- EU Official Says Bank Heads Won’t Be at Summit Table Tonight
- EU leaders may frame agenda for more bank talks on bondholder losses in 2nd bailout
pkg for Greece.
- Says IIF doesn’t entirely represent private banks
- Says Greek debt swap would take several weeks
We all know the news by now: "MF reported its biggest quarterly loss ever yesterday, after having its credit ratings cut a day earlier by Moody’s Investors Service on concern that the broker won’t meet earnings targets and may not be able to manage investments in European sovereign debt. The company’s shares fell 48 percent. “It’s aggregated risk,” said Richard Repetto, an analyst at Sandler O’Neill & Partners LP. The positions in Europe, the further downgrade potential and the quarterly loss, combined to discourage investors, he said." Here is where it gets worse: "Analysts at KBW Inc., led by Niamh Alexander, wrote in a note yesterday that the Moody’s downgrade and lower earnings could cause a ripple effect on the company, raising borrowing costs and triggering collateral calls. “It also exposes MF to collateral calls of up to $5 million,” the note said. “We believe it could also prompt lenders to reduce financing, clients to withdraw assets and trigger the need to recognize losses on certain bilateral over- the-counter and off-balance sheet transactions." Well, judging by the bond yield chart below, MF is done (further confirmed by WSJ reporting that the company has hired restructuring expert Evercore Partners). The only question is whether that ever so handy uber collateral puller, Goldman Sachs, so critical in the extinction of Dexia and of course AIG, will be the party responsible for the death of MF Global? Considering who the current head of MF is, and his "key man status" in the prospectus of the company's recently bonds (which are plummeting today), we somehow doubt it.
- PARLIAMENTARY SOURCE SAYS GERMANY'S BUNDESTAG LOWER HOUSE OF PARLIAMENT APPROVES MOTION TO STRENGTHEN EFSF VIA LEVERAGE
- 503 vote in favor of the measure; 89 voted against, while four abstained in Berlin today - so this is a surprise we take it?
The farcial tragicomedy that is today's European summit, which not even the combined minds of Beckett, Camus and Kierkegaard could come up with on their own, is about to begin. Watch it live here in all its frontal lobe liquefying glory. Popcorn not optional.
There is only one notable data point in today's release of new home sales, which, and this should not come as a surprise to anyone, continue to crawl along the floor with just 313,000 houses sold. The datapoint is the median home price, which tumbled from $210,900 to $204,400. This is certainly the lowest number in 2011, and is just modestly off the decade low record in October 2010. And it gets worse: the 3 month drop in median home prices is the biggest ever. Regardless: we are confident this will force the Comcast-based, housing "bottom-callers" to call yet another bottom shortly.
Well, that surge lasted all of 10 minutes.
- EU TALKS WITH BANKS ON GREEK BOND LOSSES SAID TO BE DEADLOCKED
- EU TALKS 'PAUSED' ON A DISPUTE ON INSURING RISKS OF NEW BONDS
- EU official says dispute centers on insuring risk of new bonds.
- Involuntary Greek haircuts can’t be ruled out
- EU Said to Consider Limits on EU-IMF Loans in 2nd Greek Rescue
Amazon's business model is quite fascinating: it is a retailers' retailer, and an online micropayment-based bookstore. That's it. Yet, as is well known, the key problem with retailers is margins. So take a retailer squared and the margin becomes a problemsquared. And the one problem with online bookstores is that they compete dollar for dollar with Apple's ap store, so one must constantly spend for "innovation", if not actually innovate. Which explains the only two truly relevant charts from the AMZN earnings release: their operating income profit, and their R&D spend. One, to confirm that you can remove the retailer from the retailer, but you can never remove the margins; and the no matter how hard you try, you will always have to compete with Apple, and spend accordingly. And we throw in one bonus chart for good measure.
The only real question remains, is whether Merkel and Sarkozy will hold hands to add emphasis to their "we saved the world" announcement. We will get an announcement and it will sound positive. Unless they did a lot of work in the past 24 hours, it seems unlikely that any details will come out. We will hear about grand plans to leverage EFSF, how it has more than enough money to accomplish its goal (of pushing default to next year) and how countries are committed to making it work, and how bank recapitalizations will be done to ensure the safety and soundness of the Eurozone banks, and how with private sector involvement, not only will Greece have the opportunity to grow its way out of the crisis, but other countries too will be given the chance to grow and be successful - austerity is now a dirty word.
The stockpiling continues. While today's durable goods number on the surface was good, declining less than expected at the top-line level, down 0.8%, or $1.5 billion, to $200.3 billion, better than the -1.0% expected, and compared to the -0.1% decline in August. What was better than expected is that durables ex transportation came at 1.7% on expectations of 0.4% (previous adjusted to -0.4%). What however negates all the good data is one simple fact: shipments of manufactured durable goods, declined substantially to $200.1 billion, or 0.7%. So what is the reason for this continuing beat? Why inventories of course: "Inventories of manufactured durable goods in September, up twenty one consecutive months, increased $0.4 billion or 0.1 percent to $365.6 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.9 percent August increase. Transportation equipment, also up twenty one consecutive months, had the largest increase, $0.5 billion or 0.5 percent to $112.7 billion." Not only that, but the annualized growth rate just hit the highest ever (see chart below)! And as would be expected, the Inventory-to-Shipments ratio increased from 1.81 to 1.83. Said otherwise, we are back to the old model where economic "growth" is only due to stockpiling as producers hope that tomorrow, and tomorrow, and tomorrow someone will actually buy record inventory stockpiles at market value instead of LIFO liquidation prices. Oddly, this reminds us of European thinking too.
For those who don't expect something for nothing...
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