Archive - Mar 23, 2010

It is irrefutable. The Bernanke Fed will go down in history as the most wildly successful ever. Nobody in financial history has been able to re-sky stocks in one year after the two largest banks in the country were within a hairsbreadth of imploding. No doubt, he will be trumpeted and hailed as a national hero, for orchestrating the fastest run in retail stocks in world history.

Gasparino breaks news that David Einhorn will be brought in as a witness in the upcoming Congressional hearing on the Lehman's fraudulent disclosure as reported by the much discussed Anton Valukas report. According to the Fox Business senior correspondent: "Einhorn through a spokesman declined to comment, but a person close to Einhorn said “it wouldn’t be a surprise” if he was called in some way given his role in exposing Lehman’s problems. A spokesman for US Rep. Barney Frank, the chair of the committee, didn’t return a telephone call for comment." With Tim Geithner most likely present at the hearing, this will be quite a memorable spectacle, which will certainly result in absolutely nothing as usual.

Paul Krugman now wants to start the economic equivalent of World War III. The man is dangerous.

This memo will be about one of the inarguably most depressing topics of our time: the seeming inability of governments and politicians to solve – or even tackle – the financial problems we face. - Howard Marks, Oaktree Capital

Yet another Fed-dictated market aberration today as the 10 year swap spread turns negative. “It’s hedge-related activity related to new corporate issuance,” said Christian Cooper, an interest-rate strategist at Royal Bank of Canada in New York, one of 18 primary dealers that trade with the Federal Reserve. “As more and more institutions receive, then swap rates will go lower.” We expect that with ZIRP continuing in perpetuity, many more abnormal market phenomena will transpire, courtesy of Ben Bernanke increasingly dominating every aspect of capital markets. We have yet to see if this most recent foray into economic central planning by our central bank will, for the first time in history, prove to be successful.

Earlier today the FSA announced that in the first ever operation carried out between British regulators and the Serious Organized Crime Agency,"16 addresses have been searched this morning in London, the South East
and Oxfordshire in the FSA’s largest ever operation against insider
dealing." Furthermore, " Six
men including two senior city professionals at leading city
institutions and one city professional at a hedge fund have been
arrested on suspicion of being involved in a sophisticated and
long-running insider dealing ring." And what has just been announced by the BBC is that multi-billion hedge fund Moore Capital, run by billionaire Louis Bacon, is likely about to suffer the same fate as our very own Galleon.

I've been telling readers and subscribers that the housing market has a considerable amount to fall before we reach income parity and equilibrium in supply and demand. With income currently falling along with rising underwriting standards, that point is actually being pushed even farther into the (event) horizon! We are now at a point where interested parties would be remiss in not pursuing blogs (both in addition to and instead of the mainstream media) to get the nitty gritty analysis on a wide variety of topics. With that being said, I have finally decided to bite the bullet and expand BoomBustBlog by accepting partners in a bid to grow the business. Lethargic media and financial concerns, look out, here comes the BLOGS!!!

RANsquawk 23rd March US Morning Briefing - Stocks, Bonds, FX etc.

High Yield 1.000%, WI rate at 1:00 PM 0.993

56.32% allotted at high

Bid To Cover 3.00 vs average 3.23 (3.33 previous)

Indirect take down plunges to 34.78% from 53.56% in prior auction, last year average 44.55%

Direct take down surges from 8.2% to 13.8%

Yet more countries are anticipating the Fed finally killing the dollar sooner or later, as Spain now joins Portugal in issuing dollar-denominated bonds. If Europe's most insolvent countries (granted, Greece has yet to issue $-denominated debt, although we are confident that will happen shortly as well) are getting on board of the asset side of the Fed's balance sheet, it can only mean one thing: the InTrade odds for the winner of the currency race to the bottom are squarely in favor of the US currency. Earlier, the Spanish director of Treasury and financial policy Soledad Nunez, told reporters that Spain may issue a dollar bond via syndication. In a page right out of Greenspan's dictionary Soledad said: ""Usually we syndicate in dollars, and we have not made one yet this year, and we may do so, maybe yes, maybe no. That is the answer." She added in Alan-speak: "Doing a dollar syndication is always in our strategy, it is always depending on market conditions." Translation: we bet that, at the end of the day, Ben Bernanke will be far more successful in killing his own currency, than those bumbling buffoons over in Luxembourg.

Headline: GERMAN FINMIN SOURCE: GERMANY,FRANCE AGREE IMF JOIN GREECE AID

The DOW rebounded from a crushing six point opening sell off to close the day at 21,626, up 43 points for the day. The rebound came after there were reports, later denied, that European officials are working on a bailout for EU member Greece. Greece has been in a state of near suspended animation since debt woes struck the country in early 2010, though strikes have been averted through the daily airing on government controlled television of an Anthony Quinn film extravaganza.

If you ever wondered just how independent the Federal Reserve is, wonder no more. A recently declassified transcript of a July 16, 1974 phone conversation between Henry Kissinger and then-Fed Chairman Arthur Burns, demonstrates just how very involved in global financial bailouts the Federal Reserve gets under duress of the administration. In the span of about a minute Kissinger advises Burns to do whatever he must to "not let Italy go down the drain." The facility with which the Federal Reserve throws around US taxpayer capital to bail out the "chosen ones" is simply beyond reproach. We are confident that the Fed is currently preparing a comparable bail out package for Greece as a measure of last resort. There is no way that Ben Bernanke will allow Greece to fail, killing the euro and sending the dollar into the stratosphere, destroying all hope of inflating the trillions in bad debt saddling America's banks and the Federal Reserve (which is now the world's biggest bank holding company).

The double dip in housing is getting worse by the month. After hitting a nearly 6.6 million in existing home sales in late 2009, the number has now plunged to 5.02 million, a decline of 0.9% sequentially, and a major drop from the artificially induced peak. Sales for single-family homes were down and were up for condos and co-ops, indicating a preference for smaller, cheaper units among a population concerned with record unemployment and expiring homebuyer taxes. The number came on top of expectations of 4.98 million, with the range being from 4.75 million to 5.2 million units. Sales in the Northeast and Midwast improved slightly, even as sales in the South and recently bubble West declined. Yet the biggest stunner was the months of supply on market which jumped by a 20 year high, from 7.8 months to 8.6 months.

Making US and Greek economics fun and comprehensible...