Wednesday, November 30, 2011

Europe: Death By Asfixiation (Or Heart Attack First?)

Ambrose Evan-Pritchard today, on Europe's upcoming lost decade, a la Japan

Citigroup's guru Willem Buiter has more or less condemned the eurozone to death by asphyxiation (if it doesn't die of a heart attack first).

In his global forecast for generalized Götterdämmerung in 2012, the Dutch Meister said Euroland will remain in recession for the next two years, contracting by 1.2pc next year and again by 0.2pc in 2013.

Heaven knows what that will do to the South. Dr Buiter said the chance of a euro break-up is low (of course, of course). He assumes that the ECB will blink, acting at the 11th hour as lender-of-last-resort. Well, it had better blink fast.

If his figures are correct, I find it it very hard to see how the eurozone can hold together. Club Med will be in even deeper depression. The debt trajectory will be even worse.

Be that as it may, the Meister and his team said the eurozone will not regain its 2008 level of output until 2016. The overall picture for both EMU-land and Britain will be "similar to, or below" Japan's Lost Decade in the 1990s (though with much higher unemployment than in Japan).

So there we have it. The Japanese handled their mess rather well in retrospect".

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Major French Bank Was About To Fail Today, Thus Central Banks Intervention

David Rosenberg was live on BNN TV at 12:30PM stating that a major French bank was about to fail today, hence the major CB intervention today, including China's. He would not name the bank but said it was one of the big three.

David looks sideways wondering whether he should name the bank or not.

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Fed, ECB, Central Banks Announce Coordinated Actions To Boost Liquidity: Stocks To the Moon (But Think Why This Was Done)

The central banks are saying "we are ready to intervene" shall it get so bad. They are providing cheap U.S. dollars. Fed, ECB, Central Banks of Canada, England, Japan, and Switzerland announced joint action to boost liquidity, addressing pressures in global money markets by lowering pricing on liquidity swap arrangements by 50 basis points.

China lowers reserve requirements, central banks announce coordinated actions to enhance capacity to provide liquidity to global financial system: stocks to the moon. The problem is why this was done, was it because liquidity had dried up and banks were on the brink? Borrowing costs have been lowered by these central banks by 0.50%, to what rate now? "The new interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points, or half a percentage point, from 100 basis points, the Fed said in a statement in Washington"
How much more can they be lowered, another 0.50% to... zero! or else they start paying the banks to borrow money.

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Tuesday, November 29, 2011

Europe's M1, M2, M3 Are Shrinking: Implosion of Banks Moving To Europe's Core

Ambrose Evans-Pritchard from the Telegraph reports that Europe's money supply have begun to decline - in absolute terms. He is referring to M1, M2, M3.

M3 shrank last month by €59B to €9.78T, in "a sign that Europe's long-feared credit squeeze is underway as banks retrench to meet tougher capital requirements".

Quoting Tim Congdon from International Monetary Research: "This is very worrying,"  "What it shows is that the implosion of the banking system on the periphery is now outweighing any growth left in the core. We are seeing the destruction of money and it is a clear warning of serious trouble over the next six months."

Simon Ward from Henderson Global Investors said "narrow" M1 money – which includes cash and overnight deposits, and signals short-term spending plans – shows an alarming split between North and South.

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Canada To Cut Interest Rates; Growth Forecast Drastically Cut

The OECD has warned that Canada should cut its interest rates as it faces significantly deteriorating conditions due in great part to the European mess.

"The risks are skewed to the downside" the Parisbased think tank for the world's wealthy nations cautioned in its latest Economic Outlook. "The outlook for the Canadian economy has worsened significantly."

"If not addressed, recent contagion to countries thought to have relatively solid public finances could massively escalate economic disruption."

The OECD  cut its outlook for growth in Canada for next year down to 1.9 per cent from its previous forecast of 2.8 per cent in May, based on the expected impact of the European debt crisis, a deteriorating external market for its exports made worse by the strong Canadian dollar, and high personal debt loads.

"Persistence or worsening of global growth prospects and financial-market turbulence may lead to a sharper slowdown in exports, while damaging business confidence and investment. A sharp correction in house prices could further (dampen) consumption,"

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Italy's Autions: Still Paying Above 7%; Huge Jumps in Yields Again

We commented on the massive amounts of auctions coming up for Italy. The situation has not gotten any better in spite of all the recent "Europe has been saved" news, and the ECB apparently buying their bonds to keep yields low.

