European Markets All Out Of That Special European Flair, May Turn To Snorting Zoloft. (Reuters)
Markets across Europe were down overnight on continued credit worries and fear that the incoming administration may not be able to move quickly enough. In an attempt to allay panic it looks as though the EU CB is going to posture for rate cuts; we should be looking for a 50bps announcement sometime in the near future.

The FTSE was down 2.8% (at print), primarily on Commodities and Banks. As Oil prices have fallen, so goes those who sell - we saw BP, Royal Dutch Shell, Cairn Energy and Tullow Oil all fall back between 1% and 3%. Also of note, the mining sector saw a pull back overnight as metal prices fell in response to Vedanta Resources posting a 24.7% drop in first-half profit.

Bank of England Makes Rate Cut. (WSJ)
BOE cut their rate to 3% overnight; conservative numbers had it at 4%, liberal 3.5%.

Cerberus May Be Separating GMAC, Looking At Bank Formation (Bloomberg)
The idea is to spin off control of GMAC to investors, and allow it to blossom into a bank so as to take advantage of Government money. The move would keep Cerberus falling under Banking Regs, and possibly save GMAC. GM would have to give up its 49% stake in the company to avoid regulations, but one wonders if there’s not a super-secret master plan there.

Barclays To Buy Italian Mortgage Lender. (AP)
“The purchase increases the value of Barclays mortgage book by 1.1 billion euros ($1.4 billion) — or nearly 10 percent. Before this deal, Barclays mortgage book was worth roughly 12 billion euros ($15 billion).”

IEA Projecting $100 Barrels. (FT)
“The developed world’s energy watchdog has doubled its long-term price expectation from last year’s $108 a barrel for 2030 and assumes oil prices will rebound from today’s $60-$70 a barrel to trade, in real terms adjusted by inflation, at an average of more than $100 a barrel from 2008 to 2015.”

This is still optimistic, $200 barrels in 2030? The way things are going a bottle of Aspirin is going to cost $200 in 2030.

If all it takes to call energy prices 20 years from now is a flair for the ridiculous, I’m well qualified make calls on Economic Policy in 2030: I have it on good authority that in the near future we’re going to learn how to clone hotdogs. They’re going to be so abundant they’re going to become our currency: 20 hotdogs would equal roughly a Nickel, depending on the strength of the Yen. A barrel of Oil will cost between 60,000HD and 80,000HD.

Nikkei slides 6.5 pct as Toyota, Isuzu hammered. (Reuters)
I’m not upset that Japan failed miserably at picking itself up off the floor, I’m pissed that they made everyone watch. It’s one thing to admit you suck, take Emo kids for example: you know better than to look at them, you certainly don’t talk to them, and you couldn’t give a shit about their Grandmother. I feel like we’ve been made to care about Japan’s Grandmother, and we should all be pissed.

That being said, the Nikkei closed down 6.5% as Japanese automakers announce people aren’t buying their shit. Also of note in the story: they too are looking to the new US administration to quell economic fears.

Table of Projected Bonus Cuts. (Bloomberg)
Bloomberg has put together a table of bonus cuts they see coming down the road after talking with a consulting compensation firm. I want to emphasize here that this came from a consulting firm, which we all know is in the sales business.

It looks like anyone ever mentioned in a proxy statement is going to take it the hardest (60 - 70% reduction) with PE and IB following suit (at 30 - 45%).

As we love to compile our own data, anyone with concrete/rumored numbers for their firm are encouraged to email them to tips (AT) dealbreaker (DOT) com or text them to 973-495-0177.

—William Richards

“Analysts welcomed the move but said it had already been priced in and the outlook remains grim.” (Reuters)
This has all the grace of a blind dog running head first, full speed, into a brick wall. Sure Bernanke, you say there’s a treat on the other side, but we both know there isn’t. We’re floating dollar liquidity in concert with the IMF to the EMs until April 30th, and there’s a 600B Mortgage Billthat might be coming to the table in an exercise of insanity worthy of worship. But, at least this has nothing to do with fear or emotion, it’s completely logical.

