Tuesday, 23 March 2010 00:00

Newscan from the Weekend Past

Comments on global news from the weekend past...

Bloomberg.com:

  • $7.88 billion of slices underwritten by Deutsche Bank under downgrade review since underlying CMBS have been downgraded (CDOs are MAX CMBS I Ltd. Series 2007-1 and Series 2008-1), S&P has already downgraded 2007-1 to BB+
  • A BlackRock presentation stated that Deutsche Bank's CDO portfolio does not forecast for tranche losses
  • The MAX CDOs are among the Federal Reserve's holdings in Maiden Lane III
  • AIG provided Deutsche Bank with $5.61 billion in collateral before the Maiden Lane III transfer

FT Article: Merkel v. Greece Round 239,084.67 (Ding, ding) @ http://www.ft.com

  • Merkel insists Greece has not asked for money, and Greece does not need any [Let's permanently attached this to Merkel's credibility rating]
  • European Commission and IMF officials are far from same page as Merkel
  • The article wasn't dense with info, which is not unusual considering the subject matter, but what is clear is that the bazooka everyone was talking about has no trigger, and probably loaded with more baby powder than gunpowder!
  • That is going to be a big issue with Greek debt maturing in April if they have no revenue to pay it off

FT Article @ http://www.ft.com

  • British Airway strikes did nothing to dampen travel plans over the weekend
  • Examples like this are calling the union's bluff, they are not stopping society, potentially leaving room for union break ups by private companies, sovereigns and municipalities if they choose so, this could be a blip on the radar or an emerging trend, so something to continue to watch

Reuters Article: PIMCO on tightening @
http://www.reuters.com

  • Fed will have purchased over $1.25 trillion in MBS and $125
    billion in agency debt at end of quantitative easing
  • Consumers are still constrained by high unemployment, minimal
    spending, and credit reducing
  • The odds of another credit/consumption induced bubble seems slim
    as the Fed takes unofficial tightening actions at end of QE, consumer
    conditions have arguably worsened over time
    [particularly if you
    consider that practically the only economic positive has been government
    intervention]
  • El-Erian is predicting a "new normal" of disappointment in the
    "recovery"

China Daily Article: Morgan Stanley defends CNY @ http://www.chinadaily.com.cn

  • Complaints about undervalued Yuan contributing to US economic
    hardship have risen over previous month
  • US has trading deficit with 90 trading partners
  • Morgan Stanley analyst sees Yuan revaluation as protectionist and
    negative to global growth
  • Note: There is no guarantee the Yuan would appreciate, especially
    in the face of an enormous asset bubble, credit based construction, and
    25% M2 YoY growth. Subscribers see China
    Macro Discussion 2-4-10

Business Week Article: Latvian Government steps down @ http://www.businessweek.com

  • Prime Minister Dombrovskis rejected economic rescue plan calling it
    too "populist" to achieve success
  • The People's Party has walked out of parliament, putting future
    implications for return from ruin on hold or shoving them aside
  • After failed bond auction, Latvia received €7.5 billion from IMF
    in assistance, which has parliamentary election in six months
  • See As
    I Warned Earlier, Latvian Government Collapses Exacerbating Financial
    Crisis

ZH Article: Geithner implies state/muni bailout @ http://www.zerohedge.com

  • Geithner feels there is no way the US can lose its AAA credit
    rating
  • Romer and Geithner pledged implicit (for now) support for
    state/municipal bailouts, as conditions continue to worsen
  • California CDS spreads have been wider than Kazakh spreads over
    the past few weeks, New Jersey potentially to follow
Last modified on Tuesday, 23 March 2010 00:00

4 comments

  • Comment Link Reggie Middleton Wednesday, 24 March 2010 12:39 posted by Reggie Middleton

    The US having a lot of debt doesn't invalidate the thesis of China having a lot of debt. It also doesn't do anything to aid China in paying its debt. Thus, the answer to your question is no, it doesn't mean my thesis on China is wrong.

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  • Comment Link overthetop Wednesday, 24 March 2010 12:35 posted by overthetop

    From the zero hedge article "ROMER: STATE, LOCAL BUDGETS TO REMAIN 'VERY VERY BAD'
    GEITHNER: V.STRONG CASE FOR ASSISTING STATES ON SIGNIF SCALE".

    So im taking that to mean he is saying is states and municipalities become insolvent the federal gov. will bail them out.

    From your China article "If local government debt that China's local governments have been raising through off-balance sheet (and similar) investment vehicles to circumvent direct borrowing regulations - and which is not counted in official calculations, is included in the total debt - then the country's debt could rise to 39.838 trillion Yuan or $5.8 trillion. This puts China in similar debt standing with many of the PIIGS, being that its accounting for 96% of GDP, much higher in comparison to the IMF's estimate of 22% which excludes local-government liabilities, in 2010 based upon research by Northwestern University's Professor Victor Shih, who estimates China's local- government outstanding debt at the end of 2009 at 11.429 trillion Yuan. "

    So im just saying this argument doesnt really hold because almost every country in the world is also on the hook for their local gov. debt. Im not sure what the debt % of gdp would be in the US if you added up federal and local debt but im pretty sure it would be higher than China's. I dont disagree with your short china thesis, just this argument as a reason.

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  • Comment Link Reggie Middleton Wednesday, 24 March 2010 03:54 posted by Reggie Middleton

    I don't see how an article means that my argument is wrong. You will have to explain your point.

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  • Comment Link overthetop Wednesday, 24 March 2010 01:26 posted by overthetop

    doesnt the article from zero hedge where geithner states that the government will bail out states and munis mean that your argument against china (china has more debt as a % of gdp when you include local government than the US) is wrong?

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