I caught up on the claims. I doubled up for three days this week and finished what I had left. But then the local accounting department got involved.
They told me that when I have a claim of short-shipment (right product, but fewer received than billed), I should use the RMA (a “return,” but in this Click Here to continue reading.

The Fed’s actions over that last week need to be mocked in the worst way. Jeff Matthews steps up to the plate and does his best. But we feel he is too kind.

So you all heard about this right? If you have’t you have been living under a rock. But seeing as we cater to all sorts (including those who live under rocks) I will give you the back story. From the Wall Street Journal…..

In one of the banking world’s most unsettling recent disclosures, France’s Société Générale SA said Mr. Kerviel had cost the bank €4.9 billion, equal to $7.2 billion, by making huge unauthorized trades that he hid for months by hacking into computers. The combined trading positions he built up over recent months, say people close to the situation, totaled some €50 billion, or $73 billion.

Okay, here is the joke (from Market Watch)….

The Federal Reserve was not aware that Societe Generale was unwinding trades in Europe on Monday that had been amassed by a rogue trader at the French bank, a Fed source said Thursday.

The bank’s scramble to get out of those trades is now presumed to be a factor behind the panic sell-offs that roiled overseas markets on Monday. And those sharp declines in Europe and Asia were cited by Fed watchers as a central concern that moved the Fed to engineer an unprecedented emergency rate cut only one week before their formal meeting.

In case this needs to be spelled out for you here is Felix Salmon to explain how one little trader at one little bank struck terror into the heart of the Fed……

Firstly, they decided to liquidate as quickly as possible, dumping the overwhelming proportion of their huge long position in one day. And secondly, the day they picked was Martin Luther King Day: a public holiday in the US, which meant that Chicago was closed.

As a result, futures traders across Europe had to scramble to find a huge amount of liquidity in a very short time, and prices predictably plunged.

As Macro Man puts it….

Macro Man also assumes that he’s not alone in scratching his head and thinking “what now?” Next week’s Fed meeting is set up to be an extraordinarily interesting one. It has emerged that despite the Banque de France knowing about SocGen’s travails over the weekend, the Fed had no clue when they hit the panic button on Tuesday.

Grep Ip seems to suggest that the SocGen revelation won’t impact the Fed’s decision next week, but come on! If, before the equity market meltdown, the Fed was planning on doing 50…..why should they cut any more next week, thereby at least doubling the amount of their originally intended easing?

Yet to the market, it’s not a question of whether the Fed eases, but by how much. The OIS market is currently pricing in 40 bps of easing. Of course, if the Fed doesn’t ease, markets could then puke, delivering the kind of price action that prompted the emergency cut in the first place. The problem with allowing the market to lead you, Mr. Bernanke, is that it inevitably leads you into an uncomfortable corner.

What seems evident is that volatility is set to remain pretty high. If the Fed doesn’t cut next week, equities should tank and bonds soar. If they do cut….well, let’s just say that the dollar will be (French) toast.

Lots of markets are crashing to day. From Marco Man….

Later in life, Mr. Eliot repudiated the ending to “The Hollow Men”, quoted above. One would have to presume that if he were alive today and a practitioner of financial poetry, he would be equally averse to claiming that the world would end with a whimper.

Or so we’d have to judge by price action today, wherein all things risky are tracing out an Icarus-like descent, and the only thing preventing a Black Monday-style crash in the US today is that the market is closed. This month has already been a testing one, and on the basis of today’s gruesome start that trend appears set to continue.

He has a graph at his site that demonstrates what he means by “Icarus-like descent.” Naked Capitalism has charts showing the drop of Japan’s stock market.

From SPIEGEL……

A bad day for German banking: WestLB, the latest victim of the subprime credit crisis, has reported a 2007 loss of €1 billion. Meanwhile, stock prices are tanking amid fears of global recession. Banking stocks are among the worst hit.

From The Economist…..

IT APPEARS to be an old-fashioned case of risk aversion. Stockmarkets are plunging (the FTSE 100 was down more than 300 points, or 5% just after noon in London, on Monday January 21st), commodity prices are dropping and investors are flocking to the safety of government bonds and currencies like the Swiss franc and yen. Speculative bonds now yield seven percentage points more than US Treasuries, the highest spread since April 2003.

The day after I wrote my last post–that is, the Monday after I clocked a fourteen hour day to get this documentation for our new software done on schedule–they canceled the project. As suddenly as we began this new software implementation we ended it. Evidently when someone actually looked around at the different software in Click Here to continue reading.

