The Social Security Trust Fund is able to make accurate estimates on the major components of its monthly cash flows. Therefore the first quarter operating results for the Fund are in. Only the payroll taxes and benefits paid numbers are currently available for January, February and March of 2010. The raw numbers show clear acceleration of the deterioration in the Funds dynamics. They also give us some insights into the employment situation in the country. The conclusions are not good.

This chart summarizes the payroll tax (both FICA and SECA) receipt numbers for 09 and 10.

The 1st Q 2010 YoY top line for the Fund is down by 6%. A very significant drop. There are 160mm workers that contribute to SS. The simple math would suggest that there are 9.3mm workers that are no longer contributing to the system (or are contributing at a much lower rate). The BLS NFP report, which looks at a different set of numbers for employment, suggests that the drop in payrolls is only 2.5mm during the same period. This is not an apples to apples comparison, however, I have looked at this from every which way and it is my conclusion that the BLS numbers have to be significantly understating the loss in jobs. The payroll tax receipt numbers can’t be that badly skewed. They are hard numbers.

There is no good new for the Fund on the expense side either. While there has been variations on a month to month basis, the trend line for benefits is northward at a 5% compounded growth rate. And that percent number has nowhere to go but up as the boomers get checks. The following chart looks at the growth in benefits over the past ten years.

The actual results for the Fund are not available. The reporting for interest income, income tax receipts (outside of FICA and SECA), the operating expenses and the costs of the Railroad Retirement are not available. In 2009 these numbers were +$118b, +$20b, -$6b and -$4b respectively. It is unlikely that these numbers will vary too much in 2010.

Based on the assumption that these other numbers will remain static and that payroll receipts will stabilize to the 2009 numbers for the remainder of the year the following forecasts of the full calendar year can be made:

Benefits paid will exceed Payroll tax receipts by $40b (+660b, -700b). In my opinion this is the primary measure of financial soundness. This number was -$5 billion in 2009.

 

The Fund uses the ratio of total tax receipts to benefits paid as its soundness measurement. Based on the 1st Q results it would appear likely that the full year results of this ratio will be negative $20b ($700b-680b). Should that happen, it would be the first time in the Fund’s history. The Trustees of the Fund have suggested that this significant milestone will not occur until 2017. This party seems to be starting six years early than was planned.

When I look at the Fund I look at cash flow. All of the experts on this topic say that is a dumb way to look at it. Annual cash flow is meaningless when you are looking at something that has $2.5T in assets and will, under the very worst of conditions, be able to pay the bills for 15 years or so. I disagree. It’s all well and good to ignore cash flow when cash flow is positive. But when it goes negative it is the first gentle step that leads to a very slippery and steep slope.

Interest income for the Fund is a non-cash item. They get credit for more paper. There is something about this process of automatic money creation that bothers me. I believe the Fund must ponder this question as well. In their reports they publish on a monthly basis their net cash position. The following is their annual summary for 2009. Note that the net cash flow is a positive $3b.

The following is a graph of the annual net cash flow of the Fund. You can see that the surplus is crashing. Based on the 1st Q 2010 results we will be in the red for the full year. This problem could make health care look like a walk in the park by comparison.

The 10 Year Treasury To Mortgage spread just broke the 60 bps barrier, and is now trading at a record tight 59.61 bps, after dropping as low as 58 bps earlier. Is the Fed now launching a short squeeze in MBS as well? Pretty soon Mortgages will be trading at negative rates, when the Fed realizes that the only way to get house prices higher is to pay Americans to take out a mortgage.

What is wrong with this picture: the MTS just announced that the February budget deficit was $220.9 billion, after receipts of just $107.5 billion with vastly surpassed by outlays of $328.4 billion. This is a record. Yet the interest on the public debt was a mere $16.9 billion (page 13 of the MTS report). The reason for this is because as TreasuryDirect points out, in February the interest on public marketable debt (actual cash outlays), which as of Monday stood at $8.061 trillion, hit an all time low of 2.548%. How is it possible that unprecedented debt accumulation can result in ever declining interest rates, and Treasury auctions, such as today's 10 Year reopening, in which the Bid To Cover hit an all time high? One answer: The Federal Reserve, which through complete domination of the entire capital market courtesy of ZIRP and QE has now turned market logic upside down by 180 degrees. In a normal world, the more money you borrow, the greater the associated risk, and the greater the interest payments on this debt. Not in America though. So can we assume that the Fed can forever keep rates on debt at record low levels? No. Which begs the question: what happens when interest rates do finally start going up?

Here is the relevant page highlighting the deficit. In a word: the US collects enough money organically (via taxes) to cover less than a third of its outlays.

A look at the distribution of receipt components should lead to questions about the sanity of anyone who claims that the budget trajectory is sustainable - in a word, tax revenues are plunging. Of course, this has to be evaluated in parallel with the observation that tax refunds in January and February of 2010 have actually surpassed those of 2009 as Zero Hedge discussed previously, explaining why consumers have shown abnormal resilience so far in 2010.

So even as the income side of the Federal ledger has rarely if ever been quite as bad, the expenditure side has exploded, and not as a function of debt funding: the bulk of outlays have to do with entitlement programs which came in over $160 billion, and which still could not have been covered organically.

Here is where debt comes in. We know that recently the debt ceiling was raised to $14.3 trillion which is expected to be hit in less than a year. Observant readers will recall that the previous ceiling of $12.4 trillion was supposed to last the US until the end of March - well, not only was this number passed over a week ago, it is now, less than half way into March at $12.5 trillion, which would have broken the debt ceiling far in advance of expectations. This leads us to believe that the $14.3 trillion ceiling will likely have to be raised once again and at a very critical time for the administration: around mid-term election time.

Yet if one were looking just at the interest rate paid by the government on the marketable debt portion of the public debt (which was $8.06 trillion as of most recently), it would appear that America's economy was cranking on all cylinders. Of course, this is not the case, and the rate is merely an indication of the Fed's direct intervention in all possible markets.

The chart below shows the absolute level of the interest on marketable debt, and the MoM % change. In February the rate came in at a record low 2.548%, a 1.8% decline from the 2.595% in March.

To be sure, this is expected with the Fed running a Zero Interest Rate Policy, and QE adding direct purchases by the Fed.

Yet what is notable is that even with the effective Fed Funds rate at zero for over a year, the rate on marketable debt has bottomed out, and the spread from FF to the Interest Rate has held constant at about 2.5%.

The primary reason for this is the duration distribution of US debt. The short-term portion has already reaped the benefits of issuance at or near 0%, while the longer-dated side of the curve is keeping rates higher. If indeed the Treasury is serious about extending the average maturity on public debt from 4 to 6 years, the new baseline for this spread will eventually be at about 3%, where it was earlier in the decade. 

