Iceland, which alone in the entire developed world allowed its banking sector to collapse, and which, also alone, has benefited from a recovery that is truly organic courtesy of a devaluation of its currency and a global restructuring of its corporate balance sheet (read wipe outs for its banker class), continues to show the world that it is possible to have at least some semblance of justice in a world captured by fraud and criminal financial interests. After the CEO of failed bank Kaputhing was arrested back in May, today AFP reports that Iceland police has also detained the former CEO and several other executives of the other major Iceland failed bank: Landsbanki.
Adding insult to injury for holders of muni bonds, whose assets have plunged in value in the past month, pretty much as expected in light of pervasive state insolvency which is no longer being masked by the government's generous "Build America Bonds" distraction, is Charlie Gasparino's breaking news that now the SEC has gotten into the fray, and is looking into muni bond prospectus disclosures. Per Gasparino: "What they are looking at whether municipalities, cities and states, are adequately disclosing their budget woes to investors who buy these bonds." Which only means that as the risk of further pervasive impropriety is unearthed, and the muni space ends up being as much of a fraud as the MBS one, that the risk of holding on to MUB-derivative equivalents will only get higher, leading to yet another round of sell offs now that the muni bond situation has entered a toxic spiral where, in the inverse of the stock market, any news creates merely greater selling pressure.
Today we present yet another analysis of the complete failure of the QE framework, this time from Van Hoisington: "From the standpoint of most households, the home is the main component of wealth, not stock market investments. The continuing drop in housing prices serves to underscore the ill advised and likely temporary drop in the personal saving rate that was so critical to economic performance late last year." The problem is that with even the Fed itself confirming that it no longer cares to even attempt to reflate housing, and merely is seeking the make the wealthiest even wealthier, why bother? Why even speculate what the theoretical framework behind the Fed's actions and what proper policy should be, when Bernanke has now made it clear that the Fed cares not one bit about its two key mandates, both of which have been made irrelevant to its only real prerogative: inflating stock prices to as high levels as possible, asset bubbles be damned. Next month we will bring you the latest all time record high number of Americans on food stamps. And the same for the month after, and after, until eventually we get a replay of the Tunisian (French citizenship) candidate situation in our own country.
While Zero Hedge already noted that fund flows into bond funds and out of equity funds have once again resumed (a fact that was barely mentioned if at all on CNBC, contrary to the day-long segment on fund flows dedicated to the first equity inflow after 33 weeks of outflows), digging through the actual composition of debt receiving inflows reveals some curious details. EPFR reports a very disturbing development, namely that in the last week, Floating Rate debt saw $859 million inflows which was the largest inflow by dollar amount in history. Implicitly what this means is that bankers are currently pitching another massive round of refi deal to companies (particularly those that are past the non-call window, which in 2011 would mean quite a few of them), one which seeks to replace fixed debt with floating, or debt based on a Libor floor and a fixed margin. And for thousands of corporate treasurers, at a time when the Fed is guaranteeing ZIRP for the next 3 years at least, this is a slam dunk decision: after all why pay even a modest fixed interest when one can part with a modest refi fee, and still pay a fraction of the current interest expense. To some this may seem familiar: after all this is precisely the last push in refis in the housing bubble when everyone was jumping into an adjustable rate mortgage, which had a floating rate in its first 5 or so years. Are we starting to see the Option ARM wave in corporate refinancings? And if so, is this the same top tick indicator in the credit market currently that it was in the housing bubble of 4 years ago? The answer: it all depends on how much longer Ben Bernanke can succeed in defying gravity and the rules of the free market, courtesy of his ponzified central-planning artificial economy. And just like with Paolo Pellegrini, the one who can time the flip properly will be able to retire shortly thereafter.
The bottom 80% own a 7% share of the nation's financial wealth. That is 7% of $45 trillion, or $3 trillion, including all stocks, bonds and securities in IRAs, 401K retirement funds, savings and other accounts. That's $3 trillion held by 108 million households, compared to $32.4 trillion held by the top 5% of households (72% of $45 trillion), roughly 7 million households. In other words, the vast majority of assets held by the Baby Boom generation are in the top 5% of households, and most of the remaining assets are owned by the 15% tranch just beneath the top 5%. The bottom 80% don't have much home equity or directly owned bonds or stocks. So the Fed propping up housing and the stock market only benefits the top 20%, and most of the benefit flows to the top 5%--not exactly what most Americans think of as "middle class."
It was just 10 days ago (before anyone had even heard of food inflation) that Zero Hedge first predicted food riots were just around the corner (before anyone had even heard of Tunisia). Little did we know how quickly things would escalate out of control. Here is one man who is 100% confident he can leave the country before protests over runaway inflation succeed in getting him to face his (very hungry) population (presumably in close proximity to a decapitation device). This is probably the first confirmed case of a corrupt government overthrown as a result of the daily POMO secret CIA weapon. Certainly not the last. Stocks up on the news that some rating agency has downgraded the country to BBB+ (much higher than Greece) due to revolution. POMO: liberating countries from oppressive governments through excess inflationary liquidity since 2011
From the McCrudden complaint, which cites a letter sent by the Alnbri CEO to a CFTC lawyer T.M.: "You can tell that fucking corrupt piece of Goldman Sachs shit [G.G.] I am coming after him as well. Oh, and your "ban"... shove them up your fucking ass you corrupt mother fucker....Make sure you all show up with [T.M.] and that fucking corrupt fucking midget [G.G.] when you serve me papers. I have something ready for you all." It appears that Vincent sure was passionate about his beliefs... And certainly not a fan of Gary Gensler.
