$100 Billion QE2 a Month, As Far As Eyes Can See

By now, many of you may have already read the Fed leak piece that appeared in Wall Street Journal this afternoon.

Benny and the Inkjets are planning QE2 alright, but with a twist. And that twist is given by none other than James Bullard, St. Louis Fed President who penned the light-weight paper back in July about inflation target and fed funds rate, comparing the US with Japan.

In that paper, Bullard came out in favor of the Quantitative Easing 2 as a way to nudge the inflation rate toward the Fed's unofficial but implicit target, which he calls "stable target state". (I've read the paper, and I still don't quite understand his logic of why that particular area is "stable".)

Now according to the WSJ article, he is in favor of QE2 in a sneaky way, by not announcing the total amount or duration. He wants to do QE2 at a measured rate, less than $100 billion a month, and keep doing it until the Fed decides to stop. Or Bullard decides to stop.

He says in the article that $1 trillion per year of QE2 would give him "pause", but he doesn't say whether that would deter him from printing further. He is worried, supposedly, that it would amount to outright monetization as $1 trillion would be close to the net debt issues by the Treasury Department.

Not that Turbo Timmy and Barry at the White House (who by the way is reduced to pitching a longer school days ) would mind issuing extra debt so that the Fed would appear not to be completely monetizing. And they would get more free money to squander on their grand plans for the rest of us while sending US dollar down the drain.

Bullard seems to have more clout than others within the Fed. It's just my sense, but the Fed's announcement after the September FOMC read like one particular section of Bullard's July paper; that was about how to craft the FOMC language on inflation expectation to guide the inflation expectation and hopefully actual inflation rate higher. In the paper, he praised highly the FOMC language on inflation after the dot-com bust, and he seemed to think that clever language did the trick and the stock market and the economy recovered.

So why do these people at the Fed need advanced degrees in economics? All they would need seems to be BA or MA in English Literature. If they call it economics, then economics is certainly not a science.

Anyway, here we have it. The Fed's plan, $100 billion a month, for as long as it takes. To achieve what? Don't ask. Don't even bother.

They will achieve inflation alright. Just don't expect it to be a gradual affair. We will never know (neither will they) which incremental $100 billion will break the camel's back.

If you want to read Bullard's paper, here's the link. I've read it, and I can assure you there's nothing to be intimidated if you don't have a PhD in economics. It's not really a research paper, but more like an essay, a stream of consciousness about zero interest rate and fear of being stuck forever.

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Czech President to UN: Stay out of Economics and Science

Czech President Vaclav Klaus, speaking like an Austrian (economist, that is). I would go one step further and not leave the solutions to the member governments either; the solutions are to be found in free market capitalism. But I'm sure Professor Klaus knows that, as he is after all a follower of Friedrich Hayek.

From Reuters:

"UNITED NATIONS, Sept 25 (Reuters) - Czech President Vaclav Klaus on Saturday criticized U.N. calls for increased "global governance" of the world's economy, saying the world body should leave that role to national governments.

"The solution to dealing with the global economic crisis, Klaus told the U.N. General Assembly, did not lie in "creating new governmental and supranational agencies, or in aiming at global governance of the world economy."

""On the contrary, this is the time for international organizations, including the United Nations, to reduce their expenditures, make their administrations thinner, and leave the solutions to the governments of member states," he said.

""The anti-crisis measures that have been proposed and already partly implemented follow from the assumption that the crisis was a failure of markets and that the right way out is more regulation of markets," he said.

"Klaus said that was a "mistaken assumption" and it was impossible to prevent future crises through regulatory interventions and similar actions by governments.

"That will only "destroy the markets and together with them the chances for economic growth and prosperity in both developed and developing countries," he said.

"The Czech president, a vocal skeptic of global warming, said the United Nations should also keep out of science, including climate change. U.N. Secretary-General Ban Ki-moon has made fighting climate change one of his top priorities."

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Zero Hedge: Implication of QELite and QE2 = Death of Fiat Monetary System

Excellent article from Zero Hedge on the implication of QE2 that is to come our way, courtesy of the uncontrollable, unaccountable Federal Reserve.

(If you prefer to print out the article and sit down to read it, here's the printer-friendly version.)

Oh BTW, got gold?

(Or for that matter, toilet paper, baby formula, bag of rice, packs of cigarettes ... and a whole lot other items?)

Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame (Tyler Durden, 9/26/2010 Zero Hedge)

Recently the debate over when QE2 will occur has taken a back seat over the question of what the implications of the Fed's latest intervention in monetary policy will be, as it is now certain that Bernanke will attempt a fresh round of monetary stimulus to prevent the recent deceleration in the economy from transforming into outright deflation. Whether or not the Fed will decide to engage in QE2 on its November 3 meeting, or as others have suggested December 14, and maybe even as far out as January 25, the actual event is now a certainty. And while many have discussed this topic in big picture terms, most notably David Tepper, who on Friday stated that no matter what, stocks will benefit from QE2, few if any have actually considered what the impact of QE2 will be on the Fed's balance sheet, and how the change in composition in Fed assets will impact all marketable asset classes. We have conducted a rough analysis on how QE2 will reshape the Fed's balance sheet. We were stunned to realize that over the next 6 months the Fed may be the net buyer of nearly $3 trillion in Treasurys, an action which will likely set off a chain of events which could result in rates dropping all the way to zero, stocks surging, and gold (and other precious metals) going from current price levels to well in the 5 digit range.

A Question of Size

One of the main open questions on QE2, is how large the Fed's next monetization episode will be. This year's most prescient economist, Jan Hatzius, has predicted that the minimum floor of Bernanke's next intervention will be around $1 trillion, which of course means that he likely expects a materially greater final outcome from a Fed that is known for "forceful" action. Others, such as Bank of America's Priya Misra, have loftier expectations: "We expect the size of QE2 to be at least as much as QE1 in terms of duration demand." As a reminder, QE1, when completed, resulted in the repurchase of roughly $1.7 trillion in Treasury and MBS/Agency securities. It is thus safe to assume that the Fed's QE2 will likely amount to roughly $1.5 trillion in outright security purchases. However, as we will demonstrate, this is far from the whole story, and the actual marginal purchasing impact will be substantially greater.

