Friday, September 30, 2011

Kodak, EK Caput - 60%, Straddles

This is EK today, off 60%. Bloomberg report Kodak Said to Weigh Bankruptcy Filing:

These are the straddles from our post here 4 days ago:

Now the stock has been halted, so we can't yet trade it. Wait and see.

Here is  a preliminary update:

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Austria Passes ESFF II But 'Referendum Now" Banner Raised in Parliament

117 MPs voting in favour while 53 voted against Austrian guarantees in the EFSF to double to €21.6B.

However, members of the Alliance for the Future of Austria, or BZO party held a banner calling for a "referendum now.

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A New Movie: "Debt Again": If The Eurozone Crisis Were a Movie How Would It End?

From the BBC folks. If the eurozone crisis were a movie how would it end?

"From the people who brought you the collapse of Lehman Brothers, the global financial crisis and the credit crunch, comes Debt Again. This takes financial disaster into a whole new low."


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The Android Tax And The Microsoft Rip-off; MSFT Loves Android

While consumers embraced Android devices, the OS provided for free by Google, did you know that from pretty much every Android device sold a bew bucks go to Microsoft?

Whle the many companies that get Android software free from Google Inc., more and more of them are forking over millions to Microsoft Corp. as an 'Android tax.'

Microsoft has just signed a deal with Google's largest manufacturing partner, Samsung Electronics Corp, this after signing patent licensing agreements with seven other large Android makers in the past three months,  including Acer Inc. and HTC Corp.

Brad Smith, Microsoft general counsel: "our most important Android patent licence to date," said on Twitter.

Twitter does not pay royalties to Microsoft, yet
RBC Capital Markets estimates the royalties to be between US$5 and US$15 per device sold.

If only half of the 19 million smartphones Samsung sold during its most recent quarter were running Android, Microsoft would have made between US$50-million and US$150million..

Not bad for MSFT. Very bad for eevryone else.

Motorola Mobility Holdings Inc. is the only U.S.-based Android maker without a Microsoft licence. Microsoft just won a motion last month to have an ongoing patent lawsuit moved to its home turf in Seattle

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Germany Says "No Mas", No More Bailouts; Cannot Risk Credit of Germany's State

Excellenet commentary from Ambrose Evans-Pritchard today on the misundersdanding of yesterday's approval in Germany.

"The significance is entirely the opposite. The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.

Horst Seehofer, the leader of Bavaria’s Social Christians, said his party would go "this far, and no further".

There can be no question of beefing up the EFSF to €2 trillion or any other sum, whether by leverage or other forms of structured trickery. "The financial markets are beginning to ask whether Germans can afford all this help. We must not risk the creditworthiness of the German state," he said.

The best-read story in today’s Handelsblatt is the mounting rebellion against the EFSF in the Bundesrat, the German senate representing the interests of the regions. While this chamber does not have the power to block budget deals, it has begun to express deep alarm about the drift of events.

Marcel Huber, Bavaria’s Staatskanzleichef, gave an explicit warning that the Free State of Bavaria will not take one step further towards an EMU fiscal union or debt pool.

“A collectivisation of debts will under no circumstances be accepted. We oppose credit lines for the EFSF or leveraging through the ECB. Our message is simple and clear.”

Profound Changes Have occurred in Germany

"In a sense, the Bundestag vote was much like the ruling by the Constitutional Court earlier this month. It too said "Yes" to the bail-out machinery, but that was not relevant fact. What mattered was the Court’s implicit warning that Germany had reached the outer boundaries of EU integration, that German democracy is under threat, and its explicit warning that the Bundestag’s fiscal powers could not be alienated to Brussels.

Something profound has changed. Germans have begun to sense that the preservation of their own democracy and rule of law is in conflict with demands from Europe. They must choose one or the other."

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Inflation Surges in The Eurozone

Bad news for those countries wishing to print more money. Eurozone inflation has risen sharply and  unexpectedly to 3%, a three-year high of 3 per cent.

In addition, it will be very difficult for the ECB to cut interest rates now.

In England, Economist Spencer Dale, one of the more hawkish members of the Bank of England’s interest rate setting Monetary Policy Committee, told the Daily Mail   that he expects inflation to rise to 5% from its current level of 4.5%.

The Bank’s target was 2%.

Read more:

The surprise rise in annual inflation strengthened the case against an ECB interest rate cut at its meeting next week, although the euro’s monetary guardian is expected to press ahead with measures to provide extra liquidity to the eurozone banking system.

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Roubini: ESPF III Will Have To be $2T Euros

EFSF I was 250 billion euros; EFSF II is 440 billion but isn't enough. EFSF III will have to be 2 Trillion euros plus to bailout Italy/Spain.

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Thursday, September 29, 2011

QQQ, Nazdaq Composite: Bizarre Chart

As if things could not any weirder.

Look at the two parallel lines the two day chart:

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Banks Force Spain To Cancel Its Biggest IPO Because It Would Take Money Away From Banks

Its is quite stunning that what would have been Spain's biggest ever IPO was cancelled due to bank pressures as they were afraid people would take money away from their coffers to buy the IPO shaes..

The ruling Socialists abruptly cancelled plans to boost public coffers by selling part of the state lottery for up to 9 billion euros (US$12 billion), "under pressure from the centre-right opposition party and banks fearing they would be choked of funds, market sources said" (Reuters) .
The IPO was fiercely opposed by Spanish banks involved in the sale, Santander and BBVA , which saw Loterias as a "direct rival to their need to bolster capital, by attracting would-be investors away from their deposits".

"I know for a fact that pressure from the banks involved is the reason behind this decision. The banks need capital to shore up their balance sheets and Loterias was direct competition. It would have attracted investors who would otherwise have opened deposits which the banks badly need," said a fund manager at one of Spain's largest institutions".