PIMCO, that tried and true client of Fed "expert network" Larry Meyer who just loves 'hinting' at what the Fed will be doing in the next 3-6 months in exchange for a modest retainer, has just released the December composition of its flagship Total Return Fund. Despite declining for a second month in a row, from $250 billion to $240.7 billion, the world's largest bond fund has once again increased its MBS holdings, this time from 43% to 45%. Keep in mind this was at 18% in July, and in the meantime Bill Gross has gone from $5 billion in net cash to $17 billion in margin. It is obvious that Bill Gross, who already has a major position in municipal debt, and will thus benefit from the imminent state and muni bail outs, also believes that once the Fed is content with having sacrificed 100 bps in the rates to generate 10% in the S&P, will soon be forced back into the mortgage market, and will be buying MBS once again. Based on Gross' ongoing accumulation of MBS, we are now fairly confident that the "expansion" to QE2 (really, QE3 but who keeps count) to be announced sometime in May, will contain Treasurys, Municipal bonds and Mortgage Backed Securities among the asset permitted for purchasing. Unlike the BOJ, we don't think the Fed will announce ETF purchases yet. That will be reserved for QE4, to be announced some time in early 2012.
Vincent McCrudden, CEO Of Alnbri Management, Arrested For Threatening To Kill Members Of SEC, FINRA And CFTCSubmitted by Tyler Durden on 01/14/2011 - 11:45
Yet another person appears to have flipped out, and attracted the government's attention, this time luckily without any actual casualties. Curiously the target of the latest FBI arrest is not some insane gun toting troglodyte, but a 20 year Wall Street veteran: Vincent McCrudden of Alnbri Management. Presumably the reason for the arrest is that the commodities trader had threatened to kill 47 members of the SEC, CFTC and Finra in a post on his website. The following information has been pulled from his website. While McCrudden's fund appears to have been modest if at all notable, it would be curious to discover just what recent perceived action on behalf of the government may have forced the manager to take the step. The kicker: an email from McCruden to CFTC attorney T.M. sent on December 16, 2010: "You corrupt mother fucker! You're not getting away with this....Merry Christmas!"... Much more in the charge against McCruden presented inside.
During a presentation in Chicago yesterday, Jim Rogers may have well laid the foundation for the next bubble predicted by Zero Hedge in October, namely rice. His comments may have also spooked some of the weaker hands in gold, which has tumbled by $20 today, primarily on concerns what Chinese tightening may do to demand for the precious metal. Of course, how tightening is bad for commodities and good for stocks is one of those questions that can only be explained by the Fed's third mandate. From Bloomberg: "While gold “may go down for awhile,” the metal is “going to go over $2,000 in this decade,” Rogers, who owns gold, silver and rice, said today during a presentation to business executives in Chicago. Gold touched a record $1,432.50 an ounce in New York on Dec. 7. The price closed today at $1,387. “I’d rather own rice,” Rogers said. “I’d rather own something that’s more depressed than gold.”"
Rosenberg On The Illusion Of Prosperity, The 7 Biggest Downside Risks, And The Fed's Third Mandate: "Higher Equity Valuations"Submitted by Tyler Durden on 01/14/2011 - 10:54
It is refreshing to see that an economist of David Rosenberg's statute agrees with Zero Hedge that the third mandate (we personally believe it is the one and only) of the Fed is "Higher Equity Valuations." While a faux-indignant Corker pretends to attempt to cull the Fed's powers and remove the inflation mandate, maybe someone can finally eliminate the one mandate that the Fed does not even have in its charter, yet which is the only one that it is beholden to: namely to get the Dow to 36,000. Which brings us to another point: instead of giving us his forecast on the GDP, maybe Bernanke can simply give everyone his price target for the Russell 2000. It will save everyone a lot of second-guessing effort: after all the Fed now has complete control over the stock market, and the whole frontrunning the Fed shtick is getting old.
The Fed chairman is 100% confident inflation can be contained. Rapidly spreading rioting (5 countries so far) would take the under on that.
The steady climb in Fed assets continues, with the left side of Bernanke's balance sheet swelling to just under $2.5 trillion, as US Treasury holdings hit $1.07 trillion, implying that the Fed's DV01 continues to increase on a daily basis with every single POMO. The differential between the US and China is now $163 billion and rising. We expect our now second-largest creditor to realize the game theory balance of leverage (no pun intended) is shifting away from its favor (and to the Fed), and to respond accordingly.
Gold and silver have fallen in most currencies today but are higher in the “commodity currencies” of Canadian, Australian and New Zealand dollars, and flat in Swiss francs. Gold and silver are both slightly higher for the week in US dollar terms but weaker in terms of other currencies.