Economic Fundamentals set the stage for Oilrebound (Bloomberg)
The question wasn’t ever whether Oil would rebound, but rather how long the illiquidity issue would keep it depressed.

Trading Markets provides the information to get on to the Exxon call this morning.

It’s (almost) always a good thing to beat the Street’s expectations. (WSJ)
Deutsche Bank beat expectations this year in spite of posting a 73% fallback this quarter “as results were boosted by a reclassification of assets under new European Union accounting rules and a tax benefit”.

Empire of the Sun. (BBC)
The Nikkei pushed ahead nearly ten percent (9.96%) last night in the third day of gains posted by the Japanese exchange. US liquidity injections into the EMs, the rate cute, the projected rate cut by the BOJ, and a 5 trillion yen stimulus package that includes highway toll (seriously?) cuts were listed as the primary culprits in the “rebound”.

FTSE 100 relatively flat overnight. (FT)
Promising indicators as to what Exxon might say came out of Shell, as they reported earnings overnight (71% rise in Q3 profits). The British banks are calling for rate cuts similar to those seen in the United States yesterday, and optimism about the move appears to be crutching the market, for now.

Best and brightest future of Government number crunching? (Reuters/Trading Places)
I’m torn between crying and laughing here:

“Yet another sign of tough times on Wall Street, dejected financial professionals were among those lined up yesterday for a shot to work for none other than the IRS, the New York Times reports.”

Economically today we’ve got the Q3 advanced GDP coming our way at 8:30, with the 3/6 month Bill announcements coming shortly thereafter. The EIA Natural Gas report should be out just in time to spike volatility in the energy sector (assuming it hasn’t been fully priced into the market) before Exxon reports. (Bloomberg)

—William Richards

From: Lowenthal, Albert

Sent: Oct 24, 2008 8:47 AM

Subject: Today

It has never been more difficult to come to work and face overnight market reports and the continuous cacophony from market pundits telling us how the world as we know it is coming to an end. This morning, we face markets that were down 7-10% around the world in the overnight, the Japanese yen at new highs versus every currency (only slightly ahead of an increasing U.S. dollar) and U.S. stock futures down the limit, projecting an opening down more than 6%. Meanwhile, commodities are dropping like a stone with oil down, despite OPEC announcing a cut in production.

Commentators are saying that “Wall Street is wallowing in despair after being beyond the panic stage.” The fundamental problem of a seized credit market is being resolved by the infusion of capital and guaranty of liquidity to the system. While we are in a recession of unknown duration, the world is in fact not coming to an end. Stock prices have gone beyond predicting a period of weaker earnings and now only reflect unremitting selling pressure without committed buyers. We need to recognize that unwinding of leverage is a painful process and that it is taking place in real time. Margin selling by hedge funds, individual investors and corporate chieftains is creating indiscriminate selling of financial assets with sellers focused on where they can get bids, as opposed to selling positions that they don’t believe will perform. While there is no way to predict the bottom for markets, many indicators show that it is not far off.

U.S. stock futures blasted after Asia plunge (Marketwatch)
U.S. futures are getting smashed up this morning after a nightmare trading session in the Asian markets (see next article). Dow futures are off 546 points, while Nasdaq futures are falling 82.5 points; S&P futures are down 60 points, at 855.20. There’s a lot of technical analysis that says the S&P has to hit 800 before we see a decent rebound; more and more, that’s looking the right analysis. That said, with the extent of this selloff, and the huge volatility, the potential for short squeezing has never looked so ominous or looming. Opec cut production by a whopping 1.5million barrels a day, not that that’s likely to have a huge effect: once a commodity market enters freefall, there’s little stopping it.

Tokyo, Seoul Head Asian Market Train Wreck (CNBC.com)
The overnight dealer notes from Hong Kong were all broadly disbelieving of the last-minute rally in the Dow yesterday … and those sentiments couldn’t have been proved more right. The Nikkei plummeted 9.6%, to 7649.08, more than a five-year low. The yen hit a 13-year high vs. the dollar, at around 91 yen. South Korea’s Kospi was off more than 10%, while everything else in Asia pretty much went belly-up too. Although it looks like a U.S.-led thing, much of the Asian mauling is really more to do with the yen than anything else.