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Fed's Fisher: Operation Twist Likely Ineffective, May Well Work Against Job Creation

The Dallas' Fed's President Fisher said in a speech today in Dallas that he voted againt  operation Twist “a strategic decision where I did not feel the benefits outweighed what I perceived to be the costs,” in particular, being conterproductve to job creation. Well, this would be a major effect indeed.

Presidents Charles Plosser of Philadelphia and Narayana Kocherlakota from Minneapolis also dissented

“My fundamental concern is about the efficacy of these initiatives,” “nothing more than pushing on a string”

Atlanta's Fed's President Dennis Lockhart said Operation Twist will probably "give no more than a slight boost to the U.S. economy". “The transmission mechanism for monetary policy remains somewhat impaired, and for this reason I am not expecting large gains from the Fed’s most recent action,” “It’s realistic to expect modest positive impact from this program.”
Fisher also commented about the U.S. economy  “it’s weak. Businesses are on pause. Customers and consumers are on pause. Uncertainty about the future is rampant and uncertainty undermines confidence.”
“There’s lots of liquidity,”  “You cannot rely on the Federal Reserve to do it all.”

Fisher also discussed conversations with business people who told him that a plan like Operation Twist would signal the FOMC’s concerns about a worsening economy and give people incentives to hoard savings, and that would complicate the Fed’s future decisions, as well as suppress bank earnings.

“There is a significant risk that the policies recently undertaken by the FOMC are likely to prove ineffective and might well work against job creation,”

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Bernanke Tells One Truth About The Unemployed, Too Much Time Has Already Passed

Referring to long-term unemployment is a "national crisis", Federal Reserve Chairman Ben Bernanke said Wednesday suggested once again that Congress should take further action to combat it as well as lawmakers provide more help to the battered housing industry.

Bernanke noted that 45 percent of the unemployed have been out of work for at least six months.

"This is unheard of," "This has never happened in the post-war period in the United States. They are losing the skills they had, they are losing their connections, their attachment to the labor force."

In that he is absolutely right, and that is a huge crisis, which unfortunately has been going on for too long, and for way too many it's too late to fix.

That is a calamity.

In his speech, Bernanke also said the United States and other rich nations could re-learn a few lessons from fast-growing developing nations: successful emerging economies such as China had adopted disciplined budget policies, embraced freed trade, made public investments and supported education.

"Advanced economies like the United States would do well to re-learn some of the lessons from the experiences of the emerging market economies, such as the importance of disciplined fiscal policies,"

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France's Budget First To Cut Spending Since... 1945!? With Elections Coming?

France "proudly" presented next year's budget as "the first to cut spending since World War II".
However, economists balked at the claim and said the cuts in the 2012 budget are not substantial enough to meet deficit targets laid out by the government -- or to reduce the country's debt load.

The Budget Ministry said that "Public debt reduction is a priority. It happens by first reducing the public deficit,"
Facing elections soon, skepticism abouds that they will really cut spending.

Budget Minister Valerie Pecresse: "It's a historic moment: For the first time since 1945, public expenditures year-on-year will go down,".

France hasn't balanced its budget in three decades and has for years flouted EU rules that require members to keep their deficits under 3 percent of GDP.
France's own bond yields -- the interest rate investors demand to lend a country money -- rose this summer amid fears its debts were too high.

"In response, the government unveiled a series of measures -- mostly new taxes -- that were reiterated in Wednesday's budget. Among other measures, it plans to increase taxes on the wealthy, levy a tax on sugary drinks and close loopholes.

It also promised to cut around 30,400 public jobs next year by not replacing one in two posts vacated by people retiring.
Budget Minister Valerie Pecresse told her colleagues Wednesday that -- including the austerity measures -- next year's deficit should fall to 80.8 billion euros ($109 billion) -- that's nearly 15 billion euros ($20.4 billion) smaller than this year's. (Business Week)

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Amazon's Fire: RIM Boom or Bust: Profit Either Way

Amazon's Fire may well signal the Playbooks' demise. However, RIM still releasing many new products this fall ans still makes a lot of money on its Blackberry, with many loyal users, corporate and otherwise.

Which way will it be for RIM?

Below are straddles (strangles) for October, November, December, and January, which allow an investor to profit either way if the stock moves the indicated amount. The longer term versions are purposedsely way OTM (high risk, high gain).

Please do your own due diligence. Options are dangerous and may cause 100% loss.

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Wednesday, September 28, 2011

Greece Tax Hikes: Greek Deputy Prime Minister Can't Pay His Own Taxes

Theodoros Pangalos, Greece's deputy Prime Minister said on Television today: "I believe that the tax limits of Greek society have been exhausted. I would say they have been exhausted for some time,".
Mr. Pangalos is a 73-year-old Sorbonne-trained economist listed as owner or part owner of eight properties and farmland in greater Athens and several other parts of Greece.

"The property I own was purely obtained through inheritance. Personally, I have never bought anything ... I will be obliged to sell some of these properties. There is nothing else I can do," Pangalos said. (Global TV)

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Hague: Germans Are Going to Subsidise Those Countries For a Long Time to Come, For The Rest of Their Lifetimes

Brittish Foreign Secretary William Hague says he has been proved right by the debt crisis after calling the eurozone a "burning building with no exits" in 1998 (while Conservative leader).

He also says the Euro is a "burning building with no exits". From Daily Mail:

You can have burning buildings where they manage to put out the fire or control it or get more room or something.

'I might take the analogy too far but it’s not built with exits so it is physically a difficult thing to leave a currency without any plan to do so I don't think we can advocate that but they are on very unpalatable choices and it clearly means that being in the Euro that Greeks, or Italians or Portuguese have to accept some very big changes in what happens in their country, even bigger than if they weren’t in the Euro.

'And Germans will have to accept that they are going to subsidise those countries for a long time to come really, for the rest of their lifetimes.'

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Amazon Kindle Fire Review: RIM's Playbook Kiss of Death, And Threatens Apple's Model

Amazon unveiled its Kindle Fire today. Forget the old Kindle eReaders, this is no ordinary "kindle".

