Archive - Apr 2011

The Fed may be talking like Smokey the Bear, but it continues to hand out matches trying to increase leverage ...

The Banksta Internationale unites the Banksta race!

Two Foreclosure Cases, Four Assignments, on Same Note and Mortgage

As the Fed Chairman is about to commence his luncheon address (and yes, take more moronic questions) at the Community Affairs Research Conference, it has offered readers the option of joining in and commenting alongside in realtime on the Fed's very own chat board. Everyone is suggested to participate and tell the Chairman what they really think. The chatboard link is here.

Even as America has an insolvent government and a debt ceiling to deal with in the only way it knows - Mutual Assured Destruction, Europe still has a insolvent banking system 10 times greater than America's to worry about.  Which explains the following Friday night bomb (because it is past 6pm in Europe). From DJ:

• 15:52 29Apr11 DJN-DJ EU PAPER: LARGE PARTS OF BANK RESTRUCTURINGS YET TO COME
• 15:54 29Apr11 DJN-DJ EU: "DISTINCT VULNERABILITIES REMAIN" IN EU BANK SECTOR
• 15:55 29Apr11 DJN-DJ EU: ROLL-OVER RISK STILL PRESENT IN SOVEREIGN DEBT MARKETS
• 16:05 29Apr11 DJN-DJ EU: EXIT FROM GOVERNMENT BANK BAILOUTS MAY SPUR M&A WAVE
• 16:13 29Apr11 DJN-DJ EU: THREAT OF PRIVATE CREDITOR LIABILITY "BADLY RECEIVED"

Translation of bolded: if you hear gronin', MAD's a-bonin' (taxpayers)

Following yesterday's release of advance Q1 GDP and deflator data,for the first time since the full unwind of the Great Financial Crisis in late 2008, early 2009, the Taylor rule is not only positive (it hit 0.1% in Q4 2010, in line with the federal fund's rate) but has now jumped substantially above the prevailing interest rate, hitting +0.4% in Q1 2011. Needless to say this will not remove any of the latent animosity between John Taylor, whose rule, or at least a special case thereof, is used by the Chairman in determining monetary policy, and the Chairman: as the possibility of a hike is negligible for at least one more year, with a far greater possibility for another QE episode, we expect to see this number continue to diverge substantially from the Taylor implied number for a long time, which in turn will mean that the Fed will be forced to scramble, just as it did in the 05-07 period to catch up with runaway inflation. Only this time it will have $3 trillion in asset to unwind as well. We hope Volcker will not mind being thawed from carbonite a second time when runaway inflation surges in about a year or so, and Volcker's expertise is needed more than ever.

Hopefully at this point nobody is surprised why at this rate gold will pass $1,600 within a month, silver may be $100 by the end of the year, and the dollar will be worthless, in order, to paraphrase Bernanke, reincarnate it in a fresh start version of itself, following the refinancing of all US private and public debt at 0% interest. For everyone still confused, and the naysayers, we urge you to read the following - link.

While the miss in the April Chicago PMI was just as we predicted, with the final read of 67.6 below "expert" expectations of 68.2, and down from a near record 70.6, it seems that the full pain will only be felt yet. The reason: "In response to special questions about the Japanese disaster, panelists reported minimal impact." They will. Guaranteed. Which means that upcoming weakness is simply deferred from April to May or later, pushing back the "imminent" rebound further into the future, yet guaranteeing a major miss in Q2 GDP. Our call continues to be for a Q2 GDP of at or below 2%. Yet the most insight as usual comes from the survey respondents, where we find this pearl of wisdom which probably explains everything that is wrong with the economy: "Companies that are very profitable still behaving as if bankruptcy is around the corner". And why wouldn't they: when in the history of human events has central planning every worked?

Sounds crazy but, "Forces loyal to Muammar Gaddafi crossed into neighbouring Tunisia and fought a gun battle with Tunisian troops in a frontier town as Libya's conflict spilt beyond its borders...Pro-Gaddafi forces fired shells into the town of Dehiba, damaging buildings and injuring at least one resident, and a group of them drove into the town in a truck, local people and a Reuters photographer in the town said. The Libyan government troops were pursuing anti-Gaddafi rebels from the restive Western Mountains region of Libya who fled into Tunisia in the past few days after Gaddafi forces overran the border post the rebels had earlier seized." So is this the carte blanche that Pro Oil liberation forces need in order to justify a land invasion of Libya? And what happens to oil in that case when Gaddafi's back is truly against the wall?

And while everyone has forgotten about the terabequerels of radiation released on a daily basis out of Fukushima, even as the Japanese Center for Economic Research just revised March GDP massively lower (more shortly), TEPCO, nearly two months after the explosion, has released the following very brief video of the spent fuel rod pool at Reactor 4. The good news: it is submerged in water; the bad news: it is submerged in water, meaning nobody is even one step closer to safely removing the constantly leaking radioactive material.

March Personal Income comes at 0.5% on expectations of 0.4%, while spending is also 10 bps higher than consensus of 0.5% printing at 0.6%. Sizable prior revisions see February income of 0.3% revised to 0.4%, while spending was revised from 0.7% to 0.9. As a result the February savings rate we revised lower to 5.5%, which is where the March savings rate came as well. Not surprisingly, the "rental income" which as explained before is what is known as Squatters rent, continues to come in strong, increased by $8.7 in March (over $8.1 billion in February). Following some timing offsets in the tax code, Disposable personal income (DPI) -- personal income less personal current taxes -- increased $64.4 billion, or 0.6 percent, in March, compared with an increase of $49.6 billion, or 0.4 percent in February. The GDP critical PCE increased 0.4 percent in March, the same increase as in February. The PCE price index, excluding food and energy, increased 0.1 percent in March, compared with an increase of 0.2 percent in February.

As competition that is as inevitable as gravity itself both validates our contrarian thesis and causes Research in Motion’s stock to imitate amateur base jumpers, sans parachute…

As promised, I am presenting historical justification of the logic behind my call of absurdity in the drastic drop in share price after Google announces a redoubled effort in investment and marketing of its nascent businesses.

• Officials Unfazed by Dollar Slide (WSJ)
• Egypt May Open Border With Gaza Strip as Israel Expresses Concern on Hamas (Bloomberg)
• China’s Exports Perch on Uncertain Truck System (NYT)
• How Goldman Sachs Created the Food Crisis (Foreign Policy)
• House Budget Ryan Chair Backs Cutting Oil Subsidies (Reuters)
• Nasdaq Eating Machine Starving for NYSE Deal (Jonathan Weil)
• Indonesia’s Central Bank Asks 23 Lenders to Stop Adding New Wealth Clients (Bloomberg)
• Syrian Republican Guards Patrol Main Damascus Road (Reuters)
• Panetta Faces Big Budget Challenges (WSJ)
• Russia Unexpectedly Raises Benchmark Interest Rate Quarter Point to 8.25% (Bloomberg)