Archive - Dec 2009 - Story

Even as the BLS and the administration are trying to cover up the real state of unemployment affairs using assorted semantic gimmicks of just what it means to be unemployed, and as companies provide adjusted EPS numbers, while actual earnings continue to collapse, the true barometer of spending, provided by the Financial Management Service, tax withholdings (net of refunds), continues to paint the truest picture of just what is really happening with both America's consumer and the corporate world. And it ain't pretty. On a rolling 12 month basis, individual tax withheld has dropped by nearly 8% YoY, from $1.42 trillion to $1.31 trillion, while company witholdings are down a whalloping 64%, from $274 billion to just under $100 billion! This is money that will never be used to pay down the skyrocketing US deficit, because both the US consumer and average US company are simply not collecting the required cash to line the Treasury's pockets with the one traditional way to pad the deficit: taxes. Expect much, much, much more debt issuance in America's short, medium and long-term future.

The WSJ reporting that Istithmar, the investment arm of Dubai's royal family, has lost the foreclosure auction for the Union Square W Hotel, which as we pointed out a month ago was the most likely next CRE casualty. The winner: mezzanine specialist LEM Capital. We wish them all the best. Presumably this means the bottle service at the Underbar has all but dried up. Do you see what happens Larry when the bouncer doesn't rotate the B&T crowd to keep the banker-folk happy? And this happening even with all-time record bonuses? Travesty.

Remember the jovial market response after the B(L)S came out with the 10% unemployment number courtesy of all able-bodied unemployed migrating to work in Tijuana? No? Neither does the market. The 10 Year is now back to pre-NFP levels. It would appear the government's "data scrubbing" interventionism now has a half-life of at best 3 business days.

"We will continue to use all tools at our disposal to aggressively pursue illegal market manipulation by high frequency traders and others." Mary Schapiro

But we thought manipulation by HFT only existed in the deranged brains of certain fringe websites. How is that possible?

RANsquawk 8th December US Late Morning Briefing - Stocks, Bonds, FX

Unemployment may or may not be a lagging indicator (it sure won't be once BLS emails are "hacked" by enterprising Russians) but the Moody's loan upgrade/downgrade ratio is about the surest countertop indicator available anywhere. And now that Upgrades have surpassed Downgrades for the first time in ages, watch out below.

RANsquawk 8th December US Morning Briefing - Stocks, Bonds, FX etc.

Is it time for the liquidity bulls to panic? At $180 million probably not, but while rates can't really go down (chukle, chukle Uncle Ben), this number can only go up. As a reminder, the first repo test was a 3 day term, this one is 8 days. Long way to go before the collateral is the same bankrupt stocks that the Fed accepts in its tri-party repo agreements.

Such a bearish appearance must be the result of the rose-colored glasses affirmative action thing at GE Capital: we have yet to see what the Comcast policy vis-a-vis unbiased content is. Nothing substantially new from Meredith - same focus areas of concern including toxic mortgages on the Fed's balance sheet, non cash flow generating "assets," and consumer, consumer, consumer (apparently she has not read the David Bianco piece either - after all the US consumer now accounts for 100% of Kindle revenues and 0% of US GDP, or so Merrill will soon want you to believe). Yet withComrade Sam making sure all is good for ever (the alternative, just like falling housing prices in your average S&P model from 2005, simply did not compute at the most recent 5 year plenary session), is there any reason to worry about anything? After all the debt auction carnival begins afresh again today at 1PM with $40 billion in 3 years. So long as those keep getting gobbled up without a glitch, all shall be well.

In addition to having become the biggest joke on trading desks the world over, the AAA rating of both the US and the UK is now starting to bother Buffett baby (soon to be step child) Moody's. It's "Aaa Sovereign Monitor" released today is all about the cautionary language that we have grown to love and expect from the toothless rater. This time however, it is what is between the lines that is most substantial: while Moody's will never go ahead and directly downgrade the U.S. for fear of the mutually assured apocalypse such an action would create (or so Blankfein and Bernanke tell us), an exhaustive read of this report indicates that Moody's thinks the U.S. and the U.K. deserve to be anything but AAA. Full report attached.

• A lonely voice against the Fed now leads a chorus (WaPo)
• Fitch takes the first step: downgrades Greece to BBB+, outlook negative (Bloomberg)
• More legal troubles for BofA: this time for CEO-in-waiting Greg Curl (Reuters)
• A view of things to come: Japan announces brand new $81 billion stimulus packake as recovery, ratings collapses (Bloomberg)
• Greek debt poses a danger to common currency (Spiegel, h/t Alexis)
• Hedge funds win profit on Chicago sewer debt at public expense (Bloomberg)

The FTSE chart is identical to what happened over Thanksgiving (absent the 5 hours of downtime of course): FTSE 100 down 1.6%, FTSE Eurofirst 300 down 1.7%, And as if having all its bankers depart and its CT office look like a ghost town, RBS is now getting freshly clobbered. In US futures, computers with massive REIT positions are short circuiting.

• Asian shares were mostly lower Tuesday with bank stocks weighing on some markets.
• Bernanke reaffirmed plans to keep interest rates near zero for "an extended period".
• Bernanke sees 'formidable headwinds' for economy on tight credit, job woes.
• China’s stocks fell for the first time in three days, led by raw-material producers.
• Consumers shed debt for the ninth month in October, but at a slower rate.
• Dubai stocks tumble most in world on Nakheel debt restructuring concerns.

This morning is sovereign morning here on Zero Hedge. Having looked into Dubai the United Kingdom, and Moody's non-assessment assessment of the Aaa gang, we explore the popular notion that treating with deep skepticism the economic pronouncements released by the sovereigns of developed, "western" economies (or their nearest approximation) is something for the "tin foil crowd." Despite the tremendous temptation presented to sovereigns in their role as not only issuer and regulator of debt, but the supervising authority overseeing financial reporting (and the absence of an authority empowered to enforce creditor's rights) it apparently seems quite beyond comprehension to wonder if a bit of rose colored lensing isn't being applied.

What might we discover in an audit of the Federal Reserve? Well, let's ask Her Majesty's Treasury, which, imagine this, actually released details of the assets dumped from the holding tanks of Royal Bank of Scotland into the cesspool of the United Kingdom's "Asset Protection Scheme." As a bit of background, perhaps you might frame things thus: RBS is to APS as Citi is to TARP (probably stuck in it for life). (That would make Lloyds Goldman, we suppose).