Let's start with the negatives. This new devide shares a couple of shortages that its predecessors (iPad 1 and Playbok) have: lack of a camera, and lack of access to the OS (open architecture), this might be addressed by hackers in no time, and more debatably, lack of 3G.

Now, the the big positives, and there are many.
  • Powerful (dual core CPU)
  • Cheap ($199, with wi-fi)
  • Light, good battery

For Amazon, the huge plus is that the device integrates access to Amazon's content, including, books, musioc, and videos. This is probably even better than Apple's model, and infinitely better than RIM or any other tablets. The low price is also a major hit to Apple.

This product can be a huge differentiator for Amazon. I would expect very good news from Amazon due to this device in the future.

Very good move from Amazon. Just waiting from a pullback. Keep an eye on the stock.

Features (per Amazon site):

Stunning Color Touchscreen: 7" vibrant color touchscreen that delivers 16 million colors in high resolution. Kindle Fire uses IPS (in-plane switching) technology - similar technology to that used on the iPad - for an extra-wide viewing angle, perfect for sharing your screen with others.

Magazines in Rich Color: Enjoy your favorite magazines with glossy, full-color layouts, photographs and illustrations. Choose from hundreds of titles, such as Bon Appetit, Elle, and Oprah. Special editions of titles like Vanity Fair, Wired, and GQ come with built-in video, audio and other interactive features.

100,000 Movies and TV Shows: Over 100,000 movies and TV shows, including thousands of new releases and your favorite TV shows, are available to stream or download, purchase or rent - all just one tap away. Amazon Prime members enjoy unlimited, commercial-free streaming of over 10,000 popular movies and TV shows.

Fast, Dual-Core Processor: Kindle Fire features a state-of-the-art dual-core processor for fast, powerful performance. Stream music while browsing the web or read books while downloading videos.

Your Favorite Apps and Games: Angry Birds, Plants vs. Zombies, The Weather Channel and more, plus a great paid app for free every day. All apps are Amazon-tested on Kindle Fire for the best experience possible.

Ultra-fast web browsing - Amazon Silk: Amazon Silk is a revolutionary, cloud-accelerated browser that uses a "split browser" architecture to leverage the computing speed and power of the Amazon Web Services cloud. Supports Adobe® Flash® Player. Learn why it's so fast.

Millions of Books: Read bestsellers, children's books, comic books, and cookbooks in vibrant color. The Kindle Store offers over 1 million books, including 800,000 titles at $9.99 or less. In addition, over 2 million free, out-of-copyright, pre-1923 books are also available such as Pride and Prejudice. Learn More

Free Cloud Storage: Forget about memory - Kindle Fire gives you free storage for all your Amazon digital content in the Amazon Cloud. Your books, movies, music and apps are available instantly to stream or download for free, at a touch of your finger.

Your Favorite Children's Books: Kindle Fire is great for parents and kids. Stir your child's imagination with over 1000 beautifully-illustrated children's books, including favorites like Brown Bear, Curious George, and Circus Ship.

17 Million Songs: Stream your music library from Amazon Cloud Drive or download to your device and listen offline. Looking for new music? Discover over 17 million songs in the Amazon MP3 Store.

Extra Durable Display: Our state-of-the art Kindle Fire display is chemically strengthened to be 20 times stiffer and 30 times harder than plastic, making it extra durable and resistant to accidental bumps and scrapes.

Email: Stay in touch using our built-in email app that gets your webmail (Gmail, Yahoo!, Hotmail, AOL etc.) into a single inbox. Import your messages and contact lists from other email accounts. Additional email apps are available in our Amazon Appstore for Android.

Amazon Whispersync: Like Kindle e-readers, Kindle Fire uses Amazon's Whispersync technology to automatically sync your library, last page read, bookmarks, notes, and highlights across your devices. On Kindle Fire, Whispersync extends to video. Start streaming a movie on Kindle Fire, then pick up right where you left off on your TV - avoid the frustration of having to find your spot. Learn more

Read Your Documents: Kindle makes it easy to take your documents with you. You can e-mail documents - including Word, PDF and more - directly to your Kindle so you that you can read them anytime, anywhere.

And a "Free Month of Amazon Prime", to generate even more cash for Amazon. "Experience the benefits that millions of Amazon Prime members already enjoy, including unlimited, instant streaming of over 10,000 popular movies and TV shows and Free Two-Day Shipping on millions of items."

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Greek 1-Year Bonds Tell The Story

3-year chart:

(click to enlarge)

1 month chart:

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Sprott Blasts Dimon in Carney vs Dimon

Mr. Sprott wrote an open letter to The Globe and Mail backing Mr. Carney.

"Dear Sir,

I wish to express my firm support for Mark Carney’s recent financial regulation speech in Washington. Despite Mr. Dimon’s alleged criticism of Mr. Carney’s remarks, the fact remains that we would not be in the present situation today were it not for the excessive overleverage and flagrant misappropriation of capital undertaken by the world’s largest banking corporations.

It has been our view for many years that the world’s largest banks are operating with leverage ratios of over 20-to-1. We are now in an environment where all financial assets, including currencies, can change 5-10% in a single week (many change by that percentage in a single day – see the Swiss Franc’s 9.5% depreciation against the US dollar on September 6th, 2011). With volatility of that magnitude, the practice of maintaining such leverage is not only imprudent, it is irresponsible.

We have long maintained that all banks should make stronger efforts to bolster their capital reserves. It should not be the responsibility of government to rescue these corporations if they continue to make the same mistakes, and engage in the same risks, year after year. In that vein, we must also question why banks were allowed to reinstate their dividends so quickly after the 2008 crisis. In France, for example, where French banks are currently experiencing deposit withdrawals, one wonders how much stronger they would be today had they initiated a more prudent recapitalization policy.

