Federal Reserve has surpassed China as the leading holder of US Treasury securities - By June will hold $1,600bn -

Federal Reserve has surpassed China as the leading holder of US Treasury securities - By June will hold $1,600bn - 






The Federal Reserve has surpassed China as the leading holder of US Treasury securities even though it has yet to reach the halfway mark in its latest round of quantitative easing, according to official figures.


Based on weekly data released on Thursday, the New York Fed’s holdings of Treasuries in its System Open Market Account, known as Soma, total $1,108bn, made up of bills, notes, bonds and Treasury Inflation Protected Securities, or Tips.


According to the most recent US Treasury data on foreign holders of US government paper, China holds $896bn and Japan owns $877bn.


“By June [the Fed] will have accumulated some $1,600bn of Treasury securities, likely to be in the vicinity of China and Japan’s combined holdings,” said Richard Gilhooly, a strategist at TD Securities. “The New York Fed surpassed China in the past month as the largest holder of US Treasury securities,” he noted.


The Fed is buying Treasury debt under two programmes. The largest is QE2, which began in November and is scheduled to involve $600bn of purchases by June.


It is also buying $30bn of Treasuries a month as it reinvests principal payments from its large holdings of mortgage debt and debt issued by government housing agencies – a programme dubbed QE lite.


By the end of June, the Fed plans to buy $800bn in Treasury debt under both programmes. Since November, the Fed has purchased $284bn of Treasuries.


The Fed has devoted 67 per cent of its QE2 purchases to Treasuries with a maturity of four-and-a-half to 10 years. That has helped pull back yields in that part of the yield curve from their highs of December.


By contrast, just 5 per cent of the Fed’s buying has been for Treasury debt longer than 17 years. Last Friday, the yield on 30-year bonds briefly rose to its highest level since last April.


“The end of QE2 will be a big test as rates are likely to rise once the Fed stops buying large amounts of Treasuries,” said David Ader, a strategist at CRT Capital. “We don’t know if that means a rise of 20, 30 or even 50 basis points for key yields.”


In total, foreign central banks hold $2,604bn of Treasuries, according to the Fed. After rising from $2,250bn at the end of last June, foreign central banks have stayed at about $2,600bn since mid-November, when the Fed began QE2. This indicates the Fed has stepped up as other central banks have scaled back their Treasuries purchases.


Before the financial crisis, the Fed held $775bn of Treasuries in Soma. That was reduced by $300bn during the first half of 2008, when the Fed sold Treasuries and focused on supporting the financial system. The first QE program, which began in 2009, saw the Fed buy $300bn of Treasuries.


Read more - http://www.ft.com/cms/s/0/120372fc-2e48-11e0-8733-00144feabdc0.html#axzz1Coiu97oq

US Mint Sells Absolute Record 6.4 Million Ounces Of Silver In January, 50% More Than Previous Highest Month -

US Mint Sells Absolute Record 6.4 Million Ounces Of Silver In January, 50% More Than Previous Highest Month -



As the topic of US Mint silver sales is not new to our readers, after we first brought attention to the record January sales by the Mint, we will not dwell much on it, suffice to say that the final January tally is in. And at 6,472,000 ounces, this is nearly 50% higher than any prior month in the Mint's 26 years of published sales history. This has occurred, despite supposed profit taking in the paper silver market in January. And just today, another 50k, were sold. It seems that physical buyers continue to enjoy the dip in paper silver that is providing them with an attractive entry point.


Read more - http://www.zerohedge.com/article/us-mint-sells-absolute-record-64-million-ounces-silver-january-50-more-previous-highest-mont

Microsoft's Bing Caught Copying Google Search Results - AND Bing has all but admitted the claim -

Microsoft's Bing Caught Copying Google Search Results - AND Bing has all but admitted the claim - 








A sting operation by Google reveals that Microsoft has been copying results from Google for its Bing search engine.


The search giant alleges that Microsoft has been using its Internet Explorer web browser and the Bing Search bar to harvest information on Google users, according to a lengthy report by Danny Sullivan at Search Engine Land. Amit Singhal, a Google Fellow who oversees the search engine’s ranking algorithm, was crystal clear about the findings. 


“Our testing has concluded that Bing is copying Google web search results,” Singhal told FoxNews.com.


