Fed Joining in Alarm Over Distortion It Enabled: Or How Do They Bailout, a Bailout?

February 13, 2013
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“To fight this recession the Fed needs more than a snapback. Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble.” - clown posse Paul Krugman in 2002.

Addendum to yesterday’s junk bond post (at Actionables) . When you finally get a headline and story like this out of mainstream financial outlet like Bloomberg, it means the Fed is in big trouble: Fed Joining in Alarm over Distortion it Enabled. I added a chart to that post showing the huge surge of lite-covenant issuance in 2012. Then in January sales of so-called covenant-lite loans represented about 55 percent of the debt sold to non-bank lenders, the greatest proportion ever, Morgan Stanley analysts wrote in a Jan. 25 report. Covenant-lite debt does not carry lender protection such as financial maintenance requirement.

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It’s Like Speculating on the Mafia

February 6, 2013
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I highly recommend viewing one of Brazil’s biggest box office hits ever is “Tropa de Elite II” (trailer), which is a very intelligent film about the “sistema,” or corrupt system, in Rio de Janerio. It’s available  on Netflix (with subtitles) in the instant play/streaming section. The story involves the sleazy criminal alliance between a group of corrupt  politicians and corrupt police militia (corruptos), who move into a vacuum after the traficantes (drug dealers) and vagabundagem are run out of several of Rio’s largest favelas (slums) by Rio’s special police, the BOPE.  The corruptos (some of the best villains in film history) then take over the favelas unchecked, and in mafia style, exploit and control the communities through violence and intimidation.

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The Real Great Rotation Will Be A Shift Away From Money

February 4, 2013
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The “great rotation”,  is the newest propaganda meme for the masses. On Google search stats, the last major spike was the 2007 market high. This one has been around for awhile and now shows a recent search surge. However, the money flows into equities represent the pull forward of selling into December to take advantage of lower tax rates. January is primarily a return of this investment, and not new money of any consequence.  January almost always sees money coming to the market, so this is being exaggerated. Even if there was a rotation, that would spell the death knell of the credit and bond bubbles.  Credit and bond bubbles need constant new credit, not diversion to equity.

Entire article is available at Seeking Alpha. 

 

 

Consumer is in Trouble

January 30, 2013
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Presented without comment:

Redbook Chain Store Sales: +1.6% Y/Y vs. +1.8% last week. The 1.6% is the slowest growth rate since mid-Nov. ICSC Retail Store Sales: -1.0% W/W, vs. -1.5% last week.+2.0% Y/Y vs. +3.5% last week. Higher payroll taxes, post-holiday and cold temperature negatively impacted store sales

Jan. Consumer Confidence: 58.6 vs. 65.1 expected, 66.7 in Dec. (revised).

More perverse lousy numbers followed by a rally to new highs in Amazon (AMZN): Q4 EPS of $0.21 misses by $0.07. Revenue of $21.27B (+27% Y/Y) misses by $1 billion and guides 1Q revenue lower by $1 billion.

 

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America’s New Housing Landlords

January 17, 2013
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Lee Adler and I discuss this topic in last part of Radio Free Wall Street.

America’s New Housing Landlords is available at Seeking Alpha.

An article in the “Arizona Republic ‘Phoenix Becomes Virtual Investor’s Housing Market‘, reveals how a handful of large financial institutions are dominating housing purchases and ownership in regions such as metro Phoenix. Key takeaways: -

The Jefferson Cupronickel: America’s Last Honest Currency

January 15, 2013
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“When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.” – Sir Thomas Gresham (Gresham’s Law)

The Jefferson nickel, or the Cupronickel, should be considered as America’s last honest  currency. Your first reaction might be “only a kook cooped up in bunker would hoard nickels, right?” Not exactly. Consider this: Kyle Bass, founder of the Hayman Capital Partners hedge fund, reportedly exchanged one million dollars for 200 million Cupronickel nickels.

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