"China Global Investment Tracker: 2010"

From the Heritage Foundation:

China's financial behavior is increasingly important to the United States and the international community. The China Global Investment Tracker created by The Heritage Foundation is the only publicly available, comprehensive dataset of large worldwide Chinese investments and contracts beyond Treasury bonds. Details are available on over 200 attempted transactions -- failed and successful -- over $100 million in all major industries, including energy, mining, transportation and banking.

...China's investment total could be higher. Over $100 billion in proposed spending has been rejected by foreign or Chinese regulators or has failed due to mistakes by Chinese firms....MORE

Download the dataset on large Chinese foreign investments: China Global Investment Tracker

HT: Foreign Policy's Passport blog who write:

The Heritage Foundation has pulled together a fascinating study of Chinese investment -- showing (with really nice charts and maps!) just where all of those yuan are heading overseas....

...Why is China spending so much in Greece? Shipping?....MORE

"Analyst Looking For A Cost-Benefit Analysis Of Chugging A Bottle Of Olive Oil For $2k"

Go to DealBreaker for the video, here's part of their commentary:

...Update: Some added color: “He wasn’t allowed to puke for an hour starting 2.5 hours ago. Still has it down, but went home, apparently not feeling too well.”

Foreign Exchange: "Euro ‘Mortally Wounded’ as Index Indicates Drop: Chart of Day"

Our last EUR/USD post had links to some of our thinking on the currency, including a link dated Nov. 18, a week before the $1.5144 top tick :
Euro Risks ‘Leg Lower’ to $1.3405: Technical Analysis

...I don't have anything concrete I can point to but 1.50 EUR/USD almost feels as if someone has drawn a line in the sand. As more and more money piles into the trade without movement past that line you start to lose the mo-mo traders and the psychology can shift fast.

If the buck were to turn and head back to say, 1.20, the results for equities and gold would be painful.
I'm just sayin'...

It's either one of those "I may be in error but never in doubt" statements a rookie would never refer back to or it's a Maxwell Smart moment: "Missed it by thissss much"....

From Bloomberg (again, they've had some good analysts, the "Leg Lower" headline was theirs):

The euro’s decline against the currencies of Group of 10 countries suggests that its slump against the U.S. dollar may accelerate, Bloomberg Correlation- Weighted Currency Indexes indicate.

The CHART OF THE DAY compares the euro versus the dollar and the 16-nation’s currency performance measured against a basket of G-10 currencies proportioned by correlation in exchange rates. The chart shows the slump in the euro, at its weakest level since Nov. 8, 2007, versus G-10 currencies, started in December 2008, before concern surfaced that the fiscal health of European Union members such as Greece were declining.

“A rescue package will give the euro a short-term reprieve, but it’s mortally wounded,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The euro’s peak against the G-10 currencies occurred many, many months before the euro-dollar’s did. It’s come down a long way lately, but the euro’s still exceptionally overvalued.”...

...The euro dropped to $1.3444 on Feb. 19, its lowest level since May 18. It has declined about 10 percent to $1.3512 since a high on Nov. 25th of $1.5144. It plunged to 105.6 in the Bloomberg index on Feb. 18....MORE

Also at Bloomberg:

Brain-Eating Zombies Invade Disney in Iger Plan to Win Boy Fans

Things You didn't Know: "How do I hypnotize a chicken?" -Al Gore Variant

From Mental Floss:

How do I hypnotize a chicken?

The chicken mind is easy to control, and chicken handlers have found several ways of hypnotizing chickens. Three methods known to make a chicken very, very sleepy are: 1) holding a chicken’s head under its wing and gently rocking its body, 2) holding a chicken upside down and wiggling a finger in circles around its beak, and 3) staring intently into a chickens’ eyes. Chickens will stay spellbound for several minutes, or even hours, until a loud noise snaps them out of their trance. Scientists think this state is a form of tonic immobility, a defense mechanism in which animals “play dead” in order to shake off a predator. Hypnotized chickens can so resemble inanimate objects that Vice President Al Gore recalled using them as paperweights and doorstops during his childhood days on the farm.