3.5 billion euros of a new three-year bond were sold, 2.5 billion euros of 2022 bonds and 1.5 billion euros in 2020 bonds, a little short of the top range of 8 billion euros for the sale. The three-year bond yield were 7.89% percent while the 2022 bond yielded 7.56%, up from the previous 4.93% (!). and 6.06% on Oct. 28..
Bloomberg: The ECB started buying Italian debt on Aug. 8 to "tame borrowing costs after the 10-year yield had surged to euro-era record of 6.4 percent. After falling to under 5 percent around mid-August, the yield resumed rising and reached a new record of 7.48 percent on November".

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Friday, November 25, 2011

Black Friday: Pepper Spray Increases Sales; XRT ETF

From BNN today:

"The AP reports today that police in Los Angeles are searching for a woman who assaulted other shoppers with pepper spray during a Black Friday sale at an area Walmart. The incident occurred at around 10:30 pm last night when shoppers, full to the point of bursting with dry turkey, sweet potato and marshmallow casserole, warm white wine and the passive-aggressive condescension of their mothers-in-law exploded through the doors in a flat-screen TV feeding frenzy".

Thankfully, those shoppers not directly affected by the pepper spray were able to step over the writhing victims to secure their purchases. Who could possibly have seen this coming?"

Now, others are reporting huge sales on this silliness rush to buy useless stuff, perhaps even the best BF ever. So... I am thinking XRT after the it drops today.

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The Other Huge Elephant: S&P Threatens Japan Downgrade

This is te other, rather huge elephant in the room: S&P ratings agency hasn’t made progress in tackling the public debt burden.
Ogawa, director of sovereign ratings at S&P in Singapore, said that “Japan’s finances are getting worse and worse every day, every second,”. On downgrade: “may be right in saying that we’re closer to a downgrade. But the deterioration has been gradual so far, and it’s not like we’re going to move today.”

Bloomberg reports: "A reduction in S&P’s AA- rating would be a setback for Noda, who took office in September and has pledged to both steady Japan’s finances and implement reconstruction from the nation’s record earthquake in March. It’s unrealistic for Japan to think it can escape the debt woes that have engulfed nations overseas unless it can control its finances, according to Ogawa.

While Japan has enjoyed borrowing costs at global lows for its debt, the International Monetary Fund said in a report released on its website yesterday there’s a risk of a “sudden spike” in yields that could make the debt level unsustainable. Japanese government bonds fell after Ogawa’s remarks, sending 10-year yields to the highest level in three weeks".

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European Yields Soar, 7.90% For Italian 2y, 18% for Portugal

The news is very grim from Europe this morning, as if it could get any worse.

Italy paid a record 6.5% to borrow money over six months.

Italy managed to sell the entire10 billion euros, so it was not a "failed" auction like the German a couple of days ago, but it is not know hw much was bought by the ECB.

Italy 2-Yr Yield hit 7.90%, Belgium 5.22%, Portugal 18.38%; Greek 1-Yr Yield... 310%

Stock futures are well down.

Yahoo: "Traders said the ECB was buying Italian and Spanish bonds in an attempt to shore the market up. But given its reluctance to prop up high-debt euro zone governments, its bond-buying program has been conducted intermittently, and never powerfully enough to provide more than short-term stability."

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Wednesday, November 23, 2011

Markets Tanks: XLF Play Update

Our straddles from yesterday are already in the money, not by much. Note both versions in and out of the money. Another little push wil make them win big, I have actually bought more XLF calls as a hedge. Lots of time on these.

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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Roubini: Euro Contagion is Now Viral; Eurozone Breakup

"Europeans have a plan to have a plan". That won't work...

Yahoo: Nouriel Roubini says about Europe that "money alone is not going to resolve the problems" "contagion is spreading" "The contagion has now gone viral, cross Atlantic and global."
"Most ominously, credit spreads are widening on the sovereign debts of France and Belgian among other core nations. In addition, there are acute signs of stress in interbank lending such as LIBOR and the TED spread while many European banks are facing a shortage of dollars".

"It's a slow-motion train wreck,"

There is "at least a 50% probability" of breakup of the eurozone in the next 2-to-3 years

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Jim Chanos: Chinse Government Doesn't Have Money; Banking System is Built on Quick Sand

Jim Chanos sounds a warning on China, in this Bloomberg interview.

