Euro Hits Near 2-Year Low on Spain Troubles

The euro fell today to it lowest level in 23 months against the U.S. Dollar.

Spain's banking sector and soaring borrowing costs are the topic of the day, and after Italy was forced to pay dearly to sell debt.

"The euro was seen highly vulnerable to further falls, with many analysts looking for a drop towards $1.20.
Concerns are growing that Spain may have to tap debt markets at a time when bond yields are near unsustainable levels. Market players fretted that it may be forced to seek an international bailout.
Adding to the euro's woes, Italy sold bonds at a very high cost, with 10-year yields topping 6 percent for the first time this year as sentiment on the indebted economy looked vulnerable to contagion from Spain's worsening problems". (Reuters)

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Fitch Donwgrades Japan

Fitch lowered its assessment of Japan’s sovereign credit to A+, still investment grade but just above countries like Spain and Italy.

The agency criticized Japan for not doing more to pare down its burgeoning debt.

According to the agency, Japan’s public debt will hit almost 240% of its gross domestic product by the end of the year.

 "The new rating also heightens the pressure on Prime Minister Yoshihiko Noda to rein in spending and raise taxes at a delicate time, when the Japanese economy is still recovering from natural and nuclear disasters last year.

Mr. Noda has warned that Japan could eventually face a debt crisis akin to that afflicting Europe and is staking his job on a plan to double the consumption tax rate to 10 percent by late 2015. That increase, he has argued, is necessary to pay for soaring welfare costs and pension payments".  {New York Times)

Der Spiegel: Bundesbank Has No Clue What is Happenning To Spanish Banks

German magazine Der Spiegel  has an article emphasizing the need for financial reform not only in Spain but throughout Europe.


The publication emphasizes that at this time, the Spanish banking system is built on unstable loans worth approximately one billion euros and encrypts the Spanish banking rescue between 50,000 and 200,000 million.


"Since that amount of money would be an overload for both banks to the government budget, experts believe that the Spanish government should seek urgent assistance to European Financial Stability Fund (EFSF).


However, Der Spiegel notes that Mariano Rajoy "resists this movement," because it would give members of the euro "a voice in governing the country." Also displayed are the magazine, also hang the disgrace to Spain as a country of high risk and, probably, "this will cause isolation of the international financial markets for a long time."


Under the circumstances, says Der Spiegel, direct payments to the banks of the euro countries become "a sensitive issue." The German Government completely rejects the idea "for fear that their money disappear into a bottomless pit." In fact sources said that the German central bank, the Bundesbank, say they have no clue what is happening in Spanish banks.


To Der Spiegel, this lack of knowledge is a consequence of nationalism in Europe has allowed the flourishing of its financial industry. The European banking industry is more connected internationally than any other, however, "each country controls its national bank and, if necessary, rescue their banks on their own."


Therefore, the journal recognizes citing Clemens Fuest, a German economist, professor at Oxford University and adviser to the German government, "without a fundamental reform of the European banking sector, the euro is in danger."

Spain Bonds Plunge

There is no relief in Europe. Spanish 10 year bonds hit a new cycle high today, with the yield moving up to 6.08% - 23 basis points in one day.

The previous cycle high was 6.07% reached April 16th.  (Chart)

Europe Burns, Buffet Comments on U.S.

While Europe burns today after the defeat of the "austerity" governance, Warren Buffett commented on the bad jobs reports last week. He states the obvious: no construction, no jobs. He says he is not surprised there were no more jobs created without a more meaningful pickup in residential construction.

"When we see a million residential units constructed annually," (CNBC's Squawk Box), "only then will we see more decent numbers on jobs growth."  

He says GDP growth of 4 to 5% "would be unsustainable in the long term," He believes that a 2.2% GDP print is not as abysmal is is being made currently. 

"If you have a 2.2% growth in annual GDP and have a 1% growth in population, that would be 1.2% increase in real per-capita growth."  

That, according to him is equivalent  a generational growth of ~20%. "That means that every succeeding generation has a 20% better standard of living than the preceeding one,"

"If we were guaranteed 2.2% for the next 100 years, that would be Nirvana!"  

Is the population growth only 1%?

Canada's Ontario Downgraded

Moody’s Investors Service’s downgraded Canada's Ontario, following a sharp warning and dimmer outlook one day earlier by Standard & Poor.

The downgrade reflect the provinces very high debt and dim prospects for improvement.

The Globe and Mail says that Moody’s downgrade of the province’s debt rating to Aa2 with a stable outlook from Aa1 with a negative outlook brings the agency’s score more in line with S&P and DBRS, which both downgraded Ontario by one notch in the fall of 2009. DBRS, which also weighed in Thursday on Ontario’s fiscal state, decided to maintain its “stable” outlook on its debt rating for Canada’s largest province, saying the government’s increased focus on controlling spending was “an encouraging step in the right direction.”

But DBRS, too, struck a note of caution. Limiting debt growth will be very challenging and require a “significant pickup in fiscal resolve,” DBRS analysts Travis Shaw and Eric Beauchemin said in a report to clients.

