The Big Picture Fri 2009-10-23 09:03 EDT

Dick Alford on Opportunities Lost by the Fed

Richard Alford (via Chris Whalen)

Against a backdrop of continued financial fragility and extraordinary policy actions, policymakers are discussing re-balancing global growth, restoring financial stability, and the future of the Dollar as the world's reserve currency. In 2005, Edwin Truman proposed a list of policy measures that if followed would have reduced the US external imbalance and placed the reserve status of the Dollar on better footing. Truman's proposal differed from the standard litany of US fiscal discipline, Dollar adjustment, and increased demand in surplus countries. It called upon the Federal Reserve to slow the growth in US demand. More recent research, by Shin and Adrian, suggests that if the Fed had heeded Truman's prescription, then monetary policy would have also mitigated the recent turmoil in financial markets...

Big Picture; Dick Alford; Fed; opportunity lost.

zero hedge Tue 2009-10-13 20:07 EDT

Global Central Banks Join The "Short Dollar" Bandwagon

A recent piece by Barclay's Steven Englander demonstrates how everybody and the kitchen sink is soundly amused by Geithner's call for a strong dollar. "The IMF Composition of Official Foreign Exchange Reserves data suggest that central banks are doing more than talking about reducing the concentration of USD in their reserve portfolios. They are actually acting on their statements." [dollar losing reserve currency status]

bandwagon; Global Central Banks Join; short dollar; Zero Hedge.

Wed 2009-10-07 10:31 EDT

Beijing's derivative default stance rattles banks

Reuters

For banks that are hoping to sell more derivatives hedges in China, the world's fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like...Air China, China Eastern and shipping giant COSCO -- among the Chinese companies that have reported huge derivatives losses since last year -- had issued almost identical notices to banks.

Beijing's derivative default stance rattles banks.

Tue 2009-09-29 11:10 EDT

Steeling for a Currency Deal in Pittsburgh? - Up and Down Wall Street Daily - Barrons.com

RANDALL W. FORSYTH

An options play suggests somebody expects the G20 to hatch a scheme to stabilize currencies. Duct tape for the dollar?...Reports John F. Brady, futures expert at MF Global, there was a big seller of "volatility" in the euro versus the dollar Thursday...What's curious, Brady explains, is that vols on the euro already are low, so it's hard to see them going much lower...Which got me to wondering if the volatility seller was thinking the G20 would do something to force volatility lower -- that is, stabilize exchange rates...Notwithstanding the calls for a replacement of the dollar as the main reserve currency, gold isn't it, according to long-time market observer David P. Goldman,..."Even a rather wobbly reserve currency is better than gold," he writes as his alter ego, Spengler, whom he "channels" for Asia Times (www.atimes.com.) "Gold is far less liquid than U.S. Treasury securities, costly to store and insure, and above all more volatile in price...gold isn't an investment but an insurance policy against a breakdown of the function of the world financial system."

Barrons; com; currency deal; Pittsburgh; steel; Wall Street Daily.

Calculated Risk Tue 2009-09-22 09:28 EDT

GAO Report: AIG Stabilized, Repayment "Unclear"

CalculatedRisk

A report on AIG from the General Accounting Office (GAO): While federal assistance has helped stabilize AIG's financial condition, GAO-developed indicators suggest that AIG's ability to restructure its business and repay the government is unclear at this time.

AIG Stabilized; Calculated Risk; GAO report; repayments; unclear.

Mish's Global Economic Trend Analysis Mon 2009-09-21 14:57 EDT

Strategic Default Data Suggests Foreclosure Prevention Tactics Useless

Michael Shedlock

An interesting report in the Los Angeles Times shows that a person with super-prime credit scores is more likely to walk away from an underwater mortgage than a person with a subprime credit rating.

Mish's Global Economic Trend Analysis; Strategic Default Data Suggests Foreclosure Prevention Tactics Useless.

The IRA Analyst Sun 2009-09-13 12:14 EDT

House Testimony: The Trouble With Models Starts With Subjectivity

...we have now many examples where a model or the pretense of a model was used as a vehicle for creating risk and hiding it. More important, however, is the role of financial models for creating opportunities for deliberate acts of securities fraud..the widespread use of [VaR] statistical models for risk management suggest that financial institutions are subject to occasional "Black Swans" in the form of risk events that cannot be anticipated...We don't actually believe there is such a thing as a "Black Swan."...leaders in finance and politics simply made the mistake of, again, believing in what were in fact flawed models...Or worse, our leaders in Washington and on Wall Street decided to be short sighted and not care about the inevitable debacle...We need to simply ensure that all of the financial instruments in our marketplace have an objective basis, including a visible, cash basis market that is visible to all market participants. If investors cannot price a security without reference to subjective models, then the security should be banned from the US markets as a matter of law and regulation. To do otherwise is to adopt deception as the public policy goal of the US when it comes to financial markets regulation.