I’ve heard roosters don’t have penises. Is that true?...MORE

There's a certain irony in the answer.

Zeitgeist: "Researcher Accused of Fraud Found Dead"

I somehow missed the backstory:

New York state officials this week charged that a researcher from the University at Buffalo hired three actors to testify as peers—falsely—in his defense in a scientific misconduct investigation in 2004. That testimony led to a finding that William Fals-Stewart, an expert on addiction, was not guilty of fabricating data, according to a statement released this week by the New York Attorney General.

After the misconduct hearing, Fals-Stewart sued the university, claiming the investigation had done $4 million in damage to his career. In defending the university, the New York attorney general claims to have come upon evidence that witnesses in the misconduct hearing were scripted by Fals-Stewart and coached to play parts in what they thought was "a mock trial."...

Both the headline post and the earlier story were from the Insider blog at the journal Science.

The fraudulent schmuck would still be alive if he had read our one-and-only post on Climategate:

Do Corrupt Scientists Produce Corrupted Science?: The Climatic Research Unit E-mails

It's the question I've been asking myself since the University of East Anglia CRU emails surfaced last week. I don't have an answer despite having read about a third of the emails.
For guidance I sought out a bongo player-slash-raconteur.
Here's the musician riffing on science:

"...It is interesting, therefore, to bring it out now and speak of it explicitly. It's a kind of scientific integrity, a principle of scientific thought that corresponds to a kind of utter honesty -- a kind of leaning over backwards. For example, if you're doing an experiment, you should report everything that you think might make it invalid -- not only what you think is right about it: other causes that could possibly explain your results; and things you thought of that you've eliminated by some other experiment, and how they worked -- to make sure the other fellow can tell they have been eliminated.

Details that could throw doubt on your interpretation must be given, if you know them. You must do the best you can -- if you know anything at all wrong, or possibly wrong -- to explain it. If you make a theory, for example, and advertise it, or put it out, then you must also put down all the facts that disagree with it, as well as those that agree with it. There is also a more subtle problem. When you have put a lot of ideas together to make an elaborate theory, you want to make sure, when explaining what it fits, that those things it fits are not just the things that gave you the idea for the theory; but that the finished theory makes something else come out right, in addition.

In summary, the idea is to give all of the information to help others to judge the value of your contribution; not just the information that leads to judgement in one particular direction or another...."

Long time readers will recognize the words of amateur magician and author, Richard Feynman.

He had a wide variety of interests, for example in 1965 he was awarded the Nobel prize in physics for his work in quantum electrodynamics. He coined the term nanotechnology.

The above snip is from his 1974 Cal Tech commencement address "Cargo Cult Science".

(here's the version at leninism.org)

We've linked to that speech a couple times, most recently in "Gates Puts Feynman Lectures Online"

During the same speech he went on to say:

"....I would like to add something that's not essential to the science, but something I kind of believe, which is that you should not fool the layman when you're talking as a scientist. I am not trying to tell you what to do about cheating on your wife, or fooling your girlfriend, or something like that, when you're not trying to be a scientist, but just trying to be an ordinary human being. We'll leave those problems up to you and your rabbi. I'm talking about a specific, extra type of integrity that is not lying, but bending over backwards to show how you're maybe wrong, that you ought to have when acting as a scientist. And this is our responsibility as scientists, certainly to other scientists, and I think to laymen.

For example, I was a little surprised when I was talking to a friend who was going to go on the radio. He does work on cosmology and astronomy, and he wondered how he would explain what the applications of his work were. "Well", I said, "there aren't any". He said, "Yes, but then we won't get support for more research of this kind". I think that's kind of dishonest. If you're representing yourself as a scientist, then you should explain to the layman what you're doing -- and if they don't support you under those circumstances, then that's their decision.

One example of the principle is this: If you've made up your mind to test a theory, or you want to explain some idea, you should always decide to publish it whichever way it comes out. If we only publish results of a certain kind, we can make the argument look good. We must publish BOTH kinds of results.

