Sean Corrigan On Six Sigma Events In The Bond Curve, "Inexorably Rising Risk", And Other Observations

 

The Next Stop In Obama's Political Suicide Tour: Announcing Social Security Cuts During State Of The Union Address

 

Review Of Europe In 2010, And The 2011 Continental Outlook From The Rosy Prism Of Erik Nielsen; Is A New European Brady Plan Coming?

 

Guest Post: For How Much Longer Can China Resist Raising Rates?

 

A Look At The Upcoming Calendar As The Sleepiest Week Of The Year Arrives

 

Jim Sinclair’s Commentary
Why should they be surprised? This is how the game has been played since the short of the euro operation started.

EU shocked by Irish debt downgrade
European leaders received a nasty shock as the credit agency Moody’s downgraded Ireland’s debt, even as the politicians closed a summit intended to prop up confidence in the eurozone. By Emma Rowley 7:56PM GMT 17 Dec 2010
The dramatic downgrading of Irish debt by five levels sent the cost of the country’s borrowing up, as yields – the returns demanded by wary investors – on 10-year government bonds rose more than 24 basis points to pass 8.6pc.
If Ireland cannot stabilise its debt then further revisions may follow, warned Moody’s, which has also told Greece and Spain their ratings could fall.
"I don’t understand what they do," Nicolas Sarkozy, the French president, said of the agency’s latest move. "This decision – I simply call it stunning."
However, the International Monetary Fund (IMF) warned that Ireland is not on track to hit its target of achieving a budget deficit of 3pc of GDP by 2015. The beleaguered nation faces significant risks that could affect its ability to repay the IMF’s share of the €85bn (£72bn) international bail-out it received, the fund said.
The European Central Bank (ECB) on Friday said it has arranged to borrow up to £10bn from the Bank of England in a temporary swap to ease liquidity at Irish banks.
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Jim Sinclair’s Commentary
Moody’s had taken comfort in their role of the short of the euro play. They took protection in Federal court from suits over the accuracy of ratings based on free speech.
Legally that is looking shaky but they still have Federal Court to take comfort in.
The second they downgrade US credit, they have signed their litigation death warrant. They know this and might be playing a game of chicken.

Dollar’s Sovereign Credit Standing: U.S. Plays a Dangerous Game December 19, 2010
Moody’s will consider lowering its credit outlook on U.S. Treasurys due to the Obama/ Republican tax cut deal. If the agency decides to lower the outlook, that will open the possibility of actually cutting the rating below AAA within 12-18 months, the rating agency said December 12.
Not so long ago, Treasurys stood above all other credits, even other sovereign credits, as the closest thing to an absolutely, unquestionably, risk-free asset. Even with all our well publicized troubles, it was shocking, if not surprising, to see Moody’s discuss the possibility of a U.S. ratings downgrade publicly.
American Leadership Still in Denial Abut Nation’s Decline
Back in early 2009 I asked why anyone thought the United States could subsidize weak banks, stimulate the economy, and maintain the status of the dollar. Oh, and fight two foreign wars? Maybe we can’t, Moody’s now seems to be saying.
After writing that post I saw this article by former IMF economist Desmond Lachman (he’s now with AEI, the Republican-leaning think tank) who had seen several currency crises first-hand. Lachman compared the denial we operate in to that of “Argentina in its worst moments.” He concluded by saying,
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Jim Sinclair’s Commentary
This is not new news to Comrades in Golden Arms (CIGAs). It is just another example of the leadership and regulators hiding the facts.

Underfunded pensions dwarf deficit By Ted Mann
Publication: The Day
Lack of political will, stock market crashes leave state’s obligations in precarious shape
Hartford – It’s one of the simpler guidelines in politics: Be careful what you promise; someone might ask you to pay up.
As the state of Connecticut prepares to face a gaping deficit in its budget for the next two fiscal years, lawmakers and Gov.-elect Dan Malloy also will be forced to reckon with an equally challenging and even bigger problem: the long-term cost of the pensions and health care the state has promised its retirees.
The challenge is one inherited from past legislators and governors, who despite occasional periods of reform and investment have repeatedly failed to set aside money for pension accounts – accounts that will owe tens of billions of dollars to retired workers over the next 30 years.
The reason isn’t just the collapse in stock market investments, said State Treasurer Denise Nappier, whose office manages the investment of pension funds. That collapse only exacerbated an underlying, older problem, she said: The state for years has failed to set aside the funds it will one day be compelled to pay.
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Jim’s Mailbox

Posted: Dec 19 2010     By: Jim Sinclair      Post Edited: December 19, 2010 at 12:34 pm
Filed under: Jim's Mailbox

Jim,
What recovery? Look at the audacity these people have to place a large headline in the paper saying "a pay hike is coming" here in Philadelphia. The lies are so plentiful I cannot count them any longer. I believe you warned us about those lies increasing long ago.
CIGA BJS

Payrolls Drop in 28 U.S. States, Joblessness Rises in 21 in Labor Setback By Timothy R. Homan and Courtney Schlisserman – Dec 17, 2010 8:35 AM PT
Payrolls decreased in 28 U.S. states and the unemployment rate climbed in 21, showing most parts of the world’s largest economy took part in the November labor- market setback.
North Carolina led the nation with 12,500 job cuts last month, followed by Massachusetts with 8,600 dismissals, and Ohio with 7,800, figures from the Labor Department showed today in Washington. Joblessness increased most in Georgia and Idaho, while workers in Nevada faced the highest rate in the country at 14.3 percent.
The report is consistent with figures on Dec. 3 that showed unemployment increased last month for the first time since August. The Federal Reserve’s pledge to buy an additional $600 billion of Treasuries by June and the $858 billion bill passed by Congress extending all Bush-era tax cuts for two years may help boost growth and cut unemployment.
The report shows “an uneven distribution of improvement with some disappointing results,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “We’ve seen pretty clear evidence that demand is starting to improve and with the tax program that was passed last night it should further accelerate. That increased demand is going to pull forward further improvements in employment.”
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