In the US, we instead chose to undermine capitalism and the economic cycle. In the process we’ve undermined trust in the system. Until this is remedied there will be not REAL recovery.
Are we really in an economic recovery or is it a figment of the Fed's quantitative easing? This will be the biggest factor in the 2012 elections.
Last week we heard from Nomura's bearded bear as Bob Janjuah restated his less-then-optimistic scenario for the global economy. Today his partner-in-crime, Kevin Gaynor, takes on the bullish consensus cognoscenti's three mutually supportive themes in his usual skeptical manner. While he respects the market's potential view that fundamentals, flow, valuation, and sentiment seem aligned for meaningful outperformance, it seems actual positioning does not reflect this (yet). Taking on each of the three bullish threads (EM policy shift as inflation slows, ECB has done and will do more QE, and US decoupling), the strategist teases out the reality and what is priced in as he does not see this as the March-2009-equivalent 'big-one' in rerisking (warranting concerns on chasing here).
This is the time of year when you are supposed to look back and make sense of what happened during the year and make predictions about the new year. A futile task if there ever was one. How can anyone make sense of a world where California prohibits the production or sale of beer to which caffeine has been added (They want drunks to fall asleep at the wheel?). ...
The financial crisis of the last few years has created not just a perceived shift in the creditworthiness of our financial entities but a real crack in the foundation of their business model and more importantly any explicit or implicit supports or guarantees. Moody's, in a special report on credit post crisis "The Great Credit Shift" look at the impact of the crisis on every major asset class within the credit space from sovereigns to corporates to structured finance. Noting that this crisis has profoundly changed the credit picture for sovereigns and financials, Moody's note there is some dispersion in the latter as banks have seen systematic downgrades while insurers (for now) remain on par with pre-crisis levels. More interestingly, large US regional banks represent an exception to this broad downgrade but we suspect that the continued low interest rate, low NIM, and high volatility spread environment will cause both insurers (we have long considered proxies for HY portfolios, no matter how well cushioned from vol their business models may be) and US regionals (consolidation will have the opposite effect of TBTF in our view as it will lead to more comfort with more risk-taking and expose them to more current-bank-like volatility) to face more pressure going forward (despite their lower apparent sovereign risk exposure). As BofA and Morgan Stanley trade at extreme 'crisis' levels in both CDS and equity markets, we suspect the raters have further to go and while the systemic shifts are apparent, we would expect less and not more differentiation going forward - especially if we sink into another solvency crisis.
And end the Fed ...
Hunting the Squid, Part 5: Sometimes Your Local Superhero Doesn't Look Like What They Show You In The MoviesSubmitted by Reggie Middleton on 10/07/2011 10:14 -0400
Geithner said US banks aren't at risk, shares spiked. He's considered a (super)hero by some. I say look to track record, TRUTH, facts & actual accomplishments for our new superheroes! Here are some Goldman Sachs FACTS Geithner forgot to mention!!! Must have left them home with his cape...
BoomBust BNP Paribas? This Article Is A Hard Hitting Piece That EVERY MSM Outlet Needs To Pick Up On, IMMEDIATELY!Submitted by Reggie Middleton on 09/13/2011 16:40 -0400
This post, in and of itself, should demonstrate to the entire Sell Side of Wall Street, the MSM/pop media outlets and all who may follow them that BoomBustBlog forensic research and analysis is simply superior to much of what is available and significantly overpaid for in terms of investment advice and opinion.
The Squid: A Federally (Tax Payer) Insured Hedge Fund Paying Fat Bonuses That Can't Trade In Volatile MarketsSubmitted by Reggie Middleton on 08/22/2011 11:51 -0400
Some investment and trading tidbits about the Squid that somehow have miracurously escaped both the pop media and sell side Wall Street... Hmmm....
Was A Double Dip Recession Really Hard To See Coming? Is It A Double Dip Or A Large Serving Of A Single Recession?Submitted by Reggie Middleton on 08/10/2011 07:06 -0400
How can it be a double dip if the first recession never ended? The Fed spent $1 for every 80 cents of "supposed recovery", all of which lasts only as long as the Fed keeps spending those $1s. Patently unsustainable, as we are now seeing...
When one things of Europe's default contagion, one traditionally thinks of the Club Ded countries along the Mediterranean. It may be time to change that after Denmark's CDS has surged by nearly 20% overnight, from 74 to 88, and by over a third since June 7, making it the worst performing government in the past month. The reason for this is that the country, which unlike other European nations, has allowed its insolvent banks to actually fail without masking their poor state. This in turn prompted S&P to come out with a report yesterday that as many as 15 more banks could default. In its report, S&P said that "In our base-case assumption, we estimate the gross loss due to additional bank failures to be Danish krona (DKK) 6 billion-DKK12 billion over a given three-year period. If the losses are larger than we expect, we would have to reassess our ratings on individual Danish banks, based on the impact of the fallout on each. Eleven banks have failed in Denmark since 2008. Although the banks were small by international standards, it is nevertheless an unusually high number for a developed market where bank defaults are generally rare events and extraordinary government support mostly averts losses to senior creditors. While the Danish regulatory authorities accept the concept of systemically important institutions, they have so far given no formal indication of which institutions fall under this definition. In our opinion, the banks we rate would be considered systemically important and therefore may receive extraordinary government support, beyond that defined in the country's established bank resolution scheme." So according to the rating agency any country that dares to avoid the Paulson-Summers TBTF doctrine is in prompt need of annihilation if we read this right. Either way, this latest black swan means that the crisis is creeping ever closer to German, which now has to fund two insolvency fronts: a southern and a north one. And when S&P finally puts France on downgrade review, the time to panic will have come and gone.
Buried under the hysteria of a potential US default is the fact that we are stagnating but no one seems to grasp why that is. One of the reasons, a very important one, is that local and regional banks and their small business borrowers are bogged down with bad commercial real estate. In this article we discuss bank credit, banks and their real estate loans, the so-called "liquidity trap," and why the economy is not growing. It attempts to quantify the problem that local and regional banks have with their commercial real estate loans. We also explain how, why, and when the economy may grow again.
The Founding Fathers' vision of prosperity has been destroyed - and we've gone from the "wealth of nations" to the "debt of nations" - at least in part because our political system has been subverted by non-Constitutional committees and entities.
The Fed has admitted that its banks are private institutions.
Now, it's the "Super Congress" ...