Greenspan Concedes Error on Regulation (NYT)
In a dramatic and humbling mea culpa yesterday, the former fed chairman admitted he was “shocked” by the mess we now find ourselves in, and that he may have got it wrong a little bit with regard to regulation. It’s refreshing to see someone being honest right now, rather than blaming the market, the short speculators, the regulators, the homeowners, or whoever else is possibly in the firing line. It makes you think, actually, that he’s the only guy round who stands a chance of fixing the problem … given that half of it seems to have been in saying “we have a problem” in the first place.

German banks overexposed in Iceland (Daily Telegraph)
It turns out that the counter-parties hardest hit by Iceland’s recent banking turmoil are German banks, which are owed $21 billion. That’s around a third of Iceland’s $75 billion debt. German banks are having a hard time; it was also a major lender to both Spain and Ireland, which have been pretty badly beaten up in the credit crunch. These announcements could not have come on a worse day, either.

Sony Blames Profit Warning on Yen, Weak Demand (Business Week)
A lot of the Asian market selloff was down to a surprise announcement by Sony that its earnings would fall 58% on the year, to $2.04 billion, by March 2009. The article explains that Sony sees the higher yen harming sales. It’s not really the harm in sales that’s the issue here however, but more the margin on exports, which is just wiped away when the yen’s sitting up in the 90’s.

Microsoft earnings beat the Street (NYT)
Microsoft is turning out to be a bit of a contrary indicator. When times are rolling, the software giant is lagging … but now that things are in somewhat of a death spiral, earnings are up. Still, only just, a 48 cents a share vs. 47 cents a share. That’s the advantage of a monopoly: it’s almost recession-proof by default. After all, everyone still needs MS Word, if only to polish their resumes while they look for a new employer.

Futures fall as recession fears weigh (Reuters)
There’s no end in sight to the bottom of this week’s selloff — but this morning there is perhaps the beginning of one. S&P futures are down 7.7 points, Dow Jones futures lower by 35 points, and Nasdaq futures are off around 12 points or so. Those numbers are much lower than in futures trading in recent days, but that’s no indication of how bad things can get once the opening bell chimes.

Seoul, Hong Kong extend retreat; Tokyo cuts losses (Marketwatch)
Another spike in the yen and gloomy economic data in Japan overnight brought about a slump in Asian share prices. The Nikkei fell 2.5%, while the Hang Seng dropped 3.6%, to its lowest close since May; South Korea’s Kospi ended 7.5% lower, with trading halted at one point in the day.

Foreclosure Filings Rose 71% in Third Quarter as Prices Fell (Bloomberg)
The title of this piece says it all, really: 765,558 homes either foreclosed, or were auctioned off in the last quarter. As with data from yesterday: no doubt about it, deeply recessionary. In addition, lots of people predicting a rise in foreclosures throughout the rest of the year.

OPEC Faces Worsening Oil Price Drop as Growth Slips (Bloomberg)
Bloomberg is reporting that OPEC’s rumored 1 million barrel a day cut in production tomorrow at Vienna’s meeting will fail to stem a freefall in oil prices … right on the money: love it or hate it, oil is headed for $45 a barrel, where prices were the last time equities were at this level. The two will move in lockstep: just because the marginal cost of extraction has risen due to drilling in ever colder/more cumbersome climates, doensn’t mean everyone will pay that price.

Is Argentina’s government deliberately trying to fuck its consumers? Off the DJ wire:

Very few bonds had traded yet, but the dollar-denominated Boden 2012 was down sharply to the peso equivalent ARS136 from its open at ARS149.90.

On Tuesday, President Cristina Fernandez signed a bill that, if approved by the legislature, will end the country’s 14-year-old private pension fund system.

The private pension funds are set to receive very limited compensation under the proposed bill, according to a draft of the law which has been sent to Congress for debate.

The companies will “in no case (receive more than) the equivalent of the shareholder capital of the liquidated Administrators,” according to the bill.

In addition, compensation will be paid with government bonds, not cash.

According to Dow Jones, Argentina’s stock market fell 10% in the first 20 minutes of morning trading.

