Wednesday, January 28th 2009

FDIC May Run `Bad Bank’ in Obama Plan to Remove Toxic Assets, Spur Lending: Bloomy

Stocks Could Drop 20%, No Safe Haven: Dr. Doom: CNBC

GE, GE Capital Aaa Ratings May Be Cut by Moody’s: Bloomy


Can’t help but NOT talk about the fomc meeting results announced in a few hours. There’s enough of that ‘out there’ and we’ve got much of it on the PDF. Will they? Won’t they? What can THEY? Yada yada yada. WE can’t help but point out the beneficiary of all this good bank/bad bank stuff coming from DC. NOT BofA or Citi or JPM but GE. Right. Late yest afternoon one of those trusty ratings agencies came out suggesting AAA ratings are in jeopardy and today we’re not even talking about it. WHAT? Huh? We’ve got a h’line or two and some links up there and would urge one and all to NOT get too overly optimistic that things are all of a sudden FIXED this morning. This may be an important day, don’t get us wrong. Just thinking out loud. Have a great start. Saul/Steve


Damned if they do and damned if they don’t. The Fed’s walking a very fine line and we are in awe of the day and specifically what lies directly ahead. On one hand, the FOMC may very well want to reiterate what they had said back on December 16th … “The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.” As GCM suggests, ‘This last sentence was worth about 25bp to a drop in 10-yr yields, and about 12 bp to the 2s/10s slope. With nothing else on Wednesday’s agenda we will focus entirely on the FOMC and that particular statement. To wit, if the Fed moves a step closer to the suggestion of buying Treasuries we could see another rally and presumably more flattening as such introduces a buyer to longer dated Treasuries vs. a very anchored front end.’



In today’s PDF, we then go on to set up a framework for how/where WE see the greater risk/reward ‘out there’ currently – thinking along the lines of some sort of financial markets ‘shock and awe’ by GoBamaNomics team – which leads to a giNORMOUS sigh of relief in the more risk-taking markets (stocks) at the expense of the Treasury market. This sets the USofA up as being more forward thinking than it’s counterparts and therefore sets up nicely for being short US vs Europe. We take a look at 5s/Bobls …


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