14 January 2009

Citi and JPM Move Their Earnings Reports to This Week


On Tuesday J. P. Morgan surprised the market by moving its earnings release from January 21 to tomorrow, January 15th, the day before the options expiration.

Today Citi announced that it is moving its own earnings release to this week, on Friday.

Is there a significance to this?

Perhaps. One likely reason is that they did not wish to put their earnings out at the same time as an historic event with the inauguration of Barack Obama on Tuesday January 20, with what is likely to be considered bad news.

There is also a likelihood that Citi and JPM wished to 'throw their cards on the table' ahead of the initial decision by Congress with regard to the disposition of TARP funds which is likely to occur next week. Economic blackmail is de rigeur for Wall Street when it is back on its heels.

Whatever does happen, we are certainly in for an interesting month of January.


Citi Fourth Quarter and Full-Year 2008 Earnings Review - Revised Date


NEW YORK -- (Business Wire) --

Citi announced it will review fourth quarter and full-year 2008 results on Friday, January 16, 2009, at 8:00 AM (EST), instead of January 22. Fourth quarter results will be issued via press release at approximately 6:00 AM (EST) on January 16, 2009.

A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citigroup/fin. A replay of the webcast will be available at http://www.citigroup.com/citigroup/fin/pres.htm.

13 January 2009

Corporate and US Treasury Yields from 1926 to 1934


The Bonds held up much better than one might have expected, and the spreads between corporates and longer dated Treasuries was remarkably uniform.

Bear in mind that these are yields on this chart, and the value of the underlying bonds moves in the opposite direction to the yield.


The Fed's Game Plan: What Ben Bernanke Is Thinking


Bernanke's game plan is becoming more apparent. Based on a reading of his papers and his public statements, here is a distilled view of what we think is his game plan.

1. Grow the money supply quickly and abundantly

2. Stabilize the Banking System to avoid destructive banking failures

3. Do not withdraw the monetary stimulus prematurely to fight inflation.

4. Manage 'confidence' aggressively to dampen the expectation of inflation later, and a panic liquidation now.


Each of these legs of his policy is a reaction to lessons he believes the Fed learned from the Great Depression.

As you consider the specific things he is doing, it is likely that they will fit very nicely into this framework.

He is obviously fighting the 'last war,' the last great battle that the Fed is known to have waged, and lost. For it did lose, as there was no lasting recovery until the world suffered through the Second World War.

Whether he will be successful or not remains to be seen. It is important to bear in mind that the Fed is absolutely confident that they know how to stop inflation once it gets started, even if it becomes rather serious.

The over-arching theme is that this is an emergency, and so long term niceties like moral hazard and systemic reform will be left for later: the ends justify the means.

William Poole says that this is a dangerous approach, because longer term consequences like inflation appear with a one to two year lag after a significant monetary stimulus such as we have just seen.

The timing of the Fed's dampening of inflation will be critical, and perhaps constrained by the real economy. How can the Fed tighten sufficiently if the real economy remains sluggish?

Bernanke is determined to err on the side of too much stimulus, given the trauma of the Fed's experience in the Great Depression. Coupled with the Fed's confidence in their ability to stop any monetary inflation, this raises a higher level of probability in the most likely outcome of the Fed's latest and greatest monetary experiment.

We cannot help but wonder what he thinks the Fed will be doing this time that will be different than 2003-2007 when they reflated the financial system after a market crash the last time without meaningful reforms, resulting in the stock market and housing bubbles.

Whatever happens, it will certainly provide the raw material for economic papers yet unwritten.