BSE Sensex and CSI 300 Down 1.6%, PBoC Raises Bank Reserve Ratio

Jim Rogers and Marc Faber win again. They were short emerging markets.

China Raises Bank Reserve Ratios to Fight Inflation (Bloomberg)
China raises bank reserves again (Reuters)
INSTANT VIEW - China raises bank reserve requirements (Reuters India)
BSE Sensex below 19,000 level, at 4-month closing low (Reuters India)
Sell-off Continues; India's Sensex Down 1.7% (RTT News)

BSE Sensex (Bombay Stock Exchange, India)
http://www.bloomberg.com/apps/quote?ticker=SENSEX:IND



CSI 300 Index (Shanghai, Shenzhen A-Shares)
http://www.bloomberg.com/apps/quote?ticker=SHSZ300:IND

Meredith Whitney On Municipal Bankruptcies (Ch. 9), State Arbitrage (CNBC Video)

Meredith Whitney was back on CNBC talking about municipalities. She doesn't see states defaulting on their debt, or Federal bailouts, but she still sees local municipalities declaring bankruptcy (not all of them). "It's not a severity issue, it's a frequency issue" she said. State governments are confirming her thesis. See the articles below.

She also mentioned state flight risk (state arbitrage), where companies or people leave for more favorable business conditions. Imagine if people left a city in mass exodus. What would happen to the tax base? Would defectors be treated like short sellers? Detroit is going through a similar event, but it was years in the making. They are shrinking the city, shutting down services and offering incentives for people to move. FYI: Illinois increased business taxes by 46 percent and the individual income tax by 66% (Fox Video). Watch the CNBC interview after the jump.

Jamie Dimon Interviewed On CNBC About JPM's Dividend (1/13/2010)

More on the new golden age of banking. Jamie Dimon, CEO of JP Morgan (JPM), is hopeful that JP Morgan will be able to "reinstate a dividend" in the second quarter.

Dick Bove: We're In A Golden Age Of Banking, C, BAC, STT, NTRS, BK Trading Below Cash Per Share

Dick Bove of Rochdale Securities thinks we're in new "golden age" of banking. He mentioned that bank shares are trading below cash.

"There's so much cash in some of the banks in the United States that they're actually selling at below their cash value per share. For example, Citigroup, Bank of America, Bank of New York, State Street, Northern Trust. They all sell at below their cash per share. What that means is, these companies now have a tremendous amount of liquidity which ultimately can be put to use to generate further earnings growth. And I think for the next 2-3 years what you will see, is that banks will actually increase their earnings at about a 20% rate per year, which will be far faster than what you're going to see from the industrial averages."

"Banks have more capital as a percentage of assets since anytime since 1934"

More bullet points:
  • 28% of bank assets are in cash
  • Non-performing loans are down
  • Net charge-offs are down
  • Delinquencies are down
  • Reaching point of being over reserved

Watch the CNBC interview after the jump, and the bankers vs. consultants rap battle in honor of the new golden age of finance.

Who, How and Why: $140 Oil and $5 Gas

Guest post by OilPrice.com

Who, How and Why: $140 Oil and $5 Gas

According to a loosely-organized apocalyptic Christian movement, May 21, 2011 will be the "end of days." On or about that same date, the price of oil in the United States will begin to climb to $4 a gallon, according to two savants of the oil industry.

The former is highly unlikely but the latter is very probable.

The escalation in the price of oil is predicted by the legendary oil man T. Boone Pickens, known for his financial acuity as well as his oil expertise, and John Hofmeister, who retired as president of Shell Oil Company, to sound the alarm about the rate of U.S. consumption of oil.

In an interview with a trade publication, Hofmeister predicted that oil would rise to $4 a gallon this year and to $5 a gallon in the election year 2012. Separately, Pickens-who has been leaning on Congress to enact an energy policy that would switch large trucks and other commercial vehicles from imported oil to domestic natural gas-predicts that oil currently selling for just over $90 a barrel will go to $120 a barrel, with a concomitant price per gallon of $4 or more.

