Europe Goes From Worse To Horrible: Ireland Broker Than Expected, Greece Mulls Splitting Up Into "Good" And "Bad" Greece 

Submitted by Tyler Durden on 05/29/2011 11:41 -0400

Greece hasn't even filed for bankruptcy yet and the "unexpected" consequences are already coming. In comments to The Sunday Times newspaper, Irish Transport Minister Leo Varadkar said the country will likely need another "unexpected" loan from the troica, after he became the first cabinet member to cast doubt in public on Ireland's ability to raise cash. In other words once on the temporary bailout wagon, always on the temporary bailout gain. Reuters reports: "I think it's very unlikely we'll be able to go back next year. I think it might take a bit longer ... 2013 might be possible but who knows?" Varadkar was quoted as saying. "It would mean a second program (of loans from the EU/IMF)," he said. "Either an extension of the existing program or a second program. I think that would generally be most people's view." We wonder how German taxpayers will fell now that they realize they have not one, not two, but three (and soon 5 or more) heroin addicts they need to clean, wash, scrub, and feed on a monthly basis (with their, and US money, but Americans continue to not care that the biggest source of capital for the IMF is them). And speaking of ground zero, Greece is now scrambling after the Independent said that even Sarkozy is now prepared to let the Greek chips falls where they may. Following earlier news that the troika believes that the privatization plan it itself set up is not ambitious enough, Greece which now realizes that Germany, the EU, IMF, and Franch all are prepared to let it go, the country is now coming up with last ditch ideas faster than a speeding bullet: according to Reuters: "A Greek paper reported on Sunday that the government was considering setting up a Spanish-style "bad bank" to clean up its lenders' accounts from "toxic" Greek bonds and make them more attractive to potential buyers." Of course since it is toxic Greek sovereign bonds we are talking about, this implies that the country will somehow be split into a "good" and "bad" version of itself. And who thought financial innovation only comes out of the US.

100,000 Protesting In Athens Right Now 

Submitted by Tyler Durden on 05/29/2011 16:33 -0400

The first confirmation of protests expected to sweep across Europe tonight from Greece to Spain, France and Italy comes from Syntagma square where up to 100,000 people are protesting at this moment. Ekathimerini reports: "Greeks inspired by the Spanish “Indignant” or “Indignados” movement held their largest protest so far in Athens on Sunday, which some estimates put as high as 100,000 people, although a more accurate assesment seemed to be that those taking part exceeded 30,000. No official figure was given for the number of people packing into Syntagma Square in front of Parliament but it was clear that the protest was by far the largest since the movement began on Wednesday." For now the Greek protest is peaceful, but with the US on vacation, and the EURUSD about to be very volatile, we urge readers to follow the real time update at the following live webcast. 

Three Trillion Dollars Later: Charting A Recovery Only Failed Fiscal And Monetary Policy Can Buy 

Submitted by Tyler Durden on 05/29/2011 14:43 -0400

Another indicator of what the US "recovery" looks like come courtesy of the Chicago Fed National Activity Index. As can be seen in the chart below, one can only wonder just what recovery the US would have if it did not spend $3 trillion to kickstart the virtuous (or better make that virtual) economic cycle when it did. And by the looks of facts (and not Tim Geithner spin), the downward inflection point has now arrived. Next up: another $1-1.5 trillion in monetary stimulus, although admittedly in a form that may be slightly different from the LSAPs we have all grown used to love and expect each and every day at 11:00 am EST.

Guest Post: Dollar Got Me Down: A Down Dollar Roadmap 

Submitted by Tyler Durden on 05/29/2011 14:33 -0400

All the talk about a dollar currency crisis is getting ahead of itself. Quoting Mises won’t make it happen overnight. It takes years, even decades for a reserve currency to dissipate. Instead of wholesale collapse, the most likely outcome is a steady decline in the dollar over an extended period of time. Of course there is a tail possibility of a collapse, and that is why hedges exist. But the high likelihood trend is persistent policy action to drive the dollar lower with respect the United States trading partners’ currencies, combined with a decline in the dollar’s use as a vehicle currency. This means serious dollar weakness for the next three years (or more), but not collapse. 