In our opinion, the current economic crisis is still, at its heart, a banking crisis. Mr. Dimon’s alleged criticism reflects his inability to acknowledge this. Banking regulation is a wholly crucial issue and we stand behind Mr. Carney’s attempts to address it.

Yours sincerely,

Eric Sprott, FCA

Sprott Asset Management LP "

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Germany's Eureca Secret Plan For Greece: Is Greece East Germany?

The answer of course with regards to fiscal austerity, is no.

As Germany said that Tim Geithner's "leverage" plans was "stupid", French paper La Tribune reported that that Germany may have a secret plan to rescue Greece. The plan is simlar to what they did for East Germany,  putting most of the country’s public assets in to structure that would be privatized.

La TribuneLe plan secret allemand pour sauver la Grèce

The assets, not exactly sure what they are (banks, real estate, telephone, ports, ...) would be purchased for approximately 125 Billion euros.  Then the country’s bonds would be removed from the ECB and the EFSF. As a result of this accounting trick, Greece’s debt to GDP ratio would fall to under 90% (today it is 145%).

Thus Greece would be allowed to... borrow again.

You cannot make this stuff up.

They also talk about new "infrastructure" investment in Greece, around 50 Billion euros, to spurr growth.

Then perhaps they would do the same in Italy, Spain, et. al. (and would own the whole continent eventually?).

From the paper (Google translation):

"Is there a credible alternative to the plans being considered for the rescue of Greece, that would solve the issue of debt without causing failure, and sustained the country emerge from the spiral of recession and social disorder?

Difficult equation and do not include the plans being discussed today. This plan exists. Called "Eureca" was developed by consultants very influential with the government of Angela Merkel, led by Martin Wittig, CEO of Roland Berger. It is divided into six main phases, which can be summarized as follows:

1. Greece confine all of its public assets (banks, real estate, telephone, port ...) in a common structure, a sort of equivalent of the Treuhand in Germany established in 1990 to privatize some 8,500 East German companies, these assets are estimated at 125 billion euros, according to the valuations already known on a number of properties listed for privatization "official".

2. This structure is purchased by a European institution, financed by the states, whose head could be located in Luxembourg, close to that of the European financial stabilization. This structure is responsible for guiding the privatization of these assets, with a deadline of 2025 to unwind the transactions (which is much longer than the life of the Treuhand, which closed in 1994, although a number of operations were finalized during the year 2000).

3. The 125 billion euros and are released to Greece to buy back its bonds to the ECB and EFSF, which has the immediate effect of reducing the 88% debt / GDP ratio, rather than 145% today. Exposure of the ECB at the Greek debt is reduced to zero, which can only exercise a calming effect on European taxpayers ... Interest rates on Greek debt fell by 50%, allowing to return to Athens possibly on the market.

4. This European institution invests 20 billion euros in restructuring segregated assets to increase their value by about 50 billion euros. The amount of these investments can be increased from 10 to 15 billion from EU structural funds that Greece can not use right now. This injection of money into the economy, equivalent to 8% of GDP, loosen the noose around the Greek economy, and puts the country on the path of growth, about 5% annually over the past three or four years instead of 5% of a recession it faces today. With the increase in tax revenue thus generated, Greece is engaged in a program to repurchase its debt of around 1% of GDP per year, which makes the board, in 2018, to below 60% of GDP.

5. Privatization transactions to be unwound in 2025. If these operations emit a profit, it is paid to Greece, net of interest and management fees. If they give off a loss, Greece supports it, but economists Roland Berger calculated that, even if no privatization was carried out (which is an extremely unlikely event), the debt of Greece down again mechanically under 70% of GDP, which is an improvement over the situation today.

6. This plan wiped out the gains of speculators who do not believe in saving Greece and the euro area and betting on a collapse of the Greek bond prices, but also Spanish, Italian and Irish and who will have lower spreads CDS.

What are the chances of this program to be adopted by Greece and the European governments, working on other tracks? It relies heavily on a bet: that of collecting the bulk of the Greek public assets, a list much larger than that Greece has made public as part of the privatization plan of 50 billion euro in the agreement of July 21. It is the belief that privatization and out of central Greece (although the Greek capital are given a priority in transfer operations) will escape the risk of corruption and opacity.

The plan has other virtues: it offers a new path as Europe goes round in circles since the month of July on the Rescue of Greece in Athens it avoids an austerity of the most serious and gives time to implement structural reforms that the government is committed to achieving and it creates immediate growth and allows Greece to re-enter the market and it removes the prospect of a systemic crisis of Europe and It discredits the speculators. "Our recovery plan pursues a clear objective: to provide financial assistance to Greece to restructure its balance sheet and generate sustainable growth," said Martin Wittig, CEO of Roland Berger.

Even if the plan is "carried" by a group of consultants, it is very likely that it has not been designed outside the circle of Angela Merkel and experts from the troika. Roland Berger is also a good knowledge of the subject of privatization since it was also the group that was to maneuver in the conduct of operations of the Treuhand ... He will have to reckon with the opposition, however, banks and financial markets, the former because they probably have their idea on the privatization of assets Greek, the latter because the current situation of uncertainty allows multiple games and remunerative

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Inflation Accelerates in Germany; German Bonds Fall

Throwing yet another wrench at any new bailout plan, spcially the leveage kind, German 10-year bonds dropped for a fourth day after inflation in five states accelerated in September.

The annual inflation rate jumped to 2.8 percent from 2.3 percent in North Rhine-Westphalia, and rose to 2.3 percent from 1.9 percent in Hesse.

Inflation in the in Saxony, Bavaria and Brandenburg also rose.

Bloomberg: "The annual inflation rate quickened to 2.8 percent from 2.3 percent in North Rhine-Westphalia, and to 2.3 percent from 1.9 percent in Hesse, the states’ statistics offices said today. The rates in Saxony, Bavaria and Brandenburg also climbed.

