Market Talk

- The 10-year yield has fallen 40 bps during the past month, James Hamilton notes at Econbrowser. “If you wanted to attribute all of this to expectations of QE2, and if you were assuming that $400 billion in long-term bond purchases could lower the rate about 13 basis points, you might think the market has already discounted some $1.2 trillion in additional large-scale asset purchases,” he says. “All of which raises the interesting possibility that if the Fed were to announce in November another trillion in purchases, nothing would happen, because the market has already discounted it.”

- “The fact that an IMF meeting ended with the participants unable to feign a narrowing of differences on the currency front is further evidence that positions are hardening,” Yves Smith writes at naked capitalism.

- Bank stocks no longer driving this rally. “That old adage of ‘as financials go, so goes the market’ — I don’t think that’s tru this time,” said John Lynch, chief equity strategist at Wells Fargo Funds management Group.

- Next-gen 4G mobile phone systems promise faster speeds and better audio. Various US carriers have already promised to roll the new technology out within the next couple of years, but Apple (AAPL) will wait until the technology is more mature before adding it to the iPhone, according to TechCrunch. Instead, the blog speculates that AAPL will release phones next year that are compatible with many more carrier networks using different technologies.

- The Reformed Broker blogger Josh Brown channels his inner Alanis Morrisette as he discusses Dow 11000. “When I consider the state of the market rally, I can only think to myself, ‘Isn’t it ironic, don’t ya think?’”

- Piper Jaffray’s Gene Munster tells Silicon Alley Insider that tablets built with Google’s (GOOG) Android software will provide some “very stiff competition” to Apple’s (AAPL) iPad. While Apple will probably ship about 20M-25M iPads next year, Munster says “ultimately we think that Apple won’t have the majority of the (tablet) market share. It’ll probably be with Android-based tablets.”

- “The biggest problem with TARP is that the other portions of the response were so poorly crafted,” the Economist’s Free Exchange blog says. “And the legacy of that underperformance — a weak American recovery alongside continued wealth on Wall Street — is what continues to give political TARP-bashing its potency.”

- Southwest (LUV) announces it’s ending its eight-year tenure as the “official airline” of the NBA after the two sides couldn’t agree on an extension. Farewell then to Slam Dunk One, a specially painted plane that marked the partnership which is now destined for a new color scheme. “With our tough financial climate and limited resources, we had to make the tough decision to say goodbye to one of our dear friends and partners, and both sides agree — we’ll miss each other!” gushes Southwest’s blog.

- Big Picture blogger Barry Ritholtz says America needs an intervention. “The credit crisis and now foreclosure debacle have revealed to anyone who cares to look what we have sought to ignore: That the past decade has been based on a set of fundamental beliefs that are intrinsically false,” he says. “The sooner we stop kidding ourselves, the sooner we can move forward with more productive honest economic lives.”

- Jets-Vikings: the hyperbole bowl, WSJ’s Jason Gay writes.

We could use a good Stoic right now.

Let’s not waste time. What gives with the stock market not rallying off the best GDP report in six years? For one thing, it was a total sell on the news play; the whispers for some time had GDP coming with a “5″ handle.

But for another thing, even that hot, blistering number can’t obscure the fact that the economy remains stagnant, and the administration, rather than spending its first year stoically addressing this nation’s problems, wasted it propping up connected banks and dithering over its pet project.

When this crisis began, more than two years ago, I opined that the only true solutions were time and open markets. I still believe that. But we are wasting time, and we’re shielding connected players from the vagaries of open markets. That is making our open markets, the deepest and most liquid anywhere, and the envy of the free world, less open and more rigged. And only a fool doesn’t see it.

It’s not just the 10% unemployment rate, as bad as that is. It’s not just that wages for everybody else that aren’t keeping pace with even slight inflation. It’s that as those two situations persist, as the overall state of the consumer continues to stagnate and decompose, it drains demand, which keeps the lid on corporate profits, so companies are reluctant to ramp up new operations. It keeps state and federal tax revenue dropping, straining already strained budgets, especially on the state level. Something eventually will burst.

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Of course, you know, this means war!

