Archive - Dec 25, 2009 - Story

Here is the only math you need to know as we all look at 2010: in 2009 US Dollar denominated fixed income supply, net of the Fed's Quantitative Easing operations, was $190 billion. In 2010 it will be $2,060 billion, an eleven fold increase. The Fed has three choices: 1) a QE 2 announcement soon, causing a plunge in already low Democrat popularity ahead of the mid-term elections; 2) interest rates skyrocketing, throwing the economy into a true tailspin; 3) the mother of all engineered equity crashes to return capital flow to risk-free assets. None of the three is a pleasant choice, however the Fed could only delay the inevitable hangover from the biggest private-to-public risk transfer in history for so long.

Just occasionally, we feel as if we might be a little too harsh with Barney Frank. He has, after all, been something of a singular lightning rod for many of the more adverse consequences of the housing boom. Without question he has taken a disproportionate share of the heat generated by increasing scrutiny of Government Sponsored Entities like Fannie and Freddie. True, he was involved directly in crafting provisions of the Troubled Asset Relief Program. Indeed, as he chairs the House Committee on Financial Services, he is uniquely exposed to all things "credit crisis" and most things "bailout." Yes, his loose alliance with figures like, say, Maxine Waters, tends to draw sporadic sniper fire from the trenches (well, and sustained grazing fire from the MG42 nests). And, obviously, some of the more publicly scrutinized aspects of his personal life have aligned social conservatives against the Congressman. The combined effect of these disparate circumstances gives us pause in those moments when we begin to form our critiques of the Distinguished Gentleman from Massachusetts. Then we come to our senses.

Anything goes! (Well, almost anything).

As the Zero Hedge duty officer this holiday season (we're making "The Narrator" do this next year, trust me) I'm watching closely (or at least casually) for the "take out the trash" dump of sketchy announcements, bad news and shifty disclosure this weekend. We've already seen a bit of it in the form of the Fannie and Freddie blank checking shell-game, and I'm sure there is more to come. Be that as it may, the tempo of the world has ebbed just a bit and things actually appear a bit... well... slow. So I thought I would share with you some upcoming highlights. Consider them belated holiday gifts from Zero Hedge. (All purchases final).

• Russia lowers key rate, kills carry trade.  Merry Christmas, foreigners.  ("In Soviet Russia, rates lower you") [bloomberg]
• Ethanol producers sue California to prevent low-carbon fuel restrictions. (Corn shortage forces greens to start to eating their own young?) [wall street journal]
• Latvia attempts to lower pension benefits to avoid fiscal meltdown. Courts: "Denied." Latvian PM: "We will just go bankrupt if we observe all legal norms" (Sufficiently satirical comeback fails me) [baltic reports]
• Increase in pension contribution requirement for NY Teachers causes rush to lock in old rates.  (Officials shocked, shocked to find that rational actors avoid taxes)  [wall street journal]
• Retailers extend Christmas hours to boost traffic. (Losing money for every open hour, but making it up on volume) [bloomberg]

J.S. Kim is the founder of SmartKnowledgeU™, an independent investment research and wealth consulting firm. J.S. accurately called the recent global financial crisis, sharing his thoughts on his investment blog, to his subscribers, and in a series of YouTube videos. His articles have been reprinted online by Reuters, the New York Times, USA Today, the Wall Street Journal, the Financial Times and the International Business Times. He recently authored the timely book, “Confessions of a Wall Street Insider, a Zen approach to making a fortune from the coming global economic crisis.”