Five-year notes fell as investors bid for fewer securities than were available at an auction of the debt today. Quickening inflation makes it less likely the European Central Bank will cut interest rates at its policy meeting next week. Greek two- year notes dropped as German Chancellor Angela Merkel signaled policy makers may review the terms of the Mediterranean nation’s second bailout.

“The market could see today’s inflation numbers as a good reason for the ECB to explain that a rate cut is not needed in the short term,” said Annalisa Piazza, a fixed-income strategist at Newedge Group SA in London. “German paper is quite expensive relative to other European countries, so demand is not as strong as it used to be.”

The 10-year German yield rose three basis points to 2 percent at 11:44 a.m. in London, the first time it has breached that level since Sept. 15. The 2.25 percent security due September 2021 lost 0.310, or 3.10 euros per 1,000-euro ($1,368) face amount, to 102.265".

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Tuesday, September 27, 2011

The EIB To leverage to Trillions?! This is Who Owns The EIB

From the EIB site:

Note Germany, Italy And Spain way up there. In addition, some non EuroZone members too (Sweden, Denmark).

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Rosenberg: If This Leveraged European Plan is True, The Euro Has to Be A Gigantic Short Here; Desperation

From David Rosenberg today: "No doubt the market wants a solution. And it wants massive amounts of money thrown at the problem, regardless of who pays (so long as it's not the banks holding the debt!). But a proposal, as we have seen, is one thing — getting it in place and approved is another. How big is it? How flexible is it? What will it buy? What are the dilution risks for the recipient banks? Is it legal, specifically under the German Constitution? These are all important questions.

Not only that, but it is surreal actually that the markets could rally on a leak to a CNBC economics reporter on a plan that is still bereft of details (classic shoot first, ask questions later ... like the ballyhooed rumour of China stepping into the fray with a bailout package for Europe). So if this leak is true, Europe is going all in with leveraged bets that will water down the credit quality of both France and Germany. So what this means is that there will be no strong fiscal credits left (the euro has to be a gigantic short here) in the region".

"If my reading of history is accurate, the experience with SPVs hasn't been so successful. The blown opportunity to let Greece default, ring fence it, and have individual countries support their banks I think would yield much more desirable results, even if painful over the near-term. And there are more complications. So the EIB will take the beaten-up PIIGS bonds off the banks' balance sheets? But at what price? Par? Market? Somewhere in between? The banks don't take a haircut at all on this? And if this is all an attempt to prevent banks from taking a hit, I just can't see how German taxpayers are ever going to be willing to bailout Spanish banks. This all smacks of desperation to me and I think there would be a taxpayer revolt in both Germany and France over it".

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BAC: Is Bank of America Going Under?

Or will it rise from the ashes?

With memories of Lehman and Bear Stearns, here are straddles (strangles) for BAC for October, November, and December. Computed with StraddlesCalc Tool, which shows the required move for each position to achieve profitability.

Very high risk, and potential high gain, perhaps a lottery ticket. Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Gold Soars: Physical Buying of Gold "Exceptional"

Gold has rebounded sharply today, taking the goldminers up with it. Investors used the last few days to load up on physical gold, to very hefty profits today.

Reuters reports today that physical gold buying has been "xceptional"

"...Holdings of the largest, New York's SPDR Gold Trust, declined some 5-1/2 tonnes but are still up 1.2 percent so far this month.

Most major funds are still in positive territory for September in percentage terms, with the iShares Gold Trust and ETFS' Swiss Gold fund up 0.5 percent.

Meanwhile, heavy buying of physical gold stocks -- often a price-sensitive area of demand -- suggested that Monday's price fall had whetted investors' appetite for the metal.

Swiss bank UBS said it had seen very strong physical buying in Asia, particularly number one bullion consumer India, on Monday. "To be clear, physical demand right now is not just decent, it is exceptionally strong," the bank said.

Other precious metals also bounced back after Monday's hefty losses. Silver, which slid as much as 16 percent to a 10-month low of $26.04 an ounce on Monday, rose more than 9 percent to a high of $33.48 an ounce.

Spot platinum was up 1.3 percent at $1,575.50 an ounce, while spot palladium was up 3.7 percent at $650.22 an ounce.

Gold's premium over platinum stood at around $90 on Wednesday, with a ratio of 1.06, its highest in 20 years".

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G20 Countries Have Lost 20M Jobs and May Lose Another 20M by End of 2012

A study by the International Labour Organization and Organisation for Cooperation and Development (OECD) presented on Monday in Paris says that the risks of prolonged unemployment are growing in the G-20. The study indicates that the G-20 lost 20 million jobs with the financial crisis of 2008 and risk losing more than 20 million by the end of 2012.
"We are very concerned about what we are seeing in the numbers," said Stefano Scarpetta, chief analyst jobs in the OECD, just before a two-day meeting to be held in the French capital with the labor ministers of 20 countries. "Employment and social policies should be the focus of a policy to combat the current situation."

The recent expansion of employment in the G-20 is insufficient to offset the 20 million jobs lost in the 2008 economic crisis, said Scarpetta. Employment grew 1%, but it requires an annual expansion of at least 1.3% to fill the gap of 20 million jobs in the G-20 2015. Scarpetta said the situation tends to worsen with the current economic slowdown.

"If the employment rate grows by 0.8% by the end of 2012, now a possibility in mind, then the lack of jobs will grow by another 20 million jobs for a total of 40 million in the G-20" , said the ILO and OECD.

The study says that 200M are currently unemployed, at levels very close to the great depression.

The performance of labor markets was very different from country to country. While some countries such as Brazil, Germany and Indonesia had a strong growth in employment and significant falls in unemployment, others such as Argentina, Australia and Russia showed little or no growth in employment, and another group of countries and regions still have persistent high unemployment such as Spain, the United States, United Kingdom, South Africa and the European Union.

