Jonathan Weil

Frontrunning: November 4

  • Fed takes bold, risky step to bolster weak economy (Reuters)
  • Oil rises towards $86 on Fed, weak dollar (Reuters), we expect $90 oil within a week
  • Asia Girds for Stronger Currencies, Bubble Threat From Fed Move (Bloomberg)
  • Obama Says He'll Negotiate With Republicans on Bush Tax Cuts (Bloomberg)
  • Sarkozy To Meet Hu As France Takes G20 Lead (FT)
  • Pettis Op-ed: Targeting Currencies Will Not Stop Trade Imbalances (FT)
  • Bank of America Edges Closer to Tipping Point: Jonathan Weil (Bloomberg)
  • Analysis: Strategic tensions threaten Asia as China rises (Reuters)
  • Goldman's Pay Pool Shrinks Fastest as Traders' Fortunes Dwindle (Bloomberg)

Frontrunning: October 21

  • Banks Clueless on Foreclosure Mess Severity: Jonathan Weil (Bloomberg)
  • New York Fed Faces `Inherent Conflict' in Mortgage Buybacks (Bloomberg) - as we speculated first, the FRBNY gets dragged into this as not pursuing action would be dereliction of fiduciary duties to taxpayers by Maiden Lane
  • Geithner suggests major currencies "in alignment": report (Reuters)
  • Geithner's Goal: Rebalanced World Economy (WSJ)
  • Chinese growth slows to 9.6% (FT)
  • On the "cash on the sidelines" BS and on Google's 2.4% effective tax rate (Bloomberg)
  • Osborne vows not to backtrack on cuts (FT) as UK unveils dramatic austerity measures  (FT)
  • Greek, Portugal Bonds Lead Peripherals Lower After Spanish Sale (Bloomberg)
  • We See Totally Surreal Markets (Bob Chapman, h/t John)

Frontrunning: October 7

  • Greenspan Op-Ed: Fear undermines America’s recovery (FT)
  • Revision season begins: job losses in 2009 likely bigger than thought (Reuters)
  • The Mutual Fund in the 'Flash Crash' (WSJ)
  • Yen at fresh high amid intervention talk (FT)
  • Japan Says It Won't Join Currency Devaluation Race (Bloomberg)
  • Geithner Calls for Currency Cooperation Amid Rush to Weaken (Bloomberg)
  • Jonathan Weil debunks another government lie: why AIG's numbers are much worse than presented (Bloomberg)
  • Fed is banking on phony wealth effect (Reuters)
  • Fed Officials Mull Inflation as a Fix (WSJ)
  • NY Fed takes $180m hit on Hilton debt restructuring (FT)
  • Greek Services Paralyzed as Public Workers Strike Over Austerity (Bloomberg)

Listing The Best Replacements For Larry Summers

Let's cut to the chase: Larry Summers is leaving the Obama administration because he simply could not destroy the US economy fast enough. Which is why the next director of the National Economic Council should not be allowed to do a half-assed job. With that in mind, here are the best replacements for the now vacant post as suggested by Bloomberg's Jonathan Weil.

Frontrunning: September 30

  • A cynical must-read twofer from Bloomberg: Mystery of Disappearing Proprietary Traders (Michael Lewis) and Save Americans by Sticking It to Them (Jonathan Weil)
  • Someone gets it: Stocks are up only in terms of a declining dollar. In real terms, relative to gold, stocks have gone nowhere.  (Barrons)
  • Ireland faces "horrendous" bank bill, Spain downgraded (Reuters, WSJ)
  • Final bill for Anglo bailout at least €29.3bn (Irish Indepndent) as Lenihan warns Budget will be worse than expected (IE)
  • Pathetic farce of the day: AIG Announces Plan to Repay U.S. Rescue With Stock (Bloomberg) as nobody mentions yet that the CBO, OMB and Treasury project losses on the "aig investment program" in the amount of $36B, $50B and $45B; Taxpayers cant wait to get made whole fast enough
  • Japan and South Korea report output growth (FT), yet stocks are more focused on the 7K claims beat in the US

FASB Proposes Semi-MTM Requirement, American Banker Association Goes All "Mutual Assured Destruction"

Ever since the financial crisis made it all too clear that all US banks would be insolvent if their assets were marked anywhere near fair market value, Bank Holding companies received a green card to actually represent any of their securities "held to maturity" at anything else than mark-to-model/myth/unicorn on their books. Obviously models miraculously priced all barely cash producing loans at par, and with "out of sight, out of mind" receiving the full blessing of the administration's treatment vis-a-vis an insolvent banking system (i.e., no risk, all return), investors realized they have nothing to fear as pertains to the asset side of bank balance sheets, they ended up purchasing such otherwise undercapitalized companies as Citigroup (and soon, incidentally, Government Motors, which as Jonathan Weil reported recently, would have an equity value of negative $6 billion if the bankrupt company's $30 billion in goodwill assets was removed). Well, the FASB has just fired a semi-warning salvo at the banking system with a new proposed rule that would seek the gradual return of that long lost concept known as mark-to-market.