I say that's also important in giving certain types of government advice. Supposing a senator asked you for advice about whether drilling a hole should be done in his state; and you decide it would be better in some other state. If you don't publish such a result, it seems to me you're not giving scientific advice. You're being used. If your answer happens to come out in the direction the government or the politicians like, they can use it as an argument in their favor; if it comes out the other way, they don't publish at all. That's not giving scientific advice...."

When Congress wanted to know why the hell the space shuttle Challenger blew up he was the one they asked. Something about integrity.

Private Equity: "Rough Road For Infrastructure Funds" (ABB; CAT; FWLT; FLR; PWR)

From the WSJ's Private Equity Beat blog:

Private equity firms and banks attempting to raise infrastructure funds haven’t had an easy time of it lately.

A number of infrastructure funds have been canceled in the last year or so, including ones from Royal Bank of Scotland Group PLC and Bank of Ireland Group. Other offerings, including ones from CVC Capital Partners and Kohlberg Kravis Roberts & Co., have struggled to gain traction.

And today comes word that Blackstone Group has adjusted the terms on its debut infrastructure effort, which is having a slow fund-raising campaign, to make them friendlier to investors. Blackstone Infrastructure Partners has cut the carried interest it intends to charge to 10% from 15%, and adjusted its management fees lower as well (for more details, read the LBO Wire story here).

The infrastructure market, at least for public-private partnership transactions, has been slow to develop in the U.S., and the credit crunch hurt some of the banks that are big lenders in this sector, explaining some of the struggles of these groups. But some think there are other factors at work.

Chris Beale, a managing partner at infrastructure firm Alinda Capital Partners LLC, says that the problems some groups have had fund-raising may have to do with their lack of independence from their parent organizations....MORE

It's not just private equity. From the Globe and Mail:

Infrastructure strategy falls short of hype

Over the past 12 months, stocks in this sector have merely kept up with broader indexes

It has been a little less than a year since the great infrastructure boom was launched with President Barack Obama's $787-billion (U.S.) stimulus package, promising roads, bridges and jobs, jobs, jobs. It looked like an ideal time to make an infrastructure-themed investment, and the fact that the promised building boom coincided with the final year of touches on the 2010 Winter Olympic Games in Vancouver was a bonus. How could investors go wrong?

Like many of these big-picture investment themes, the results have been mixed. Since Mr. Obama signed the American Recovery and Reinvestment Act in mid-February, 2009, North American stock market indexes have taken off. The S&P 500 index has risen a total of 40 per cent (after including dividends), as investors bet early that extraordinary measures taken to turn around the U.S. economy would work out. In Canada, the S&P/TSX composite index has risen about 41 per cent over the same period – driven in part by Canada's own stimulus spending.

By comparison, infrastructure stocks have merely kept up with this strong advance. We looked at five infrastructure stocks for companies based in the United States, Canada and Europe, and an exchange-traded fund that tracks the MFC Global Infrastructure Index. The results over the past 12 months suggest that betting big on infrastructure probably wasn't worth the effort....MORE

From ETF Trends:

Infrastructure ETFs: The Consequences of Not Spending

Infrastructure is a sector that has lacked substantial investment and any further negligence of this area may put economic growth at risk, experts believe. The renewed sense of urgency could benefit infrastructure exchange traded funds (ETFs).

Governments around the world need to increase their spending on agriculture, energy, water, transport and information technology infrastructure. But where will the money come from? [What is holding back infrastructure spending?] In the United States, stimulus money is still being deployed. [Will 2010 be the year for an infrastructure boost?]

Lloyd’s reports that underinvestment in infrastructure is one the most highly interconnected risks, among others such as:

• Telecommunications systems are heavily relied on by many industries, most importantly emergency services.
• Power grids are vulnerable; failures have impacted more than 50 million people in North America since 2003.
  
• A lack of infrastructure spending means that disease spreads more rapidly.
  
• Major port closures could occur, which would choke off world trade and have widespread consequences at a time when we need world trade most.

Shawn Langlois and William Spain for MarketWatch report that Caterpillar (NYSE: CAT) wrapped up what it said was the worst economic year it had faced in generations. This year could be better - the heavy-machinery giant is signaling a cautious outlook for 2010, after a steep drop in fourth-quarter profit.

For more stories about infrastructure, visit our infrastructure category.

