggest weekly drop in six on concern Europe split by Greece.
• Nikkei hits sixth straight weekly gain, up 0.7% on week.
• US Treasury to sell $118B in notes.
• Papandreou races against time to cut borrowing costs as EU splits on aid.
• Supply of foreclosed homes on the rise again, putting pressure on home prices.

RANsquawk 19th March Morning Briefing - Stocks, Bonds, FX etc.

The fact that Google will not kowtow to Bejing and will walk away from the market of greatest potential is to me a commendable act. This is a companion piece to my series, "China's Fragile Economy, Its Housing Bubble, and What It Means To Us." China is not a liberal country, by far.