One day this war is gonna end...
[ snip ]
"The public debt transaction, then, is very different from private debt. Instead of a low-time preference creditor exchanging money for an IOU from a high-time preference debtor, the government now receives money from creditors, both parties realizing that the money will be paid back not out of the pockets or the hides of the politicians and bureaucrats, but out of the looted wallets and purses of the hapless taxpayers, the subjects of the state. The government gets the money by tax-coercion; and the public creditors, far from being innocents, know full well that their proceeds will come out of that selfsame coercion. In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future. This is the opposite of a free market, or a genuinely voluntary transaction. Both parties are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people's property, and both deserve the back of our hand. The public credit transaction is not a genuine contract that need be considered sacrosanct, any more than robbers parceling out their shares of loot in advance should be treated as some sort of sanctified contract."
[ snip ]
The full article Repudiating the Nation Debt can be found at the Ludwig von Mises Institute.
Saturday, February 14, 2009
One day this war is gonna end...
Posted by Ben Bittrolff at 4:00 PM
Friday, February 13, 2009
I fail to see how it is even remotely possible for Goldman Sachs (GS) to find enough revenue generating opportunities in this environment to justify their current business model. Mergers and acquisitions? Initial public offerings? Scuritizations Proprietary trading? EVERYTHING has collapsed in total volume AND won't come back for years... with a lot of it NEVER coming back at all. The firm as a whole now has to deleverage and make the switch to life as a 'bank holding company'.
Posted by Ben Bittrolff at 9:30 AM
The late day rumor that the Obama administration was toying with the idea of subsidizing mortgage rates... by capping fixed rate mortgages at 4% - 4.5% caused a short squeeze of epic proportions.
Notice how 'convenient' the timing of this 'leak' was. As the market hit lows and threatened to challenge 800 late in the day... POW! Instant coordinated moonshot!
No matter. We all know the banksters on Wall Street and the G-men in Washington are both dirty. Looking to add to shorts on the first sign of weakness (should we have an instant reversal) or around 850 (should the squeeze extend).
U.S. Housing Plan to Fund Interest-Rate Reductions (Update1): "The Obama administration’s housing plan will use government money to help reduce interest rates for struggling borrowers, while asking lawmakers to approve more ways to modify mortgages, according to a person briefed on the proposal.
U.S. Treasury Secretary Timothy Geithner intends to make the plan public in coming days, possibly within a week, said the person, who declined to be identified before the announcement. Some elements can begin immediately, and others must be considered by Congress.
Foreclosure filings in the U.S. surged 81 percent last year to 2.3 million, the highest on record, as home prices fell and tighter mortgage standards made it harder for homeowners to sell or refinance, according to RealtyTrac Inc. of Irvine, California, a provider of real estate data. The administration has pledged to use $50 billion to $100 billion for housing relief, taken from the $700 billion bank rescue package enacted last year.
“Our focus will begin on using the full resources of the government to help bring down mortgage payments and help reduce mortgage interest rates,” Geithner told the Senate Banking Committee yesterday."
Thursday, February 12, 2009
Uh oh! The US dollar went bid AND Gold... at the same time... when this story broke.
Looks like nobody believes in Timbo "TurboTax" Geithner.
Wall Street's Double Secret Emergency Meeting: "Charlie Gasparino reports that hours after the Congressional bitch sesh yesterday, a top secret meeting entitled "The Goldman Sachs Roundtable" was held at 85 Broad. And if you're thinking this was a clubhouse meeting run by a couple of first years, how wrong you are. According to Chaz, this was not organized by some "low level schlubs," but Goldman's Milton Berlinski, and run by co-presidents Gary Cohn and Jon Winkelried. On the agenda? "Solving this problem because the government isn't going to."
The task-force apparently included "top 20 hedge fund and private equity executives," and while we've got nothing but love for Ken Griffin, I want to hear the Big Guy* was there or it doesn't count. While we wait on confirmation, a few more details. Griffin reportedly made some "fascinating comments," including the bold call to get at the root of the cause, the mortgages themselves; the prevailing sentiment was that while it's better to wait for a good plan, as opposed to "a quick and dirty bad one," time is of the essence; there's no confidence in Geithner; they want more Volcker; and the representative from Bain Capital made off like a bandit, stuffing free fruit and cookies in his purse, when he thought no one was watching.
*Try and tell me he's not the White Knight we've been waiting for. And he'd look great on horse, you know this much is true."
Posted by Ben Bittrolff at 3:00 PM
The appetite for risk is definitely waning... again. That should send equities cliff diving.
Yen Gains as Stocks Fall on Concern Bank-Bailout Plan Will Fail: "The yen rose against the dollar and the euro as stocks around the world fell on concern the U.S. government will fail to revive bank lending, boosting demand for Japan’s currency as protection against the financial turmoil.