A Question of Composition

Probably the most important fact that economists and investors are ignoring is that QE2 will be accompanied by the prerogatives of QE Lite, namely the constant rebalancing the Fed's balance sheet for ongoing and accelerating prepayments of the MBS/Agency portfolio. This is a critical fact, because once it becomes clear that the Fed is indeed commencing on another round of monetization, rates will collapse even more beyond recent all time records (and if we are correct, could plunge all the way to zero). What is very important to note, is that as Bank of America's Jeffrey Rosenberg highlights, a material drop in rates, which is now practically inevitable, is certain to cause a surge in mortgage prepayments of agency securities: "Our mortgage team highlights a 100 basis point decline in rates would raise the agency universe of mortgages refinanciability from currently about half to over 90%." (full report link)

The fact that declining rates creates a feedback loop on prepayments, which in turn results in more security purchases and even lower rates, is most certainly not lost on the Fed, and is the primary reason for the formulation of QE Lite as it currently exists. Indeed, those who follow the Fed's balance sheet, are aware that the MBS/Agency book has declined from a peak of $1.3 trillion on June 23, to $1.246 trillion most recently, a decline of $53 billion, which has been accompanied by $25 billion in Bond purchases, resulting in such direct FRBNY market involvements as $10 billion weekly POMOs. These, in turn, are nothing less than a daily pump of liquidity into the Primary Dealers (who exchange bonds boughts at auction for outright cash) by the Fed's Open Market Desk, which then liquidity is used to the PD community to bid up risk assets.

If we are correct in our assumption that on November 3, the Fed will announce a $1.5 trillion new asset purchase program, the implications of the previous observation will be dramatic. We additionally believe, that unlike QE1, the Fed will be far less specific as to the composition of purchases this time around, specifically for the aforementioned resion. As the Fed adds an additional $1.5 trillion in total assets, and as 10 Year rates, and thus 30 year cash mortgage rates, drop, the prepayment frequency of the Fed's existing MBS/agency book will surge, until it approaches and surpasses BofA's estimated 90% in a very short period of time. And courtesy of its QE Lite mandate, the Fed will purchase not only $1.5 trillion of US Treasurys as part of its new QE2 mandate, but will actively be rolling those MBS and Agencies put to it by the general public. As a result, it is our belief that over the six months beginning on November 3, the Fed will end up purchasing almost $3 trillion in US Treasurys in total. This can be summarized visually as follows:

As the chart shows, while the Fed's balance sheet grows from its current level of $2.3 trillion to $3.8 trillion, it is what happens to the Treasurys held outright by the Fed that is most disturbing: from $800 billion, we expect this number to surge to nearly $3.6 trillion in just over half a year, a massive increase of almost $3 trillion. The implications of this asset "transformation" on the Fed's balance sheet, not to mention those of US retail and foreign investors, and capital markets in general, will be dramatic.

Offerless Bonds?

One of the main problems facing the Fed in indirectly monetizing US Treasurys (keep in mind the proper definition of monetization is the Fed buying bonds directly from the Treasury, as opposed to using Primary Dealer middlemen, which is how it operates currently), is that there simply are not enough bonds in circulation to be bid, under its current regime of operation! Readers will recall that as part of existing SOMA guidelines, the Fed is limited to holding at most 35% of any specific marketable CUSIP. Furthermore, applying the SOMA limit to the $2 trillion in upcoming next twelve month issuance, means that in the interplay of the prepayment feedback loop coupled with collapsing rates, the Fed will need to either change the cap on the SOMA 35% limit, or the Treasury will need to issue far more debt to keep up with the sudden expansion in the Fed's outright, and not just marginal, capacity for incremental debt. Priya Misra summarizes this conundrum facing the Fed best:

We examine the Treasury market to analyze which part of the curve might benefit the most from Fed buying if it embarks on QE2. The constraints will come in term of the 35% SOMA limit as well as current outstandings and issuance profile. Table 5 provides the breakdown of average SOMA holdings and eligible dollar amount outstanding by sector. We estimate that in the nominal coupon universe, there is currently $1.3trillion in outstanding eligible issues for the Fed to buy. We compute eligible number of issues as the amount the Fed can buy without breaching its SOMA limit of owning 35% of the issue size. Considering that the Fed has not purchased 0-2 year securities in either QE1 or the reinvestment program so far, the eligible universe reduces to $935billion. Interestingly, $560bn of this is in the less than 7 year sector.

While the total eligible securities may seem like a low number in the context of QE2, we expect $2.1tn in gross issuance over the next year. Adding 35% of this gross issuance to the total, the Fed will have $1.67tn in eligible nominal outstanding to purchase without breaching the 35% limit. However, depending on the total size of QE2, much of the buying might have to be concentrated in the 2-7 year sector. To the extent that the Fed wants to keep long end rates low, it might have to increase the 35% SOMA limit, or the Treasury could change issuance.

We believe that the resolution to the limited supply question will be found promptly, as the last thing the US government and Treasury need is to be told that they need to issue more debt. We are confident they will obligly handily. From a purely structural perspective, suddenly the entire UST curve, and not just the "belly", will be offerless, as the Fed will now have a mandate of buying up virtually every single bond available in the open market, and then some! What this means is that rates will promptly plunge, and while many have noted the possibility that the 10 Year drops below 1% upon the formal announcement of QE2, we believe there is a very high probability that even the long-end can see rates drop substantially below 1%, while the 10 Year approaches 0%. Keep in mind that this move will not be predicated upon inflation expectations whatsoever (and in fact we believe this is merely the first step to an outright monetary collapse also known in some textbooks as hyperinflation), but merely as a means of frontrunning Ben Bernanke, as the entire bond market goes offerless, knowing full well that the Fed will buy any bond below its theoretical minimum price of 0% implied yield (we leave it to our readers to determine what this means price-wise on the curve). It also means that the Fed will finally cross the boundary into outright monetization, as Bernanke will be forced to directly bid for any new paper emitted by the US Treasury, to maintain the tempo of its purchases.

Asset Implications

As we have noted above, the immediate implication of the vicious (or virtuous if you are Ben Bernanke) feedback loop of collapsing rates, prepayments, and accelerating UST purchases, is that mid-and long-term rates will likely promptly approach zero, as every UST holder realizes they are now the marginal price setter in a market in which there is a bid for any price. The Fed will merely render the traditional supply/demand curve meaningless, and any bonds offered for sale at any price will be bid up by Brian Sack. The implication on stock prices is comparably obvious: to readers who have been confounded by the impact on stocks when there is $10 billion worth of POMOs in a week, we leave to their imagination what the impact on 4x beta stocks will be once the Fed floods the market with $90 billion worth of weekly liquidity, which is what we calculate to be the peak repurchase activity between the months of January and March, as QE2 ramps up to its full potential. In this vein, analysts such as Deutsche's Joe LaVorgna who this Friday came out with a note advising clients not to "Fight the Fed" (link) may take the message to heart. After all, if this last attempt by the Fed to spur asset price inflation, in which Bernanke is effectively telling the consumer that a house can be had for no money down, and for no interest ever, thereby eliminating the risk of price deprecitation, fails, it is game over.