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Germany's Top Judge Issues Stern Warning: No New Financial Powers To EU Without New A German Constitution

The Telegraph reports that Andreas Vosskuhle, head of the German constitutional court, said "politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent".
"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution),".

"There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people,".

The extraordinary interview comes just days before the Bundestag votes on a bill to revamp the EU's €440bn bail-out fund (EFSF), enabling it to purchase EMU bonds pre-emptively and recapitalise banks.

Tensions are running high after it emerged over the weekend that officials are working on plans sketched by the US Treasury and the European Commission to "leverage" the firepower of the EFSF to €2 trillion, in conjunction with lending from the European Central Bank.

Germany's politicians are suspicious of all the current talk about new bailout plans, whatever name they might be given. Carsten Schneider, finance spokesman for the Social Democrats, demanded that Chancellor Angela Merkel and finance minister Wolfgang Schäuble clarify their "true intentions " before the vote on Thursday.

"A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable,".
"Our judgment makes clear that the Bundestag cannot abdicate its fiscal responsibilities to other actors. And no permanent mechanism may be created that entails taking over the liabilities of other states,"

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Monday, September 26, 2011

Kodak Plunges: Profit Either Way

Eastman Kodak's stock price has plunged today on news it needed to access a credit line.

Straddles allow an investor to profit either way. Here are both ITM and OTM versions:

Huge moves needed? You bet possible? You bet.

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss. Computed with StraddlesCalc Tool

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The Top 20 World's Most and Least Polluted Cities

The World Health Organization released today the list of world cities pollution.

The worst:

The best:

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Latest Euro Plan Will Not Work, Markets Will Crash, Be Prepared

That is the view from Alessio Rastani interviewed by BBC, who puts it quite simply in terms everyone can understand. He says markets are ruled by fear, institutions do not buy ths plan, market is toast, will crash, Euro latest plan, with 50% haircut on Greece or not, will not work.

He says the governments do not rule the world, the Goldman Sachs et al. do".

"Be prepared, act now to protect your assets"

However, there is also opportunity to make money, hedging, investing in bonds. "Anybody can make money from it".

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JPM"s Dimon Attacks Marc Carney; Carney Infers Bankers Are Troglodytes

The FT says it was a tirade against well-respected Marc Carney. According to The Globe and Mail's  it appears that to have been more a full-on assault this weekend meeting in Washington.
Mr. Dimon's "tirade: occurred in a room filled with bankers and finance officials.

Mr. Carney was highly critical of bankers in a speech Sunday morning to the International Institute of Finance. “In no other aspect of human endeavour do men and women not strive to learn and improve,” “The sad experience of the past few years shows that there is ample scope to improve the efficiency and resilience of the global financial system.”

Now a troglodyte is a "member of a prehistoric race of people that lived in caves, holes and dens. Has also been a term used to describe a person who is a recluse, a brute, ill-mannered or simply out-of-date".

Carney: “It is difficult to believe that prolonging this implementation phase even further would have material impact on real economic outcomes,” Mr. Carney said. “If some institutions feel pressure today, it is because they have done too little for too long, rather than because they are being asked to do too much, to soon.”

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Perfect Storm For Gold and Silver; Biggest Plunge in 28 Years; ECB's 500 Tons Annual Sale End This Week; Investors Are Running

BNN had a great interview from George Gero this morning on the reasons on the recent gold and silver plunge: Gold has had many many headwinds, margin increases on both gold and silver, and institutions selling gold to stem losses. The ECB annual 500 tons of gold sales each September end this week, plus options expirations. Well, that was a very good time to take profits.

Watch video.

Article here.

"Gold was set for its biggest three-day loss in 28 years on Monday, as investors fled commodity markets in a scramble to secure cash in the face of mounting fear over the impact of a potential Greek debt default on the rest of the euro zone. [...]

In the last three days alone, gold has fallen by nearly 10 percent in its largest three-day slide since February 1983 and implied volatility has risen to a 2-1/2 year high.

Spot gold was down 3.0 percent early this morning at $1,621.49 US an ounce, having fallen earlier by as much as 7.4 percent, putting the difference between the intraday high and low at $128.40, the largest daily price swing on record.

"It shows you that at times of extreme stress, there is not a suitable substitute to liquidity and although gold is liquid by metal standards, in comparison to treasuries, when you get this kind of flight to cash, then it really is cash that counts and that means U.S. dollars," said Credit Suisse analyst Tom Kendall.

"The markets are going to continue to react this week to the political situation within Europe and I don't see any quick resolution or stimulus coming to the markets."
"The rise in volatility taking place in the gold price was clearly an indication that gold was no longer a low-risk asset. So there are a few signs there that would have given you pause for thought, but inevitably when the move happens, everyone is taken a little bit by surprise," said Natixis commodities strategist Nic Brown.

"I would suggest that part of what is happening is a collective move away from commodities by investors. The fact that there is carnage going on across the commodities spectrum indicates there are a fair few investors who are getting cold feet at this stage and that has hit some precious metals disproportionately," he said.

Last week's data on investment in U.S. gold futures shows speculators cut their holdings to their lowest level in over two years, as reflected by the fall in net non-commercial open interest on COMEX.

[...] Gold is often sold off as a means of raising dollars when funding conditions deteriorate, much as they did in late 2008 with the onset of the credit crunch that ensued from banks withholding lending because of their concern over counterparty exposure to toxic U.S. mortgage-backed assets.
Silver came under fire, falling by as much as 16 percent at one point in the day and set for its worst three-day fall on record, having lost more than 25 percent in this period.

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Gold and Financial Options: AUY +100% ROI

Here is the current situation of our gold and XLF straddles. AUY (Yamana) position in particular doing extremely well.

