BEA News: GDP (third estimate) 2nd Qtr 2010

The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.7 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.
The full text of the release on BEA's Web site can be found at
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

 

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U.S. Bureau of Economic Analysis · 1441 L Street NW · Washington DC 20230 · 202-606-9900

Shadow Banks, Systemically Important & TBTF

Professor Mark Thoma pulls the covers off a subject that has been well camouflaged by other issues around the topic of financial stability. In his article at The Fiscal Times he reminds us of shadow banks and the danger they pose to financial stability. Just recall the speed, or velocity, of shares of everything being sold in the early weeks of the financial crisis during Q4 2008. Some of the momentum was unexpected because the lack of visibility about the amount of, and surprisingly poor quality of, the financial derivative securities shadow banks were invested in. Shadow banks enjoy the freedom from oversight and judgement from investors on their risk taking. Shadow banks can be thought of as a risk averse conventional bank that has created an unregulated alter ego. The alter ego takes on more risk in pursuit of juicing profits for the conventional bank. The alter ego is going to look like a bank sponsored broker-dealer, a non-bank mortgage lender like GMAC, and include bank sponsored hedge funds and money market mutual funds.

One Eye on the Fed: Permanent Open Market Operations

From Zero Hedge yesterday:
"CNBC (the infinitely more credible European edition) has run a stunning interview with Cazenove technical strategist Robin Griffiths in which the banker discusses such taboo items as the Plunge Protection Team's intervention in the market for the month of September in a last ditch effort to keep stocks from tumbling following the horrendous August performance. First Griffiths dissects POMO: "One of the reasons [for the surge] is POMO: what happens is the Fed buys Treasurys off the banks, the banks put the money into the market...That amount of money turns the algorithms up, then all the algo trading hits the market. Real life investment managers are not doing this buying. They know that equities are for losers." And the stunner: "The S&P is being effectively goosed up by the Plunge Protection Team - they can keep doing this for a little bit longer... But according to me the April high will not break...as...all of those Keynesian stimuli did not work." As for bonds: "There is an old saying, don't buy the Fed - yields will go down. Even now you should be buying bonds and not equities. The bubbles never burst when wiseheads in the media tell you it's a bubble that's gonna burst, they burst when they've given up on that and tell you this time it's different.""  Here is a link to the post on ZH including the CNBC video, which I have trouble embedding here.

Elizabeth Warren on the Financial Consumer Protection Bureau

Elizabeth Warren, recently named as interim chair of the FCPB, is an anomoly among government regulators. She is unafraid to look under the covers and frankly describe what she sees. She does not back down to the financial power structure. Unfortunately, she is basically on her own because her popular positions (described in the following video clips) make her politically toxic to poiticians working for re-election. She needs some of them to support her work. If she can deliver any part of what she is describing in this video, without adding to the cost and size of government, I say clone her. She may be the perfect regulator. Here is a link to an interview on CNBC that includes former GE CEO Jack Welch, who confronts her and allows her to demonstrate her qualities as both an interviewee and a private market advocate.

Market Data: Week Ending Sept. 24, 2010

Market Index	2009 Close	9/24 Close	Week Change	Simple YTD %
Dow Industrials Avg	10428.05	10,860.26	2.38%	4.14%
S&P 500	1115.1	1,148.67	2.05%	2.92%
Fed Funds Rate	0.25%	0.22%	0%	0%
10 yr T-note Yld	3.85%	2.60%	-0.14%	-1.25%
5 yr T-note Yld		1.35%	-0.08%
5 yr infl adj Note		0.02%	-0.09%
Implied 5 yr Inflation %		1.33%	0.01%
2 yr T-note Yld	1.14%	0.44%	-0.02%	-0.70%
2-10 Yr Slope	2.70%	2.16%	-0.12%	-0.54%
90 day T-bill Yld		0.14%	-0.01%
Gold ($/oz)	$1,096.95	$1,298.10	1.59%	18.34%
WTI Oil ($/brl)	$79.36	$76.49	3.84%	-3.62%
VIX "Worry Index"	21.68	21.71	-1.36%	0.14%
Credit Spreads		9/24 Close	Week Change
Inv Grade Credit Idx		4.38%	-0.07%
Low Grade Credit Idx		8.32%	-0.14%
Markit CDX Inv Grd Idx		114	9.62%
Markit CDX Mid Grd Idx		175	11.46%