RBS Prepares To Seek More Money Out Of Goldman

While the punditry debates whether the SEC settlement was or was not a win for Goldman (As Bloomberg's Jonathan Weil summarizes it best: "Here’s the real beauty of the SEC’s settlement agreement yesterday with Goldman Sachs. The next time Goldman Chief Executive Officer Lloyd Blankfein goes on television and is asked by some reporter if Goldman committed securities fraud, as the SEC alleged, he won’t be allowed to say no.") those wronged by Goldman are only just starting to flex their legal muscles. Reuters reports that one of the "big" winners from the settlement, UK's biggest nationalized bank RBS, is about to beg for more handouts (allegedly to cover its ongoing losses on sovereign debt holdings): "Royal Bank of Scotland may pursue Goldman Sachs for hundreds of millions of dollars to add to $100 million it got as part of a settlement over the marketing of a subprime mortgage product. RBS said on Friday it would "carefully consider all of its options" after Goldman agreed on Thursday to pay it $100 million as part of a $550 million settlement of civil fraud charges over how it marketed the subprime mortgage product. RBS's options include taking Goldman to court as
the U.S.
Securities and Exchange Commission said the penalty left the
door open for future civil suits.
" At this point the response by RBS, which is 83% state owned will likely depend on US treatment of BP, considering that "Former UK Prime Minister
Gordon Brown said in April that Goldman would have to pay back
"hundreds of millions of dollars" if the charges against it were
" The only question left is to define "does not admit or deny guilt."

Rigged-Market Theory Scores a Perfect Quarter

In a feat that would seem to defy the odds, Goldman Sachs, JPMorgan Chase and Bank of America this week each said its trading desk made money every day of the first quarter. Goldman said its daily net trading revenue topped $100 million 35 times last quarter out of 63 trading days. JPMorgan and Bank of America disclosed similar eye-popping stats. Citigroup, too, recorded a profit on each trading day, Bloomberg News reported, citing unnamed people who knew the results. The intrigue is high. If a too-big-to-fail bank’s traders were able to make money every day of a quarter, were they really trading in any normal sense of the word? Or would vacuuming be a more accurate term? What kinds of risks do such incredible profits entail, for the banks and the rest of us taxpayers? And are results such as these too good to be true? - Jonathan Weil, Bloomberg

The Must Have Dictionary For Those Who Don't Speak Goldmanese Good

With less than 12 hours left to the once-in-a-generation cruentus calamari roasting, here is a primer for all those who will be listening in and hoping to understand any of the guttural noises coming out of the beaks of the those doing god's work on the Senate witness stand. Below is a must-have dictionary for all who seek to speak the divine (or is that brine?) dialect of the Goldmanites, courtesy of Bloomberg's Jonathan Weil.

Goldman Serves One Master Better Than The Others

As Wall Street bombshells go, the lawsuit that the Securities and Exchange Commission filed against Goldman Sachs Group Inc. is about as big as it gets. Who knew the folks at the SEC still had it in them to accuse a major Wall Street bank of fraud? And who could have guessed that Goldman’s canned explanation for its behavior during the subprime mortgage bubble -- that it simply was serving clients’ needs -- could come so unglued so quickly?- Jonathan Weil

Frontrunning: April 8

  • Jonathan Weil: How $1 trillion time bomb posts a phony profit (Bloomberg)
  • Jobless recovery becomes more jobless and less recovery: initial claims spike by 18k to 460,000, miss expectations by 25k (Bloomberg)
  • Ken Rogoff Op-Ed: Bubbles lurk in government debt (FT)
  • Investors playing defense heighten Greek debt woes (WSJ)
  • Early Easter boosts March retail sales (Reuters) as consumer buy trinkets with money saved from not paying mortgage or credit cards
  • With oil surging, the old merger rumor is back: US Airways, United in talks again and again (WSJ, Reuters); in the meantime US Airways prepares to allow standing-only passengers on its flights

