Guest Post: Subprime Government And The Liquidity Trap, Parts I and II

Submitted by Tyler Durden on 04/09/2011 21:33 -0400

Intragovernmental debt holdings have been one of the more underreported topics during the last few economic cycles. This isn’t surprising. We’ve turned the federal debt argument into a legal, rather than financial or moral, debate where the fairness doctrine of universal applicability means any inconsistency of logic on the part renders the whole invalid. The result of this is the public grossly misunderstands the burden of proof to be the lack of controvertible evidence, and with it any hope of meaningful discourse is lost in the chicanes of grandiose political gestures. Arguments get boiled down into easy-to-swallow pills ready for mass consumption. We rally against illegal immigration without questioning who built our houses, and condemn illegal drug use while washing down an oxycodone with a highball of scotch. National debt is now far too high and government spending and waste far too pervasive. We must stop at nothing to rid ourselves of this indentured servitude... Oh, dear Faust, if it were only that easy. 

 

 

 

The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate" From Goldman Sachs

Submitted by Tyler Durden on 04/09/2011 22:25 -0400

Lately, there has been a lot of chatter by virtually everyone with some soapbox to stand on, about this and that. That's swell... if mostly irrelevant: by now everyone should be aware that only two charts actually matter, both of which are painfully self-explanatory. 

 

 

 

Egypt Revolution: Take 2

Submitted by Tyler Durden on 04/09/2011 14:40 -0400

Remember how happy the Egyptain population was to depose one dictator only to have him replaced with a ruling military junta, and how prosaic, not to mention cynical, our assumption was that the newly "democratic" country has three months before the country experiences another post-Thermiodrian revolution? Well, our estimate was three weeks off. As the video shows, Tahrir Square (remember it? the second black swan of 2011 after that whole Tunisia thing...) is once again the latest and greatest place to go, be seen, and occasionally, shot at.

Putting It All In Perspective: Bernanke Does More For The Budget In 15 Minutes Than The Government Does In A Year

Submitted by Tyler Durden on 04/09/2011 14:19 -0400

At a time where the government has demonstrated a complete lack of will over $38 billion, we are left in the hands of Ben to determine short term rates, influence the curve, and Timmy to determine what maturity profile that 'best meets our needs'. The actions of either of these two unelected individuals could dwarf the $38 billion as every 1% of increased borrowing costs would cost $143 billion. Since the government could barely deal with $38 billion, how will they deal with increased borrowing costs? Does even congress know just how trivial their cuts look relative to the potential increases in debt cost? 

 

 

 

Goldman Sachs: "The Margins Are Not What They Seem"

Submitted by Tyler Durden on 04/09/2011 13:55 -0400

And for today's exercise in surreality, in your best Agent Cooper voice repeat after us: "The margins are not what they seem." Why? Because in his latest Weekly Kickstart, the next incarnation of A Joseph Cohen, David Kostin appears to be channelling David Lynch when he says: "Company-level margins can fall while aggregate margins for the market continue to rise. If high margin stocks grow sales faster than low margin stocks, the index-level margin still expands." We won't even parse the logic of the first sentence. As for the big "if", so that's what Goldman bets its FYE 2011 S&P 1,500 target on - now we know. "The apparent fallacy of composition may be explained by the simple fact that revenue growth matters." See, David, that's why you get paid the big bucks. But it does not end there: "Analysts expect 66% of S&P 500 ex Financials and Utilities stocks will expand margins in 2011." Now that with Brent at nearly $130 makes absolute sense. In other news, we now know who killed Laura Palmer.

Video Of Tsunami Smashing Into Fukushima Nuclear Power Plant; Reactor 1 Radiation Counter "Breaks" After Reporting 100 Sieverts/Hour

Submitted by Tyler Durden on 04/09/2011 12:57 -0400

Better late then never. Almost a full month after the March 11 earthquake generated a tsunami strong enough to cripple the Fukushima nuclear power plant, TEPCO has finally released a video of the 45 foot waves coming to land and resulting in the biggest nuclear catastrophe since Chernobyl. As CNN explains what is patently obvious, the video shows the giant wave generated by the historic March 11 earthquake crashing over the plant's seawall and engulfing the facility, with one sheet of spray rising higher than the buildings that house the plant's six reactors. Tokyo Electric Power, the plant's owner, told reporters the wall of water was likely 14 to 15 meters (45 to 48 feet) higher than normal sea levels -- easily overwhelming the plant's 5-meter seawall. 

 

 

 

 

The Government Shutdown Battle Is Over; Now The Real Soap Opera Ratings War Begins

Submitted by Tyler Durden on 04/09/2011 11:52 -0400

For some reason, much ado is being made about the nothing that is last night's 11th (or technically 10th) hour aversion of a government shutdown. As we pointed out last week, it is not as if this strawman outcome, or for that matter the raising of the debt ceiling was ever in doubt: "look for both of these events to be consistently spun as key positive outcomes, even though the chance of these things actually not transpiring in a non-favorable light is non-existent." And sure enough, we are confident that the spin of this outcome will be extremely bullish even if in reality it is the perpetuation of a baseline status quo, while the alternative would have been unthinkable. In the grand scheme of things, this was nothing more than a free episode of political soap opera. The markets largely shrugged, because the Treasury Department still would have been able to issue and service debt and the Fed would continues to goose markets higher courtesy of POMO. Yet as Reuters points out astutely: "The battle over the U.S. budget has ended. Now the war begins. The debate over this year's budget that took the U.S. government to within an hour of a shutdown is only a dress rehearsal for bigger spending clashes to come." Here is what to look forward to, as the beltway entertainment spigot is cranked out to the max. 

 

 

 

Toxic Dollar: Why Nobody Seems to Want US Currency