"... because what happened the last two crises, in ’99 and ’04, when non-performing loans went crazy in China without even a recession, the Chinese banking system was not re-capitalized like ours was, it was papered over. Going into this credit expansion, Chinese banks are sitting on lots of bonds from the so-called asset management companies set up in 1999 and 2004, and they are keeping them on the books at par, at full value."

"The Chinese banking system is built on quicksand, and that’s the one thing a lot of people don’t realize. When they talk about the foreign reserves of $3 trillion, what everybody forgets is there’s liabilities against that".

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Tuesday, November 22, 2011

New Tough U.S. Bank Stress Tests: Are They Really Going To Fail The Banks Tested?

It is being reported today that the Fed said  that the 31 largest U.S. banks will be stress tested for their loan portfolios and trading books against a "severe recession and a European market shock". The conditions are actually tough. Given that they may fail under less tough scenario, will they actually make all these banks fail?

The tests will assume:

  • 13 percent unemployment rate
  • 8 percent decline in U.S. GDP

 31 financial institutions are being asked to project revenues, losses and capital positions through the end of 2013 using four different scenarios, two provided by the Fed, and the other two defined by the bank. They take into account loan-loss reserves at the end of 2013.
Each Fed scenario for the U.S. variables includes five measures of economic activity and prices, four aggregate measures of asset prices or financial conditions and four measures of interest rates.
In addition, the six largest banks will also have their trading portfolios tested against a global market shock.
Seeing is believing.

Fed: “The aim of the annual capital plans, which build on the CCAR conducted earlier this year, is to ensure that institutions have robust, forward-looking capital planning processes that account for their unique risks, and to help ensure that institutions have sufficient capital to continue operations throughout times of economic and financial stress,”

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Banking Crisis: ECB Force To Lend A Record 247B Euros to 178 Banks; TED Surges

Reuters reports today on the ECB's operatipns:

"Euro zone banks' demand for European Central Bank funding surged to a two-year high on Tuesday, as fast spreading sovereign debt worries left lending markets virtually frozen and the ECB the only available funding option for many institutions".

The ECB's weekly, limit-free handout of funding underscored the widespread problems on Tuesday with 178 banks requesting a total of 247 billion euros.

This amount is the highest since mid-2009.

IFR strategist Divyang Shah: "We don't need to look far for signs of tension in the money markets, with the ECB acting as the main intermediary with 1) deposits parked at ECB at elevated levels and 2) MRO usage also now increasing sharply,"
"The ECB is the main vehicle through which the money markets are able to make transactions, highlighting that we have not just a liquidity crisis on our hands but also heightened concerns over solvency,"

The TED spread continued to surge higher, reaching a new 2-year high:

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Bank of America Warned Again On Governance, Risk, and Liquidity: Straddles

BAC, Bank of America, whose stock has been severely battered,  had been operating under an MoU since 2009. The memorandum, according to Reuters, said that "governance, risk and liquidity management" were  problems that needed to be fixed. However,  regulators met again with BofA's board recently and said they wanted to see more progress on the bank's compliance with the MoU.

"In the absence of progress, the informal order could turn into a formal and public action, which would likely mean intensified scrutiny and greater restrictions,".

Below are straddles for BAC, computed with StraddlesCalc Tool. Stocks is right between strike prices, great, but risky shall the stock price not move.

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

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Monday, November 21, 2011

Europe, Super Commitee, China, MF Global Have Done It

A big collection of bad news today has done it. The S&P500 and Dow are negative for the year. Europe, Super committee, China, MF Global. It was better to leave money on the bank earning 0.01%.

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Friday, November 18, 2011

Mayhem in Europe and Banks, Print Or Collapse? Using XLF Either Way

Will the ECB print at will and save European banks, causing stocks to skyrocket (at severe costs down the line), or will Europe fall apart?

Below are straddles for XLF, the popular financial ETF, for December. There are two versions, one in-the-money, and one out-of-the money. As long as XLF moves the indicated amount, the positions will be profitable.

Although the moves needed are similar, these are very different beasts with different risks and potential gains. The OTM versions can potentially become much more profitable, but can also drop to $0 (shall XLF end between $12 and $13). The ITM in this case cannot end at $0 but will not appreciate as much. No pain, no gain!

Computed with StraddlesCalc Tool

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

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Why France is So Worried About Italy

The BBC has a wonderful tool out that shows what each country owes to other countries, and their debt to GDP levels.

These are the figures for Italy and France:

You can see the tool here.

