Archive - Feb 2010 - Story

An AP article which has been syndicated throughout the web, making such reputable outlets as CNBC, reports this interesting tidbit:

Japan also reduced its holdings of U.S. Treasuries, cutting them by
$11.5 billion to $768.8 billion in December, but that amount was still
more than China's December total of $755.4 billion.

That's interesting, because the AP must know something that the US Treasury does not. Because you see "reducing" and "cutting" seems to imply the official November number of $757.3 billion was higher than the December number of $768.8 billion. Yes the difference was $11.5 billion... But in the wrong direction. We share the sentiment though - what's a couple dozen billion between market manipulating central banks.

We surely hope the AP will note this minor $23 billion delta...And the difference between a + and a - sign.

Nothing good to see in the credit card arena. Capital One's January annualized net charge offs hit a record 10.41%, while 30-Day delinquencies stayed at the highest of the past 3 months. Then again with entire countries defaulting, it really is a shocker than neither of these numbers is at 100% yet (or higher, courtesy of sound GAAP accounting principles). If Greece can be bailed out, surely that payment for the 7th $2,000 plasma TV can be buried under the rug, thank you IMF.

"In Friday’s Comments, we wrote that the napkins suggested support in the S&P was “way down around 1058/1063”. The sharp opening selloff took the S&P to an intra-day low of 1062.97 before they circled the wagons. For today, we’ll stick with the 1058/1063 support. Resistance looks like 1083/1088 and then 1093/1097. The dominance of the dollar was so evident that I was stunned from time to time to see brokers getting calls from trading desks inquiring “what turned the market?” Talk about not seeing the forest for the trees. The Dow closed two-thirds off the lows. That allowed the first up week in the last five. Not quite a resounding victory for the bulls, but a welcome respite at least." - Art Cashin

A quick preliminary read of the Simon proposal to acquire GGP for $10 billion, via Bank of America, indicates a cap rate of 8% "assuming growth of 3.5% on top of the annualized NOI stream." The offer values GGP at $9/share, including $3 for the land business. As readers will recall there has been a difference in opinions between Hovde and Ackman on GGP's value, the first of which gets an "implied equity value of $5.73 per share at a 7.5% cap rate and negative $5.03 per share at an 8.5% cap rate which after incorporating the conversion of the unsecured debt into equity at price of $6 per share, the implied equity value is $5.94 per share at a 7.5% cap rate and $3.62 per share at an 8.5% cap rate," while Ackman is a tad more ambitious: "based on cash NOI (not adjusted for lease termination fees, tenant allowances, maintenance capital expenditure) for LTM ending Sep 2009, Ackman values GGP at $23.7, $32.0 and $41.6 per share at cap rate of 7.21%, 6.71% and 6.21%, respectively." Seems like Hovde is just a little bit closer in his valuation (assuming no overbid). The OCC supports the Simon offer as they get taken out at par.

Gradually we are getting confirmation that Chinese "posturing" about offloading US debt is all too real. The most recent TIC data confirmed the Treasury's greatest nightmare: China is now dumping US bonds. In December China sold $34.2 billion of debt ($38.8 billion in Bills sold offset by $4.6 billion in Bonds purchased), lowering its total holdings $755.4 billion, the lowest since February 2009, and for the first time in many years relinquishing the top US debt holder spot to Japan, which bought $11.5 billion (mostly in Bonds, selling $1.4 billion Bills) bringing its total to $768.8 billion. Also, very oddly, the surge in UK holding continues, providing yet another clue as to the identity if the "direct bidder" - as we first assumed, these are merely UK centers transacting primarily on behalf of China as well as hedge funds, which are accumulating US debt under the radar. UK holdings increased from $230.7 billion to $302.5 billion in December: a stunning $70 billion increase in a two month span. Yet, with the identity of the UK-based buyers a secret, it really could be anyone... Anyone with very deep pockets.

RANsquawk 16th February US Morning Briefing - Stocks, Bonds, FX etc.

