Saturday, December 25, 2010
Monday, June 15, 2009
How Screwed is Your Town?
Interesting piece from McClatchy shows when employment in different parts of the country is expected to recover. Looks piss-poor for SoCal!
Sell Sell Sell!
From Reuters:
Technical analyst Robert Prechter on Monday said he sees the United States losing its top AAA credit rating by the end of 2010, as he stuck by a deeply bearish outlook on the U.S. economy and stock market.
Technical analyst Robert Prechter on Monday said he sees the United States losing its top AAA credit rating by the end of 2010, as he stuck by a deeply bearish outlook on the U.S. economy and stock market.
Prechter, known for predicting the 1987 stock market crash, joins a growing coterie of market heavyweights in forecasting the United States will lose its top credit rating as the government issues trillions of dollars in debt to fund efforts to bail out the economy.
Fears about the long-term vulnerability of the prized U.S. credit rating came to the fore after Standard & Poor's in May lowered its outlook on Britain, threatening the UK's top AAA rating. That move raised fears that the United States could face a similar risk, with the hefty amounts of government debt issued in both countries to pay for financial rescues causing budget deficits to swell.
Prechter, speaking at the Reuters Investment Outlook Summit in New York, said he sees investors' confidence in an economic rebound fading, a trend that will drag the S&P 500 stock index .SPX well below the March 6 intraday low of 666.79 by the end of this year or early next.
Gold Rollercoaster
Here's Prof. Lewis from Minyanville explaining the volatility in gold:
I suppose some gold bulls are upset that a story in the Wall Street Journal said the Federal Reserve is unlikely to boost its purchases of Treasury bonds, so some might think this has removed a near-term upside catalyst. Who knows? (I’m not sure I buy that story’s message either, incidentally).
But let me emphasize: Gold is a long-term play. The US government has only 2 options: default or debase. Both lead to more inflation. What the Fed “wants to do” is irrelevant. What it will be forced to do is all that matters, and it will be forced to monetize more government debt this year. Whether that's in June, July, or August doesn’t really matter. The picture hasn't changed.
Gold bulls need to always be prepared to take violent swings, just as short-sellers in the financials did last year. Like those sellers of financials, gold bulls will get paid off big at the end of the day if they stick to their convictions.
I suppose some gold bulls are upset that a story in the Wall Street Journal said the Federal Reserve is unlikely to boost its purchases of Treasury bonds, so some might think this has removed a near-term upside catalyst. Who knows? (I’m not sure I buy that story’s message either, incidentally).
But let me emphasize: Gold is a long-term play. The US government has only 2 options: default or debase. Both lead to more inflation. What the Fed “wants to do” is irrelevant. What it will be forced to do is all that matters, and it will be forced to monetize more government debt this year. Whether that's in June, July, or August doesn’t really matter. The picture hasn't changed.
Gold bulls need to always be prepared to take violent swings, just as short-sellers in the financials did last year. Like those sellers of financials, gold bulls will get paid off big at the end of the day if they stick to their convictions.
Friday, May 15, 2009
Tuesday, May 12, 2009
Sunday, May 10, 2009
Saturday, May 9, 2009
Rational Exuberance
This is super-super-cool:
Step away from your Google search for a moment and consider the following scenario: What if a search engine, instead of giving you a long list of Web pages, simply computed the answer to whatever question you threw at it?
What was the average temperature in Chicago last year? What is the life expectancy of a male, age 40, in New Zealand? If you flip a coin 10 times, what is the probability that four of the flips will come up heads.
This scenario will become reality later this month with the highly anticipated launch of Wolfram Alpha, a free Web site that is the result of years of secret work by a British mathematician—Stephen Wolfram—and his team of 250 colleagues. The project set the tech world on fire last week after a sneak preview at Harvard Law School, and may present the most powerful challenge yet to the Google behemoth.
