Panic In Italy: FTSE MIB Down 6.2%, Biggest Drop Since May 2010

Remember when we said yesteday that the FTSE MIB won't have a good day today? It isn't...

Italy Bank Update As Dow Jones Wipes Out Entire Post-FOMC Surge

Below is a a chart of Italian bank equity performance. Countrywide bank run next? Whether the reason for the sell off is due to a typoed GOFO 12M SocGen print or there is a fundamental reason, remains to be seen, but US equities are not taking the risk. US stocks have wiped out all of yesterday's last minute gains.

And The Hits Just Keep On Coming: Fitch Downgrades Cyprus To BBB, Outlook Negative

"The two-notch downgrade of Cyprus's ratings to 'BBB' reflects the actual and anticipated fiscal slippage, compounded by Fitch's expectation that the sovereign will be unable to access the international debt markets in order to refinance an increasing debt maturity profile in H211 and H112. The 2011 deficit is now expected to be close to 7% of GDP and not all of the increase, from 4%, since the agency's most recent analysis in June can be attributed to the naval base explosion, which took out half of Cyprus's electricity generating capacity," says Chris Pryce, Director in Fitch's Sovereign Group. The government's calculations indicate its financing requirements in the last five months of the year will be close to EUR1.1bn, of which EUR650m will be existing debt falling due for redemption. Against this, the government has EUR570m of cash balances, representing about half of the total financing requirement. The government anticipates that it will be able to refinance the balance by borrowing from domestic financial institutions, although Fitch considers that this may prove challenging at a time when the banks are facing a decline in asset quality. Even if the sovereign can secure refinancing through H211, it will enter 2012 with minimal cash balances and refinancing needs of EUR1.2bn in the first two months. Under current market conditions (government three-year yields reached 15.4% in August), Fitch believes that the government will be unable to meet this target without recourse to external official assistance, reflecting a lack of options inconsistent with a sovereign issuer in the 'A-' category. At this juncture, Fitch anticipates that such assistance is likely to be forthcoming.

Guess what? It IS 2008, or at least late 2007!

The market is selling off today on rumors and fears of some European bank being on the brink of default.  Monday, it was BAC that was rumored to be in big trouble.  Markets are moving again because of rumors of bank problems.  That sounds a lot like 2007 and 2008 to me.  People are shooting first, asking questions later again.  Any of SocGen, Intesa, Dexia, BAC are big enough to provide the market with a “Lehman moment”.  Notice the geographical diversification?  The contagion was never really at the sovereigns, it is at the banks.  I have argued over and over that each sovereign problem was relatively independent; whereas, the banks are all inter-connected. 

I Think The Federal Reserve Is Underestimating The Severity Of The Coming Economic Downturn

Admin at Marc Faber Blog - 26 seconds ago

I think the Fed is underestimating the severity of the coming economic downturn. Essentially they spent their bullets. It is very difficult to follow through with QE3 right here, because you have gold prices going ballistic, and you have the dollar being very weak, and so there are unintended consequences with implementing QE3 right here. - *in Bloomberg, August 10* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*




Was A Double Dip Recession Really Hard To See Coming? Is It A Double Dip Or A Large Serving Of A Single Recession?

Posted by: Reggie Middleton

Post date: 08/10/2011 - 07:06

How can it be a double dip if the first recession never ended? The Fed spent $1 for every 80 cents of "supposed recovery", all of which lasts only as long as the Fed keeps spending those $1s....

Here's the Snapback... Next Up New Lows

Posted by : Phoenix Capital...

Post date: 08/10/2011 - 10:10

Nothing goes straight up or straight down. So there are going to be sharp bounces during this collapse. This was certainly the case in 2008. In fact, during the two months of October-December we had...

Think gold is high? Wait till dollar bonds are dumped, Davies says

 

 

In The News Today

August 9, 2011, at 5:42 pm
by Jim Sinclair in the category In The News |  Print This Post |  Email This Post

My Dear Friends,

You can see the importance of the $1764 Angel today.

Regards,
Jim




Jim Sinclair’s Commentary

The Fed has thrown the dollar into the wind.





Jim Sinclair’s Commentary

This is as important in the grand scheme as the downgrade of US treasuries.

