Supermodels Get It, Citibank & The Fed Don't
In the Red... After Chinese Premier Wen Jiabao said his government may delay allowing mainland investors to buy Hong Kong stocks...
the Hang Seng Index plunged 1,526.02, or 5%, to close at 28,942.32, its steepest decline since September 2001.
One of our Dead Pool leaders... Friday: "Citibank is expected to hold an emergency board meeting this weekend.
I'd like to be a fly on the wall. Write downs? SIV failures? Do ya think its another landmine waiting for Monday?"
And how as Citibank CEO Charles Prince resigned his throne.
Citigroup's announcement indicates that Q3 was not the bottom or "kitchen sink" write off quarter that the media has been hyping for the financial sector.
Citing corrections related to the valuation on its $43 billion in asset backed collateralized debt obligations, in a regulatory filing Monday...
Citigroup cut its Q3 net income to $2.21 billion, from the $2.38 billion it reported three weeks ago.
Citigroup also said it will write off between $8 billion and $11 billion to reflect the declining value of subprime mortgage related securities since Sept. 30.
Citibank's new, expanded losses come on top of $2.2 billion in trading losses and mortgage related write downs that the bank announced on Oct. 15...
when it reported Q3 earnings were down 57% from a year earlier. Citigroup manages seven SIV funds, with a total of $80 billion in assets.
In other words, Citibank holds debt that lost $11 billion of value in the past month, a decline that may wipe out half of the company's profit so far this year.
The price of poker just went up... The price of insuring debt default risk for Citigroup, credit default swaps, has more than tripled in the past three weeks.
The contracts, last at 73 basis points, are trading as if the company was rated Baa3 by Moody's Investors Service, one level above non-investment grade, or junk.
Contracts on the CDX North America Investment Grade Series 9 index, a benchmark for the cost of protecting against corporate defaults, increased as much as 4.5 basis points to 74 basis points
A basis point on a credit default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
The Nattering One muses... something we've Nattered about before, downgrades and the rising costs to insure or have reserves, will strangle liquidity.
Do the math. Citibank swaps triple from 25 to 75 basis points, instead of $2.5 Million to insure $1 Billion, it now costs $7.5 Million.
That sure helps liquidity, doesn't it? Citigroup said liquidity is in no way impaired, the stock is down 31% YTD.
Mister Rogers Neighborhood... Jim Rogers, a former partner of investor George Soros, said last month he's selling his house and all his possessions in the U.S. currency to buy China's yuan.
"The dollar is collapsing, I'm moving to Asia because moving to Asia now is like moving to New York in 1907 or London in 1807. It's the wave of the future."
Even a Supermodel gets it... Gisele Bundchen the Brazilian supermodel...
who Forbes magazine says earns more than anyone in her industry, wants to remain the world's richest model...
and is insisting that she be paid in almost any currency but the U.S. dollar.
Like billionaire investors Warren Buffett and Bill Gross, Bundchen is at the top of a growing list of rich people who have concluded...
that the US currency can only depreciate because Americans led by President George W. Bush are living beyond their means.
Bill Gross at PIMCO:
"We've told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non- dollar currency. That should be on top of the list."
Speaking of debauchery or systematic debasing of our currency, from Flecks latest "The Fed Digs Us A Deeper Hole":
"No shortage of ink was spilled last week about the Fed's quarter-point rate cut. Yet none of it acknowledged the big elephant in the room:
Why in the hell was the central bank easing the federal funds rate with:
(1) the dollar at a new low, (2) oil at $90, (3) gold at $800, (4) virtually every commodity on the planet going wild and (5), despite government statistics to the contrary, inflation raging?
Nothing better illuminates the Fed's position -- between a rock and a hard place -- than its rate cut last week.
The Fed cannot fight inflation. It cannot provide for a decent currency. The Fed's policy is to print money, print money and print more money.
Our government would have us believe that inflation was running at only 0.8%, which allowed the growth of real GDP to be 3.9%.
If the government had calculated the annualized rate of inflation to be 3.9% (probably a low estimate), then real GDP growth would have been zero.
The Nattering One muses... Last week, Mexico raised rates, the Russians and Chinese instituted price controls, and the Fed lowered rates.
So while the government and the Fed pretend the U.S. doesn't have inflation problems...
countries around the world are acknowledging that US monetary policies are exporting stagflation vis a vis, the dollar, on a global basis.
Real inflation or stagflation is raging at around 13%, this means that GDP is really -10%, but we wouldn't want to tell the truth now? Would we?
Lets be generous and say stagflation is only 6.5%, this means GDP is really -2.6%. Either way, real GDP has gone negative for almost the last two years.
I think there is a word for sucessive quarters of negative GDP, but like the Fed, it simply slips my mind.