There is all this talk about stimulus plans and cutting interest rates. But there is only one thing that is keeping America from going down the tubes. And it is this….

China’s government added $430b to its foreign exchange reserves.

Russia’s government added $150b to its foreign exchange reserves.

China’s state banks likely – this is the only point here where there is some real doubt – added around $150b to their foreign portfolio, or would have, had China not made it harder to borrow from abroad and thus forced them to pay down some of their external debt. The state banks’ dollar purchases reduced the central bank’s need to intervene in the market (apparently the exchange rate risk remains with the government). The central bank basically told the state banks to hold more of their required reserves in dollars.

Brazil’s government added a bit over $90b to its reserves. Brazil’s Treasury holdings are up close to $70b for through November, in another kind of reverse bailout.

India’s government added a bit under $90b to its reserves, almost none of which seems to have been invested in US Treasuries.

The China Investment Corporation likely had about $17b to invest abroad – as the majority of the funds it raised in 2007 were used to buy the central banks’ stake in the state banks and to recapitalize China Development Bank. It will get something like $105b early in 2008. Maybe $45b to $50b of that is already committed to the recapitalize the domestic banking system, leaving up to $60b more to invest abroad. But the CIC is still the smallest official investor among the BRICs.

Sum it up and the BRICs added just a bit under $800b ($760b) to their formal foreign exchange reserves (the total would top $800b if I counted China, Russia and India’s valuation gains) even without counting the Chinese banks. Counting the state banks and the CIC, the total is more like $900b. I was conservative back in July.

Goldman started dreaming of the BRICs well before energy traders started dreaming about $100 a barrel oil. The Gulf can hardly be left out of the discussion today.

The Saudi Monetary Agency’s foreign assets likely increased by $75b in 2007 — they were up over $60b through November (Table 8a, in Saudi riyal). Saudi pension funds added another $5b.

The Gulf’s other central banks likely added close to $50b to their reserves – though we are still waiting for data from the Emirates for the second half of the year.

The big existing Gulf investment funds – the Abu Dhabi Investment Authority (which, incidentally is likely to be bit smaller than the $875b to $1 trillion total that is commonly cited; see Mohsin Khan’s statements in the FT), the Kuwait Investment Authority, the Qatar Investment Authority and the confusing jumble of Dubai investment funds (some belonging to Dubai, run by Sheik Mohamed, and some belong to Sheik Mohamed, ruler of Dubai) – likely added around $100b to their assets. The $100b total doesn’t count any additional funds that they borrowed to finance some of their more aggressive strategies, or the capital gains on their existing holdings. $100b is what the funds got from their countries surplus oil revenues and the interest on their existing holdings.

Gulf central banks and sovereign funds collectively added about $225b to their foreign assets, and maybe $150b to their dollar assets. The rapid growth in central bank reserves (still mostly in dollars) likely offset the diversification done by various wealth funds.*

People are having a hard time saying the truth. MBIA is rated AAA. MBIA is a company that insures bonds against default. This allows institutions who do not have a AAA rating to have their bonds rated AAA so that retirement funds and insurance companies can buy them.

Everyone knows that MBIA is no longer close to being a AAA level company. If MBIA loses its AAA rating, all the bonds that it insures lose their AAA rating. So saying that everyone knows that MBIA is not even close to being a AAA company is to say that their are a lot of bonds out there that don’t deserve an AAA rating.

With that in mind, watch the clip below (h/t Calculated Risk)

This from the International Herald Tribune…..

Next year in California, state regulators are likely to have the emergency power to control individual thermostats, sending temperatures up or down through a radio-controlled device that will be required in new or substantially modified houses and buildings to manage electricity shortages.

The proposed rules are contained in a document circulated by the California Energy Commission, which for more than three decades has set state energy efficiency standards for home appliances, like water heaters, air conditioners and refrigerators.

The changes would allow utilities to adjust customers’ preset temperatures when the price of electricity is soaring. Customers could override the utilities’ suggested temperatures. But in emergencies, the utilities could override customers’ wishes.

Final approval is expected next month.

I wish I lived in a country where Wall Street did not set the interest rates. But sadly that does not seem to be the case. The best predictor for what the Fed will do seems to be what the markets want. This from Calculated Risk….

It’s now a tossup, based on market expectations, between a 50 bps rate cut and a 75 bps rate cut, on January 30th.

Just a couple of days ago, I heard a couple of analysts say that the Fed wouldn’t cut 75 bps because that would give the appearance that the Fed is panicking.

Wall Street is apparently saying “Bring on the panic”.