And speaking of game over, we dread to look at a chart of the DXY in early 2011. The dollar will plunge, pure and simple, as the Fed makes it clear that it will not tolerate currency appreciation. Also, don't forget that as a side effect of QE2, another component that will surge in addition to Fed Treasury holdings, will be excess reserves held by the banks. If we are correct in estimating that the Fed's assets will explode to $3.8 trillion, then bank excess reserves will skyrocket by a factor of 150% from the current $1 trillion to well over $2.5 trillion. The immediate casualty of this will be the US Dollar: one needs to look no further than 2009 to see what happened to the DXY when excess reserves increased by $1 trillion, in order to extrapolate what happens when it becomes clear that Bernanke is prepared to put any amount of liabilities on the Fed's balance sheet in its latest reflation attempt. And if anyone had doubts about the Fed being able to successfully absorb $1 trillion in excess reserves accumulated through QE1, all those concerns will be put to rest once the number hits $2.5 trillion, or more.

Which brings us to gold. Needless to say, once the full "all in" realization of just what QE2 means for risk assets and capital markets sets in, gold (and other physical commodities) will promptly go from its current price of $1,300 to a number well in the five-digit range. We leave it up to our readers to provide the actual digits.

In summary, David Tepper may well be right that stocks will benefit from QE2, as will Bonds and as will commodities. In fact, every asset class will explode in a supernova of endless liquidity. To be sure, all of this will be very short lived. Very soon, all those assets denominated in fiat paper, will promptly collapse in the great black hole of reserve currency devaluation, as it becomes clear that the Fed will stop at nothing to win the race of global currency debasemenet. And of course, none of this is to be confused for an actual improvement in the economy, as QE2 will result in a dramatic and irreversible deterioration in the US, and thus global, economy, which, once the initial euphoria from QE2 recedes, will promptly progress to isolationism, protectionism, currency wars and exponentially accelerating monetization of each and every asset class, thereby rendering price discovery irrelevant, as central banks around the world stampede into irrelevant capital market, each buying up as much of everything as their printing presses will allow them, until the ink runs dry.

At this point we refuse to pass ethical judgment on the Fed's actions. The Fed will do this action regardless of what happens on that other fateful event scheduled to take place on November 3. If it does not, asset prices will collapse leading America into a deflationary vortex of deleveraging, and Bernanke is fully aware of this. The only reason the market has found some validation to the September risk asset surge, is the "certainty" of QE2. Were this to be taken away, stocks would plunge, as would all other assets. And since the Fed is uncontrollable, and unaccountable to anyone, it is now impossible to prevent this line of action, whose outcome is what some may be tempted to call, appropriately so, hyperinflation. The direct outcome will be an explosion in all asset prices, although we continue to believe that of all assets, gold will continue to outperform both stocks and bonds, as recently demonstrated. Those who are wishing to front-run the Fed in its latest and probably last action, may be wise to establish a portfolio which has a 2:1:1 (or 3:1:1) distribution between gold, stocks and bonds, as all are now very likely to surge. We would emphasize an overweight position in gold, because if hyperinflation does take hold, and the existing currency system is, to put it mildly, put into question, gold will promptly revert to currency status, and assets denominated in fiat, such as stocks and bonds, will become meaningless.

And while Zero Hedge refuses to condemn what is now openly an act of war against the US middle class and the country's holders of dollar-denominated assets, by Ben Bernanke, who is fully aware what the implications of QE2 will be, we were delighted to read a brief note by none other than Bank of America's Jeffrey Rosenberg, who analyzes the costs of QE2, and comes to a politically correct conclusion which recapitulates everything said previously.

The costs of QE 2 in our view however go beyond the cost benefit analysis Chairman Bernanke highlighted in his Jackson Hole speech. There, the Chairman highlighted two key risks to additional purchases of longer-term securities. First, that they do not know with precision the effect of changes in Fed holdings of securities on financial conditions. On this point we have emphasized on numerous occasions that the main consequences of QE1 to date have been financial asset inflation. Further purchases under QE2 hence in our view would likely be limited in impact to furthering this process of asset inflation. However, the costs of even further asset inflation would likely accelerate the risks associated with what we characterize as conditions conducive to the growth of a credit bubble: low global yield levels, tight credit spreads, and an excess of demand for credit relative to supply. While those characteristics create asset inflation and form the backdrop of our near term bullish outlook on risky asset class performance, the risks of sparking future credit bubbles with their attendant systemic risk consequences grows under a scenario of QE2, in our view.

It’s the (lack of) confidence, stupid

The second risk highlighted in Jackson Hole by the Chairman concerns the confidence effects of Fed’s ability to exit accommodative policy and shrink the size of its balance sheet. While we agree with the notion that the key risk is one of confidence, the confidence impact of greater near term importance may lie less with concern over the Fed’s eventual ability to exit and more with what expanding QE2 says about the Fed’s confidence in its ability to utilize monetary policy to address deflationary risks.

Bernanke acknowledged that fiscal policy needs to be part of the policy response and that “Central bankers alone cannot solve the world’s economic problems.” In our assessment, further liquidity injection beyond some additional marginal transmission mechanism into mortgage refinancing or housing affordability would achieve little impact on the real economy. Much of the liquidity benefit of QE1 for the commercial side of the economy already remains on display in the form of very high rates of corporate refinancing activity. Additional rate declines from QE2 would add only marginally to those trends well underway. For smaller corporates or small business, QE1 did little to expand lending, though QE1 likely did prevent even further declines in lending. However, QE alone appears incapable of leading to expanding lending as the problems today shift from one of supply to one of demand. Chart 5 illustrates the stabilization of lending and how most of the Fed’s expanded balance sheet remains in the form of cash, not loans. Chart 6 shows that even as banks have eased underwriting standards, the demand for loans remains low.

