S&P Puts EFSF's Critical AAA Rating On Downgrade Review, Can Cut By Up To Two Notches
From the full release: "We could lower the long-term credit rating on EFSF by one or two notches if we were to lower the 'AAA' sovereign ratings, which are currently on CreditWatch, on one or more of EFSF's guarantor members. Conversely, we could affirm the 'AAA' ratings on EFSF and its issues if we affirm the rating on all six of EFSF's guarantor members currently rated 'AAA'. We could also affirm the ratings if we were to lower the current 'AAA' ratings on one or more guarantor members, but had evidence that the EFSF guarantor members were implementing further credit enhancements that were in our view sufficient to mitigate the relevant guarantor members' reduced creditworthiness."‘Gold For Bonds’ in Japan as Bond Buyers Get Gold Coins - May Enhance Returns 5.9 Times
Japan will reward investors who buy reconstruction bonds with half an ounce of gold, an added incentive that could boost the return by nearly six times according to Japanese Finance Minister Jun Azumi. Individual investors who purchase more than 10 million yen ($129,000) in the debt with a 0.05 percent return and keep it for three years will receive a gold commemorative coin weighing 15.6 grams (0.55 ounces), the Finance Ministry said in Tokyo today, worth about $948 based on current prices for the precious metal. The offer suggests the return could be boosted to 89,000 yen should gold prices remain at current levels, more than the approximate 15,000 yen one would receive from the bond. The coupon on conventional three-year retail government debt to be sold on Jan. 16 is 0.18 percent. 10 year debt remains near multi record lows of 1%. Silver coins weighing 31.1 grams issued as 1,000 yen currency will be distributed to those who own more than 1 million yen of the bonds, the government said. The coins will be offered for debt going on sale in March. All investors receive a thank-you note from the minister, who showed his to reporters in Tokyo today as proof of his purchase. Chief Cabinet Secretary Osamu Fujimura also bought the bonds, Azumi said, without saying how much. This is a sign that the Japanese government like governments internationally is very concerned that they will not be able to sell their government debt.Exclusive: Many Americans already done with holiday shopping
Shop 'til you drop may not be dead, but it's certainly taken a hit in 2011.
Pre-holiday credit-fueled shopping benders are being slowly replaced with
layaway and less is good mentality. Society, driven largely by economic
cycles, behaviors and forces few understand, is slowly changing. Ignore the
talking heads and follow the money, particularly the upward bias in the
U.S. dollar. The bulls are...
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I Do Not Hold Any Government Bonds Anywhere In The World
I do not hold any government bonds anywhere in the world. I am unlikely to
buy into them unless there was some kind of special situation. - *in
Investment Week*
*Related, ProShares UltraShort 20+ Year Treasuries ETF (TBT), iShares
Barclays 20+ Yr Treasury Bond ETF (TLT)*
*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.*
Obvious Slowdown In The Chinese Economy
Basically the data can be manipulated, but in general I would say there`s
an obvious slowdown in the chinese economy and as I pointed out in my
report, I think there is a chance for a haed landing. - *in CNBC*
ETFs, iShares FTSE/Xinhua China 25 Index ETF (FXI)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Currencies: I Own The Chinese Renminbi, The Yen And The Swiss Franc
I own the Chinese renminbi, the Japanese yen and the Swiss franc. I have held these for a long time and have no intention to sell out. - *in Investment Week* *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.*
Cheap Macro Hedges And How VIX Has Always Been A Poor Early Warning Signal
We
have time and again pointed to the warning signals being sent from
credit markets, FX volatility skews, and equity option volatility
technicals (skews and implied correlation) but while the mainstream
media is behooven to watching every tick in the 'fear index', the
'simple' VIX has consistently underpriced risk in the face of danger. Furthermore, this implicit optimism, leaves equity options among the cheapest macro hedges across asset classes currently (especially relative to FX, Rates, and Credit). FX options offer the next cheapest hedge with credit already notably stressed. BAML's
research group finds Nikkei (Japan), Nifty (India), and ASX200 (AUS)
puts attractive as global macro (crash beta) hedges with Copper, IG, and
HY credit the least attractive at current levels. So the next
time you hear the VIX is up or down or sideways, treat it with the
contemporaneous weighting it deserves (or potentially discount its
eternal optimism entirely) and remember that while VIX is frequently cited, the availability bias needs to be suppressed when investing.Bank Of America Sends Internal Email Exposing Where The "Occupy" Movement Is Hurting It Most
