Same Old Story

Well, new week, same stories. Asia ended higher, Europe is trading higher on no news (media in claiming on G-20 stimulus). Looks we have relief rally, we survived last week filled with economic data and events and now on no major economic announcement or earnings (except WMT) this week we move up. Skeptical, as I am, I will remain only spectator of the market.

China car sales came out today, up 76% last month on stimulus and tax breaks. Bloomberg story: China’s October Passenger-Car Sales Rise on Stimulus.

Crude Oil is trading higher on hurricane Ida entering Gulf of Mexico. Bloomberg story: Crude Oil Rises as Hurricane Ida Disrupts Output, Dollar Drop. Fundamentals here don’t matter as hurricane lasting a few months wouldn’t remove all the glut. Storage at sea again raising, off course as U.S. is not importing. The only difference is that we have refined products stored in-place of crude oil. The amount of heating oil and jet fuel stored at sea increased 17 percent to 112 tankers with a combined capacity of 13.1 million DWT, according to London-based Simpson, Spence & Young Ltd., the world’s second-largest shipbroker, Nov. 6 report. Bloomberg story: Oil at $100 Doesn’t Compute as OPEC Output Pace Grows. Some heavy signaling from the Saudis claiming “WTI ‘Disconnected’ From Its Customer Market”. Bloobmerg story: Saudi Aramco Says WTI ‘Disconnected’ From Its Customer Markets. Looks my short crude oil position will be closed today on U.S. market opening as I raised stop order limit on Friday.

Two interesting articles on zombie banks. First on Citi. Bloomberg story: Citigroup Asset Guarantees May Cost U.S. Taxpayers, Panel Say.


U.S. taxpayers may have to share in the losses on $301 billion of Citigroup Inc. loans and securities covered by federal guarantees after unemployment reached a 26-year high, according to the Congressional panel overseeing bank-bailout programs

The Federal Reserve Bank of New York projected a year ago that the Treasury Department might have to pay $3.96 billion on the guarantees if unemployment hit 9.5 percent, the panel said in a Nov. 6 report. The jobless rate rose to 10.2 percent in October, the Labor Department said last week.

Under the terms of Citigroup’s asset guarantees, the Treasury and U.S. Federal Deposit Insurance Corp. must absorb a combined 90 percent of any losses beyond Citigroup’s $39.5 billion deductible, up to $16.7 billion. The Federal Reserve would absorb 90 percent of any further losses.

Under the “severely adverse scenario” of 9.5 percent, the losses would rise to $43.9 billion as more people became unable to pay the mortgages, auto loans and other obligations included in the guaranteed pool, the reserve bank projected. At that point, Citi would have exhausted its deductible, forcing taxpayers to begin paying out.

Citigroup said in a filing last week that the guaranteed assets lost $2.8 billion in the third quarter, bringing the total losses in the pool to $8.1 billion as of Sept. 30. The value of the covered assets has shrunk to $250.4 billion from the original $301 billion (!!!) because of asset sales, loan payoffs and the losses, the bank said.

Just to note Citi’s last quarter shareholder equity stands at 152 billion.

Second zombie bank would be Lloyds which shared some truth with the general public in the prospectus. Bloomberg story: Lloyds Banking ‘Heavily Reliant’ on Central Banks, Governments.

Lloyds Banking Group would risk “materially higher” refinancing costs were the lending and guarantees unavailable…

Nice article by Telegraph on natural gas outlining the dilemmas on commodity future. Telegraph story: The great natural gas conundrum.

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This entry was posted on Monday, November 9th, 2009 at 6:29 am and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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