Tuesday, October 18, 2011

S&P Downgrades Over 20 Italian Banks, Says Difficult Climate Is Neither "Transitory" Nor "Easily Reversed"

Another day, another pervasive downgrade action by S&P. "In our opinion, renewed market tensions in the eurozone's periphery, particularly in Italy, and dimming growth prospects have led to further deterioration in the operating environment for Italian banks. We also think the cost of funding for Italian banks will increase noticeably because of higher yields on Italian sovereign debt. Furthermore, we expect the higher funding costs for both banks and corporates to result in tighter credit conditions and weaker economic activity in the short-to-medium term. We do not believe that this difficult operating climate is transitory or that it will be easily reversed. In our view, funding costs for Italian banks and corporates will remain noticeably higher than those in other eurozone countries unless the Italian government implements workable growth-enhancing measures and achieves a faster reduction in the public sector debt burden. Consequently, we envisage a situation where the Italian banks may well be operating with a competitive disadvantage versus their peers in other eurozone countries. At the same time, we think all banking systems across the eurozone, including Italy, may raise their commitment to reinforcing banks' capitalization."



Corporate Margin Squeeze Coming As Producer Prices Soar 0.8% On Expectations Of 0.2%

Following concerns that China will be unable to funnel liquidity into its slowing economy due to latent inflation, the last thing the world needed was to learn that inflation, in this case Producer Prices, was still running at a blistering pace in the US. Alas, that is precisely what it got after September PPI printed up 0.8% from the month before (following the unchanged print in August) and 6.9% YoY. The number was above even the highest expectation from Wall Street strategists (consensus was 0.2%). And while PPI ex food and energy was up just 0.2%, try telling that to those 99% of the population whose income is barely sufficient to buy the, you guessed it, food and energy, which rose by 0.6% and 2.3% respectively. The biggest concern is the immediate impact on margins: producers’ rising costs likely to lead to further margin shrinkage “as firms choose to absorb increasing costs rather than pass them along to consumers,” says Bloomberg economist Joseph Brusuelas. Don't expect much respite in the CPI report to follow shortly.

Egan-Jones Downgrades Goldman From AA To AA-

Just out by the only rating agency that is even remotely credible. "Synopsis: Across the valley - GS recorded $2.96B in investing and lending losses and a $378M decline in IB revenues, totaling a $3.34B decline. Hence, the total loss of merely $393M is respectable. Furthermore, given the political pressure, now is not the time to show robust results. The major issues facing GS is the cost of complying with the Volker rule (look for some changes or exemptions from the proposed rule), changes in senior management (to appease Sen. Levin) and a still weak IB and trading environment. However, with the demise of most of its major competitors, GS benefits from the lack of competition, attractive LT trading opportunities, and various forms of federal government support. Other raters might take neg. actions."

Agriculture Commodities: Supply & Demand

Admin at Jim Rogers Blog - 2 minutes ago
I own all commodities, but I own agriculture most of all. Agriculture is in the worst shape of all in terms of adequate supply. ETFs: ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN (AMEX:RJA) *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

Investing Lessons: Going Against Panic

Admin at Jim Rogers Blog - 2 hours ago
Just about every time you go against panic, you will be right if you can stick it out. - *in Market Wizards* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

The Next Shoe To Drop Could Be China

Admin at Marc Faber Blog - 2 hours ago
I think we have to distinguish between different commodities. We have agricultural commodities, and I think the long term outlook for agriculture in the world is probably rather favorable. I would rather play it by owning farms than by speculating in wheat futures and corn futures because the average investor will find it very difficult to trade these markets. And then we have industrial commodities, and this is an important signal for the market. They collapsed. They did not collapse because of Greece. They are down 30 percent because it is very likely that the Chinese economy is n... more » 

There Is A Lot Of Uncertainty And The Markets Move According To Momentum

Admin at Marc Faber Blog - 2 hours ago
I think we have a lot of volatility in markets and they are, as far as I am concerned, fairly unpredictable because we have a lot of government intervention. We do not know whether QE3 will come about in America, some form is likely. We do not know about the bailout of banks in Europe, some bailout is likely. So there is a lot of uncertainty and the markets move according to momentum. For instance, is it possible for me that the euro just strengthened in the last couple of days as much as it has because the outlook for Europe is probably worse than for the U.S. So we have a lot of u... more » 

Prime X or Preparation H?

The drop continues...