Yet the logical next question is what happens when rates start going up? It was as recently as September 2007 that we had a interest rate on marketable debt of nearly 5%. The plunge to 2.5% took just over a year. Even the mere mention of actual tightening will spring rates right back to 5%. What does that mean for actual outlays. Well: if indeed we are correct that total debt will hit $14.3 trillion in less than a year, it means the marketable debt will be about $10 trillion, and the incremental 250 bps of interest will mean about $250 billion of additional interest outlays a year, or half a trillion annually. That comes to about $42 billion a month. In January this amount would have been double the net withheld income taxes.

It becomes obvious why the Fed simply can not allow rates to go up. It has nothing to do with excess liquidity, which of course is a major concern as America goes from one excess-liquidity bubble to another. The problem is that the surging budget, which will need ridiculous amounts of debt for funding, will truly explode if rates were to go up merely to 5%. What happens if rates hit 7.5%... or 10%? At that point it is game over. And that sad ending will occur once the Fed and the administration realize that all ongoing efforts to kick start a consumption driven economy will fail. In the meantime, the economy will slowly grind to a halt as the servicing of public debt takes over a greater and greater portion of all tax receipts, until all taxpayer money is used merely to cover the interest expense. At that point buying CDS on the US denominated in euros, dollars, gold, .556, watermelons, or what have you, will be completely pointless as the bankruptcy of the US will be entirely priced in.

Things are really starting to get wild.  CNBC should just eliminate the NYSE trading floor shots and replace them with battle scenes from "Hamburger Hill" or some of the medieval battles in "Lord of the Rings".  Basically, everyone is out for blood today as panicked put and call holders are getting barbecued with Goldman's flamethrowers or getting bludgeoned to death by spiked clubs.

The games started on the open with moonshot moves in RF, ZION, STI, etc. as panicked short sellers ran for the hills. 

Then the "Oil Glut" report came out, and once USO spiked up, everyone started dryhumping OIH, XLE, GDX, etc.  But then came a sudden collapse in gold and oil, and immediately any and all commodity, emerging market, infrastructure stocks were sold with the utmost urgency.

That sent stocks down and the robots immediately started playing the "failed double top" play by shorting aggressively for the "net big leg down".

But unfortunately, the massive bout of selling intraday left most REITs, retailers and banks completely unfazed.

And as the QQQQ's blew out to new highs led by the BRCM meatball, everyone looked around and started second guessing the idea of shorting.

Just the same old battlefield tactics for Options Expiration.

Any stock that was heavily shorted was skying non-stop.  Examples like SWN, FSLR.

Of course, banks, mortgage insurers, retailers, etc. were unfazed through it all.  Check out the non-stop meltup in Wells Fargo:

 

And any stock with upside momentum that looked like it was going to break out was shanked.  Pick any gold stock today.  Completely smoked.

 

"Hard Asset" plays got bombed, despite the repeated, tiring, clarion calls of:

"This Is It!!"

"It is Now!!"

"OTC Derivatives are going to kill us all!!"

"Gotta be in it to win it!"

"It's up to $1,650, and then to Alf's numbers!"

Who the heck is Alf anyway?  The one from Sesame Street?

LOL...

 

Anyway, just more of the same with all sorts of junk being bought today.  Like Furniture Brands hitting new, 52-week highs..

Who is going to stop the consumer?

Funny how Goldman's efforts to squeeze out shorts in consumer and finance stocks and blow away call buyers on "Gloom and Doom" sectors creates a self-perpetuating, self-fufilling momentum on its own.

How else can the retail sector be performing so well with consumer confidence waffling around world record lows?

Today's intraday chart on the OIH pretty much sums up the absurd stop-running action today....

Watching these intraday charts during Options Expiration, I feel like I'm watching The Outer Limits....

From The Daily Capitalist

My favorite party boy economist, Nouriel Roubini, just came out with his analysis for the second half and he notes that we may be heading toward a double-dip recession. Too much negative news, he frets. I have been saying this for some time. The difference between me and Roubini is that he believes in the necessity and efficacy of fiscal and monetary stimulus whereas I don't. He went to Mises University but, apparently, only took Austrian Econ 101, not 201.

Here is his research note:

V, U and W

A slew of poor economic data over the past two weeks suggests that the U.S. economy is headed for a U-shaped recovery—at best—in 2010. The macro news, including data on consumer confidence, home sales, construction and employment, actually suggests a significant downside risk even to the anemic levels of growth which RGE forecast for H1. The U.S. faces continued challenges in H2—particularly as historic levels of fiscal stimulus fade—and appears far too close to the tipping point of a double-dip recession.

This is not the conventional wisdom. Heated debate continues to rage in the United States on whether the economic recovery will be V-shaped (with a rapid return to robust growth above potential), U-shaped (slow anemic, sub-par, below trend growth for at least the next two years) or W-shaped (a double-dip recession). The V camp includes distinguished research groups and individuals such as Ed Hyman’s ISI, Larry Meyer’s Macroeconomic Advisors, the research group of JP Morgan, Michael Mussa and others. The U camp includes—among others—Roubini Global Economics, Goldman Sachs’ U.S. economic research group, PIMCO and Ken Rogoff. As early as August 2009, I worried in a Financial Times op-ed about the risk of a double-dip recession even if our RGE benchmark scenario characterizes the risk of a W as still a low probability event (20% probability) as opposed to a 60% probability for a U-shaped recovery. Others concerned about the double-dip risk include also David Rosenberg, Gary Shilling and John Makin.

 

Ed Hyman and I debated whether the recovery would be U or V-shaped on a February 22 conference call attended by over 2,200 listeners. Since that call, a slew of new U.S. macro data have come out. They have been almost uniformly poor, if not outright awful. Consumer confidence, based on the Michigan survey, has tanked. On the real estate front, new home sales are collapsing again, existing home sales are also falling sharply, and construction activity (both residential and commercial) is sharply down. Durable goods orders are down, initial claims for unemployment benefits remain stubbornly high (way above the 400K mark). Real disposable income for Q4 has been revised downward while real disposable income (before transfers) for January was negative again. The manufacturing ISM index—while still expanding being above 50—has now fallen a couple of notches and its production and new orders index levels are falling, too; and global PMIs suggest a loss of momentum in the global economic recovery. Real inventories look unchanged in Q1 relative to Q4; auto sales were at best mediocre; core CPI was falling and core PCE was close to 0%, suggesting anemic demand and economic weakness. Q4 GDP growth was revised upward to 5.9% but most of it (3.9%) was due to inventories; final sales grew at a 1.9% rate while consumption grew at a dismal 1.7% (down from 2.8% in Q3). Q3 growth has been revised from an initial 3.5% to 2.8% to 2.2%, with final sales growing only 1.7%. So, at the time of maximum policy stimulus (H2 of 2009), final sales were growing only at a pathetic 1.8% average rate.

