The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

The Value of the “Too Big to Fail” Big Bank Subsidy

UVEX, the ski goggle maker, got a nastygram from an Olympics Committee IP lawyer, forbidding them from using any images — or even mentioning — that gold medal winner Lindsey Vonn uses their equipment.

Blonde Who Uses Our Stuff Wins Downhill (Last Name Rhymes With “Bonn”)

There once was a lawyer from the IOC,
who called us to protect “intellectual property.”

“During the Olympics”, she said with a sneer
“your site can’t use an Olympian’s name even if they use your gear.”

“No pictures, no video, no blog posts can be used…”
Even if they are old? “No!”, she enthused.

While Olympians chase gold the IOC pursues green.
Cough up millions, or your logo cannot be seen . . .

~~~

Visit msnbc.com for breaking news, world news, and news about the economy

~~~

On a lazy expiration Friday, you can either spend time on the Tiger nonsense, or you can surf the web looking for chartporn and other good time killing stuff.

I chose the latter.

Consider these two lists via Tunku Varadarajan. I met him some time ago (thru Paul Kedrosky) when he was managing editor of the WSJ OpEd page. I have spoken to his NYU Stern Business School Journalism class a few times over the years.

Tunku, writing at The Daily Beast, takes a look at the 25 “most influential Liberal/Conservative journalists” by their political orientation.

I found these two to be very interesting lists:

• The Left’s Top 25 Journalists

• The Right’s Top 25 Journalists

Each individual has a short bio/political bonafides if you click thru to them.

Even though there is plenty to disagree about with the inclusion and order, its still rather intriguing.

Mr. Benjamin S. Bernanke
Chairman, Board of Governors of the Federal Reserve System
Mariner S. Eccles Building
20th Street and Constitution Avenue, N.W
Washington, DC 20551

Dear Mr. Bernanke:

I guess I was wrong about you. I’ve repeatedly written that you and the other members of the Federal Open Market Committee would not have the gumption to raise interest rates in 2010. Yesterday’s move by the FOMC to hike the discount rate by 25 basis points to a lofty 0.75% put the lie to my claims, and I, like Tiger Woods this morning, feel I must make a public apology. I’m sorry.

With this mea culpa come a few questions, though. If the spines around the FOMC conference table are indeed stiffening, why did you choose to raise only a largely symbolic rate, and then by only a token amount? Is it because, as Bank of America Merrill Lynch economist, Michael Hanson, suggests in the document attached herewith, that yesterday’s move was indeed not the FOMC’s idea? As Mr. Hanson states, “Also keep in mind that the Board of Governors cannot initiate an increase in the discount rate. Rather, a request must be made by one or more regional Fed banks. The press release indicated that the Board approved requests from ‘the boards of directors of the 12 Federal Reserve Banks’ — presumably it wanted to wait for all 12 banks to make such a request before acting.” If Mr. Hanson’s presumption is true, isn’t yesterday’s move to boost the discount rate more a reflection of responsible policy attitudes by the district banks rather than of the Board itself?

Furthermore, Mr. Bernanke, why did the Board go to such great pains to make it clear to the world that yesterday’s move did not signal a policy change? Perhaps tellingly, the following paragraph from the release itself comes before any mention of a change in the discount rate:

“Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve’s lending facilities. The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” (source: Federal Reserve press release)

Forgive me, Mr. Bernanke, but I’m confused by both this paragraph and its placement in the release. Why did the Board reaffirm its commitment to a near zero funds rate for an “extended period” before announcing the actual change in the discount rate? In journalism, this tactic is called “burying the lead”; in politics, it is cynically called C.Y.A.; and, with apologies to Mary Poppins, in finance it is called “a spoonful of sugar that helps the medicine go down”. Is the FOMC really so afraid of either Congress or the asset markets that it felt the need to remind the world about ZIRP prior to revealing the nudge higher in the discount rate? Since stocks, the dollar, commodities, and even the 30 Treasury bond are all higher as I write these words (1pm est), Mr. Market certainly approves of this form of “tightening”.

But I’m not alone, sir, in wondering whether yesterday’s action by the Fed is a genuine tightening, a trial balloon-style hint of interest rate hikes to come, or, as Mr. Hanson puts it, “much ado about nothing”. Perhaps a little more of the transparency you claim to covet is in order, Mr. Bernanke. You should know that the following riddle has been offered up near at least one water cooler today: “When is an interest rate hike not a tightening? When it’s announced by the Bernanke Fed.” Or, were a blizzard of questions and a trail of confusion the goal of yesterday’s action all along?

