Wednesday, November 10, 2010

USA gets downgraded by a Chinese rating agency – this news actually hit Tues @ 10amET.
China’s Dagong Global Credit Rating Co. downgraded the U.S. to A+ from AA, with a negative outlook,
because of quantitative easing – Bloomberg
Gold continued its post-QE2 climb, surpassing the US$1,410 mark on November 9 as China
announced a number of measures designed to curb inflows of hot money. – Roubini Global Economics

Ten Year Chart of Gold

An international backlash against the Federal Reserve's move last week to pump billions of
dollars into the U.S. economy is threatening to undercut the Obama administration's economic goals for
this week's G-20 meeting of world leaders. – Washington Post
US homeowners can’t take advantage of lower rates – homeowners are unable to take
advantage of low rates b/c of neg. equity and/or stringent new lending requirements. Refinancing levels
are well below where they normally should be given how low rates are. FT
“New risks for munis” – The greatest default risk is in smaller municipalities w/shrinking tax
revenue bases and large projects. WSJ
According to the WSJ, the Fed is expected to grant approval to some US banks to resume
capital payouts to shareholders (either via buybacks and/or dividends) although its not clear whether a
public announcement will be made (or if the banks will simply be given guidance privately).
US Housing market – new bleak Q3 report published from Zillow – “Nationally, home values
continued to decline, and several local markets that had been showing strong signs of stabilization took
a turn for the worse.” – Zillow
 Inflation/food worries – one of the lead FT articles – “food price fears as US warns on crop
yields” – the US gov’t again on Tues cut its forecast for corn yields, raising concerns about surging
prices. Worry growing over supply shocks. – FT
CNBC’s Steve Liesman reports that the G20 Leaders Summit communiqué, it is officially be
published this weekend, will call for more flexible, market-based exchange rates and will also declare
that no financial institution should be too big to fail. The leaders are expected to endorse the Basel III
rule changes. Large systemically important banks will be encouraged to create “living wills.” – CNBC
Banks – the G20 has drawn up a “two-tier” bank regulatory plan, whereby global regulators
would focus their attentions on large world-spanning institutions instead of more domestic-focused
firms. This means that many banks in Japan and China, which have a more domestic focus, would wind
up being exempted from the new regulatory framework. A list of 20 large global banks whose
importance is “systemic” is being drawn up. Some of the banks that may wind up on that list: GS, MS,
BAC, C, RBS, HSBC, Barclays, RBC, Standard Chartered, UBS, CS, SocGen, BNP, Santander, BBVA, Mizuho,
Sumitomo, Nomura, Mitsubishi, Unicredit, Intesa, DB, and ING (and some think the Japanese banks may
wind up being removed as they are primary domestic institutions). FT
Goldman Sachs Asset Management’s Jim O’Neill said China is accelerating the yuan’s
appreciation as part of the “grand bargain” to win U.S. support for Beijing to gain a bigger say at the
International Monetary Fund. – Bloomberg
The National Federation of Independent Business Index of Small Business Optimism improved
by 2.7 in October to 91.7, though it remains in “recession territory” and well below the long-term
average of 98.7 – Roubini Global Economics

NFIB Small Business Optimism Index