House testimony; IRA Analyst; models starting; subject; Troubles.

Bruce Krasting Fri 2009-09-04 19:39 EDT

On Fed Intervention and the Blogs

Bruce Krasting

A week ago a great debate was stirred in the financial blog world. As is often the case Zero Hedge was in the middle of the fracas. Mr. Durden penned a piece that suggested that the Fed was manipulating the auctions in such a way as to benefit the primary dealers. It got to be a very sophisticated discussion that brought in some thinking from Yves Smith at Naked Capitalism and John Jansen at Across the Curve. The debate is over is far as I am concerned. The Treasury had another successful auction today of the 30 year. But in order to make it a success the Fed bought $27 billion of 15-30 year mortgage paper. The curve is the curve...This is timed intervention. That is a polite way to say manipulation. Federal Reserve manipulating Treasury auctions; quantitative easing.

Blog; Bruce Krasting; Fed intervention.

Mish's Global Economic Trend Analysis Sun 2009-08-30 12:03 EDT

Greater Than One in Four FDIC Insured Institutions are Unprofitable; Bank Problem List at 15 Year High

Michael Shedlock

The second quarter 2009 Quarterly Banking Profile has some interesting charts and facts that inquiring minds will be interested in.Insured Institution Performance Higher Loss Provisions Lead to a $3.7 Billion Net LossMore Than One in Four Institutions Are UnprofitableCharge-Offs and Noncurrent Loans Continue to RiseNet Interest Margins Show Modest ImprovementIndustry Assets Decline by $238 BillionThe Industry Posts a Net Loss for the Quarter The Industry Posts a Net Loss for the Quarter Burdened by costs associated with rising levels of troubled loans and falling asset values, FDIC-insured commercial banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter of 2009. Increased expenses for bad loans were chiefly responsible for the industry's loss. Insured institutions added $66.9 billion in loan-loss provisions to their reserves... ``Conventional wisdom regarding money supply suggests there is massive pent up inflation in the works as a result of the buildup of excess reserves...The reality is excessive debt and falling asset prices have rendered the best efforts of the Fed impotent. Banks are not well capitalized, they are insolvent, unwilling and unable to lend.''

15-year high; Bank problem listings; FDIC insured institutions; greater; Mish's Global Economic Trend Analysis; unprofitable.

Thu 2009-07-30 00:00 EDT

Mish's Global Economic Trend Analysis: Nonexistent "pre-recovery" in Manufacturing Suggests US Treasuries a Buy

Mish's Global Economic Trend Analysis: Nonexistent "pre-recovery" in Manufacturing Suggests US Treasuries a Buy

buy; Manufacturing Suggests; Mish's Global Economic Trend Analysis; nonexistent; pre-recovery; Treasury.

Fri 2009-01-16 00:00 EST

The Institutional Risk Analyst: On the Economy: For Barack Obama, It's All About Credibility

The Economy: For Barack Obama, It's All About Credibility, by The Institutional Risk Analyst (IRA); ``We just don't think that Geithner has the integrity or the independence of mind to close and sell C, GS and the rest of the larger Wall Street banks...we suggest FDIC chief Sheila Bair.''

Barack Obama; credibility; economy; Institutional Risk Analyst.

Sat 2009-01-03 00:00 EST

naked capitalism: Past Financial Crises Suggest Pain Far From Over

Economists Carmen Reinhart and Kenneth Rogoff show historical financial crises more severe and protracted than ordinary recessions

Financial Crises Suggest Pain; naked capitalism.

Wed 2008-06-25 00:00 EDT

naked capitalism: Illinois Sues Countrywide

mortgage counsellor suggests "70% to 80% of subprime mortgages involved fraud by the mortgage broker"

Illinois Sues Countrywide; naked capitalism.

Wed 2008-05-14 00:00 EDT

naked capitalism: Wolf, Becker, and Posner on Oil (With a Shocker From Posner)

Richard Posner suggests "heavy taxes on oil or (better) carbon emissions"; lack of political will imples "democratic failure" to address long-term problems

Becker; naked capitalism; Oil; Posner; shocker; Wolf.

Mon 2008-03-10 00:00 EDT

Market Ticker: Pump Pump Pump Up The Goldman

(simple market timing signal suggested)

Goldman; Market Ticker; Pump Pump Pump.

Tue 2007-11-20 00:00 EST

naked capitalism: Another Sighting of a Sensible Markets Reform Proposal

Stephen Cecchetti suggests standardized securities, exchange-based trading

naked capitalism; Sensible Markets Reform Proposal; Sight.