It is better to be an outcast, a stranger in one’s own country, than an outcast from one’s self. It is better to see what is about to befall us and to resist than to retreat into the fantasies embraced by a nation of the blind.
Chris Hedges

Tuesday, January 19, 2010

A Carbon Tax may save us.

I have not considered the pluses with respect to climate change economics. But economist Jeff Rubin makes a strong case for a global tax on energy consumption. This is a long video but it is well worth a look and listen. Thanks to Paul Kedrosky's Infectious Greed

Saturday, January 09, 2010

Terminal Turbo Timmy

Turbo Tim's time in "The Show" is drawing to a close.

The much heralded phenom is about to be relegated to the minors after the New York Times revealed the former FRBNY's chairperson put the kybosh on the release of counterparty details in AIG's backdoor payout to Goldman Sachs, That the Washington Post also got copies of the e-mails between AIG and FRBNY smells of Team Obama's desperate need to save face on composting economic matters and offer a sacrificial lamb on the altar of public opinion. William D. Cohen's Op-ed in the Times, that identified Paulson, Bernanke, and Geithner as the three horseman of the economic collapse provides the third witness.

Bloomberg reports that Geithner will be called before Congress on January 18th to testify on his role in the affair. White House Press Secretary issued a hearty "of course" when asked if the President still supported the Treasury Secretary... the kiss of death.

Senator Byron Dorgan, who recently announced he would not stand for re-election, has added his name to those placing a hold on Ben Bernanke's second term as Federal Reserve Chairman. Dorgan makes six Senators- from both sides of the House - who want a vote on Bernanke's reappointment. 41 votes in the Senate and Bernanke is toast. Only a neophyte could believe the two matters are not closely related.

Rahm Emmanuel's iron fingerprints are all over the brown envelopes slid under the doors of the Times and Post after being caught flat-footed by the momentum of HR 1207. Ron Paul's audit the fed bill revealed the soft underbelly of House politics in the face of growing popular dissent, Obama does not want the same dynamic to take out Ben Bernanke.

With mid-term elections on the fore, Congress needs to show some steel and Timmy is the fall guy. It's a win-win situation for everyone: Timmy gets to pull in some 'Rubinesque' coin, Summers gets his shot at Treasury(?), and campaigning Congressmen and Senators get to flex and preen for voters.

But the real game is putting a stop to the multiple crosshairs being brought to bear on Time's Person of the Year.

Friday, January 08, 2010

Nexus Point - March 2010

The pivotal month is March. The Fed has signalled an exit from purchasing MBS (Quantitative Easing) and the results from Q1 earnings and job numbers will be in. This is Big Picture's Peter Boockvar's take on early 2010:
The US Treasury market, Fed and the level of interest rates hold the key to stock market performance in 2010 and the thesis will specifically be put to the test just in the next few months. If the Fed decides to stick to their current plan to end the purchases of MBS/Agency debt by March 31st, yields are going higher with mortgage rates following and stocks are going lower as they’ve already priced in, in my opinion, a healthy rebound in corporate earnings. If the Fed caves in because of the fear of what higher rates will do to a still fragile but improving economy and announces another round of asset purchases, aka more money printing, no matter what the size, the reflation trade will be in full force, the US$ will resume its downward trend and nominal gains in stocks will continue.

PIMCO's Bill Gross believes there will be a need for Stimulus II, shifting the focus from backstopping financial institutions to kickstarting job creation. In this interview for Time Magazine, the Managing Director for the world's largest Bond firm says this:
The first half will be dominated by government stimulus and by inventory accumulation or a lack of [inventory] liquidation among businesses. I expect nothing from consumer [spending] and nothing really from housing or really any of the standard cyclical leading sectors. It's hard to put a number on GDP growth rates, but let's say 4% in the first half and then 2% in the second half, which would basically call for some additional help.,8599,1951623-1,00.html

By March we will know if Bernanke/Geithner did enough and if there is enough residual from Stimulus I to effect the national economy in any real way. If stocks retrace significantly and if Interest Rates increase (I think they will), then fears of a double-dip recession will generate the need for a second stimulus package. If we are being set up for Stimulus II, the $2 trillion dollar question is: How will we finance the deficit without more QE?

Friday, January 01, 2010

Best 2010 Forecasts

Well, this is the time of year when everybody selling investment advice or books gives you their forecast for the year. Since this site provides a bearish point of view, I'm starting off with this list of Doom Forecasts put together by Paul Farrell at Market Watch...My favourite from that list?
Barton Biggs warns us to prepare for a "breakdown of civilization ... Your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc ... A few rounds over the approaching brigands' heads would probably be a compelling persuader that there are easier farms to pillage."

Those wanting a more mainstream view can check out this wonderful list put together by the team at The Pragmatic Capitalist.
Another great post from James Howard Kunstler at Clusterfuck Nation, who rivals Matt Taibbi over at Rolling Stone in turning a phrase. Kunstler's 2010 forecast is would be funny if it wasn't so true.