• iShares S&P Global Infrastructure Fund (NYSEArca: IGF)

• SPDR FTSE/Macquarie Global Infrastructure 100 (NYSEArca:GII)

• PowerShares Emerging Markets Infrastrucutre (NYSEArca: PXR)

• iShares S&P Emerging Markets Infrastructure (NYSEArca: EMIF)
  

"Nationwide strike paralyzes Greece, Rioting spreads to Spain"

Sometimes the gimlet eye can be hilarious. Here's a conversation I just had:

Me: "Half of Greece is on strike."
He: "So productivity's up?"

Here's the headline story from Before it's News:

"Paul Kanjorksi: Bankers Are Like Incontinent Dogs"

Frpm New York Magazine's Daily Intel:

"When your dog just keeps wetting the carpet, there's only one thing to do, you've got to whack him on the nose to let him know that's not what he's supposed to do. Maybe the regulators have to whack the banks a little bit to make them respond." [CNBC]

"Building the Perfect Pre-Market Risk Gauge"

From MarketBeat:

The Greece-led euro panic has been simmering for a few weeks. And, outside of currency movements and Treasury issuances, there hasn’t been much to shout about recently.

So…here in the subterranean bunker of MarketBeat HQ, we’ve been tinkering with the software we use to track the markets. Our first task was to build a comprehensive U.S. pre-market risk indicator.

Are investors elbowing to chase a hot trade? Or are they worried and moving money into the proverbial mattresses of the U.S. dollar and Treasury bills?

Without further ado, here’s the list of the items found on our “Risk-on” screen, designed to go green as investors get ready to bet the farm on that highly speculative small cap biotech tip Uncle Bob mentioned over Christmas.

Stock Futures: Specifically, the S&P 500 stock index futures traded on the Chicago Mercantile Exchange. Appetite for equities is clearly a “risk-on” signal.

Foreign Markets: We keep an eye on the emerging markets, especially those with ties to commodities, such as the Australia All Ordinaries and the Shanghai Composite....MORE

Trina Solar Q4 2009 Supplemental Earnings Call Presentation (TSL)

I didn't have time for the conference call, I'll have to check in later today with the replay.
In the meantime here's the supplemental info. (8 Page PDF)

• Guiding Q1 lower sequentially on margins, higher on shipments.
• Still driving down cost/watt.
• Cutting exposure to Germany, Belgium.
• Projecting dramatic growth in China, U.S.
• Solid balance sheet.

"Whoa, Fed Revives a New Reserve Drain Method"

From Economic Policy Journal:

The Federal Reserve is reviving its ability to drain reserves via the Treasury. Here's the Treasury release:

The U.S. Department of Treasury today issued the following statement on the Supplementary Financing Program (SFP):
"Treasury anticipates that the balance in the Treasury's Supplementary Financing Account will increase from its current level of $5 billion to $200 billion. This will restore the SFP back to the level maintained between February and September 2009

This action will be completed over the next two months in the form of eight $25 billion, 56-day SFP bills. Starting tomorrow, SFP auctions will be held each Wednesday at 11:30 a.m. EST, unless otherwise noted."

The program was halted because the Treasury was nearing its debt ceiling, now that the ceiling has been raised, the program has been restarted.

That it is being put right back into action is somewhat of a surprise, though, and indicates that there will be no net-boost in money entering the system from the final $200 billion in mortgage backed securities that will be purchased by the Fed, as the Treasury SFP raise of $200 billion that will be deposited at the Fed sterilizes the purchases....MORE

Trina Solar Swings To 4Q Profit As Revenue Jumps, Costs Fall (TSL)

UPDATE: "Trina Solar Q4 2009 Supplemental Earnings Call Presentation (TSL)"
Original post:
The stock is up 2.87% at $23.62 in pre-market trading.
From the Wall Street Journal:

Trina Solar Ltd. (TSL) swung to a fourth-quarter profit as sales rose and the company saw record volume. Results topped Wall Street's estimates.

