Archive - Mar 11, 2011

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/03/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/03/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/03/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/03/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/03/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/03/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/03/11

Per CNN: Radiation level rising in Fukushima No. 1 nuclear plant turbine building, Kyodo News Agency reports.

That's not good.

Who'd a thunk that BTFD works for commodities even better than it does for stocks. Desks now advising clients that QE3 is likely (whether or not due to this article is irrelevant) and the result is presented below.

Taxes are always on the mind of the electorate, and while individual rates of taxation garner the greatest fraction of our attention, the way corporations are taxed is important too. A change in direction in this area could potentially free up a lot of capital, all the while reducing a great deal of waste.

This is why people tend to pay a premium for "Made in Japan"...

While the signature of Governor Walker to the Bill that had passed both the Senate and the Assembly, was inevitable, it is now also history. The first shot across the bow at America's unions is now official. What happens in Wisconsin next is anyone's guess. Probably nothing much. And any union member who may consider protesting today should carefully evaluate whether they should be doing so at the Senate building or on Wall Street/D.C. where the root of America's insolvency, and all of its financial problems stems from.

When we last updated on the size of the shadow banking system, the financial "system" that is far more important to the economic prosperity of the US economy than the traditional liabilities held by conventional banks, we observed that after declining for 9 consecutive quarters, having hit a peak of $21 trillion in 2008, the shadow banking system had reached an inflection point and had posted a very modest increase at around $16 trillion in total liabilities in the third quarter of 2010. Well, following yesterday's Z.1 release, it seems the bulk of the data was revised, and it appears that not only was last quarter's upward pre-revision data a fluke, when in reality it was another decline of $191.7 billion, but the Q4 data further reinforced the negative trend, with shadow liabilities declining by an even greater $206.4 billion. The components responsible for the decline were ABS Issuers whose liabilities declined by $94 billion, securities loaned by funding corporations declining by $40 billion and lastly repos, which dropped by $79 billion. In other words, speculation that the Fed had achieved its goal of stimulating an organic reflation in the shadow banking system at which point it would be able to end QE and hand off releveraging over to the private sector were premature, and recent data confirms that the Fed has no choice now but to continue with its quantitative easing process, as it does more of the same: take capital from the public sector and proffer it to Primary Dealers in an attempt at ongoing asset reflation, which will, the theory goes, be matched by a comparable hike in liabilities. Botton line - Bernanke has once again failed to spark a "virtuous leveraging cycle" even with QE2, which after all is the fundamental goal of the Fed, far beyond even getting the Russell 2000 to 2000. Which means that the Fed will have no choice but to continue "printing" money, and monetizing bonds, as it (in conjunction with the Treasury of course) continues to be the only incremental source of leverage, and thus money, for the world's biggest economy.

The selloff we saw this week is consistent with my long term view that we are permanently downshifting from a 3.9% to a 2%-2.5% growth rate, and the lower multiples this deserves. Given our flaccid growth prospects going forward, I think the new range will be 10-16. It does not make today’s 15 multiple look like such a bargain.