Yes!!!
Jim Sinclair’s Commentary It looks like the Federal Reserve now understands the Formula. The scary part is it also looks like the Fed cannot count on non-US interest to finance the game. Note the following excerpt from the article: "In a report to the government, a panel of experts said that the department must take more steps to meet the projected deficit." Treasury to auction $21 bln, brings back one year bill WASHINGTON (MarketWatch) - The Treasury Department will auction $21 billion in notes and bonds next week in its quarterly refunding auctions, the government said Wednesday. The department will auction $15 billion in 10-year notes and $6 billion in 29-year, 6-month bonds to refund $74 billion in maturing securities and pay down approximately $53 billion. In addition, to meet growing financing needs, the Treasury announced that it is bringing back the 52-week T-bill. The first of the monthly auctions will take place on June 3. In a report to the government, a panel of experts said that the department must take more steps to meet the projected deficit. "The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term," the panel said. Analysts believe the next option will be to bring back the 3-year note. Jim Sinclair’s Commentary Ever wonder who buys this stuff? You might look up the Exchange Stabilization Fund and note that they can buy any US debt or security they please. The Fed, judging by the recent actions, make up the rules as they go along. Citigroup Increases Stock Offering to $4.5 Billion (Update1) April 30 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, boosted the size of its stock offering by 50 percent to $4.5 billion, taking advantage of investor demand to bolster capital depleted by a $5.1 billion first-quarter loss. The company sold 178.1 million shares at a price of $25.27 each, New York-based Citigroup said in a statement today. Late yesterday, the bank said it had begun pricing the offering, part of a plan to ``optimize'' its capital base. Today's increase was in response to ``strong demand from a broad base of investors,'' Chief Financial Officer Gary Crittenden said in the statement. Companies usually try to avoid forced stock sales because they dilute the earnings power of current shareholders. The sale represents about 3 percent of Citigroup's shares outstanding as of March 31. ``We were hoping they wouldn't have to go the equity markets like this,'' said William Fitzpatrick, an analyst at Optique Capital Management in Racine, Wisconsin, which held more than 550,000 Citigroup shares at the end of last year. ``This was extremely disappointing.'' Citigroup already has raised more than $30 billion of capital since December, including the sale of equity to investment funds controlled by foreign governments in Abu Dhabi, Singapore and Kuwait. Last week the company sold $6 billion of preferred shares, a bond-like security that isn't dilutive to common shareholders, after it reported the first-quarter loss and cut 9,000 jobs.
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Jim, The spin today is the outlook for commodities and the markets relying on the language from the Fed. Who knew? I thought it was fundamentals that made a company or currency strong. What a world of make believe. CIGA Alex Jim, The 3m Libor rate rose 0.33% showing that Banks confidence to lend to each other is lower (see Bloomberg article below). Consequently, Adjustable Rate Mortgages (ARMs) are not going down despite humongous Fed effort (see 1y-ARM chart below taken from HSH® Associates http://library.hsh.com/?row_id=93). Today, Yahoo finance shows 1y-ARM at 5.77%, up from 5.73% last week. If this trend continues ARM resets coming up will be very painful, foreclosure will be up and bank losses on derivatives much greater. The highest point of the financial crisis is in front of us! Best regards, Click chart to enlarge in PDF format |
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Bernanke Urged to Do More to Ease Bank Funding Costs (Update1) April 30 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may need to step up his effort to unfreeze bank funding markets as a surge in borrowing costs blunts the impact of the cash auctions the central bank introduced in December. The cost of obtaining funds for three months has risen by 0.33 percentage point since the Federal Open Market Committee's last meeting on March 18. The jump may force homeowners with variable-rate mortgages and some companies to pay more on their loans at a time when economic growth is faltering. Policy makers may discuss the results of the $100 billion- a-month Term Auction Facility when they gather for the second day of their two-day meeting in Washington to set interest rates. The central bank will probably increase the size and duration of its biweekly auctions, according to economists at Barclays Capital Inc. and other firms. ``There's clearly a need for the Fed to do more,'' said Charles Lieberman, a former New York Fed economist who's now chief investment officer of Advisors Capital Management LLC in Paramus, New Jersey. ``The underlying problem'' is that banks and other investors are ``still nervous'' about lending to each other, he said. The FOMC may also lower its benchmark rate by a quarter point, to 2 percent, as officials attempt to spur economic growth. Traders anticipate the central bank will then take a breather from its series of rate cuts, futures prices show. Today's meeting started as scheduled at 9 a.m. in Washington and a statement is scheduled for release around 2:15 p.m. Jim, According to the article in Bloomberg (below): "About $460 billion of adjustable-rate loans are scheduled to reset this year, according to New York-based analysts at Citigroup Inc.". "Nevada led the nation with the highest foreclosure rate in the first three months of the year. Filings rose 137 percent to 19,595 from the year-earlier period. One in every 54 households there was in default or foreclosure..." One in every 54 households or 1.85% for the highest foreclosure rate in the US. That is a low foreclosure rate for the moment! Nevertheless the banks have made $300 billion in writedowns so far. House prices are expected to go down for the next 2 years at least. Consequently, I expect to see the foreclosure rate go way up in the next 2 years. Indeed, why would you refinance your mortgage of an asset loosing its value every day? Imagine what the bank writedowns will be when the foreclosure rate will be picking up in 2011. According to a 07/2007 Moody's study: "Subprime ARMs issued during the last three months of 2006 could fare worst of all, with a projected foreclosure rate of just under 20 percent during the fall of 2011." Regards, U.S. Foreclosure Filings Double in First Quarter, Led by Nevada April 29 (Bloomberg) -- U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money. Almost 650,000 properties were in some stage of foreclosure during the quarter, or 1 in every 194 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. The number was 112 percent above a year ago. Nevada, California and Arizona had the highest rates. The median U.S. home price may drop by a record 5.8 percent this year, Fannie Mae, the world's largest mortgage buyer, said April 7. Congress, the Bush administration and regulators have urged lenders to renegotiate terms for borrowers so they can stay in their homes, easing the glut of empty houses. Such efforts may mask the slump's extent by delaying foreclosures, RealtyTrac Chief Executive Officer James Saccacio said in the statement. ``This country needs a cleansing,'' billionaire real estate investor Sam Zell, chairman of Equity Group Investments LLC, said yesterday at the Milken Institute Global Conference in Los Angeles. ``We need to clean out all those people who never should have bought in the first place, and not give them sympathy.'' Jim Sinclair’s Commentary Consider the following in terms of the Formula as revenue drops and spending remains the same or rises in the US Federal Budget. A growing Federal Budget deficit is a negative weight on the US dollar. Hello Jim, Some quick analysis of the GDP. As we have said before, GDP numbers are biased. Thus, historical comparisons of the nominal numbers do not yield comparable trends. To provide apples to apples comparisons, the series must be adjusted. Best Wishes, |
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