Moody's Not Crazy Bout JP Morgan's $20 Billion Bridge Loan

Amidst all the cheering and hullabaloo over AT&T's proposed $39 billion bid to acquire Deutsche Telecom, a few sober credit folks over at Moody's would like to point out something in passing. Nothing major really, just the fact that JP Morgan is giving AT&T a $20 billion bridge loan to finance the acquisition. Certainly $20 billion is chump change, but despite the Fed's proclivity for spending trillions on mortgage and treasuries, it still hasn't stooped to buying bridge loans for large Telecom mergers in the event that no buyers turn up to buy the debt. Then again, earthquakes, tsunami's, nuclear reactor meltdowns, middle east unrest, nor the implosion of parts of the EU is going to stop this market from loving debt issued by anybody to finance anything. In any event, it's really great to see AT&T turning itself into an enormous crappy monopoly again. After all, the government is going to need something to break up in a couple of years. As long as the investment bankers keep getting paid, everybody's happy.

Yay Dividends!

After the latest round of stress tests, the Fed has decided to play nice and allow some of the 19 largest US banks to do the fun stuff they used to love to do before they all fell into the big black hole of 2008. Banks have the Fed's permission to pay dividends and buy back stocks again! Yippee!!

Everybody seems to have forgotten just how much $40 stock Citigroup bought right before it went straight to $3. Or Wa Mu. Yes, the same Wa Mu whose former executives (and their no-good, asset-shuffling wives!) are getting sued by the FDIC, used to spend all day paying $45 for its own stock, months before it was seized by the FDIC. These firms spent billions upon billions of capital, capital that would've really come in handy when all their fraudulent mortgage underwriting was finally unveiled, to help boost their stocks so that executives (and their money-sucking gold-digging wives!) could sell stock and collect north of $900 million in comp. The FDIC is looking for $900 million dollars, so you know the wives have run off with way more than that.

See, everybody just has way too much capital sitting around and it's just so wasteful. It's not like we're ever going to need that capital for any reason. Because if you can just go crying to the Treasury and Fed for more capital and cheap financing every time your own balance sheet throws up on itself after looking at its asset, then why would you need any excess capital? We've already rewarded employees, time to get back to our second favorite thing to do, rewarding our shareholders.

So if you're reading the news, and you're wondering why on earth the market is staging a comeback today given all the turmoil in the Middle East, possibility of nuclear armageddon in Japan, and the Fed's determination to continue to ease in the face of recent inflationary data, you have your answer: bank dividends. Whoopdy Doo.

Japanese Tsunami Wrecks Markets

US equities rallied marginally on Friday despite the devastating 8.9 earthquake/tsunami combo that struck Japan. After having the weekend to think it over, and watching the Nikkei plunge 6%, investors have reconsidered. Lately, it seems like equities can seem to talk themselves into rallying no matter what the headlines. It's like they read the news in their sleep and bought stocks out of habit. Hmmm.... Yawn, a natural disaster that cripples one of our largest economies and brings the Japanese to the brink of a nuclear disaster? No biggie. Price of oil is down, that's great for us, keeps inflation in check. Right? Goldilocks economy. Give some money to the Red Cross. Buy more stocks. A couple of nuclear power plant explosions, a few fuel rod fusions later and the news seems, well, maybe not so bullish anymore. Suddenly, things like the announcement of Berkshire Hathaway's intent to buy Lubrizol for $10 billion, which would've sent stocks into a euphoric lather a few weeks ago, seem pretty insignificant when compared to the aftermath of the Japanese tragedy. Is logic and reason returning to the markets?

China Posts a Trade Deficit

China posted a $7.3 billion trade deficit in February, surprising those who expected them to continue their usual habit of flooding the world with their manufactured goods without reciprocity. Analysts are blaming this anomaly on the Lunar New Year holidays, when apparently even the Chinese get lazy and party too hard to make stuff to export. Better to believe that, of course, then the alternative; that world economic growth might actually be slowing. If this continued, it would be extremely inconvenient for the Fed, who was probably hoping that somebody else would step in to buy a few Treasuries after it is done with QE2. I mean, somebody has to help keep US interest rates in check so our debt fueled recovery won't be crushed by the slightest uptick in rates. If it's not going to be the Chinese, who's it gonna be? Maybe everybody who is puking Spainish government bonds on Moody's downgrade this morning? All of those investors who are surprised, yes SHOCKED, that it's gonna cost Spain more to recapitalize its banks than the government's previous official estimates? They actually needed Moody's to tell them to sell. Anyway, the more havoc elsewhere in the world, the better the US looks in comparison.