Fitch: U.S. Retail Credit Card Defaults Hit Near-Record Levels with No Relief in Sight

U.S. consumers defaulted on store-branded credit cards at near-record levels during the holiday shopping season, with 2010 likely to bring more of the same trend, according to Fitch Ratings.

Fitch's December Retail Credit Card Index results show that more than one in every eight dollars of receivables was written off as uncollectable during the November collection period on an annualized basis. Taken with the recent delinquency trends and Fitch's expectation for unemployment, Fitch expects retail card chargeoffs to remain elevated throughout first half-2010. (more)

Bill Miller: Most Big Stocks Are Undervalued

Fund management icon Bill Miller says stocks are undervalued, particularly shares of the 10 biggest companies in the Standard & Poor’s 500 Index.

“I think there's a lot of value in the overall market right now,” he told CNBC.

That’s because the economic recovery has just begun, Miller says.

He expects GDP growth to have totaled 4 percent in the fourth quarter, and he sees the economy expanding as much as 4.5 percent in 2010.

Corporate profits will soar 25 percent this year, Miller predicts. (more)

See Who Was Paid Off In The AIG Bailout

It appears that of the roughly 38 Goldman CUSIPs which have data available, there are exactly zero rated A or higher by Moody's (we ignore the rating from the other rating agency as they apparently have long stopped rating most of these securities). There are 9 CUSIP issued after 2006, 21 between 2005 and 2006, and 8 issued before 2005. As Matt Goldstein points out, of the 25 or so deals that had CDS written on them after January 1, 2006, Goldman accounts for 40% of this late (post 2005) issuance. Goldstein notes: "that’s critical because in December 2007, former AIG Financial Products head Joseph Cassano had said AIG largely got out of the CDS business by the end of 2005." Some more reasons to finally indict the man who, more so than anyone, cost taxpayers hundreds of billions with horrendous risk management practices. (more)

Computer-driven trading raises meltdown fears

An explosion in trading propelled by computers is raising fears that trading platforms could be knocked out by rogue trades triggered by systems running out of control.
Trading in equities and derivatives is being driven increasingly by mathematical algorithms used in computer programs. They allow trading to take place automatically in response to market data and news, deciding when and how much to trade similar to the autopilot function in aircraft.

Analysts estimate that up to 60 per cent of trading in equity markets is driven in this way.

Concerns have been highlighted by news that NYSE Euronext, the transatlantic exchange operator, has fined Credit Suisse proprietary trading arm for the first time for failing to control its trading algorithms. In the Credit Suisse case, its system bombarded the NYSE’s systems with hundreds of thousands of “erroneous messages” in 2007, slowing down trading in 975 shares. (more)

A New Moral Hazard in the Banking System

One commonly hears the argument that the FDIC creates moral hazard in the banking system, because depositors aren't worried about the soundness of their banks. I find this argument broadly dubious, since I have no idea how the vast majority of depositors could possibly be expected to have informed opinions on the soundness of their banks. Moreover, during the Great Depression, local wealthy people--who did have quite a lot of knowledge about the banks, and the local economies into which they lent--got hammered along with the rest of America.

But this suggests that there is a different, more plausible form of moral hazard operating right now: (more)

Central banks end US dollar emergency swap lines

The Bank of England said Wednesday that it and other major central banks are ending emergency lending arrangements put in place with the U.S. Federal Reserve in the wake of the global credit crisis, citing improvements in financial markets.

The decision marks the first unified retraction by central banks around the world of extraordinary support measures to boost lending after credit markets seized up in late 2007, causing the global economic downturn. (more)