Oops: Fed Extends POMO Closing Time By 15 Minutes

What's wrong Brian Sack, couldn't get the bank syndicate to collude fast enough on the latest criminal OWIC?


And Once Again, German, French Dischord Threatens To Scuttle European Bailout Reports AP

All it took to unwind two weeks of rumors and lies were a few factual articles. Such as this one from the AP: "Disagreement between France and Germany may prevent eurozone leaders from reaching a crucial deal on a second rescue package for Greece this weekend, a person familiar with the negotiations said Tuesday....Investors around the world hope a comprehensive plan to fight the debt crisis, including final details on Greece's second bailout, will keep the debt turmoil from pushing the global economy back into recession. Signs that such a plan is proving slower to clinch caused markets to slide on Tuesday. Germany is pushing for banks to accept cuts of 50 percent to 60 percent in the value of their Greek bonds, while France is insisting that leaders should only make technical revisions to a preliminary agreement reached with private investors in July, the person said. France on the other hand has been reluctant to back bigger losses for banks, since French banks are among the biggest holders of Greek government bonds. Its position is supported by the European Commission, the EU's executive. Commission officials said last week that technical revisions to the July deal with the banks are necessary because changed market conditions had made the deal more expensive for Greece and the rest of the eurozone." And so on. Are we the only ones dazed, confused, and tired beyond comprehension with this endless, ridiculous, pathetic, grovelling Groundhog Day bullshit? Stop risking civil and international war just to satisfy your bureaucratic vanity. THERE IS NO MONEY! YOU KNOW IT, WE KNOW IT, THE PEOPLE KNOW IT. ENOUGH!!!  

Wondering Why The Market Just Bounced? Thank Jean-Claude

Just as the bottom was about to fall from the market, here comes the ECB cavalry with its tactical ultra short-term bailout in the form of several billion in Italian BTP purchases. Since this is nothing but a liquidity injection which does nothing to resolve deep, structural and solvency problems, we give this latest intervention attempt about half an hour in halflife. And once the market processes the news from the FT that the EU bank on naked CDS shorting will become permanent, look for everyone short sovereigns to unwind synthetic positions and to rotate shorts into cash bonds. Good luck ECB.

Collapse In French Bonds Implies EURUSD Now Rich By About 1300 Pips

Below we refresh the very simple correlation chart showing the EURUSD and the spread between French OATs and German Bunds, a spread which has soared to all time wides now that France is once again the target of vigilantes on fears of an imminent French downgrade. According to this alone, the EURUSD us now about 1300 pips rich, an ES-implied level of just about 1,000. We expect reality to rear its ugly head very soon.

Because The Financial Short Ban Was Not Enough, Europe To Proceed With CDS Short Selling Ban Imminently, Accelerate Terminal Unwind

Just because Europe did not learn any lessons with the financial shorting ban which made everything much worse, here comes this...
This means that cash Sovereign bonds are about to go bye bye as the only recourse will be to short the living daylights in good old-fashioned govvies. And so we move one step closer to the final unwind courtesy of idiot European bureaucrats who are handing free money on a silver platter to the skeptics...

The Fraud At The Heart Of Student Lending Exposed - The One Sentence Everyone Should Read

A key reason why a preponderance of the population is fascinated with the student loan market is that as USA Today reported in a landmark piece last year, it is now bigger than ever the credit card market. And as the monthly consumer debt update from the Fed reminds us, the primary source of funding is none other than the US government. To many, this market has become the biggest credit bubble in America. Why do we make a big deal out of this? Because as Bloomberg reported last night, we now have prima facie evidence that the student loan market is not only an epic bubble, but it is also the next subprime! To wit: "Vince Sampson, president, Education Finance Council, said during a panel at the IMN ABS East Conference in Miami Monday that lenders are no longer pushing loans to people who can’t afford them." Re-read the last sentence as many times as necessary for it to sink in. Yes: just like before lenders were "pushing loans to people who can't afford them" which became the reason for the subprime bubble which has since spread to prime, but was missing the actual confirmation from authorities of just this action, this time around we have actual confirmation that student loans are being actually peddled to people who can not afford them. And with the government a primary source of lending, we will be lucky if tears is all this ends in.

Some Market "Fun With Numbers" From Art Cashin

Art Cashin Groundhog Day Twitter Art Cashin shares this amusing market "performance" anecdote which should come as no surprise to anyone who follows the uber-volatile chaos that the stock market has become.

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