• Russian President Medveded recommends to Papandreou that Greece seek aid from IMF and WB (Kathimerini, h/t Paul)
• Are Goldman and Paulson partnering to profit from the downfall of an entire country/continent? (LittleSis)
• Weigh in on the FDIC proposal on executive pay (HuffPo, h/t David)
• Otmar Issing, former ECB executive and current Goldman Sachs advisor: Europe cannot afford to rescue Greece (FT) and Simon Johnson's take down (Baseline Scenario)
• Bazooka time: Henry Paulson thinks he is qualified to give advice on how to regulate banks (NYT)
• Spain has fingers crossed as it comes on deck with 15 year bond sale (Bloomberg)

• Asian stocks, copper, Aussie Dollar rise as earnings boost confidence in recovery.
• Australia and China committed to starting negotiations on an “open skies” accord.
• Bank of Japan may refrain from easing credit even as deflation intensifies.
• Possible European debt crisis is seen pushing US Dollar to its highest point in 9 months.
• EU finance ministers are uniting to oppose Pres. Obama’s Banking overhaul.
• Indian inflation accelerated to 8.56% in January, up from 7.31% in December and 4.95% a year ago.
• Japan stays ahead of China as world's second-biggest economy as 4Q GDP strong.

RANsquawk 16th February Morning Briefing - Stocks, Bonds, FX etc.

It appears that earlier rumors of a Dubai World proposal to creditors for a 60% repayment been have just that, rumors. And unfounded at that. Debtwire reports that in reality nothing has been proposed, and nothing has been discussed.

We are having some temporary trouble translating the following statement by BOJ's Governor Masaaki Shirakawa "We are serious about ending deflation. It will take time and
it's not something the BOJ alone can achieve. But we will be
doing all we can." We are confident that there has to be some context here, rendered into logical argument by Richard Koo, as otherwise all those thousands of pages of powerpoint slides, filled with Nomura-produced charts demonstrating that sooner or later Japan will pull out of the quicksand, just a few more quadrillion of yen stimuli, mix and boil, will have been for naught. Alternatively, thousands of Zero Hedge posts will not have been for naught if and when Fed Chairman Bernanke utters some variation on a theme by Shirakawa.

Spreads in Europe widened today amid low volumes as the US, parts of Asia, and some of the Greeks took the day off. Breadth was notably negative at almost three wideners to every tightener financials underperformed non-financials on average, and the continued flattening in Financials curves is increasingly pricing in traumatic times ahead in the short-term. Sovereign risk moves were generally small today in CDS-land with bond spreads underperforming CDS in all the major European nations. Dubai staggered back to its wides (widest since MAR09) as investors snarled at the 40% haircut being offered. SovX widened less than 2bps (with ITRX FINLs underperforming) as France, Portugal, Norway, Sweden, and Holland managed small tightenings (helping SovX intrinsics compress marginally and narrow the skew). Dubai was the worst performer of the day followed by Latvia, Qatar, Ireland, Turkey, and Ukraine.

Part 1 makes a case that an ideal way to catalyze job creation in the U.S. is to subsidize American consumers and producers of customized
education, and American operators of associated online markets. Part 1 concludes by speculating about the reasons that said subsidies are
absent from all talk of "jobs stimulus." From part 1: "A guess? In two words? Banks, children."

16:58 02/15 EU JUNCKER: WON'T SPECULATE ON INSTRUMENTS TO HELP GREECE
16:59 02/15 EU JUNCKER: NOT WISE TO PUBLICLY DISCUSS SPECIFIC AID TO GREECE
17:01 02/15 EU JUNCKER: GREECE WILL NOT BE LEFT TO MERCY OF MARKETS
16:46 02/15 EU JUNCKER: WE WILL RETURN TO THE GREECE TOPIC IN MID-MARCH
16:42 02/15 EU JUNCKER: GREECE NEW MEASURES ON MAR 16 IF RISKS MATERIALIZE
16:40 02/15 EU JUNCKER: GREECE SHALL ANNOUNCE ADDITIONAL MEASURES MARCH 16
17:01 02/15 EU JUNCKER: WE ARE DOING ALL WE CAN ON GREECE
16:47 02/15 EU JUNCKER: IT IS UP TO GREECE TO CUT ITS BUDGET DEFICIT

and the ever ready:

16:47 02/15 EU JUNCKER: EUROZONE STANDS READY TO ACT IF GREECE NEEDS

Uhm, they need it bud. Like yesterday.

Translation: "Translation: "that whole "bail out" thing... we were keeeeeding. Oh, but don't short Greece. That's not cool. You see we all have our collective head up our collective behind and we think it will all sort itself out if we just keep on doing nothing."

And you thought 100,000 mile, bumper-to-bumper, unlimited powertrain warranties were for cars nobody bought...

I'm not claiming to what extent Toyota is thinking about extending warranties and incentives- but they're considering it.