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Proof of Concept: Oil Rises, and Collapses, We Profit

Here is the result from our starddles on UCO, from 2 days go. November is on top.

+123% is not bad. Computed with StraddlesCalc Tool

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Oil Leak in Brazil in Chevron Well: Police Opens Investigation Against Company

There is an oil leak 129Km off the coast of Brazil on a well being drilled by Chevron. Transocean seems to be involved as well.

O Globo newspaper today has full page on it:

Just yesterday the company had denied any leaks from the wellhead were taking place:

"Rio de Janeiro, November 17, 2011 - 18:30 - Chevron Upstream Frade Ltda Brazil today confirmed that the cementing operation to seal an appraisal well located near the Frade field is in progress.
The company also confirms that there was never any flow of oil through the wellhead and the most recent monitoring indicates that the lines of the oil oozing near the ocean floor was reduced to an occasional drip".

Occasional drip? Today the Brazilian oil agency says there was  a technical flaw on the well and that it was not due to natural causes, and the government is demanding  the company come and testify.

Brazilian federal police has open an investigation on the case.

O Estado de Sao Paulo today: "The company may have caused an environmental accident in the Campos Basin in Rio, because of an oil spill in a shoe of one of the wells drilled for oil in the area for about eight days.
Federal police in Rio de Janeiro yesterday filed the police report to investigate the cuases of the environmental accident that has occurred in the Campos Basin. Those responsible for the incident may be indicted for pollution offenses and, if convicted, are subject to penalties ranging from 1 to 5 years imprisonment".

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Spain's Total Debt Levels Soar, More Than Italy

Nice piece from Robert Peston, BBC Business Editor. He looks at Spain's total debt level, including government, corporate, and financial. The total: 363% of GDP.

"In 1989, Spain's ratio of government debt to GDP - the value of what the country produces - was just 39%. Its ratio of corporate debt to GDP was 49%, the ratio of household debt to GDP was just 31% and financial sector debt was just 14% of GDP. The aggregate ratio of debt to GDP was 133%.

By the middle of this year, the picture was utterly different. The aggregate ratio of debt to GDP had soared to 363% of GDP.

And it was really from 2000 onwards, the euro years, that Spain really got the borrowing bug, with the ratio of aggregate debt to GDP rising by a staggering 171 percentage points of GDP.

The biggest increment over the past 20 odd years has been in the ratio of corporate debts to GDP, which has soared to a staggering 134% of GDP. Spanish companies have become addicted to debt".

He says that Italy's numbers are similar but not for coporate debt, which is much lower.

"But the debts of Italy's private sector are a fraction of Spain's. The indebtedness of Italian businesses is just 81% of GDP and the indebtedness of households just 45% of GDP. Italy's private sector, from the point of view of indebtedness, is in pretty good shape.

So Italy's total indebtedness at the end of last year was 313%, some 50 percentage points less than Spain's."

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The Failed Euro: What Happened to The Democratic Process?

Wow. A must watch short video with regards to the democratic process and what is going on in in Europe. Nigel Farage, current Member of the European Parliament for South East England.

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Food Crisis is Back: Cooking Oils Supply Ultra Low; Prices To Rise

Blame it on the Chinese's new found love for processed food? Cooking oils are used to make everything these days from candy bars to "healthy" margarine, to biofuels.

Stocks have declined to the lowest in two generations as demand is expanding at five times the pace of the world population. Oil production cannot keep up.

The U.S. Department of Agriculture data shows that inventories of soybean, rapeseed, sunflower and six other oils will drop to less than 29 days of consumption this year. This is the lowest since 1975.
The very popular Palm oil, will rise 8% to $1,100 a metric ton in Malaysian by the end of the first quarter, the highest since March.
A United Nations report published Nov. 3 says supplies of oils and fats will be near the same critically low level seen during the 2008 food crisis,.
Says Peter Thoenes, an economist at the UN Food and Agriculture Organization in Rome: "This is an early warning that we're giving," "A tightening in the global supply and demand balance seems inevitable. The oil-crop market fundamentals seem to call for continued firmness in prices."