The solar-power industry has seen signs of improvement in recent months. But the market is expected to remain challenging over the next year, as supply is expected to exceed demand. Analysts are also concerned about a proposed cut on subsidies to solar-power providers in Germany, a largest solar market. But Lazard Capital Markets said Trina maintains one of the most diversified sales channels in Europe, which should help limit pricing pressure as Trina could redirect products elsewhere.

On Wednesday, the Chinese maker of solar-energy systems posted a profit of $49.2 million, or 74 cents per American depositary share, compared with a year-earlier loss of $673,000, or a penny per ADS. Revenue grew 45% to $313.3 million.

Analysts polled by Thomson Reuters expected earnings of 60 cents on revenue of $284 million.

Gross margin grew to a better-than-expected 32.6% from 9.6% amid lower silicon costs....

Here's the press release, the company didn't mention the effect of their use of the U.S. dollar as their 'functional' currency although I don't see how it could hurt, especially in their European operations. I'll have to check the filing for this rather esoteric (but multi-million dollar) detail.

Trina Solar Limited (NYSE:TSL - News) ("Trina Solar" or the "Company"), a leading integrated manufacturer of solar photovoltaic products from the production of ingots, wafers and cells to the assembly of PV modules, announced today its financial results for the fourth quarter and fiscal year 2009.

    Fourth Quarter 2009 Financial and Operating Highlights
  -- Solar module shipments were approximately 164 MW, compared to the
     Company's previous guidance of 145 MW to 165 MW, representing an
     increase of 33.5% sequentially and 184.3% year-over-year
  -- Net revenues were $313.3 million, an increase of 25.4% sequentially and
     44.8% year-over-year
  -- Gross margin was 32.6%, above the Company's guidance of 25% to 27%,
     compared to 28.5% sequentially and 9.6% year-over-year
  -- Operating income and operating margin were $64.4 million and 20.6%,
     respectively, compared to $45.5 million and 18.2%, respectively, in the
     third quarter of 2009
  -- Net income was $49.2 million, compared to $40.1 million in the third
     quarter of 2009
  -- Earnings per fully diluted American Depositary Share ("ADS") were $0.74,
     compared to $0.65 in the third quarter of 2009

...MORE

Société Générale's Albert Edwards: "Stocks Face ‘Ice Age’ Drop as Indicators Peak..." Euro to $1.25; We're all Doomed

A threefer. The headline story is from Bloomberg, February 19:

Stocks are poised to tumble as gauges of the economic outlook in the U.S. and China have peaked, according to Societe Generale SA’s Albert Edwards.

The CHART OF THE DAY shows the Economic Cycle Research Institute’s weekly index of leading indicators for U.S. growth topped out on Jan. 15 and the Organization for Economic Cooperation and Development’s monthly gauge of measures for China peaked in October, according to Edwards.

High-points in the indexes for the U.S. and China, the world’s biggest and third-largest economies, foreshadowed the stock market selloff that began in October 2007 and sent the MSCI AC World Index down as much as 60 percent in 16 months. The China gauge bottomed in November 2008 and the U.S. index on March 6, before the rally in stocks that began on March 9, 2009.

“We monitor a variety of such indicators and until recently they have all been giving an unambiguous green light to participate in risk assets,” Edwards, Societe Generale’s global strategist in London, wrote in a research report today. “That has now changed.”>>>MORE

Two from ZeroHedge. First up (Feb. 19) the long version of the above:

Timing The Exit As Competitve Devaluation Looms; Is The Euro 25% Overvalued? More Thoughts From Albert Edwards

Soc Gen's Albert Edwards, who has never been shy about his cautious stance on equities, has released another report taking his cautionary posture to the next degree. This ties in perfectly with earlier observations by David Rosenberg which unmask the market for the jittery, volatile, headline-driven knee-jerk automaton it has become. Also, Edwards provides a response to readers who are confused by the strategist's endorsement of Richard Koo's mantra of fiscal stimulus as pertains to both Japan and the US. Somewhat tying it all together is the argument that the euro has yet to experience a 25% drop from current levels. That expectation makes the Morgan Stanley euro target of $1.25 seem timid by comparison. Yet in a world of competitive devaluation, as Albert Edwards points out, "it is the nation that devalues last which suffers the deepest deflation." We are confident that Ben Bernanke is all too aware of this mantra.

