Archive - Nov 16, 2010 - Story

The city of Hamtramck, desperate for cash, has asked the state for permission to take an unprecedented step: filing for bankruptcy. City Manager Bill Cooper said the city of roughly 20,000 people is staring at a $3 million deficit, fueled by a dispute with Detroit. Unless Hamtramck files for bankruptcy, it won't be able to pay its nearly 100 employees or 153 retirees, he said

The city sent a letter to the state Department of Treasury last week asking for approval to seek bankruptcy protection. It has not received a reply, Cooper said. "I'm going to run out of money Jan. 31," Cooper said. Bankruptcy would allow the city wants to stave off creditors and force its unions to consider concessions.

After watching the total pandemonium and maelstrom of lies out of Europe today, some may have forgotten that our own rulers are among some of the most incompetent, corrupt, and stupid people on earth. Luckily, here is Dick Durbin to remind us that nothing compares quite to the chaos emanating from D.C. - it appears the extension of the Bush tax cuts which until early this week was taken for granted, until yesterday when Moody's implied a permanent extension of such cuts would lead to a rating cut, may have been all but killed after preliminary discussions between Senate Majority Leader Harry Reid, and Mitch McConnell, the chamber’s top Republican, “did not go well.” Bloomberg reports that not only is the Senate's #2 Democrat "not very optimistic" about the option of extensions, but nobody even has a clue what is going on: "I don’t even know what the options are at this moment,” said Washington Senator Maria Cantwell, a Democrat who serves on the tax-writing Finance Committee." Tangentially, the question of how this economy continues to chug along courtesy of central planning by an administration and a monetary institution, both of which are beyond clueless, will some day be the topic of extended Ph.D. papers (of course, by then having a Ph.D. will be perceived as the vilest form of socio-educational stigmata).

Some delightful observations on two sets of bubbles by United-ICAP's Walter Zimmerman: one are those blown with impunity by the Federal Reserve; the other are those that put even the Greenspan-Bernanke legacy to shame, with a diameter of 50,000 light years. The latter are entertaining, but the former are far more relevant to our everyday lives. And on those, Zimmerman says the following: "Now if one studies history one finds out that the Federal Reserve was formed to prevent speculative panics, to maintain the value of the dollar, to preserve the purchasing power of the consumer, and to responsibly manage the nations money supply. Has an organization ever strayed as far from accomplishing its goals as the Fed?" We can only hope Princeton's cosmological program is subpar (unlikely), as otherwise Bernanke may decide that 50,000 light years across is a perfectly reasonable number for a bubble. The next question, of course, is what amount of dollar bills would fill up a sphere with a radius of 25k light years...

EUR came under renewed selling pressure on Tuesday in spite of the fact the Irish government continued to argue that it does not need to tap the primary markets until next June. Still, given that the Irish banks are plagued with soar loans, which as a result is expected to lead to another liquidity injection suggests that the country may be forced to tap the stability fund just to save its beleaguered banks. GBP posted heavy losses against the USD on Tuesday which rose sharply amid renewed uncertainty over the Eurozone and further tightening moves in Asia. The USDJPY continued to edge higher and moved to mid-83.00 levels and toughed on highest levels since October the 5th amid a stronger USD which rose following ongoing uncertainty over the Eurozone, as well as potential monetary policy tightening moves by the PBOC.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 16/11/10

CNBC's Diana Olick reports that the investigation into the biggest financial fraud in recent history is about to be shelved: the reason, state AGs are nearing a settlement with banks, which will slap a few wrists, will see banks put some lunch money in a settlement fund, will result in some principal reductions, and everything will be well again, as banker bonuses surpass 2009 levels (as noted previously). Retroactively in perpetuity. In other news, state sponsored fraud in America is alive and well.

Live coverage of the Senate Banking Committee's make believe grilling of Bank of America representative Barbara Desoer over fraudclosure starts live at 3:15pm, or was supposed to: just like the EU Press Conference, it is also late.

This is so deja vu of the EU press conference when the Greek bailout was announced on Sunday, May 9. Although this time there is no silver lining, as no deal has been reached. Anyway, here is the link for the EU press conference which so far is agenda-less so anything could be announced... or nothing.