It’s a serious allegation from the world’s most popular search engine, a company that takes pride in the quality of its product.


"I've spent my career in pursuit of a good search engine," Singhal told Search Engine Land. "I've got no problem with a competitor developing an innovative algorithm. But copying is not innovation, in my book."


Bing, although denying that they outright copy results, and has all but admitted the claim. Director of Bing Stefan Weitz told FoxNews.com that the strategy is one of many that Microsoft uses to provide the best search results.
“We use multiple signals and approaches in ranking search results,” Weitz said. “The overarching goal is to do a better job determining the intent of the search so we can provide the most relevant answer to a given query.”
Harry Shum, corporate vice president at Bing, spoke at a company event Tuesday, furthering these sentiments. “It’s not like we actually copy anything,” Shum said at the event. He claimed that competitors such as Google employ similar tactics. “We use the customer data to help improve the search experience.”
Google is understandably vexed. The company grew wary of potential copycats in October 2010 when engineers noticed that bizarre misspellings were returning the same set of results on both Google and Bing searches.
Unsure, but suspicious, Google set up a trap. From December 17 to December 31, engineers inserted a “honeypot” result as the top result for specific search queries -- including, hiybbprqag, mbzrxpgiys, and indoswiftjobinproduction -- and waited to see if the same results would appear on Bing. Lo and behold, the identical results popped up.
"It's cheating to me because we work incredibly hard and have done so for years -- but they just get there based on our hard work,” a frustrated Singhal told Sullivan. “I don't know how else to call it but plain and simple cheating. Another analogy is that it's like running a marathon and carrying someone else on your back, who jumps off just before the finish line."
On the official Bing blog, Shum called the Google ploy a “spy-novelesque stunt,” a “creative tactic by a competitor, that Bing was actually taking as a back-handed compliment.” 
“It doesn’t accurately portray how we use opt-in customer data as one of many inputs to help improve our user experience,” Shum wrote.
It's difficult to say how this discovery will affect the search experience for consumers, Sullivan told FoxNews.com, because we really don't know the extent of Bing's usage of Google data.
”It potentially makes the search engines more the same,” he allowed, “and my gut feeling is that we want them to have some differentiation. That's because being more Google-like isn't a guarantee that you're necessarily improving results.”




Read more: http://www.foxnews.com/scitech/2011/02/01/microsofts-bing-caught-copying-google-search-results/#ixzz1CkpJ37ih

Nearly 11 Percent of US Houses Empty - There were 18.4 million vacant homes in the U.S. in Q4 '10 -

Nearly 11 Percent of US Houses Empty - There were 18.4 million vacant homes in the U.S. in Q4 '10 - 

I usually find the quarterly homeowner vacancy and homeownership report from Census pretty lackluster, but the latest one released this morning was anything but.

America's home ownership rate, after holding steady for a while, took a pretty big plunge in Q4, from 66.9 percent to 66.5 percent. That's down from the 2004 peak of 69.2 percent and the lowest level since 1998.

Homeownership is falling at an alarming pace, despite the fact that home prices have fallen, affordability is much improved and inventories of new and existing homes are still running quite high.

Bargains abound, but few are interested or eligible to take advantage.

More concerning than the home ownership rate is the vacancy rate. The Census tables don't tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that's only dropped by about 30 thousand in the past year. 38 million are rented, but that's up by over a million year over year. That means more new households are choosing to rent.

Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 '10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you'd think.

The number of vacant homes for rent fell by 493 thousand, as rental demand rose. 471,000 homes are listed as "Held off Market" about half for temporary use, but the other half are likely foreclosures. And no, the shadow inventory isn't just 200,000, it's far higher than that.

Slideshow: 10 U.S. Cities Where Renting Beats Buying

So think about it. Eleven percent of the houses in America are empty. This as builders start to get more bullish, and renting apartments becomes ever more popular. Vacancies in the apartment sector have been falling steadily and dramatically, why? Because we're still recovering emotionally from the toll of the housing crash.

Younger Americans have seen what home ownership has done to their friends and families, and many want no part of it. Credit has become very nearly elitist. Home prices, whatever your particular data provider preference might be, are still falling.

Banks, Fannie [FNM  0.487    -0.003  (-0.61%)   ] and Freddie [FRE  3.26    0.01 (+0.31%)   ] are holding on to hundreds of thousands of properties, and we don't know exactly when or how they'll sell them.

