Odd Lots
Posted by Eddy Elfenbein on February 18th, 2010 at 6:27 pm

How to Make a Crayon Rocket
UBS: World’s Largest Trading Floor
A Look at the Tax Returns of the Top 400 Taxpayers
The Mouth of Sauron

Ugly Dogs
School used student laptop webcams to spy on them at school and home
Behind the Scenes at Footnoted.org
America’s Most Dangerous Drivers By Profession

An economist predicts the Olympic medal standings
Flesh-Eating Vultures Descend on Luxury Condo Building
New Beta Stock Twits

Fed Raises Discount Rate
Posted by Eddy Elfenbein on February 18th, 2010 at 4:33 pm

This is the Discount Rate not the Fed Funds rate:

The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs.
Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve’s lending facilities. The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
The changes to the discount window facilities include Board approval of requests by the boards of directors of the 12 Federal Reserve Banks to increase the primary credit rate (generally referred to as the discount rate) from 1/2 percent to 3/4 percent. This action is effective on February 19.
In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight. Primary credit is provided by Reserve Banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds. Finally, the Board announced that it had raised the minimum bid rate for the Term Auction Facility (TAF) by 1/4 percentage point to 1/2 percent. The final TAF auction will be on March 8, 2010.
Easing the terms of primary credit was one of the Federal Reserve’s first responses to the financial crisis. On August 17, 2007, the Federal Reserve reduced the spread of the primary credit rate over the FOMC’s target for the federal funds rate to 1/2 percentage point, from 1 percentage point, and lengthened the typical maximum maturity from overnight to 30 days. On December 12, 2007, the Federal Reserve created the TAF to further improve the access of depository institutions to term funding. On March 16, 2008, the Federal Reserve lowered the spread of the primary credit rate over the target federal funds rate to 1/4 percentage point and extended the maximum maturity of primary credit loans to 90 days.
Subsequently, in response to improving conditions in wholesale funding markets, on June 25, 2009, the Federal Reserve initiated a gradual reduction in TAF auction sizes. As announced on November 17, 2009, and implemented on January 14, 2010, the Federal Reserve began the process of normalizing the terms on primary credit by reducing the typical maximum maturity to 28 days.
The increase in the discount rate announced Thursday widens the spread between the primary credit rate and the top of the FOMC’s 0 to 1/4 percent target range for the federal funds rate to 1/2 percentage point. The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a backup source of funds. The Federal Reserve will assess over time whether further increases in the spread are appropriate in view of experience with the 1/2 percentage point spread.

Was this news leaked?

2-Year/10-Year Treasury Spread Hits All-Time Record
Posted by Eddy Elfenbein on February 18th, 2010 at 1:03 pm

Bloomberg:

The gap in yield between Treasury 2- and 10-year notes, known as the yield curve, steepened to a record as reports showed that Philadelphia region manufacturing and U.S. leading indicators rose.
The Treasury Department said it will sell $126 billion in notes and bonds next week: billion in 30-year Treasury Inflation Protected Securities, or TIPS, $44 billion in two-year debt, $42 billion in five-year notes and $32 billion in seven-year securities on successive days beginning Feb. 22. The producer price index rose more than forecast last month.
“The steep yield curve is starting to reflect signs of stagflation,” said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities in New York. “The short end will remain tied to the Fed funds. Yet we are seeing inflation signs and as a result, long dated maturities are getting hurt.”
The yield curve increased to 2.92 percentage points, beating the record of 2.90 percentage points set on Jan. 11.
The 10-year note yield advanced five basis points, or 0.05 percentage point, to 3.78 percent, the highest level since Jan. 14, at 11:13 a.m. in New York, according to BGCantor Market Data. The two-year note yield rose two basis points to 0.86 percent.

(HT: Alea)

There’s a Constitution Laying Around Here Somewhere
Posted by Eddy Elfenbein on February 18th, 2010 at 11:26 am

The WSJ:

President Barack Obama on Thursday created a bipartisan commission to confront what he calls the federal deficit’s “disturbing” trajectory.

Correct me if I’m wrong, but don’t we already have a bipartisan commission in charge of the confronting the deficit called Congress?
Not that they’re any good but why would a commission be any better?

