fotokemist

Conspicuous Correlation: October 2009 Discretionary Retail Sales and U.S. Home Prices

While the correlation is strong, I would suggest falling incomes as a consequence of high unemployment is the likely cause of both changes.

Is Goldman Sachs the Canary in the Coal Mine, Or Just No Longer Relevant?

You will find a similar divergence with BAC. Might be interesting to see if the other banks with large, unrecognized losses are behaving in a similar manner. Is there a selling pressure present as large positions are quietly reduced into a rally?

Could it be one of the purposes of this rally is to give TPTB an opportunity to minimize their losses when the losses have to be taken?

PBGC Is Not Only Underwater, It's Drowning

John,

I am a novice at this game (~13 months.) However, I have come to the conclusion that fractional reserve banking requires the entire financial system become a con game, since everybody cannot withdraw their money at the same time.

The con game seems to have spread to all asset classes except physical gold and silver. I watch with horror and disgust as my relatives in their 70s and 80s begin to consume their capital where they could live on the interest payments a few years ago.

Such observations lead me to a loss of confidence not only in our financial system, but our entire political and social system. I pray that leaders with integrity will rise and chart a course through the problems we cannot avoid. Otherwise, I have had a good life and really cannot complain if my remaining years are spent in a failed society.

Why Is Zero Hedge Claiming Fed Intervention in Equities Markets?

Rumors exist because they are plausible. The FED could end the rumor mongering by submitting itself to an accounting. Seems reasonable, since it is our money they are spending.

Big Banks: The Consensus Is Cracking

Two changes that should alter behavior are:

1) All shareholders and bondholders have lost there entire investment prior to any taxpayer money being used in a bailout.

2) All Officers and Directors are forced to return any compensation received during their tenure with interest at the average 30-year T-Bond rate before any taxpayer money is used in a bailout. This would include any O/D that have left the company in the past five years.

BofA and Stating the Obvious About Bank Profits

The Fed has assured us BOA will not be allowed to "fail". My belief is that position is intended to reassure counter-parties. They have not assured us of an increasing stock valuation or even that the bank will not be nationalized. As I recall, Mr. Obama made a very clear statement about the consequences of future bailouts in his wall street speech a few weeks ago.

The stock valuation is a separate matter. I don't know how one can justify any price for the stock given the unknown real value of their assets (in other words, how long will "profits" be consummed as they adjust reserves to realize the losses being ignored by current accounting practices.) Then one reads reports (rumors?) of vast off-balance sheet loses that will have to be realized someday, perhaps as early as next year. What happens to BOA stock price if rising oil prices (in $) force the Fed to support the $? What if either increasing energy costs or rising interest rates (to support the $ and avoid the rising energy costs) leads to a W recovery?

I have a hard time reconciling shipping being down 17% YoY, consummer credit contracting at historic levels, retail sales being down 5 - 10% YoY in reporting retailers, and consummer consumption being an increasing fraction of our GDP with the idea that we are seeing a recovery.

Bank of America: Struggles Behind, Struggles Ahead

granger, I don't have a link handy, but it is scheduled for 1/2/2010. It has been widely published that the ABA etc. are lobbying hard to get a delay and/or phased-in approach over next year.

Inverse Correlation of Stocks vs. Dollar at a Glance

Michael Clark asks about a longer term chart. You can use the free charts at stockcharts.com for a three year lookback. If you enter $USD:$SPX (ratio of dollar index divided by SP500 closing) in the symbol field and select 3 years for the range, you will see that the ratio reached a minimum of ~ 0.050 in early Nov 2007 and peaked at a value of ~ 0.130 in early March 2009.

Other than volatility, the $USD:$SPX ratio chart is very similar to the simple $USD chart over the past three years. So, are we all effectively FX traders?

WHERE IS OBAMA'S 'CHANGE' NOW?

Perhaps Obama is setting the stage for the rise of a president more like Teddy.

Does Economic Data on Debt Support Medium-Term Bullishness?

Thanks for a great deal of effort.

Jobless Claims Fall to Lowest Level in 37 Weeks

Great news!! So we are down to only a couple of millions folks a month losing there jobs!!!

Despite representatives Ron Paul and Alan Grayson's entreaty to Sen. Chris Dodd to slow down Bernanke's reconfirmation as Fed chairman to determine whether he's "fit to serve," Dodd's expecting no roadblocks.

Ron Paul and Alan Grayson emerging as the leadership of the new centralist party?

Alcoa (AA): Q3 EPS ex-items of $0.04 beats by $0.13. Revenue of $4.6B (-34%) in-line. First-half measures making "strong positive impact on our cash position and profitability." Shares halted. (PR) Updated 4:40 p.m.: Shares resume trading, up 6.3% AH.

Hmmm... Let's see. 4 x $0.13 = $0.52 annualized profit based upon vigorous expense reduction. Sales down 34%. Auto industry in decline. Construction in decline. Aerospace in decline. Yup, a P/E ~ 30 makes perfect sense.

Should You Invest in Banking Stocks?

First, a caveat: I am a simple country chemist trying to make a living down here in the big city. I have no formal training in finance, other than running a business for 20 years.

Before buying BAC or C, you might want to estimate the losses they face, then calculate how much time at what profit level will be required for them to earn their way out of their mess.

I am more familiar with BAC since they happen to be headquartered in the very state where I live. They have serious, and largely unrecognized, exposure to 2nd mortgage, sorry HELOC, in California. You might want to check the change in price of CA RE to estimate the true value of those loans. They also have significant exposure to CRE. Been to a mall lately? Checked on the hotel industry lately? Then we should consider off balance sheet SIVs. I have read credible estimates that BAC has over 1$T of notional exposure and perhaps as high a $30T. What % of those chickens need to come home to roost to take all earnings for the remainder of my life? (Currently estimated to be 23.6 years by some insurance company web site) Then there are the lawsuits. I read today that some group of hedge funds have filed a multi-billion $ lawsuit against BAC on the basis that they were mislead. As a minor sideshow, there is the very real possibility that the BAC CEO and various board members face active prison sentences for the ML fiasco.

Are you following the growing anger in middle class America to this rip-off. Go to C-Span and look at the size of the crowds in DC in 9/12. I have talked to blue collar friends and relatives recently. Any congresscritter voting to continue bailout of the finance industry does so with the near certainty of losing the next election, at least in my neck of the woods, Where will the TBTF boys be without a FED backstop?

All-in-all, betting against the NJ mafia seems like a better idea than buying BAC to me.

Especially Bad Housing Numbers and Taxpayers as Mouse Models

I spent the weekend at a family reunion in the foothills of North Carolina. Farmers, small business people, blue collar employees. Folks most of you would classify as red necks.

The ones I talked with had a surprisingly clear understanding of the economic situation, lack of government credibility re: the state of the economy, the role of TBTF banks with the collaboration of the FED and Treasury in screwing them all out of a lot of money, etc.

Perhaps the best long term hope for the FED is a credible audit. At the end of the day, government must always rely on the consent of the governed. Unless we are prepared to use the tactics employed by the Romans, Nazi's, etc. to obtain that consent, someone should start paying attention to the rising frustration and anger of J6P.