Wolfgang Munchau On How The Greek Rollover "Deal" Is A Toxic CDO 

Submitted by Tyler Durden on 07/03/2011 22:33 -0400

A week ago, Zero Hedge penned "An MLEC In PIIGS' Clothing: The Latest Greek Bailout Proposal Picks Up Where the Super SIV Failed" in which we explained how the current fatally flawed proposal for a Greek bailout is nothing more than a structured vehicle, expected to remain off the books, and much more importantly, expected to not trigger rating agency ire, and kill the entire extend and pretend game: remember - an Event of Default by a rating agency, even a Technical one (completely irrelevant of what ISDA does with Greek CDS) means game over for the European Central Bank and its €2 trillion in "assets", not to mention the western financial system. Now, a week later, the FT's own Wolfgang Munchau explains why our observation of how toxic the "bailout plan" is was rather accurate: "This structure is still not quite so complex as some of the more elaborate CDOs we have encountered in the global financial crisis. If you take some time to work through the arrows and boxes, you see relatively quickly that this complex structure is not a private sector participation at all. Rather it is a private sector bail-out... I have no space for a large drawing with lots of boxes and arrows to explain the complexity of the vehicle, through which eurozone governments want to involve the private-sector banks in its next loan package." Munchau's conclusion: "If this was any other field of human activity, you would go to jail if you accepted, let alone made such an indecent offer." On the other hand, all is fair in love and perpetuating the ponzi Status Quo^TM. Our follow-on observation that "The two things that are keeping the Eurozone afloat: an SPV and a CDO" alas appears also to be rather in line. And before the entire financial system collapses upon itself like a cheap lawnchair, this will be fondly remembered as one of the more prudent "rescue" mechanisms enacted to delay the inevitable.

Goodbye Rare Earth Minerals, Hello Not So Rare Underwater Minerals: Vast ___ Oxide Deposit Discovered In Pacific Seabed 

Two weeks ago we demonstrated what happens to prices of so-called "rare" earth minerals, which are almost exclusively controlled by China, and whose exports China recently decided to cut to a mere trickle, resulting in a 10+ fold increase in some of the most rare minerals in under a month. It also has allowed the third R bubble to persist as long as it has. It appears that the bubble is about to pop big time. According to Nikkei, "Vast deposits of rare earth minerals have been discovered on the seabed of the Pacific Ocean amounting to 1,000 times those on land, media reported on Monday citing a study by Japanese researchers." Of course, this could merely be one of those not quite definitive discoveries, which end up being disproven eventually, but which serve to merely pop a temporary speculative bubble. Just like the IEA. In the meantime, it may be time to temporarily erase the Rare from Rare Earth Minerals, and change Earth to Underwater.

June Light Vehicle Sales SAAR Drops To 10 Months Low, Upside Economic Case In Question 

As is by now well known, when it comes to upside theories debunking the bearish "economic contraction" case, there are two core arguments: a Japanese pick up, and a surge in automotive production and sales. And following a jump in Japanese industrial production last week, there was a brief consensus that the soft spot as a result of the earthquake and tsunami have been overcome. Until the subsequent Tankan confidence index release, that is. And in the meantime, nobody can still explain how the economy is expected to return to trendline if peak electric consumption can not be met by a crippled electrical infrastructure. Which leaves auto production, and the latest iteration of inventory restocking. Zero Hedge already discussed the glaring split in inventory data between the Chicago PMI and the Manufacturing ISM, which as Goldman noted previously is a major wildcard in determining future GDP growth. Perhaps David Rosenberg said it best in his Friday Breakfast with Dave: "While there is no doubt that we will see an inventory boost from a revamping of auto production in the coming quarter, what will be critical is whether final sales will hold up. So far in June, chain store sales are running below plan. Auto sales, however, are the real wild card and could hold the key as to whether we are, in fact, at an inflection point. Go back to August 2007 and they put in an interim peak of 16.3 million annualized units. They bottomed for good in February 2009 at 9.2 million units. Then they hit a nearby high of 11.7 million units in March of last year just ahead of the market downturn and "double dip" concerns, only to then trough at 11.5 million in August 2010 just as the market was ready to rip. And then, in February of this year, sales peaked at 13.4 million in February. The May number was 11.8 million - and today we get June. Stay tuned." Consensus was for a significant rise to 12.0 million in June. The actual number was 11.45 million. The lowest since August 2010. So much for an inflection point (not to mention that all of this ignores the record channel stuffing in post-reorg GM).





Check out this list on the CIA web site, showing positive and negative foreign trade balances.
Look who is at the very bottom of the list with the largest trade deficit, by a wide margin. This can't go on much longer without a currency collapse.





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