Computed with StraddlesCalc Tool

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Friday, September 23, 2011

Greece's Finance Minister Admits Default

Brazilian newspaper O Estado de Sao Paulo reports today that The Greek finance minister, Evangelos Venizelos, told lawmakers of his party that the country faces the risk of a disorderly default, according to the Friday edition of a Greek newspaper. The publication adds that the minister has suggested a possible 50% discount on the debt. According to the newspaper Ta Nea, Venizelos presented to parliamentarians from the Socialist Party three possible scenarios for Greece.

In the first scenario, Europe would follow through with the commitments made at a summit July 21, extending a bailout plan to the Greeks, worth € 109 billion, but the offer including the country's creditors for a voluntary program exchange of debt.

In the second scenario, Greece could not reach an agreement with its international creditors in the coming days, what would the Greek government to run out of money in the middle of October and would require a disorderly default.

Without citing sources, Ta Nea reported that Venizelos also said a third option for the country, which would include an orderly restructuring of the Greek debt, but with lenders facing a loss of 50%. Such a scenario would be agreed with the creditors and allow the permanence of Greece in the euro area, the newspaper said. Ta Nea adds that this scenario seems to be gaining ground elsewhere in Europe.

The Finance Minister said, however, that it is counterproductive for the media to distribute information suggesting that the country set a default rating, with 50% losses to creditors. Although it has not directly denied it, Evangelos Venizelos reiterated Greece's commitment to achieve the deficit targets and to continue with an ambitious agenda of reform, as promised its European partners.

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Thursday, September 22, 2011

Bernanke Twists, Market Shouts; The Bears Run Wild: Results +35% in 1 Day

Bernanke did it, but he actually did not do much, other tha na whole lot of damage to stocks and gold.

This is the current update on the straddles we posted yesterday, as of 12:30PM.

Not bad for 1 day.

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Wednesday, September 21, 2011

Investing For the Bernanke and the FOMC Meeting Crucial Decisions On Twist and Shout

The FOMS will release its latest decision at 2:15PM. Will it be operation twist (and shout), or QE3, or a major disappointment?

Below are straddles for gold and general market stocks, computed with the StraddlesCalc tool.

Here are two interesting ones I am doing for XLF, both ITM and OTM versions.

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Tuesday, September 20, 2011

Roubini Strikes Again: Greece Should Default And Quit The EU

Nouriel Roubini  was quoted by CNBC and FT today stating the obvious that everyone knows: Greece to default and exit the euro.
"The recent debt exchange deal Europe offered Greece was a rip-off," "If you take into account the large sweeteners the plan gave to creditors, the true debt relief is close to zero."
According to him, the major problem is a lack of growth and competitiveness, which can only be overcome by currency depreciation - something that cannot hapen if they remain with the Euro
"A return to a national currency and a sharp depreciation would quickly restore growth and competitiveness, as it did in Argentina and many other emerging markets that abandoned their currency pegs,"
"Overnight, the foreign liabilities of Greece's government, banks, and companies would surge,". "Yet these problems can be overcome. Argentina did so in 2001, when it converted its dollar debts into pesos. The U.S. did something similar in 1933, when it depreciated the dollar and repealed the gold clause."

"Euro zone financial institutions would need recapitalizing and draconian measures would need to be imposed on the Greek banking system to avoid its implosion, according to Roubini, who believes the short-term and long-term benefits for Greece are better than the current path that Athens finds itself on".

"Via nominal and real depreciation, the exit path will restore growth right away, avoiding a decade-long depression," said Roubini who warns that contagion for countries such as Italy and Spain is already a reality, and requires liquidity support from the European Central Bank or the European Financial Stability Fund.

"Like a broken marriage that requires a break-up, it is better to have rules that make separation less costly to both sides".

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Brazil To Propose BRICS Help Europe With Billions; Aiming To Save Portugal And Spain

How things change. Brazil will propose to the other BRIC countries that they provide billions of dollars in resources to the International Monetary Fund (IMF) as a way to alleviate the crisis in the euro area.

Brazil's  finance minister, Guido Mantega, will present the proposal this week during a meeting in Washington of the BRICs, the source said on condition of anonymity.

"Giving more resources to the IMF seems one of the most attractive options that we have to help Europe," the source said.

Brazil could provide up to $ 10 billion of its own resources to help Europe through various channels, including the IMF or the purchase of sovereign debt, the source added.

Brazil's contribution alone would certainly be too small to make a difference. But a coordinated effort that includes China and Russia in particular, could have a major impact at the time that investors look to the international reserves of emerging economies such hope of help.

A consensus on a coordinated action seemed to gain ground on Monday. The Russian Finance Minister Alexei Kudrin told reporters that countries with substantial reserves could help bail out the euro zone nations under "certain conditions."

The BRIC countries of Europe were already buying bonds issued by the European Financial Stabilisation Mechanism, the Valor Economico newspaper reported on Monday.

Mantega had earlier proposed that the BRICs make coordinated purchases of European bonds, but the idea met with resistance in other group members, who fear the purchase of risky assets or doubt to be able to help. The IMF would be a vehicle "safer" for coordinated action, the source said.

The proposal would meet the desires of two Brazil. The aid could alleviate the impact of the crisis on the eurozone economies in trouble - especially Portugal and Spain, which have large investments in the country.

Greater participation in the IMF could also increase Brazil's power within the institution. Members of the government of President Rousseff have said they see the crisis in Europe and the United States as an opportunity for Brazil and the BRIC countries gain greater importance in global affairs.

One way for the BRIC countries provide more resources for the IMF could be through "New Arrangements to Borrow" - kind of crisis fund currently has about 591 billion dollars available, the IMF said.

Brazil received direct consultation of European countries regarding the purchase of sovereign bonds, the source said, but international reserves can only be used for the purchase of securities with investment grade

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Monday, September 19, 2011

Currency Wars: Brazil To Propose New Exchange AntiDumping Measures

Brazilian newspaper O Estado de Sao Paulo reports today that, concerned about the effects of the exchange wars on its economy, Brazil will propose  the adoption of a barrier to offset currency devaluations. The mechanism is provisionally named "exchange antidumping" and will be presented at the World Trade Organization (WTO).

