Archive - Nov 30, 2009 - Story

The earlier announcement of a 25 bps rate hike by the RBA was not a big surprise. What was, however, was the knee-jerk reaction by both the USD and the JPY, and specifically the relative sizes of said jerk. As both currencies are funding currencies to AUD longs, the relative reactions provide a good, if crude, way to quantify the relative concentration of shorts in any givencurrencies (USD and JPY). Then again, it may merely indicate that tonight's USD-trading night shift at Goldman had much more Red Bull than the OZ one. In either way, both the initial knee jerk reaction as well as the subsequent follow through, indicate a roughly 50-100% greater concentration of dollar than yen-based shorts: in other words: the carry ratio funded in USD and JPY is between 2:1 and 3:2.

The October delinquent loan balance of $32.55 billion is a 504% increase from the $5.39 in October 2008. Additionally, RealPoint presents a scenario in which the delinquencies in June 2010 would hit $65 billion (8.3% total delinquency rate): a doubling from the most recent level and unprecedented pain for any form of CRE exposure.

Yen drops, Dollar, Euro surge. Yen - The Carry Currency, the sequel coming to a theater near you.

TOKYO (Dow Jones)--The Bank of Japan policy board will hold an unscheduled monetary policy meeting from 0500 GMT "to discuss monetary control matters based on recent economic and financial developments," the central bank said Tuesday. BOJ Gov. Masaaki Shirakawa will also meet the press from 0730 GMT.

The one moniker that may just stick. And seeing how the Chairman is having illicit (and excess liquidity lubricated) liaisons with the entire US middle class, yet is sufficiently covert about it that TMZ will never figure it out, it is about time that Senators do the right thing and prevent Bernanke's reappointment, as well as make the Federal Reserve fully transparent, even as they set it on a path to its ultimate dissolution. With fiat monetary systems and the entire Keynesian experiment proven to be one uncontrollable fiasco, leading to exponentially increasing bubbles and bursts, the last thing Central Bank countries can afford now is delay.

And so economists begin their protest against the perpetuation of the farce that is US economics, and the madman in charge of the USS Titanic - Ben Bernanke. Nassim Taleb has decided to go into exile courtesy of the imminent reappointment of the man who not only caused the near destruction of the financial system, but with his actions has sealed the fate of America's middle class. In a post titled "Good Bye! The reappointment of Bernanke is too much to bear" Taleb bid farewell and shares his disgust with the bullshit that the Wall Street - D.C. cabal has become, and the certain destruction that it is leading this once great country to. While we may or may not agree with Taleb's expression of disappointment, it, together with ever more vocal demonstrations of anger at Bernanke's second term by more and more prominent politicians, presents an increasing social problem for Obama, who has now bet the farm as well as taken out a 3rd lien (via CIT) on the success of Bernanke's policies, as well as sacrificed the future of the US middle class so that Wall Street can enjoy another record bonus year.

Buried in the depths of page 26 of the Office of the Special Inspector General for the Troubled Asset Relief Program's (SIGTARP's) November 17, 2009 report "Factors Affecting Efforts to Limit Payments to AIG Counterparties" hidden in footnotes 33 and 34 is something of a mystery. It might be the beginning of an interconnected financial chain involving Dubai, the Federal Reserve, AIG, Basel I, Eastern Europe and even Switzerland and which, even if it doesn't worry you, probably should. Or it might be nothing at all.

One bonus of the global recession is that it wiped a lot of incompetent hedge fund managers and energy speculators from the canyons of Wall Street. As the Gordon Gecko sycophants regroup and look for the next Big Thing, maximizing profit while minimizing risk, the landscape looks very different than it did a year ago. In such a climate, it is uranium, not oil and natural gas that would seem to have the brightest future for one simple, overriding capitalist principle – supply and demand.

