Wednesday, October 19, 2011

Ironic "Scariest Chart Ever" Redux - America Will Surpass 100% Debt To GDP On Halloween

Earlier today we presented Bloomberg's Chart of the Day which represented the GDP and Debt per capita on a historical and projected basis, and we hysterically, and tongue-in-cheekly, dubbed it "the scariest chart ever" because it confirmed that at some point, very soon, US Debt will surpass GDP and never look back. We decided to dig into the actual numbers (cancelling out the per capital denominator as it is the same on both sides of the equation) and came to a very disturbing revelation: as of today, total US Debt, is $14.942 trillion (source), obviously an all time high. Q2 GDP as was reported by the BEA three weeks ago, was $15.012 trillion in current dollars. In other words, the spread between total GDP and total debt has now collapsed to an all time low $70 billion. Incidentally, this number was $1.8 trillion at the beginning of 2010. Then we decided to take a quick look at the upcoming bond issuance and find that tomorrow the Treasury will announce approximately $99 billion in 2, 5 and 7 Year bonds to be auctioned off October 25 through 27... With a very appropriate settlement date: October 31, elsewhere known as Halloween. Yes, ladies and gentlemen: All Hallows E'en will be doubly scary this year: for the first time since World War II, US debt will officially surpass GDP on Halloween 2011.

European CDS Ban Sends 1 Year Greek Bond Yield To 188%

Well, it is not just the CDS ban, the fact that Greece is now done is also a modest factor, but since nobody can short Greek default risk unhedged, the only option is to short the bonds. As they did today en masse. Greek 1 Year bonds: the most liquid proxy for default in the absence of 1 Year CDS, closed at 183%, after hitting an all time high of 188%, following yesterday's 173% close. To all those who bought 1 Year Greek bonds when yields hit 100% a month ago because "they just couldn't possibly drop any more, and you would double your money in one year guaranteed", condolences for the 50% loss. We are certain that a new batch of bottom callers will emerge, this time calling for doubling your money in six months.... Then three.. Then one and a half... etc... Until finally Zeno's paradox catches up and you either double your money overnight or you lose it all.

Deadbeat State: Ill. Owes Billions in Unpaid Bills

Eric De Groot at Eric De Groot - 2 hours ago
Illinois is not the only cash strapped state within the US union. If the public sector (state or local) cannot pay, the formula’s trend, already under pressure in 2011, will weaken significantly in 2012. Headline: Deadbeat State: Ill. Owes Billions in Unpaid Bills Drowning in deficits, Illinois has turned to a deliberate policy of not paying billions of dollars in bills for months at a time,... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Gold fails at the upper end of its trading range - moves lower

Trader Dan at Trader Dan's Market Views - 2 hours ago
Once again, the $1680 level has proved to be too high a mountain for the gold bulls to climb.Having failed there the previous trading session, it has now begun moving back down within the recent trading range testing support levels in the process. The first level that gave way was $1660. We are now challenging $1640. If that gives way, we then move towards $1625 - $1620, followed by the region near $1600. The HUI is absolutely no help once again as the ratio trades are back, due mainly to weakness in the broad equity markets and the dumping of risk trades. Traders who love chan... more » 
Bruce Krasting
10/19/2011 - 12:26
We're getting the biggest derivative security in history in the next few days. Some thoughts on how it will be priced. 
10/19/2011 - 11:15
All you need to read. 

Gold and Euro Politics

Dear CIGAs,

There is a real possibility that Euroland could talk itself to death. Discussions of upcoming rescue plans, arguments against it and warnings serve to make nice opportunities for trading equity markets, but not settling the problem of debt gone wild.
The movement in gold continues and is playing quite nicely to Kenny’s alternative of the "Accordion Chop" which has not technically damaged the various higher price objectives.
This is just another period of consolidation/reaction in gold without fear of a full valuation having been established.

Dear Daily Readers. 

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