Led by the Ministry of Development and the Foreign Ministry, the measure proposes an acceptable band of fluctuation of currencies - which would be determined by such organizations as the International Monetary Fund (IMF). If the band is exceeded, the countries would be allowed to charge an extra import duty to offset the damage caused by the exchange.
"This discussion is ripe for this moment. All countries face the same problem, which is the devaluation of the dollar," said the State Development Minister, Fernando Pimentel. He cited as an example the recent decision of the Central Bank of Switzerland to ensure a high limit for its currency.

The government believes that import taxes in Brazil, which can reach a maximum of 35%, are no longer sufficient to offset the foreign exchange crisis in the post-2008 crisis. The understanding is that countries committed themselves to the current levels of tariffs in 1994, a time of relatively fixed exchange rates.

The ministry has stepped up measures to protect trade, but has noticed that the current rules for antidumping and safeguards only solve specific problems in some sectors. If all antidumpings measures demanded by the private sector were adopted today, only 4% of the import tariff would be achieved.

The initiative to propose an "exchange dumping" occurs at a time when the real currency reached its highest against the dollar depreciation in the year. For Brazil, this is not a discussion of short-term, but rather strategic. It is another example of the shift in trade policy Dilma, considered to be more protectionist than in previous administrations.

To try to slow the strengthening of the real, the government adopted an aggressive policy of buying stocks and raised the tax on Financial Operations (IOF). Last week, it raised the Industrialized Product Tax (IPI) by 30 percentage points for imported cars or those with less than 65% of Brazilian pieces.

Support. Brazilian diplomats have informally sounded the U.S. and China over its support for the mechanism of "exchange dumping" and, at least at this stage, they have not found strong resistance. In practice, the Chinese would be the hardest hit, but they argue that its currency merely followed the devaluation of the dollar.

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Thursday, September 15, 2011

Brazil's CPI Inflation Rises to 7.12%

The Brazilian CB very unxpectedly dropped interest rates earlier this month, at the apparent pressure of the government. The move was hghly criticized as politial as it rusn the risk f unleashing inflations.

The critics got more ammunition today as a measure of inflation jumped to 7.12%. The risk of inflation exceeding the target ceiling in 2011 of 6.5%, is "relevant" in the words of the Coordinator of Economic Analysis of the Getulio Vargas Foundation (FGV) Solomon Frames. He made the comment noting that retail inflation in 12 months, as measured by the family of IGPs is still above 7%. The CPI-10 is up 7.12% in 12 months to September.

Until and including August, the IPCA, calculated by IBGE and used as a reference to the inflation target, is up 7.23% in 12 months. "It is not impossible, mathematically for inflation to drop to 6.5%. But it is very difficult. I think it is an increasingly strong case that it is above target," he said.

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Wednesday, September 14, 2011

Moody Downgrades French Banks Societe Generale and Credit Agrilcole; Warns Of Further Downgrades

Moody's has just downgraded the credit ratings of French banks Societe Generale and Credit Agricole
The agency had put them as well as BNP Paribas on review for downgrade in mid-June.

The rating on Societe Generale's long-term debt rating was cut to Aa3 and Credit Agricole's to Aa1, Moody's warned that both could have their ratings downgraded by a further notch as it assesses "the implications of the persistent fragility in the bank financing markets."

The agency said that BNP's rating also remains under review.

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China to Europe: First 'Put Your Houses In Order"; Do Not Rely On "Bailouts From China"

Rumours that China was about to help European troubles countries were put to rest yesterday after the Chinese premier said economies “must put their own houses in order” and "not rely on bailouts from China".

“Countries must first put their own houses in order,” Wen said at the  World Economic Forum in Dalian, China. “Developed countries must take responsible fiscal and monetary policies. What is most important now is to prevent the further spread of the sovereign debt crisis in Europe.”

What is funny is that more "reports" are today coming about about some other Chinese official saying China want to diversisy its $2T in reserves, from some organization that has no power to dictate so.

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Tuesday, September 13, 2011

Unbelievable Greek Bonds Hit 130%

This is quite astonishing:

And some still claim it won't default.

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Monday, September 12, 2011

Euro-Yen Collapses: 10-Year Low

All the unsurprising news anf rewewed talks that time Greece will default (!), there is an astonishing chart for the Euro in Yens:

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (above chart from MarketClub by INO). For example, for the above, enter symbol FOREX:EURJPY

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Wednesday, September 7, 2011

Greece 1-Year Bonds Now Yields 89%

Please take a look at the chart as of 7:25AM:

Chart from Bloomberg.

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Monday, September 5, 2011

Roubini: This is Not The Time To Be In Risky Assets; Cash Is The Place To Be

Nouriel Roubini is making public comments again, this time saying that the risk of a global recession is greater than 50%.

In addition, he says that the next two to three months are crucial.

“This is not the time to be in risky assets,”. Cash is the place to be

WSJ interview Simon Constable:

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Thursday, September 1, 2011

Brazilian CB Cuts Rates By 0.50%: Brazilians Highly Suspicious of Reasons: Crazy Politicians

The Brazilian Central Bank unexpectedly cut interest rates by a rather alrge 0.50%. The move is officially due to "global slowdown". '"the committee saw a substantial deterioration in the international outlook as the U.S. and Europe struggle with debt and anemic economic growth."

However, Brazilians are highly suspicious of the move and are worried about government pressure (i.e, interference on the CB).

Moreover, new president Dilma Rousseff, wants real interest rates (nominal less inflation) to be 2-3% by the end of 2014. This seems like crazy talk as the currently stands at 6.5% with high inflation risks. For the rates to drop that much it means lowerin the inflation rate, at a time when the WC 2014 and Olympics 2016 is generating a construction boom.

This just seems like crazy politicians, really crazy.
Does this look like inflation is slowing down?

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