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Thursday, November 17, 2011

Jim Grant: World Hangs by Threads; Fed Is Leveraged 100 to 1

Jim Grant on Bloomberg:

"... ECB has a ratio of non-AAA rated assets to equity of 14 to 1. What the ECB has been doing is stepping in where private money fears to tread. In the private sector we call that heading for trouble"

"The New York Fed is leveraged 100 to one"

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Spain Today: 2Y and 10Y Yields Soar

There are scary yields coming from Spain today:

2y: 5.80%

10y: 6.76%

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Wednesday, November 16, 2011

Fitch Warns of Contagion Into U.S,. Banks, and Markets Tumble: Silly

Fitch said its current outlook on the U.S. banking industry is stable because of "improving fundamentals and ratings that are lower than before the debt crisis". However it warned that "risks of a negative shock are rising and could alter this outlook,”

“Fitch believes that unless the Eurozone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,”

The market tumbled on the news. However... Did anyone not expect Europe's problems to spill into the U.S.?

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Oil Skyrockets: Profit Either Way

Oil has moved north of $100, bringing with it the popular USO and UCO ETFs. Below are straddles for our favorite UCO, computed with StraddlesCalc Tool

The first (top) is for November, the 2nd (bottom) is for December (not November), as pointed out by 'crash' in his comments. UCO is indeed a 2X.

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, (powered by INO).

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

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Tuesday, November 15, 2011

Spain's Yields Continue To Rise, Bringing Markets Down

Yields on Spanish bonds continue to rise today, bringing the markets down.

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Monday, November 14, 2011

Spain 10-y Yields Rise Over 6%

What is next, another unelected ECB or EU official to take the Prime Minister Spot in Spain?

Bloomberg reports today that Spanish 10-year bonds fell pushing the yield on the securities to more than 6 percent for the first time since Aug. 5.  The yield on the 10-year debt climbed 0.17% to 6.02% today.

"It’s the first occasion the rate has reached 6 percent since before the European Central Bank was said to resume its purchases of government debt, including buying Spanish and Italian securities, on Aug. 8.

The Italian 10-year bond yield rose 20 basis points to 6.65 percent. It reached a euro-era record 7.48 percent on Nov. 9."

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Sunday, November 13, 2011

ESPF Is Buying Its Own Bond Offerings

You cannot make this stuff up. The ESPF tried to sell bonds this week, claimed success, but it turns out, they bought their own offering because there were not enough buyers

The Telegraph: "Europe's €1 trillion (£854bn) rescue fund has been forced to buy its own debt as outside investors become increasingly concerned about the worsening eurozone sovereign debt crisis.

The European Financial Stability Facility (EFSF) last week announced it had successfully sold a €3bn 10-year bond in support of Ireland.
However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.
Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt.
The revelation will be seen as a major failure and a worrying sign of future buyers strike after EFSF officials and their bankers had spent recent weeks travelling the world attempting to persuade key investors, including China's national wealth fund and Japanese government funds, to buy its bonds".


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Friday, November 11, 2011

Spain's Economy Stalls; Bad GDP Numbers

An amazing week, started wit Greece, shifted to Italy by the middle, and it moves to both France and Spain today. Unbelievable, and not good.

Bloomberg reports today that Spain’s economy stalled in Q3, with its Gross domestic product unchanged from Q2, when it expanded 0.2 percent.

From a year earlier, the economy expanded a measly 0.8%.
"The slowdown threatens Spain’s budget-deficit goals, the European Commission said yesterday, meaning the government that emerges from the Nov. 20 general election may have to accelerate spending cuts to prevent the nation becoming the next victim of the debt crisis. The People’s Party, which polls show will win, has pledged to regain Spain’s AAA rating and tame borrowing costs without raising taxes or cutting pensions".

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Thursday, November 10, 2011

Italian Debt Death Spiral Calculator

Reuters has an online visual tool that allows to see the effects of the new yields on Italian debt, taking into account GDP growth.

And a scenario:

Access tool here.

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Wednesday, November 9, 2011

Roubini: The Plane Is In Stall, Europe May Implode; Countries May Leave, Governments May Fall

Nouriel Roubini said today in Brazil that the risks of a double dip in the world economy are higher than the chances that the level of global activity will accelerate in the short term. He said one factor that could be decisive even worse than in 2008 with the collapse of investment bank Lehman Brothers, is the possibility that problems in the euro area is still worsen more, which may lead some countries to have to abruptly leave the block.

Two Roads. Roubini said the severity of the crisis in Europe will determine one of two roads to its member countries in the short and medium term. "Either they do economic and fiscal integration, and me political too, or it will implode from the exit of some of its members," Roubini said during a talk to businessmen, in Sao Paulo, Brazil

He said the authorities in Europe are doing little to tackle structural problems in the region. He noted that, besides improving the management of public accounts, the authorities must act to stimulate growth in the euro zone, otherwise the social and political instability will grow.

