Monday, July 4, 2011

As ECB Finds Rating Agencies Have Suddenly Found Religion, It Prepares To Flip Flop On Accepting Greek Bond Collateral

Well this was unexpected: the rating agencies, for years and years patsies of their highest paying clients, have suddenly found their conscience, if not religion, and adamantly refuse to bend long-standing rules which qualify the proposed Greek MLEC/CDO type rescue as an event of default. Per Bloomberg: "The rating companies have signaled the plan would trigger because it is being done to avoid default, so couldn’t be considered voluntary, and because investors would be worse off than by holding the new securities." The ECB is so confused by this intransigence and unwillingness to bend to the will of the criminal cartel that earlier today the ECB's Novotny was complaining to Austrian TV about this unexpected demonstration of independence: "Debt rating agencies are being much tougher on potential private-sector contributions to Greece's debt woes than in past bailouts, European Central Bank Governing Council member Ewald Nowotny said on Monday. "We are conducting a very difficult conversation with the ratings agencies," he said."This is what we have to try to find: a way that on the one hand certainly involves banks without having this lead to a default as a consequence," he added. "I also must say it strikes me that the ratings agencies are being much stricter and more aggressive in this European matter than they were, for example, in similar cases in South America. I think this is something we will have to think over." As a result of all this sudden uncertainty, Bloomberg now speculates that the ECB will have no choice than to flip flop on its own adamant position of isolating defaulted collateral, and accept Greek bonds even in an event of default: “The ECB cannot remove liquidity from the big Greek banks,” said Dimitris Drakopoulos, an economist at Nomura. “This discussion is a waste of time. The ECB is going to back down in the end -- what can they do?” he added."

Here Is Why Those Who See In IEA's SPR Release A "Shadow QE" Are Dead Wrong

Leave it to Goldman to explain why the surge in crude prices is actually a good thing. Enter the good old ("recycled" some may say tongue in cheekly) recycled petrodollar thesis. The logic, in brief, is as follows: Petroleum exporters are the primary beneficiaries of rising oil prices and, assuming they don't use the bulk of the funds to buy their citizens' endless love (a big if in recent months), use this "savings" flow to purchase various assets from developed capital markets. To quantify, Goldman suggests that that the $70/barrel rise in crude over the past 2 years "has caused petrodollar saving flows to rise from roughly $10bn to $70bn per month, thus adding roughly $700bn of asset demand to global capital markets." Which is supremely ironic: those who claim that the IEA's action is comparable to a QE are 100% dead wrong. It is actions which raise the price of oil that have an implied QE effect, whereby the abovementioned $700 billion in recycled capital is only possible due to the surge in crude. As prices drop, whether it is due to idiotic, politically-driven actions like that by the IEA, or otherwise, the recyclability of petrodollars plunges, and far less "savings" end up being reinvested in US asset. What would be further ironic is if the administration realizes this paradox, and in order to save the market (which it will have to very soon in the absence of ongoing flow monetization by the Fed), it send the price of WTI well over $100 to generate bond buying interest in the short-term. That said, based on some of the stupidity we have recently seen out of the White House, such an outcome would not surprise us in the least.

Dispatches from Occupied Territory – The Awakening

Posted by: Cognitive Dissonance

Post date: 07/04/2011 - 19:17

Even though most of us come to Zero Hedge to learn, laugh, share and even rant, ultimately many of us are all alone as we cope with our awakening. While Tyler & Company do an excellent job deconstructing the insanity, rarely is our day to day emotional and psychological battering discussed. I offer the following occasional series as a small step in that direction.

Richard Alford: Counter-Cyclical Follies

Posted by: rcwhalen

Post date: 07/04/2011 - 15:09

Increasing numbers of economists, market participants and some members of the US policy establishment have come to a greater appreciation of the role of globalization on US economic performance. They view globalization and the US policy response to it as the cause of the US asset price bubbles and hence the balance sheet nature of this “recession”. This perspective also implies that counter-cyclical fiscal and monetary policies do not address the cause of the under-performance of the US economy and hence are not solutions.

Bloomberg does video interview with Erste's Ronald-Peter Stoeferle

China Bears Are 'Dead Wrong,' Says Jim Rogers

Commodity bull Jim Rogers says hedge fund managers such as Jim Chanos and Hugh Hendry, who have been shorting Chinese related stocks and credits, have got it wrong.

A New Investment Strategy: Preparing for End Times

The Daily Bell: Where Will You Go When the Sovereign Debt Volcano Blows?

Rating Agency Issues Greek Rescue Plan Warning

Ron Paul: US Should Declare Bankruptcy

On-line Retailers Strike Back at Internet Tax Levy

S&P to Deeply Cut U.S. Ratings if Debt Payment Missed

Gas is 24 Cents Cheaper Than Labor Day

The "Economic Recovery" Turns 2. Feel Better Yet?

US Auto Sales Up in June, But Japan Still Hurting