Property/Financials

It's completely ridiculous that the new American "pay czar" has been able to deny former Bank of America chief Ken Lewis part of his pay package.

The Treasury Department's pay czar pushed outgoing Bank of America Corp. Chief Executive Kenneth D. Lewis into giving back about $1 million he received so far this year and forgoing the rest of his $1.5 million salary for 2009, say people familiar with the matter.

The move makes Mr. Lewis the biggest target so far of Kenneth Feinberg, the Treasury's "special master" for compensation. He also asked that Mr. Lewis pass up any 2009 bonus from the Charlotte, N.C., bank.

Mr. Lewis is still walking away with a lot of money, almost $70m I believe, which shows that this Czar action was merely symbolic. Kenneth Feinberg (the Czar) is now investigating almost 200 highly paid employees who unfortunately happen to fall under his authoritarian control. This sends a horrible message. Essentially, it says that if you are highly ambitious in your career, don't join any bank associated with the U.S. goverment. Join another bank that will pay you as much as you can command.

Dr. Doom proves he is a master of hedging. He's turning bullish, saying we should have a global recovery by year-end, but still says there is a tiny chance that we get the double dip. Thus he'll be right either way.

The world economy still risks a double-dip recession if oil prices rise toward $100 per barrel and if huge U.S. government debts frighten investors, Nouriel Roubini, professor of economics and chairman of RGE Monitor, told CNBC... 

"Asset prices should go higher, the question is too much, too soon, too high? In my view there is the risk of a correction," Roubini said... 

I'm not saying it's going to happen but it's a risk," Roubini added.

The best bull argument I can find in regards to the Chinese market is that the government has little choice but to keep liquidity flowing, even if they know this is will be negative in the long-term. 

Since a government "investigation" can't possibly yield much, and since they're saying flat-out that lending won't be capped, this sounds incredibly bullish. China isn't going to take away the punchbown -- as we've noted, they just can't. When even the slightest hint of lending curbs recently brought up, the market tanked nearly 7%. Imagine if the threats were real. The bubble must roll on.

The government may fear the potential repercussions of deflating asset prices in the short term so much that they are willing to ignore the longer term consequences of fueling asset prices further. Fair enough, sounds like standard human nature when it comes to politics and just today Chinese officials have said they will investigate price gains but won't cap new lending. Thus if you openly regard this as a punt on the government's actions, fair enough we can't argue that. But...

The US is increasing its sales of treasury inflation protected securities (TIPS) in response to Chinese interest. While TIPS will remain a tiny market on comparison to the $6.66bn US government bond market, it looks like we could have $10bn in new supply flowing into a market which issued just $44bn in the nine months to June 2009. That's a lot of new supply in relative terms. The TIPS market fell on the news, no doubt due to fears of this potential oversupply, but might there be a positive angle to this development?