Problems intensify with Greece/Decision in 24 hrs/Gold and silver rebound

Harvey Organ, Monday, June 20, 2011

Problems intensify with Greece/Decision in 24 hrs/Gold and silver rebound

 

 

Another Market Levitation Day On Absolutely Abysmal Volume 

Submitted by Tyler Durden on 06/20/2011 15:07 -0400

One look at the MVOLNYE stock volume chart below should explain to everyone involved why there is yet another entirely algorithmic driven melt up in stocks. With less than an hour of trading left, today is shaping up to be the lowest trading volume day of the year! 

 

 

 

 

 

 

S&P Says "Consensual" Greek Bailout Would Be An Event Of Default 

Submitted by Tyler Durden on 06/20/2011 15:33 -0400

When we said over two weeks ago that the second Greek bailout is Dead On Arrival, we were, as sometimes happens, just a little ahead of the curve. S&P has just confirmed that a "voluntary debt restructuring" would be characterized as an event of default from the rating agency's point of view, which is the most disastrous outcome, as it would impair the collateral held by the ECB and be the true catalyst for a liquidity freeze, while anything ISDA decides on whether Greek CDS is triggered and if a rating agency default is an ISDA determination Event Of Default, is almost completely irrelevant, as discussed in our CDS myth debunking post over the weekend.

Final Stock Volume: 32% Below Average, As Buysiders Dump Corporate Bonds En Masse 

Virtually all other times when stock volume was as pathetic as today's in recent history, were holidays. The chart below speaks for itself. 

 

 

 

 

 

 

 

 

 

41% Of Belgian Central Bank Gold Has Been Lent Out 

Submitted by Tyler Durden on 06/20/2011 16:10 -0400

Some very disturbing revelations from CLSA's Chris Wood who in his latest Greed and Fear note discusses an event that may be all to prevalent within the central banking community: the less than overt lending out of central bank gold to "other entities" in return for picking up nickels in front of a steamroller. In this case, the central bank of governmentless Belgium, which had 41% of its gold out at the end of 2010 on loan. Naturally, the lent out gold is being used by some other key entity, potentially to mask its own inventory deficit, in exchange for the paltry sum of 0.3% on the total loan. Wood's conclusion: "This is a reminder that the paper gold market is significantly larger than the physical market. Just like a run on a bank in a fractional banking system, GREED & fear suspects it will be very hard to settle all the paper claims to gold physically in a real scramble for the metal. This is why in a parabolic spike physical gold is likely to trade at a significant premium to paper claims." We couldn't have said it better ourselves.

S&P Profit Margins Have Now Peaked 

Submitted by Tyler Durden on 06/20/2011 17:03 -0400

Well, technically they peaked some time ago (contrary to mainstream media propaganda), but we were waiting for another quarter to confirm our findings. For the sake of recreating our results, courtesy of CapitalIQ, we ran an analysis for all S&P 500 companies excluding companies that belong to the S&P Financials Sector Index, ending up with a universe of 418 companies. Then we looked at the last 3 years of gross profit margins on a quarterly basis (13 data points), and did a simple average, simple median, and trimmed mean (excluding top and bottom 15%), and got the following result. 

 

 

 

 

 

Paulson Dumps All Sino-Forest Holdings: $750 Million+ Realized Loss 

Submitted by Tyler Durden on 06/20/2011 17:31 -0400

Done and Done. PAULSON & CO. SELLS ALL OF ITS SINO-FOREST HOLDINGS.
The world's smartest investor just capitulated, confirming he has fallen pray to the oldest trick in the stock fraud world. And so much for careful "due diligence" underlying each and every decision at the fabled fund.
Rough estimate of loss on his stock and bond holdings: $750 million+.