Read more - http://www.cnbc.com/id/41355854

China's state broadcaster CCTV Tries to Pass Off a scene from the movie "Top Gun" as Real News footage of a Chinese J-10 -

China's state broadcaster CCTV Tries to Pass Off a scene from the movie "Top Gun" as Real News footage of a Chinese J-10 -

China central bank says Fed easing ineffective and dangerous - may lead to competitive currency depreciation -

China central bank says Fed easing ineffective and dangerous - may lead to competitive currency depreciation -

Quantitative easing by the Federal Reserve and other central banks cannot address fundamental economic problems but may lead to excessive global liquidity and competitive currency depreciation, China's central bank said on Sunday.

In its monetary policy report for the final quarter of 2010, the People's Bank of China (PBOC) also confirmed that it would target 16 percent growth of the broad M2 measure of money supply this year, down from the 19.9 pct growth recorded at the end of 2010.

The central bank said the Fed's monetary easing was pushing up international commodity prices and asset prices in emerging markets, including China.

"Quantitative easing policy cannot fundamentally address economic problems, and it may cause excessive liquidity on a global scale as well as risks of competitive currency depreciation," the Chinese central bank said in its 59-page report.

"It is creating imported inflation and short-term capital inflows, pressuring emerging markets," it said.

As a result, China needed to work hard to soak up liquidity from foreign exchange inflows in order to minimize the impact on the domestic economy, it added.

The central bank reiterated that it would keep the yuan basically stable while making the exchange rate regime more flexible.

The central bank said it would continue to use different tools, including interest rates, bank reserve requirements and open-market operations, to rein in money supply and bank credit growth as a way of handling inflationary pressure.

Read more - http://www.cnbc.com/id/41336393

Financial Crisis Inquiry Commission Slams Greenspan, Bernanke, Geithner, Paulson, Summers, SEC, etc... for Causing Crisis -

Financial Crisis Inquiry Commission Slams Greenspan, Bernanke, Geithner, Paulson, Summers, SEC, etc... for Causing Crisis -

The Financial Crisis Inquiry Commission is releasing its report Thursday.

The New York Times has a preview of the report, which shows that the Commission will slam the right people for causing the financial crisis.

Barry Ritholtz gives a good summary of the Times’ article:

The many causal factors highlighted in the FCIC report:
• Alan Greenspan’s malfeasance — his refusal to perform his regulatory duties because he did not believe in them — allowed the credit bubble to expand, driving housing prices to dangerously unsustainable levels; Greenspan’s advocacy for financial deregulation was a “pivotal failure to stem the flow of toxic mortgages” and “the prime example” of government negligence;
• Ben S. Bernanke failed to foresee the crisis;
• The Bush administration’s “inconsistent response” — saving Bear, but allowing Lehman to crater — “added to the uncertainty and panic in the financial markets.”
• Bush Treasury secretary Henry M. Paulson Jr. wrongly predicted in 2007 that subprime meltdown would be contained.
• The Clinton White House, including then Treasury Secretary Lawrence Summers, made a crucial error in “shielding over-the-counter derivatives from regulation [CFMA]. This was “a key turning point in the march toward the financial crisis.”
• Then NY Fed President, now Treasury secretary Timothy F. Geithner failed to “clamp down on excesses by Citigroup in the lead-up to the crisis;” Further, a month before Lehman’s collapse, Geithner was still in the dark about Lehman’s derivative exposure;
• Low interest rates brought about by the Fed after the 2001 recession “created increased risks” but were not chiefly to blame, according to the FCIC (I place some more weight on Ultra-low rates than they do);
• The financial sector spent $2.7 billion on lobbying from 1999 to 2008, while individuals and committees affiliated with the industry made more than $1 billion in campaign contributions. The impact of which an incestuous relationship between bankers and regulators, Congress and bankers, and classic regulatory capture by the industry.
• The credit-rating agencies “cogs in the wheel of financial destruction.”
• The Securities and Exchange Commission allowed the 5 biggest banks to ramp up their leverage, hold insufficient capital, and engage in risky practices.
• Leverage at the nation’s five largest investment banks was wildly excessive: They kept only $1 in capital to cover losses for about every $40 in assets;
• The Office of the Comptroller of the Currency along with the Office of Thrift Supervision, “federally pre-empted” (blocked) state regulators from reining in lending abuses;
• The report documents “questionable practices by mortgage lenders and careless betting by banks;”
• The report portrays the “bumbling incompetence among corporate chieftains” as to the risk and operations of their own firms:

-Citigroup executives admitting that they paid little attention to the risks associated with mortgage securities.
-AIG executives were blind to its $79 billion exposure to credit default swaps;
-Merrill Lynch top managers were surprised when mortgage investments suddenly resulted in billions of dollars in losses;

I certainly agree with all of these points, and have criticized these same players in the past.

