Key News

• The U.K. economy shrank more than economists forecast during the fourth quarter in the biggest contraction since 1980 as the financial crisis crippled the banking industry and mired Britain deeper in the recession.

Key Reports (WSJ):
10:30 a.m. EIA Natl Gas Inventories

Quotable

"Oh, colder than the wind that freezes Founts, that but now in sunshine play'd, Is that congealing pang which seizes The trusting bosom, when betray'd. ”

                               Thomas Moore

FX Trading - Friday Hodgepodge!
Yuppy-fication is killing us!

One of the problems I've lamented about over the last several years is what I refer to as the Yuppy-fication of Wall Street.  Instead of the guys who made it to the top because of their guts, instincts, and brains, we now are faced with a world of Ivy-league MBA's with spreadsheet running this institutions.  Often guys that have never had to worry about how to feed their kids, or make their mortgage payments or scrape together just enough of their own funds to launch a venture that later failed miserably; instead we have an incestuous pool of people with powerful contacts populating the upper echelon. 

The old-school guys who understood risk viscerally and did all to keep overhead at a minimum knowing there is such a thing as a business cycle seem to have been either pushed out or retired or runaway from the newly Yuppy-fied world in which we live. 

Don't get me wrong.  Our Ivy League turns out some very smart people indeed.  But smart in terms of facts and figures and business case studies. They know strategic planning all right, proper schmoozing with just the right person has been perfected, and how to make a spread sheet sing they are Maestros.  But they never delivered mail in the mail room and grinded their way through every level of the organization having to prove themselves every step of the way (then sent to a top school by the company having proved real leadership skills) and learned about the firm's core culture and competencies that drive sustained long-term success in all business environments.

I think this is why we end up with egotistical clowns such as John Thain. 

In a just world Mr. Thain would be taken out and beaten to within an inch of his life for his arrogance and incompetence and destruction of other peoples' wealth. Instead he walks away with millions, will likely spend a few years in the wilderness being "rehabilitated" (read friends in high places and journalist rebuilding his reputation with well placed lies at just the right time to polish the image) and re-emerge to "lead" another institution. 

Sadly gone are the days when the head guy will sit at a trading desk with the troops and lead by example--think John Gutfreund at Solomon.

"Salomon [Brothers] was an institution.  The chairman, John Gutfreund, had a desk on the trading floor that he sat at every day.  In my nine years at Salomon, I never sat more than twenty feet away from him. 

...Here's a guy who is chairman of Salomon Brothers, which in those years was probably the most powerful firm on the Street, while I am a nobody trainee.  It has been a year since that first encounter and he has the presence of mind and the interest to set me up like that," as told by Bill Lipschutz to Jack Schwager in The Market Wizards. 

I guess a lot of this had to do with the fact that firms on the street were partnerships.  The partners had real money on the line so they couldn't afford "social promotions."  The key players had to know risk viscerally.  Partners needed and hired really smart people with guts and integrity to safeguard their own wealth and grow the firm over the long run.

Now, clowns like Thain play with other peoples' money.  And sadly we see how Yuppy-fication has destroyed our once great trading institutions.

My last TV Appearance-It Won't Shake the World I Know!

I was booked on a 5-minute spot yesterday on Fox Business News with Stuart Varney to talk about the strength of the dollar; but of course got about 40-seconds because I didn't lament about how awful the dollar was and instead said the dollar was entering a multi-year bull market.  After that total waste of time, my TV career (yes that was a joke) is over.  In the words of that great statesman Roberto Duran said during his last fight with Sugar Ray Leonard to end the battle, "No mas, no mas." 

I guess it comes down to two things: 1) I don't like or watch those shows anyway so why should I expect any real content to flow when my "made for radio" mug appears; and 2)

I hate leaving the screens for that long because that's the place where real money is made and talk is cheap.

But as I think more about it, something good did come from yesterday's appearance--it was how surprised Mr. Varney seemed when he heard someone with a long-term bullish view of the dollar.  That tells me there are still plenty of perma-bears out there who have not yet capitulated to the trend. 

Mr. Varney playing the dutiful host entertainment role was lamenting how dog-gone awful the US banking system is (agreed) and how the world seemingly looks to end soon by implication in his lead up to my 45-seconds of fame.  So in an effort to bring a reality bite to the US bank hysteria Fox was strewing, in the form of "it could be much worse elsewhere" (not a comforting fact I realize but an important one when it comes to currency trading) , I shared this fact with the ebullient host:

Banking System Liabilities to GDP:

Eurozone         335% [Est. $41 trillion]
United States   65% [Est. $9.8 trillion]

I didn't get a chance to add: Emerging market lending exposure by European banks to emerging (submerging) markets $4.4 trillion of the total $4.8 trillion; a stat we've shared before in Currency Currents.  The other stuff was just too much to comprehend on TV I guess.  And off I go. 

Given the price action in the euro of late, just maybe the market is waking to the potential disaster brewing in the corridors of European banking instead of solely focusing on the US debacle.