Courtier of the Hip Class
Posted by Eddy Elfenbein on February 18th, 2010 at 10:55 am

Lots of people love Matt Taibbi’s reporting. I find him entertaining, but not very worthwhile. I don’t see him as a journalist but as a courtier to the hip class. He distorts his stories to flatter their prejudices which is everything a journalist should not be.
Taibbi consistently leaves out important details. He takes already known facts and bends them into dishonest narratives. Moreover, his sex and drug references sound forced and hint at a dramatic inferiority complex.
Taibbi first attacked Goldman Sachs in July with his famous Vampire Squid article which was later shredded to pieces. Then in October, he went after naked short-selling and strolled into the propellers once again. Now he goes after Goldman again and compares their business to several con jobs.
Taibbi includes this charmer about Goldman: “They raped the taxpayer, and they raped their clients.”
See how edgy that is? Of course, he could also talk with some actual rape victims.

The Hemline Theory Strikes Again!
Posted by Eddy Elfenbein on February 18th, 2010 at 9:20 am

The AP reports that long hemlines are back in fashion:

So long, miniskirts. The up-to-there trend gave way to longer hemlines at New York Fashion Week.
There were more pants, too, than in recent seasons when the dress ruled the runways. Even designers who showed shorter dresses paired them with leg-warmers for a less leggy look.
On Wednesday, Oscar de la Renta showed long slim skirts for daytime, while Michael Kors had the slim shape just below the knee as well as more free-flowing knits that grazed the floor.
The old saying that hemlines go up in a good economy and down in a bad one is not always the case, but many did see the longer hemline as a reflection of the Great Recession.
“There’s a general growing up of fashion after a very difficult year,” said Joanna Coles, editor in chief of Marie Claire magazine. “Women don’t want dressing up to be so complicated. The hemline dropping is part of that.”

This is a change from four years ago when hemlines were rising.

Sandler O’Neill Cut Estimates and Price Target Price for Eaton Vance
Posted by Eddy Elfenbein on February 18th, 2010 at 9:06 am

From Barron’s:

Based on our math, we think Eaton Vance generated about $2 billion of net inflows during fiscal first quarter, translating into 5%-plus annualized organic growth. Though down from the $5.5 billion (15% growth) in fiscal fourth quarter (Oct.), the prior quarter included $3 billion-plus of lower-fee institutional mandates.
Looking ahead, we expect Eaton Vance to continue to gain market share reflecting strong long-term investment performance track records, reaccelerating equity volumes, broadening flows, and rising demand for the firm’s equity income and tax-managed strategies given the specter of higher tax rates.
As January AUM came in below our forecast, we are taking down our fiscal 2010 (Oct) and fiscal 2011 earnings-per-share estimates from $1.68/$2.04 to $1.59/$1.93, bringing us about in line with consensus.
Moreover, our fiscal-first-quarter forecast falls by two cents to 37 cents. As a result of our lower earnings outlook, we are reducing our price target by $1 to $32, or less than 10% upside potential from current levels.
While Eaton Vance continues to generate above-average flows, we think further upside from here is limited given the stock’s seemingly full valuation. Eaton Vance is currently trading at 19 times our revised fiscal 2010 EPS estimate, or about 15% higher than the peer group average of 16-17 times.

Missy Francis Basis for Avery Jessup
Posted by Eddy Elfenbein on February 18th, 2010 at 8:51 am

The New York Post reports that former child star and CNBC anchor Melissa Francis was the basis for Avery Jessup, the love interest of Jack Donaghy on NBC’s “30 Rock”:

Avery Jessup, the new love interest of Alec Baldwin’s “30 Rock” character played by Elizabeth Banks, is based on a real person. A source close to the show said that Jessup, who hosts a fictional CNBC show called “Hot Box,” was inspired by real-life CNBC anchor Melissa Francis. Our source said that Francis herself, who hosts morning show “The Call,” pitched the idea to a “30 Rock” producer. “Francis was hoping to be asked to play the character herself, but they ended up going with Banks,” our source says.

As a girl, Melissa played Cassandra Cooper Ingalls on Little House on the Prairie. Jason Bateman played her brother James.

The Federal Reserve’s Profit Machine
Posted by Eddy Elfenbein on February 18th, 2010 at 8:36 am

Worried about the Federal Reserve’s profits? Maybe at some point, but for now the central bank is raking it in.
Any profit the Fed makes over 6% goes directly to the U.S. Treasury. For the month of January, the Fed forked over $5.2 billion (see page 6). For the first four months of this fiscal year, the Fed has paid the Treasury over $24 billion which is twice as much as one year ago.
For the 2009 calendar year, the Fed’s net jumped 46% to $52.1 billion, and $46.1 billion of that went to the Treasury.

Self-Parody Alert
Posted by Eddy Elfenbein on February 18th, 2010 at 7:43 am

From Nassim Taleb:

Giving businessreaders my book: like giving vintage Bordeaux to drinkers of Diet Coke and listening to their comments about it [TBS-2nd ed]

Oh dear lord. Let’s ponder the irony that that thought was a Twitter tweet.