Spain Downgraded Again: Shocking?

Not a real topic for the "shocked" investor since there is nothing shocking here, it was all expected.

S&P downgraded Spain’s rating by two notches due to “mounting risks to Spain's net general government debt as a share of GDP in light of the contracting economy”.

Spain's GDP is expected to shrink by 1.5% in 2012 and 0.5% in 2013. 

The US-based ratings agency is also worried Spain’s troubled banking sector will require fiscal support from the government.

Now the country is rated at the same level as Ireland and Italy, which are also struggling with debt problems.
Meanwhile experts believe the Spanish economy is likely to show some improvement in the next few years.

But the country probably won’t meet its 2012 budget deficit target of a 5.3%. 


Spain said that borrowing costs surged despite a 27.3B euro austerity program announced by the government late last month.

The country’s authorities pledge Spain won’t follow Greece and ask for financial help.

Really?

France Elections: Hollande and Sarkozy Battle for 1st, But Anti Euro Protest Votes Steals The Show

The 1st round of the french election was a show of the protest vote. Centre-left Hollande narrowly beat the conservative Sarkozy in Sunday's 10-candidate first round by 28.6% vs 27.1%, with 99% of votes counted.

 She wants France to abandon the euro currency

 Le Pen, the far right candidate daughter of former paratrooper and National Front founder Jean-Marie Le Pen stole the show by surging to 18.0%, the strongest result for a far-right candidate.

First Round Totals

• Hollande: 28.6%
• Sarkozy: 27.1%
• Le Pen: 18%

Le Pen's "breakthrough mirrored advances by anti-establishment Euroskeptical populists from Amsterdam and Vienna to Helsinki and Athens as anger over austerity, unemployment and bailout fatigue deepen due to the euro zone's grinding debt crisis".

 "The battle of France has only just begun," She said: "We are now the only real opposition."

Stunning Natural Gas Drop to Below $2: 1 Handle is Here

A '1' handle was reached today, simply amazing:

Golds Repeats the 2008 Period: You Know What Happened Afterwards

Gold has been dropping lately, but that is a very short term view. Please see the various cycles of gold prices:

In particular, the 5 and 10 year charts show a very similar period during the 2008 crisis.

The Effects of Eurozone Constraints On Greece: Greek Federation of Athletism Suspends All Operations

This is not good for sports, for young people, and for the kids in Greece. The Greek Federation and Athletism today suspended all its operations after performing an emergency meeting. The decision was made because of cuts in government funding and represents the last act in the financial crisis facing the country over the past three years.

A text of the decision on Wednesday, released after the emergency meeting of the federation board, explained that the suspension is indefinite. The decision suspending all athletics competitions in the country, including a competition that was scheduled for May 12.

Initially, the suspension does not affect international competitions such as the London Olympics, but members of the federation will meet again in two weeks, when they can harden their position if the government fails to act. "We call the sports leadership to intervene and avoid the deadlock and economic disintegration of athletics," the federation said in a statement.

Spain's Youth Unemployment Now Exceeds 50%

The unemployment rate in Spain is the largest in all Europe, and among young people it has exceeded 50%, Something that had not happened since at least 1986, from which the data of this research are available on Eurostat's office statistics of the European Union.

More than half (50.5%) of the Spaniards up to 25 years were unemployed in February. This figure shows that the labor market for young people in Spain is already so difficult as those of Greece, where the rate is 50.4%.


Unemployment map, for both youth and general population:

Chart from O Estado de Sao Paulo.

Food Shortages and The Dissapearing Bees

Think bees are not important? Think again.

Don Coxe has alluded several times to the mystery of the disappearing bees, a problem which may have devastating effects on agriculture worldwide.

Two studies to be published in this month's Science journal., one by UK researchers and one in French researchers, suggest that neonicotinoid insecticides, could be the culprits and harm bee populations worldwide.  These have been in use since the early 1990s.

Scientists have in the past proposed that pesticides could be partially to blame for the disappearing bees, but it's been unclear exactly how. In the last few years, much time has been devoted to the mysterious disappearance of bees, referred to as Colony Collapse Disorder. Honeybee populations have been decimated and bumblebee species have also gone missing.

In the US, the Environmental Protection Agency says on its website  that France, Germany, Italy and Slovenia have all instituted bans on neonicotinoids over fears of their effect on bees, but says that "to the EPA's knowledge, none of the incidents that led to suspensions have been associated with Colony Collapse Disorder".

Not so says Dave Goulson of the University of Stirling, co-author on the British study: “Some bumblebee species have declined hugely. For example in North America, several bumblebee species which used to be common have more or less disappeared from the entire continent. In the U.K., three species have gone extinct,”

Dr. Goulson and his colleagues exposed developing bumblebee colonies to a neonicotinoid called imidacloprid at doses comparable to what they might find in the wild. These colonies were around 10% smaller than those that weren't exposed. They also produced 85% fewer queen bees (which means far fewer bee-leaders that can set up new colonies).

