Friday, November 11, 2011

65% Chance of a New Banking Crisis?

    There is a 65 percent chance of a banking crisis between November 23-26 following a Greek default and a run on the Italian banking system, according to a research firm which focuses on global risks.  

Merkozy's Frankenstein

Whatever the European experiment once was, it has morphed almost beyond recognition.  The policy responses have made the problem worse, not better, and it is becoming more complex.  The contagion is spreading because every policy is linking the countries more closely, but not in a controlled and thoughtful way but in a haphazard poorly thought out way. Making things more complex primarily in reaction to previous moves with limited understanding of what you are getting into is a recipe for disaster, and Europe has followed this policy for years now, it is a shame they don't see it before it is too late to fix.



Daily US Opening News And Market Re-Cap: November 11

  • Trading volume remains thin as Veterans Day in the US and Armistice Day in Europe is being observed
  • The new Greek government, led by ex-ECB vice president Papademos, is expected to be sworn in at 1400GMT today
  • The Italian Senate approves budget measures. According to the PM’s office, Italy’s cabinet will meet on Saturday evening at around 1700GMT, after the lower house votes on a financial stability law
  • Market talk that the ECB is buying the Italian and Spanish government debt
  • Merkel's CDU party's general secretary said that the party is poised to back a motion at its annual party congress on November 13th-15th to offer states a "voluntary" means of leaving the Eurozone



The Farmers Will Be In The Captain`s Seat

Admin at Jim Rogers Blog - 13 minutes ago
It's the farmers, the producers who are going to be in the captain's seat when the prices go through the roof. - ** *Related ETFs, ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN (NYSE:RJA), PowerShares DB Agriculture Fund (NYSE:DBA)* *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.*


Chart Of The Day: The Real, The Fake And The Soon To Be Ugly

The chart below is the perfect summary of the dilemma facing traders and investors: that primary marginal risk setter, the EURUSD (recall the all time record correlation between the 250x levered EURUSD and the ES), is trading inbetween the Italian-Bund spread, which following the massive ECB intervention in the past two days, is largely "fake" and thus irrelevant for price discovery purposes, and the French-Bund spread which is ineligible for ECB intervention as noted yesterday, and hence presents the real risk perspective in Europe. Naturally, with optimism and a bullish bias (bonds are closed today so momos and robots are in charge) ruling the day, the EURUSD is well bid toward the "fake" side of the spectrum. However, unless the key question at the heart of the European dilemma, the math of the Italian bailout is answered, expect the French spreads to continue slipping ever wider, and the EURUSD to eventually catch up once this latest bout of optimism expires. That is, unless of course, Sarko tips his hand and demands an ECB bailout, an action which will unleash the endgame as vigilantes put France in rearview mirror and head, from every possible direction, right for Frankfurt and the German spread (with itself) directly.



Italian Senate Passes Budget Measure By Large Majority, Paving Way For Berlusconi Resignation

Minutes ago the Italian Senate, in a vote that passed 156 to 12, approved a key budget bill, paving the way for final passage tomorrow in
the Chamber of Deputies that will lead to Prime Minister Silvio Berlusconi’s resignation. The market reaction as judged by the EURUSD has been oddly muted with just 15 pips the immediate move higher, implying this has been largely priced in. The question, is noted previously, is whether Mario Monti will be able to form a unity government or if the country will proceed with drawn out elections in which Silvio himself will participate as well.



European Bond Spreads Tighten As Hope Makes Brief Return

Spreads across Europe are tighter today, and stocks higher, as investors hope that a power shuffle at the top in Greece and Italy, where the placement of two Fed and ECB puppet rulers, would change decades of flawed fiscal planning and destructive habits. Of note, the catalysts inducing a substantial rise in French, Italian, Belgian and Irish bonds, is the expectation of a new Greek government as well as the Italian Senate voting on approving the 2012 budget and passing austerity measures (which it has already done before, and nothing happened) such as increasing the retirement age by 2 years in 15 years. The vote itself is a symbolic ouster to Berlusconi who has previously said he would retire the second the budget is passed. The question remains what happens after Berlusconi falls: elections or a new technocratic consensus government, headed by Mario Monti, and whether the ECB will support whatever course Italy takes. So needless to say prepare for vicious 50-100 pip moves in the EURUSD, and with every pip amounting to 1-3 DJIA point, the volatility in the market today will be significant. Buckle in. In other news, the one fundamental question that needs some answer before all this is over, namely how Italy will fund €300 billion in debt maturities and interest payments over the next year, with the EFSF now a formal dud, remains unanswered, and will, as there is no answer.

Meanwhile, Someone Forgot To Invite France To The Party

With Italian bonds giddy at the prospect of changing one worthless political muppet with another, if only for a few hours, and especially with the stern and long overdue assistance of the ECB (we will find out how many bonds Mario Draghi bought this week to preserve the price stabeeleetee next Monday - we expect the SMP cumulative total to pass €200 billion, a number which will delight Germany), it is becoming increasingly clear that France needs to be urgently added to the list of countries eligible for ECB secondary market "sponsorship", because while Italy yields are gapping in, Franch Bund spreads have since blown out back to record levels, following some modest tightening earlier in the morning. And unlike yesterday, this time there are no downgrade rumors to be blamed. At least not yet.

RANsquawk European Morning Briefing - 11/11/11

Morning Briefing RANSquawk

White Paper | The MERS Mortgage in Massachusetts: Genius, Shell Game, or Invitation to Fraud?
11/10/2011 - 22:25
Although the title says “in Massachusetts,” many of its salient points have broader application. If you really want to understand MERS, I suggest making time to read this one in full.

Frontrunning: November 11

  • ECB as Last-Resort Lender Will End Crisis: Silva (Bloomberg) just don't tell the ECB that
  • Crude Futures Head for Longest Run of Weekly Gains in New York Since 2009 (Bloomberg) - QE X coming
  • China central bank to legalize part of private loans (Reuters)
  • Bini Smaghi’s Resignation From ECB Opens Board Seat for France (Bloomberg)
  • Goldman Sachs in China: Best Investment Ever? (WSJ)
  • Europe Rebuked Over Crisis by Asia-Pacific Nations Seeing Expansion Weaken (Bloomberg)
  • China ‘Big Four’ Banks Lent CNY240 Bln Loans In Oct (MNI)
  • Progress Amid the US Deficit-Cut Noise (Reuters)



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