Archive - Sep 2009 - Blog entry

Let me just say that the IMF's Global Financial Stability Report is an excellent document that every serious money manager needs to read carefully. It provides an outstanding overview of global financial system. I went through it today and concluded that global financial risks have subsided but banks are by no means out of the woods. The semiannual report struck me as one of cautious optimism.

An article by The Hill dated 9/20/09 quoted President Obama as saying"...I am concerned that if the direction of the news is all blogosphere, all opinions, with no serious fact-checking, no serious attempts to put stories in context, that what you will end up getting is people shouting at each other across the void but not a lot of mutual understanding..."
Since President Obama confirmed that bloggers do run the world, I’d like to dedicate this blog to respond to his comments.

I was on CNBC a few days ago discussing the Japan debt situation, here are my talking points and some additional thoughts a lot of them I did not have a chance to cover in the previous note or the interview.

Traders are positioned for a reversal of the down trend in the Dollar Index. Watch out below if it doesn't materialize.

The national sales tax is no longer idle talk. I guarantee that it is coming soon because Obama is running out of money and they're panicking about paying for the deficit. They just can't tax the rich enough to pay for it. Tomorrow starts the official vetting of the tax.

All global economic problems today are rooted in the existence of Central Banks and their commitment to an application of destructive Keynesian economic theories to our global monetary system that simply has not worked for the better part of this century. Within the realm of academics, monetary policy, politics and media, there is a persistent refusal to acknowledge the primary role Central Banks undertake in artificially creating boom-bust cycles that would not occur in such severe fashion were Central Banks simply willing to step out of the way and allow free market forces to operate.

With the exception of a few, many retail/apparel stocks are back to - or in some cases even higher - than their pre-bubble valuations. Someone remind me, unemployment is where, again?

A lot of hedge funds are hurting but most are doing well because they're riding the Beta Express up while charging alpha fees to their investors. Take it from me, hedge funds are no no panacea. And in many cases, they are pure con artists peddling snake oil.

More tough talk from a Fed Governor. The problem with talking tough is if you do not back it up with action you look soft. If that is the way this plays out the weak link is still the dollar. If they raise rates as they say they will it is going to dramatically increase the cost of funding the mega-trillions of short term debt that Geithner has floated on our behalf.

Currently, the great market debate seems to center around two chief concerns: Have stocks jumped ahead of the economic recovery? And if so, are they setting up for a big correction? To better gauge the real economic condition, I typically like to look at commercial trade related indicators to verify just how good or bad business is doing. One of the most ignored leading economic indicators is probably freight volume. A review of some key freight indices should provides a much more sobering picture of the US economy.

Should Britain get ready for a mass exodus of bankers who are pissed at these new measures to curb their bonuses? Oh please, where are they going to go? Wall Street? They're next in the line of fire.

Where IS the economy going? Ben Bernanke says we've turned the corner and the economy is in recovery. Don't assume that is the case. It isn't. The data has too many negatives to assume that everything is going to re-set to pre-2008. The prospect of deflation and then stagflation is a more likely scenario.

The Financial Times recently reported on the Fed’s latest exit strategy to eventually contain the inflation zombie...TD touched on this last Thursday, and we will expand upon it here as it is particularly relevant to our ongoing theory that it is the proceeds from permanent open market operations (POMOs) and their close cousins that are driving equities. Though this may be received wisdom to ZH readers, the Fed has done us the favor of providing additional evidence through the FT story. A bit of background, as we are new contributors to this forum:

Project Mayhem reviews the most important financial and geopolitical news of the past week and takes a look at the week ahead.

One of Timmy G's smaller responsibilities is the $60 billion Federal Financing Bank. They're doing a "heck of a job". My bet is it's going to cost us one way or the other. The FFB might be the new lender to the FDIC. It looks like they have already filled out the loan forms. Sheila B. will love the pricing. They are giving the money away.