Fading Shiller and why.
Leading neoconservative (read “closet Trotskyite“) commentator Charles Krauthammer’s latest Washington Post editorial pays homage to the glory days of NASA and the retirement of the space shuttle Discovery. Titled “Farewell, the New Frontier,” the piece evokes mental images of Uncle Sam losing his international prestige as President Obama scales down NASA’s space exploration endeavors. Contrary to Krauthammer, NASA has never represented America’s collective vision of frontier exploration. It has been just another bureaucratic black hole for Washington to throw dollars at in hopes of buying reelection. Because one of the main tenets of economics is considering the unseen, then it can be assumed that space exploration would very well be advanced far beyond what we see today if it was left completely out of the hands of the state. If Krauthammer truly wished the human race capable of traveling into the new frontier of the stars, he would welcome NASA cuts rather than lament. How ironic then is today's news of Planetary Resources as investor and avowed anarchist Doug Casey thoughtfully observes on the inefficiency of NASA: "We should have colonies on the moon by now, and more: We should be mining the asteroids and developing real estate on Mars."
Austerity is dead! Long live Spending! Futures are up, Italian and Spanish bonds are up, CDS spreads on them are at least 10 bps tighter, and MAIN is 3 bps tighter on the day (though I have this feeling I better type fast as we are starting to fade off the best levels). Lots of little things seem to be contributing to the strength, TXU earnings, no economic data, auctions that raised the required money, etc., but there does also seem to be a belief that Germany finally “gets it”. That Germany is finally going to relent on their demands for austerity. So “Austerity Now” may be over, but killing something that didn’t work, isn’t the same as solving the problem. Going back to the norm that caused the problem in the first place, hardly seems like a solution either. Currency reversion and/or debt restructuring will be the ultimate end-game.
“We must hold the bailed out banks accountable for their harmful, unlawful fraud which has so deeply infected our county’s economy, security, and hope for the future”
It appears that when it comes to mocking consensus groupthink emanating from lazy career 'financiers' who seek protection from their lack of imagination and original thought, 'creation' of negative alpha and general underperformance (not to mention reliance on rating agencies, only to jump at the first opportunity to demonize the clueless raters), in the sheer herds of other D-grade asset "managers" (for much more read Jeremy Grantham explaining this and much more here), David Rosenberg enjoys even more linguistic flexibility than even us. Case in point, his just released trashing of the latest Barron's permabull groupthink effort titled "Outlook: Mostly Sunny." And just as it so often happens, no sooner did those words hit the cover of that particular rag, that it started raining, generously providing material for the latest "Roasting with Rosie."
It's Official & As I Foretold Years Ago, Greece Is Now In A True Depression As Reality Hits Greek BanksSubmitted by Reggie Middleton on 04/23/2012 10:28 -0400
Who beleves the Euro-Depression will really just stop at Greece? Here's tons of supporting evidence that the biggest financial disruption & largest wealth accumulation opportunity of this lifetime is nigh upon us. Remember how the robber barons from the US depression era got started?
- A Forecast of What the Fed Will Do: Stand Pat (Hilsenrath) - they finally realized that they have to leak the opposite...
- Draghi's ECB Rejects Geithner-IMF Push for More Crisis-Fighting (Bloomberg)
- Wal-Mart's Mexico probe could lead to departures at the top (Reuters)
- The Sadly Unpalatable Solution for the Eurozone (FT)
- US Regulators Look to Ease Swaps Rules (FT)
- Yuan, Interest Rate Reform to be Gradual: China Central Bank Chief (Reuters)
- Run, Don't Walk (Hussman)
- Hollande Steals Poll March on Sarkozy (FT)
One of the biggest games in the Wall Street farce is the game of Beat the Number.
Don't believe the negative housing hype.
So far, 2012 has been a banner year for the stock market, which recently closed the books on its best first quarter in 14 years. But Casey Research Chairman Doug Casey insists that time is running out on the ticking time bombs. Next week when Casey Research's spring summit gets underway, Casey will open the first general session addressing the question of whether the inevitable is now imminent. In another exclusive interview with The Gold Report, Casey tells us that he foresees extreme volatility "as the titanic forces of inflation and deflation fight with each other" and a forced shift to speculation to either protect or build wealth.
And does this mean anything for the stock market?
Ideological deflationists and inflationists alike find themselves both facing the same problem. The former still carry the torch for a vicious deflationary juggernaut sure to overpower the actions of the mightiest central banks on the planet. The latter keep expecting not merely a strong inflation but a breakout of hyperinflation. Neither has occurred, and the question is, why not? The answer is a 'cold' inflation, marked by a steady loss of purchasing power that has progressed through Western economies, not merely over the past few years but over the past decade. Moreover, perhaps it’s also the case that complacency in the face of empirical data (heavily-manipulated, many would argue), support has grown up around ongoing “benign” inflation. If so, Western economies face an unpriced risk now, not from spiraling deflation, nor hyperinflation, but rather from the breakout of a (merely) strong inflation. Surely, this is an outcome that sovereign bond markets and stock markets are completely unprepared for. Indeed, by continually framing the inflation vs. deflation debate in extreme terms, market participants have created a blind spot: the risk of a conventional, but 'hot,' inflation.
Bank of America reported results earlier, which were somewhat amusing: reported earnings were $653 million or $0.03 per share. Yet the number that the market is fascinated by is the one arising from "negative valuation adjustments" of $4.8 billion, which included $1.5 billion in DVA "resulting from the narrowing of the company's credit spread", and resulted in a $0.28 per share addition. This is the same number that we were told to ignore when it did not help the bottom line. We will be told to ignore it again next quarter when spreads once again balloon, but for now it leads the market to see a $0.31 adjusted EPS number. In other words, one time items are to be ignored when negative, and praised when providing a "one-time benefit." These also included $0.8 billion in litigation expenses, which are also supposed to be excluded, even though the bank has now been sued by virtually everyone due to its Countrywide legacy portfolio. Yet all of this is accountant fudge heaven: there are only three things that matter. 1) The approaching refi cliff, in terms of tens of billions in maturities, including FDIC-funded TLGP, which are as follows: "$34B of parent company maturities in 2Q12 including the remaining $24B related to the Temporary Liquidity Guarantee Program" 2) sliding sales and trading revenues which dropped from Q1 by $546 million from a year ago to $2.844 billion in FICC, and by $332 million in Equity income to $907 million; and finally 3) and reserve release gimmicks: specifically BAC took a $1.6 billion reserve release even as the net chargeoff percentage increased. Specifically look at the first chart below showing the $1.8 billion surge surge in junior-lien Non-Performing Home Equity Loans due to regulations finally catching up to reality. Also, the bank charged off more in Reps and Warranties than it reserved, even as everyone is now suing the bank for precisely this issue. And this is the environment in which the firm books profits from reserve releases?