 

The eurozone (EZ) debt crisis, which RGE discusses in depth in a major new paper, predisposes Europe to a rising double-dip risk, due to the wave of fiscal austerity sweeping the periphery of the EZ. Even if the EZ doesn’t enter a double dip, the growth of domestic demand there will be as or more constrained than in the United States. This, in turn, will be a drag on the potential for U.S. export growth. The U.S. dollar rally on risk aversion reflects this risk. The U.S. dollar is settling back down and the threat of a debt crisis is headed off by a stronger Greek fiscal adjustment and potential adjustment package. But fiscal spending cuts, confidence hits and the looming threat of either rising unemployment or falling wages in the public sector—on top of private sector retrenchment—will remain. A similar retrenchment may well lie ahead in the United Kingdom, given rising fiscal sustainability concerns and the threat of a sterling crisis. Europe then will have great difficulty being a source of demand for U.S. exports, and may even provide impetus to faltering global demand growth, contributing to the threat of a wider double dip across high-income countries.

GATA must be gulping hard as Goldman, GETCO, Citadel, MS, UBS & DRW announce the purchase of minority stakes in NYSE Liffe U.S., which administers 100 oz. gold futures, 5,000 oz. silver futures, options on gold and silver futures, and mini-sized 33.2 oz. gold and 1,000 oz. silver futures.  The long-suspected ringleader of silver futures short-sided shenanigans, JPM, was conspicuously absent from today's NYSE press release.

 

 

NYSE Liffe U.S. Completes Sale of Ownership Stake to Leading Market Participants

-Reinforces Commitment to Competition, Innovation and Customer Service-
-Semi-Mutualized Exchange Structure Now with Six Partners in Total-

New York, March 10, 2009 – NYSE Euronext (NYX) today announced that it sold a significant minority ownership stake in its U.S. futures exchange, NYSE Liffe U.S., to six leading firms and liquidity providers: Citadel Securities, DRW Ventures LLC (an affiliate of DRW Trading Group), GETCO, Goldman Sachs, Morgan Stanley, and UBS. NYSE Euronext will continue to be the largest shareholder in NYSE Liffe U.S., managing the exchange’s daily operations. NYSE Liffe U.S. will continue to operate under the supervision of a separate Board of Directors, chaired by James J. McNulty, former CEO of the Chicago Mercantile Exchange.

"With the completion of this transaction, NYSE Liffe U.S. is well positioned to deliver innovation, competition and value to the U.S. derivatives marketplace," said Duncan L. Niederauer, Chief Executive Officer, NYSE Euronext. "We are committed to building a diverse, customer-driven U.S. futures exchange, and are confident that partnering with our clients is the right strategy for success."

"The NYSE Liffe U.S. partnership includes some of the most sophisticated and forward-thinking participants in today’s global markets," said Thomas F. Callahan, Chief Executive Officer, NYSE Liffe U.S. "The addition of a world-class partner like DRW to this group will only accelerate our efforts to deliver a vibrant, liquid U.S. futures exchange."

"Citadel Securities is committed to innovation as a means to promote open, fair and transparent markets. NYSE Euronext shares these principles and we welcome the opportunity to become a founding partner in this innovative new exchange," said Patrik Edsparr, Global CEO of Citadel Securities.

Don Wilson, Founder and CEO of DRW Trading Group added, "DRW’s partnership with NYSE Liffe U.S. is an exciting opportunity to influence the evolution of the futures industry in this time of unprecedented regulatory change."

"GETCO has a long-standing tradition of supporting competition and efficiency across the spectrum of global capital markets. We look forward to working with NYSE Euronext to build a world class U.S. futures exchange," said Dave Babulak, Managing Director of GETCO.

Reinhardt Olsen, North American Head of Exchange Traded Derivatives of UBS said, "In closing this agreement with NYSE Euronext, UBS clearly shows our dedication to expanding our leadership presence in the listed derivatives marketplace and our commitment to delivering more trading options and better value to our customers."

NYSE Liffe U.S. is a fully electronic, liquid market for 100 oz. gold futures, 5,000 oz. silver futures, options on gold and silver futures, and mini-sized 33.2 oz. gold and 1,000 oz. silver futures as well as equity index futures based on MSCI Emerging Markets, MSCI EAFE, and MSCI USA indices. NYSE Liffe U.S. has plans to further expand into futures on other asset classes, including U.S. interest rate products.

The Options Clearing Corporation (OCC) acts as clearing house for NYSE Liffe U.S. futures on precious metals, MSCI index futures, as well as all ETF options and index options trading on NYSE Arca, creating the opportunity for unique margin efficiencies for NYSE Euronext customers. NYSE Liffe U.S. intends to clear its U.S. interest rate futures at New York Portfolio Clearing, its innovative joint venture with DTCC designed to offer significant transparency and capital relief to major market participants by offering ‘single pot’ margining of cash bonds and interest rate derivatives, subject to regulatory approvals.

 

 

While NYSE Liffe U.S. will continue to operate under the supervision of a seperate BoD, chaired by James J. McNulty, GATA might wanna hire Det. Jimmy McNulty from The Wire to search for all the dead bodies hidden within the crooked gold and silver futures markets.  Avon Barksdale, Marlo and Omar themselves would each be proud of this gold-cabal's ability to hide the monstrous carnage that lies in its wake; the remnant souls of fallen soldiers soil the soles of this cabal like broken vials beneath Bubbles' shoes.  David Simon himself couldn't write a seedier script of flagrant fraud and regulatory remiss.

 

 

Gold Futures (GC) ~ Daily

 

 

 

Silver Futures (SI) ~ Daily

 

 

 

 

 

" This game is rigged, man "

 

 

" We fight on that lie "

 

 

For similar technical market calls and insights into the idiosyncratic machinations of financial markets ~ check out fibozachi.com.

There, you can view a body of our analytic work as well as detailed explanations of the unique design development and technical methodologies within the proprietary technical indicator packages that we employ daily to perform a comprehensive technical analysis of financial instruments (stocks, options, ETFs, bonds, futures, FOREX, etc.) across interval periods of time, tick and volume.

It would appear that European leaders are back at their usual table.

