| 10 Tuesday Late Afternoon Reads Posted: 06 Sep 2011 01:30 PM PDT Afternoon reads: • Dow headed below 10,000 as cyclical bear begins (Market Watch)
• How your emotions can cost you money (CNN Money)
• The Eurozone Could Break Up Over a Five-Year Horizon (Credit Writedowns) see also Europeans Talk of Sharp Change in Fiscal Affairs (NYT)
• Are stocks undervalued? (Market Watch)
• Bank of America’s Buffett Premium is All Gone (and Then Some) (WSJ)
• For the Economy, the Real Slam Dunk Is Debt Forgiveness (Bloomberg)
• Data scientist: The hot new gig in tech (Fortune)
• Occupy Wall Street will lay siege to U.S. greed (Market Watch)
• James Murdoch ‘was told of phone-hacking email’ (Guardian)
• Earth from 6 million miles away (Earth Observatory)
What are you reading? > 
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| FBR’s Paul Miller, Banking’s Latest Cheerleader Posted: 06 Sep 2011 11:28 AM PDT Today’s Dick Bove wannabe is the once respected Paul Miller of FBR Capital Markets & Co. In a note to clients that revealed a stunning ignorance of fiduciary and legal obligations, Miller said FHA, FHFA, and GSEs were “acting in their own self-interest as opposed to that of the broader U.S. economy.” The details of the note was reported on by Bloomberg. Banking analyst Chris Whalen critiqued the position, stating, “Miller has gone to the dark side. Things are looking so bad for BAC, that Miller is starting to actually sound like a sell side analyst.” Whalen said that despite receiving billions in bailouts, the large public banks may be required to undergo major restructuring eventually. If MBIA and/or GSEs win in court, it could force the issue. Whalen added “Rather than doing this piecemeal through litigation, we should use the power of receivership to organize this process, treating all banks fairly.” Here’s Bloomberg: “U.S. government-backed firms and agencies should "stop punishing banks" and suspend demands for mortgage repurchases because they are impeding an economic recovery, according to Paul Miller of FBR Capital Markets & Co. Repurchase losses may total $121 billion, wrote Miller, a former federal bank examiner, in an analyst's note to clients dated today. He previously said the tally might range from $54 billion to $106 billion. Losses for Bank of America Corp. (BAC) could reach $66 billion in some scenarios, he wrote. Fannie Mae, Freddie Mac, the Federal Housing Authority and the Federal Housing Finance Authority "are acting in their own self-interest as opposed to that of the broader U.S. economy," Miller wrote. Their claims "drain capital from the banking system, and they cause banks to overly tighten credit standards, which pushes potential home buyers onto the sidelines."
Its a race to the bottom between European and American banks, with analyst integrity the collateral damage of the pending financial rout . . . > Source:
U.S. Must 'Stop Punishing Banks,' Halt Putback Claims, FBR's Miller Says
Hugh Son
Bloomberg, Sep 6, 2011
http://www.bloomberg.com/news/2011-09-06/mortgage-claims-by-u-s-impede-recovery-must-be-halted-fbr-s-miller-says.html 
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| Global Market Review: Dax, Nikkei Posted: 06 Sep 2011 09:46 AM PDT 
> Kevin Lane of FusionIQ writes: As seen in the attached pdf today we take a look at the German Dax, arguably the strongest and most stable economy in Europe. The DAX is currently at a six month low and not looking attractive technically. Additionally we take a look at the Nikkei and see it is also at new six month lows. Last but not least, we look at what we believe is the best real time bellwether for global economic activity, FedEx Corp (FDX) and it too is at a six month low. Market breadth and trends globally remain poor as does confidence. Investors are not that far removed from the scars of 2008 so shooting first and asking questions later looks to be current mantra. While dislocation and panic create great opportunity, timing the end of these dislocations can be extremely tricky. That said it's best to wait for real confirmation, even if it means missing a little bit of the turn. Sentiment remains the markets only friend with negativity growing amongst investors, however sentiment is a mixed bag as this weekend strategist in Barron's polled tended to still be extremely optimistic. Now we are not saying they are wrong but typically corrective waves end when people rein in their optimism. Again markets are formed on opinion and ultimately the correct one will surface and be backed by internals and volume. However at this juncture the path of least resistance remains down and until that chances it is better to be cautious than early !
