Been getting a lot of hate mail from people. Calling me an Unbeliever, Anti-American, perma-bear, and my personal favorite....Anti-Capitalist Terrorist!
I love it...Keep it coming.
I can only offer the following reasons for such negativity.
1- Please tell me when employment trends will get better. None of this we only lost 335K Jobs last month. That payroll figure only reiterates that we are in a deep recession, and that actual job additions will not take place until mid 2010 at the earliest. If 9.4% unemployment is not to be alarming, why would Obama be defending all of the recent Stimulus? If Obama feels the need to defend Stimulus in front of a 9.4% print, he feels the heat just as much politically.
2-Deleveraging has not happened to the extent that bank losses have been socialized and put on government (tax-payer) ledgers. The powers that be don't believe that solvency is an issue, as they continue to harp on liquidity concerns. Households have generally not reduced debt, just rolling them over into more loans that they cant afford. So Deleveraging really has not started, although I commend Morgan Stanley for begrudgingly aggressively reducing leverage and size of their balance sheet.
3- Stress Tests were a brutal bogus joke. Even today the US Bailout Oversight Board stated that not only do they see the jobless rate increase the worst case assumptions that the Stress Tests stated they would, that Stress Tests should be repeated under more difficult conditions.
4-Rising government debt ratios will eventually lead to increases in real interest rates that may crowd out private spending and even lead to sovereign refinancing risk.
5-Monetization of fiscal deficits is not inflationary in the short run...slack product and labor markets imply massive deflationary forces. But if central banks don't find a clear exit strategy from policies that double or triple the monetary base, eventually either goods price inflation or another dangerous asset and credit bubble (or both) will ensue.
6-Bank potential credit losses are the tip of the Iceberg. Credit Card losses/writedowns last year was total $55 Billion, this year that figure is conservatively pegged at $65 Billion. As much as 25% of Americans will default on at least 1 credit card by year end.
7-FASB declaration that all SPV/OBS transactions need to be placed back on Bank Balance Sheets is a game changer. Stress Test results did not take this into account. Wells Fargo has notional value of $1 Trillion of SPV exposure.
8-Crude Oil back to $70 is not good for consumer spending, as higher gas prices will keep people at home.
9-The Mortgage REFI trade is over. MTG Rates have risen almost a full point. Remember a 10 basis point increase in MTG Rates = 1% drop in Housing prices.
10-Housing still sucks in almost every major city. Repeat...The Economy will not get going until housing prices stop going down.
11-As trillions are pumped into economy, the amount of credit to consumers is being zapped out as credit card limits and HELOC levels are being trimmed.
12-Bank 1st Qtr profits were illusory, not driven by operating results.
13-What ever happaned to toxic asset plan? This plan was shelved last week, as the garbarge is already stinking up the joint.
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