Archive - Nov 26, 2009 - Story

The $ PET (Plunge Enforcement Team) will have its work cut out for it tonight and tomorrow, after speculation was rampant that both Japan and Switzerland would intervene in their respective currency markets to halt the dollar's collapse, in essence making Tim Geithner's self-proclaimed job of maintaining a strong dollar that much easier. And even as the Nikkei has terminally decoupled from the US equity market, and is now over 10% down from its 2009 highs, the yen just passed 85, hitting a 14 year high against the dollar and throwing Japan's export economy into a tailspin: that a confirmed deflationary economy is considered a "safe-haven" in today's world should be sufficient to get Keynes boogying to the foxtrot in his grave as his economic gospel falls apart at the seams.

I was looking through the avalanche of economic data today, and it struck me how once again Americans are spending well over their income growth. I thought to myself, well part of this are all the programs where the American government is subsidizing consumption. In fact we're at the point one of every six dollars of consumption are from goverment, meaning you only need to "earn" 5/6ths of your spending power.

But something else hit me... I've written about this in the past in conceptual terms but never put it into an analysis. The true stealth stimulus plan in America is letting so many of its people live "rent free" as they sit in defaulted homes not making a mortgage payment. This "cost savings" allows them to shop and spend, and otherwise support the American consumption society. While it is hard to keep track of all the stimuli, try to think back to the Bush spring 2008 stimulus. (that was about 37 stimuli ago) That goosed GDP quite well for two quarters. But we now have a quasi permanent stimulus plan that goes on quarter, after quarter, year after year.... and its equivalent to have a permanent Bush level stimulus (using VERY conservative figures).

Far be it from us to be so cynical as to suggest that financial disclosures might be delayed to fall on the deaf ears of absent markets (Dubai related evidence notwithstanding) but who else might we expect dire tidings from this long weekend? Whither Failure Friday?

You sort of just knew Dubai was going to implode. Or if you didn't, you sure should have.

"Standard & Poor's Ratings Services today said it had taken rating actions on a number of Dubai-based government related entities (GREs) and transactions . Standard & Poor's has downgraded DIFC Investments LLC, DP World Ltd., Jebel Ali Free Zone (FZE), Dubai Holding Commercial Operations Group LLC (DHCOG), and Emaar Properties PJSC. All of these entities have been placed on CreditWatch with negative implications. The ratings on Dubai Multi Commodities Centre Authority (DMCC) were affirmed, although they were placed on CreditWatch negative. A CreditWatch negative placement also applies to the notes issued by Thor Asset Purchase (Cayman) Ltd. (Thor), which are securitized by cash flows from a revolving pool of existing and future receivables originated by Dubai Electricity and Water Authority (DEWA; not rated)." S&P

The bank that got its ass kicked first in the subprime collapse in 2007 may be the first one again to get the KY treatment from the Dubai implosion.

Contagion effect is spreading as the weakest link in the Eurozone catches fire.

Panic settles in as the update call for Nakheel bondholders crashes and has to be postponed due to unprecedented and unexpected surge of participants.

Focus observations from Barclays as the Dubai SNAFU has ripple effects around all global markets.

Maybe it is a good thing markets are closed in the US today, as the world is certainly not sharing America's festiveness. The ES was down 22 at last check. The FTSE (yes, the entire index) was halted for more than 3 hours earlier, in expectation of the second coming of Jerome Kerviel. The FTSE futures, however, continued trading, and are now at the lows of the day, down 128. And all bets are off in Dubai where CDS for Dubai World, and its linked Dubai sovereign, were wider by about 120 bps. Dubai World hit 612 bps while Dubai is at 545. The spread between the two entities, which Bloomberg describes as "Dubai World is a holding company for the Government of Dubai", is converging by the second, as can be seen on the chart below. With everyone expecting the next domino to come out of Eastern Europe, it is only fitting that it would instead appear in the Persian Gulf.

RANsquawk 26th November Morning Briefing - Stocks, Bonds, FX etc.

Zero Hedge's inkmaster, John Redmann on the typical horrors of Thanksgiving dinner with the family.