Friday, May 8, 2009
The Genesis of the Debt Disaster
Gillian Tett of the Financial Times on the origins of the financial crisis:
The first sign that there might be a structural problem with the innovative bundles of credit derivatives that bankers at JP Morgan had dreamed up emerged in the second half of 1998. In the preceding months, Blythe Masters and Bill Demchak – key members of JP Morgan’s credit derivatives team – had been pestering financial regulators. They believed that by using the new credit derivative products they had helped create, JP Morgan could better manage the risks in its portfolio of loans to companies, and thereby reduce the amount of capital it needed to put aside to cover possible defaults. The question was by how much. (Though these bundles of credit derivatives later went under other names, such as collateralised debt obligations [CDOs], at that time these pioneering structures were known as “Bistro” deals, short for Broad Index Secured Trust Offering). Masters and Demchak had done the first couple of Bistro deals on behalf of their own bank without knowing the answer to their question for sure. But when they were doing these deals for other banks, the question of reserve capital became more important – the others were mainly interested in cutting their reserve requirements.
It's well worth reading the whole thing!
The first sign that there might be a structural problem with the innovative bundles of credit derivatives that bankers at JP Morgan had dreamed up emerged in the second half of 1998. In the preceding months, Blythe Masters and Bill Demchak – key members of JP Morgan’s credit derivatives team – had been pestering financial regulators. They believed that by using the new credit derivative products they had helped create, JP Morgan could better manage the risks in its portfolio of loans to companies, and thereby reduce the amount of capital it needed to put aside to cover possible defaults. The question was by how much. (Though these bundles of credit derivatives later went under other names, such as collateralised debt obligations [CDOs], at that time these pioneering structures were known as “Bistro” deals, short for Broad Index Secured Trust Offering). Masters and Demchak had done the first couple of Bistro deals on behalf of their own bank without knowing the answer to their question for sure. But when they were doing these deals for other banks, the question of reserve capital became more important – the others were mainly interested in cutting their reserve requirements.
It's well worth reading the whole thing!
Regarding the Bank Stress Tests
The usual suspects think they're a bunch of hooey:
Yves Smith: The fact that the stress tests took place at all was an admission of regulatory failure. Financial firms are subject to oversight, most important, of safety and soundness, on an ongoing basis. The notion that a one-shot effort is a substitute for insufficient supervision is spurious. Given that the minders were badly behind the curve thanks to years of believing that the industry could manage itself prudently, a crash effort to catch up was not a bad idea. But this should have taken place a year ago, when Bear Stearns exposed that no one really knew what was up at these firms. The fact that a bailout package was crafted based on a cursory emergency weekend review of complex trading exposures clearly demonstrated the dangers of ignorance.
Yves Smith: The fact that the stress tests took place at all was an admission of regulatory failure. Financial firms are subject to oversight, most important, of safety and soundness, on an ongoing basis. The notion that a one-shot effort is a substitute for insufficient supervision is spurious. Given that the minders were badly behind the curve thanks to years of believing that the industry could manage itself prudently, a crash effort to catch up was not a bad idea. But this should have taken place a year ago, when Bear Stearns exposed that no one really knew what was up at these firms. The fact that a bailout package was crafted based on a cursory emergency weekend review of complex trading exposures clearly demonstrated the dangers of ignorance.
But the stress tests fell far short of the needed level of review. First, they were administered by the industry based on scenarios provided by the industry. Most observers found the “adverse” case to be too optimistic. Even worse, banks got to use their own risk models, the same ones that got them into trouble. And there was no independent verification of the quality of the accounting. The number of examiners per bank was well short of what you’d need to probe a single business, much less an entire firm.
Second, the industry got to negotiate the results. This is simply unheard of. That suggests both a lack of confidence in the process and a lack of belief on the part of the key actors (Treasury Secretary Timothy Geithner, in particular) that the government needs to set the parameters and demand compliance.Monday, May 4, 2009
Excess "E"s
From VoiceOfSanDiego.org:
This is a big week for Vantage Pointe, downtown's biggest condo building.
Next weekend is circled on the calendars of as many as 72 contracted buyers there, people who signed up in 2004 for a chance to own a piece of the then-hypothetical high-rise.
That's the date -- Saturday for a couple, Sunday for the rest -- that comes 42 months after they reserved their condos with 5 percent deposits in 2005. If the developers fail to make their units ready for move-in by then, some buyers could walk away from their contracts, their deposits in hand.