While the general media may be ignoring the latest peculiar twist on the "Occupy" theme, or in this case the "occupyourhomes.org", Bank of America is taking it quote seriously. As a reminder, "Tuesday, December 6th is the National Day of Action to stop and reverse foreclosures. The Occupy Homes movement is holding actions around the country in support of homeowners and people fighting to have a home. Find an event near you and join in our day of action tomorrow!. There are actions happening in over 20 cities nationwide. Events are taking place in Brooklyn, Buffalo and Rochester New York; Los Angeles, Oakland, San Francisco, San Diego, San Jose, Petaluma, Sacramento, Paradise and Contra Costa California; Lake Worth, Florida; Atlanta, Fayetteville, and DeKalb Georgia; Chicago, Illinois; Bloomington, Indiana; Minneapolis, Minnesota; Cleveland, Ohio; Denver, Colorado; Detroit and Southgate Michigan; St. Louis, Missouri; Portland, Oregon; and Seattle, Washington." And if you have not heard about today's protest on the conventional media that is understandable: as BAC says internally, this event "could impact our industry." Here are the specific warnings to BAC "field services" agents: i) Your safety is our primary concern, so do not engage with the protesters; ii) While in neighborhoods, please take notice of vacant BAC Field Services managed homes and ensure they are secured; iii) Remind all parties of the bank’s media policy and report any media incidents. Aside from the superficial implications, what is more important is that the big banks are showing precisely what the weakest links in the system are, and what makes them the most nervous: it is not protesters living in tents in a major metropolitan city: it is protesters disrupting the lifeblood of the broken banking system - the home selling/repossession pathway. Expect many more such protests now that Bank of America has tipped its hand.
The Fed - Independence, Yes; But Accountability And Limits?
At this point it is clear that there is no single person in America, and possibly the planet who can influence markets as much as the Chairman of the Federal Reserve Board. The president may have more overall power (possibly) but in terms of moving markets for weeks at a time, that power primarily belongs to Mr. Bernanke. An unelected official with almost total control over the “board” he chairs. Some have argued whether the Fed should even exist. Peter Tchir doesn’t go that far (it is beyond his scope), and it is understandable why the Fed needs some independence. But we don’t understand why Bernanke isn’t accountable or why there aren’t limits.Live Webcast From Moscow Protest Against Putin
Time
to add another focal point to the ever larger matrix of geopolitical
chokepoints. As this live webcast from Moscow shows, where several
hundred protestors are shouting "Russia Without Putin" things in
Russia, in the aftermath of the recently completed parliamentary
elections which saw Putin's party lose substantial popular support, are
heating up. Will the government respond, as it sometimes tends to do,
with a crack down on protesters? Stay tune and find out.Charting This Year's Cross Asset Chaos
Whether
it has been investor sentiment, equity implied volatility, or
sovereign bond spreads, 2011 has been a year of extremes. The
roller-coaster of various spreads, prices, curves, and flows still
leaves us cognitively dissonant as we anchor on recent action and forget
where we came from. BofA has produced a 'stress heatmap' that
at-a-glance illustrates the behavior of 20 critical cross asset class
warning signals throughout 2012 and we note this Critical Stress Signal
has been in risk-off mode since July 12th - which fits well
with the relative perspective we have long-held that high-yield credit
is pricing for considerably more concerns than equities for instance.
Seven crucial aspects are highlighted throughout the year, most notably the slower than expected tail-risk hedge demands in Europe as we suspect ECB QE complacency remains far too high.
Nowhere is that optimism more evident of policy maker intervention than
in the money flow indicators currently which are back in non-stressed
territory.Guest Post: About Your "Guaranteed" Santa Claus Rally....
A lot of punters are awfully confident that Santa Claus will deliver his usual year end rally this year. A glance at a few charts calls that confidence into question. Let's take a look at a daily chart of the S&P 500. (Those of you who loathe charts, please scroll down and enjoy the pithy conclusion.) While charts are as much a reflection of the reader as the market, several things pop out of this chart to me. One is the bullish flag in September. The On Balance Volume (OBV) was rising while price declined, a classic example of bullish divergence. Given this and some other clues (sentiment hit an extreme of bearishness, VIX spiked,etc.), then the rally in October was not exactly "out of the blue." But when we turn to recent action, the indicators are bearish. OBV climbed to a new high, but price did not even make it up to the previous high--a bearish divergence. Now OBV has plummeted while price has skyrocketed higher, an extremely ugly divergence.
