Archive for December, 2008

Happy New Year

Tuesday, December 30th, 2008

As 2008 comes to a merciful end hopefully it will take with it the era of lack of corporate accountability and the stream of bad economic news but I doubt it.

The end of the year brought news that another entity, GMAC Financial Services, the financing arm of General Motors will be bellying up to the Federal trough to the tune of $6 billion. One is forced to wonder who will be left out of the largesse once the printing presses runs out of ink or the dollar is rendered useless due to its overuse.

On the economic side the Conference Board’s Consumer Confidence Index for December registered a new all time record low.

Try and enjoy the football anyway.

Happy New Year!

Happy New Year from Saxo Bank

Thursday, December 18th, 2008

Europe based Saxo Bank Capital Markets released a list of 10 predictions or “outrageous claims” as they put it for the year ahead. The bank says that if their “outrageous claims” transpire, economic conditions will worsen dramatically in 2009.

Nothing like optimism at this sacred time of the year or as Saxo chief economist David Karsbøl put it, “2009 will be a turning point because it can’t get much worse.”

Here are Saxo’s predictions; the comments (in italics) are ours.

• There will be severe social unrest in Iran as lower oil prices mean that the government will not be able to uphold the supply of basic necessities.

Many are predicting social unrest in the U.S., which most likely will remain the most stable country in the world so all bets are off everyone else.

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Not-so-new kids on the block

Thursday, December 18th, 2008

Today Barack Obama appointed two figures that will be instrumental in how current financial regulatory struggles play out. Mary Schapiro was named head of the Securities and Exchange Commission (SEC) and Gary Gensler will lead the Commodity Futures Trading Commission (CFTC).

Both, Schapiro especially, are hardly new to the regulatory scene. Gensler worked at Treasury during the Clinton administration and worked as an adviser to former Sen. Paul Sarbanes of Sarbanes-Oxley fame. Schapiro, currently head of the Financial Industry Regulatory Authority, has served as SEC commissioner and was chairman of the CFTC in the mid-1990s.

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SEC takes the fall, finally

Wednesday, December 17th, 2008

As a parent it never fails that when one of my sons is confronted with a broken household item, unclaimed mess or injured sibling, he will predictably recite a list of previous misdeeds by one of his siblings in lieu of acknowledging culpability for the issue at hand. Unfortunately that is the same reaction taken by our leaders in Congress and at agencies like the Securities and Exchange Commission.

When faced with complaints over rising energy costs, Congress ignored the historically weak dollar, energy fundamentals (some of which were of their own making) and 35 years of failure to create an energy policy and went after speculators. When the explosion of leverage and lax oversight of investment banks helped to contribute to our current credit crisis the SEC went after short sellers.

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The Brad Pitt exchange

Thursday, December 11th, 2008

For all of you traders who are loyal readers of Entertainment Weekly and are totally psyched about this morning’s Golden Globe nominations (all two of you), Cantor Fitzgerald has a fantastic opportunity in the works. This week, Cantor filed an application with the CFTC to launch an exchange based on Hollywood box office receipts. The proposed Cantor Exchange’s Domestic Box Office Receipt contracts would be a hedging/profiting tool based on the first four weeks of a film’s box office revenues.

It’s doubtful that there’s a lot of demand among actual traders to speculate on the amount of bank Brad Pitt’s next flick will bring in, but Cantor’s already experienced at this sort of thing – it owns the Hollywood Stock Exchange, a virtual exchange where you can buy fake stocks and bonds on actors and movies.

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Treasury Accountability Retroactively Please

Thursday, December 11th, 2008

For all you Treasury and Fed watchers out there, you may want to check out “The First Report of the Congressional Oversight Panel for Economic Stabilization,” which was published yesterday.

Here are some highlights from the introduction, alone:
• “The unemployment rate is the highest it has been in 14 years. In the past three months, 1.2 million Americans lost their jobs, 533,000 in November 2008 alone.”
• “One in 10 mortgage holders is now in default.”
• “More than 200,00 families and small businesses filed for bankruptcy in protection in the past two months.”

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Congress passes "Motor City Shake Down"

Thursday, December 11th, 2008

Surprise! The House of Representatives has signed “Auto Industry Financing and Restructuring Act,” also known in some circles as “The Motor City Shakedown.”

The bill passed in the House of Representatives by roll call vote. The totals were 236 in favor; 170 against; 27 voted present or did not vote. Reportedly the bil is running into resistance in the Senate.

The final version of the bill was not yet available, but here is draft I found last night:
Read the bill

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Read the complaint against Blago

Wednesday, December 10th, 2008

Why should the mainstream media have all the fun?

Here it is. No wind up, no pitch, just the complaint filed against Illinois Governor Rod Blagojevich, courtesy of the U.S. Department of Justice.

http://www.usdoj.gov/usao/iln/pr/chicago/2008/pr1209_01a.pdf

FYI: You’ve probably heard many of these words and phrases on the trading floor, loading dock and at dog fights, but the language from the transcripts is truly not for sensitive souls.

Enjoy.

The Triffin dilemma

Monday, December 8th, 2008

One of the best parts of being a journalist is having an excuse to call strangers and ask them all kinds of questions. Recently I called Benn Steil, senior fellow and director of international economics at the Council of Foreign Relations, a think tank in New York, and asked him about the possibility that the United States would enter a state of deflation.

Steil discounts the probability, while allowing for the possibility, and says the root of all the market uncertainty is the massive, global-deleveraging process that we are still going through. In short, the vicious cycle of losses inducing selling, leading to more losses and more selling.

“This clearly has some ways to run, Steil says. “It illustrates one big feature of financial globalization nobody had really appreciated before,” that being the Triffin Dilemma.

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Six for the price of one

Monday, December 8th, 2008

The financial sector was turned upside down in September and economic news has been pretty awful ever since, topped off with 1970s-style unemployment numbers on Friday. These topsy turvy times have been a gold mine for crazy statistics straight out of bizarro world. In October 2007, the Royal Bank of Scotland bought ABN Amro for $100 billion. But if it had just held its money until after the financial sector meltdown, it could have bought six banks for the price of one – Citibank for $22.5 billion, Morgan Stanley for $10.5 billion, Goldman Sachs for $21 billion, Merrill Lynch for $12.3 billion, Deutsche Bank for $13 billion and Barclays for $12.7, a total of $92 billion. Luckily the Federal Reserve and Treasury Department were able to take advantage of these red-hot discount prices.