Archive - 2010

If you love watches, the measuring of time, horology, the art and finesse of mechanical engineering, keep reading. You fancy in the perceptions of prestige and exclusivity with cunning attention and the celebration of style and detail- click and read on. Everyone else, go back to having a great weekend.

After posting a record crude-oil import month in December, as well as the second highest iron-ore import month in history, China's program economy is roaring back to life, even if the imports are actually sitting in full warehouses, used to build empty cities that consume negative electricity, make washing machines that never launder anything except the government's flawed economic statistics, and create cars that somehow use up ever-less gasoline. Of course, when the government has trillions in increasingly worthless excess dollar foreign reserves that have to be used up for something, it is no wonder that the Chinese government is buying anything and everything it can stockpile, and that can't be devalued by Tim Geithner, hand over fist. As for exports: courtesy of the dollar peg, which makes China's exports as cheap as the US' (assuming the latter had much of anything to export besides financial innovation), China had no shortage of counterparties to purchase its $1.2 trillion in 2009 exports. Yet despite all this, China's trade surplus plunged a record $100 billion, or 34%, to $196 billion from 2008's $296 billion.

Page 17 of the latest Adrienne Shapira/Goldman Sachs retail cheerleading report finds the smoking gun of the end of the recession: A "group of Spanish tourists made the trek to fill their luggage with merchandise from ANF and Hollister." Well, if the Spanish tourists are stuffing child porn endorsed trinkets down their carry-ons, then all is well. Where does one buy these retailers who are currently (and far into the foreseeable future) experiencing negative margins thanks to -80%/-90% and, who knows, in many cases five finger, discounts (you didn't think the rampant hustle and bustle this Xmas season was all AmEx and CapitalOne funded, did you).

excerpted from The Stamford Review, 2009: Volume Two, "Mortgages, Finance Markets, and the Imperative of Growth" by Hugh Kelly

Rising interest rates, stubbornly high unemployment, no credit, and large chunks of the economy dead in the water are not what economic booms are made of. The second in a series of seven on The Mad Hedge Fund Trader’s Annual Asset Allocation Review.

Let's talk dollars and cents ...

The latest AIG fiasco may well be the straw that breaks Geithner's "public service" back. The question of Tim's involvement in the purposeful cover up has now attained epic proportions as even the White House claims the Treasury Secretary and former NY Fed governor had recused himself and was not involved in the discussions of the biggest bailout in US history. By doing so, the White House has transferred an ever greater amount of political risk to itself by continuing to back Geithner at increasing costs to its popularity. Whether or not Geithner was intimately involved procedurally seems irrelevant: he certainly was aware of the broad strokes and was thus complicit by implication. Nonetheless, one of the allegations that is circulating the blogosphere is that the handwriting on the "smoking gun" cover up memo belongs to Timmy. While we do not have a certified graphologist in our ranks, this assumption appears to be patently false.

An interesting observation emerges when one analyzes the various holders of non-revolving consumer credit. While the traditionally largest players in non-revolving consumer credit provisioning, commercial banks and finance companies, have been materially curtailing their lending of auto loans (the primary form of non-revolving credit and which also includes student loans, as well as boat and trailer loans) with their combined holdings declining by 5% year over year (from $989 billion to $940 billion), another actor has jumped in to take their place. It should not surprise anyone, that with a 68% increase in non-revolving credit holdings over the past 12 months, this entity is none other than the Federal Government.

Thoughts on Japan from John Maynard Keynes. This economist is more powerful today than he was when he was alive. I wonder what he would really say about the Nikkei. Also some interesting information from the CIA. I am always looking for 'clues'.

By now everyone knows about the Rip Van Winkle effect in stocks: the "noughties" were a snoozer, with the stock market lower on December 31, 2009 than on January 1, 2000. Yet what may have escaped most people is that the decade was also a scratch in terms of employment: the country now has essentially the same number of employed people as it did 10 years ago.

The insightful authors of "This Time It's Different" Carmen Reinhardt and Ken Rogoff are at it again, doing a simple yet crucial empirical analysis correlating sovereign debt (both government and external), and inflation (in some case) with GDP growth. It will come as no surprise to anyone that the more indebted a country is, with a government debt/GDP ratio of 0.9, and external debt/GDP of 0.6 being critical thresholds, the more GDP growth drops materially. Alas for the US, which is on the wrong side of this threshold, at the rate Geithner is issuing debt, the US economy will be able to grow organically, and not through stimulus after Keynesian stimulus, only after the administration manages to find a way to reduce its massive and growing debt load. In other words never.

A story of how the "vampire squid" caved and offered to help North America's most powerful union...

The eclectic set of topics discussed in this week's link's: Hank Paulson's bazooka, the debt to GDP point of no return, Wall Street bonus deferral, the toxic twins Fannie and Freddie, and of course prisoners.

Those of you who have all but given up hope a the recovery for the U.S. labor market should read this brief comment very carefully...

A vigilant reader, who combed through the backup of today's Consumer Credit G.19 statement points out a flagrant and obvious error in the Fed's data. While luckily the data impact is not major (at most $4 billion, which in our day and age is a pithy 50% of Goldman's FICC trading desk bonus), the implication that the Fed does not check its work in something as critical as one of the core data series (or at least it used to be until a few machines took over the market, to whom, as today indicated, a record credit contraction somehow ended up being a positive event) is very, very troubling.