Rather than liquidity – and its potential augmentation from expanding QE - the key issue behind the inability to see credit expansion and the weakness of monetary policy more broadly to affect a more positive economic outlook is confidence. And this leads to our final cost analysis on QE2. Where confidence stands as the key issue for the economy, expanding QE2 may end up doing more damage than good as the confidence loss from a Fed indicating its fears of deflation through expansion of QE2 as well as the follow on loss of confidence from the diminishing impact of further QE leads to a loss in confidence whose costs outweigh those of the benefits of further reductions in long term rates.

Perhaps at this point it is prudent to recall what the first definition of credit is:

1. Belief or confidence in the truth of something.

By that defintion, America's "credit" has ran out.

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Unilever to Study Stone-Age Diet

Bloomberg News cites the Times of London that reports Unilever is studying Stone-Age diet to come up with new product.

Well, you don't need to wait around for a big multinational food and consumer goods conglomerate to come up with a Paleo diet for you. You can start right away by going to Mark's Daily Apple, and eat and exercise like a caveman!

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War and Deficit As Far As Eyes Can See

The first three links go to the articles by Jason Diz on September 24, 2010 at Antiwar.com website:

US Combat Continues in 'Post-Combat' Iraq

...US military spokesman Brig. Gen. Jeffrey Buchanan announced today that “our rules of engagement have no changed,” meaning the claims that only “non-combat” troops remains in the nation were even more transparently false than they appeared on the surface.

Pants on fire!

Obama Vows US Troops to Stay in Afghanistan ‘Until the Job Is Done’

...In an interview today with the BBC’s Persian Television channel, President Barack Obama promised that the United States would not end the war in Afghanistan as a result of the July 2011 drawdown date.

Rather Obama insisted the war would continue “until the job is done”and went on to define the job as “to provide Afghans themselves the capacity to secure their own country.” He gave no indications of when he thought this might be.

Pants on fire! I thought the reason of going there was to grab Osama Bin Laden. No?

FBI Launching Mass Raids of Antiwar Activists’ Homes

...The FBI is confirming that this morning they began a number of “raids” against the homes of antiwar activists, claiming that they are “seeking evidence relating to activities concerning the material support of terrorism.”

Now, how do they define "material support" and "terrorism"?

Here's Paul Craig Roberts' take:

...Now we know what Homeland Security (sic) secretary Janet Napolitano meant when she said on September 10: "The old view that 'if we fight the terrorists abroad, we won't have to fight them here' is just that--the old view." The new view, Napolitano said, is "to counter violent extremism right here at home."

"Violent extremism" is one of those undefined police state terms that will mean whatever the government wants it to mean. In this morning's FBI's foray into the homes of American citizens of conscience, it means antiwar activists, whose activities are equated with "the material support of terrorism," just as conservatives equated Vietnam era anti-war protesters with giving material support to communism.

"Material support" is another of those undefined police state terms. In this context the term means that Americans who fail to believe their government's lies and instead protest its policies, are supporting their government's declared enemies and, thus, are not exercising their civil liberties but committing treason.

As this initial FBI foray is a softening up move to get the public accustomed to the idea that the real terrorists are their fellow citizens here at home, Kelly will get off this time. But next time the FBI will find emails on his computer from a "terrorist group" set up by the CIA that will incriminate him. Under the practices put in place by the Bush and Obama regimes, and approved by corrupt federal judges, protesters who have been compromised by fake terrorist groups can be declared "enemy combatants" and sent off to Egypt, Poland, or some other corrupt American puppet state--Canada perhaps--to be tortured until confession is forthcoming that antiwar protesters and, indeed, every critic of the US government, are on Osama bin Laden's payroll.

Almost every Republican and conservative and, indeed, the majority of Americans will fall for this, only to find, later, that it is subversive to complain that their Social Security was cut in the interest of the war against Iran or some other demonized entity, or that they couldn't have a Medicare operation because the wars in Central Asia and South America required the money.

And the multibillionaire Warren Buffett excoriates us for being angry at the government.

If you add up all the defense related expenditure, it adds up to slightly over $1 trillion. The federal deficit is $1.5 trillion. But "Suck it up" says Warren Buffet.

Will "gullible" Americans suck it up, for the sake of .....what?

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Warren Buffet to Taxpayers: Get Over It!

Huh?

I sincerely, truly hope and pray that the rumor of Buffet becoming the chief of that consumer financial protection bureau within the Federal Reserve was, is, and remains utterly, totally false.

Buffett to taxpayers: Get over your anger (9/24/2010 Omaha.com)

"Taxpayer anger against President Barack Obama and Congress is counterproductive because policy makers took measures including deficit spending to stimulate the economy, billionaire investor Warren Buffett told CNBC.

"“Sentiment has turned very sour in the last three or four or five months,” the chairman and CEO of Omaha-based Berkshire Hathaway Inc. said in an interview broadcast Thursday.

"“I hope we get over it pretty soon, because it’s not productive,’’ Buffett said. “We will come back regardless of how people feel about Washington, but it is not helpful to have people as unhappy as they are about what’s going on in Washington.”

"...“The truth is we’re running a federal deficit that’s 9 percent of gross domestic product,” Buffett said. “That’s stimulative as all get out. It’s more stimulative than any policy we’ve followed since World War II.”

"...Buffett said he uses a common sense standard to evaluate the economy. Buffett gets insight into the health of the economy through the performance of Berkshire’s many subsidiaries." [The whole article at the link above.]

So the federal government running deficit of over 9% of GDP is a good thing, according to Buffett. Deficit spending on useless projects and government union workers is a good thing.

And if that's his common sense, then he really, truly has nothing in common with the rest of us. (His father would be very disappointed in him.)

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Iranian President Got Applause for his UN Speech on 9/11

and the US delegation walked out.

As a financial blogger, I find it amusing that the US delegation walked out on his 9/11 theory but didn't, on his comment on capitalism being the cause of poverty.

Anyway, neoconservatives are fuming, alongside the US government whose delegation walked out. Here's one of them:

Applause for Ahmadinejad (9/23/2010 Fox News)

"He was greeted by applause when he walked into the United Nations General Assembly, and applauded again, even after questioning 9/11 and claiming that the American government may have been behind the attack.

"That’s right, applauded after questioning the motivation for the terrorist attacks, who was responsible for them, and essentially suggesting they were a U.S. plot.

"...On Tuesday, when Ahmadinejad spoke during the global summit on poverty, the American delegation remained even as he predicted the defeat of capitalism.

"But true to form, he quickly went over the line with his 9/11 remarks and that prompted the U.S. diplomats, and others, to get up and walk out.