First, Edwards focuses on leading indicators and what "leading" implications their recent top may have for markets.

In a post-bubble Ice Age world, equity investors have to watch the cycle far more closely than before. One of the key lessons from Japan was that prior to their bubble bursting, equity valuations were dominated by movements in bond yields and hence there was only a very loose relationship between equities and the economic cycle.

But after the bubble burst and as The Ice Age unfolded, the close positive correlation between bond and equity yields broke down as equities suffered secular de-rating - driven by 1) the unwinding of unrealistic market-wide long-term earnings expectations in a low inflation world, and 2) a rise in the cyclical risk premium, as Japan?s own version of The Great Moderation gave way to highly volatile economic cycles.

Japan enjoyed some impressive 50% equity market rallies during their lost decade, driven by strong policy induced cyclical recovery. The secret was to exit as the cycle started to top out as this preceded the equity market dropping to new lows.

Early last year the safe re-entry back into risk assets was signalled by a clear upturn in leading indicators. So too now should investors be concerned that the leading indicators are topping out. The recovery in the leading indicator for China seemed to precede that of the composite for the OECD and similarly China has now topped out ahead of the OECD composite (see chart below). Indeed, other emerging economies such as India (below) and Brazil are also seeing clear warning flags of cyclical caution.

So are leading indicators to the leading indicators the key catalyst to follow in this market?

In a post-bubble world it is far more important for equity investors to follow the cyclical ebb and flow of the economic cycle. We know from the Japanese experience that the post-bubble equity market synchronizes extremely closely with the economic cycle. But, while in a post bubble world massive cyclical gains can still be made in a structural bear market, how does an investor know when it is time to get out of equities?

Certainly my former colleague, James Montier [whose latest, quite pessimistic piece we posted previously], derided the notion of investing on the basis of forecasts as they inevitably proved so inaccurate. It would not be too unfair to say that market and economic forecasters tend to hug the consensus and typically lag events. That is especially true at cyclical turning points. That is why it is useful to monitor proprietary leading indicators. These are especially useful in predicting economic turning points and allow the investor the opportunity to pile into or withdraw from cyclical risk assets.

We monitor a variety of such indicators and until recently they have all been giving an unambiguous green light to participate in risk assets. That has now changed. We noted on the cover the OECD leading indicators for China and other emerging markets have now topped out. But also in the US, some leading indicators have started to dive quite sharply, albeit from very elevated levels (see chart above). In Japan too, we note a topping out action (see below). Recent hard data in Japan such as the closely watched Tertiary (non-manufacturing) activity index has been surprisingly weak, suggesting their anemic recovery is already stalling.

Some more bullish commentators, while accepting that leading indicators are topping out, point to the extreme strength of the recent peak as suggestive of still more positive growth surprises in the pipeline. I think this is wrong. I was always taught that it was turning points that were accurate and hence should be watched closely, and not the magnitude of any directional movement to either the up- or downside.

Going back to macro opinions, and away from indicators, Edwards is extremely pessimistic on the overall economy: when the stimulus effects expire, the double dip will come....MORE

Finally the Big Daddy, a Feb. 12 post at ZH:

Albert Edwards: At 500% Net Liabilities To GDP, It Is Too Late To Prevent The Collapse Of The G-7; Greece Is Irrelevant, We Are All Now Insolvent

For Greece, with on and off balance sheet liabilities at over 800%, it's game over. For the Eurozone, with the same ratio at about 500%, it is also game over. For the US, at 500%+, it is, you guessed it (sorry Joseph Stiglitz), game over, but since we have the printers, it will simply take a little longer. Following up on yesterday's popular post on prevailing delusions as captured by Albert Edwards' colleague Dylan Grice, we present Albert's latest outlook. Please don't read this if you want to keep believing there is any hope left for the (developed) world.

