fixed

Two BOJ interventions for about 400 billion down so far, and if history is any precedent there are about 36 trillion and 128 days to go. Goldman's take on the decision to manipulate the FX market makes sense, as Kan's victory would have likely pushed the USDJPY well below 80: "With the re-election of Kan as DPJ leader yesterday, the timing is potentially a surprise given that intervention was perceived as more likely if Ozawa had taken the reigns. But this perception may have been precisely why the authorities felt they needed to intervene, to stem the risk of speculative positioning becoming increasingly on-sided following the election outcome. The FX volatility around the outcome of the DPJ leadership election yesterday already had this flavour." So around 400 billion of Yen down...

From Tungstenman Sachs: "Our view remains that the Federal Open Market Committee (FOMC) will once again ease monetary policy via unconventional measures in late 2010 or early 2011. Our views have not changed, and today’s comment discusses them in Q&A form. We believe that purchases of US Treasury securities cumulating to $1 trillion or more are the most likely cornerstone of the program; that the September 21 FOMC meeting is probably too early for a big announcement, but that November 2-3 is a possibility; and that it would likely “work” to a limited degree, perhaps boosting real GDP growth by a little under ½ percentage point per $1 trillion in purchases."

Today we’ll be exploring the mathematics behind the US housing market over the last thirty years to determine how smart we really want our kids to be. If you can successfully complete (or at least understand) the accompanying quiz you’ll have a more thorough understanding of economic realities than every Ivy League professor (including Nobel Laureates) active in government and mainstream media.

What's next? A thought.

DoubleLine's Jeff Gundlach will hold a webcast discussing the performance of his new DoubleLine Core and Total Return Funds (which as we pointed out recently had presciently started selling bonds ahead of the recent move lower), but more importantly will share his general outlook on the market. As this is the man who a few months ago warned that the US will likely end up defaulting (and very much correctly, contrary to those drinking the perpetual monetization Kool Aid, believing in the ultimate power of the Fed, which will be the last buyer long after all other marginal buyers of US debt are long gone), this webcast will be a very informative and interesting one. DoubleLine has opened up the webcast to readers of Zero Hedge. Mark your calendars - details inside.

In his latest must read letter, Oaktree's Howard Marks focuses on the age old self delusion pattern formation and mean reversion which so often is the cause of ruin of so many investors: "Investors consistently fail to recognize that past above average returns don’t imply future above average returns; rather they’ve probably borrowed from the future and thus imply below average returns ahead, or even losses. The tendency on the part of investors toward gullibility rather than skepticism is an important reason why styles go to extremes." Yet the High Yield bond manager, is oddly enough, bullish on stocks and bearish on bonds. However, even Marks can't fully bash fixed income - he has now joined those drinking the "HY will outperform IG" kool aid, in no small part dictated by the portfolio allocation of his funds... Just as Pimco will tout Treasurys... Paulson will pimp MGM and "recovery" names...Hugh Hendry will bash China, etc. Buyer beware... Especially when the one true end-buyer is that 1913 Frankenstein creation - the US central bank.

Earlier the ECB released its weekly USD tender operation details, i.e., the Fed swap line roll, and it appears that the same European bank that has been locked out of money markets for several weeks now continues to have dollar funding issues. The same bank that was the sole bidder for $60MM in dollar liquidity last week, and the week prior, has once again obtained dollar funding via the ECB at the fixed rate of 1.18%, which continues to be roughly 4 times richer than comparable USD Libor based rates. Why this bank is locked out of the interbank market? Why is nobody else curious about why a seemingly solvent Europe continues to need the Fed's swap lines? It doesn't matter: by 2019 the bank should be ok. After all it will have 30x leverage for at least 3 years to get its book in order. Perhaps they can also hire Dick Fuld as executive chairman and head consultant on how to generate the best IRR on ludicrous leverage levels.