"But as Ahmadinejad walked from the podium, he did so rewarded by applause in the august chamber of the world body." [The full article at the link above.]

So what exactly is Ahmadinejad's theories about 9/11? According to AP,

1. That a “powerful and complex terrorist group” penetrated U.S. intelligence and defenses.

2. That some segments within the U.S. government orchestrated the attack to reverse the declining American economy and its grips on the Middle East in order also to save the Zionist regime.

3. That the attack was the work of “a terrorist group but the American government supported and took advantage of the situation.

So, the Iranian president proposes that either the US intelligence was compromised, or the US government orchestrated the attack, or the US government was complicit and took advantage of the situation (and introduced the monstrosity like the Patriot Act).

Obama's former Green Czar had the same doubts... Oh wait, he had to resign. Over 80% of Americans thought (probably still think) that the government was hiding something. Oh wait, the non-ruling class is irrelevant. And so-called Tea Partiers of Sara Palin's and her cohort's variety are all for bombing Iran anyway.

I'm sure either the CIA or the State Department recorded which delegation applauded after the speech (all of them?) and will take appropriate retaliatory measures.

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Terrorist Attacks May Be Imminent, Warn Officials

Just in time. October surprise, anyone?

Here's from Washington Post on September 22:

"Al-Qaeda and its allies are likely to attempt small-scale, less sophisticated terrorist attacks in the United States, senior Obama administration officials said Wednesday, noting that it's extremely difficult to detect such threats in advance.

""Unlike large-scale, coordinated, catastrophic attacks, executing smaller-scale attacks requires less planning and fewer pre-operational steps," said Homeland Security Secretary Janet Napolitano, testifying before the Senate Homeland Security and Governmental Affairs Committee. "Accordingly, there are fewer opportunities to detect such an attack before it occurs." [Emphasis is mine. The article continues.]

Ummm, excuse me Ms. Napolitano but the US government claimed it couldn't detect a large-scale, coordinated, catastrophic attack which was 9/11. "Who could have known?" said Condoleezza Rice.

But wait, it may not be Al-Qaeda but domestic terrorists!

ABC News scares us by saying terror threats highest since 9/11, and the terrorists will likely be Americans or Westerners:

"The nation's top counterterrorism officials were blunt. The threat from within---of Americans willing to commit terrorist acts--- is growing. FBI Director Robert S. Mueller III told a congressional hearing today that a spike in recent terrorism cases is direct evidence of the evolving threat.

""Groups affiliated with al Qaeda are now actively targeting the United States and looking to use Americans or Westerners who are able to remain undetected by heightened security measures," Mueller said. "It appears domestic extremism and radicalization appears to have become more pronounced based on the number of disruptions and incidents."" [Emphasis is mine. The article continues.]

Oh, you mean, like those guys that the FBI practically manufactured so that they could arrest them for doing what they coerced them to do? (The latest example: Wrigley Field "bomber")

Or do you mean those "racist" health care "reform" protesters of last summer, or crazy people demanding the audit of the Federal Reserve, or people who donated $2 million to the GOP candidate in Delaware in two days? Or anyone who oppose the president's policies?

(Oh wait, are these warnings being coordinated with the release of Bob Woodward's book?)

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In Heaven, as on Earth, and the Financial Markets (UPDATED)

Today (September 22) is the autumn equinox. Early tomorrow morning, we will have the full moon, the Harvest Moon. We also have some unusual planets accompanying the full moon - Jupiter and Uranus.

These should be enough to cause some unusual events on earth, shouldn't they?

As if as a follow-up the Federal Reserve New York Bank will be conducting another POMO (permanent open market operation) on Friday, buying up Treasuries from the likes of PIMCO which clearly front-runs the Fed as a matter of course.

I will let you know if I figure out this astrological portent.

(UPDATE)

From Wikipedia:

Jupiter: Astrologically, Jupiter is associated with the principles of growth, expansion, prosperity, and good fortune.

Uranus: Astrologically modern interpretations associate Uranus with the principles of genius, individuality, new and unconventional ideas, discoveries, electricity, inventions, and the beginnings of the industrial revolution.

Some august planets to accompany Moon...

Even the NASA weighs in, calling this "Super Harvest Moon", a must-watch celestial event!!

Usually, the Harvest Moon arrives a few days to weeks before or after the beginning of fall. It's close, but not a perfect match. The Harvest Moon of 2010, however, reaches maximum illumination a mere six hours after the equinox. This has led some astronomers to call it the "Harvestest Moon" or a "Super Harvest Moon." There hasn't been a comparable coincidence since Sept 23, 1991, when the difference was about 10 hours, and it won't happen again until the year 2029.

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Quick Read of FOMC Statement - August vs September

from Zero Hedge. I'm reading it right now myself. It looks like Benny and the Inkjets have done what James Bullard, St. Louis Fed President, was pushing: guide the inflation expectation ever so slightly upward with the sheer power of words. More later.

Aug Sept Comparison

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84-Year-Old Suffers Broken Neck at the Hand of 26-Year-Old Police Officer

Such an incident arising from what I'd call "police bubble" has become so common but it never ceases to infuriate me.

A drunk and frail (he uses a walker) 84-year-old man was thrown on the asphalt pavement with such a force by a young police officer in Orlando, Florida that his neck broke. Eyewitnesses say the man didn't pose any threat at all. For what? For having parked his car in a wrong spot.

Will Grigg at Lewrockwell.com blog said it all for me. Thank you. Here's the entire blog post, and emphasis is mine.

Orlando Police Prepare to Charge Victim of Police Assault
(William Grigg, 9/20/2010 LRC Blog)

Travis Lamont, the costumed government enforcer who assaulted Daniel Daley outside an Orlando bar on the morning of September 18, is 26 years old. His victim is 84 years old and uses a walker. Lamont, as a member of the state’s enforcement caste, was armed. Daley was not.

Eyewitnesses to the assault insist that the elderly man never harmed or threatened Lamont in any way. His “offense” was to grab the younger male’s shoulders to balance himself when he stumbled. This “assault” supposedly justified a violent attack in which Lamont body-slammed the elderly man head-first into the pavement.

In his report, Lamont claims that Daley “cocked his right hand back as if to throw a punch”; the officer “feared a physical attack was imminent,” to he “directed him [Daley] to the ground with an arm bar technique…. In the process of directing the subject to the ground, the right side/top forehead [of the victim] struck the pavement.” Apparently, Lamont “directed” the old man so forcefully that witnesses on the scene feared that they had just witnessed an act of homicide.

