Tuesday, December 15, 2009

Quick Notes

I am pressed for time because I have paperwork to do as well as the Christmas card merry go round to try and make some headway on. Just a few notes on things I found interesting today.

Banking Issues Not Going Away
Edward Harrison (writing at TBP) notes that the Austrian banking crisis is big in a relative sense:
The Austrian government has nationalized the insolvent bank Hypo Group Alpe Adria (HGAA). The financial institution, which has 40 billion Euros in assets, is the country’s sixth largest bank. But, in relative terms, this is a very large bankruptcy – using GDP at purchasing power parity, an American HGAA would have assets of $2.5 trillion, larger than any of the American banks. So, this is a very big deal and it speaks to the size of Austrian banks’ international exposure, renewed risks in banking and the possibility of contagion.
Again, nothing to worry about to sell banking stocks over; another government has already picked up the backstop. Move along.

How about another 400 Billion for Freddie and Fannie? Mish fleshes out the never ending black hole.

The Automatic Earth explains some of the problems with thinking China will replace the US anytime soon.

How many jobs programs are there anyway? No wonder Steve Liesman does not know all the names! Next up, another 150 Billion for various support programs (think keeping state employees at work) and 50 Billion for the usual stuff that never gets done: Schools, highways and more housing junk.

I had a discussion with The Illusion of Prosperity about leverage in the metals markets. Jesse so happened to have this post up today about that very thing. Snippet (from Ted Butler's piece):
JPMorgan, now holds 200 million ounces net short in COMEX silver futures, fully 40% of the entire net short position on the COMEX (minus spreads). As I have previously written, JPMorgan accounted for 100% of all new short selling in COMEX silver futures for September and October, some 50 million additional ounces. As extreme as JPMorgan’s position is, there is a total true net short position of 500 million ounces (100,000 contracts) in COMEX silver futures. Try to put that 500 million ounce short position in perspective. It equals 75% of world annual mine production, much higher than seen in any other commodity.
Strange indeed.

Have a good night.


watchtower said...

The Automatic Earth article was an interesting read.

Sounds plausible to me.

I wonder how someone, well someone like Jim Rogers for example would refute it?

EconomicDisconnect said...

I always find that everyone one has their blind spot. I think Rogers' is China. I know mine is anti-dollar/pro metals. This does not mean Rogers or I have nothing to add but we both have a bias.

BTW, the dollar is scaring me right now as it is looking strong all of a sudden. Just like in my "Do They Ring a Bell" post on Saturday Dec 5, unreal!

watchtower said...

I went back and read the Dec 5th post.

It's kind of like the $140 oil going to $30, I never would have thought that, especially after being indoctrinated by the peak oil talk.

I can almost imagine Yoda sitting on my shoulder saying "much to learn you have"

But in the end I think the real reason the dollar is scaring you and the PMs are tanking is because a couple of weeks ago I said:

"I can't believe I bought something that hasn't cratered in price yet"

EconomicDisconnect said...


Theres many a slip twixt a cup and a lip and I think things may not be so clear cut as many are thinking.

insanity shelter said...

And the market just glides upward without a care in the world.

Everything is Sunshine Lollipops and Happy graphs. Woopieee!!!

Stagflationary Mark said...

"The Automatic Earth explains some of the problems with thinking China will replace the US anytime soon."

It was a good read. I agree.