Is another French Revolution on its way and will it shake the foundations of Casino Capitalism?
A few articles for you to consider as global pension tension heats up...
Mark Pittman Smiles After Appeals Court Refuses To Review Fed Attempt To Stop Bailout Disclosure; Supreme Court Now On DeckSubmitted by Tyler Durden on 08/23/2010 14:13 -0400
It appears that the Fed is heading for its biggest legal confrontation ever. After, as Bloomberg reports, the U.S. appeals court refused to reconsider a ruling that requires the Federal Reserve Board to disclose documents identifying financial firms that might have failed without the largest U.S. government bailout, the one last resort to preserve the secrecy interests of the Clearing House Association which is basically the formal name for all the banks that have received Fed handouts in some form or another over the years, is now the Supreme Court of the United States. And should the SCOTUS go ahead and vote alongside the administration (in this case the Fed), as it did in the Chrysler case, the fallout could well be dramatic as it once again becomes clear that the one entity truly in control of this once-great country is a group of middle aged men, which conducts all of its decision-making in strict secrecy, and whose every decision is predicated upon the perpetuation of the ever more failed Keynesian status quo.
- Australia business confidence falls to lowest in 14 months on higher rates.
- British July same-store sales rise 0.5%: British Retail Consortium.
- China to close factories in energy drive; move affects 2,000 industrial companies.
- China’s July trade surplus surged to $28.73B, helped by 38.14% jump in exports.
- Mkts await outcome of Fed meeting; risky assets rise in anticipation of easing measures.
- Oil falls to below $81 as traders look to Fed for possible stimulus.
- Ambac's Q2 loss narrows to $57.6M from year-ago's loss of $2.37B.
As Automotive News points out in its expose on better than expected volume and top line results at GM and Chrysler, "Reports of robust post-bankruptcy sales at General Motors Co. and Chrysler Group need an asterisk." The reason, based on internal documents obtained by the publication: digging behind the headlines indicates that retail sales, or those that actually matter and are indicative of a vibrant end consumer (with or without rebates), are actually down year to date: 1% at GM, and 19% at Chrysler. "Essentially, GM and Chrysler regained the fleet business they lost during their troubled 2009 trip through bankruptcy. Counting fleet of all types and retail sales, GM is up 13 percent this year, and Chrysler is up 11 percent. That's close to the industry's 15 percent gain." So basically if one were to strip away the rental companies, all of which themselves were on the verge of bankruptcy in early 2009, and have recently found themselves in a position of strength, courtesy of cheap floorplan financing and various cheap ABS conduits, the two bankrupt auto companies are doing worse off YTD than they did in 2009. If this is not indicative of the "strength" of the US consumer when it comes to medium-ticket purchases, little else is.
Just as Goldman's hope that the BP gusher's taking front page priority, especially in the aftermath of the rather amusing settlement between the firm and the SEC, was finally appearing to bear fruit as for the first time in over a year there was nothing relevant on the news front regarding the 200 West company, here comes Senator Chuck Grassley lobbing a grenade full of provocative and very much unanswered questions directed at the GAO, at Elizabeth Warren, and at Neil Barofsky that demand clear and prompt answers. We are also quite content that Blackrock and AIG once again manage to get themselves dirty.
Is market volatility forewarning doom? Read on...
Fresh from Reuters:
A U.S. appeals court on Thursday rejected the Obama administration's request to put on hold a ruling that lifted a temporary moratorium on deepwater oil drilling in the wake of the BP Plc oil spill.
The U.S. Court of Appeals for the Fifth Circuit, based in New Orleans, ruled about an hour after hearing arguments over the administration's request to put on hold a lower court ruling that lifted the six-month moratorium.
Another slap in the face for a president who believes the constitution is something that has to be taught but not really followed. Of course, the appeals court ruled against Obama in the Chrysler case too, only to have the most corrupt "judicial" organization in the US, the Supreme Court, rule in favor of abolishing creditor rights at the end of the day.
