Archive - Mar 2010

Ummm ... it already has ...

Just in case some people forget what the trade off to the market melt up is, today we are starting a periodic daily report of the Treasury's total debt subject to the statutory limit. Today's total: $12,607,140,000,000. We started March at $12,383,717,000,000. We started the fiscal year (October 1) at $11,853,434,000,000. We have added $223 billion of debt in the last three weeks, and $755 billion in just 5 months. As a reminder, the debt limit is $14.3 trillion. We are $1.7 trillion away from the limit. At March's run-rate of about $300 billion per month, the debt ceiling will be breached by October 2010. If somehow the government manages to reduce the monthly issuance to "just" $200 billion, we have eight and a half months until breach, or January 2011.

Janet Yellen earlier said: "Obviously, with the unemployment rate so high, we are very far from that full employment level. In fact, the output gap was around negative 6 percent in the fourth quarter of 2009, based on estimates from the nonpartisan Congressional Budget Office, or CBO. That’s an enormous number and it means the U.S. economy was producing 6 percent fewer goods and services than it could have had we been at full employment. In view of my forecast of moderate growth and high unemployment, I don’t expect the output gap to completely disappear until sometime in 2013." This means no Fed hike for the next three years. Those calls on Dow 100,000,000 looking really good here.

The chart below shows all you need to know about the market participation in the most recent rally. A simple calculation indicates that as algos take the Dow higher by about 100 points a day, we are only 251 days away from Dow 36,000. But why stop there: it is now obvious that Bernanke will not stop until 2 shares of total NYSE volume take the Dow to 100,000 in just under two and a half years at this rate. And as the VIX goes negative in just under a month, the Fed will be paying investors to buy calls on Dow 100,000,000 just in case. Because it is better to be safe than sorry.

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