Archive - Nov 2010 - Story

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

CNBC is parading the fact that its chief eCONomist Steve Liesman, who by now has learned that there is a difference between EUC and Extended Claims, and that when Tim Geithner tells him that the US will not monetize debt, he is lying, has managed to get a 20 minutes interview with former Goldman Sachs managing director and current FRBNY president Bill Dudley. Alas, having gone through the transcript, this interview is complete garbage, with nothing new or relevant, and we are looking far more to the upcoming official statement by Bob Corker's disclosure of how he intends to clip Blackhawk Ben's dual mandate main rotor (it was oddly enough the same Bob Corker who just last year was bashing everyone who wanted to audit the Fed. Go figure - then again it was the same Bob Corker who did his best to kill the Volcker Rule, so a pattern did emerge...). As for confirming the idiocy of the Fed, the only relevant section from Liesman's interview is the following excerpt...

Today's POMO, which is getting absolutely no coverage on CNBC, now that the new POMO regime has no bearing on equities and thus can not be sold as bullish development, has closed. Brian Sack bought back $5.4 billion in debt, at a whopping 6.2 submitted to accepted ratio, implying the PDs are once again positioned weakly. Of course, one look at the ES is sufficient to see this. What is most relevant is that the bond monetized the most to the tune of $1.6 billion, was the 2 year PH7 due 8/31/2012 which was auctioned off by the US Treasury... 2 months ago.

Today at 2:30pm the US public will get its first and certainly not last spectacle orchestrated by the banker's lame duck pet, Chris Dodd, and his Senate Banking Committee (as in bought and purchased by the banks) over fraudclosure. The hearing is titled "Problems in Mortgage Servicing From Modification to Foreclosure" and will be broadcast it on Zero Hedge. Mark your calendars: as the star witness is Bank of America President of Home Loans, Barbara Dosoer, the level of bullshit will be one for the history books.

Earlier we reported rumors that Austria may withold a major upcoming payment to fund the Greek rescue package that could set the Eurozone on fire once again, as countries pull out of their rescue commitments to the insolvent nation. We have now gotten confirmation.

Yesterday, while reporting on Michael Pense's interview with CNBC, we asked: "Are Republicans Preparing For A Push To Eliminate The "Maximum Employment" Part Of The Fed's Dual Mandate?" The answer, it appears, is yes. Bob Corker has just come out with a statement urging a change to the Fed's mandate, removing the entire "maximum employment" clause. This is possibly the biggest news for the Fed since 1977, and would effectively end the Fed's supreme reign over the US economy, as Bernanke will no longer have the fall back of keeping rates at zero just to get unemployment back to some imaginary number.

While we await for the Treasury Department to actually update its complete September TIC LT flow data tables, here is some of the data we can compile with what has been released so far. China is now once again solidly ahead of the Fed in terms of total Treasury holdings, owning $883.5 billion USTs in September, a $15 billion increase from August, of which $10 billion came from an increase in non-Bill holdings, and the balance from Short Term, which at $21 billion have risen to the highest since... April 2010. This is peanuts. The Fed will surpass this total by Thursday. The bigger surprise came from Japan, which added $28.4 billion in Treasury debt to a total of $865 billion, of which just $3.5 billion was from ST holdings. The broke UK moderated its torrid pace of gobbling up US debt and added just $10.7 billion in US paper to bring its new total to $459 billion. Notably, in September hedge funds (Carribean Banking Centers) sold $14 billion of Treasuries as they took the proceeds and invested it all in Apple to force the biggest short squeeze in history (note the number of HF adding Apple as of Sept. 30, shares which they have almost certainly disposed of since). The biggest surprise by far in today's TIC update had little to do with Treasury holdings but instead had everything to do with Agencies, the security most in peril courtesy of the massive fraud perpetuated by MERS and the robosigners. To wit: foreign official institutions (primary central banks) dumped a massive $31.4 billion in Agencies: a record number since the TIC data has been reported in 1978. This was offset marginally by Agency purchases by other foreigners of $23 billion, although the dump by central bankers what everyone will be focused on. This is certainly news that PIMCO and all the other RMBS investment funds did not need to see today.

After Greek CDS went offerless, and is about to pass 1,000 bps following news of Austria's defection from the EU rescue fund over Greece's endless lies, now we get the next defector: Finland, who it appears is opposing an Irish rescue. This is not too odd, since Finland actually has a viable banking system whose viability does not depend on the generosity of Irish and European taxpayers. What this means, however, is that European unity is finally coming apart at the seams.

The EU's finely tuned (and well-greased by assorted bankers) Nash Equilibrium is about to become history. Austria is the first major country to say enough to Greece's endless lies. Why? Who knows - Austrian banks will be first on the firing squad line when, not if, Greece implodes. Perhaps even Europe is getting sick of this charade. Next up - every man for themselves, but only those who defect first win.

Deflation in all the non-core items continues, even as your cotton-based and coffee purchases are about to go up by 30%. The November PPI increased by 0.4% on expectations of 0.8% (and previous 0.4%). More importantly, the PPI ex the things one actually needs, food and energy, actually went down by 0.6%, despite expectations of an unchanged print of 0.1% from September, confirming that all semi-leverage requiring purchases are getting trounced. Also, how the BLS got a -0.1% read in the food PPI is a secret the Department of Truth will take with it to the grave. At least there was some trace of honesty in energy price reporting, which jumped by 3.7% - the highest since January.

• Meet the new reserve currency: Global Power, Influence Shifting From US To China (WSJ)
• IMF Lowers Dollar, Yen Weights in Its SDR Valuation Basket, Increases Euro (Bloomberg)
• Liesman with another hilarious interview: Fed Easing Is Not Aimed at Weakening US Dollar says ex-Goldmanite and current New York Fed president Dudley (CNBC)
• China May Raise Interest Rates Several More Times, Fidelity's Bolton Says (Bloomberg)
• China Selling Stockpiled Pork, Sugar to Cut Prices (BusinessWeek)
• Revaluation pressures on emerging markets (FT)
• Eurozone Members Pressed on Debt Plans (FT)
• Ireland's Cowen to Weigh EU Steps to Shore Up Banking System (Bloomberg)