Eyewitness Sean Hill recalls the sickening noise made when Daley’s head collided with the asphalt: “Like a watermelon — pop!”

Daley remains in intensive care following emergency surgery to repair his broken neck. Assuming that he recovers from his ordeal, the police intend to prosecute him for assaulting the tax-devouring goon who attacked him.

“He grabbed the officer, pulled back his arm and said, `I’m not going anywhere until I knock out this cop,’” insists Orlando Police spokeswoman Sgt. Barbara Jones, who wasn’t there. Those who were there insist that Daley never uttered anything that could be construed as a threat — assuming, of course, that a decrepit octogenarian could possibly pose a threat to a valiant representative of the Regime’s domestic army.

Sgt. Jones, who like her professional peers has been taught to regard “officer safety” as the highest priority, asserts that Daley was a threat to the two-year veteran of the Orlando P.D.

“Everybody is focusing on the age,” she told local television station WFTV. “I am focusing on the action of this person. People, 84, can kill officers, too, can cold-cock my officer in the face, knock him out and now you’ve got an officer laying [sic] down on the ground with a gun, and everything is completely out of control.”

According to eyewitness Tim Scott, Lamont was all but palsied with terror over the “threat” posed by an 84-year-old man who could barely stand upright.

“I told him [Lamont] `Dude, you’re tougher than that,’” after the officer had assaulted Daley. “He said, `I didn’t know what he was going to do.’”

Any officer who can be laid out by a hobbled 84-year-old man deserves to get his tax-fattened ass handed to him. Any nominal male who can list himself as a “victim” after beating up a crippled 84-year-old — as Lamont did in his official report charging Daley with “battery on a law enforcement officer” — doesn’t deserve to be called a man.

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Tuesday FOMC: Will They, or Won't They?

All eyes and ears on the Federal Open Market Committee (FOMC) meeting tomorrow. What will Bernanke and the gang (one smartass poster at Yahoo called them Bennie and the Inkjets, a spoof on this famous song of course) say they will do?

The consensus only a few weeks ago was that Benny and the Inkjets would likely announce the QE2 (full version in trillion$) after the September 21 meeting. Then last week the new consensus emerged that the Fed wouldn't announce any new scheme on the September meeting but would wait until the November meeting, after the election.

So what's it going to be? It will be entertaining to the dwindling number of stock market participants. Here's Zero Hedge's take, citing Goldman Sachs. It would be surprising if Ben dared deviate from the scenario...

Welcome To Chez Shalom: Here Is The Menu For Tomorrow's FOMC Lunch (Tyler Durden, 9/20/2010 Zero Hedge)

"Concerned what will happen tomorrow at 2:15pm? You should be: after all the Fed is now in charge of everything, and this (in)decision will impact your life much more than who the fattest person on this season's Biggest Loser is. Here is this year's most prescient economist, Jan Hatzius, once again doing the best summary on the four possible outcomes of tomorrow's FOMC decision. In a nutshell these are: i) No substantive change in the policy statement, ii) Recognition of a weaker economic outlook, but without an explicit signal that renewed unconventional easing is under consideration, iii) An explicit signal that renewed easing is under consideration, and iv) An announcement of renewed easing. Our personal choice is entree #2, although this being Chez Shalom, no matter what, it will always end being an omakase type of affair - fiat prix tres unfixe. (Oddly enough, Chez Shalom still does not have a Zagat's entry. As everyone in America eats (or defecates) there every single day, it is about time our more industrious readers provided their feedback and rating).

"From Goldman's Hatzius and Tilon

"FOMC Preview: Several Options on the Menu

• The key question at the September 21 FOMC meeting is how far the committee will lean in the direction of renewed policy easing. Will it formally acknowledge a weaker growth outlook, and if it so will it go further by hinting at—or actually implementing—additional easing measures?
• In our view, the most likely outcome is a more dovish statement that explicitly reflects a dimmer economic growth outlook and nods in the direction of further easing via changes to its forward-looking guidance on policy. Though we ultimately expect the Fed to purchase at least another $1 trillion in Treasury securities, we think it probably will take more time for the FOMC to reach agreement on such a major step.

"The key question at the September 21 FOMC meeting is how far the committee will lean in the direction of renewed policy easing. The tone of the statement will depend principally on how the FOMC describes the economic outlook (the growth outlook in particular), and whether it signals the possibility of (or actually announces) additional balance sheet expansion. The choices along these dimensions yield four basic choices for the statement, ranging from most “hawkish” to the most “dovish”:

1. No substantive change in the policy statement. One option is essentially to repeat the August statement, with only minor changes in wording. The justification would be that the data since the last FOMC meeting on August 10 have been roughly in line with expectations. As shown in Exhibit 1 on page 2 of last Friday’s US Economics Analyst, our US-MAP scoring system of economic indicators–which is largely based on how the economic indicators compare with the Bloomberg consensus as of just before the release—has averaged around zero over this period. Chairman Bernanke suggested in his Jackson Hole speech that further easing could be triggered by an increased threat of deflation and/or a significant weakening in the economic outlook. One might therefore argue that the committee will take the view that these risks have not increased significantly, and that it is therefore inappropriate to change the statement. Indeed, the description of the economy in the August statement—indicating that the recovery “has slowed,” “[h]ousehold spending is increasing gradually,” and “employers remain reluctant to add to payrolls”—remains accurate. This would be the most “hawkish” of the options, and would imply that the Federal Open Market Committee, or at least a significant faction of it, requires more proof to warrant additional quantitative easing (QE).

2. Recognition of a weaker economic outlook, but without an explicit signal that renewed unconventional easing is under consideration. A somewhat more “dovish” alternative would be for the committee to indicate that the economic outlook has in fact deteriorated since the last meeting. Although the monthly indicators have on average been in line with expectations, those expectations were quite low, and many economists have cut their longer-term growth and employment forecasts over this period. For example, the median forecast for real GDP growth in the second half of 2010 fell from 2.6% (annualized) in the Blue Chip Economic Indicators survey released on August 10 to 2.1% in the survey released on September 10. It is likely that both the committee and the Fed staff have revised down their forecasts as well, perhaps by a similar amount. If the committee indicates a downward revision of its forecast, this may be viewed as an implicit signal that additional easing has become more likely. The FOMC could acknowledge a weaker forecast via one or more changes to the first paragraph of its statement, perhaps indicating that recent growth is below trend or that resource utilization is not rising materially.

