Saturday, December 13, 2008
The talk of a potential bubble in U.S. Government debt continues to grow, and the chorus grows louder every day. Other bubbles, including both real estate and commodities, have demonstrated similar phenomena, frequently not long before those bubbles have popped and the manias collapsed.
From Bloomberg today:
"The rally in Treasuries that pushed yields on bills below zero percent this week is adding to concerns that the $5.3 trillion market for government debt is a bubble waiting to burst."Click here for the full story.
Friday, December 12, 2008
This is market mayhem!
From Reuters today:
Click here for the entire Reuters story.
"Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded."
Rogers has repeatedly said that by infusing capital into failing banks, the Fed reward the bad behavior of bad banks while penalizing the banks that have performed responsibly.
"Bernard Madoff, the founder of Bernard Madoff Investment Securities and a former chairman of the Nasdaq stock market, was on Thursday charged by federal prosecutors with a multibillion-dollar securities fraud.
"Mr. Madoff, 70, told employees that he estimated the losses from this fraud to be “at least approximately $50bn”, according to federal prosecutors."
Click here for the entire story.
The potential counter-party risk on this could have wide-spread implications, so it has import far wider than just to those clientele that will be affected.
"The lowest yields on Treasuries are providing no solace to U.S. companies paying the highest borrowing costs on record. While rates on everything from four-week Treasury bills to 30-year bonds fall to all-time lows, companies are paying an average 10.8 percent on their debt..."
Here is the full story.
Bloomberg sued under the Freedom of Information Act to uncover to whom the Fed has extended $2 trillion in loans. The Fed has refused to disclose both the recipients of the emergency loans and the nature of the collateral for those loans, despite requirements by Congressional legislation to do so.
“If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, who oversees about $14 billion at New York-based ICP Capital LLC."Here is the Bloomberg story.
From Yahoo and Reuters:
"Bank of America Corp said on Thursday it plans to eliminate 30,000 to 35,000 jobs over three years, reflecting its pending purchase of Merrill Lynch & Co and weaker business activity stemming from the economic recession."Click here for the full story.
Thursday, December 11, 2008
From San Jose Mercury News:
"A frustrated Gov. Arnold Schwarzenegger warned Wednesday that California is headed toward "financial Armageddon" if legislators continue their standoff over how to solve the state's ballooning budget deficit.
With the recession sending state tax receipts plummeting, Schwarzenegger announced that the state faces a budget shortfall of $14.8 billion in the current fiscal year, up from an earlier estimate of $11.2 billion. Looking ahead to mid-2010, the gap could grow to as much as $40 billion if nothing is done to cut spending or generate new revenue, administration officials said Wednesday."
Here is the full story.
"Treasuries have some bubble characteristics, certainly the Treasury bill does" Bill Gross, Pimco CEO
“The flight out of Treasuries is something that will be breathtaking.” Mitchell Stapley, Fifth Third Asset Management
The U.S. Treasury officials indicated yesterday in New York that it will need to finance $1.5 to $2.0 trillion in 2009, a staggering amount of new debt.
Here is a Bloomberg story.
"The U.S. pledged $8.5 trillion, more than half of the country’s gross domestic product, to spur lending and limit the damage of the recession."--Bloomberg
From Financial Times:
"Germany’s finance minister has launched a stinging attack on the “crass Keynesianism” pursued by Gordon Brown, the British prime minister, fuelling tensions on the eve of European economic crisis talks in Brussels."He's right! It is crass!
Here is the full story.
"The devaluation of Russia’s ruble gathered pace as the central bank loosened its control of the currency for the fifth time in a month... Russia has drained 27 percent of its reserves since the start of August as the central bank sold foreign currency to stymie a 16 percent decline in the ruble versus the dollar. The currency has weakened along with the Micex stock index as investors took almost $200 billion out of the country amid the worst financial crisis since Russia’s 1998 debt default as oil slumped."
Here is the rest of the story on Bloomberg.
Wednesday, December 10, 2008
"Cattle prices rose for the second time in two days on signs that the shrinking U.S. herd may limit beef supplies next year. Hog futures declined."
"Libor, the benchmark for $360 trillion of financial products worldwide, is set by a panel of banks in a survey by the BBA before noon each day in London. The euro interbank offered rate, or Euribor, is published by the European Banking Federation earlier in the day."Here is another one from Bloomberg that offers a very good explanation of various Interbank rates.
Here is the full story.
"China's exports declined in November, the first such contraction in more than seven years, underscoring the severity of the global slowdown, and painting a bleak outlook for the sustainability of mainland exports in the months ahead."
It has been announced this morning that GMAC needs $30 billion of capital in order to qualify to become a bank holding company. They don't have the funds. This further underscores how desperate the auto companies are. This has the potential to impact the capability of auto dealers to fund their purchases of the cars in their show rooms, and of consumers to borrow enough to pay for new cars.
Tuesday, December 9, 2008
"Democratic leaders sent the White House a $15 billion bill to rescue the domestic auto industry on Monday, a proposal that requires long-term restructuring plans and other concessions from the Big Three in exchange for a federal lifeline... The Bush administration, however, is already concerned by some aspects of the auto bill, the Journal reported."
Here is Martketwatch story.
“It is remarkable that during the period that Fannie Mae substantially increased its exposure to credit risk its regulator made no visible effort to enforce any limits,” Frankline Raines, former Fannie Mae CEO.
"The cuts include 8,000 full-time employees, or 5 percent of the company’s electronics workforce, and another 8,000 part-time and seasonal workers, Sony said. The reductions highlight the severity of the slump in consumer spending at a time when companies typically focus on the peak Christmas shopping season."
Fedex Cuts 2009 Earnings Forecast
"FedEx fell 12 percent to $65.86 after saying annual profit may be as much as one-third lower than analysts expected."
Existing Homes Sales Declines Further
"Fewer Americans signed contracts to buy previously owned homes in October as credit markets seized, signaling the housing slump will extend into a fourth year."
"A lower start is likely this am in what could prove to be a "turn-a-round Tuesday" session with the market giving back some of yesterday's big gains. The $ index is up while crude oil and the equities markets are lower, a bearish combination for the grains."
Monday, December 8, 2008
Click here for the whole story.
"Office of the Comptroller of the Currency director John Dugan on Monday released statistics showing a high re-default rate on mortgages that have been modified in the first two quarters of 2008. "The results were surprising, and not in a good way," Dugan told a gathering in Washington at the Office of Thrift Supervision's annual conference."
58% of mortgages that have been modified by the government had defaulted again within months of the modifications. Unfortunately, the American People are going to be left holding the bag for this!
Sunday, December 7, 2008
Click here for the complete Bloomberg story.
"Crude oil rose for the first time in seven days in New York after the Organization of Petroleum Exporting Countries’ president said there was consensus for a “significant” production cut when the group meets next week."