SEC Conducts Inquiry Into St. Joe's Land Impairment Practices (JOE)

The SEC is checking out St. Joe's impairment practices. David Einhorn of Greenlight Capital, who is currently short St. Joe shares, believes $JOE needs to recognize significant impairment charges on their land. He thinks the stocks is worth $7-10 per share and it's trading at $24.60. Read: Einhorn's Presentation On Why He's Short St. Joe Vs. Bruce Berkowitz Who Owns 30%. This is getting interesting. Hat tip Going Concern.
"The Securities and Exchange Commission (the "SEC") has notified The St. Joe Company ("St. Joe") that it is conducting an informal inquiry into St. Joe’s policies and practices concerning impairment of investment in real estate assets. St. Joe intends to cooperate fully with the SEC in connection with the informal inquiry. The notification from the SEC does not indicate any allegations of wrongdoing, and an inquiry is not an indication of any violations of federal securities laws." (SEC.gov Form 8K)

St. Joe Reports Informal SEC Inquiry of Accounting for Land Impairments (Bloomberg 1/10/2011)
The St. Joe Company Dropping On SEC Concerns (JOE) (Benzinga)

Financial Links - Jeff Gundlach, David Einhorn, Illinois, EUR/USD, Spain, China (1/12/2010)

Jeff Gundlach’s Doubleline Presentation: Must Read "Bonds, 2011 Bonds", 1/1/2011 (Stone Street Advisors)

An Exclusive Interview With Green Light Capital's David Einhorn (Motley Fool)

David Einhorn - Federal Reserve’s Policies are Quite Dangerous (KingWorldNews)

China’s Chongqing Plans Tax for Used Homes, CCTV Says (Bloomberg) h/t Nuibi

Illinois Lawmakers pass income tax hike; Rep. collapses on Senate floor (Chicago Sun Times)

"Illinois lawmakers OK 66% income-tax increase in budget crisis. The rate increase from 3% to 5% will generate about $6.8 billion a year. A taxpayer who used to owe $1,000 would owe $1,666 instead." (AP / LA Times)

JP Morgan chief investment officer says EUR to drop to USD 1.20 by end-Aug - (hat tip Ran Squawk/Zero Hedge)

Euro May Fail if Spanish Economy Collapses, Nobel Winner Pissarides Says (Bloomberg)

Japan May Buy More Euro Bonds to Help Region, Officials Say (Bloomberg)

Spanish Bank Debt Costs Spur Doubt on Ability to Sustain Profit (BusinessWeek)

German Economy Grew at Fastest Pace in Two Decades in 2010 (Bloomberg)

Portugal Borrowing Costs Fall at Auction as Bailout Speculation Diminishes (Bloomberg)

St. Joe’s ($JOE) Accounting for Real Estate Impairment to Get the ‘Informal’ SEC Inquiry Treatment (Going Concern)

JGB CDSs are rising. See quotes and charts: JGB CDS USD SR 5Y and JGB CDS USD SR 10Y (h/t dutch book). *JGB CDS = Japanese Government Bond Credit Default Swaps

Federal Reserve Banks Earn $80.9 Billion In 2010, Up From $53B In 2009, Distributes $78.4 Billion To Treasury

The Federal Reserve Banks made $80.9 billion in 2010, up from $53.4 billion in 2009 (audited). "After providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in", they distribute profits to the U.S. Treasury (see chart below). Are Fed Bank shares on Second Market?

"Release Date: January 10, 2011

For immediate release

The Federal Reserve Board on Monday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $78.4 billion of their estimated 2010 net income of $80.9 billion to the U.S. Treasury. This represents a $31.0 billion increase in payments to the U.S. Treasury over 2009 ($47.4 billion of $53.4 billion of net income). The increase was due primarily to increased interest income earned on securities holdings during 2010.

EU Prepares to Approve €1 Trillion Master Energy Plan - Guest Post

Guest post by GIR Analysts for OilPrice.com

EU Prepares to Approve €1 Trillion Master Energy Plan

INCIDENT: Towards the end of last year, the European Commission presented its new energy strategy for the next decade, calling for investment of €1 trillion in the EU's energy network, among a series of other measures. Leading Eurocrats hope that an EU energy summit scheduled for next month in Budapest will endorse the proposals and give them some political traction.

SIGNIFICANCE: The new energy strategy is a set of normative proposals that depend upon the member-states, the private sector, and other EU organs such as the European Parliament (EP) for clarification and implementation.

David Rosenberg Prefers US Dollar Over Euro, Bonds Not In Bubble (EUR/USD, UUP)

David Rosenberg, Chief Economist and Strategist at Gluskin Sheff, was interviewed at The Globe And Mail this morning. He sees more "financial spasms out of Europe" on debt concerns and the Ireland elections, a flight to safety bid back into the US Dollar (lower EUR/USD) and fixed income as an attractive investment. He said "bonds are not in a bubble". Link to the video (hat tip Zero Hedge)

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/market-view-video/david-rosenberg-on-market-prospects/article1863551/

*Rosenberg is also bullish on Japan when using price valuation and interest rate comparables to the U.S. and Europe. Read more at Business Insider.