Hat tip to Bloomberg for the snipets laced as always, with lots of Nattering love, cuz we do care.
the Hang Seng Index plunged 1,526.02, or 5%, to close at 28,942.32, its steepest decline since September 2001.
One of our Dead Pool leaders... Friday: "Citibank is expected to hold an emergency board meeting this weekend.
I'd like to be a fly on the wall. Write downs? SIV failures? Do ya think its another landmine waiting for Monday?"
And how as Citibank CEO Charles Prince resigned his throne.
Citigroup's announcement indicates that Q3 was not the bottom or "kitchen sink" write off quarter that the media has been hyping for the financial sector.
Citing corrections related to the valuation on its $43 billion in asset backed collateralized debt obligations, in a regulatory filing Monday...
Citigroup cut its Q3 net income to $2.21 billion, from the $2.38 billion it reported three weeks ago.
Citigroup also said it will write off between $8 billion and $11 billion to reflect the declining value of subprime mortgage related securities since Sept. 30.
Citibank's new, expanded losses come on top of $2.2 billion in trading losses and mortgage related write downs that the bank announced on Oct. 15...
when it reported Q3 earnings were down 57% from a year earlier. Citigroup manages seven SIV funds, with a total of $80 billion in assets.
In other words, Citibank holds debt that lost $11 billion of value in the past month, a decline that may wipe out half of the company's profit so far this year.
The price of poker just went up... The price of insuring debt default risk for Citigroup, credit default swaps, has more than tripled in the past three weeks.
The contracts, last at 73 basis points, are trading as if the company was rated Baa3 by Moody's Investors Service, one level above non-investment grade, or junk.
Contracts on the CDX North America Investment Grade Series 9 index, a benchmark for the cost of protecting against corporate defaults, increased as much as 4.5 basis points to 74 basis points
A basis point on a credit default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
The Nattering One muses... something we've Nattered about before, downgrades and the rising costs to insure or have reserves, will strangle liquidity.
Do the math. Citibank swaps triple from 25 to 75 basis points, instead of $2.5 Million to insure $1 Billion, it now costs $7.5 Million.
That sure helps liquidity, doesn't it? Citigroup said liquidity is in no way impaired, the stock is down 31% YTD.
Mister Rogers Neighborhood... Jim Rogers, a former partner of investor George Soros, said last month he's selling his house and all his possessions in the U.S. currency to buy China's yuan.
"The dollar is collapsing, I'm moving to Asia because moving to Asia now is like moving to New York in 1907 or London in 1807. It's the wave of the future."
Even a Supermodel gets it... Gisele Bundchen the Brazilian supermodel...
who Forbes magazine says earns more than anyone in her industry, wants to remain the world's richest model...
and is insisting that she be paid in almost any currency but the U.S. dollar.
Like billionaire investors Warren Buffett and Bill Gross, Bundchen is at the top of a growing list of rich people who have concluded...
that the US currency can only depreciate because Americans led by President George W. Bush are living beyond their means.
Bill Gross at PIMCO:
"We've told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non- dollar currency. That should be on top of the list."
Speaking of debauchery or systematic debasing of our currency, from Flecks latest "The Fed Digs Us A Deeper Hole":
"No shortage of ink was spilled last week about the Fed's quarter-point rate cut. Yet none of it acknowledged the big elephant in the room:
Why in the hell was the central bank easing the federal funds rate with:
(1) the dollar at a new low, (2) oil at $90, (3) gold at $800, (4) virtually every commodity on the planet going wild and (5), despite government statistics to the contrary, inflation raging?
Nothing better illuminates the Fed's position -- between a rock and a hard place -- than its rate cut last week.
The Fed cannot fight inflation. It cannot provide for a decent currency. The Fed's policy is to print money, print money and print more money.
Our government would have us believe that inflation was running at only 0.8%, which allowed the growth of real GDP to be 3.9%.
If the government had calculated the annualized rate of inflation to be 3.9% (probably a low estimate), then real GDP growth would have been zero.
The Nattering One muses... Last week, Mexico raised rates, the Russians and Chinese instituted price controls, and the Fed lowered rates.
So while the government and the Fed pretend the U.S. doesn't have inflation problems...
countries around the world are acknowledging that US monetary policies are exporting stagflation vis a vis, the dollar, on a global basis.
Real inflation or stagflation is raging at around 13%, this means that GDP is really -10%, but we wouldn't want to tell the truth now? Would we?
Lets be generous and say stagflation is only 6.5%, this means GDP is really -2.6%. Either way, real GDP has gone negative for almost the last two years.
I think there is a word for sucessive quarters of negative GDP, but like the Fed, it simply slips my mind.
Hat tip to Bloomberg for the snipets laced as always, with lots of Nattering love, cuz we do care.
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