Archive - 2010

Well now you've done it Lloyd - the New York Attorney General has just gotten involved in banker bonus deliberations. Look for a formal announcement at 12 noon Monday.

A must read op-ed from John Taylor, the Stanford professor best known as the inventor of the famous Taylor Rule, rips apart Bernanke's recent defense of Fed policies in the 2002-2005 period, which claimed that the Fed was not responsible for the housing bubble. Bernanke, who pushed the blame for the bubble on indefinite interpretations of the implications of the Taylor Rule, and whose chairmanship of the Fed will be lost should he not be formally reconfirmed by the end of January, loses ever more credibility when considering Taylor's response that the Chairman "said that international evidence does not show a statistically significant relationship between policy deviations from the Taylor rule and housing booms. But his speech does not mention that research at the Organization for Economic Cooperation and Development in March 2008 did find a statistically significant relationship." Furthermore, Taylor blasts Bernanke's catch-all solution that new regulation will prevent such bubble in the future: "it is wishful thinking that some new and untried macro-prudential systemic risk regulation will prevent bubbles."

• Federal Reserve seeks to block release of U.S. bailout secrets (Bloomberg)
• Dubai's first foreclosure may open floodgates in worst market: Dubai’s housing rout sent prices
  down 52 percent in the past year, prompting some homeowners to
  abandon their cars and mortgage payments and flee the country.
  Not one received a foreclosure notice. Until now. (Bloomberg)
• Geithner has support of Obama, Democratis lawmakers, aides say (Bloomberg)
• Trichet may signal central bankers' risk concern: European Central Bank
  President Jean-Claude Trichet, who warned investors against taking on
  too much risk two years before the financial crisis started, may be
  about to sound the alert again.( Bloomberg)
• Bernanke bond spread most since 2007 shows decoupling (Bloomberg)
• Financial crisis panel seeks bankers' testimony (WaPo)
• Disappointment ahead for UK - and big test for euro (TimesOnline)

If you have always wanted to hear John Thain and Rodgin Cohen, the people who benefited for ages from the bubble and were among the complicit architects of the collapse, discuss bonuses, here is your chance. "The numbers when they do come out will be subject to criticism and public outrage." Oh yes. Cohen claims looking for the individuals responsible for the crisis is a non-starter. This is ironic as Cohen himself has been implicated by many as a primary culprit in perpetuating a status quo which would ultimately result in the Wall Street collapse.

• Abu Dhabi sovereign fund has most holdings in US, Europe; sees potential in the West.
• Asia stocks, metals rise as China exports soar
• Chavez, harried by recession and declining popularity, devalues Venezuela's currency.
• China's investigation of Rio Tinto executive complete, case with prosecutors.
• China is expected to rev up steel production by nearly 10% this year.
• China may overheat with 16% GDP growth in 2010, Govt researchers say.

Paul McCulley discusses the failed Japanese inflation experiment, and the ongoing 3rd decade of deflation, which has destroyed over 70% of the Nikkei's value. The reason proposed by the Pimco Managing Director for this 30-year ongoing weakness: an inability to fight the "liquidity trap" with sufficiently forceful measures. Yet an implication of Pimco's perspective is that despite posturing for an end to QE in March right here in our very own United States, this will likely not happen, or even if it does, QE will promptly return soon thereafter.

Following the empirical evidence that banks share price moves are outstripping their fundamental performance, I have decided to run the same analysis with REITs that have beat the S&P 500.

Going from a “V” Market to an inverted "V", or lambda market. Keep an itchy trigger finger on your mouse. The third in a series of seven on The Mad Hedge Fund Trader’s Annual Asset Allocation Review. (SPX), (EEM),(EWZ), (RSX), (PIN), (FXI), (EWY), (EWT), (IDX)

RANsquawk 11th January Morning Briefing - Stocks, Bonds, FX etc.

While some China Bears are busy publicizing prediciton of an utter Dubai or Enron-like collapse in China, Beijing is actually in the process of rebalancing its economy and an overheated real estate market. And gold is poised to benefit the most from this shift.

In a groundbreaking presentation to be delivered on January 11 in Shanghai, "The First Phase of US Recovery and Beyond" St. Louis Fed president and monetary policy decision-maker James Bullard has come the closest to openly refuting Ben Bernanke's claim that no asset bubbles have been created via the Fed's monetary intervention policy during the post-Lehman period. Yet, Bullard notes, there is nothing that the Fed's "blunt instrument" approach can do to pop such bubbles proactively, as "financial institutions would need to be capable of withstanding large shocks to asset prices, as well as other shocks." Of course, the implication is that the day of reckoning for "financial institutions" is merely delayed to the point where further extend and pretend policy action is impossible and the Lehman collapse reaches a systemic contagion phase. In other words, the Fed admits the current course of action it itself has set the country on, is one of self-destruction, courtesy of the fiat banking system's ultimate death spiral. Alas, the disproof of Keynes' dogma will be a Pyrrhic victory as there will be nothing left of the American financial system in its wake.

Big devaluation in Venezuela over the weekend. The locals knew about it in advance. The Black Market was trading at 3X's the official rate.

Does it matter? I think it might. It is just more of that 'sovereign risk" story that keeps popping up.

And the good old dollar pounding, gold spiking, futures gunning Sunday night action that we all know and love, is back.

While we at Zero Hedge observe and lament the passage of America from a once great superpower into a second-rate banana republic, on occasion we do witness that rare example, somewhere in the world, of complete and utter political and economic lunacy that inspires us to think, "wow, not even Bernanke could have thought of this... yet. "After devaluing the currency on Friday, Venezuelan president Hugo Chavez "threatened to deploy troops and expropriate businesses that increase their prices." This is just one such example.

In this oldie but a goodie, Ron Paul hammers home the point of why the Federal Reserve needs to finally be accountable and transparent, despite the desires of Barney Frank, Wall Street, Ben Bernanke and all the current failed system's apparatchicks who will stop at nothing to perpetuate the broken status quo. For regular readers none of this should be news. For everyone else, this 1 hour program is a must watch. Clip courtesy of Fora TV and the Cato Institute.