Granted — Argentina is an extreme example, but this is the first of many to come in the emerging market space. How anyone can think that emerging markets are more sheltered from the credit freeze than the giant, federally/huge central bank-backed European and American economies just because they weren’t as leveraged is beyond comprehension.

It doesn’t matter that emerging markets were not leveraged on credit. If the countries whose funds that were propping up their bond markets, equity markets, and growth in general (by buying their products/services) are suffering, they will too. Claiming - as some have - that emerging markets are somehow “decoupled” from America is like saying the Merrill plant-waterer is somehow decoupled from Merrill Lynch’s troubles. If the bottom falls out, the plants go too.

With spiraling oil prices and less and less liquidity around, emerging markets are going to feel pain similar to ‘97 in the not-too-distant future. The fact that a lot of them are running current account surpluses and have enormous sovereign wealth funds won’t matter one iota either, because the point is, there will be no more income to make those surpluses sustainable any longer.

And the sovereign wealth funds that remained tied up in oil cash without diversifying into U.S. equities on the cheap will live to regret it.

Article (No Link): Argentina Stocks Down 10% After First 20 Minutes Of Trading (Dow Jones)

U.S. Futures Weighed Down by Gloomy Earnings Reports (TheStreet.com)
Despite good news from the Apple camp after the bell yesterday, an overnight selloff along with the likes of AT&T, Wachovia and Boeing reporting today is having a gloomy impact on futures trading. S&P futures are off between 19 - 31 points, at 939, while Nasdaq futures are down 17 points, at 1276. Dow futures are in the red by 242 points. The Energy Information Administration is also releasing crude-oil inventory figures for last week.

Mortgage applications dropped 16.6% last week (Marketwatch)
This doesn’t look promising. The weekly mortgage application volume was off 44% from the same week last year, and hasn’t been so low since December, 2000. The four week moving averages for mortgage applications has dropped 9.2%. No doubt about it: that looks recessionary.

Asian markets slide on glum corporate outlook (AP)
When the U.S. sneezes, the world catches cold while Asia gets SARS. So it was overnight: the Nikkei is back through the 9,000-point band, down nearly 7%; Hong Kong fell 5.2%; South Korea’s Kospi slid 5.1%, and China held up a little better, slipping 3.2%. The yen is much higher, prompting a 9% tumble in shares of Sony. This crisis is going to be much more prolonged in emerging markets than over here in the U.S. Dealer notes in Asia are all pointing out Argentina’s next possible default (see next article). Samsung has decided not to buy a stake in Sandisk.

Argentina Default Looms, Pension Seizure Roils Market (Bloomberg)
Mainly because things have been so ugly everywhere right now, lots of investors have taken their eye off Latin America. But if you look closely at the wires every day, leaders in Chile, Argentina and Brazil in particular have been printing money better than Dick Fuld. Now there are genuine fears of a big default in Argentina. The stock market plunged more than 11%, as the government seized around $29 billion of private pension funds. Bond yields are above 24%.

OPEC, Alone (Forbes.com)
Oil fell through the $70 band overnight, to $69.48 a barrel, even as OPEC is mulling a 1 - 2 million barrel cut in daily output. Russia’s surplus ceases to be once oil falls lower than $70 a barrel, raising concerns there about economic tightening. Despite pleas from OPEC, Norway is refusing to cut production, however.

Wal-Mart profit could be hurt by new supplier standards (Reuters)
Finally, Wal Mart is cleaning up its quality standards act, although chief exec Lee Scott says that could harm margins and make goods more expensive for customers. Wal Mart gets around $9 billion worth of products a year from China. With everyone raising the standards bar, and Chinese consumption declining, things are going to look precarious on the economic front there very soon (if they don’t already).

So … suddenly, the market turned up 4% or so.

Unfortunately, this is less likely anything to do with equity valuations being at bargain prices, and more to do with index option expirations, many of which take place Friday. This should by all accounts be somewhat expected: there are usually spikes in the market at this time of the month (such as around Sept. 19 when the same thing was going on), and some index options cannot be traded on the expiration date (various Dow and S&P options in particular).