The euro also fell for a third day against the yen after a report showed industrial output in the 16-nation region declined the most on record in December, giving the central bank more reason to cut interest rates. The dollar weakened against the yen for a fourth day before data that may show retail sales fell for a seventh month and the number of Americans filing first-time jobless claims remained near a 26-year high.
“There’s a general negative tone blowing through the market,” said Paul Robson, a London-based currency strategist at Royal Bank of Scotland Group Plc. “The relief rally has been short-lived and ended with the disappointment from the recent U.S. stimulus-plan announcements.”"
Pound Drops a Third Day, Gilts Rise as Risk Appetite Evaporates: " The pound slid against the euro and the dollar for a third day and gilts climbed on concern the British recession is deepening, depressing demand for riskier assets such as stocks.
The currency also dropped against the yen as the benchmark FTSE 100 Index of stocks declined 1.3 percent. The spread between two- and 10-year government bonds reached the widest since at least 1992 after Bank of England Governor Mervyn King said yesterday the economy is in a “deep recession” that may prompt policy makers to keep cutting interest rates and pump money into the economy.
“The downside risk for the pound has increased,” said Lee Hardman, a currency economist in London at Bank of Tokyo- Mitsubishi UFJ Ltd. “The Bank of England made it clear we’ve a serious economic problem, and they’re moving toward quantitative easing. Although their measures will eventually help the pound, the sentiment toward the currency should remain negative in the near term.”
The pound tumbled 1.5 percent to $1.4188 as of 11:57 a.m. in London. Against the euro, the British currency weakened 0.9 percent to 90.43 pence. It declined 1.8 percent to 127.77 yen. Hardman predicted the pound will depreciate to $1.35 in the next three months.
The pound’s trade-weighted index, a gauge of its performance against currencies of Britain’s trading partners including the yen, Swiss franc, euro and dollar, declined 3.6 percent this week to 73.54."
Posted by Ben Bittrolff at 8:00 AM
The US dollar (USD) looks set to break out explosively... only the direction remains uncertain. A break UP is BAD for equities. A break DOWN, is GOOD. A strong bid in the dollar would mean money is scrambling to get into the safest assets. (Strangely that really still is treasuries.)
Also, watch the Japanese Yen (XJY). A strong Yen represents financial stress and is BAD for equities. (Now that the Carry Trade has been unwound, the Yen is acting as a safe haven... yeah... I know. WTF eh?)
Strength in the USD and XJY combined with the refusal of volatility (VIX) to come down further is a bad sign for risky assets.
With the S&P 500 now precariously balanced at the bottom the trading range and the largest single component poised to break down, things are set for another leg lower.
Wednesday, February 11, 2009
Time to punch out some brand new lows now that there isn't anything left in the political pipeline to inspire hope... especially now that the whole damn world went into this epic fail of an announcement completely Bullish and un-hedged as measured by the CBOE Options Total Put / Call Ratio. Oversold conditions have also been worked off...
"This is going to be awesome (for Bears)." (First chart, bottom right)
Tuesday, February 10, 2009
Timbo "TurboTax" Geithner has a plan... that is "comprehensive" and stuff.
Like I said, Buy the Rumor, Sell the News.
Geithner Says Bank-Rescue Plans May Reach $2 Trillion (Update2): "Treasury Secretary Timothy Geithner pledged government financing for as much as $2 trillion of efforts to spur new lending and address banks’ toxic assets, seeking to end the credit crunch hobbling the economy.
"Instead of catalyzing recovery, the financial system is working against recovery," Geithner said in unveiling the Obama administration’s financial-bailout overhaul in Washington today. "At the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it."
Stocks slumped, led by financial shares, as investors expressed concern about a lack of specifics on plans for addressing the distressed assets choking banks’ balance sheets. Geithner warned today that it will "take time" for the administration’s strategy to bear fruit.
The main components of the Treasury’s package today are a joint public- and private-sector fund to buy as much as $1 trillion of illiquid assets and a $1 trillion program to supply new credit to consumers and businesses. The administration also will inject additional taxpayer funds into banks, imposing tighter restrictions that will include limits on dividend payments, acquisitions and executive pay.
"I want to be candid: this strategy will cost money, involve risk, and take time," Geithner said today."
Posted by Ben Bittrolff at 3:30 PM
No way! They need more than the original $200 billion? Whocouldanode?
Additional money for Fannie and Freddie needs to be added to the already truly awesome $9.7 Trillion on Bailouts already pledged. (Both companies continue to lower their credit standards.)
To say the American illusion of prosperity has been shattered would be an understatement.
"Look! The emperor has no clothes!"