But first some aeral photography from Dylan Grice, indicating just how far the US government is willing to go to get the population stoked about owning fixed (shouldn't it be called broken really?) income. With British QE over, and the country still to implement the same criminal annuitizing of 401(k)s that Uncle Sam is contempltating in order to make "Buy Bonds" a "voluntary" option one can't really decline, maybe letters on modern architecture building blocks is all that would works. As Edwards says: "I'm not sure leaving man-sized building blocks around the City of London is really going to make an awful lot of difference, but I suppose when your public sector deficit is around 13% of GDP, every little bit helps!"

So back to Greece, the Eurozone, and policy response in general, Edwards places the causes (and "solutions") of the escalating problem precisely where it belongs: at the core of the Keynesian systemic outlook flaw....MORE

NY Fed Treasury Spread Model: Probability Of Double-Dip Recession Is Zero

Dr. Perry attracts a reasonably sharp crowd. [present company...? -ed] The comments are usually pretty good.
From Carpe Diem:

Today the New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" with data through January 2010, and the Fed's recession probability forecast through January 2011 (see top chart above). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.67% spread in January, the highest since May 2004) to calculate the probability of a recession in the U.S. twelve months ahead (see details here).

The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month. For January 2010, the recession probability is only 0.82% (less than 1%) and by a year from now in January 2011 the recession probability is only .043%, the lowest reading in more than 26 years (since September 1983).

Further, the Treasury spread has been above 3% for the last nine months (since May), a pattern consistent with the economic recoveries following the last two recessions (see bottom chart above), and the 3.67% spread in December is the highest since May 2004, five-and-a-half years ago. Finally, the pattern of the recession probability index last year (going below double-digits and declining monthly) is very similar to the patterns that signalled the end of the 1990-1991 and 2001 recessions.

According to the NY Fed model, the chances of a double-dip recession in 2010 or 2011? Zero.

REPOST: "The Dead Shall Be Raised: The Future of Fannie and Freddie" (FNM; FRE)

For some reason this post disappeared. It's a decent overview so we'll try to get it back on the interwebs.
Original post:

Please note that none of the four options discussed should give false hope to holders of the common stock.
The AEI being the AEI favors the privatization option. in which case my best guess is the shareholders would end up with some warrants or an equity stub as a residual claim on the future cash flows of the former GSE's.

From the American Enterprise Institute for Public Policy Research:

The renewed interest in Fannie Mae and Freddie Mac is premature. They are currently the mainstays of the U.S. housing market--more important now than they were before being placed in a government conservatorship in September 2008. Many observers do not believe the two government-sponsored enterprises (GSEs) can survive the immense losses they will cause taxpayers, but this is far from true. For Fannie and Freddie to be eliminated, a new mortgage-financing system must take their place, but there is not even a hint of a replacement on the horizon. Once the housing market recovers, the GSEs will still be the only game in town, and supporting them will continue to be the course of least resistance for Congress. Moreover, it will not be easy to implement any of the alternatives to reestablishing Fannie and Freddie as GSEs. Nationalizing or reorganizing them as public utilities would both have significant drawbacks, while privatizing the GSEs--the most sensible approach--would require a major change in public attitudes about securitization. Sadly, in the absence of viable alternatives, their restoration as GSEs seems the most likely outcome....MORE (8 page PDF)

HT: EconBlog Review who writes:

...When talking heads comment on debt-to-GDP ratios and similar metrics, they are often shilling for their own interests. Not only do they generally ignore unfunded liabilities such as Social Security, they assign a present value of zero to this sort of GSE obligation.

The U. S. once had a Federal Government that was serious about financial responsibility. Those days are long gone. One way or another, however, bookkeepers and accountants have their day. The road down which cans get kicked is not smooth, straight and downhill forever.

"Dave’s Top 10 Reasons to Fade the Recovery (It’s Not a Business Cycle!)"

Something to chew on until we get to Albert Edwards. From the Asia Times' Inner Workings blog:

By David Goldman

This is NOT a business cycle: this is a one-time reversal of twenty years of inflation of the household balance sheet. An aging populationneeds a 10% savings rate (at least) to meet minimum funding requirements for the biggest retirement wave in US history (comparable to Japan’s retirement wave during the “lost decade” of the 1990s). With 17% effective unemployment, many Americans are dis-saving, after a $6 trillion shock to home equity.

