Archive - 2010

Bob Janjuah's latest in its full, unabridged and grammatically irreverent version. A must read for all non-conformists. A juicy morcel:
"The budget should be balanced, the Treasury should be filled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome be bankrupt. People must again learn to work, instead of living on public assistance. - Cicero, 55 BC... Brilliant....and u know how Rome got away with it for so long - they secretly reduced the silver content in the coins (aka DEBASED) more and more - until they were worthless....and then the Empire imploded, ushering in the Dark ages..."

Today's banks are much more complex than LTVs and 2nd liens, but when these risky products on the downturn are multiples of your tangible capital, it really doesn't take more than that to start causing some severe solvency issues. You can have a trillion dollars in assets, but if you have $20 billion in equity with $100 billion in investments that will take a 50% loss, you are underwater by $30 billion. You can talk about these banks using terms such as "complicated", "complex", "fancy" and all of the other high falutin' adjectives that you can think of, but at the end of the day, if you lose more than you own you are insolvent. Now, that's a simple concept and it works quite well for my investment pursuits.

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

Clearly there is a permanent bid in gold, because of the Fed's (and other central banks') aggressive monetary policies, both proactive and reactionary. But the complacency in markets, discounting a recovery, and increasing sovereign credit risk, make another round of QE anything but a foregone conclusion, as far as what is priced into the market. Until excess reserves are unsequestered (by ceasing interest payments on them for bailout recipients to collect a riskfree spread), there is no signal that the Fed is done with its printing. And from now until the next round of liquidity injection, there has to be an endogenous event to provoke reactionary response. Here's why.

The EUR/USD foretold the weak dollar-driven asset rally that characterized the post-dotcom crash 2000s, the inflationary energy bubble/crisis in late 2007 to summer 2008, the liquidity crisis in fall 2008 to spring 2009, and the liquidity rally since spring 2009. Could the strong reversal since December be forecasting a return to mean reversion and a rush to (dollar) liquidity?

As you recall, my take on the deflation vs inflation debate is much less crystal ball-ish than many other pundits on the web. I never was very much into fortune telling or forecasting the future. From what I observed and researched, if I had to make a call that call would be stagflation.

On that note, here is an interesting note from one of my site's subscribers on how China is exporting to what is amounting to stagflation to the United States, now!

JP Morgan's Q4 results show that banks are not only still in hot water yet, but the pot hasn't even really started to boil. Why is it that I look at the info and get such a different impression than much of the media and the sell side who proclaim "blow out results"? Yeah, the results "blow" alright...

Let’s Try Chinese Style Securities Regulation. Just execute the bastards! Great for the human organ business, but not so good for crime prevention, or getting your money back. The urban legend about a vast secret complex of government concentration camps is true. The next kidney up for sale may be yours.

According to the C.D. Howe Institute and the British-North American Committee, the governments of the UK, US and Canada are understating the true cost of public sector pension plans. If true, then you got the seeds to the next debt time bomb. The hard road ahead is looking harder when you sit back and analyze the implications of all these pension liabilities, especially if you consider the possibility that they're grossly understated.

With $13,636 million in total 2009 inflows, we present... Gold

There has been much discussion about the possibility of a dollar carry trade. Although I’ve resisted it, it seems pretty clear at this point I was wrong, and there is full-on dollar carry trade. This is bad, bad news for everything else, and I’ve nick-named it The Unwind.

It is the Unwind because the dollar shouldn’t be a carry currency: it is volatile anyway, and that combined with its reserve currency status makes it like playing with gasoline and matches. Wild swings in exchange rates followed by asset markets are often the result of an incremental leveraging and then a violent unwinding carry trade. Get ready for some dollar love that will burst many bubbles and illusions.

The Unwind will initiate the next iteration of debt-deflation. Don’t let the current optimism and propaganda dull your wits: optimism prevailed from 1929 to the spring of 1931.

Much hope had initially been placed in Obama's Home Affordable Modification Plan (HAMP) whose purpose was to keep millions of homeowners out of foreclosure. Yet a recent analysis by Moody's senior director Celia Chen demonstrates that out of the 3 to 4 million loans that the administration had hoped would benefit from HAMP, at most 1 million will experience a foreclosure benefit, and more realistically, this number would be a mere 400,000, less than 1% of all U.S. first mortgages.

Complacency reigns as they don't ring a bell at the top.

Just because the regular US market is closed doesn't mean the ever vigilant futures traders are not HiFTing the living daylight out of the any and all nanopoint trends they can find. And already the market, in the complete absence (literal, not metaphoric) of any volume, has managed to recoup a major portion of Friday's "sell the JPM and INTC news" losses.

All the latest news about the accelerating deterioration in CMBS, courtesy of Barclays' Aaron Bryson.