Credit Suisse: "Debt Ceiling Hike Delay: Market Down 15%; Default: Market Down 30%+"

Submitted by Tyler Durden on 07/28/2011 - 10:33 Bond Budget Deficit CDS Credit Suisse Cyclicality Debt Ceiling default Equity Markets Gross Domestic Product Kraft Recession Risk Premium TARP Tim Geithner In the past week, almost every single sellside bank and their mother has released a report on "what happens to the US if there is a [default|debt extension|compromise|zombie apocalypse (if one believes Tim Geithner)]. Sure enough, here is Credit Suisse with its three scenarios. This is notable as it presents the binary outcomes for the stock markets as a result of what develops in Congress. The scenarios are: i) debt ceiling extension (market up 3%); ii) debt ceiling not extended (market down 15%); iii) default (market plummets by at least 30%). Of course, if there is really is a default it is game over for equity markets but that is a moot point. Either way, any report that has zero mention of the word gold when contemplating the impact of a US default goes straight into the garbage. Such as this one.

Those Appalled Haven't Seen Anything Yet

Eric De Groot at Eric De Groot - 16 minutes ago

Capital understands that headline adjectives are often layered. "Appalled" enough to seed the headlines with discontent? Yes. Appalled enough to sell Treasuries? Not yet. Investors that believe bonds can't be sold faster than bad habits at finishing school are likely to be 'appalled' by their price action by 2016. US Treasury Bond 20YR+ (TLT) And US Treasury Bond Diffusion Index... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Guest Post: Debt Ceiling Dilemma: The Foul Choice Facing Investors

For the record, I still believe that there will not be a breach of the debt ceiling and no overt default for the US. Things will be worked out in the nick of time, like they always are. However, the media is full of articles wondering about what ‘investors’ might do in response to a US default and/or credit downgrade. What will happen to Treasury prices? Will they go down as investors dump them en masse in response to a credit downgrade forcing interest rates to climb? It’s a big question and the most likely answer is “No, not really”. Partly because these so-called investors have been well-conditioned to believe that another bailout is always around the corner, but mainly because they have nowhere to go. The big money is trapped... The Treasury market is the largest and most liquid in the world, by far. For many big money funds there really aren’t any realistic options other than the Treasury market, and this present reality will limit the market reaction to any downgrade.

White House Press Briefing Summary On Debt Ceiling

The latest meaningless headlines from White House spokesman Jay Carney:

• CARNEY SAYS NO REASON TO REPEAT DEBT DEBATE LATER THIS YEAR Except for retaining Obama's job of course
• CARNEY SAYS AMERICAN PEOPLE WANT COMPROMISE ON DEBT LIMIT Preferably the democrat compromise which saves a few quadrillion by not launching war on Mars?
• And sure enough there it is: CARNEY SAYS REID PROPOSAL REPRESENTS COMPROMISE 
• CARNEY SAYS SENATE WILL REJECT BOEHNER DEBT PROPOSAL
• CARNEY SAYS TREASURY WILL EXPLAIN HOW IT WILL MANAGE FINANCES
• CARNEY SAYS BOEHNER PLAN VOTE WILL NOT LEAD TO COMPROMISE
• CARNEY SAYS CONGRESS `CONTROLS OUR FATE' ON DEBT LIMIT
• CARNEY SAYS ONGOING DEBATE HAS HAD NEGATIVE IMPACT ON ECONOMY
• CARNEY SAYS `NO QUESTION' BOEHNER PROPOSAL IS `POLITICAL ACT'

Bottom line: algos now using every appearance of the word "compromise" in a headline as buying trigger.

Guest Post: "Whatever It Takes"

During 2008, traitors like Hank Paulson were able to con most of us by saying that we risked a destruction of the financial system as an excuse to give the banksters and their allies a blank check. The con wasn’t in the notion that the financial system risked implosion as I believe that statement was most likely true. The con was that since most Americans don’t have a clue how the financial system works they merely became scared and reflexively agreed in their own minds that “well of course the financial system must be saved.” I on the other hand argue that the financial system is a ponzi scheme that enriches only the three enshrined parasite classes that dominate America today. The TBTF Wall Street banks, the military industrial complex and the politicians and lobbyists in D.C. that line their pockets. Everyone else gets sucked dry. I have spent the last three years of my life writing about this so that people understand when the next major crisis happens who is to blame and more importantly I want to instill in people the courage to look outside of this immoral money system to something that can move us forward when this one gets dismantled. I do not claim to have the answers I am just trying to get people to ask the right questions and get educated on how things operate. We the People must own the debate or it will own us.

Football Legend Cristiano Ronaldo To Be Used As ECB Collateral

We were pretty much speechless when we read this - it sure puts guarantees by Noyer, Trichet and all the other bureaumonkeys that the ECB does not accept just any collateral in perspective. From Presseurop.eu: "The most expensive footballer in history may now be used to guarantee the solvency of a Spanish bank. “Ronaldo in the bailout fund,” headlines Süddeutsche Zeitung. The daily reports that the Bankia group of savings banks, which financed Real Madrid’s acquisition of the Portuguese player, is now seeking to borrow funds from the European Central Bank. In response to the ECB’s demand for guarantees, Bankio are putting up… Ronaldo and the Brazilian Kaka, who also plays for the Madrid football club. In 2009, Real borrowed 76.5 million euros to pay transfer fees of 100 millions euros to Manchester United, and 60 million to Milan AC."