Speaking at the Bookings Institute before meeting with the US administration, Greek Prime Minister George Papandreou blamed “unprincipled speculators” and “ill-regulated” financial markets for pushing Greece to the brink of financial ruin and dragging down the euro.  Along the way he convinced France’s Nicholas Sarkozy, that another financial crisis is around the corner if the CDS market is not curtailed.  Sadly, we agree with the conclusion, but many European “leaders” are confusing cause and effect.  Keith McCullough, at Hedgeye, explained it best yesterday when he said, “markets don’t lie; politicians do . . . hearing politicians talk about markets is like watching a southern belle try to ice fish.”

So let’s set the record straight.  CDS trades are not the cause of Greece’s problems.  Profligate government spending is the 800 pound gorilla jumping up and down in the center of the Parthenon.  We wonder how Mr. Papandreou would respond if asked to imagine that the Greek public debt ratio was 50% instead of 135% and the Greek budget deficit was 5% or 6% (or even a surplus heaven forbid) rather than 12.8%.  Would insurance against a Greek default cost north of 300 bps and would Greek government interest rates be trading at elevated levels and rising in this unfathomable scenario?  We think not.

We’d like to briefly review our “principles” for the benefit of Greece’s PM.  We are a small family office in North Carolina, entrusted with protecting family wealth and growing it prudently for future generations.  We are also fortunate enough to do the same for a few other families that share the same objectives and same values.  Believe it or not, when we lend (i.e. invest) our money to businesses – and governments – we expect to get it back (and occasionally earn a respectable return over time).  We have a fiduciary obligation to look after the pool of capital entrusted to us and work hard to earn our investors a consistent rate of return.  As Papandreou and Company go cup in hand on their global PR tour blaming “unprincipled speculators” for their own fiscal recklessness, we ask how many of these so-called, evil investment managers have been bailed out with tax-payer dollars during this Global Recession.  And we’d encourage Mr. Papandreou to consider the following “principles” as Greek actions speak louder than words:

• As early as 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, hidden from public view because it was treated as a currency trade rather than a loan.  This allowed Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
• Greece entered the monetary union with bigger deficits than permitted under the treaty that created the currency. Rather than raise taxes or reduce spending, the Greek government artificially reduced their deficits with derivatives.  Ironic how the same politicians are blaming derivatives for the problems they created.
• Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics.
• Then in 2002, accounting disclosure was required for many entities like Aeolos and Ariadne that did not appear on nations’ balance sheets, prompting governments to restate such deals as loans rather than sales.
• After numerous downward budget revisions, the recently appointed “Committee on the Reliability Of Statistics” uncovered $40 billion of previously hidden debt.  Per Zero Hedge, “the findings indicate that the possibility of political interference is mainly associated with the close relationship of NSS with the Ministry of Finance and the inability of the General Accounting Office to work independently and responsibly.”

George, George, George.  We wonder exactly what  is “principled” about levering-up your country’s balance sheet to 135% debt to GDP, with a 12.8% deficit and them blaming others for your problems?  Take a look at the recent piece by GaveKal which clearly demonstrates that markets are, indeed, efficiently pricing the risk in government balance sheets.  There is nothing speculative about it.

The reality is that, politicians having failed at the task, financial markets have now become the best ally of the Euro’s founding fathers. Indeed, since the beginning of the year, sovereign spreads have been nearly perfectly aligned with the level of fiscal constraint imposed by the Maastricht Treaty to each country of the Eurozone. In other words, the market is doing the job that policymakers could not tackle.

The fiscal data presented on the table above helps us to understand the current structure of bond yields in the Eurozone. Working with publicly available official data rather than with potentially opaque in-house assumptions, we obtain a very good fit (97% correlation) between actual bond yields and a small number of key variables. Thus, for all of the complaints about market manipulation, it seems that the hierarchy of spreads over German Bunds has followed, since the beginning of this year, a pretty rational walk. Actual debt levels and short-term pressure on government accounts have systematically explained more than 85% of yield spreads. When a liquidity risk premium is applied, the explaining power of our model rises to above 95%.

While visiting US President Barack Obama this week, Papandreou urged that “Europe and America must say ‘enough is enough’ to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system.”  We can almost visualize those cynical speculators letting it all roll.  Yet, we’d much rather invest for long-term returns, with a focus on capital preservation, than bet on the politicized strategy of piling debt, upon debt, upon debt.  Believe it or not, it appears that White House officials sent George packing, recommending that Greece focus on righting its economy and dealing with its own debt problems.  There is hope!

Submitted by Nic Lenoir of ICAP

The recovery has been uneven around the globe. The US with heavy stimulus has returned rapidly to positive growth (whether we can sustain it is a completely different debate), Swiss real estate was never really affected by the quasi worldwide slide and GDP in Switzerland is expected to be between 1% and 1.5% for 2010, and Canada has not only returned to positive growth but it also has to consider slowing down a bubbly real estate market. Meanwhile Europe's leading rebounder Germany is not guarantied to post positive GDP for Q1, Greece is wondering whether debt refinancing and what it will take will lead to civil war, Spain's industrial output is still approximately 30% off of what it was in late 2007, and Japan is discussing extending QE. The least we can say is that the bottoming process is rather uneven based on where you live, and with rates at near 0% everywhere or almost, we look at what relative value opportunities may present themselves as central banks debate how to transition from QE to more "normalized" liquidity environment and finally towards higher rates.

The Fed has constrained itself by stressing the 4 to 6 months meaning of "extended period of time". Some in fact view it as a moral hazard because it takes away some flexibility in the Fed's ability to respond to the data should it surprise significantly to the upside. As liquidity is starting to be withdrawn the need for the language and the constraints that come with it are starting to balance each other. While we have not necessarily heard enough from the Fed to believe a change in the statement is coming up necessarily next week, should it happen the sell-off in reds and EDZ0 should be brutal. If this is not the case, I expect the Fed to be at least a lot more vocal in stressing liquidity withdrawal and give details about upcoming operations. The carry remains pretty steep (58bps rolling EDZ0 to EDH0) but policy risk to longs is starting to build up.

The BOC has historically rarely started hiking before the Fed. At the same time, the BAZ0/EDZ0 which was just under 20bps to start the year is now at 60bps. So if history repeats itself and the BOC waits for the Fed to draw first, the spread is probably a bit rich here. I am not sure whether the BOC has the luxury to wait for the Fed, but USDCAD in the lower end of the range between 1.02 and 1.03 is also certain to lead to caution as a strong CAD is not at the top of the BOC'c wishlist. So the Dec BED spread is slightly rich or at best fairly priced we feel.

