Archive - Oct 2010 - Blog entry

What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale, in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost? This is the game that is being played today.

The Department of Finance released their latest economic and fiscal budget projections up until 2015, and to no one’s surprise, it is extremely optimistic. There are many positive data points in the report, highlighting the positive employment situation, the strong fiscal position ‘relative’ to other G-7 nations, and solid growth in GDP.

What has 60% of the nation’s residential mortgages but 0 employees?

Before I release my opinion of JPM's most quarterly results, I want to demonstrate the risk that banks take in releasing provisions to boost accounting earnings in this environment. After reading this in its entirety, JPM shareholders should be infuriated at JPM management's actions, which are sure to be reversed in the near to medium term. It is not as if the accounting earnings boost has fooled anyone and lifted the stock, which is currently down on an up day.

Given the global surge that is going on in all asset classes, the (PCY), with its generous 5.82% yield, has to be on the menu in a yield hungry world. One of the great ironies in the international capital markets is that emerging nation balance sheets are so healthy because the West refused to lend to them for so long. Take a look at the (ELD) where you get the a double play: a continuous cycle of credit upgrades lead to lower interest rates, higher bond prices, in appreciating currencies.

At some point, and I cannot tell you when, the US is going to find itself facing a situation very similar to that of Greece. Indeed, if Greece’s numbers are “Crisis Worthy” investors should consider that the US’s fiscal condition is in fact AS BAD IF NOT WORSE than Greece’s.

The US is expected to run a $1.7 trillion deficit in 2010. Assuming that the GDP numbers are accurate (they’re not, but that’s an article for another time), the US economy is in the ballpark of $14 trillion. This means we’re running a deficit equal to 12.3% of GDP. That’s RIGHT next to Greece.

Then of course, you’ve got our Debt-to-GDP ratio. If you ignore unfunded liabilities like Social Security and Medicare, the US already has a Debt-to-GDP ratio of 98.1%. That’s only slightly off of Greece’s Debt-to-GDP of 112%.

The mobile computing market is unfolding exactly as we anticipated...

This daily report is designed to help traders find opportunities to trade against this group. The premise is very simple we are looking for 66% of retail traders to be trading either long or short a currency pair, we then look for opportunities to fade (trade against) this group. For example if 72.99% of traders are long the USD/CHF we look for opportunities to short that pair.

I don't know about you, I am tired of all this fraudclosure stuff...I am concerned that our best and brightest will not be adequately rewarded for all their good works!

It was another quiet day in the market as the expectation of QE2 continues to dominate the headlines like Securities Analysis dominates the insomnia drug market or like Gabourey Sidibe dominates a doughnut (or box of doughnuts to be more precise). The market still can't figure out what to do as investors continue to oscillate between delusion and ecstasy over the Bernanke Put which seems primed to lower real rates until they drop further than Meg Ryan's boobs.

How much can we blame on state pensions?

Seat belts on please.

There are still huge headwinds facing the residential real estate market. Shadow Inventory is not getting better, and now we have the robo-signing scandal which will only further delay recovery. Since all real estate is "local", some markets are clearly starting to find a floor. But a "recovery" whereby prices stabilize is a couple years away.

If only our own Fed were somehow held accountable to the people of this country - even symbolically…

A 2.4% GDP rate added to 0% inflation is giving you the 2.4% yield you see glaring at you from your screen today for the ten year Treasury bond. The market is essentially betting that inflation will remain at zero for another decade. Rampant inflation has already broken out in great swaths of the global economy. What is wrong with this picture?