Carl Icahn Confesses That The "System Is Not Working Properly", Warns Of Another "Major Problem" Coming 

Submitted by Tyler Durden on 05/29/2011 13:54 -0400

Confirming our ongoing observations that the pursuit of leveraged beta is the only game in town ("Levered Beta Uber Alles: NYSE Borse Margin Debt Jumps To Three Year Highs, Investor Net Worth Remains At Record Lows") is this surprising confession by hedge fund titan Carl Icahn, who not only warns that the levels of leverage achieved in the current centrally planned regime is as bad as it ever was, and that some form of Glass-Steagall should return, but that, stated simply, the entire "system is not working properly." His warning, stated in a very politically correct fashion, is that "there could be another major problem" either next week, or next year. Which is not surprising: after all not only has anything changed, but the very same drivers of risk that nearly crashed capitalism in Q3 2008, are back and arguably stronger than ever. That the Fed is the last recourse mechanism preventing an all out systemic wipe out probably should not be a source of comfort to anyone. In the end, the Fed, as any other authoritarian institution promoting central planning, will always lose.

Brian Sack And The Robots Claim Another Market Neutral Victim As The Market Continues To Reward Only Failure 

Submitted by Tyler Durden on 05/29/2011 13:04 -0400

While it may not be Duquesne or Shumway or even Icahn, it is merely the latest in a string of hedge fund closures, in this case market neutral, thus without a long or short bias, that was just put ouf of business by the ongoing streak of market surreality courtesy of $5+ billion in daily average POMOs, and the complete dominance of momentum driven, algo sponsored and robot implemented market strategies. The pioneer James Advantage Market Neutral Fund is now closing. "We have some important news to pass along on the James Advantage Market Neutral Fund (JAMNX). We have decided to close the Fund before June 30, 2011. While it was one of the first Market Neutral mutual funds to come out in 1998, times have changed and the investment approach has not been accomplishing what we originally intended." Chalk one for robot assisted central planning. And confirming that the "market" no longer rewards "quality" companies and merely encourages failure (thank you Uncle Fed) are the latest observations from Barclays's Matt Rothman: "Despite the retrenchment last week, in quant land the euphoria gripping the market has manifested itself in a continuing struggle for High Quality companies. Our long/short Quality index last month turned in notable underperformance, returning -1.64%. As this index generally runs at approximately 1/3rd the volatility of broader market indices such as the SPX, this underperformance is eye-opening to us. We were hoping that earnings season and the ensuing news by just a few companies might have been responsible for the strong underperformance of Quality – that it was a few outlier stocks, a few big names that drove our index down. Unfortunately, this is not the case. Quality as style just failed...This is the second worst monthly stock picking performance for Quality since we launched our model in July 2007... To see large stable companies, with solid profit margins, strong balance sheets and repeatable earnings underperform in this manner month after month now is distressing." Someone please inform the Chairsatan that he has flipped the core premise of the stock market 180 degrees upside down...

Guest Post: Change In Corporate Profits Leads To Market Movements 

Submitted by Tyler Durden on 05/29/2011 12:25 -0400

Lately analysts have been stumbling all over themselves to raise estimates for earnings growth over the coming quarters based on recent earnings announcements by various companies. However, one of the things that should be paid attention to, besides rising input prices and weakening economic variables, is the Year Over Year Change (YOY %) in corporate profit margins...The evidence is mounting that corporate profits are under attack due to rising input costs through high commodity prices, weakening support from the consumer and an overall weakening state of manufacturing and employment completing the feedback loop into the domestic economy. While economists are still predicting just a slowdown in the economy before a reacceleration - my thoughts, as stated before, is that we will either see close to zero economic growth by the end of the summer or QE 3.