Which again raises the question: when do we hit a bottom? Much of the recent talk of hitting a bottom in the stock market is probably misplaced, and definitely too narrowly focused. The truth is, in a bear market a bottom has less to do with how cheap equities become relative to earnings, and more to do with other macroeconomic factors (as is true in a bull market very often, too).

Likewise, the issue with the various bailout packages is not so much that they are politically problematic, but that they try and correct the microeconomic climate, rather than the macroeconomic one. (For example, a reduction in the Japanese interest rate would have had more effect than the Asian, European, and U.S. ones combined).

There are four factors combined that most probably trigger the “buy” signal: the value of the dollar, the value of the yen, the price of gold, and the price of oil. When these four factors hit favorable valuations all at once, equity prices will probably see a big rush in buying. Here’s why:

U.S. stock futures pointing to further losses (Marketwatch)
It’s getting easier and easier to make an accurate call on the market these days: all you have to do is say, “major indices will be down between 5% and 10%.” With seven straight downward sessions, we’re still in the death spiral this morning. Futures for the S&P, Dow, and the Nasdaq are all off between 2.2% and 3.5%. If things get any worse, we’re on track for the worst trading year since 1937. Any guesses for how low we go before we hit a rebound?

Bush to make statement Friday after market volatility (Reuters)
The President will be speaking at around 10 am from the Rose Garden of the White House this morning “to assure Americans that every action is being taken to stabilize the financial system,” according to Reuters. Hopefully that “every action” point includes an end to lengthy congressional debates over policy that needs rapid-fire approval.

Asian Stocks Plunge as Credit Crisis Deepens; Banks, BHP Slump (Bloomberg)
Japan ended the day 9.6% lower, Hong Kong plunged 9%, India lost 8.9%, and Australia dropped 8.3%. Curiously, considering it has just introduced short-selling, China’s Shanghai composite fell just 3.6%, although that index is off 67% from its high.

European shares plunge in early trading (Marketwatch)
The selling activity extends to Europe, too. Markets in England, France and Germany were all falling more than 8% in morning trading. “Panic” seems to be the watchword right now, as no one wants to call a bottom here.

Treasury Weighs Next Step to Stem Crisis (WSJ)
Meanwhile, Treasury big-wigs are trying to figure out what to do here. They’re mulling several versions of the same capital-infusion scheme, according to the Journal. One would have Treasury take equity stakes in banks at favorable valuations; another would be voluntary, a la the U.K.’s plan. The most interesting suggestion seems to be the one where banks get federal funding if they raise a certain amount of money privately. That would carry fair risk, but it might also kick-start the market engine into gear again.

Oil down four dollars amid equities ‘bloodbath’ (AFP)
Oil fell to around $82 in Asian trading. At one point the price briefly tinkered in the 70’s for the first time in about a year. As I said yesterday, the moves have been much larger on the way down than on the way up (equity market conditions notwithstanding). With stock prices back at 2002 levels, it’s probably not unreasonable to look for $45 a barrel if things don’t improve quickly.

U.S.futures point to Wall St rebounding (Reuters)
After six days in the snake-pit, this morning’s futures activity shows the first genuine signs of an up day. Futures in the Dow, S&P, and the Nasdaq are all climbing around 1.7%. Whatever happens, it’s probably going to feel a bit like a newly-fitted jet over the Himalayas. Short selling comes off today, which funds will either to pummel Goldman, Morgan et al, or they’ll use to hedge against big upside bets. With valuations so weak now, it looks like stocks will probably move towards the buying end of the scale.

Paulson Signals U.S. May Invest in Banks to Shore Up Confidence (Bloomberg)
Perhaps due to the farsightedness of the British, Paulson indicated yesterday that the U.S. federal government is mulling a plan to buy some of its own banks. Unfortunately, that’s probably the type of drastic measure that may be required to stem the blood in this market if things get any worse.

U.S. Pending Home Resales Rise 7.4% as Prices Drop (Bloomberg)
… then again, that’s the biggest jump in home resales since 2001. The increase has been attributed to lots of “vulture investors”, among other things. Either way, once again this does suggest that we’re still pretty far from recessionary conditions.