The SNB has been at the center of many talks in the last few days and it is believed that in the current more risk prone environment the appreciation of the CHF against EUR and USD has been more controlled which may give Switzerland the room to maneuver it needed to consider hikes. Here again outright plays other than for June are carry-expensive and some worry that the overall poor environment in Europe will also make the SNB more hesitant. A relative value play could be to buy ESZ0/ESH1 as a spread against selling ERZ0/ERH1 as a spread. The liquidity normalization in Europe is keeping the Euribor curve relatively steep in the front-end, but at the same time hikes are completely out of the picture. Selling ERZ0/ERH1 rather than buying Euribors outright isolate the liquidity normalization risk while allowing to take a view on a stronger economic environment in Switzerland. (See ERES Z0H1 Chart)

The economic picture in Europe is so obviously bad that rates are completely out of the picture. The ECB is historically a solid year beinh the Fed anyways as the US economy enters faster in recession but also comes out of it a lot faster. However, if the carry to ERZ0 still seems attractive being north of 50bps, a lot of it stems from the expectation of liquidity normalization which would bring Eonia back in line with the 1% target rate. The fact that ERZ0/Z1 is in th mid 80s and EDZ0/Z1 above 140 is already factoring a more aggresive Fed. Still by historical standards more could easily be priced in. We looked at buying EDZ0/H1 against ERZ0/H1 and found that even tough the market could well price more, the box trades already +14bps, so it is a relatively consequent negative carry. Until policy starts physically changing, fighting carry can be a very expensive hobby, so we prefer the SNB/ECB play mentioned earlier when it comes to fading ECB hikes.

The Bank of England has a tough task ahead, but not as tough as fixing the budget gap is. England seems to have the will compared to other countries to balance the budget to avoid a refinancing crisis like what is happening in Greece (claims that the crisis is over today by the way or not only ludicrous but also moronic as there is a huge tranche of refinancing coming up in April and May, and only successful issuance will allow politicians to claim victory). As long as those issues aren't addressed, and the consequences of the austerity required on the economy are evaluated, an extension of QE could well be more likely than talks of hikes. This is why we view a relative value play between ED and short sterling as the best way to express the economic outperformance of North America over Europe. The chart shows that buying EDZ0/H1 against L Z0/H1 allows us to express the view without barely any carry, we would buy the spread around -2/-3 in order to play +10/+15. For those who prefer using options, this morning we priced that selling the EDZ0 99.50 calls to buy the L Z0 99.125 calls could be done receiving 3bps for the structure. If both markets sell-off a gain of 3bps is realized, and the only real downside scenario would be a case where the Fed is on hold through 2010 and the BOE hikes. We view this scenario as very unlikely.

The last central Bank we want to quickly mention is the Bank of Japan. Most market participants expect the BOJ to extend QE and continue to pump liquidity into the system in a desperate 20 year in the making attempt at creating inflation. Whether they succeed or not, it should undermine the vlaue of the JPY. As I have stressed out on many occasions I believe USDJPY is grossly mispriced. The trade is hard to keep on because of risk aversion flight to JPY which can be rather painful, but if one aligns market timing with fundamentals it is a good trade to play from the long side. Watch closely a break past the 91.50 and 92.80 resistances which would confirm an exit outside of the bearish channel and lead to a strong move upward.

Good luck trading,

Nic

• Yields 3.735% vs. WI of 3.744% as of 1 PM
• Allotted at high 70.94%
• Bid To Cover 3.45 is a new record, previous at 2.67, previous reopening at 3.00
• Indirects 35.1% vs. Avg. 42.01% (Prev. 28.85%), hit ratio on Indirects 51.5%
• Direct Bidders surge to a record 17.5%, hit ratio on Directs 43%
• Primary dealer hit ratio at record low 19.9%

Some Market News commentary discussing the expectations on the 10 year reopening in advance of the auction, which may explain the various records in today's auction.

Wednesday's $21.0 billion 10-year note reopening sale is expected to be sponsored by short covering as well as real and
fast money demand, as specific foreign accounts may be at bay due to the issue's reopening status or its timing ahead of the Japanese fiscal year end, sources said. Given the downtick in prices, the auction should, in theory, be supported by short covering. Dealer desks confirmed that a portion of both Tuesday and Wednesday's downtick is linked to this week's auction trio set up.

 

The ABC Consumer Comfort Index, which is by far the most pessimistic of all confidence trackers, and which conveniently comes out each Tuesday after market close, and just came in at -49 "has been iced in a 3-point range since early January, averaging -48 on its scale of +100 to -100 this year. That ties last year’s average, the worst on record in weekly polls since late 1985." Digging into the data reveals why the non-millionaires in America - those that do not have access to the government's record excess liquidity - are just plain unhappy about the economy: "The index’s individual components tell the story: Half or more Americans have rated their personal finances negatively in 91 of the last 97 weeks. Fewer than one-third have rated the buying climate positively steadily since November 2007, about when the recession began. And at least eight in 10 have rated the economy negatively since late March 2008, stuck in a 4-point range since last April." While we have little doubt UMich Confidence and Conference Board will show dramatic improvements, as these two are merely a lagging market indicator, the question of just whom these various indices tracks, is becoming increasingly relevant as even the divergence between assorted confidence levels reaches record levels.

More from the press release:

INDEX – The CCI has been below the -40 mark for a record 98 weeks. It’s now 36 points below the long-term average, -13, and has been below that average for a remarkable 125 consecutive weeks – well over two years. It languished longer below its long-term average just once before, in a more than four-year stretch from April 1990 to December 1994.

Among the individual components of the index, just 8 percent of Americans view the economy positively, the fifth straight week at this level, the 15th straight week of single-digit ratings and 29 points below its long-term average.

For nine weeks straight at least half of Americans have rated their own finances negatively, and a quarter or fewer have called it a good time to spend money.

GROUPS – The CCI is -11 among the highest-income Americans vs. -65 for those with the lowest incomes; however this 54-point spread is the narrowest it’s been since November. Among other groups, the index is -41 among people who’ve attended college vs. -71 among those who never finished high school, -43 among homeowners but -67 among renters, and -57 among Democrats vs. -47 among Republicans. The index is closer than usual among men and women, - 45 vs. -51. And it’s notably low, -52, among 18- to 34-year-olds.

Here’s a closer look at the three components of the ABC News CCI:

NATIONAL ECONOMY – Eight percent of Americans rate the economy as excellent or good for the fifth straight week. The highest was 80 percent Jan. 16, 2000; the worst, 4 percent Feb. 8, 2009.

PERSONAL FINANCES – Forty-four percent say their own finances are excellent or good; it was the same last week. The best was 70 percent, last reached in January 2000. The worst was 39 percent June 28 and 21, 2009.

BUYING CLIMATE – Twenty-five percent say it’s an excellent or good time to buy things; the highest it’s been since the first week of the year. The best was 57 percent on Jan. 16, 2000. The worst was 18 percent, last reached Oct. 19, 2008.