President Obama, in full populist rhetoric, tsk-tsked the bankers today, and swore to make them pay for their “obscene” bonuses  — literally, by proposing his bonus tax, or whatever fancy name he’s given it. (For the record, they’re calling it a “financial crisis responsibility fee.” Sounds like they’re charging a fee for being responsible, no? Is that ironic or what?) He said he’s committed to getting back “every single dime” the American people are owed.

Don’t get me wrong,  I have no sympathy for the banking industry, which deserves its fair share of the blame for the financial meltdown. But the president’s little assault today is just a blatant attempt to draw some popular support, or at least deflect popular anger.

To be sure, in some ways, the banks brought this on themselves. As my colleague Madeleine Lim commented during today’s Tomorrow’s News Today (coming later this afternoon,) among all the various parties that bear some responsibility for the housing crash and credit crisis, the banks remain the most tin-eared.

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- Obama’s bailout fees on TARP recipients should become a “too-big-to-fail” tax.

- Netflix’s business model transformation continues.

- Recovery won’t happen in a vacuum, bulls, Miller Tabak’s Peter Boockvar says.

- One week later Nexus One is off to a slow start.

- Google’s pride stands out in China’s threats.

- Jamie Dimon previously didn’t even consider a stress test when housing prices fell. Unbelievable.

- More than 100,000 are feared dead after Haiti earthquake.

- Some questions for the banking chiefs.

- Beige book shows modest improvement.

- California’s debt rating cut again.

I don’t even know what to add to this, so I’m going to run it verbatim. Barry Ritholtz over at The Big Picture absolutely strips the bark off Washington. The only thing I’d add — and it’s a sad addition — is that I’m not convinced the condition he diagnoses is temporary. And if he’s right about the state of our democracy, his proposal doesn’t stand a chance. Still, it’s worth exploring.

Yesterday, the news broke about a tax on the large banks — it was ostensibly designed to close the deficit. Instead, I’d like to rename it the Too Big Too Fail Tax (TBTFT).

What I found interesting about the tax is the somewhat misleading way it has been premised — namely, that it is payback for all of the Non-TARP subsidies the banks have been enjoying at the expense of the taxpayers. Further, went the MSM narrative, such a tax at a time of populist outrage over big bonuses is a slick political move calculated to assuage the angry masses.

I am not sure how clever the Obama brain trust is — so far, the answer has been “Not very” — but there is an opportunity here for a third basis for this tax. Let’s call it the TBTF tax.

Allow me to explain:

So far, we have learned that Wall Street has become impervious to regulation. Our Parliament of Whores is bought and paid for, well greased by the Street’s lobbyists. Wrap your lips around this big purple legislation and suck. Even the most benign regulation — i.e., a basic disclosure of mortgage costs relative to a plain vanilla, 30 year fixed — has been thwarted.

When lobbying prevents even the most simple of consumer disclosure legislation, you have a broken political system. Such failures can only occur when a democracy has been lost — when corporations own Congress, when the will of the electorate is ignored, when money has utterly corrupted the political process. Have no doubt about this: Our experiment in Democracy is nearly over; we have morphed into a Corporatocracy — a government by and for large corporate interests. Let’s pray it is only temporary.

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- Temporary employment trend marks a welcome sign for the jobs market. “The combination of fewer layoffs and more hiring provides some welcome news – but within the context of two years of job losses,” the Atlanta Fed’s macroblog.

- Did someone break a mirror? Could take almost seven years for the unemployment rate to revert back to 5%, University of Oregon economics professor Mark Thoma writes at MoneyWatch.

- Keep an eye out for percolating commodity prices and what impact they may play concerning Fed’s monetary policy, UC San Diego economics professor James Hamilton writes at Econbrowser.

- Citi repaying TARP is nice. And the focus will be on strong capital ratios once the deal is completed. But the bottom line is Citi still needs to get smaller and more profitable, Reuters blogger Felix Salmon says.

- Exxon’s $31B bet.

- President Obama calls bankers “fat cats” and lashes out at Wall Street over increasing tensions surrounding financial reform. But is Obama merely posturing with rhetoric on bankers? Naked capitalism’s Yves Smith weighs in.

- John Hussman’s at it again, making the case that the S&P 500 is “decidedly speculative” at current levels. And the long-term outcome for risk-taking at these levels will “almost undoubtedly be unrewarding.”