Frontrunning: March 25

  • Jonathan Weil: John Mack's short story was too dumb to fail (Bloomberg)
  • Oops - RBS CDS surge on rumor of debt restructuring - yet another bankruptcy-cum-bailout for the Greek bond-laden third-tier repository of toxic assets? (Bloomberg)
  • As expected, the entire manipulated, short-squeeze based market run up was merely for the benefit of the government selling its Citi stake (Reuters)
  • Dubai bail out #2 (Bloomberg)
  • Jobless claims still materially over 400,000 6 months after the "end" of the recession (Bloomberg)
  • As Zero Hedge first reported, Social Security to see payout exceed pay-in this year (NYT)
  • David Tepper probed by the SEC (WSJ)
  • Cramer explains why he was wrong once again (CNBC)

European Commission To Back CDS Trading Ban As Second Round Of Strikes Cripples Greece; Greek GDP Now Expected To Miss Worst Case Scenario

The Washington Post reports that the next "Lehman-sized" event may be just around the corner, as the European Commission is now supporting a ban on trading sovereign CDS. While we are in process of tracking down whether this is actual news or just some exaggeration based on semantics, we will caution, once again, that the consequences of a CDS trading ban will be severe and very likely result in the opposite of what the EC intends on achieving. Keep in mind that everyone expected the Lehman bankruptcy to be contained as it was at best a fringe cog in the financial system. The result was a systemic collapse as one interlinked component of the financial fabric imploded after another. The rush to unwind CDS positions ahead of a ban will be massive and have unpredictable consequences. But the biggest threat is what happens to bond prices, which once basis trades are made impossible, will be promptly unwound, leading to pervasive selling of the cash leg not by speculators but by plain vanilla mutual fund idiot money. What scapegoaters seem to forget is that the vast majority of existing sovereign CDS notional is tied into perfectly boring insurance "basis" trades, in which the bond is held in combination with associated CDS. Once there is an inability to have hedged cash sovereign exposure, the demand for European sovereign paper will plummet, achieving precisely the opposite of what the CDS ban is attempting to accomplish.

Frontrunning: February 25

  • Yet another example of the ongoing FASB crookery via Jonathan Weil (Bloomberg)
  • Markopolos on Schapiro and the SEC: "she has the wrong staff. They're a bunch of idiots there." (HuffPo)
  • Semi-nationalized RBS loss shrinks to just $1.2 billion, has approval for $1.3 billion in bonuses: one wonders just how the FASB is involved in this one (MarketWatch)
  • British Pound could fall as low as $1.05 (Telegraph)
  • +22K in Jobless Claims to 496K, 460K expected,: 6 our of 8 weeks in 2010 have seen growing jobless claims (Bloomberg, DOL) snow blamed for firings, and worst initial claims number since November 14
  • Palm slashes guidance (Palm), keeps retarded white font on blue background website color scheme
  • The 21st century economic breakdown (Minyanville)

Goldman's Levitt Calls Obama's Gimmick To Keep GSEs Off The Balance Sheet "Shades Of Enron"

A few days ago we made some observations on the just-announced nearly $4 trillion 2011 budget. The key point was that while the ugly numbers already looked like a superglued Frankenstein monster without a Kardasian botox treatment, or even simple lipstick, it would have been truly disastrous had the administration done what Peter Orzsag threatened he would do 2 years ago, namely bring the GSEs, Freddie and Fannie, on the government's balance sheet. How this is not the case yet is simply stunning: the GSEs enjoy not only the constant "bid of first refusal" courtesy of the Fed's MBS QE program, but an explicit Treasury guarantee that has no ceiling as of last Christmas eve. Bloomberg's Jonathan Weil today came to the same conclusion, although being a Bloomberg employee he was characteristically much more crass, uncouth and downright cynical than the paragon of respected journalistic patois that is the establishmentarian concept known as Zero Hedge. In an attempt to awake the morts out of their stupor, a pandering Weil uses such cheap tricks as hyperventilating allegory, sarcasm, and hyperbole when saying that  "[b]y all outward appearances, it seems
Obama and his budget wizards decided that including the
liabilities at Fannie and Freddie would be too much reality for
the world to handle. So they left the companies out, in a trick
worthy of Enron’s playbook, except not quite so hidden.
" Obviously, Bloomberg has an uphill struggle if its ever wishes to reach profitability (in the trillions of dollars that is... billions is so fin de pre-bailout siecle). We also fear for Weil's job prospects should he ever wish to find an occupation at such a highly respected place, where not only is there a 4 syllable word minimum but no sentences ever end in prepositions, as the Reuters blogosphere. Ironically, Bloomberg did redeem themselves somewhat later today, when in a Tom Keene interview, Goldman policy advisor Arthur Levitt is caught on tape performing more of the same hyperventilating, and in doing so blasting the administration, using the same Enron-esque analogy, when analyzing the paradox of the GSEs and the sovereign balance sheet.