Archive - Jan 11, 2010 - Story

From a conference call that just ended, NY AG Cuomo is taking aim squarely at bank bonuses and is now demanding extensive info on bonus pools, bonus allocation, clawback provisions and vesting period data, from the 8 original bailout recipient banks. Did Hamptons real estate prices just drop 10%?

New year window dressing was responsible for the micro yields on bill auctions pre-New Year. Or so the theory went. So why did we just have another effectively zero bill auction? And no, the Lehman scramble for risk-free parallel is oh so very inappropriate here - after all funds have to window dress their Dec. 31 2010 results... Granted, a little early. So we ask, again, who is buying stocks when real money is willing to accept zero returns to park their cash in "risk-free" equivalents. Liberty 33 - once again, the podium is all yours.

TrimTabs' Charles Biderman makes another appearance, this time on BNN, discussing "circumstantial evidence" of the Fed's goosing of stock markets. And yes, the debate of who is buying futures consistently takes front and center position. Liberty 33 - your move: feel free to refute any and all claims presented by the TrimTabs CEO.

2010 has started off with a bang. Insiders purchased $4.5 million worth of stock (and yes, this does not include the end year transaction by such individuals as Nelson Peltz who acquired nearly 10 million shares of Legg Mason on the last day of 2009), in the period from January 4. It should, however, comes as no surprise that in the same period selling did not moderate, and insiders offloaded $281 million in shares (yes, this accounts for double counting between various corporate entities). Net result: an insider selling to buying of 62x to kick off 2010. And still the quants are chasing momentum ever higher. There is no way this will end in anything but tears.

Albert Edwards is back and spreading evil, vicious realism as usual.

RANsquawk11th January US Morning Briefing - Stocks, Bonds, FX etc.

Well now you've done it Lloyd - the New York Attorney General has just gotten involved in banker bonus deliberations. Look for a formal announcement at 12 noon Monday.

A must read op-ed from John Taylor, the Stanford professor best known as the inventor of the famous Taylor Rule, rips apart Bernanke's recent defense of Fed policies in the 2002-2005 period, which claimed that the Fed was not responsible for the housing bubble. Bernanke, who pushed the blame for the bubble on indefinite interpretations of the implications of the Taylor Rule, and whose chairmanship of the Fed will be lost should he not be formally reconfirmed by the end of January, loses ever more credibility when considering Taylor's response that the Chairman "said that international evidence does not show a statistically significant relationship between policy deviations from the Taylor rule and housing booms. But his speech does not mention that research at the Organization for Economic Cooperation and Development in March 2008 did find a statistically significant relationship." Furthermore, Taylor blasts Bernanke's catch-all solution that new regulation will prevent such bubble in the future: "it is wishful thinking that some new and untried macro-prudential systemic risk regulation will prevent bubbles."

• Federal Reserve seeks to block release of U.S. bailout secrets (Bloomberg)
• Dubai's first foreclosure may open floodgates in worst market: Dubai’s housing rout sent prices
  down 52 percent in the past year, prompting some homeowners to
  abandon their cars and mortgage payments and flee the country.
  Not one received a foreclosure notice. Until now. (Bloomberg)
• Geithner has support of Obama, Democratis lawmakers, aides say (Bloomberg)
• Trichet may signal central bankers' risk concern: European Central Bank
  President Jean-Claude Trichet, who warned investors against taking on
  too much risk two years before the financial crisis started, may be
  about to sound the alert again.( Bloomberg)
• Bernanke bond spread most since 2007 shows decoupling (Bloomberg)
• Financial crisis panel seeks bankers' testimony (WaPo)
• Disappointment ahead for UK - and big test for euro (TimesOnline)

If you have always wanted to hear John Thain and Rodgin Cohen, the people who benefited for ages from the bubble and were among the complicit architects of the collapse, discuss bonuses, here is your chance. "The numbers when they do come out will be subject to criticism and public outrage." Oh yes. Cohen claims looking for the individuals responsible for the crisis is a non-starter. This is ironic as Cohen himself has been implicated by many as a primary culprit in perpetuating a status quo which would ultimately result in the Wall Street collapse.

• Abu Dhabi sovereign fund has most holdings in US, Europe; sees potential in the West.
• Asia stocks, metals rise as China exports soar
• Chavez, harried by recession and declining popularity, devalues Venezuela's currency.
• China's investigation of Rio Tinto executive complete, case with prosecutors.
• China is expected to rev up steel production by nearly 10% this year.
• China may overheat with 16% GDP growth in 2010, Govt researchers say.

Paul McCulley discusses the failed Japanese inflation experiment, and the ongoing 3rd decade of deflation, which has destroyed over 70% of the Nikkei's value. The reason proposed by the Pimco Managing Director for this 30-year ongoing weakness: an inability to fight the "liquidity trap" with sufficiently forceful measures. Yet an implication of Pimco's perspective is that despite posturing for an end to QE in March right here in our very own United States, this will likely not happen, or even if it does, QE will promptly return soon thereafter.

RANsquawk 11th January Morning Briefing - Stocks, Bonds, FX etc.

In a groundbreaking presentation to be delivered on January 11 in Shanghai, "The First Phase of US Recovery and Beyond" St. Louis Fed president and monetary policy decision-maker James Bullard has come the closest to openly refuting Ben Bernanke's claim that no asset bubbles have been created via the Fed's monetary intervention policy during the post-Lehman period. Yet, Bullard notes, there is nothing that the Fed's "blunt instrument" approach can do to pop such bubbles proactively, as "financial institutions would need to be capable of withstanding large shocks to asset prices, as well as other shocks." Of course, the implication is that the day of reckoning for "financial institutions" is merely delayed to the point where further extend and pretend policy action is impossible and the Lehman collapse reaches a systemic contagion phase. In other words, the Fed admits the current course of action it itself has set the country on, is one of self-destruction, courtesy of the fiat banking system's ultimate death spiral. Alas, the disproof of Keynes' dogma will be a Pyrrhic victory as there will be nothing left of the American financial system in its wake.