Archive - 2010

Pension reform advocates are warning that federal and provincial governments will pay a political price if they fail to turn a vague commitment made in December to pursue pension reform into a concrete plan to bolster Canadians' retirement savings.

In continuing the rant on the possibility of the US entering a stagflationary environment, as was hinted by Alcoa's quarterly report (see "Is My Warning of the Risks of a Stagflationary Environment Coming to Fore?"), I have decided to graphically illustrate the historically most successful inflation hedges as well as demonstrate where North America and Western Europe currently stand.

RANsquawk 12th January Morning Briefing - Stocks, Bonds, FX etc.

Markets will end the year lower. Technology, REIT’s, and retailers are looking ripe. Companies with poor balance sheets will get clubbed. Shorting Treasuries is a home run staring you in the face.

Is it time to head for the hills, stockpile food and ammo, and wait in the bunkers? I get a number of e-mails from readers seeking advice, usually investment advice. Last year I received messages of a theme that can be described as folks who felt The Great Collapse was happening. Armageddon and that type of thing. Here's my advice. Do you agree?

Even accounting for demographic shifts in the labor force, the recent decline in the labor force participation rate is at the extreme end of prior recessions. We therefore suspect that the participation rate will stabilize over the coming year, implying that outright job growth of more than 100,000 per month will soon be needed to keep the unemployment rate from rising further.

While people may complain about the daily contradictory statements from the Federal Reserve about rates, easing, assets, QE, repos, etc., the truth is we have it easy. For a glance at what the dark side of a gonzo stimulus run amok, coupled with a sociopathic central bank, look no further than China. Earlier today, we got the following bit of data from Caing.com, "It seems that China's commercial banks have slowed the lending pace due to warnings from the People's Bank of China (PBOC) and banking regulator. However, new statistics showed that the pace actually accelerated during the first week of 2010. New lending by banks reached 600 billion yuan, with the five biggest banks accounting for 280 billion yuan, according data obtained by Caixin Media." And while the PBOC giveth with one hand, it taketh with the other. "China’s central bank guided its benchmark one-year bill yield higher for the first time in 20 weeks to curb lending, causing banking stocks to decline. The People’s Bank of China sold one-year bills at a yield of 1.8434 percent in open-market operations, according to traders at Industrial & Commercial Bank of China Ltd. and BOC International Holdings Ltd. The yield rose eight basis points, or 0.08 percentage point, said the traders, who asked not to be identified."

One nagging question that the industrial world has been asking itself since the discovery of the first oil well is what happens when the wells begin to run dry. The answer is relatively simple to imagine. We had a dry run, so to speak, when Dubai’s economy tanked a few years ago. And although the causes of Dubai’s ills and ails were financial and not oil related, the drama which unfolded gave us a watered-down version of what might transpire if and when the oil wells stop producing.

"As we sit here today, Wall Street continues to exploit a policy of government-sponsored giveaways and secrecy to pay themselves billions. Record-setting bonuses due to banks like Goldman Sachs as early next week. Yet instead of acting as our cop, Secretary Tim Geithner has become central to what may be a cover-up of the greatest theft in U.S. history. Here is the evidence." - Dylan Ratigan

A year ago I stated that if I had to pick a scenario, the most likely would be stagflation wherein high input costs would co-exist with a deflationary drop in asset values, creating a "worst of both worlds" style environment. Well, Alcoa has given us some anecdotal evidence of the likelihood of such an occurrence approaching.

In the current hodge podge of abstract finance, it is easy to get lost in the numbers and lose sight of the forest for the trees. Which is why we provide the ultimate simplification: In calendar (not fiscal) 2009, the US grew its budget deficit by $1.47 trillion. In the same time, the Federal Reserve grew its securities holdings from $500 billion to $1.85 trillion, a $1.34 trillion increase. Keeping it simple: 91% of the budget deficit increase in 2009, under the authority of President Obama, was funded by the... United States.

Change?

Not much ...

"When investors are forced to sell even their less-speculative positions to make good on their loans, markets spiral lower and create a severe demand for cash. At that point, the Minsky moment has arrived." The Minsky moment is, once again, knocking on the door.

More theater, more injustice, more kickbacks. We demand Mary Schapiro's immediate resignation for gross dereliction of assigned duty.

• SEC Won't Bring Charges Against BofA Execs In Merrill Deal
• Such Charges 'Are Not Appropriate'-SEC
• Decision Covers 'Individual Officers,' Directors And Attorneys For BofA
• SEC Proceeding With Revised Lawsuit Against BofA
• U.S. Judge Has Pushed SEC For More About BofA Execs' Role

Mom and Pop investors aren't buying stocks ...