Dhaka Stock Exchange Index In Bangladesh Falls 20% In One Month, DGEN Chart And Protest Video

The DSE General Index (DGEN) lost 20% (8,918 to 7,135) from 12/5/2010 to 1/9/2011 and according to AP it is sparking protests.
"The government regulator, the Securities and Exchange Commission, held an emergency meeting Monday with merchant bankers and institutional stockbrokers to decide what actions to take to save the market from further falls." (Source: AP via myway.com)

Here is the 6-month chart of DHAKA:IND courtesy of Bloomberg.com. More at Reuters: Bangladesh police, investors clash as stocks go into free fall. See people riot in the streets outside the Dhaka Stock Exchange courtesy of Russia Today.

Portugal CDS, 10 Year Government Bond Yield and Bank Watch (Charts)

Credit protection on Eurozone sovereign debt is rising and banks are under pressure. Portugal is hitting the wires hard this morning (see below). I provided snapshots of Portugal's 5Y CDS and 10-year Government bond yield with direct links to Bloomberg. Bailout coming? It looks like Portugal's 10-year yield is lower at 7.05% from 7.17% earlier. *Here's your answer: Portuguese bond spread tightens, ECB seen buying (h/t Toni).

Jim Rogers Is Long The US Dollar, Short Emerging Markets ETF (Short Term)

In an interview with The Economic Times on 1/3/2011, Jim Rogers said he was long the US Dollar and short an Emerging Market ETF. He also mentioned sugar, rice, silver, oil, China, the Renminbi and more. Watch the full interview with text at their website: Jim Rogers outlines hot commodities for 2011 trade.

*Related: Marc Faber told CNBC TV18 India on 12/10/2010 that emerging Markets could fall by 20-30% (video)

$BGP February Call Option Activity, Watching Borders Group News

Expect big news soon from Borders Group (BGP). Bill Ackman of Pershing Square Capital Management owns 37%, their General Counsel and Chief Information Officer resigned, they halted payments to certain vendors to refinance debt and something needs to be done about declining revenues and shareholders equity (see chart comparison since 2001 below). Articles:

*More red flags up at Borders Analysts: Chapter 11 an option; company needs a strategy, too (Crains Detroit)

*Borders Group bankruptcy filing may be inevitable, University of Michigan expert says (AnnArbor.com)

BGP closed at 0.92 on Friday and $1 call options were active from February to August. February activity was over open interest. I'm not sure what this activity means. Are investors positioning for a pop on news? Is someone hedging their short positions? Either way, hopefully something interesting happens with this company, including more land for Laptopistan. Massive retail commercial real estate space is involved here as well. See my previous post for more news and information. BGP option chain snapshots and fundamental data after the jump.

Financial News and Research Links (1/9/2010)

Eclectica's Hendry Turns Greece Profit Into China Failure Bet (Bloomberg)

Freight Rates Tumbling as 35 Miles of Ships Passes Ore Demand (Bloomberg)

THE BEST RISING INTEREST RATE TRADE - Credit Suisse (Pragmatic Capitalism)

Goldman Sach's Abby Joseph Cohen January 2011 Research (Zero Hedge)

Goldman traders to leave to start hedge fund- FT (Reuters)

*$432 BILLION PENSION FUND COALITION DEMANDS BANK DIRECTORS IMMEDIATELY EXAMINE FORECLOSURE PRACTICES - (New York City Comptroller/John C. Liu) h/t Ritholtz

Christie Targets Medicaid to Close $10.5 Billion New Jersey Budget Deficit (Bloomberg)

Illinois may dig deeper credit rating hole (Pensions & Investments)

In Illinois, a Giant Deficit Leads to Talk of a Giant Tax Increase (New York Times)

For more headlines see my Twitter handle in the Wibiya toolbar below.

Higher Bond Yields, Dollar Could Trigger Gold Sell Off (Keith McCullough On CNBC)

Keith McCullough (Hedgeye Risk Management) told CNBC last week (1/7/2010) that higher bond yields and US Dollar could trigger a sell off in Gold. Watch the video below for more. LaSalle Futures Group and Doug Kass agree. Here's a 3 year chart of $GLD courtesy of stockcharts.com.

GLD (SPDR Gold ETF) - 200DMA 123.67