“Bumblebees pollinate many of our crops and wild flowers. The use of neonicotinoid pesticides on flowering crops clearly poses a threat to their health, and urgently needs to be re-evaluated,”

Lost. The French study  stuck tiny RFID chips on to honeybees so they could track them as they buzzed in and out of their hives. The French National Institute for Agricultural Research (INRA) found that bees they had blasted with a sublethal dose of the neonicotinoid thiamethoxam got disorientated and couldn't find their way home.

Honeybees have a homing ability that lets them navigate back to their hives, which the researchers think was  messed up by the pesticide. The lost honeybees were two to three times more likely to die outside the nest, pushing populations down to levels that would be difficult to recover from.

Says study author Mikaël Henry of INRA: "Our study raises important issues regarding pesticide authorization procedures. So far, they mostly require manufacturers to ensure that doses encountered on the field do not kill bees, but they basically ignore the consequences of doses that do not kill them but may cause behavioral difficulties," Read More

More Bailouts: Greece Now Talks About New 3rd Bailout

Nobody really expected Greece to have a balanced budget, possibly ever, so that new bailouts would not be needed. . Today, Lucas Papademos, Greece's Prime Minister  said that Greece may need a third bailout package "if the sweeping austerity measures demanded by its international creditors fail to stabilize its shattered economy and restore market confidence".

It was the first time Papademos talked about the risk that the austerity program might fall through if they don't try hard enough.

"Greece will do everything possible to make a third adjustment program unnecessary," (!) "Having said that, markets may not be accessible by Greece even if it has implemented fully all measures agreed on". (Yahoo)

"It cannot be excluded that some financial support may be necessary, but we must try hard to avoid such an outcome."

FIFA WC2014 In Brazil: Costs To Skyrocket; As If It Was Unexpected

You read this here before, years ago.

Prestigious newspaper O Estado de Sao Paulo reports that delays in the 2014 World Cup will make the final cost of the 2014 World Cup be far higher to what everyone imagined five years ago. The finding was made by the leaders of FIFA, which on Wednesday put full pressure on the country because of the difficulties in the organization and made it clear: Brazil should not save money to ensure that everything is prepared.

Sure... As if none of this was known and expected. Somebody will make lots of money.

The actual costs are conflicting. A recent report by the TCU (Court of Audit) indicates a value of just over R$25 billion (US$ 15B), based on data from the Responsibility Matrix. But the agency itself complained of outdated data and gave 60 days within the Ministry of Sports to update the information in the Matrix.

In the evaluation of the members of FIFA, the delays will make the final price of the world cup explode.

Push This Button On Your Fridge And It Automatically Orders Pizza for You

It's real, push the button, it sends a bluetooth signal to your cell phone, and pizza is delivered to your door.

Available only in Dubai - for now.

The Perfect Storm For Natural Gas and UNG, Now You See Why UNG Reversed Split Was the Kiss of Death; Full Report

This is quite remarkable: Natural gas prices are almost at a 1 handle.

Today's reason for the big drop was that storage actually increased in North America, this still in March. The red curve is the current year's curve, compared with the average 5 year range in shaded gray. Amazing.

The woeful UNG reacted accordingly, remember the kiss of death post on UNG?

5 year chart:

Contango is now at a huge 5.5% on the two front months contracts.

Contango us UNG's killer.

Indeed the perfect storm for UNG today.

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Why You Should Stay Away From Volatility ETFs

Larry Berman today explained why investors should stay away from volatility ETFs, specially vehicles like the TVIX.

The reason is that they invest in futures, and as pretty much all of them, they are money-losing machines when there is contango In the case of TVIX, that is clearly the case as investors expect volatility to increase in the future, thus, the ETF has to lower (lose) the number of contracts every month. These ETFs should really be banned.

Watch

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Airlines About To Go Belly Up

Emirates, the biggest airline by international traffic, warned yesterday that airlines will go bust this year due to fuel costs and "sluggish economies".

Interesting that the same was feared about Air Canada, and most likely many others.

Tim Clark, Dubai-based carrier’s president, said that  “We can reel off a whole load of airlines that are teetering on the brink or are really gone,” “Roll this forward to Christmas, another eight or nine months, and we’re going to see this industry in serious trouble.”


Bloomberg reports that "Airline profits will plunge 62 percent in 2012 to $3 billion, equal to a 0.5 percent margin on sales, as oil prices rise, the IATA aid this week. Emirates’s fuel bill accounts for 45 percent of costs and may jump by an “incredibly challenging” $1.7 billion in the year ending March 31, according to Clark, who says he’s sticking with a no-hedging strategy rather than risking a losing bet.

“You think you’re going to win, but in the long term you always lose,” Clark said yesterday at the Gulf carrier’s head office near Dubai International Airport. “When we enter into derivatives, betting whatever it may be with counterparties who actually control the price of fuel in the first place, you have to ask yourself, ‘Is that smart?’”

Risky Business: Apple Stock Goes Ballistic

Apple stock passes to $600.

You know how this story ends when a stock goes like that..

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