3. An explicit signal that renewed easing is under consideration. This could take the form of an added phrase or sentence in the forward-looking policy discussion. An example would be the following modification of the “extended period” sentence: “The Committee…continues to anticipate that economic conditions…are likely to warrant exceptionally low levels of the federal funds rate for an extended period and potentially a further expansion of the Federal Reserve’s balance sheet.” Another option would be a bald statement that the committee “is considering” additional unconventional easing.

4. An announcement of renewed easing. Finally, of course, the committee could simply announce that it will ease monetary policy anew. In this case, we would expect an asset purchase program focused on long-term Treasury securities that would ultimately total at least $1 trillion in size, though whether the committee is prepared to state this amount up front or begin with a smaller figure and leave open the possibility of further moves remains an open question.

"How likely is each of these options? We cannot rule any of them out, but we suspect the discussion will focus around options 2 and 3, with a majority of the Committee willing to acknowledge a slightly softer growth outlook but more vigorous debate about the desirability of signaling a possible easing step. In the end, we think the FOMC will give at least a nod in the direction of further easing via changes to its forward-looking guidance on policy but stop short of actually announcing the implementation of a new program."

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CNBC Sponsors Town Hall Meeting for Obama

Despite the recent unhappiness of Mr. Immelt, CEO of Government Electric aka General Electric toward the administration he serves as economic advisor, his media subsidiary CNBC dutifully set up a town hall meeting for President Obama this morning so that the Prez can promote himself as the epitome of the "American Dream".

Oh that's rich.

Obama Town Hall: Defending His Record on Economy, Jobs
(9/20/2010 CNBC)

"President Obama spoke Monday to a cross-section of Main Street, Wall Street and Washington gathered at a CNBC-sponsored town hall, with the economy at a crossroads and the nation's precarious political structure hanging in the balance.

"Sharing an hour with a largely friendly crowd that gave him hoots of approval and a standing ovation at the end of the "Investing in America" forum, Obama defended his administration's record toward business while simultaneously deriding his critics as being politically motivated and saying he would work "setting a better tone" in Washington.

""I know how frustrated people. I know in some cases how desperate people are," he said, later adding, "I am confident that if we stay on course that gets us back to old-fashioned values of hard work and responsiblity and looking out for one another, that America will thrive."

"The president spoke just as the National Bureau of Economic Research proclaimed an end to the recession. But Obama acknowledged that times are still tough.

""Obviously for the millions of people still out of work, people who have seen their home values decline, people struggling to pay their home bills every day, it's still very real for them," Obama said.

"The audience also includes college students and union leaders, small business owners and retirees.

"...."My life, I'm testimony to the American Dream. Everything I've been doing since I came into office is to make sure that American dream continues for future generations," Obama said. "The challenge now is I'm thinking about the next generation and there are a lot of people out there thinking about the next election."" [The article continues.]

A lot of people thinking about the next election? Like yourself, Mr. President?

He claims he's "testimony to the American Dream" which he wants to make sure continues for future generations. So the American Dream these days is to receive endless subsidies and preferred treatments from the government based on anything from race, ethnicity, gender, union membership, income level, what have you, to breeze through top Ivy-league schools without worrying about paying back student loans for decades, and not to work a single day in the real world.

OK, I'm all for it. Sounds good.

How are you going to pay for that, Mr. President? Out of your own multi-million dollar pocket?

The American Dream as I've understood is more like him - "Up by the bootstraps". I guess I'm too old-fashioned.

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The Ruling Class on the Run

Fun to watch.

Here's Lew Rockwell's take on the hysterical Jacob Weisberg.

Here's Pat Buchanan's take on Karl Rove and GOP establishment.

And here's the thin-skinned Barack Obama's plan for the Tea Party (as if there is a single monolithic party...) to help Democratic candidates. How? By painting them as "extremist". (From Obama's position, anyone else would be "right" and "extremist".)

But it does get Larry Kudlow giddy with renewed hope that this is a revolution that will bring back American entrepreneurship and it is bullish for the economy and the stock market.

Have you read the paper by Angelo Codevilla yet? It's for the rest of us, unless you are a ruling-class wannabe.

And if you want "radical" and "extreme", here's Lew Rockwell's plan for total makeover of the US in 30 days.

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Dem's Line of Attack on Boehner May Well Backfire

Democrats are getting frantic by the day as the November election approaches.

From the President on down, the Democratic political and media establishments are getting in gear attacking the GOP Minority Leader John Boehner. They insinuate Boehner gets his tan in a tanning salon, they say he plays golf a lot (uh huh, Mr. President), he spend a lot on vacation (uh huh, Mrs. Obama), that he is a rich elite in the pocket of the lobbyists (uh huh, Mr. President).

Well, they seem to have picked a wrong guy.

John Boehner: the second of 12 kids from Ohio who is Barack Obama's elitist target (9/17/2010 Telegraph UK)

"The White House is attempting to cling on to Democratic control of Washington by portraying an Ohio congressman who grew up in near poverty as an elitist country club Republican controlled by wealthy lobbyists.

"President Barack Obama is doing his best to turn Representative John Boehner, the House minority leader, into Public Enemy Number One. If Republicans win back the House of Representatives in November, as polls indicate, he will replace Nancy Pelosi as Speaker of the House.

"In a recent speech, Mr Obama mentioned Mr Boehner by name nine times. A fundraising email sent out from BarackObama.com this week stated that corporate interests and lobbyists “have put all their chips on one man: Congressman John Boehner”.

"Democrats have started a BeatBoehner.com website that claims he spent $1 million on "luxury hotels, exclusive golf resorts and gourmet dining for himself and his fat-cat contributors". On the I-75 freeway outside Cincinnati, a huge poster showing a tanned Mr Boehner playing golf accuses him of teeing off 119 times in a year.

"Yet Mr Boehner's life story is the type of classic up-by-the-bootstraps tale of the American Dream that can put a tear in a voter's eye. As his story becomes better known, the Democrats could even be drawing favourable attention upon him. Right now, most Americans have never heard of Mr Boehner, and fewer still can pronounce his name, which rhymes with Rayner. The alleged elitist country club Republican is an Ohio Congressman who grew up in near poverty.

"... Mr Boehner, 61, is the second of 12 who grew up in a German-Irish family in Reading, Ohio, just outside Cincinnati. All but two of them still live within a few miles of each other. Two are unemployed and most of the others have blue-collar jobs.