On one hand you have Phil Lebeau. On the other you have legendary hedge fund investor Mike Steinhardt. When asked whether he would sell a hypothetical allocation of GM stock, Steinhardt's response is about as priceless as it gets: "As quickly as I can. I don't think one should be a long-term holder in government securities, particularly government equity securities." q.e.d.

Once again Zero Hedge pulls a fast one on the MSM. We highlighted this earlier today, but it bears repeating: in a post yesterday we asked rhetorically: "Are republicans preparing for a push to eliminate the "maximum employment" part of the fed's dual mandate?" As of a few minutes ago, Reuters has answered: "Republicans want Fed focus solely on inflation." Those who have read us will find absolutely nothing new here, but here is the gist of the Reuters piece: "Two U.S. Republican lawmakers said on Tuesday the Federal Reserve should focus solely on inflation and ditch its "dual mandate" to promote both price stability and full employment. The pressure from Senator Bob Corker and Representative Mike Pence adds to the pile of international criticism over the central bank's plan to buy an additional $600 billion in government bonds to try to speed up a sluggish economic recovery." As we stated before, while we ridicule the fact that Bob Corker is suddenly all about curbing the Fed, despite that 5 of his top 15 contributors are banks, and last year did his best to make the Paul-Grayson "Audit the Fed" initiative disappear, the fact that this idea is finally making the rounds should be endorsed by all those who believe that a bankrupt America is a bad America. As the Fed will not cease from doing everything it can to boost banker recoveries, under the guise of stimulating employment, the only way to curb its central planning aspirations is to pass legislation that will make it focus solely trillions of excess dollars creating asset bubbles across the global economy.

In a just released report, New York State's Comptroller Thomas DiNapoli presents his expectations for what is set to be another bumper year for Wall Street. Per the report: "The first quarter of 2010 was among the most profitable on record ($10.3 billion), but in the  second quarter profits eased (to $3.8 billion) and were more in line with pre-crisis levels. It appears that profits were relatively modest in the third quarter as well, but 2010 could still be the fourth most profitable year for the securities industry in New York City." Yet here is the most relevant piece: "While it appears that the cash bonus pool will be smaller than
last year, the average bonus paid to employees in the securities
industry in New York City may be a bit larger, since the pool will be
divided among fewer workers given continued staff reductions". Money well earned. So summarizing the report - in a year when US underemployment persists at around 17%, when the US federal debt is at nosebleed levels, when well over 40 million Americans are on foodstamps, when personal bankruptcies are at the highest they have been in 5 years, when GDP is about to turn red again, when America still doesn't have a formal budget, the average banker bonus may be one the biggest ever on record. Peasants - 0; Kleptocrats - 1.

Contrary to CNBC's interpretations of Irish PM Cowen's speech that the leader may have opened a door, or is "clearing the political space" for a bailout, the Irish Times has a completely opposite take on the speech, one that confirms that no matter how hard Ireland is pushed by Europe and Fed interests to exchange par recoveries to the bankers for austerity, it has so far refused to bend. To wit: "Speaking in the Dail Mr Cowen reiterated that Ireland had made no
application for external support and said there had been some
“ill-informed and inaccurate” speculation about the Government seeking a
bailout in recent days." Which of course is not to say that lack of liquidity will not end up crushing the mostly foreign banks domiciled in Ireland (which has enough funds to hold it through next summer, by which time Portugal, Italy and possibly core countries will have long been bailed out). Nonetheless, we can certainly hope that Ireland stays the course and refuses to betray its public in exchange for a few more years of debt-induced slavery, something which our own monetary authority has no problems doing.

The banks in England are celebrating austerity in a tried and true fashion: by boosting salaries. SkyNews reports that HSBC, infamous vault custodian of the precious paper for GLD and SLV, has decided to double banker salaries. After all, someone has to trigger inflation. We are confident the broader English population will celebrate the news with the same fervor as it did when it realized it was its generosity that allowed an insolvent RBS to keep operating for a few addition years.

From the WSJ:

• Officials also discussing smaller bailout for Irish banking sector alone
• Eurozone members want UK contribution to rescue - Good luck with this. This is a non-starter.
• IMF to have role in Irish rescue

The EURUSD so far calls shenanigans on the latest development, and may soon breach 1.35.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 16/11/10