CME Cuts Treasury Futures Margins By 30% In Under Three Weeks Despite 20% Jump In Volatility 

Submitted by Tyler Durden on 06/20/2011 18:18 -0400

While it didn't lower ES margins just like before the S&P rout started several weeks ago, the CME has just decided to lower margins across virtually all interest rate products. Again. This is the second consecutive margin drop in under 3 weeks, following an identical action on June 3 when the CME slashed IR margins initially. Some examples: TEN maintenance and initial margins are down from $2160 and $1700 to $1485 and $1100 respectively, or over 30% each in under weeks, 17 (the 30 Year UST Bond Futures) maintenance and initial margins are down 3713 and 2750 to 2700 and 2000 respectively, another 30% drop, and so on. Most amusingly is attempting to validate this margin cut when looking at the Treasury complex vol expressed by the MOVE index. Oddly enough from 71.50 at the beginning of June, or a 2011 low, vol since surged to nearly 2011 highs, or a roughly 20% jump. Yet it is precisely this jump in volatility that somehow is conducive to not one but two margin cuts in three weeks. Luckily, the end of QE3 in precisely 10 days has nothing to do with this decision which makes investing in Treasurys by speculators so much more easy... 

 

 

 

 

 

A Little Fly On The Wall Defeats The Big Banks

Back in April 2010, Zero Hedge wrote an article titled "Banks Stifle First Amendment, Attempt To Create A Tiered Market Of "Clients" And "Everyone Else" As Theflyonthewall.com Is Blocked From Instant Stock Research Reporting" describing how "Theflyonthewall.com, which is a news aggregator service (much like most of the blogosphere these days, but without the snarky commentary), and is hosted on Zero Hedge, has just seen a major driver of its business model cut off, after several banks just won an injunction that blocks Fly from notifying its clients when a bank may have issued a research event such as an Upgrade or, on those extremely rare occasions nowadays, Downgrade. The banks who feel violated by everyone getting access to information about their sellside detritus contemporaneously, not just wealthy accounts and wire services, are Barclays, Bank of America Corp.’s Merrill Lynch, and Morgan Stanley." We spared no words to explain the stupidity of this action: "this injunction is about the dumbest thing one could imagine: news of sell side research changes are reported immediately by Bloomberg, Reuters and all the major newswires. Why did Lehman, Morgan and Merrill not take them on? Oh yeah, limited budget. And now that they have a case precedent, the door is open to demand cashola or threaten with shutting down the big boys. As for the rest of the blogosphere - good luck."  Well, it won't come to that. Our friends at Fly just won their case.

  

SocGen Tries To Make Sense Of The Complete Chaos That Is Europe Ahead Of The Greek Vote Of Confidence, Fails 

Submitted by Tyler Durden on 06/20/2011 19:22 -0400

If anyone has a clear idea what is going in Europe, you are smarter than us, and may move on to a different post. For everyone else, here is a must read piece from SocGen that tries to make sense of what is rapidly becoming the biggest clusterfuck in modern European history, in which everyone hates the outcome that is predetermined by the bankers, yet nobody knows just how to achieve it. From SocGen's James Nixon: "What is so surprising is how much the Eurogroup appears to have handed the initiative to Greece itself; if the Government falls after Tuesday’s vote of confidence presumably we reach the point where the crisis starts to get really sporting. And, if there weren’t hurdles enough, the latest from Mr Papandreou is a referendum on the whole kit and caboodle in the autumn. The risk for the Eurogroup is that the gambit of pressuring Papandreou may now backfire with some of the Greek press seeing this as a full frontal attack on the PM. In many respects the situation in Greece very closely mirrors the political situation in Portugal. The right-wing business orientated opposition is unhappy that their spendthrift socialist government still haven’t bitten the bullet and undertaken root and branch reform of the public sector. Hence Mr Papandreou continues to rely too heavily on hypothetical increases in tax revenue rather than wield the axe over his own supporters. As in Portugal, the opposition may be prepared to bring down the government over this if they can and force new elections. This would leave the Eurogroup having to negotiate with the different political parties in Greece in order to secure agreement on further austerity."