"The Euro area, United Kingdom and United States have serious fiscal problems, with very high public debt. However, the solutions to structural problems, especially in the euro area have primarily financial focus. They lack finding of ways for growth to be restored, because without it, the insecurity increases, unemployment rises, there are social and political tensions, culminating in the fall of governments."

Plane in stall mode. "There are already signs that the eurozone and the UK are in recession, while the United States are still in a border area," he said. "The United States grew 2.5% in 2010, a mediocre level, because the historical rate is 3%. In the first half of this year, 2011, the United States showed an increase of only 1%," "The global economy can be seen as a plane in flight, which currently is in stall mode"

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Italian Bond Yields Now Over 7%

Italian 10y bonds have risen 8.15%:

Siamo tutti caputi.

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Merkel Calls For Changes in European Union Treaty; Situation in Europe "Too Unpleasant"

Well, it has indeed been very unpleasant for quite time. Now Angela Merkel said today that the situation in Europe is "so unpleasant" that it is time for a change, calling for changes in the European Union Treaty.

Reuters reports that Merkel said so in a speech today. She added that declarations of good intent are no longer good enough and "that genuine structural reforms are needed that can be checked".

Merkel added that the political community "will not survive if it is not capable of changing".

She said countries' responsibilities cannot end at their frontiersl reforms are needed quickly because the "rest of the world is not waiting for Europe.".

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Rome is Burning: Margins On Italian Bonds Raised

Stocks are tummling today, and yields on Italian bonds are soaring as London's clearing house LCH.Clearnet increased the margin on Italy's debt.

The cost of using Italian bonds to raise funds rose close "to levels deemed unsustainable". Reuters.

"Banks use government bonds as collateral to access cash in the repurchase (repo) market, in which a handful of clearing houses play a vital role, assuming lending risks to provide institutions with the cash".
"When LCH.Clearnet Ltd took similar action on Portuguese and Irish debt as bond yields soared, it added to selling pressure on the paper. Both countries were later forced to seek bailouts".

10-year Italian government bond yields are now approaching 7%. As a reminder, a hge chunk if Italy's bonds are coming up for renewal, please see our previous posts.

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Tuesday, November 8, 2011

Italy Yields Spread Soar To Scary Levels

The Greek Papandreou tragedy is being replaced by the Italian Berlusconi soap opera. While this goes on, Italy-Germany yields spreads are soaring to very scary levels:

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Rate of Late Mortgages Rises Again; Bad Economy Pushing More People Into Foreclosure

The rate that mortgage holders were late with their payments by 60 days or more rose in the June-to-September period. It was the first time since 2009. 5.88% of homeowners missed two or more payments, which is an early sign of potential foreclosure.

The problems were widespread. BetweenQ2 and Q3, all but 10 states and the District of Columbia had an increase in delinquency rates.
TransUnion's Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit, ays they can not pinpoint one particular reason for the jump. He pointed to number of reasons: the U.S. credit rating downgrade, the U.S. and European debt crises and the tanking U.S. stock markets during this period, and declines in consumer confidence.

Arizona had the best rate of improvement in the nation, and now has a delinquency rate of 7.46%, which is still the fourth worst in the country, and the highest foreclosure rate in the nation at one in every 44 housing units with a foreclosure filing in Q3

"Another possibility for the bump in the delinquency rate is that a new crop of adjustable mortgages written toward the end of the housing bubble is resetting. Even if their interest rates remain low after the adjustment, the payments might have increased", says Yahoo/AP, quoting Realtytrac.
TransUnion is now forecasting a few quarters of elevated nonpayment rates due to the uncertain economic outlook. Says Mr. Martin: "More and more homeowners are likely to struggle," "I'm not sure this is a one-quarter blip."

RealtyTrac agrees: "This isn't just about bad loans anymore," "It's about a bad economy that's pushing people into foreclosure."

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Marc Carney on Global Liquidity: We Are On The Cusp of Another Retrenchment.

The quote of the day comes from the Bank of Canada governor, Marc Carney, speaking to the Canada-U.K. Chamber of Commerce.

"The Usual Suspect for any event or dynamic too complicated to explain, global liquidity is the Keyser Söze of international finance. It has no agreed definition and, as a consequence, there has been no coherent policy approach to tame its more violent tendencies."