10) There is no recovery at all in Europe. European growth ground to a halt during the fourth quarter and German busines confidence unexpectedly fell in February.

9) China won’t collapse, but government efforts to stop overheating by raising reserve requirements make clear that the world’s second-largest economy can’t be the locomotive for world growth.

8. Greece and its prospective rescuers in the European Community are at loggerheads over conditions for EC help. “Greece faces several important challenges in the coming days, including an expected bond auction, a planned general strike on Wednesday, and a visit from European Union officials that began Monday, aimed at pushing the country to take tougher steps to rein in its budget deficit,” WSJ reported today.

7. State fiscal crises continue to worsen. “Doomsday is here for the state of Illinois,” California’s last set of cosmetic measures do little to address a $20 billion deficit, Baltimore has no idea how to close a $120 billion deficit. On top of this year’s $200 billion deficit, states face a trillion-dollar shortfall in pension funds....Six MORE

"Visualizing The Black Hole Of State Revenues"

Lifted from ZeroHedge:

The following chart from Stateline will be quite critical to evaluate going forward as states increasingly ponder just how to tweak their revenue formulas in order to not only get away from the precipice of insolvency, but to pay back the tens of billions borrowed from the Federal government to fund unemployment pay.

And as for the abovementioned borrowings to fund unemployment insurance payments, the Post and Courier has the following story highlighting that not only are states in the red, they also have a $31 billion hold to repay to Uncle Sam....MORE

Stateline isn't kidding. Here's an AP headline via BusinessWeek:
"Washington state Senate Dems want sales tax hike"

Via Calculated Risk:
"From the Rockefeller Institute: States Reported Fifth Consecutive Drop in Tax Collections in the Fourth Quarter of 2009"

From AlterNet: "Cities Shortening Yellow Traffic Lights for Deadly Profit"

HT for the last two to the Columbia Journalism Review's The Audit blog.

"Dilbert for Sale. Peanuts Too."

From Scott Adams' blog:

Today United Media announced it might try to sell the licensing rights for Dilbert, Peanuts, and the rest of its licensing properties.

http://www.cnbc.com/id/35536849

United Media has been handling syndication and licensing for Dilbert for over 20 years. They plan to keep the syndication part, which involves selling and distributing comics to newspapers. The licensing group, which is potentially for sale, manages licensing of Dilbert, Peanuts, and other properties to the third parties who put it on t-shirts and calendars and whatnot.

There's no way to predict if this is good or bad for me. It depends who buys the rights.

And from Dilbert.com:

Headline of the Day: "STEC Q1 Forecast Misses By a Mile; Stock Halted"

Yikes!
I'm not sure if that was Savitz or Ray at Tech Trader Daily but it sure is a grabber.

Options Flash "First Solar Burns Out; Bears Taste Blood" (FSLR)

Back on January 19 we had a similar post, "Options Update: Trader Expects Extended Slide for First Solar, Inc. (FSLR)":

The stock is trading down seven cents at $124.00 in early pre-market. The stock actually showed some relative strength on Friday, closing down about half the percentage decline of the Nasdaq.
If I had to guess, I'd say the November 12 lows, $115.09 intraday and $115.37 closing are the immediate downside risk although as you'll see in the story someone is thinking lower....

From Forbes:

If the bearish options traders are right, First Solar should soon slip below the century mark.

A pair of analyst downgrades and price decline of as much as 7% to $106.30 Tuesday fueled bearish options activity on the manufacturer of solar modules. First Solar was cut to underperform from neutral and given a 12-month target share price of $90 at Wedbush. FSLR also received an 18-month target share price of $90 and a sell rating at Wunderlich Securities.

One pessimistic options player purchased a debit put spread to position for continued downward movement in the price of shares by April expiration. The investor purchased approximately 3,400 puts at the April $105 strike for a premium of $6.86 apiece, and sold about the same number of puts at the lower April $85 strike for an average premium of $1.57 each. The net cost of the spread amounts to $5.29 per contract. Maximum potential profits of $14.71 per contract are available to the trader if First Solar's shares plummet 20% from the current day's value to $85 by April expiration. The investor breaks even on the transaction only if shares decline another 6.2% to $99.71.