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Sunday, March 15, 2009

FT Week in Reviewington: Recession Defeated

Everyone put down your food stamps and fucking pay attention! The recession is overrrr! We fucking did it, yeaaah! Done. Pwned. Pull the money, if you have any, out from under the mattress and halt construction on your race-war bunkers...

The S&P 500, if you'll ignore for the moment the 4-month nosediveish trend shown above, and the entire year before it, was up 10% on the week with most other major indices topping 5% or so. The rally began Monday when Citigroup reported that it had made something called a "profit" in the first two months of the quarter. I had to look up what this was in the dictionary but apparently they are good and make up for the billions in government aid and no-cost financing from one of the Fed's many "temporary" liquidity programs. JP Morgan and Bank of America made similar claims, thought no word on the actual size of these alleged "profits". Retail sales in the US also held up at non-cataclysmic levels. So as I understand it, "not terrible" is the new awesome.

Some pants-jizzers were certain the news marked the bottom of the market:
One investor confident that equities have seen the worst is Anthony Bolton, president of investments at Fidelity International.

In a video interview with the FT this week, Mr. Bolton called a bottom in stocks and the start of a new bull market. Mr. Bolton made the same call late last year, before a renewed sell-off.
Haha, journalism. In all seriosity, the rally was a pleasant distraction from the continuing collapse of industrial output everywhere.

Moving along, there's still a fucking financial crisis. Eighteen months on and the only financial institutions that can access capital markets, if at all, are the ones huddled in a tent-village outside Sheila Bair's house. Possibly because banks still have huge amounts of unpriceable shit on their books. Possibly.

If anyone needed a single metric to determine just how bad the things really are, well here you go. The non-profit Sesame Workshop was forced to lay off 20% of its workforce. Meanwhile the entire Sesame Street gang has been forced to scrape by in Oscar's trash condo after a bitter labor dispute. Except Snuffleupagus, who doesn't fit. Fuck you, Snuffleupagus. The rest work in various semi-legal fields, struggling to pay off Oscar's mortgage, which is saddled with negative equity since he refinanced at the top of the market and built a cardboard add-on. TYPICAL SUBPRIME LOSERS.

The G-20 summit convened in the UK, so everyone get your caffeine pills ready, and probably those things that hold your eyelids open for extended periods, you know, pornography. Topping the agenda will be fiscal efforts to fight the recessions, establishing a framework for actually regulating global financial markets on a global level, and boosting IMF funding to keep eastern Europe from falling of a cliff.

Tim Geithner prefers phone chats with UK finance minister
Alistair Darling
so as to avoid looking him in the eyebrows.
The US initially called for a tripling of IMF contributions, which is amazing considering two years ago people openly discussed closing it down since it had nothing to do. But now everyone is broke so its saved, hooray. A deal on the IMF is likely to be the only significant outcome of the summit, since the US-UK front to throw money at the recession met stiff resistance from masochistic tightwads in Germany:
“We have reached our limits,” said Axel Weber, president of Germany’s Bundesbank, in Frankfurt yesterday. “The expectation that we could neutralise this synchronised recession through short-term fiscal policy measures is false. We should not even try. There will be costs.”
Axel Weber is totally gay for recessions.

light of US spending plans, Chinese premier Wen Jiabao finally, and hilariously, did what everyone in China had long fantasized about and yanked the choke-collar of post-imperialism. America will pee on the rug again anyway. Ruff.

Ken Lewis
of Bank of America is more or less openly flouting an actual for-real investigation into bonuses paid by the failboat U.S.S. Merrill Lynch before BofA acquired it. BofA, a recipient of billions in government aid, reasons that protecting the privacy of greedy douchebags at Merrill, whose company nearly destroyed them, mind you, is more important than cooperating with the NY attorney-general. Why anyone would possibly take a stand on principle over this, now, is beyond me. Never underestimate the power of the handicapped.