- Real Time Economics gathers some remembrances of economist Paul Samuelson, who passed Sunday. He was 94.

- Will Tiger Woods ever be the same?

- How ’bout that? Goldman bows to pay pressure.

- Turbo Tim says TARP extension is needed for successful exit.

- It’s a sad day in the publishing industry. After 125 years, Editor & Publisher will fold. Newsosaur blogger Alan Mutter discusses.

- Paul Krugman puts the “good” jobs report in perspective.

- Expectations for a brief correction in the market are on the rise, yet stocks keep going up.

- One in four children are on food stamps.

- Minyanville’s Todd Harrison discusses being wrong vs. being ear1ly.

- Weekly jobless claims show firing has definitely slowed, but hiring remains in limbo.

- Hey Facebook, Twitter, MySpace…your No. 1 goal – don’t be the next Friendster.

- Recession may mark the end of an era…the US era.

US stock futures tilted higher premarket, dollar index shaded lower, following mixed action in Asian markets overnight and advances currently in European stocks.

Weekly jobless claims and October trade deficit due at 8:30 a.m. ET. The jobs picture has shown some improvement on the surface, with layoffs continuing to ebb, but there isn’t much hiring to speak of. Investors may fixate on the smaller number of initial jobless claims and decline in continuing claims, but the more telling metric may be the increasing number of folks claiming “emergency unemployment claims” when the regular benefits run dry.

Citigroup’s up in premarket trading, as it negotiates with Treasury on its TARP repayment. JPMorgan says it would be a “significant positive” for Citi to square with the government, as similar to BofA (BAC), “Citi has had to deal with a lot of political scrutiny.”

But the capital raise to pay back TARP “would create moderate dilution to normalized EPS, tangible book value, and book value assuming $10 bil new common stock issue and significant dilution under $20 bil issue cited by CNBC,” JPMorgan says.

S&P futures up 6.00, DJ futures up 37. Ten-year lower, yield at 3.45%.

- Treasury extends TARP to October. Republicans aren’t pleased.

-The Wall Street casino keeps getting even more confusing. “Over the long run, the markets reveal themselves. But on any given day, nobody can see exactly what’s happening, much less explain exactly why it’s happening.”

- Meredith Whitney says the government is “out of bullets” in its battle to boost the economy.

- Apple (AAPL) shares getting a nice bump today as tablet-related rumors have returned. Prior to the open shares had dropped 8% off their 52-week high, but one analyst stressed not to worry.

- Monetary policy and commodities – notice a link?

- A different kind of double-dip risk.

- “Trying to formulate an intermediate-term opinion on a stock right now is like building a house on quicksand.”

- Contrarianism is overrated. Or is it?

- It pains me to say this, but comments from McClatchy (MCI) and NY Times (NYT) prove newspaper publishers are looking at the future through rose-colored glasses.

- Google’s (GOOG) search market share increases, Yahoo (YHOO) and Bing fall.

- Hollywood trade publication Variety becomes another publication that will start charging for Web news.

We're coming after you, Geithner!

Long live the days of government handouts with no strings attached.

GMAC has come crawling back to the government yet again, asking for a third lifeline of taxpayer money. The troubled consumer lender, which has already received $12.5B from the government since December, has asked for another $2.8B to $5.6B of fresh capital in the form of preferred stock. WSJ has the details:

The willingness by Treasury officials to deepen taxpayer exposure to GMAC reflects the troubled company’s importance to the revival of the auto industry. Founded in 1919, GMAC has $181 billion in assets and is a major financier for 15 million borrowers and thousands of General Motors and Chrysler car dealerships in the U.S.

The new capital would help firm up GMAC’s balance sheet and solidify its auto-loan business. GMAC provides the vast majority of wholesale financing for GM dealerships across the country, meaning scores of local distributors would be unable to bring new vehicles onto their lots if GMAC were to collapse.

GMAC begging for more funds is a stark reminder of the bailout rage that swept through the economy in late 2008 and earlier this year. Bloggers, to say the least, are outraged.

“The reason for more dough to GMAC is so GM and Chrysler can continue to finance auto purchases, not as a result of greater than expected losses on its existing portfolio,” Yves Smith writes at naked capitalism. “So this is cash for clunkers under another brand name.”

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