Petition the Inspector General: Investigate Attorney General Bondi’s Firings of June Clarkson and Theresa Edwards

Posted by: 4closureFraud

Post date: 07/28/2011 - 07:23

The attorneys investigating foreclosure fraud said they were forced out. Sign the petition calling on the Attorney General's Office of Inspector General to investigate Pam Bondi's actions.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 28/07/11

Submitted by RANSquawk Video on 07/28/2011 - 12:42 ETC RANSquawk A snapshot of the US Afternoon session covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge

In The News Today

July 27, 2011, at 6:50 pm
by Jim Sinclair 

Jim Sinclair’s Commentary

Of course it is a mirage. That is what others are realizing now.

Yu Yongding Says China Needs to Hold Less Treasuries as Safety a ‘Mirage’ By Anoop Agrawal – Jul 27, 2011 4:37 AM MT
Former Chinese central bank adviser Yu Yongding repeated his call for China to reduce its Treasury holdings amid an impasse among policy makers on raising the U.S. government’s debt limit.
“U.S. bonds are not safe, but people think they are safe,” Yu, a researcher at a Beijing institute under the Chinese Academy of Social Sciences, told reporters at a briefing in Mumbai, India, today. “That is a mirage.”
President Barack Obama’s administration and Democrats and Republicans in Congress are locked in a standoff over what kind of deficit-cutting measures to tie to an increase in the nation’s $14.3 trillion debt ceiling. The Treasury Department has said the U.S. exhausts its borrowing authority on Aug. 2 and risks going into default.
Yu spoke to reporters before giving a lecture at an event organized by Export-Import Bank of India.
Xia Bin, a current adviser to the Chinese central bank, said July 25 that he’s confident that U.S. political leaders will reach an agreement before the deadline.
A U.S. default would be “disastrous,” Yu said today.
In March, Yu said that China, the biggest foreign holder of Treasuries with $1.16 trillion of the securities, should halt purchases because of the risk of an eventual default. In June, he predicted that credit agencies would limit the severity of any downgrade of the U.S. rating to avoid investor panic.
More…





Jim Sinclair’s Commentary

Problems are not going away. They are just sitting there accumulating power to destroy.

FHA May Be Next in Line for Huge Bailout: Delisle and Papagianis By Jason Delisle and Christopher Papagianis
Jul 25, 2011 6:00 PM MT Tue Jul 26 00:00:57 GMT 2011
The nationwide decline in house prices has created a vacuum in the U.S. mortgage market. Private financing for home loans has all but dried up and the U.S. government is now guaranteeing almost every new mortgage. Fannie Mae and Freddie Mac have received most of the media’s attention, but policy makers need to focus on the third leg of the housing- support stool: the Federal Housing Administration.
The FHA has some major accounting problems. Left unaddressed, they could spook the markets, lead the FHA to seek a federal cash infusion and further enrage taxpayers. These outcomes can be avoided — but only if policy makers are more transparent about the risks involved in guaranteeing mortgages.
The FHA provides private lenders with a 100 percent guarantee against defaults on home mortgages that meet certain underwriting criteria, such as a minimum down payment and credit score. Traditionally, the FHA has served first-time homebuyers and low- to moderate-income families who pay an insurance premium for this loan guarantee.
As private-financing options have disappeared, the role of the FHA has grown. Its market share has increased to about 30 percent today from 3-4 percent in 2007. That’s because the agency is now practically the only game in town, accepting borrowers with down payments of as low as 3.5 percent. As the last few years have made clear, sizable down payments — or “skin in the game” — are the key to avoiding defaults in the near term and to achieving a stable housing market in the long term.
More…






Jim Sinclair’s Commentary

Default is not the only problem.

Gauging the Fallout From a U.S. Downgrade By DAVID WESSEL WSJ
JULY 27, 2011, 4:57 P.M. ET
A prediction, widely shared in Washington and on Wall Street: One month from now, Congress will have lifted the federal debt ceiling, the U.S. government will be paying its bills, the president will have signed a convoluted deficit-reduction law that defers decisions on benefits and taxes—and the U.S. will have lost its AAA credit rating.
A downgrade of the U.S. to AA by Standard & Poor’s—putting the U.S. in the company of Slovenia, among others—is not good.
But how much will it really matter?
Is S&P’s opinion akin to sports columnists writing about the World Series? (Entertaining, but what really matters is what’s happening on the field.) Will a downgrade finally trigger the much-predicted plunge in markets and spike in bond-market interest rates? (If so, that would be economically devastating.) Or will the loss of AAA status be a near-term non-event, but become a date highlighted in history-textbook timelines tracking America’s slow decline? (In other words, a downgrade reflects the disturbing underlying economic and political woes rather than worsening them.)
The markets, we have been warned for weeks, are about to crash at any moment. ("Investors refuse to panic," read one headline.) A default surely would provoke a market drop. But if that is averted, will markets plunge because S&P points out the obvious: U.S. politicians can’t agree on a fix for the nation’s long-term finances?
More…





What are some unforeseen outcomes of conditioning our children to live in a police state?

Posted by : hedgeless_horseman

Post date: 07/28/2011 - 11:50

"...students are still not being taught that they may have to defend themselves." In fact, our students are being taught...

 

Buy me a cup of coffee

I'm PayPal Verified