Archive - 2010 - Blog entry

The Case Shiller housing report, the Conference Board's Consumer Confidence Index, and the FDIC Q4 bank report came out Tuesday with mostly negative results. Things like the biggest loan contraction since 1942 ought to grab your attention. These are significant numbers.

Some of the top secret AIG bailout info is out. One Goldman Sachs Guess who's at
the heart of it, making money by creating straight trash, selling it to
its clients then buying insurance to benefit from its inevitable
crash? I quote "divulging the names of the [trash] CDOs could erode their value: “We will be hurt because traders in the market will know what we’re holding.”.

Chen Zhao of BCA Research says the intense debt-deflation pressure being felt in Europe has many similarities to the post-crash environment in Japan in the early 1990s. Deflation pressures are building all around the world but U.S. bond traders are still not convinced. Given the choice between the lesser of two evils, it's clear the Fed and other central bankers would rather err on the side of mild inflation. What will ultimately prevail?

I found a funny connection between the sellers of REO for HUD and the FDIC. Surprised? Nah!

Add the Maestro to the list ...

On the heels of the surprise discount window rate hike late last week, and on the eve of Bernanke’s Congressional testimony, speculation abounds as to the when and where of the next round of tightening. We need look no further than the US Treasury press room, as it has announced today a revival of sorts for its Supplementary Financing Program (SFP).

The 4th Quarter FDIC Bank Data has been updated at www.wlmlab.com. Each quarter I eagerly anticipate the numbers and keep thinking "it can't possibly be worse than last quarter, can it?" Well, never fear, it can. First off, the total amount of loans outstanding at U.S. Regulated Depository Banks has fallen to $7.296 Trillion from $7.425 at the end of Q3 2008.

I was clearly able to see the Greek bank downgrades coming, but there was one bank that was left out, as I expected it to be. If or when that bank gets downgraded, it is a strong chance that Greece will go down with it.

President Obama's Proposal on health care "reform" is a far reaching plan that will cause financial havoc to the health care system specifically and to the economy in general. It, along with the plans passed by the Senate and the House, are so invasive that we will be forever mired in bureaucratic control of this most important segment of our lives. Think of the movie "Brazil."

Deutsche Bank AG is to assume the longevity risks of nearly 3 billion pounds ($4.6 billion) of pension liabilities from BMW’s U.K. plan. This is the largest deal yet in corporate longevity insurance, effectively doubling the size of the market. Will longevity swaps become the new age pension solution or will they offer a false sense of security?

The economic advisor to libertarian Ron Paul’s 2008 presidential campaign gives his views in an exclusive Hedge Fund Radio interview. The Republicans of the last administration weren’t “real” Republicans. The US government is a “cancer on the economy.” The Fed “has managed the economy into the ground.” Interest rates will skyrocket, stock and bond markets will crash, and more financial institutions will fail. Civil unrest is coming. Gold, commodities, and emerging market stocks will be the only place to hide out. You won’t be able to buy “a stick of gum” with a dollar.

Bait and switch ...

A few weeks ago, we noted the potential for an oversold bounce despite what appeared to be a clear shift in the investment landscape. Now that most major equity indices have rallied for two consecutive weeks (with the S&P 500 stalling at a 50 DMA which looks to be rolling over), it is critical to assess the underlying strength of this move. Suffice it to say, that the evidence is mixed at best. Many of our immediate term commodity and commodity currency models have moved back into “buy” territory, but we view Dollar Strength as a BIG RED DEFLATIONARY FLAG.

We’re about to find out who has been swimming without a suit. TALF is expiring, sucking another $1.5 trillion out of the system. One of the steepest yield curves in history is about to become a lot steeper. The face of Half Dome comes to mind. A short in 30 year Treasury bonds will be THE great trade of 2010. Failed Treasury auction here we come.