Now we wait to find out how much money Timbo "Turbotax" Geithner is about to burn with his super bank bailout plan...
Fannie, Freddie Funding Needs May Pass $200 Billion, FHFA Says: "Fannie Mae and Freddie Mac, the mortgage-finance companies seized by regulators, may need more than the $200 billion in funding pledged by the U.S. government if the housing market continues to deteriorate, Federal Housing Finance Agency Director James Lockhart said.
The companies’ needs will depend largely on the direction of home prices, Lockhart said in an interview in Las Vegas yesterday. His comments followed statements from Fannie Mae in November and Freddie Mac Chairman John Koskinen last week that the government’s funding commitment through 2009 may fall short of what the companies need to make good on their obligations.
“When we sized the amount in September, we obviously looked at stress tests and what was happening in the marketplace,” Lockhart said. “There’s been some significant events since then that weren’t in our forecast.”
The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth, according to a Feb. 3 report from Zillow.com. Following a record boom, home prices are down 25 percent on average since mid-2006 amid a tightening of lending standards and an economic recession, the S&P/Case-Shiller Composite 20-city price index shows.
Freddie Mac and Fannie Mae are the largest U.S. mortgage- finance companies, owning or guaranteeing $5.2 trillion of the $12 trillion home-loan market. The government seized control of Fannie Mae and Freddie Mac after their losses threatened to further disrupt the housing market, and pledged to invest as much as $100 billion into each company as needed if the value of their assets drops below the amount they owe on obligations."
Monday, February 9, 2009
$9.7 trillion? Pffffft! That's nothing.
In the immortal words of Governator Arnold Schwarzenegger, "Don't be economic girlie men!"
U.S. Taxpayers Risk $9.7 Trillion on Bailouts as Senate Votes: "The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.
The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps. The Senate is to vote early this week on a stimulus package totaling at least $780 billion that President Barack Obama says is needed to avert a deeper recession. That measure would need to be reconciled with an $819 billion plan the House approved last month.
Only the stimulus package to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.
"We’ve seen money go out the back door of this government unlike any time in the history of our country," Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. "Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?""
Posted by Ben Bittrolff at 3:30 PM
The recent bounce in the Baltic Dry Index (BDI) was inspired by a drawdown in iron supplies in China. These supplies needed to be replenished. That's it.
No, there is no economic recovery in China. Growth rates are still in free fall. This is nothing but a bounce, that coincidently takes the BDI back to 2003 levels. These are hardly bargain prices.
Despite the bounce in the BDI and a resurgence of chatter over the "reflation trade", the Commodity index (CRB) rallied a mere 1.81% last week. To put things in perspective, CRB is now at the 2001 high. The index actually lost 23% within a year, falling to 181.83 as the bursting Tech Bubble sucked the US economy into a recession.
With the IMF now saying that advanced economies are already in a DEPRESSION, what do you suppose the odds are of the 2001 low of 181.83 holding? Contrary to the desperate beliefs of the tin foil hat crowd, deflation is here... and commodities will get smashed further as debt continues to get destroyed in truly epic proportions.
The CBOE China Index (CYX) rallied 7.54% last week and has now put in a higher weekly low at 284.59 for the first time off the panic low of 251.65. However, until the previous weekly swing high of 381.68 is pierced, the trend is still DOWN.
The best case scenario I can envision consists of several years of range bound "base building" in the low 200 to high 300 area.
However, the most probable outcome is not the best case scenario, but rather another violent leg down as the export economy of China implodes further still.
No amount of government stimulus such as infrastructure projects can successfully absorb and productively re-deploy the massive number of workers being suddenly shed from the labor intensive manufacturing export sector that China specialized in.
IMF Says Advanced Economies Already in Depression (Update1): " Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.
“The worst cannot be ruled out,” Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. “There’s a lot of downside risk.”
Ten days ago, the IMF cut its world-growth estimate for this year to 0.5 percent, the weakest pace since World War II. Stimulus packages alone won’t succeed in dragging the global economy out of recession unless confidence is restored in the banking system, Strauss-Kahn said today.
“All this will work if, and only if, the different countries are likely to do what they have to do in terms of restructuring the banking sector,” he said. “And today it’s not done.”
The U.S. economy has lost 3.57 million jobs since a recession started in December 2007, its biggest employment slump of any economic contraction in the postwar period as companies from Macy’s Inc. to Caterpillar Inc. cut costs. The U.K. economy will shrink this year by the most since 1946, the IMF forecasts.
“There is hope that the fiscal and monetary stimulus measures being implemented around the world can help turn things around,” said David Cohen, Singapore-based director of Asian economic forecasting at Action Economics. “But there is still the risk it can be short-circuited by further financial turmoil.” "