Source:
IQ Global Equity Market Review, Sept 6th 2011
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| Long Overdue: BofA to Spin Out Merrill? Posted: 06 Sep 2011 09:37 AM PDT Its just a rumor, but WTF: Maybe Bank of America IS following part of our advice, spinning out Merrill Lynch in a sale. I assume this is a quasi-distressed sale, otherwise we’d see an IPO (but for market conditions). Of course, a full blown pre-packged bankruptcy would be the better route. Remember, the bailouts were not about you or the economy or the financial system — it was all about rescuing big bond holders. Here’s a reminder of our consistent advice going back to late 2008, most recently published August 28: Imagine: What if we'd gone Swedish on banks like Citi and BofA — nationalize 'em, clean 'em up, spin them back out to the markets by placing them into a prepackaged reorganization (a polite phrase for bankruptcy). Here's how that might have played out: First, the easy stuff: Fire senior management. Not just the chief executive. Nearly the entire top floor at the bank, including the board of directors, is canned. Equity shareholders are wiped out. Whatever is left after all is said and done goes to the bondholders, typically, at 25 to 50 cents on the dollar. (In Sweden, bondholders got 100 cents on the krona, but that currency was significantly devalued. So the bondholders were not made whole; they lost 50 to 75 percent in real value.) Temporary nationalization is the play: Uncle Sam provides debtor-in-possession financing to keep operating. All of the bad holdings, mortgages, derivatives and other liabilities are pulled out and auctioned off. This includes the bad real estate (REOs), the CDS/CDO book, defaulted mortgage obligations. Remember, there are no such thing as toxic assets, only toxic prices. At some valuation, these are worthwhile investments — just not 100 cents on the dollar. Let healthy buyers pay 15 to 30 cents. And anything that is worthless gets written down to zero. Recapitalize the parent bank, and spin off each division: IPO Merrill Lynch for $20 billion. Spin out a clean Countrywide for maybe $8 billion. Sell off all the non-depository bank pieces. What you have left is a well-capitalized bank, owned by taxpayers, with well-capitalized divisions as stand-alone companies. All of the above have transparent balance sheets. Eventually, everything gets IPO'd back to the public markets. Uncle Sam gets repaid, and whatever is left (if anything) goes to the bondholders.
Any buyers for Countrywide . . . ? 
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| Aston Martin V12 Zagato Posted: 06 Sep 2011 09:00 AM PDT Breathtakingly beautiful: The Aston Martin V12 Zagato will make its motor show debut at the Frankfurt Auto Show (September 15-16, 2011) >
click for larger photo
 
via Classic Driver 
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| Massive Employment Chartfest Posted: 06 Sep 2011 08:30 AM PDT Here’s something to distract you — or perhaps help to explain? — today’s markets. Its from Ron Griess of The Chart Store, and it is a massive NFP chartfest. Enjoy: > Unemployment Rate
 ˜˜˜ U6 Unemployment Rate
˜˜˜
NFP Post WW2 Recession/Recoveries
˜˜˜ 2007-09 Compared to Post WW2 Composite
 ˜˜˜ Nominal and Real Average Hourly Earnings of Employees
~~~ Employees on Nonfarm Payrolls by industry sector
 ˜˜˜ Total NFP
 ˜˜˜ Total Private Service Payrolls
 ˜˜˜ Total Private Goods Producing Payrolls
 ˜˜˜ Total Private Manufacturing Payrolls
 ~~~ Total Government Payrolls
˜˜˜
 ˜˜˜
 ˜˜˜
 ˜˜˜ ˜˜˜ Average Hourly Wages
˜˜˜
 ˜˜˜
 
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| ISM services surprises to upside Posted: 06 Sep 2011 06:46 AM PDT Notwithstanding all the market turmoil in August, the ISM services index actually rose to 53.3 from 52.7 in July. The components were very mixed however. Business Activity fell .5 pt to 55.6 and puts in back in line with the 6 month avg. New Orders rose 1.1 pt to 52.8 off the lowest level since Aug ’09 in July. Backlog orders rose 3.5 pts but still remain below 50 at 47.5. Export Orders jumped 7.5 pts to 56.5 and puts it back in line with the levels seen in May and June. Employment fell almost 1 pt to 51.6, the lowest since Sept ’10. Prices Paid rose almost 8 pts to a 3 month high. Of the 18 industries surveyed, 10 saw growth, 5 contraction and the balance saw little change. The ISM did state the obvious in conclusion, “there is a degree of uncertainty concerning business conditions for the balance of the year.” Bottom line, the services sector held up much better than feared as maybe some businesses are taking a more wait and see view of global events rather than immediately altering decision making. The ISM last Thursday remaining above 50 also told a similar story. With this said a further unraveling in Europe and continued lack of traction in US economic activity and business decisions will change quickly. 
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| 10 Tuesday AM Reads Posted: 06 Sep 2011 06:40 AM PDT Let’s start the new month (and new school year) off with a bang, via these interesting reads: • Welcome to Sucktember (The Reformed Broker) see also And Now, the Cruelest Month (WSJ)
• Of Princeton pair Krueger & Krugman, it matters which is going to Washington (Washington Post)
• Wolf: Struggling with a great contraction (FT) see also IMF: global economy faces a ‘threatening downward spiral’ (The Telegraph)
• Economic Rx: More Refinancing (WSJ) see also Mortgage Rates Plumb the Depths, but Hard Part Is Getting That Quote (WSJ)
• Keene: Gross Says Operation Twist Likely From Fed (Businessweek)
• Stagnant August Hiring in U.S. May Signal Renewed Recession (Bloomberg) see also Obama Says His Jobs Plan Will Push for Rebuilding Nation's Infrastructure (Bloomberg)
• China's S-Shaped Threat (The Diplomat)
• A decade after the 9/11 attacks, Americans live in an era of endless war (Washington Post)
• This is why tomatoes now suck.(The Trueant Muse)
• Quantum minds: Why we think like quarks (New Scientist)
What are you reading? >
Source: Clay Bennett 
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| QOTD: Parallel Recessions? Posted: 06 Sep 2011 05:30 AM PDT From comments over the weekend: What rhymes with 1937? How about 2011?
History may not repeat, but at least we can rhyme . . . 
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| True Size of Africa Posted: 06 Sep 2011 05:00 AM PDT Crazy cool map:
>
click for ginormous version
 via mediaite.com 
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