"The future Congressman started work as a janitor and took seven years to get his degree – the first in the family to do so – because he had several jobs to pay his way. He joined a plastics and packaging company, rising to president before entering local politics by being elected to the town board.

"The family house on Hill Street initially had two bedrooms with Mr Boehner and three brothers sleeping in one, their sister in another and their parents on a pull-out bed in the living room. Their father Earl later built a three-bedroom extension.

"...Mr Boehner's deep tan is often mocked by Democrats. At a dinner last year, Mr Obama said: "He is a person of colour, although not a colour that appears in the natural world."

"Like Mr Obama, Mr Boehner is a keen golfer and a smoker. His sister sniggered at the suggestion her brother might ever have been on a tanning bed. The "dark hair and olive skin", she said, came from her mother.

"Bob Boehner, 62, the oldest of the 12, who sells real estate and is "looking for work", said: "We were conservative because we had to be. There wasn't the money to spend frivolously on things. We grew our own vegetables up on the hill. We learned early on that if you wanted something you had to go out and work for it." [The article continues.]

"Up by the bootstraps" is exactly the concept that Barack Obama as the Democratic presidential nominee openly scoffed at in the nomination acceptance speech.

I also happen to remember President Obama trying to portray his days in Indonesia as "poor", a blatant misrepresentation as his stepfather was a rich man providing well for his family and enrolling Obama in an upscale private school.

And now he is mocking and attacking a self-made man who rose from near poverty by his own hard work in the real world as an elite with a fake tan?

What a childish line of attack that is. Kindergarten level. Someone at the White House didn't do his/her homework very well.

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Elizabeth Warren to Be Obama's New Czar

That's the last person whom I expected to join Obama's cadre of czars, but there she is, quite happily, it sounds like.

Elizabeth Warren gets the job of shaping the Consumer Financial Protection Bureau she first proposed (9/17/2010 Cleveland.com)

But her capacity is not that of the bureau director, which requires the formal nomination and the Senate confirmation. Instead, she has become one of Obama's czars:

"the White House is naming Warren an assistant to the President and special advisor to Treasury Secretary Timothy Geithner"

Assistant to the Prez? Special advisor to Timmy?

The Obama White House didn't even try to formally nominate her or make a recess appointment. Instead, Obama has named her as his assistant, personally responsible to him only, to shape this agency which is supposed to protect consumer (hahahahaha).

I am not sure if this nebulous, sprawling financial reform law (Dodd-Frank bill) even allows the White House to shape the agency like this. (By the way, this agency is to be housed within the Federal Reserve, a private entity which is now known for wrecking havoc by causing boom and bust throughout its existence. Isn't that comforting.)

Ms. Warren, welcome to my list of Obama Czars. I am disappointed, but not surprised. After all, a Harvard Law professor who believes in the power and authority of the government to "do the right thing" is expected to happily work with the government. When this agency fails to "protect", she and her cohorts have this timeless excuse to make: "Oh we meant well.... Who could have known?"

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City Controller of Los Angeles: $111 Million Stimulus Saved 55 Jobs

Wendy Greuel, City Controller of Los Angeles writes for Huffington Post:

Los Angeles Shows $111 Million in ARRA Grants Has Only Created 55 Jobs (Wendy Greuel, 9/16/2010 Huffington Post)

"I released two very disappointing audits today of how the City of Los Angeles has used American Recovery and Reinvestment Act (ARRA) funds. The audits looked at the how the two departments that have received the largest amount of ARRA funding so far - the Department of Transportation (LADOT) and the Department of Public Works (DPW) - have used those funds and how many jobs were created. Los Angeles has become the largest City in America to conduct an audit of how ARRA funds have been expended.

"DPW has received $70.65 million and created or retained 45.46 jobs, though they are expected to create 238 jobs overall (the fraction of a job created or retained correlates to the number of actual hours works). LADOT has been awarded $40.8 million and created or retained 9 jobs, though they are expected to create 26 jobs overall. Overall, the Departments have received $111 million in federal stimulus funds out of the $594 million the City has been awarded so far and created or retained 54.46 jobs.

"I'm disappointed that we've only created or retained 55 jobs after receiving $111 million in ARRA funds. With our local unemployment rate over 12% we need to do a better job cutting the red tape and putting Angelenos back to work." [Emphasis is mine. The article continues.]

Even at a liberal/progressive bastion like Huffington Post, the readers' comment section is getting sharper and better than the main article. Here are some of the posts:

See, this just goes to prove that Paul Krugman is right -- if the stimulus had been several trillion dollars, we could easily have created a couple hundred jobs in Los Angeles. Maybe even 250! And then, man, we're on the road to recovery.

Only government can give you value for money like that.

I am not sure what is more astounding - that $111,000,000 only created 55 jobs or that spending $420,000 per job to get the 264 anticipated would have been considered a success.

There's a reason why people go into public service. It's because there's no way in hell they would survive in private enterprise.

they would probably be better off if they just paid 2000+ people 50k for a year to do nothing.

What Ms. Greuel would never admit but is crystal clear to everyone else outside any government: government ISN'T the answer. It never was, it never will be.

(h/t jdgreger)

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Bank of Japan Intervention Sends Yen Back to Last Friday's Level

well, ever slightly above but not by much.

Still, Nikkei celebrates by reversing almost 300 points.

According to Nikkei Shinbun newspaper, the intervention was ordered by the Finance Minister at 10:30 AM Japan Standard Time, and Bank of Japan carried out the operation of dumping yen at 10:35 AM.

Wanna bet how long will this last?

Unlike the privately-owned Federal Reserve, Bank of Japan is 55% owned by the government. Unlike the Fed, the shares of Bank of Japan is traded on a stock exchange (Jasdaq Securities Exchange).

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All That Glitters - Gold Breaks Out

from Kitco.com...



In the meantime, algo bots that have reduced the US stock market to a joke seem to be moving into the commodities market. For more, read "CME Says Test Orders Were `Inadvertently' Made in Energy, Metals Markets" (9/14/2010 Bloomberg)

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Japan's DPJ to Elect Next Leader

in about hour and a half (2:00 PM Japan Time).

Naoto Kan (current Prime Minister after Hatoyama resigned) vs Ichiro Ozawa (the king maker). For stronger leadership, Ozawa would be a better choice for Japan. Probably more realistic than Kan or Hatoyama, who tried his best to ape Obama policies.

For forex traders and the US equity market traders, Ozawa would be better, as he is very likely to intervene in the currency market to (try to) stop the rapid appreciation of yen.

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