Cesarnc's market talk, gossips, rumours & fun

Nice piece:

Currency Carry Trades Outperform Stocks at Lower Risk, BIS Says
By Kim-Mai Cutler

Dec. 10 (Bloomberg) -- Traders that borrow in countries with low interest rates and use the proceeds to buy currencies of countries higher rates tend to outperform major stock markets while offering less risk, according to the Bank for International Settlements.

Buying Australian dollars with loans denominated in Japanese yen produced an annualized average return of 12.5 percent between 2001 and September 2007, the Basel, Switzerland- based BIS said in a report published today. That compares with a 3.6 percent return for the Standard & Poor's 500 Index of stocks.
``Carry trades are often viewed as a highly speculative investment strategy, to be tried only by the most sophisticated investor,'' http://i2.photobucket.com/albums/y28...miley_rock.gif the BIS said. However, ``using volatility as the measure of risk, carry trades appear much less risky than major equity markets,'' according to the report.

Full Story

Fed's Inflation Measure Says Rates Can't Fall as Traders Expect

Dec. 10 (Bloomberg) -- The key to whether the Federal Reserve continues to cut interest rates after this week may hang on the wall behind economist Brian Sack's desk in Washington.

Sack, head of monetary and financial market analysis at the Fed in 2003 and 2004, uses a chart that plots forward rates measuring investor expectations for inflation in five years. The gauge is so accurate that Sack and his colleagues persuaded the central bank to use it to help set policy. The chart is autographed by former Fed Chairman Alan Greenspan.

Right now, it shows current Fed Chairman Ben S. Bernanke may have less room to lower borrowing costs than investors in Treasuries anticipate, potentially setting bondholders up for a fall. The expected inflation rate, which Sack says replicates what Fed officials use, reached 2.91 percent last week, the highest since 2004, when the central bank began the first of an unprecedented 17 rate increases. The measure was at 2.79 percent on Nov. 1.

``One of the defining features of the Bernanke Fed to date is its emphasis on measures of longer-term inflation expectations,'' said Sack, whose partners at Macroeconomic Advisors include former Fed Governor Laurence Meyer. ``The Fed is willing to tolerate short-run movements in inflation, but only as long as those movements don't appear to be dislodging long-run inflation expectations.''

Any evidence that accelerating inflation is becoming entrenched may heighten the Fed's debate as policy makers consider cutting rates to keep the worst housing market in 16 years and mounting losses in securities related to subprime mortgages from tipping the economy into recession.

`Inflationary Pressures'
Futures on the Chicago Board of Trade show a 100 percent chance the Fed will lower its target for the overnight lending rate between banks by at least a quarter-percentage point to 4.25 percent, the third cut since September. The chances are at least 50 percent that the Fed will cut again at its next two meetings, on Jan. 30 and March 18, to as low as 3.5 percent.
The gauge used by Sack, dubbed the five-year five-year forward breakeven inflation rate, suggests bets on lower Fed funds rates may be too bold. The fact that the rate stayed steady for much of the past two months as pessimism about the economy grew bolsters that view, said Michael Pond, an interest- rate strategist in New York at Barclays Capital Inc., one of the 20 primary dealers of U.S. government securities that trade with the Fed. A cooling economy typically tempers inflation concerns.

``The market, by keeping the same inflation expectations while lowering growth expectations, is implying there are inflationary pressures,'' Pond said. He held to that view even as the forward rate fell last week.

Breakeven Rate
Bond investors are demanding about 1 percentage point more in yield to own Treasuries maturing in 10 years than due in two years to compensate for the risk that consumer prices will accelerate. There was no difference as recently as June.

Sack and other analysts derive the measure of inflation expectations from yields on five- and 10-year Treasury Inflation Protected Securities and Treasuries.