Icelandic Regulator Takes Control of Kaupthing Bank (Bloomberg)
The Icelandic saga continues … and ends in the tradition of all contemporary bank dramas: nationalization of its biggest lender. Iceland took control of Kaupthing today, the country’s largest bank, after the krona/euro peg was abandoned Wednesday. Talks with the Russians for the $5.5 billion loan begin Tuesday, and Iceland may also tap the IMF now, according to Bloomberg.

MetLife, Hartford Held Merger Talks: Report (CNBC.com)
It should be pretty clear by now that when a firm comes out and says it’s raising money, really what it means is that it’s talking to M&A departments about getting bought out or merging. So it is with Met Life: apparently, the insurance giant approached Hartford Financial Services Group about a merger. European insurer Allianz bought $2.5 billion of Hartford earlier this week; it seems that’s enough for Hartford execs to have said “don’t call us, we’ll call you” to Met Life. My guess is Chinese Ping An could end up tying up with Met Life.

Oil prices rebound (AFP)
After falling in wake of Wednesday’s coordinated rate cuts, the black liquid is up again at around $90. But oil prices are moving in much smaller increments these days when they go up (and much larger ones when they go down); there’s definitely a lot of downward pressure on the price right now. And oil companies aren’t as satisfied with profits as you’d think.

U.S. stock futures flattish after Monday’s hammering (Marketwatch)
After a bloody Monday, U.S. stock futures are pretty much all over the place this morning. S&P 500 futures are down 2 points, at 1051.30, while Dow futures are off 55 points. Nasdaq futures are up 5 points, at 1,411.50. Once again, the attention is going to be on the Fed today, with regard to getting involved in the unsecured lending market (see next article), and as the street waits to see its stance on interest rates.

Fed reportedly looking into unsecured lending (Marketwatch)
According to the FT, the Fed is meeting with dealers and exchange execs today, to discuss the possibility of getting into unsecured lending. That would allow the Fed to directly purchase commercial paper for the first time in history, as well as participate in the inter-bank money market. Depending on the validity of this story, and how it pans out, it may well end up dominating today’s newsflow.

Bank of America profits plunge 68% (CNN Money)
We all knew it was going to be a bad quarter for BoA, but here’s the official figure, announced a week in advance: earnings of $1.18 billion, or 15 cents a share, down 68% from $3.7 billion, or 82 cents a share. Wall Street was apparently looking for $3.22 billion, or 62 cents a share, which, even if you can take deposits, seems way too high given the current market environment for financials. BoA shares tumbled 9% after market hours, when the bank made the statement Monday. BoA also said it is raising $10 billion in fresh capital. As an aside, it seems that in the mayhem everyone overlooked yesterday the news that BoA has settled with 11 states to save 400,000 former Countrywide mortgage holders from losing their homes. As a positive story, it’s just not getting enough play here.

Bank of Japan leaves door open for rate cut (Reuters)
After Australia slashed its benchmark interest rate an unprecedented one percentage point, to 6%, there’s rumors of rate cuts everywhere. The Aussie rate cut was the most since 1992, and temporarily stimulated Asian markets out of a steep morning slide. Now, Reuters reports that the Bank of Japan may be among the central banks looking to reduce rates. That would be hugely significant, because the interest rate there is only 0.5%, and could lead to a resurgence of sorts of the “yen carry trade”. Some in Asia are speculating that this alternative credit market, for want of a better term, may provide a much needed cheap lending source. The following are the official dates of the central bank meetings: Bank of England, Oct. 9 (25 bps cut anticipated); Fed, Oct. 29; ECB, Nov. 6, and Thailand and S Korea later this week.

Rate cut lifts Sydney stocks, hopes of joint action (Marketwatch)
Hong Kong was closed for a holiday today, but the Nikkei slumped 3%, finishing at 10,155.90, after coming back from a deep selloff in the morning to 9,916.21. Markets in South Korea and China were up slightly. Tuesday’s best performer by far was the Aussie S&P/ASX 200 index, which jumped 1.7%, to 4,618.70, after the rate cut.

Maybe it is because we are in “the biz,” but lately it seems that we’ve been hearing a lot of analogies thrown around comparing the credit crunch with Japan’s banking (and general) crisis. There almost is an undertone of smug amusement to the entire thing. Trust the New York Times to press that angle not too long ago:

While European and American financial titans have teetered and collapsed, Japan’s giant banking groups have stood relatively unscathed. The growing global credit crisis, which threatens companies and consumers elsewhere, has yet to appear here, where the problem for years has been that the nation’s banks have too much cash, not too little. And while the United States Federal Reserve seems to be shoring up the entire American financial sector, the last time this central bank intervened in markets, it did so in dollars instead of yen — to help international markets.

Indeed, television news gives the current upheaval, known here as “Lehman Shock,” less coverage than more domestic issues like an approaching typhoon and a scandal over tainted rice. Even in the race for prime minister, the financial crisis has emerged as just one of a dozen issues and usually not the top one.

We prefer the “here’s what we learned” articles on Japan’s crisis, along with the occasional scholarly paper or two.

The Wall Street Journal mentions one, but, in a stroke of journalistic brilliance, doesn’t cite it. That, however, leads us to another from the Federal Reserve Bank of San Francisco (who else?) which has a decent list of sources on the topic.

Conclusions are somewhat predictable: Unlimited insurance, delays in grasping the nettles, political shenanigans all will doom us to decade long stagnation. Congress is well on its way.

To explain the resentment executives in the rest of the modern world feel on occasion when forced to look at the United States on the map hanging in the conference room of their “European Headquarters Building,” you have to look no farther than the story in yesterday’s New York Times describing the absolute schooling a certain German bank faced at the hands of our favorite newly-defunct Investment Bank.

Of course, it’s hard to feel too bad when the very first webpage on the bank’s site brags that “In 2007 KfW Bankengruppe committed a total financing volume of EUR 87.1 billion - an increase of 13% over the previous year (EUR 76.7 billion).”

Apparently, this year’s tally will include a 300,000,000 Euro payment wired to Lehman Brothers… the same day Lehman’s holding company declared bankruptcy.

Woops.

Don’t Worry, Resignations and Dismissals Will Not Be “The Final Word.’ And, according to themselves:

“In the first half of 2008 KfW successfully defied the very volatile international capital markets with its funding strategy.”

Why is it that American banks never seem to make that mistake?

Calling the accidental transfer scandalous, the German Taxpayers Association demanded an investigation and recommended paring back the unwieldy, 37-member administrative board to encourage better oversight. (Emphasis ours).

Uproar Over German Bank’s Payout to Lehman [New York Times]

Sterling loses more ground against the dollar (AP)
The dollar is un-stop-a-bull! Another day, another gain against a major world currency. Not that this is only a good thing. Like, wasn’t the cheap dollar going to help make the US a low-cost manufacturing nation again? Oh, and doesn’t it inflate the earnings of basically every multinational US company? Yes, it does. In fact, interesting report yesterday from an analyst looking at major hardware companies and how much of an earnings hit they stand to take if the dollar keeps firming.

Stocks head for higher open as oil falls (AP)
Oil’s falling again, sure, but back below $114? Haven’t we played this song before? It’s time to really move on. Do we hear $110? $105?

Two Large Solar Plants Planned in California (NYT)
Some mammoth solar plants are being built in California that will produce some 10x electricity as the largest one in operation today. Sounds pretty impressive. We just hope they’re not predicated on $115 oil. Cause, you know. The plant, which will span 12.5 square miles (let that sink in for a second), will produce as much electricity as a big coal plant. Did we mention it will be 12.5 square miles?

Merrill Books Losses Through U.K., Can Offset Taxes (Bloomberg)
Good news for Merrill: Apparently the way the company booked its losses in the UK will allow it to avoid taxes — in the UK — for years to come.

World Economy Shows New Strain (WSJ)
Newsflash! Basically every major economic region is flirting with a recession. Japan, Europe, US, etc. Sure, global GDP is still expected to grow this year, but the more you look at the component parts, it all looks fairly sickly. And not in a sickly sweet way, but just in a sickly sick way. Hopefully it’s not true, and that this doesn’t have anything to do with declining oil prices. Also, check out the carnage of silver, wheat and copper.