The key datapoints this week include retail sales, IP, Philly Fed as well as the usual weekly jobless claims. Retail sales appear to have picked-up in August, judging from retailers reports. Other significant information will be the Q2 Balance of Payments data, the July TIC data (watch for continued China selling of Treasuries), DJP elections and their impact on the Yen, and lastly the SNB will meet on Thursday: watch for comments on the record strong CHF. On Friday the completely irrelevant Michigan sentiment will be released which will come far above consensus.

Zero Hedge will be out of pocket for several hours: please use this post as an open thread opportunity to discuss how honest and transparent the government economic data dissemination complex is, how efficient the stock market is, how free of monopoly the Wall Street Fixed Income trading complex is, how altruistic the Federal Reserve is, and everything else that tickles your fancy. In the meantime, here is the latest controversial, and very much must read letter from Mike Krieger: Conscious Capitalism.

There are the usual market observations (no volume - shocker), but, for once, Nic Lenoir is getting angry: "People started voting a bit more, and it seems all they want is change, but change they are not getting. You want change? Well how about the truth for a change: we are bankrupt, your investments are in their totality worth 35 cents on the dollar including your house, you need to move in with your parents because we are slashing their pension payments and you can't afford a home. Now start from scratch! To me it sounds better than 4-day school weeks in Oregon where we are not educating the future generation so they can be even angrier and counter-productive revolutionary protesters when they grow up."

Ever wonder how Moody's keeps itself busy in all the free time it has when it is not focusing on how to break the news that the US is really a B-rated credit? Here it is: the rating agency is now focusing on the ratings of villages (in this case the Village of Johnson City) with $8.1 million in debt and 14k citizens. And, not too surprisingly, a village somewhere in the bowels of upstate New York was just downgraded from A1 to A3. As to when Moody's will get back to providing a fair and honest rating on he insolvent developed world, they will get back to you.

Some CFA guy (not quite Econ Ph.D.)tells CNBC that "nothing is in a bubble when people want to buy it." At the same time Michael Pento tells CNBC the truth. Guess which one manages to enrage the infantile moderator, and is told to never show his face on CNBC again...

We are not sure what is more amusing: the Masetro's unwitting (and quite correct) observation that America is now nothing but a crony capitalist country, or his attempt to back out of what he said that so perfectly captures the essence of the failed corporatocracy currently raging in America. In the following exchange from a DemocracyNow interview, Greenspan is forced to respond to his quote from Age Of Turbulence on the definition of crony capitalism: "When a government's leaders or businesses routinely seek out private sector individuals or business, and in exchange for political support bestow favors on them, the society is said to be in the grip of crony capitalism. The favors generally take the form of monopoly access to certain markets, preferred access to sales of government assets, and special access to those in power." Greenspan's pathetic excuse is that while crony capitalism is a "dominant force" in some other regimes, it is "not the dominant force in this country." Perhaps all those who are fighting with the virtual monopoly granted to certain players, such as Goldman in fixed income trading, and Pimco in government bonds, would beg to differ. So yes, according to the Greenspan definition America is now nothing more than a crony capitalist society, which will only get worse as more and more power it granted to those who are believed to be able to ramp various asset classes, and thus the market in general, higher, because as Greenspan himself pointed out, nothing is as important a "driver" to the economy as the stock market: "if the stock market continues higher it will do more to stimulate the economy than any other measure we have discussed here". In the administration's pursuit of Dow 36,000 to prove that all is well, America has given up on its core constitutional tenets, and is now nothing better than a dictatorial regime in some far-eastern backwater country.

We present an exclusive summary of all the Paulson & Co. portfolio facts, figures, strategy, ins and outs, and Paulson's discussions with former Fed Chairman Alan Greenspan on the "the relationship between the monetary base, the money supply, inflation and gold prices." Must read for everyone.

The back-to-back super-sized traffic jams near Beijing has landed China on the top spot among the cities with the world's worst traffic. While the world seems quite fixated on the length--miles and number of days--of these mega jams near Beijing, there's also a serious message--the under-capacity of China’s infrastructure.