"In conclusion, recent history has amply demonstrated that global liquidity has an important impact on financial stability and economic growth. Global liquidity has fluctuated wildly over the past five years, and we are on the cusp of another retrenchment. There are steps that can be taken to mitigate, but not eliminate, the negative effects of the current wave. How European banks choose to delever will determine which ones authorities around the world need to take."

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Monday, November 7, 2011

Why the Euro May Fall Hard: Italy Has 2T Euros Outstanding Debt Coming For Renewal - At Much Higher Rates

It is no wonder the market is so nervious about Italy. Italy currently has about 2T Euros outstanding debt, cp,apred with Grece's 200 to 300B. Greece is noise in comparison. The amount to refinance in the year is greater than all of Greece's outstanding debt!

Maturity schedule (charts from BNN today):

Currently, Italy pays roughly 4.15% interest. However, the yields are now around 6.60%. That's an increase of over 2.4%. Austerity measure won't make much of a dent on the debt, will just pay part of the added interest.

Given all the problems and European wrangling to "fix" Greece, imagine to fix Italy (and Portugal, and Spain, and...)

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Manic Markets Monday: Europe Falls on Italy; Yields and CDS Hit New Record High

Greece is off the table for now as Papandreou is said to resing later today (or will he?). However, the focus is now Italy, not exactly in much better shape.

European shares are falling Monday, despite initial expectations of a positive start, as investors' attention shifted from Greece to Italy with fears about the stability of the Italian government and its ability to deal with their debt crisis.
The political unease in Italy and fears about the way country is dealing with their problems led the yield on 10-year bond and the cost to secure the debt against default of the Italian government to reach record levels today.

The Italian lower house of parliament will vote tomorrow on the budget measures. If measures are not adopted, Berlusconi will be submitted to another vote of confidence.  "And this time it may well be out of luck ... Italy may well take the path of Greece, namely the formation of a unity government,"

Fears over Italy were exacerbated by comments made by the member of the European Central Bank (ECB) Yves Mersch. In an interview with Italian newspaper La Stampa, Mersch said the bank decided not to buy the Italian debt if the government does not provide sufficient evidence that will keep the plans for reform and restructuring.

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Friday, November 4, 2011

Rogers: Let Them Go Bankrupt, Greek Bailout Prelude to EU Complete Collapse

Jim Rogers on Bloomberg TV today.
  • This has happened before and has happened throughout history.
  • Let them go bankrupt, let the people who made bad loans take losses.
  • pushing it into the fure and letting it go higher and higher will end very badly (note: but will save the *current* politicians and banksters); then complete collapse of the Euro and EU, and the western world
What are they doing!?

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Thursday, November 3, 2011

Trouble in Europe: Euribor Rates Rocket Higher

The Euro Interbank Offered Rate (Euribor) is a daily reference rate based on the averaged interest rates at which banks offer to lend unsecured funds to other banks in the euro wholesale money market (or interbank market).

Take a look at the Euribor rates today:

(click to enlarge)

The spread is as high as 2007/2008, just before things hit the fan

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Wednesday, November 2, 2011

IIF: European Banks Recapitalizaion Plans Has Serious Problems; Prohibitive Cost

The Institute of International Finance said today that the European Union’s plan for recapitalizing banks has “serious problems” that will hurt economic growth and "and make it harder for some nations to borrow".

IIF Managing Director Charles Dallara wrote today in a letter to the Group of 20: "There is a “clear need” to restore confidence in Europe’s banks" but "extra capital requirementswill come with considerable cost” because of "a flawed scope and approach".
"Banks are likely to decide that the costs of raising capital are 'prohibitive'. Instead of forced injections, banks will likely sell risky assets and cut back on lending, making it harder for countries on Europe’s periphery to access capital markets.

“The market value of the debt of the countries most under scrutiny is likely to decline further as banks unload sovereign bonds,” “This is contrary to the goal of stabilizing and underpinning the outlook for sovereign debt in Europe.”

 “overall credit exposure to the euro-area private sector would need to decline by at least 5 percent,”  “It is essential that the higher European capital requirements are a temporary measure as intended, not sustained over time and not seen as a new standard to be imposed more widely.”

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Bank of Canada Governor Supports Greek Referendum

Thumbs up. This is nothing but pure logic. Without public support, Greece's plans had zero chance of succeeding.