S&P Cuts AAA Ratings on Thousands of Municipal Bonds After U.S. Downgrade
By Sarah Frier and Michelle Kaske – Aug 8, 2011 9:01 PM MT
Standard & Poor’s lowered the AAA ratings of thousands of municipal bonds tied to the federal government, including housing securities and debt backed by leases, following its Aug. 5 downgrade of the U.S.
The rating company assigned AA+ scores to securities in the $2.9 trillion municipal bond market including school- construction bonds in Irving, Texas; debt backed by a federal lease in Miami; and a bond series for multifamily housing in Oceanside, California. Olayinka Fadahunsi, an S&P spokesman, said he couldn’t provide a dollar figure on the affected debt.
S&P also cut ratings on securities backed by Fannie Mae and Freddie Mac, prerefunded issues and munis repaid by using federal assets, also known as defeased or escrow bonds. No state general-obligation ratings were affected and the company said some may remain unchanged.
“It’s expected, but nobody is happy about it,” Bud Byrnes, chief executive officer of Encino, California-based RH Investment Corp., said in a telephone interview. “No one that I know thinks it was justified to cut the U.S. bonds to AA+. Once that happened, you knew that any prerefunded bonds or escrowed bonds would be downgraded too. It’s a domino effect.”
Byrnes said funds required to invest in AAA bonds would be most affected by the downgrades and may be forced to liquidate some holdings. “They will have a hard time replacing that yield,” he said.
More…





Jim Sinclair’s Commentary

This you can take to the bank as it will happen for certain.

Rogoff Sees Fed Asset Purchases in Effort to Secure U.S. Economic Recovery
By Susan Li and Scott Lanman – Aug 8, 2011 8:20 PM MT
Federal Reserve policy makers are likely to embark on a third round of large-scale asset purchases, moving “more decisively” to secure the U.S. recovery, said Harvard University economist Kenneth Rogoff.
“They certainly should do something right away,” said Rogoff, a former International Monetary Fund chief economist who attended graduate school with Fed Chairman Ben S. Bernanke. It’s “hard to know” if Bernanke would immediately be able to gain the support of Federal Open Market Committee members, Rogoff said in an interview today on Bloomberg Television.
The FOMC meets today in Washington a day after the worst day for U.S. stocks since December 2008. Bernanke last month outlined policy options including additional asset purchases or strengthening the commitment to low interest rates after the first two rounds of so-called quantitative easing failed to keep the unemployment rate below 9 percent.
“Out-of-the-box policies are called for, especially much more aggressive monetary policy, however unpopular that may be,” said Rogoff, 58, a former Fed economist who like Bernanke earned a Ph.D. from the Massachusetts Institute of Technology. The Fed is “going to move more decisively,” Rogoff said.
The Fed is scheduled to release a statement at about 2:15 p.m. New York time after its meeting. Bernanke and his colleagues may prolong a pledge to maintain record monetary stimulus, said economists at JPMorgan Chase & Co. (JPM), BNP Paribas and Goldman Sachs Group Inc. (GS) The Fed could do so by making a commitment to hold its $2.87 trillion balance sheet steady for an “extended period.” The central bank has kept its benchmark rate near zero since 2008.
More…





Jim Sinclair’s Commentary

Much to do about nothing. The Fed is in freeze frame, shocked by the failure of business to hold any recovery and the downgrading of US treasuries.

Fed to Hold Rates Exceptionally Low Through Mid-2013
By BINYAMIN APPELBAUM
Published: August 9, 2011
WASHINGTON — The Federal Reserve said Tuesday that it would hold short-term interest rates near zero through mid-2013 to support the faltering economy, but it announced no new measures to further reduce long-term interest rates or otherwise stimulate renewed growth.
The Fed’s policy-making board said in a statement that growth “has been considerably slower” than it had expected, and that it saw little prospect for rapid improvement, prompting the change in policy. It had previously said that it would maintain rates near zero “for an extended period.”
“The committee now expects a somewhat slower pace of recovery over the coming quarters,” the Fed’s statement said. “The unemployment rate will decline only gradually.”
Many economists and outside analysts argue that the Fed should act more aggressively in response to rising unemployment and faltering growth. But internal divisions are limiting the central bank’s ability to pursue additional steps.
Even the modest commitment announced Tuesday was passed only by a vote of 7 to 3. The central bank prefers to act unanimously whenever possible.
More…