 

Recap of market activity post the European close.

A new report by Moody's "U.S. Bank Asset Quality: Negative Trends Slow Down, But The Pain Isn't Over" has some gloomy observations about the asset quality of the US financial system, and its implications for future charge offs and overall profitability. In estimating total loan charge-offs between 2008 and 2011 Moody's predicts that of the total $536 billion (really $633 billion if unadjusted for purchasing accounting marks), which is equal to 9.7% of all loan outstanding at December 31, 2007, only $240 billion has been charged off, leaving $296 billion still to hit the books. Yet banks have taken loan loss allowances of "only" $188 billion, leaving just over $100 billion unaccounted for. And people wonder why banks are unwilling to lend. Moody's conclusion on what happens as reality catches up with charge offs: "Although banks have provisioned for a substantial amount of their remaining charge-offs, the additional provision required will extend the period that many banks will be unprofitable well into 2010, and will reduce capital levels." Obviously, Moody's estimates do not go past 2011 when many anticipate the next major wave of loan impairments to occur in the form of Option ARM resets and Commercial Real Estate maturities. Furthermore, Moody's does not account for securitized credit card losses, which will also be an area of major pain for the banks in the upcoming years.  Just how big the impact of all these will be is still to be determined although it is very likely that the overall impact will impair overall bank capital by well over $100 billion over the next several years.

From the Moody's report:

Moody’s estimates that rated U.S. banks will incur $536 billion of loan losses between 2008 and 2011, equal to 9.7% of loans outstanding at December 31, 2007. We have incorporated this amount into our views of banks’ capital adequacy and into our ratings. This amount has been reduced for the purchase accounting marks taken on residential and commercial mortgage portfolios in recent acquisitions, including JP Morgan’s purchase of Washington Mutual, Wells Fargo’s purchase of Wachovia, Bank of America’s purchases of Countrywide and Merrill Lynch, and PNC’s purchase of National City. On a gross basis (prior to the reduction by the purchase accounting marks), Moody’s loss estimate is $633 billion, or 11.4% of loans outstanding at December 31, 2007. Essentially, we believe charge-offs equal to 1.7% of loans were eliminated through purchase accounting write-downs. Note that these estimates exclude securitized credit cards.

The charts and table below summarize our gross loss estimates in dollar and percentage terms by asset class for all rated U.S. banks (Figures 1 and 2). Each asset class is broken down as follows: charge-offs that have been eliminated through purchase accounting write-downs, 2008 charge-offs, 2009 charge-offs, and the remaining losses that would need to be incurred to reach our full estimate. Rated U.S. banks charged off $88 billion of loans in 2008 and $152 billion in 2009, leaving $296 billion, or 5.3% of loans, to be charged off in 2010 and 2011 to reach our full estimate. Therefore, rated U.S. banks have recognized 45% of our anticipated net charge-offs. On an asset class basis, we believe 42% of residential mortgage losses have been taken versus 30% for CRE.

And despite some minor good news in the trend, the overall patern is still one which should force financial analysts to reevaluate their Strong Buy ratings on most banks:

Although the increase in charge-offs between 2008 and 2009 is substantial, the quarterly charge-off trend moderated at the end of 2009 with aggregate charge-offs actually declining slightly (from $41.3 billion to $40.2 billion) between the third and fourth quarters of 2009. This slow down in net charge-off recognition for rated U.S. banks did not change our forecast of the amount of charge-offs rated U.S. banks will incur, but it has changed our expectations regarding the timing of when these losses will be recognized. Previously, we had anticipated that rated U.S. banks would incur elevated charge-offs through 2010 and return to a more normalized level of charge-offs in 2011. However, we now anticipate that banks will still be grappling with elevated charge-offs through at least the first half of 2011.

The TBTF Big 4 (BofA, Wells, JPM and Citi) comprise the bulk of the charge off risk. The Big have merely gotten Bigger, and now represent an even more concetrated threat to the US economy once true marks are let out of the bag.

Figure 3 summarizes our gross loss estimate in dollar terms for the following bank groups: “Big 4 Banks”, “SCAP Banks – Non Big ”, and “Other Moody’s Rated U.S. Banks” . Our gross loss estimates for the Big 4 Banks, SCAP Banks – Non Big 4, and Other Moody’s Rated U.S. Banks are $447 billion (12.9%), $104 billion (10.4%), and $81 billion (7.5%), respectively. In comparison to our estimate that rated U.S. banks are 45% of the way through their net charge-offs, we believe the Big 4 Banks are 46% of the way through their net charge-offs, while SCAP Banks – Non Big 4 and Other Moody’s Rated U.S. Banks are each 43%.

And here is how many remaining losses at all banks and the Big 4 will still need to be digested.

Full report here.

 

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In his piece today, Rosenberg analyzes the increasing lumpiness of volatility in the secular market, observing an increasing performance variation as the duration of major market moves is reduced, while the delta from the flatline keeps growing. Ironically this is happening even as implied correlation drifts lower over time. And even as all eagerly await to see just what the financial regulation overhaul will look like, Rosie observes that the market is now experiencing "intense volatility that has been and continues to be nurtured by government policy." As we shift to a market which is backstopped by taxpayers holdings of assets on which even the FASB encouraged informational opacity, one wonders just what is the real value of information that prices now convey?

From Gluskin Sheff's Breakfast with Dave:

MARKET COMMENTARY

We invoked the Shiller normalized P/E ratio yesterday as a great historical benchmark to use in terms of valuation purposes. Using this metric, we found that the S&P 500 enjoyed above-average multiples each month from November 1988 right through to November 2008. Imagine as we mean-revert how long the market will have to trade below historical multiples.

When we go to the bear market, what we see is that the S&P 500 did not move into fair-value until November 2008 — think about that for a minute. The first 13 months and 40% of the bear market merely eliminated the overvalued condition in the stock market. And for the next five months, the S&P 500 was undervalued, having hit a 20% breach at the March lows. By May 2009, however, when the S&P 500 crossed the 900 mark to the upside, the index had managed to move back above the fair-value line where it has stayed ever since — and now a breach of 25% in terms of overvalued terrain. Further to this thought process, have a look at Andy Kessler’s op-ed column on page A23 of the WSJ (Lessons of a Dow Decade).

When we look at the past 12 years, dating back to LTCM and the bailout that ensued, we have endured a 60% rally, followed by a 50% selloff, followed by a 100% rally, followed by a 60% selloff, followed by a 70% rally. The whole way along, the equity market is basically flat for a buy and hold investor.

