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Monday, November 9, 2009

Low Volume Melt Up

FN: On the way down there is volume. On the way up, there is less... waaaay less (especially for this time of the year).

Can you say algos?

So what does this low volume melt up mean? Can we make new highs? Will this be sustainable? Or will it all come crahsing down again...

Taxpayers to Lose $43.9 billion on Citigroup Guarantees

"The unemployment assumptions used in both scenarios have in fact already been exceeded." -Oversight Panel

FN: The $301 billion federal guarantee on Citigroup's (C) crappy loan book is expected to cost taxpayers $43.9 billion in losses... IF the unemployment rate peeks at 9.5%. Doh. We're at 10.2% now and 13% is now being thrown around as a possible high.

Citigroup Asset Guarantees May Cost U.S. Taxpayers, Panel Says: " U.S. taxpayers may have to share in the losses on $301 billion of Citigroup Inc. loans and securities covered by federal guarantees after unemployment reached a 26-year high, according to the Congressional panel overseeing bank-bailout programs.

The Federal Reserve Bank of New York projected a year ago that the Treasury Department might have to pay $3.96 billion on the guarantees if unemployment hit 9.5 percent, the panel said in a Nov. 6 report. The jobless rate rose to 10.2 percent in October, the Labor Department said last week.

The government hashed out the guarantees over a weekend in November 2008 to help shore up confidence in New York-based Citigroup and head off a run on the bank’s deposits. The New York Fed analysis, which wasn’t previously disclosed, raises questions about whether the Treasury Department and regulators were tough enough in the negotiations, said Joshua Rosner, an analyst at investment research firm Graham Fisher & Co.

“It looks like Citigroup got the better end of that deal,” Rosner said.

FN: Citigroup one, taxpayers minus one.

The New York Fed estimated that losses on the assets would reach $34.6 billion under a “moderately adverse” economic scenario with unemployment at 8.2 percent in the fourth quarter of 2009, the oversight panel said in its report.

Under the “severely adverse scenario” of 9.5 percent, the losses would rise to $43.9 billion as more people became unable to pay the mortgages, auto loans and other obligations included in the guaranteed pool, the reserve bank projected. At that point, Citi would have exhausted its deductible, forcing taxpayers to begin paying out.

FN: Those fake stress tests coming back to haunt the administration. But now for the really fun part...

"The bank’s employees are benefiting from the rescue. Citigroup plans to give 19 top executives annual salaries of about $500,000 along with more than $100 million in stock awards, according to an Oct. 22 report by the Treasury Department’s special paymaster, Kenneth Feinberg."

FN: So with an unemployment rate greater than 10% these asshats get to take your hard earned tax dollars and award themselves great bonuses for their complete lack of ability.

Thats right, guess who gets the bread? The really fat big bird.

David Rosenberg: Unemployment Rate to Hit 13%

“This is going to be the mother of all jobless recoveries.” -David Rosenberg

U.S. Joblessness May Reach 13 Percent, Rosenberg Says (Update1): "The U.S. unemployment rate may rise to a post-World War II high of 13 percent in the aftermath of the recession, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto."

FN: This is no ordinary recession. This is a balance sheet recession where banks, business and individuals are all forced to reduce leverage even as they suffer huge losses.

"Rosenberg said the recession, the deepest since the Great Depression, “is truly secular in nature” and said the economy is “in a post-bubble credit collapse.”

A 13 percent unemployment rate would be the highest since monthly records began in January 1948, according to Labor Department data. The previous postwar high was 10.8 percent in December 1982. Yearly records, which began in 1929, show joblessness climbed to almost 25 percent in 1933 during the Great Depression."

Friday, November 6, 2009

Warren Pollock: Zombie Banks, The Game Has Changed

FN: Sounds like Japan v2.0 to me...

The recent change in U.S. and U.K. monetary policy is very similar now to what the Japanese tried, where Quantitative Easing (QE) was forced onto a captive debt market. The full consequences of which will only know become obvious: De-facto sovereign default.

It is Japan we should be worrying about, not America: "Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world's second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending – and allowing it to push public debt beyond the point of no return."

Some angry ninja quotes from about the same time last year:

I Give You The Stupidity Trap... Errr... Liquidity Trap (11/10/08):
"Awesome. Just awesome. What could possibly go wrong in a zero rate world? Oh wait, all those under funded pension plans can’t earn the yields they need to fund the outrageous promises that were made to indignant, arrogant Baby Boomers during this Age of Entitlement."

Japan v2.0: GLOBAL Liquidity Trap (09/18/08):
"We are heading for a Liquidity Trap. Believe it. I see Japan v2.0… on a GLOBAL scale."

Japan v2.0 (09/18/09):
"Think ZERO percent interest rates and think DEFLATION. Think LOST DECADE. Think DEPRESSION. Now make all that GLOBAL.

That is what we have to look forward to."

This Weeks Rally: Not So Impressive

FN: Upon closer inspection, yesterday's rally was not nearly as impressive as it first seemed. Four up days in a row could not re-capture one down day. Volume on the way up has continued to decrease. Breadth was not strong either. There was no Major Accumulation day. The two Major Distribution Days still stand.