Yet one more nail in the CRE coffin, and another reason why extend and pretend will be with us for years to come, lest investors wake up and find out just how screwed this country's economy really is. In the meantime, IYR is going to the moon. A new McKinsey study looks at the CRE lending industry and finds some very disturbing things. Such as that even in the peak market years of 2006-2007 the European CRE finance industry did not cover its cost of capital!!! One can only imagine what the reality must be like currently in the dead zone that is European Commercial Real Estate financing (and also in those barbaric lands west of the Atlantic). Yet somehow the Euro keeps appreciating every day against the dollar. Let the Kool Aid flow.

In a 'shocker' of a study, the Cleveland Fed analyzes FHA lending patterns in Ohio and determines that the FHA is at least one degree removed from New Century. We are truly speechless (and await the invoice).

"Recent news articles have carried the worrisome suggestion that Federal Housing Administration (FHA)-insured loans may be "the next subprime." Given the high correlation between subprime lending and foreclosures, which contributed to the recent recession, that’s an unsettling premise indeed. There is no doubt that FHA-insured lending has increased recently. There is also evidence of rising delinquencies among these loans. But are FHA-insured loans truly the new subprime? From our analysis it doesn’t appear so. In fact, several findings that emerged from our examination of FHA lending in Ohio point to "no" as the answer." - Cleveland Fed

Prepared By: "Brunswick Group, LLP" for your afternoon reading pleasure.

Don't say the market is unkind to Goldman. First the firm's employees are about to rake in all time record bonuses. Then, courtesy of of a rocking bear market rally, top-tick Goldman is about to get the hell out of dodge in another GS Capital Partners LBO, Adesa, basically a vehicle auction firm, which the firm bought in conjunction with Kelso in 2006. And who gets to pocket the underwriting fee? Why, Goldman. No way is the squid going to let any capital leave the firm. As for the company: prepare to own a 10x EV/EBITDA Craigslist knock off which will spew $100 million in free cash flow on a good year (and with consumers waiting for Cash for Clunkers 2 thru 100, don't expect a whole lot of car auction activity any time soon).

Apparently someone in the world cares about Dick Bove's prophetic effluvium. Either that, or the worst contraindicator in the stock market (buy Lehman, 'nuf said) believes that nowadays, (following in the footsteps of other financial pundits), it is much better to be famous for being famous, than for being right, or in Dick Bove's case, wrong. Either way, for those who actually seem to derive stock trading advice out of intellectual titans like Bove et al, your lives are above to get much more difficult, as Bove is about to go RIAA on your ass. Whatever happened to Bove's threat that he would be providing instanalysis much less (and many hoped, not at all) after his disastrous read of Wells results earlier got him in hot water following a CNBC appearance. For an even playing field, it only makes sense that Dick Bove no longer publishes or "analyzes" anything anymore, period.

It doesn't take much to panic markets when it comes to Iran. Case in point: Just about 45 minutes ago.

With the recent development of stocks no longer following every tick of the DXY, it appears the algos have been now reprogrammed to speculate much more aggressively in gold. As Zero Hedge first speculated over a month ago, the Fed's excess liquidity is no longer making its way into the broken stock market, and instead is reorienting toward smaller speculative markets such as gold. As the chart attached demonstrates, the inverse correlation from any dollar weakness is magnified in gold, while stocks continue drifting aimlessly. Then again this is merely an intraday snapshot. Look for the algos to be tweaked promptly as traditional correlations seek to get reestablished.

A follow-on interview by Dylan Ratigan of Senator Sanders confirms what everyone knows, that Bernanke is "part of the problem. The middle class in America is collapsing. We've seen incredible greed and recklessness and illegal behavior on Wall Street. This guy was running the ship and he didn't see it, and he allowed it to happen. Bernanke served in the Bush administration as Chairman of his economic advisors in 2005. The people last year voted for change and it makes no sense to me that President Obama is reappointing somebody who was appointed by Bush, who is a conservative republican, who missed the boat on the most significant economic crisis since the Great Depression. We need a whole new direction in the Fed and in our economic policies. A direction that stands up for change not for the rich, not for the top 1%, not for the giant financial institutions, but for the working class and the middle class of this country, and nobody, but nobody thinks that Ben Bernanke is that person."