The point in all this is the intense volatility that has been and continues to be nurtured by government policy. The lesson is that investors will now lose out by going long after a 50% selloff from the high and are unlikely to feel much pain from selling into a 70% rally from the low. All the while, the name of game is to minimize the volatility in the portfolio and embark on strategies that have low correlations to the equity market.

Finally, what is amazing is that equity market bulls are looking for the next leg up to come via improvement in the U.S. labour market. The USA Today runs with an article (page 4B) concluding that “investors need to see a Labor Department report that says employers are creating more jobs than they’re cutting. Until then, investors are going to stay cautious.” This is a truly unbelievable comment considering the S&P 500 has surged 70% in the past year — 10 years of price appreciation lumped into one — even though 3.3 million jobs were lost. Since when has Mr. Market shown that it really has an eye on the labour market? It’s all about a chase for relative yield in a low rate environment — a highly speculative environment, which is why U.S. companies have managed to float a huge $12 billion of new bond supply in each of the past two days; the hunger for yield.

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The BLS has released the January state unemployment update: the unemployment rate increased in 30 states, while somehow nonfarm payrolls increased in 31 states. Presumably this is due to an increase in the total labor pool. As reported, "Michigan again recorded the highest unemployment rate among the states, 14.3 percent in January. The states with the next highest rates were Nevada, 13.0 percent; Rhode Island, 12.7 percent; South Carolina, 12.6 percent; and California, 12.5 percent. North Dakota continued to register the lowest jobless rate, 4.2 percent in January, followed by Nebraska and South Dakota, 4.6 and 4.8 percent, respectively. The rates in California and South Carolina set new series highs, as did the rates in three other states: Florida (11.9 percent), Georgia (10.4 percent), and North Carolina (11.1 percent). The rate in the District of Columbia (12.0 percent) also set a new series high. In total, 25 states posted jobless rates significantly lower than the U.S. figure of 9.7 percent, 11 states and the District of Columbia had measurably higher rates, and 14 states had rates that were not appreciably different from that of the nation."

Below is a chart of the unemployment rate by state for the past 4 months as well as the sequential change.

Remember G-Pap's statement, repeated roughly once for every dollar of US sovereign debt, that Greece is not looking for financial aid? One could say the man knows a lost cause when he sees one (nobody can say they refused to help you if you didn't actually need help), which is why Greece has just become the biggest sovereign debt panhandler, begging its own people for a bailout. The Greek situation is now so bad that as of a few days ago there is a newly opened account titled "Solidarity Account for Repayment of Public Debt" at the Bank of Greece, which is now redirecting public donations straight for the "repayment of Greece's public debt." We hope these are tax deductible. This account has appeared about at the same time as California has started asking retail investors to directly invest in its critical $2 billion bond offering. In the sovereign crises of the future, will paypal donations play a critical role? All signs point to yes.

 

h/t Marco

Via UBS Financial Services

As Told To….. – I was at an all-day, offsite seminar yesterday so this is not the usual eye-witness account but is based on input from friends. The stock market opened marginally weak but quickly changed to the upside in reaction to a sharp downside move in the dollar.

Some upbeat talk from some airlines about the “return of the passenger” combined with strength in the railroads to take the Transport Index to a new 52 week high. Since the Industrials have not made a new high that sets up a Dow Theory “confirmation” challenge. If the Industrials fail to make a new 52 week high that would set up a negative divergence, hinting a meaningful pullback in stocks.

For much of the early going the Industrials looked like they might have a go at a run toward new highs. Part of the thrust came from a series of rumors that spurred trading in the likes of Fannie, Freddie, AIG and Citi. The rumor that seemed to help them all was a zany thesis that the U.S. might ban shorting of the companies that it had a large stake in. While the rumor seemed whacky and unfounded, a rumor is not responsible for who believes in it. That became evident as buyers surged into the above-named stocks, probably on the theory that a shorting ban could cause a massive short covering rally.

Citi benefitted from a couple of other rumors. Charlie Gasparino reported on Fox that the U.S. government was looking to sell its Citi stake. That might free the company up. The stock spiked 7%. Also helping was the strong demand for some preferred shares the company was issuing.

The rumor driven frenzy in those stocks swelled the volume sharply. Monday looked like the slowest day of year, followed by the highest volume in a month. All thanks to a couple of rumors.

Shortly after 1:00, the rally in the averages seemed to sputter. The initial pull back was small. They regrouped and tried to rally again shortly after 2:00. They failed to get past the earlier high and things started to turn ugly, quickly. Bids evaporated and stocks plunged in a trapdoor selloff. They shot into negative territory.

In the final hour, they circled the wagons and regained plus territory but marginally. Unfortunately, the general volume (away from the four rumor beneficiaries) accelerated on the selloff.

What caused the sudden selloff? They were several theories. First was simply technical. The failure of the S&P to surmount its earlier intra-day high, presented a double top and a failed attempt to break through Januaries highs. That, said the napkin readers, spooked the bulls.

Some friends had another theory. Shortly after 1:00, a Wall Street Journal blog run a story on a speech by a Fed official. Here’s a bit:

For some time now, Federal Reserve officials have been hesitant to put a precise time frame on when they will begin to tighten policy, except to note the action lies well into the future.

But on Monday, one of their chief lieutenants, the man charged with implementing Fed policy, offered a pretty clear take on the likely timing of a move up in interest rates. The official, New York Fed Markets Group chief Brian Sack, has no formal role in setting monetary policy. But his position elevates his importance, and he suggested in a speech some sort of rate tightening will occur by late year.

“The current configuration of yields and asset prices incorporates expectations that short-term interest rates will begin to rise around the end of this year,” Sack told a group of economists in Virginia. “The markets seem prepared for the risks toward tighter policy,” he said, adding a “decent-sized term premium” on longer-dated yields suggests low chances of a “sizable upward shift in yields’ when that tightening comes.
Why is this observation important? Sack’s speech was entitled “Preparing for a Smooth (Eventual) Exit” from the current state of very stimulative monetary policy. If the Fed wants a tranquil exit from its current stance of 0% interest rates and if it thinks market are priced for the move, then it’s reasonable to believe a late-year increase in rates is what policy makers have penciled in.

Sack’s speech also laid out a path for the unwind. He sees the Fed draining reserves on a temporary basis, then raising rates, all the while allowing the $1.7 trillion in mortgage and Treasury assets it will have purchased by end-March to mature. Any active sales will come much later. Importantly, he said the tools to drain reserves temporarily will be in place by midyear, lending additional heft to the idea the Fed can start easing rates up off 0% by year end.

That hinted tightening could come sooner than expected. Some friends claim it caused a lot of buzz and may have contributed to the selloff.

We’ll investigate more today.