For the full story: http://www.bloomberg.com/apps/news?p...ePE&refer=home

Nothing dramatic in Tokyo. Nikkei 225 opened up 10 pts. Presently down about 99 which is only .6%

MORTGAGE MELTDOWN
Interest rate 'freeze' - the real story is fraud
Bankers pay lip service to families while scurrying to avert suits, prison


Sean Olender
Sunday, December 9, 2007

New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.

Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.
But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.

The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.

I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."
Despite Thursday's ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?

The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.

The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply - period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.

Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?


http://www.sfgate.com/cgi-bin/articl.../IN5BTNJ2V.DTL

Article written by: Sean Olender is a San Mateo attorney

You think he might stand a chance of making a dollar or two suing the banks.

Now children can you say - Class Action and I'm not talking milk and cookies time.

And where is that telephone number of my new favorite salesman at the local Ferrari dealer.

230 to 530 what you think.

Morning all...

I think we have speculated all we had already. Now it's up to the market.

I'll be out for most part of the day, trying to make my fitness closing new biz to get momentum...

The good side of this business is that there is no chance my inventory gets wiped out because of the subprime crisis

The down side is that I can't take a nap while the profit mounts...

See you around

Too late, the weekend is over and so is his "shit"

Good morning everybody

Fool in the shower

Dec. 10 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may have to risk becoming the proverbial ``fool in the shower'' to keep the U.S. economy out of recession.


Renewed turbulence in financial markets puts Bernanke, 53, under pressure to open the monetary spigots wider to pump up the economy. Traders in federal funds futures are betting it's a certainty the Fed will cut its benchmark interest rate from 4.5 percent tomorrow, and they see a better-than-even chance the rate will be 3.75 percent or below by April.


``The Fed has to assure the markets that it's ready to ride to the rescue and cut rates by as much as necessary,'' says Lyle Gramley, a former Fed governor who's now a senior economic adviser in Washington for the Stanford Group Co., a wealth- management firm.

Probably up to the 200 SMA around there no?

GJ so far so good
Euro up
Dow futures up
European stocks up

25bp kicking in already

Yep, 228 and counting, uhoh UBS with more write downs

Gotta luv that.....great way to start the week.


HOLLA

is that system working.

Riding the shortbus on GJ for 226ish

Phone confusion after Bush error

US homeowners searching for help with their mortgages struggled to get through on a telephone number that President Bush gave them.
"I have a message for every homeowner worried about rising mortgage payments: the best you can do for your family is to call 1-800-995-HOPE," he said.
But those who went in search of hope got a busy signal - the president had given them the wrong number.
The number Bush gave was for the Freedom Christian Academy in Texas.
The school phone rang non-stop when Bush gave out the number.
"I've tried my best to give the correct number to these people when they called," the academy's Ms Karen Pulaski told the Dallas Morning News, having spoken to more than 50 people in an hour.
"But it got a little overwhelming because I couldn't do anything except answer these calls."
Ms Pulaski later disconnected the phone.
The correct number, aides told reporters, was 1-888-995-HOPE.
Help at hand
For those that did get the right number, the help on offer could ease the pain of rising rates.
As part of the plan announced on Thursday, rates will be frozen for hundreds of thousands of American homeowners for the next five years.
Banks' willingness to lend money to people with poor credit histories is behind the current credit crisis in the US. The crisis has not only hit US homeowners but has also had a knock-on effect on the global financial sector.

http://news.bbc.co.uk/2/hi/business/7136628.stm

WTF

Man cuts off penis in restaurant

A man cut off his penis with a knife in a packed London restaurant.
Police were forced to use CS gas to restrain the man when they entered the Zizzi restaurant in The Strand on Sunday evening.
A Metropolitan Police spokeswoman said the man was aged between 30 and 40 and that his injuries were self-inflicted. The man was then taken to hospital in south London where his condition is stable. It is understood surgeons were unable to reattach his penis.

http://news.bbc.co.uk/2/hi/uk_news/e...on/6586879.stm

He was clearly short cable eh?

I guess he is now.