Tuesday, January 19, 2010

Morning Update/ Market Thread 1/19

Good Morning,

I hope everyone had a good weekend and is all rested and ready to view the spectacle that is our markets once again.

After ramping nonstop Sunday evening and Monday, the dollar did a moonshot this morning and equities are now back to about level from the close on Friday. Here’s a snapshot of that activity in the DOW and S&P:

And here’s a chart of the action in the dollar. On the left is the 5 minute version, on the right is the daily version. It does appear that the next leg higher in the dollar has begun, but we need to see it break above the flag it’s in and we’ll have to watch the relationship with equities this time.

Citigroup announced a loss of $7.6 billion in the 4th quarter alone, of course due to paying back the TARP, in other words the people:
Jan. 19 (Bloomberg) -- Citigroup Inc., the U.S. bank that is 27 percent owned by the Treasury Department, ended a three- quarter profit streak with a $7.6 billion loss on costs to exit the government’s bailout program.

The fourth-quarter loss of 33 cents a share was narrower than the record loss of $17.3 billion, or $3.40 a share, a year earlier, New York-based Citigroup said today in a statement. The company was expected to lose 30 cents a share, the average estimate of 18 analysts surveyed by Bloomberg.

Chief Executive Officer Vikram Pandit had to book an $8 billion pretax charge when he repaid $20 billion of bailout funds in December to avoid being left behind by rival banks that exited the Troubled Asset Relief Program. Taxpayers still own 7.7 billion Citigroup shares, and Pandit failed to restore the bank to profitability in his second full year in the top job.

Yet another fine holding the American taxpayers were saddled with. Nothing to see here, just continue to mark to fantasy, all will be well.

In other news, Kraft Foods agreed to up the bid and bought Cadbury for “only” $19.7 billion. Boy, what a bargain. Look for $25 chocolate bars soon. Not to worry for the bankers who put this deal together, they can afford it. But here’s a tip… don’t leave one sitting on that Ferrari leather in the hot sun, once the chocolate works it’s way into that hand stitching, you’ll never get it out! Trust me, I know.

But $25 candy bars is not all you have to worry about, oh no. Wasn’t it just last week that we raised the debt ceiling by over a quarter TRILLION dollars ($290B)? Thought so. Well, we all knew that little drop in the bucket wouldn’t last long, and it didn’t. We’re already pressing back up against it:
NEW YORK (CNNMoney.com) -- The country's legal debt limit will need to be raised again -- and soon. The Senate on Wednesday will debate just how high.

The proposed increase is likely to be north of $1 trillion and could be as high as $1.8 trillion. The goal is to boost the limit enough so that the issue need not be revisited before next year, and in any case not before the November mid-term elections.

The debate follows on the heels of an 11th hour short-term increase passed by the Senate on Christmas Eve. That vote raised the ceiling by $290 billion to $12.394 trillion -- enough to cover Treasury's borrowing needs through mid-February.

Democratic leaders could only get support for a short-term boost because a bipartisan group of Senate fiscal hawks have said they would not vote through a long-term increase until lawmakers adopt a "credible process" to curb the growth in U.S. debt.

Just what that "credible process" should be is going to be a major focus of the debate that begins Wednesday.

Again, not to worry, Congress is going to create a commission that would make recommendations to Congress on how to make a budget that works. Good luck with the central bankers running the show.

Japan Airlines filed for bankruptcy. This is what happens when an entire nation is hyper-saturated with debt. They are leading the world in debt saturation and JAL’s bankruptcy is simply a symptom of that. Saturated government, saturated citizens, bankrupt companies. I guess Our Gang run by Summers missed that course at Haaarvaaard.

The Treasury International Capital flows (TIC) were released for October, coming in with a net negative $13.9 billion. The trade deficit in October was $33 billion, meaning that we consumed another $47 billion more than we paid for in that month alone.

TIC flows are very important to remain positive, this is clearly saying that foreigners are no longer willing to finance our shopping spree. And, being the suspicious cynic that I have become, all numbers regarding debt and financing from the Treasury Department are suspect in my book.

Oh, and in case you are wondering about the month of October and how short we were on the current account deficit, that number was $133 billion, again, a number that as bad as it is, is much worse in reality once off book accounting items and the build up of future liabilities are considered.

Technically the markets broke down from their rising wedge last Friday, but managed to hold above the 1,133 pivot so far. While technically the setup looks bearish, we know that our bond market is being artificially supported and more and more evidence of market tampering is coming to light, such as the inordinate amounts of future buying that shows up out of nowhere.

And I’m sitting here typing watching yet another miracle spike occur in the “market.” This is why patience in waiting out the game and not jumping in front of it under these circumstances is clearly important.

Anyone believe that is mom and pop or even generic fund buying? Folks, that is not real, it is fully simulated for your shopping pleasure. Oh yeah, it’ll have the shorts jumping on in no time, then everyone will simply be running with the pack…

Bad Company – Run with the Pack: