Beating Up On Big Banks
Front and center this morning, we saw the risk aversion that held a tight grip on the currencies and commodities for about a week, fade a bit as the day went on yesterday, and the dollar selling has carried through the overnight and morning sessions overseas. “What caused this turnaround?” I hear you asking… Ahhh grasshopper, come sit, and put away the sharp objects!
Yesterday – after the Weekly Initial Jobless Claims rose to near 500,000 once again putting some chinks in the risk aversion’s armor – the president announced his “new plan” to impose limits on, and restrict the size and activities of the US’s largest banks. The White House wants commercial banks that take deposits from customers to be barred from investing on behalf of the bank itself – what’s known as “proprietary trading”…
Now let me get this straight for you… This is for HUGE Banks like JP Morgan Chase, and Goldman, (even though Goldman isn’t really a bank; remember they formed a bank holding company in 2008 so they could get TARP money). But this does affect everybody… If these guys aren’t doing their mega-deals, then there’s no trickle down for the rest of us. This program will hurt, as it will keep foreign investors from buying US assets!
This is what the president is doing, folks… On one side, he sees the Republican victory in Massachusetts and his ObamaCare going down in flames… So, to deflect the bad stuff that would go along with a president that hung his hat on this health care… He says… ‘Hey, all you voters, I know what’s making you mad, it’s those fat cat bankers… So let me tell you what I’m going to do to them’…
HEY! I learned how to do that in media training! Somebody asks you something that you don’t want to answer, and you “deflect” it to talk about what you want to talk about!
So… In one week, the president has come up with an idea to “tax the banks” that took TARP money – not everyone that took it, just the banks – and now this plan… He’s playing with fire, folks… And I’m just talking about the damage the financial markets will see… I haven’t (and won’t) talk about the damage to his political capital.
I loved this the other day… Warren Buffett is not too pleased with the President these days, for he sees the same things I’m seeing… But Mr. Buffett had this to say about the President’s tax on the banks…
“I don’t see any reason why they should be paying a special tax,” said Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., in an interview on Bloomberg. Supporters of the plan to tax the banks “are trying to punish people,” he said. “I don’t see the rationale for it. Look at the damage Fannie and Freddie caused, and they were run by the Congress,” said Buffett. “Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”
In a recent survey by Bloomberg, the president is seen as “anti-business” by 77% of US investors, and 4 out of 5 question his ability to manage a financial crisis… Hey! That’s not me making stuff up, folks… This is getting ugly, and the problem as I see it resides in the country’s ability to attract foreign investment.
So… The president deep-sixed the risk aversion campers, and risk takers came back out to play, driving the euro (EUR) back above the 1.41 handle. And Japanese yen (JPY) dipped below 90 again, only to come back above it this morning in Europe.
The dollar index moved above its 200-day moving average, yesterday… So, in reality, the dollar should be on the move… That just shows you how powerful the markets can be when they smell blood.
And here’s a look at what one foreign entity thinks about all this damage to the US assets… Kokusai Global Sovereign Open, the world’s second largest actively-run bond fund, is going to shun US Treasuries, and is betting against the dollar in 2010. You may recall a week or two ago, I told you how PIMCO (the world’s largest bond dealer) announced that they were going to avoid US Treasuries in 2010… Opting for German bonds instead!
In the Eurozone this morning, we saw Eurozone Industrial Orders for November rise more than economists forecast, on demand for goods such as steel and car parts. Orders increased 1.6% in November… So… Things aren’t that bad in the Eurozone, despite what some writers would have you believe!
I heard yesterday that Big Ben Bernanke’s re-confirmation to Fed Chairman isn’t as “slam dunk” as once thought… I belong to the “Audit the Fed Coalition” and they sent me a note yesterday asking me to question my Senators and tell them to tell Harry Reid that they would not vote on re-confirmation until Bernanke allows the Fed to be audited. Well, I think my senators are probably tired of hearing from me on all sorts of things, so add this one to the list!
I’m not a Bernanke fan… I wasn’t a Greenspan fan… I was a Volcker fan… But that takes us all the way back to the ’80s!
So… Yesterday, as I said above, the Weekly Jobless Claims jumped to 482,000, from 444,000 the previous week… This marks the third straight increase in the Weekly Claims figures, and the fifth increase in the last six weeks… Do you see a trend, here?
Here are some ugly figures… 40,000 people had their unemployment benefits drop last week, while more than 650,000 received emergency compensation… UGH!
So… I was giving an economic talk to a group yesterday, and I said that I truly see the US economy slog along with bumps up in GDP, and then drops back down… Unemployment will remain very high (right now 17%), and we could very well see another drop of 10% in home prices… Now, that’s downright cheery, isn’t it? NOT!
Then there was this… Did you happen to catch the news last Thursday regarding the CFTC’s commission that was researching position limits in energy? Well, they went one step further, and also talked about how they will look into the precious metals, gold and silver in addition to energy…
This is HUGE, folks! And the media just swept it under a rug! Shame on them! Could this be the end of the price manipulations of gold and silver? I truly believe that it very well could… And that would be HUGE for precious metals holders… For, the “true” market value of the precious metals could be sought, without manipulation to keep it weak.
If you are interested in the commission’s statements, check them out here…
But it’s not helping gold and silver right now! Gold has fallen below $1,100, which I believe is an indicator to buy, but I could be wrong, of course! And silver has fallen below $18… UGH!
To recap… The risk aversion party was brought to an abrupt halt, when the president announced yet another plan to punish big banks. I truly believe this plan will hurt US assets, thus driving away foreign investors. The currencies have rallied back overnight and through the European morning session. But gold and silver are still seeing profit taking, and selling.