Now that BP's Q2 dividend of GBP1.8 billion ($2.6 billion) is virtually certain to be cut after increasing political pressure from the US president and house Democrats, impacting thousands of pensioners who rely on BP for annuity payments, the next question is whether the Obama administration will also be able to enforce additional capital structure limitations higher in the capital structure. If Chrysler and the Steve Rattner doctrine is any indication, we would not be surprised to see the administration next demand that BP creditors take the next haircut. Below is a chart of the upcoming 3 years of scheduled principal and interest maturities, payments and amortizations from the UK oil giant. Of BP's total $24.9 billion in debt and loan maturities, $11.4 billion, or 45%, comes due by the end of 2012. Add another $2 billion in interest payments over the same period and you get a number well over $13 billion. The bulk of this is due in 2011. BP better get its act together by then or those bondholders will certainly be seeing an Obama-mandated haircut on their maturities. That is, of course, assuming the company is not bankrupt long before then.
One of the highlights pointed out by those demonstrating the "resurgence" of the US consumer has been the increasing SAAR of car sales in the US. To be sure, May's SAAR of 11.6 million in light vehicle sales was the highest since September of 2008, when it was at 12.5 million (as seen on the chart below). Yet one item often ignored is that the incentives, especially by the Big 3, as reported by Autodata have reached record highs in May 2010, averaging $3,470 per car for the Detroit 3. Not surprisingly, the one company that is not bankrupt or a ward of the state, Ford is the one providing the lest amount of subsidies. And even as the D-3 capture market share, Asian automakers have not only not followed suit with a comparable ramp up in incentives, but some are in fact doing the prudent thing and cutting back on subsidies. Furthermore, the recent million car+ recalls by Chrysler and GM have not been mentioned even once by CNBC Phil Lebeau, even as the latter spearheaded a governmentally-mandated crusade against Toyota, fully intent on discrediting the Asian carmaker. Lack of free market dynamics aside, here is a snapshot of the most recent car sale trends in the US, coupled with inventory, incentive and granular D-3 sales data.
What follows will read like an indictment on our entire economic system. But underlying my (relatively mild) harangue is an observation that people are ignoring the most obvious bubble out there; that is, the bubble in U.S. government bonds. The following is my attempt to figure out why.
Full recap of the ideas and recommendations at yesterday's Ira Sohn conference.
Yesterday we pointed out how insolvent South Chicago bank ShoreBank was rescued in the last minute by a consortium of banks led by Goldman Sachs, after early unwillingness to provide rescue funding to the bank was overcome once the President allegedly got involved. Today we learn from Fox Biz' Charlie Gasparino that congressional republicans, led by Spencer Bachus, are calling for an investigation into what could turn out to be another crooked scam to bail out an administration darling, because GM and Chrysler were not enough, even as over 70 banks have failed year to date, which however do not have the privilege of being in the president's very good graces.
The biggest bankruptcy in American history has also become the biggest fee bonanza free for all for the dozens of legal and financial advisors who are assisting with the orderly liquidation of Dick Fuld's former firm. Total fees paid out to all related partied now adds up to $741.6 million. Note - this is not for a reorganization: this is a pure liquidation. Of this, chief liquidator firm Alvarez & Marsal has pocketed an unprecedented $262 million. Bloomberg quotes George Fisher of Capital Guardian: "What a travesty. They’ve taken nearly three- quarters of a billion dollars out of a company that’s bankrupt, and nobody cares." Too bad the US government will never allow any other firm to file for either Chapter 11 or 7 as this may put a dent in the administration's plan to confuse everyone that the greatest Ponzi market/economy of all time is based on anything but a constant low-volume meltup in the markets. So obviously restructuring specialists will milk all they can from the one remnant of the biggest market collapse until its emergence into... fully liquidated status. Talk about value added.
- Asia stocks decline, Yen gains on concern over Obama financial reform plan.
- Greek bond yields surged to new crisis highs, a move that coincides with a slump in volumes.
- Massive fire on an oil rig in the Gulf of Mexico left 11 workers missing.
- Russia, Egypt seek to raise $8.5B in return to overseas bond market.
- Singapore to review Hedge, PE funds rules as regulators increase oversight.
- Altria Group's Q1 earnings rose 38% to $813M on market share gains. Revs up 27%.
- AMR Corp.'s Q1 loss widened to $505M on higher fuel costs. Revs up 4.7% at $5.07B.
- AT&T's Q1 profit fell 21% to $2.48B, largely on a health-care charge. Revs flat at $30.65B.