It should be noted that leading banking analyst Chris Whalen – who I greatly respect –agrees with FCIC Commissioner Peter Wallison (co-director of the American Enterprise Institute’s program on financial policy studies) that Freddie and Fannie were a leading cause for the crisis. This is the minority view of the FCIC.

Many people – including me – have criticized the FCIC for seeming to sidestep the massive fraud which was a core cause of the crisis. However, the Commission hasindicated that it will make criminal referrals. We’ll have to wait and see if the referrals are for big or small fish.

Read more - http://www.washingtonsblog.com/2011/01/financial-crisis-inquiry-commission.html

Ron Paul: The Coming 2nd American Revolution & Exposing The FED -

Ron Paul: The Coming 2nd American Revolution & Exposing The FED -

Accounting Tweak Could Save Fed From Losses - significant shift was tucked quietly into the Fed's weekly report -

Accounting Tweak Could Save Fed From Losses - significant shift was tucked quietly into the Fed's weekly report - 

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely. 

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted."Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital. "The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.  This enhances transparency by providing clearer, more frequent, snapshots of the central bank's finances, analysts say. The bonus: the number can now turn negative without affecting the central bank's underlying financial condition.  "Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.  "The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note.  

Read more - http://www.cnbc.com/id/41198789

NYT Reports States Looking For Ways To File Bankruptcy, Muni Bondholders To Be GM'ed -

NYT Reports States Looking For Ways To File Bankruptcy, Muni Bondholders To Be GM'ed -

A few days ago we reported that Newt Gingrich was pushing for legislation to allow states to file for bankruptcy, "allowing Them To Renege On Pension And Benefit Obligations." As we speculated back then "obviously what this means for equity investors in assorted muni investments is that a complete wipe out is becoming a possibility, as Meredith Whitney's prediction, which everyone was quick to mock and ridicule, is about to come back with a vengeance." Sure enough, this most recent development in the states' path to insolvency was quickly ignored as it was not a dipping mushroom cloud that could be bought. Until tonight: the NYT has just rehashed the post in an article that would not only validate the Whitney thesis if true, but make a Cramer-Bove out of everyone who has been caught on tape in the past two weeks kicking and screaming that there is no chance in hell the carnage predicted by the scourge of Citigroup (and yes, back in 2007 everyone said that Citi could never fail either). From the NYT: "Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers." Which means that up to $3 trillion in muni debt has a high probability of being GMed, precisely as we predicted: "proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid." Oh, and since all this constitutes an EOD, readers are strongly urged to re-read the primer on what pervasive state bankruptcies will mean for muni CDS (hint: the MCDX is cheap).

From tonight's NYT:

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

But... but... the Paul Krugmans at the CBPP just said that not only do states need more debt, but their pension funds are sure to generate 8% returns. In perpetuity and then some.

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

So basically, GM? Thank you Steve Rattner.

House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.

Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.

Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.

“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.

You can read the rest here. It is pretty self-explanatory.

Fast forward to 2013 when Goldman of American PIMCO Lynch, Jefferies Stanley Tabak, BlackRock Morgan and Citibank of Rangoon all win the mandate to IPO the government's $100 billion stake in the bankrupt state of California, preceded by a 10,000% 5 day market melt up in which every single short share in the world is recalled by State Street. And the official spin by the Palin administration: "this is a huge stamp of approval and confidence by the communist capital markets in the capability of Brian Sack's solitary Bloomberg terminal to manipulate each and every asset price to levels not even Jim Cramer ever thought possible."

Read more - http://www.zerohedge.com/article/nyt-reports-states-looking-ways-file-bankruptcy-muni-bondholders-be-gmed