This is so refreshing. Defying other bankers who want to save their own, Bank of Canada's governor Mark Carney said yesterday that he supports Greek Prime Minster George Papandreou's decision to hold a referendum.

The Ottawa resident Carney said: "In times of difficult structural adjustment, major fiscal austerity, tough decisions that governments such as the Greek government is contemplating, it is imperative that there is widespread support, broad democratic support for those measures because they will unfold over a period of time,"

"And if it's the judgment of the Greek government that (a referendum) is the best approach to validate that support, we fully respect that,"

Today the Greek cabinet offered its full support to Prime Minister George Papandreou to call a referendum on the Greek financial crisis.

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Is This Europe? Greece Now Replaces All Top Military Men

The world gets stranger, and more shocking, every day. This now coming from a (soon to be former?) Eurozone member:

  • General Ioannis Giagkos, chief of the Greek National Defence General Staff, to be replaced by Lieutenant General Michalis Kostarakos
  • Lieutenant General Fragkos Fragkoulis, chief of the Greek Army General Staff, to be replaced by lieutenant general Konstantinos Zazias
  • Lieutenant General Vasilios Klokozas, chief of the Greek Air Force, to be replaced by air marshal Antonis Tsantirakis
  • Vice-Admiral Dimitrios Elefsiniotis, chief of the Greek Navy General Staff, to be replaced by Rear-Admiral Kosmas Christidis
The Telegraph: "In a surprise development, Panos Beglitis, Defence Minister, a close confidante of Mr Papandreou, summoned the chiefs of the army, navy and air-force and announced that they were being replaced by other senior officers.

Neither the minister nor any government spokesman offered an explanation for the sudden, sweeping changes, which were scheduled to be considered on November 7 as part of a regular annual review of military leadership retirements and promotions. Usually the annual changes do not affect the entire leadership.

“Under no circumstances will these changes be accepted, at a time when the government is collapsing and has not even secured a vote of confidence,” said an official announcement by the opposition conservative New Democracy party.

“It has no moral or real authority any more, and such surprise moves can only worsen the crisis currently sweeping the country”.

The party said it will not accept the new nominations and will take its own decisions on armed forces changes if it comes to power at the general elections that are expected to take place in Greece if the government loses the vote of confidence on Friday night". 

Are we talking Europe here? Is somebody afraid of  a military coup?

This is why this blog is called "shocked" . There is no shortage of shocking news.



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Fission in Japan's Nuclear Reactors

We had not heard from the unfortunate disaster in Japan for a while. Today comes a report that there is near certainty that nuclear fission is occurring in one of the reactors. Tokyo Electric Power Co anounced that it detected signs of it. They state that so far no increase in radiation have been found.

Fissioning involves the splitting of atoms which may lead to an uncontrolled reaction and emittance of radiation.

According to Bloomberg, Tepco began spraying boric acid on the No. 2 reactor at 2:48 a.m. Japan time to prevent accidental chain reactions. Tepco said it may have found xenon, which is associated with nuclear fission, while examining gases taken from the reactor, according to an e-mailed statement today.

Junichi Matsumoto, a general manager at Tepco: “Given the signs, it’s certain that fission is occurring,” He added that it is possible there are similar reactions occurring in the No. 1 and No. 3 reactors.
"Eight months after the March 11 earthquake and tsunami wrecked the Fukushima Dai-Ichi plant, causing a loss of cooling and the meltdowns of three reactors, Tepco is trying to prevent further leakage of radiation that has spread across the world".
“We are evaluating whether there are many reactions or not or whether its stopped, Matsumoto said. The incident won’t affect its schedule of bringing the plant under control by the end of this year, Matsumoto said.

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Tuesday, November 1, 2011

Number of Americans Using Food Stamps Hits New Record

Here is the latest data released today, "SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM:  NUMBER OF PERSONS PARTICIPATING", with data as of October 31 2011.

The number of users is shows as over 45.8M. This is the initial figure for August (latest month)

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Italy's Yields Soar to New Record Spread

Italian 10-year yields rose another 0.13%, to 6.23% today. The difference in yield over German bunds reached a new euro-era record of 4.37%.
Italian 10-year borrowing costs are now the highest relative to benchmark German yields since the creation of the euro in 1999. In contrast, German yields fell the most in more than two years, outperforming all their euro-area peers. Investors are seeking the safest ports.

The planned Greek referendum, if it happens before elections are called, is being blamed for the latest woes.

Another day in Europe.

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