Sincere in My Desire to Withhold Further Judgment Until I Hear From You,

Jack McHugh

>

The Fed’s discount rate hike to .75 from .50 is necessary due to surging inflation the past few months. At this point, the Fed move is a warning to the Street to stop inflating commodities and stocks and bashing sovereign debt. If you want to temper the sovereign debt crisis, either remove the juice or hike the price of the juice . . . Perhaps the pathetic 30-year auction last week forced the Fed to action.

We don’t know if the Fed is smart enough to realize that commodities are percolating because speculators, hedge funds and CTAs are loading up for the seasonal upward bias for gasoline and grains. But if the Fed is aware of this dynamic, they realize that they must stop speculators from their usual spring buying binge in commodities – especially gasoline because of its political impact.

Global solons have bet the ranch on the concept that inflation is needed to thwart deflation and modest inflation would create jobs and income for the masses. That has not occurred. What has occurred is escalating inflation but jobs and income remain stagnant. Ergo the misery index is increasing.

Some central bank officials at the Fed and MPC have openly voiced concern that the record credit creation is seeding a new asset bubble and inflation. India and China have been hiking rates & reserves requirements. The Fed is due to exit its MBS monetization next month.

But as we keep harping, equities ‘get it last’ and traders ignore bad news or fundamentals until the situation becomes dire. This is due to two decades of inculcated bullishness on central bank largesse.

A variety of Fed officials surfaced last night to assuage market concern about the Fed’s discount rate hike. Obviously they all received talking points because of the common message: ‘The discount rate hike is not a tightening or change in Fed monetary policy. It is a return to a normal policy’.

Um, excuse us, Fed officials. To get back to normal, the Fed must tighten and change its policy. So who ya zoomin’?

Usually Fed officials talk tough but reluctantly act hawkish. But now after a clear policy change, a rate hike, Fed officials are trying to convince people that what just occurred did not really occur. Fed officials are losing what little credibility they still possess.

During midday on Thursday, we got a notice from a bond source that a dealer or two was aggressively buying Nov 2039 bonds as part of a yield curve flattening play. The forceful buying flattened the curve by a couple bps. Obviously someone got a wink & a nod from somebody at the Fed.

How many times have we noted that Ben the Juiceman keeps pouring in juice during expiration week? For the week ended on Wednesday, the Fed balance sheet increased $21B of the MBS monetization of $48.676B. Term auction credit declined $23B.

January PPI exploded 1.4%, which is much higher than the consensus 0.8%. Good thing inflation is subdued and inflation expectations are stable! But the US is not the only nation experiencing escalating inflation. A few days ago, the UK reported January CPI at 3.5%, which is much higher than expected.

Yesterday Canada reported January CPI of 1.9% over the past 12 months, the highest rate since 2008.

We’ve noted twice in the past two weeks that India has double-digit food inflation. China for the past few months has been fighting food and property inflation.
The misery index of higher inflation and stagnant or lower wages is enflaming populace ire. Solons can keep spending and wet-nursing the connected, but they are destroying the middle and merchant classes.

We just got a 16% increase in our healthcare premiums. Some people have been hit with healthcare premium hikes of 38%. We are grateful for ‘subdued inflation and stable inflation expectations’.

-Reuters: The Obama administration ratcheted up pressure on health insurers on Thursday, saying some planned double-digit rate hikes while making billions in profits and paying executives multimillion-dollar salaries.

-NJ Transit May Increase Fares as Much as 30% by May

-Cotton Climbs to 19-Month High on Surging Demand, Tight Supply

Bloomberg: Copper for delivery in May rose 2 percent to $3.325 a pound, a three week high, in New York. Crude oil for March delivery increased 2.2 percent to $79.06 a barrel, the highest settlement price since Jan. 14.

Time to look at he LEIs again:

>

ECRI leading indicator starting to decline rapidly

Chart courtesy of Société Générale

Some of the recent data points are still pointing towards Deflation — not Inflation.

Consumer prices rose less than expected in January while prices excluding food and energy actually fell — something that hasn’t happened in more than a quarter-century.

If we look at he numbers that Wal-Mart, the nation’s biggest retailer, posted earlier this week, they tell the tale of a Deflation.

Yes, deflation is moderating — but we see no real sign of inflation yet.

>

A look ahead of today’s market action, with Arthur Cashin, UBS Financial Services director, floor operations.

Airtime: Fri. Feb. 19 2010 | 8:50 AM ET

An animated short that re-imagines Los Angeles as a city made up of nothing but corporate branding, populates it entirely with corporate logos and mascots, and then sets Ronald McDonald loose on a profane and by all accounts enormous bloody rampage of gun violence.