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Trading Now

Wednesday, January 27, 2010


*The proverbial rabbit out of the hat trick
Obama's speech will focus on expanding employment, shrinking deficit
U.S. President Barack Obama is expected to use his first State of the Union address to assure Americans that he is ready to work toward restoring growth to the economy, creating jobs and cutting the budget deficit. "Getting our economy moving again" will be the fundamental theme of the president's message, said White House spokesman Robert Gibbs. Obama will call for a three-year freeze on discretionary spending, aides said. San Francisco Chronicle (27 Jan.)

Documents: 2 Fed officials saw AIG payments as $30B "gift" to banks
In the weeks that followed the U.S. government's bailout of American International Group, two Federal Reserve governors thought allowing the insurer's trading partners to keep $30 billion they had received from AIG would amount to a "gift" to the banks, according to documents obtained by The New York Times. Despite the concern, the Fed allowed AIG's trading partners, including Goldman Sachs and Societe Generale, to keep the money, according to the documents. Reuters (27 Jan.)

S&P threatens to downgrade Japan's sovereign debt
Investors have been questioning the sustainability of Japan's debt for months, but Standard & Poor's issued its first formal declaration of concern Tuesday. The credit rating agency threatened to downgrade the sovereign debt of Japan unless authorities can bolster the economy while curtailing public spending. "It's a warning shot across the bows of the Japanese government. They may or may not pay attention; what is clear is that they can't spend money at will," said John Vail, chief global strategist at Nikko Asset Management. The Wall Street Journal (27 Jan.)

*if only Alistair would get his head out of his bankers butts and climb aboard too.
Trichet supports U.S. plan to rein in biggest banks
Jean-Claude Trichet, president of the European Central Bank, said proposals on financial regulation should be coordinated on a global scale. However, he offered qualified support for the White House's plan to curb the size and activities of the largest financial institutions in the U.S. Trichet also said U.S. senators should confirm Ben Bernanke for a second term as chairman of the Federal Reserve. The Wall Street Journal (27 Jan.)

*this sounds like a really good idea and a collassal waste of time and money. How about hiring people to audit corporations instead. IJIOTS!
IRS wants businesses to report "uncertain tax positions"
The U.S. Internal Revenue Service plans to require corporations to submit forms with their tax returns that disclose instances in which their judgments are questionable. Businesses would be instructed to describe "uncertain tax positions," explain the reasoning behind them and state how those decisions impact their tax liability. The Washington Post (26 Jan.)

Sovereign-debt CDS purchases are up more than 14% since October
Government-debt buyers are purchasing credit default swaps to protect themselves against sovereign-debt default at a rate more than five times that of corporate bonds. Data from Depository Trust & Clearing show that net CDS coverage outstanding on the debt of 54 countries has soared 14.2% since Oct. 9. Bloomberg (1/27)

*some things never change
Investors return to simplest forms of synthetic CDOs
After retreating to the safety of government bonds, investors are starting to return to synthetic collateralized debt obligations. Paul Volcker, adviser to President Barack Obama and former chairman of the Federal Reserve, has criticized CDOs and credit default swaps for bringing the financial system "to the brink of disaster." Bankers, however, said the financial instruments allow companies to raise capital. Bloomberg (1/26)

Analysis: Britain's recovery is almost as painful as its recession
The U.K.'s recession was the longest among the Group of Seven nations, and when the end was finally pronounced, nobody was celebrating, according to The Economist. Britain's economy grew 0.1% between the third and fourth quarters, according to the Office for National Statistics. The office is scheduled to announce in April its initial estimate of this year's first-quarter GDP, before a general election that must be held by June 3 but is expected to take place in May. The Economist (26 Jan.)

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