Archive - Apr 6, 2011

Congress, you need to wake up. The people who are acting as your financial advisors are lying to you about the economy and our financial system. They’re also lying to you about the effectiveness of their policies. You are supposed to represent us. You are supposed to defend us against threats both internal and external. Bernanke is lying to you and all of us. He is an internal threat to our financial wellbeing.

DO SOMETHING ABOUT IT.

New story, old story. Same story.

Update: It's Official. Portugal is Bankrupt:  Portuguese finance minister says the country will have to use European Union mechanisms to resolve its debt problems, to make announcement at 8PM.

In the biggest shocker to come out just hours before the ECB's announcement tomorrow, which many see is a guaranteed rate hike, Journal de Negocios has just announced that according to the Portuguese Finance Minister, the country needs a bailout, after weeks and weeks of Greece-style denials. And yes, nobody could have foreseen this, and all that jazz.

• *DJ Obama Admin Says IRS Would Shut Down If Budget Not Passed
• *DJ Obama Admin Says National Parks, Smithsonian Would Close
• *DJ Obama Admin: Cherry Blossom Festival Wouldn't Happen If Budget Not Passed
• *DJ Obama Admin: Roughly 800,000 Govt Employees Would Be Affected By Shutdown
• *DJ Obama Admin: EPA Permitting Would Stop If Budget Not Passed
• *DJ Obama Admin: Social Security Beneficiaries Would Continue To Receive Payments
• *DJ Obama Admin: Electronic Tax Refunds, Collections Would Continue
• *DJ Obama Admin: Military, Law Enforcement Will Continue To Function
• *DJ Obama Admin: Military Personnel Would Earn Paychecks, But Not Receive Them Immediately
• *DJ Obama Admin: White House Staffing Would Be Lower During Shutdown
• *ZH: POMO will continue come rain or snow: Russell 36,000 will not be denied, US bankruptcy notwithstanding

In order to make the biggest strawman so far in 2011 really scary and nasty, the administration just announced that as part of a government shut down, the IRS would end up being closed. While according to some this is the ulterior motive all along to avoid the premature outflow of tens of billions in cash due to federal tax refunds hitting the IRS next week, which without a debt ceiling hike would push the country into technical default possibly as soon as next week (debt subject to the limit was $14.2 trillion two days ago, just $94 billion under the ceiling and with about $74 billion in debt to be issued next week a $20 billion tax refund withdrawal would push the Treasury over the limit), what is far more amusing is that as the WSJ reminds us, the Fed would still be able to monetize debt regardless if the government was operating or not. Ergo nothing can end POMO ahead of time, not even a complete US government shutdown.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

With TEPCO stock dropping to a fresh all time record overnight at just over Y300, it is pretty clear what the fate of the company is at this point. What was less clear is the fate of TEPCO debt, of which there is just over $90 billion, and which many had expected would be made whole once the company is nationalized. Well, one entity is not taking a chance. Three months after quietly excluding Irish bonds from its General Collateral basket, the Swiss National Bank, by far the most prudent of all central banks in the current race to the bottom regime, has decide to take out 600 million in CHF-denominated bonds out of the eligible basket. Perhaps this is an indication that at least one investor is not quite so sanguine about the lack of impairment in TEPCO bonds: all those who have been selling TEPCO CDS in hopes of a JGB-TEPCO compression trade may want to take note...

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/04/11

In another confounding episode of biting the biggest hand that feeds it, the IMF has just issued another criticism of US fiscal policy, and in its just released Global Financial Stability report says that the US should include in its budget the "cost of mortgage loan guarantees and other housing supports." Not only that but the fund also urges that the Treasury should immediately make its support for the GSEs explicit and carry Fannie and Freddie's roughly $7 trillion in debt on the books: a move that would send US debt to well over $20 trillion and make the ratio of marketable debt (the lowest common debt denominator) to GDP well over 100%. To wit: "Government guarantees should be explicit and fully accounted for on the government's balance sheet... There is a need for better-defined and more transparent government
participation in the housing market, with all such policies, including
strict affordable housing goals, transparently shown in the government's
budget." Of course this won't happen for many years as otherwise the US would effectively confirm that it is insolvent per various Reinhart-Rogoff ratios, and instead the administration will continue pushing with its misguided plan of offloading GSE obligations on the balance sheets of private institutions. As if that will change anything: it only means that the next taxpayer funded bailout will save the TBTFs once again, instead of leading to a run on the Treasury. End result: same thing.