Archive - Sep 8, 2010

We like Erin Burnett: after all she is ranked 33 on the Fortune 40 under 40. Who can not like someone who has managed to get that high in the rankings on pure talent, although some recent CNBC appearances did seem to indicate a slight, shall we say, bias, when her guests tend not to disagree with Ms. Burnett's misperception of the world. Indeed, in a recent appearance on Meet The Press, the youngish CNBC anchor made some statements that go straight to errorchecking and bias validation. At 47 minutes into the  interview (extracted) Ms. Burnett says: "I think the problem is you have the fastest job creation in this recovery than you have in any recession in 25 years... Technically speaking this recovery has not been tepid." Alas, we are not sure who fed the CNBC employee these "facts" and figures, but they are patently false.

News out of the Irish government is that Anglo Irish bank will be split into a funding bank and an asset recovery bank, saying that the bank's "own plan in its current form does not provide the most viable and sustainable solution." Those who are familiar with Lehman will recall that this was a plan expected to be put into place for Lehman, in which a CRE-asset holding division would be spun off and allowed to roll off its assets. This plan was scrapped as it was deemed unviable. Glad to see it will work in Ireland.

Some of the JPY weakness this morning is being attributed to a rumor making the rounds that the BOJ has asked Japanese banks to prepare for possible fx market intervention tonight. Seeing how the BOJ has been full of nothing but hot air, and other byproducts recently, we are confident that nobody will buy it - traders now want action, not words. The brief spike in JPY crosses has been promptly regained. Furthermore, with new EURCHF record lows every day, we believe the likelihood of intervention in the Swiss currency is far larger, and we are surprised nobody is wondering how Hungary is doing these days, where the Forint has been in freefall, and domestic borrowers are about to embark on a default tsunami.

Just Reuters and Bberg headlines for now, but judging how the Irish 10 Year, Irish CDS, and Irish Bund spreads all jumped in unison to fresh record highs on the news, the market can't be too happy about the fact that someone in charge is stupid enough to recognize that such a thing as reality exists. It is high time for Tim Geithner to suggest the next round of the National Lampoons European Stress Test: there is much confidence that needs to be "restored."

• Michael Lewis: Beware of Greeks Bearing Bonds (Vanity Fair)
• Gold nears record as economy bears circle markets (Reuters)
• Just like everything "else" was responsible for the financial crisis, so BP blames "everything else" for the oil spill (Bloomberg)
• ECB to proudly fund the ponzi in Europe for another year in 2011 (Reuters)
• Portugal auction meets strong demand, mostly from the ECB which is now in the "stick-save" business (WSJ)
• China 'Tightening' Speculation Follows Property Surge (Bloomberg)
• Austerity lite sure makes for good theater: Sarkozy to Change Pension Bill, Won't Budge on Retirement Age (Bloomberg)

A new report in the Irish Times discusses how Irish Nationwide, where incidentally sovereign CDS spreads just hit a fresh all time wide record north of 400 bps, discusses how the insolvent bank, in a supreme example of just how prevalent ponziness has become in the current Central Bank subsidized environment, is now issuing bonds... to itself. In a circular issuance scheme that would make the Greek finance minister blush with envy, "Irish Nationwide has issued €4 billion of Government-guaranteed bonds effectively to itself. It can use the bonds to draw €4 billion in funding from the European Central to help tide it over a key refinancing period later this month." At its core, the scheme is nothing new, having been used repeatedly by Europe's most bankrupt countries, although the small scale in this case, and the blatant inability to even cover up the circularity has many worried that if the ECB needs to step in for such "modest" amounts to preserve bank solvency, it is all pretty much just a matter of time before it is game over for Ireland's banks. And elsewhere, confirming that defaults are imminent, the CFO of Anglo-Irish has just said it would be a disaster to default on its bonds. He is, of course, absolutely correct.

Following this morning’s report of a decline in mortgage applications, it’s all from the Fed this afternoon – the beige book, a Fed speech, and the monthly report on consumer credit…

• Asian stock markets were mostly lower, with financial stocks getting hit.
• Asian stock markets were mostly lower, with financial stocks getting hit.
• California Property Tax Values shrink 1.8% in `Historic' slump and deflation
• California regulators seek up to $9.9B in fines from PacifiCare
• China adds $7B of Japanese bonds, extending record yearly increase.
• EU probes hidden Greek deals as 400% yield gap shows doubt
• Germany's exports fell 1.5% in July - the second time this year.
• Japan talks up intervention as Yen hits 15-year high.
• Japan's core machinery orders spike 8.8% in July; current account surplus beats est.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 08/09/10

The year is 2002, America has just woken up with the worst post dot.com hangover ever. Paul Krugman then, just as now, writes worthless op-eds for the NYT. And then, just as now, the Keynsian acolyte recommended excess spending as the solution to all of America problems. Only this one time, at band camp, Krugman went too far. If there is one thing that everyone can agree on, is that the Housing Bubble, is arguably the worst thing to ever happen to America, bringing with it such pestilence and locusts as the credit bubble, the end of free market capitalism, and the inception of American-style crony capitalism. Those who ignored it, even though it was staring them in the face, such as Greenspan and Bernanke, now have their reputation teetering on the edge of oblivion. So what can we say of those who openly endorsed it as a solution to America's problems? Enter exhibit A: New York Times, August 2, 2002, "Dubya's Double Dip?" Name the author: "The basic point is that the recession of 2001 wasn't a typical postwar
slump, brought on when an inflation-fighting Fed raises interest rates
and easily ended by a snapback in housing and consumer spending when the
Fed brings rates back down again. This was a prewar-style recession, a
morning after brought on by irrational exuberance. To fight this
recession the Fed needs more than a snapback; it needs soaring household
spending to offset moribund business investment. And to do that, as
Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing
bubble to replace the Nasdaq bubble." If you said Krugman, you win. Indeed, the idiocy of Keynesianism knew no bounds then, as it does now. The solution then, as now, to all problems was more bubbles, more spending, more deficits. So we have the implosion tech bubble: And what does Krugman want to create, to fix it? Why, create a housing bubble... Well, at least we know now how that advice played out.