Spotty Performance – My ham radio pal passed along the latest sunspot data. For the period from February 25th through March 3rd, the numbers were 30, 26, 26, 13, 36, 39, and 39. Longtime readers will recognize that for the first three days, we had basically two spots per day. Then, we dropped to one spot followed by three days of approximately three spots per day. It’s nice to see the action but we’re still below normal. Despite the recent thaw, remember where you put that sweater.

Consensus – Assaulting January highs. Stay Nimble.

Trivia Corner

Answer - If you spell "Tennis" backward, you find the last three letters spell "Net" - a piece of equipment used in Tennis.

Today's Question - Tomorrow, today will be yesterday and yesterday, today was tomorrow. When tomorrow is yesterday, today will be as close to Sunday as today was when yesterday was tomorrow. What day is it?

And here is why fixing healthcare, whether today or in the middle ages, never works when the government gets involved:

History

On this day in 1349, in the midst of the infamous Black Plague epidemic, the forces of government, science and academia came together with a plan to save the people. As you recall from earlier episodes, the Black Plague had spread from the eastern Mediterranean throughout most of Europe killing millions over the preceding three years. People searched everywhere for the source of the plague…..a heavenly curse; a burden of immigrants; the result of spices in the food. It was tough to figure however, since whenever they held a conference either the host area caught the plague or the visitors did…..so…..not too many conferences.

Then in the six months preceding this date the death rate leveled off…..or seemed to. So in castles and universities and town halls across Europe, great minds pondered the cause of the plague. And they came pretty close. The collective governmental/academic wisdom was that the source of the Black Plague was fleas - (absolutely correct). So the word went out from town to town across Europe - to stop the plague - kill the fleas -by killing all the dogs. And immediately the slaughter of all dogs began.

But like lots of well-intentioned governmental/academic ideas it was somewhat wide of the mark...and had unexpected consequences. The cause was fleas alright but not dog fleas…..it was rat fleas. And in the 1300's what was the most effective way to hold down the rat population…..you guessed it - dogs. So by suggesting that townsfolk kill their dogs, the wise authorities had unwittingly allowed the rat population to flourish and thus a new vicious rash of Black Plague began. Before it was over, three years later, nearly 1 out of 3 people in the world had died of the plague.

To mark this eventful period, take time to review your public servant’s plans for your welfare. Whether taxes or healthcare, they'll work night and day for a solution. It may not be as efficient as the way that they handled social security but - what is? Just remember that these public servants have your best interests at heart. Don't dwell on the DARK AGES. Back in those days the seat of government often was filled with rats, vermin and leeches. Thank goodness those days are over.

(Historic footnote…..Published sources say that with so many people dying, millions of estates had to be settled - result…..the fallout of the plague was a huge growth in....the number of lawyers.)

There were no carts on Wall Street with guys crying "bring out your dead" yesterday. But in mid-afternoon, the stock market looked like it needed a doctor.

• Regulators tell US banks to hold money (FT)
• Even as Italy is expected to go bust next, Italy's Romano Prodi Says "Greek Crisis Is Over, Rest of Region Safe" (Bloomberg)
• Race to the bottom with G4 currency rhetoric (Reuters)
• Finance: an exposed position (FT)
• Todd Harrison: The witch hunt widens on Wall Street (MarketWatch)
• Simon Johnson reviews Hank Paulson's memoir (The New Republic)
• O'Krugman's Keynesian blarney (IBD)
• Buyout firms can't spend $503 billion as fund deadlines loom (Bloomberg)
• China's exports, property prices add pressure to pare stimulus (Bloomberg)
• GDP growth expected to slow down, keep rates low (Reuters)
• Dubai made "some progress" in debt talk, U.K. minister said (Bloomberg)
• Goldman moves to block Shaw Communications from buying Canwest (Financial Post)
• Dollar optimism soars to 18-month high as US outpaces Europe (Bloomberg)
• Macroimprudential monetary policy (National Post)
• Abu Dhabi is future base for Murdoch's News Corp (Breitbart, h/t Bill)
• Build America pays off on Wall Street (WSJ)
• Greece says no budget slippage, concerned by yields (Reuters)
• Wall Street's role in Greek crisis should be no surprise (WaPo)

 

 

• Asian stocks fluctuated as shipping lines and oil companies declined.
• British banks face increased bonus disclosure as Myners plans to lower bar
• China's trade surplus shrinks to smallest in a year as imports surge 44.7% in Feb.
• Chinese banks lend about $102.6B in February, around half the loans issued in Jan.
• EU is considering a ban on speculative derivative trades, including credit default swaps.
• Japan's Jan machinery orders fall 3.7%; business spending revival may be slow.
• Manufacturing in U.K. unexpectedly plunges as it sees `fragile' economy
• AIG climbs on speculation bailed-out U.S. insurer may divest more assets
• Steelmakers in Europe, US are allocating larger budgets to growth projects in 2010.
• US Senate said to weigh setting up $50B fund to wind down failed firms.
• Abbott Labs will bulk up its product pipeline with a $722M deal for Facet Biotech Corp.
• AIG's `money in the door' asset sales reap $3.2B for bondholders
• Apollo Mgmt LP to buy Citigroup Inc.’s real estate investment unit (NAV of $3.5B).
• Barclays is seeking a retail lender that would give it more deposits.
• Cathay swings to 2009 profit of $604.4M led by fuel hedging gains. Revs fell 23%.
• China Mobile agrees to buy 20% of Pudong Development Bank for $5.8B
• Collective Brands Q4 loss narrows to $10.9M on year-earlier charges.
• Continental Air open to merger should competition dictate
• E.ON's 2009 net rises almost 7 times to €8.4B on asset sales and derivative gains.
• Foot Locker expects sales to rise to $6B in five years.
• Ingersoll-Rand prohibits non-U.S. subsidiaries from selling products to customers in Iran.
• Glencore profit dropped 43% in 2009 on lower metal and energy prices
• Kroger Co. reported its Q4 net fell 27% to $255.4M on higher costs. Revs rose 7.2%.
• MGM creditors say they would rather convert to equity than sell out for an unsatisfactory price.
• Munich Re eyes 2B eur 2010 profit despite quake
• Navistar's Q1 profit slumped 93% to $17M on a big year-earlier litigation gain.
• Neiman Marcus swings to Q2 profit of $4M after steep write-downs year-ago.
• PCCW Ltd's 2009 net profit rose 19% on revaluation gains in its property, financial invts.
• Sanofi, Merck to revive JV that would be the world's largest seller of animal medications.
• Toyota says no new Prius recall planned.

Earnings Calendar: AEO, BONT, GYMB, HIL, HOTT, IPAR, JAS, MTN, MW, ODC, RAE, RMIX, SMTC, SMTX, STAN, WG.

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