El Principio

First off – thanks to Fly for appointing me to this spot.

I hope you don’t mind if I don’t wear a crown this month- the last one I ever owned was in elementary school on my birthday.

Props to ChartAddict for his promotion to the First Tabbed elite. He left the Castle of Peeg in good condition. I took a quick walking tour this morning and it looks like DPeezy`s got several suites waiting for him to return.

I saw a flock of yurts out back, not sure who those belong to but I don’t mind.

First things first

How strong can this bull be? Around the world so far the results have not been too spectacular though in fairness, the Black Friday numbers were a bit more optimistic than expected. Unless, of course, that represented 50% of the holiday shopping in the States and now everyone is hunkering down with gift cards and less ostentatious ways to celebrate the Christ’s Mass.

I stand by what I said previously, we are still in the grips of a countertrend rally. How long it lasts is anyone’s guess.

Citi (aka your money went to Spain)

Thomas Friedman has a nice bit about Citi in the Times:

including Meredith Whitney, a little known banking analyst who declared, over a year ago, that “Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust,” wrote Lewis.

“This woman wasn’t saying that Wall Street bankers were corrupt,” he added. “She was saying they were stupid. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale… For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.”

….

Lewis continued: Eisman knew that subprime lenders could be disreputable. “What he underestimated was the total unabashed complicity of the upper class of American capitalism… ‘We always asked the same question,’ says Eisman. ‘Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.’ He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S.& P. couldn’t say; its model for home prices had no ability to accept a negative number. ‘They were just assuming home prices would keep going up,’ Eisman says.”

So when things got ugly – Citi was obviously too big to fail and they received more in the way of bailout money but it is going places the politicians weren’t expecting it to head:

The Citi fund is then going to sell some highways it’s buying to Abertis Infraestructuras (ES:011184501: news, chart, profile) and Atlantia (IT:ATL: news, chart, profile) in a deal worth about 1 billion euros. Abertis is buying 621 million euros of highways in Spain and Chile, and Atlantia is buying 420 million euros of highways in Chile and Brazil.

Casa Dulce Casa

Mish asks “How far to the bottom of the housing drop?”

First he provides some chartage comparing the US and the Japanese economies and then he states:

I just added the Winter 2008 arrow. Housing prices are now one notch closer to their final destination. The US Timeline scale is compressed. At the current pace, housing will bottom in about 7 years vs. 14 years in Japan.

Well, so much for that.

But the BAILOUTS will save us all!

Well, maybe they will, and maybe they won’t.

Prominent economists argue that more than 50 percent of the next package, whatever its size, should be devoted to spending – on public projects like highway and school repairs, and on items like food stamps and stepped-up aid to state governments to subsidize their spending.

As Zandi declared in testimony this month before the Senate Budget Committee, nearly every dollar spent in this fashion generates $1.50 or more in economic activity. Repairing a road, for example, means hiring workers who spend their new salaries at supermarkets, which in turn hire more store clerks and stock more groceries.

This “multiplier effect” is missing, however, when the stimulus comes as a tax break. A $750 billion stimulus package, devoted entirely to spending, would achieve, through the multiplier effect, the $1 trillion rise in output that the Obama administration apparently seeks in order to generate 2.5 million new jobs.

A stimulus devoted entirely to tax breaks, in contrast, would require the entire $1 trillion in rebates or lower taxes.

“The multiplier effect is clearly less than $1,” said Nigel Gault, chief domestic economist for Global Insight, “and perhaps as low as 30 cents if only some of the tax break is spent.”

The main problem facing incoming presidential administration is that there is only about $300 billion of new jobs that could be created immediately. It will take time for the 21st century “New Deal” to be put into action.

Pain Elsewhere

Switzerland is facing problems as well. Imagine that – the Swiss are the epitome of the professional banker and they are concerns their financial independence (read isolationism) could wreck havoc like Iceland:

The drama playing out in the Nordic nation, whose economy the International Monetary Fund says may shrink about 10 percent next year, offers a cautionary tale for the no less fiercely independent Swiss. While they are in far better shape, their status as custodians of the world’s wealth is under threat by a global economic upheaval they can’t control and miscues by the banks that made them great.

….

Switzerland’s economy will shrink 0.2 percent next year after expanding 1.9 percent in 2008, the Organization for Economic Cooperation and Development said on Nov.25. Manufacturing contracted the most since at least 1995 in November, a report showed today. While the 2.6 percent jobless rate is low by global standards, unemployment rose for the first time in five years in September and is heading higher.

The Humbled Panda

Long the poster child for “decoupling”, now the poster child for “confused politics”, China slashed it’s rates in the most dramatic move seen in months.