Morning Reading – January 21, 2011
The Big Picture: Bull Market Duration and Strength
I was speaking with a friend who asked why 48% — why not 100% cash?
The short answer is that we are seeing some signs of a pullback, but not necessarily anything more ominous. Additionally, the 3rd year of a Presidency has lots of tailwinds in it for the markets.
The Big Picture: Will We Have US State Bankruptcies?
Attention Teachers, Police, and Firefighters: You are royally fucked…
China Financial Markets: The real cost of Chinese NPLs
Once again I am starting to hear investors tell me that they have been advised by bank analysts not to worry too much about the impact of a banking crisis in China. According to this argument, China has developed a very efficient and low-cost way to address banking crises, and the proof is that China’s last banking crisis, which occurred only a decade ago, was quickly and easily resolved. I am afraid this argument makes absoutely no sense and is based on an inability to understand how the crisis was actually resolved.
The Slope Of Hope: We Get It
Yesterday, one of the regulars here on Slope expressed puzzlement and my frequent mentions of “the evils” out there, such as Bernanke, Geithner, POMO, and so forth. He politely stated that the focus should be on the charts, and that the reason behind the price movement was really neither here nor there. He quickly got a lot of “Likes” on his comment, and I realized he had struck a chord. There was so much chatter about his comment that he wound up deleting it, but I felt it was something I should address.
The Slope Of Hope: Dwindling Loan Loss Reserves
The major banks have reported this week and have exceeded on the bottom line (top line for the most part was down Q4 2010 versus Q4 2009). The reason for the bottom line beat is they reduced their provision for credit losses. In fact each quarter since at least Q4 2009 they have continually dropped the total allowance for loan losses as a percent of total loans outstanding.
FT BeyondBRICs: Early mover: Indonesia enters correction
The Jakarta stock market was down a further 3.3 per cent in afternoon trading on Friday – lengthening a torrid run for the index, and taking Indonesia into technical correction territory.
FT Alphaville: FROB!
There a rising interest at the moment in how Spain would be able to get significant recapitalisation for its worst-off banks, the cajas, financed.
Private / Sovereign / Supra-sovereign?
FT Alphaville: The food price vulnerability index
Behold, the Tilt countries where interest rates are most at risk in a food heavy inflation environment.
FT Alphaville: From Fed run-offs to super-sized Treasury auctions
That additional financing need indicates how even Fed runoffs have a duration impact—the less the Fed rolls over, the larger the Treasury auction sizes and the more duration the market must absorb.
FT Alphaville: Silver backwardation is here
Something is definitely up with silver.