[snip]
The building is unprecedentedly large for San Diego, comprising 679 units in 40 stories, built with the largest private sector construction loan -- $210 million -- for a single building in county history. It takes up the entire block between 9th and 10th Avenues and A and B Streets. In Vantage Pointe, buyers have signed contracts to buy about 290 condos -- less than half the building's total.
The building's success as it moves through the next several months is being watched by market analysts and downtown planners.
It is unclear even yet what effect the building's opening will have on the rest of the downtown real estate market, already weighed down by more than 850 finished unsold units, according to MarketPointe Realty Advisers. The homes at Vantage Pointe and another 148 at another under-construction project downtown will double that number.
[snip]
Brian Stoddard, president and chief operating officer of Pointe of View, said on Friday the company has not yet officially split the project into the three phases, and so it is too early to tell if the Fannie Mae conditions will be met before the first buyers' deadlines next weekend.
Wow! 679 units and only 290 sold! Pretty crazy! However, the craziest part of the article is the affinity of the developers for all those excess "E"s. Vantage Pointe? Pointe of View? Way affected!
This is a big week for Vantage Pointe, downtown's biggest condo building.
Next weekend is circled on the calendars of as many as 72 contracted buyers there, people who signed up in 2004 for a chance to own a piece of the then-hypothetical high-rise.
That's the date -- Saturday for a couple, Sunday for the rest -- that comes 42 months after they reserved their condos with 5 percent deposits in 2005. If the developers fail to make their units ready for move-in by then, some buyers could walk away from their contracts, their deposits in hand.
[snip]
The building is unprecedentedly large for San Diego, comprising 679 units in 40 stories, built with the largest private sector construction loan -- $210 million -- for a single building in county history. It takes up the entire block between 9th and 10th Avenues and A and B Streets. In Vantage Pointe, buyers have signed contracts to buy about 290 condos -- less than half the building's total.
The building's success as it moves through the next several months is being watched by market analysts and downtown planners.
It is unclear even yet what effect the building's opening will have on the rest of the downtown real estate market, already weighed down by more than 850 finished unsold units, according to MarketPointe Realty Advisers. The homes at Vantage Pointe and another 148 at another under-construction project downtown will double that number.
[snip]
Brian Stoddard, president and chief operating officer of Pointe of View, said on Friday the company has not yet officially split the project into the three phases, and so it is too early to tell if the Fannie Mae conditions will be met before the first buyers' deadlines next weekend.
Wow! 679 units and only 290 sold! Pretty crazy! However, the craziest part of the article is the affinity of the developers for all those excess "E"s. Vantage Pointe? Pointe of View? Way affected!
"They (The Banks) Own The Place."
That's Senator Dick Durbin, talking about Congress. Karl Denninger has a devastating post today about the continued corruption in DC:
The Wall Street Journal, on A-1 (that'd be the top page) this morning is pointing out something much more uncomfortable - The Federal Reserve Bank of New York's Chairman, who was sitting on Goldman Sachs' board, continued to serve after they converted to a bank holding company and was in fact buying their stock.
Things are completely out of control. The cheating continues unabated, and it won't stop until people demand it stops. When people get angry enough to care, it's going to get ugly!
Well well well Senator Durbin:
"And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place."
Now that had to be uncomfortable.
Oh by the way, its not just The Senate either; Barney Frank seems to have a revolving door in his office that goes between his front door and Goldman's along with SIFMA, a big industry group.
The amusing part of this is that the article appeared in Salon, a notoriously left-leaning rag. The not-so-amusing part of this is that nobody is bothering to try to hide the blatant corruption and fraud any more - $100+ billion in so-called "CDS" written by AIG that were "made good" by Treasury so as to avoid people having to take an economic loss that was properly theirs for getting involved with someone in a transaction when their counterparty didn't have any money!
And then there's this:The Wall Street Journal, on A-1 (that'd be the top page) this morning is pointing out something much more uncomfortable - The Federal Reserve Bank of New York's Chairman, who was sitting on Goldman Sachs' board, continued to serve after they converted to a bank holding company and was in fact buying their stock.
Things are completely out of control. The cheating continues unabated, and it won't stop until people demand it stops. When people get angry enough to care, it's going to get ugly!
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