After Brief October Respite, Mauling Of Paulson & Co. Investors Resumes
Following a widely publicized bounce in the Paulson & Co. performance in October, a time in which even the since retired beta chaser extraordinaire Bill Miller probably made money, and following the mocked by Zero Hedge 13F announcement that John Paulson had sold gold exposure to buy even more Bank of America stock, we now learn that the fund's LPs have once again resumed crash positions, with the performance of his fund dropping back to 2011 lows at -46% through November. Bloomberg brings us details: "Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, declined 3.6 percent last month. The fund’s gold share class dropped 2.7 percent in November and 29 percent this year. Paulson & Co., which is based in New York and manages $28 billion, has lost money this year on investments including Citigroup Inc., Bank of America Corp. and Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. Paulson’s biggest funds, Advantage Plus and Advantage ... have $11 billion in combined assets. The dollar-denominated Advantage Fund fell 3.3 percent in November and 32 percent this year. Its gold share class slumped 1.5 percent last month and 13 percent in 2011. Paulson investors can choose between dollar- and gold-denominated versions for most of the firm’s funds." Perhaps it would be easier for Bloomberg to track what the former Bear trader has actually made money on in 2011. We are confident they would be surprised by the list.Art Cashin On The Possibility Of A "Christmas Rally", And The Certainty Of "The Post Christmas Crash" That Will Follow
Are we going to get a Christmas Rally in stocks? Perhaps. So thinks Art Cashin quoting Tom DeMark (whose predictions lately have all been about as good as those of another Tom: the infamous Stolper from Goldman Sachs). Either way, any fake rally for purely Career Risk purposes (most hedge funds still underperform the market with two weeks of trading left in the year) will be met with an even more aggressive sell off in the new, "no fiscal stimulus" year. Aka: "the bill."Meanwhile In The Shanghai Composite
Remember
that 50 bps RRR cut a week ago which was supposed to telegraph to the
market that the PBoC has commenced a monetary easing phase? It appears
quite a bit more telegraphing will be needed: unlike in the developed
world, where the central banks are entirely in control of capital
markets, in China capitalism still has a foothold, however weak, and a
result the Shanghai Composite is indicating the direction of where the
global economy is truly headed, pro forma for that ridiculous most
recent speculation that the US will decouple form something or another.The (European) Show Must Go On
It looked like S&P had gone off script. They slapped a negative watch on any euro country that didn’t have it already. They even came out with details about which countries faced 1 notch and which faced 2 notches. I’m glad I didn’t have this information on Friday as I wouldn’t have bet we would be up 1.5% on the week given that move. Now, it looks like this move has been incorporated into the plot. It puts added pressure on the countries to come to a “resolution” this weekend. It is being viewed as increasing the likelihood of a deal since the countries all want to avoid the downgrade. If they do reach a deal, then taking them off watch could add to the post photo-op rally.ECB Succeeds With Latest Weekly Sterilization Of €207 Billion In PIIGS Bond Purchases
Following yesterday's announcement that the ECB had purchased a new record total of €207 billion in peripheral bonds, many were focused on today's ECB sterilization announcement to see if, like last week, there would be a failure in the repo market, and less than the full amount of bonds to be sterilized, would be bid. As it happens today the ECB lucked out, after 113 bidders submitted bids for €236 billion in bonds, at a rate of 0.65%, with the threshold €207 billion amount being covered comfortable at 1.19x. Yet one wonders what is it that caused the €50 billion swing in available capital for European banks (last week the tendered for amount was €194 billion). What is ironic is that earlier today, the ECB provided €252 billion in a liquidity providing operation (MRO) to 197 banks at a fixed rate of 1.00%. In other words, banks borrowed €252 billion at 1% from the ECB to lend €207 billion back at 0.65% to the ECB. And that is called a "successful" sterilization.
The Very Structure of Risk Management/Internal Audit Departments In Big Broker-Dealers Are J-O-K-E-S! Ask MF Global Clients
Reggie Middleton Interviews GBI: Gold Bullion International part 3 of 5
BOMBSHELL: Damning SEC OIG Audit of SIPC Raises Conflicts of Interest for MF Global Liquidation Trustee James. W. Giddens
Why did the CFTC abdicate its congressional mandate, pushing a futures broker into the jaws of SIPC where a trustee with no futures experience could rack up exorbitant fees?
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