The perp-walk
we've all been waiting for: Bernard Madoff plead guilty to securities fraud and was marched directly to jail. He took all the blame and declined a plea bargain to rat out his employees, who prosecutors surmise must have known and helped in the fraud, what with the compiling of elaborate financial statements complete with pie-charts of deceit. Further cases are likely at some point. Madoff, who had been under Park Avenue-arrest, will hopefully get to shit in front of strangers forever.

Thirty years later, Jack Welch, father of the "shareholder value" movement, much maligned for breeding destructively procyclical short-termism in corporate boardrooms, derided those who ever listened to his "dumbest idea in the world." Uh, thanks, Jack.

Mike Mackenzie attempts to puncture the twisted cult of the Dow Jones Industrial Average.
Unlike most equity benchmarks, the price of a company matters greatly for the Dow, as it is weighted according to a company’s share price and not, like most indices, according to total market capitalisation. That means a stock with a low price has much less influence on the Dow’s overall performance.

Perma-bear Stephen Roach of Morgan Stanley, who has called three of the last one recessions, is worried that the paths chosen to counter the global meltdown so far are merely exacerbating the same underlying imbalances that led to this mess in the first place. Deficit countries have been the most jubilant about spending their way out while surplus countries seem reluctant. The noises coming out of the G20 summit unfortunately seem to confirm these attitudes haven't shifted.

Gillian Tett spoke with Dolf Bo Lundgren, the Swede who headed the efforts to clean up their banking system after the financial crisis of the early 90s:
[T]he grim truth is that, if the financial system keeps melting down, then eventually even the unfathomably large cost of a blanket guarantee might look more palatable than other options. And even before that, there is another crucial point: “What we learnt in Sweden is that you cannot solve financial crises by taking a piecemeal approach,” laments Mr Lundgren, who confesses to feeling deeply worried that “there are still [so many] piecemeal approaches being used”.
Hey, we've ignored you for so long, Sweden. Why stop now? Schnergen.

Pakistan, the basket-case enclosed in a hand-basket, post-marked to hell, just upgraded to overnight shipping. The opposition PML-N is staging protests against prime minister Asif Ali Zardari, after the Supreme Court barred its longtime leader Nawaz Sharif (the 'N' is for 'Nawaz') from holding public office, in a move that is widely seen as politically motivated. Sharif and Zardari had earlier united to secure the ousting of the military government of Pervez Musharraf but soon fell out over the failure to reinstate a senior judge dismissed by Musharraff, who it is thought may pursue corruption charges against Zardari. Pakistan already faces terrorist attacks, two insurgencies, an army only partially answerable to the government, and a desperate need of IMF funds, but will now have the more reasonable segments of the population rioting in the streets.

Hamid Karzai, president of Afghanistan, decided to annoy everyone and call a snap election for April, which would have been interesting considering the ballots for the planned August election haven't even been printed yet. He later changed his tune after the electoral commission politely informed him he was out of his fucking mind. Karzai is constitutionally required to step down in May but the logistical and security nightmare of holding countrywide elections means there will be an interim period no one is certain how to fill.

Switzerland fires
the opening salvo in the War of Competitive Devaluation, intervening to depress the franc in a move henceforth known as quantitative cheesing (patent pending). Hopefully everyone will give the Swiss a pass on this since the franc, like the yen and indeed the US dollar have been the subject of flights to safety, driving up the currency and tightening monetary policy unnecessarily given domestic economic conditions.

And finally, a few days ago I pointed out that Agent of Incontinence John McCain supported the temporary nationalization of banks that proved insolvent. I stupidly assumed the person who repeatedly confused "fiscal" and "financial" in the presidential debates knew what that meant. He and Richard Shelby, ranking Republican on the Senate banking committee, respectively called on Barack Obama to "let the banks fail" and "close them down", so as to avoid giving them more sweet, sweet tax monies. This, of course, is completely different from nationalization, which would require huge initial outlays of public funds and would almost certainly have to honor bank debt in order to avoid the multiple Lehman Brothers-like catastrophes of simply "closing them down." I'd be interested in hearing Mr. McCain's explanation of all this if I didn't already know the answer, which is "earmarks".

1 comment:

Anonymous said...

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