Archive - Apr 5, 2011

Tyler Durden's picture

CBO Analyzes Ryan Budget Proposal: 2050 Debt/GDP At 10% Versus 344% In Revised Existing Budget... But How?





The Congressional Budget Office has chimed in with a 30 page summary comparing the proposed Ryan budget and two previously analyzed scenarios: scenarios—an extended-baseline scenario based on June 2010-current law and an alternative fiscal scenario that incorporated several changes to then-current law that were widely expected to occur or that would modify some provisions of law that might be difficult to sustain for a long period. In essence these are merely variation on the theme of an Obama budget. Needless to say, the divergences are quite dramatic. Since the Ryan budget is focused on fiscal solvency, it achieves that: indeed, comparing projected 2050 Debt/GDP in the Ryan proposal, the CBO reaches a number of 10%, compared to 90% and 344% for the extended-baseline and the alternative fiscal scenarios. On the other hand, the credibility of the assumptions used to goalseek this outcome remain very much in doubt (much more on these in the CBO analysis below). The massive amount of spending cuts, coupled with some very aggressive revenue postulates, will certainly bring the critics out of the woodwork. It will also mean that with fiscal stimulus essentially curtailed, the only source of incremental economic boosting will be monetary policy, read - the Fed, which is an outcome that Bernanke has vocally warned against, due to his concern of Fed "politicization." Then again, with no other choice, it means that the debauchery of the dollar, since the economy is nowhere near the stage where the morphine can be removed, is about to kick into hyperdrive. In the meantime, here are the CBO summary observations.

 

Tyler Durden's picture

Strategic Alpha Macro Update





Time is running out for a decision on Q/E but there is simply not enough evidence to make an informed judgement on the state of the economy and how it would react to a withdrawal of liquidity. Most analysts just look at the ISM and other supply data but Bernanke has got to make sure the economy can survive without his daily liquidity gift. In addition, if as some suggest, Q/E2 has done its job by ramping up equity markets, it still falls far short of his mandates. Unemployment is still massive (the real level is nearer 12-13%) and the participation rate continues to fall. Today there are 44.2 million Americans on food stamps, or 14.3% of the US population! Analysts also seem to forget the massive mountain of issuance coming from the Treasury this year and next. Consumer debt and confidence also matter more to Bernanke than it does to main stream analysts and housing is not helping at all and looks set fall further causing havoc at the banks again.

 

Tyler Durden's picture

Charting The Last 10 Years Of The US Economy





For the chart pornoholics out there, Robert Kientz has submitted the following compilation of motley charts covering virtually all aspects of the US economy in the past 10 years. Among the topics covered are Employment, GDP, Wages, Wealth, Money Supply, Inflation, Debt and, of course, Capital Markets. We hope readers finds this enjoyable and informative.

 

Tyler Durden's picture

Guest Post: Paul Ryan's Budget Arithmetic Makes No Sense





Leaving aside for the moment the petty let's be children and see if we can grind the government to a halt game going on amongst parties and sub-parties, and the fact that both parties blessed every single debt cap increase placed before them in equal measure over the past decade of Bush *2 + Obama * 1/2, I just want to focus on House Budget Chairman, Paul Ryan's, corporate tax decrease proposal for a second - because the math is so bizarre.

 

Econophile's picture

Where Is Unemployment Heading?





The economy is in a structural readjustment that will leave the middle class higher and drier. Long-term factors will continue to negatively affect employment. We are headed to a higher level of permanent unemployment than the 5% that existed in pre-crash 2008.

 

Tyler Durden's picture

Munger "Recuses Himself" As Frontrunning Focus Shifts To His BYD Purchase





A few days ago, we disclosed that based on David Sokol's testimony to CNBC, Buffett's right hand man, Charlie Munger, may be just as guilty of a comparable attempt at frontrunning a Berkshire purchase through his previously undisclosed holdings of a 3% stake in BYD. And despite the Octogenarian's wishes that this story remain dead and buried, Bloomberg has decided to once again bring it up to popular attention. "Berkshire Hathaway Inc. Vice Chairman Charles Munger said his family was invested in BYD Co. “for years” before his company took a stake in the Chinese automaker and that he disclosed the financial interest to his business partner Warren Buffett. “I certainly suggested that Berkshire look at investing in
something that the Mungers were already invested in, but we’d
been in it for years,” he said today in a telephone interview." Of course, since there is no way to check,the general public will be happy to just take Munger's word. After all, he is just as old and cuddly as that other guy, who following the recent spate of negative publicity, and especially Mike Steinhardt's scathing review today, will very soon need his own reality show to preserve his "reputation." Either way, here is the validation fro Munger why the SEC should not be currently deposing him: "I had Dave look at it, because I knew I couldn’t talk
Warren into buying into the damn thing by myself. It’s a new technology-type investment.
But David went over
there, and he made the deal for Berkshire. I recused myself. But there’s no
question about it, that I caused Dave’s original interest." Of course, we would love to take Munger's word for it: after all he represents just the same level of "integrity" as Buffett. But in the meantime, we would love to know at  what price Munger made his purchase, and, well, when, because at last check in the "years" preceding 2008, the stock was trading pretty much in line with any price achieved in 2008, not to mention the surge once the Buffett investment was announced. And we are convinced that while his self-proclaimed recusal will placate everyone that Munger may have committed a crime, perhaps the SEC should ask a question or two. If nothing else, than at least to clear the Vice-Chairman's now thoroughly besmirched reputation.

 

williambanzai7's picture

CHARTING THE EPISTEMOLOGY OF ZERO HEDGE





A heuristic approach to determining the truth of a statement.

 

Tyler Durden's picture

India Halts All Food Imports From Japan After Fukushima Fish Found With Excess Radioactivity





After dumping thousands of tons of radioactive water in the sea, Japan appears to have been stunned to find that the radioactive content of various fish has surged and is now above just imposed radiation safety thresholds. From Kyodo: "Japan hastily set a legal limit Tuesday for the permitted level of radioactive iodine in seafood as safety concerns spread overseas in the wake of continuing leaks contaminated water into the Pacific Ocean from the crippled Fukushima Daiichi nuclear power plant. The limit of 2,000 bequerels per kilogram set by the Ministry of Health, Labor and Welfare for radioactive iodine in marine products such as fish and shellfish is the same as that already adopted for vegetables, Chief Cabinet Secretary Yukio Edano told a press conference. The imposition of the limit followed the detection by Japanese authorities 4,080 bequerels per kilogram of radioactive iodine in young sand lance caught Friday off Kitaibaraki in Ibaraki Prefecture, which prompted the health ministry to consider setting a limit for fish and clams. Different young sand lance, also caught near Kitaibaraki, were found to be contaminated with 526 bequerels per kilogram of radioactive cesium, exceeding the legal limit of 500 bequerels already set by Japan." And now that Japan has another crisis scenario fall out to deal with, other countries no longer have faith that Japan has any control over the situation and are imposing complete bans on Japanese food imports: first India, and soon everyone else. Expect sushi prices to surge momentarily.

 

Stone Street Advisors's picture

Dean Baker On Recent Economic Data





Only in Washington would this be hailed as good news...

 

Tyler Durden's picture

American Superconducter Plummets After Announcement Of Order Cancellation To Biggest Chinese Customer Due To Overinventory





A stock falling due to a cut in FY outlook is nothing new. However, a stock cutting its outlook due to its biggest customer refusing to accept contracted shipments "until it reduces inventory levels" is probably the first confirmation we have ever seen of the massive inventory overbuild in China. The plunge in AMSC stock afterhours by over 40% is not surprising considering its entire business model is now turned upside down. What also should not be a surprise is when ever more companies delivering into China commence with comparable announcements. And with China drowning in excess inventory of virtually everything, this certainty is just a matter of time.

 

Tyler Durden's picture

"Transitory" Inflation Tally: Gold, Corn Record Highs, Silver 31 Year High, Brent 2.5 Year High





Yesterday the Chairman said something about inflation being "transitory", and that he would be prepared to act by the time inflation becomes more then just "transitory", which we read as "permanent." So, in other words, by the time inflation is set in, Bernanke will be prepared to act, do we have that right?  We hope this is just another Transocean-esque vocabulary disaster, because while we all know how good the Fed is at predicting things, being incapable of sensing grammatical nuances is a Fed Chairman first... which is not surprising: nobody had any clue what Greenspan said most of the time. We just hope Benny's reference was not in the context of a "transition" to a permanently higher "new price normal." Which is maybe how the market interpreted his words: after enjoyed picking apart the irony in the Chairman's statement and once again calling his bluff, the net result is: gold and corn all time high, silver fresh 31 year high, brent 2.5 year high. At some point these prices may revert, and Bernanke will be right. We just hope that by then TEPCO is not in charge of cleaning up radiation ("it's only 1 nano sievert- we swear") from everywhere, not just Fukushima.

 

RANSquawk Video's picture

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 05/04/11





RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 05/04/11

 

Tyler Durden's picture

Guest Post: Monetary Miscalculations From A World Captive To Models





Looking through the Federal Reserve’s newly released Discount Window data fills in some missing pieces surrounding the credit crunch in 2008. We now know why Senator Chuck Schumer was so concerned about IndyMac. In the three business days after June 19, 2008, IndyMac had to double its discount window borrowings from $200 million to $400 million. Four short days later, Schumer’s leaked letter forced IndyMac to ask the Fed for $1 billion. Beyond some of these little details that end up providing granularity to the whole picture, there is still one piece of data that stands out as a singularity. Although it had become public knowledge over a year ago, the Lehman Brothers activity on September 15, 2008, still flashes a deepening warning as our economy and markets depend more and more on central banks. On the surface, Lehman’s use of the Primary Dealer Credit Facility (PDCF, the investment banker’s discount window) seems to be insignificant. It was a momentous day, after all, with turmoil in every corner of the global marketplace. Why shouldn’t Lehman borrow $28 billion from the Fed on that Monday? It had filed for bankruptcy at about 1:30am that morning, so clearly it was in need of financing. A lot has been published already about that volatile week. However, I still believe there is a hole in the “official” story as it relates to overall monetary policy. What is truly striking is not that Lehman used the Fed that Monday; rather the significance was that it was Lehman’s first use of the PDCF since April 16, 2008. Lehman Brothers did not use the Fed’s liquidity until after it had declared bankruptcy.

 

Tyler Durden's picture

Goldman's Reaction To The FOMC Minutes





Since it is now obvious to even the back office that Jan Hatzius makes monetary policy in the US (just note the spike in QE3 anticipating factors following his weak assessment of the weak Services ISM earlier), it probably makes sense to present his response to the policy that he through his predecessor Bill Dudley, helped enact. Below is the Goldman take on the FOMC minutes. Ignore the house of mirrors effect.

 
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