If Greek PSI Deal Was 'In The Bag', Greek Bonds Would Be Rallying, Not Dumping
As
headline after headline suggest that the PSI deal is getting closer
and the market appears to be pricing in that headline-driven excitement,
we cast a very skeptical eye over the performance of Greek bonds
today. Short-dated GGBs, the August 2012 issue for instance, would be
expected to rally if the deal was close (or even anticipated by the
market) but instead, this 8-month bond traded to new record low price
(and obviously therefore record high yields of 421%) today with quite a
significant drop from EUR31.5 to EUR30 on the day. Further out, the 5Y
GGB is the cheapest-to-deliver and is trading at EUR18.75/23.25 (quite
a spread), down more today, and still well below an approximate EUR32
take-out. While there may have been some unwinds in the cash-CDS basis
today, it seems to us that the greek bond market is absolutely not expecting a PSI deal
and therefore risk-on rallies on the back of this (a debt reduction
that will still leave Greek debt unsustainable) seem overdone at best
(unless the IMF can cajole the US Congress to untighten its wallet some
more - and even then, its not the solution Greece needs).Egan Jones Downgrades Germany From AA To AA-
Sean Egan strikes again, this time downgrading Germany from AA to AA-.Einhorn Ends 2011 Just Over +2%, Closes FSLR Short, Warns On Asia, Mocks "Lather. Rinse. Repeat" Broken Markets
Anyone
wondering why FSLR just jumped, it is because as was just made known,
David Einhorn's Greenlight has decided to close its FSLR position,
after bleeding that particular corpse dry. "Our largest winner by far
was our short of First Solar (FSLR) which fell from $130.14 to $33.76
paper share and was the worst performing stock in the S&P 500."
Einhorn also announces that he was among the "evil" hedge funds who
dared to provide market clearing transparency and buy CDS on insolvent
European governments: "We also did well investing in various credit
default swaps on European sovereign debt." As for losers, Einhorn and
Kyle Bass can commiserate: "For the second year in a row, our biggest
loss came from positions designed to capitalize on eventual weakening
of the Yen." He summarizes the global economic environment as follows:
"The global environment is very complicated. On the one hand the
Federal Reserve has taken a much-needed break from quantitative easing
(at least for the moment). Accordingly, inflation in oil and food has
abated, providing relief to the US economy. Bearish forecasts that the
US was headed back into recession proved wrong for the third time since
the end of the last recession. On the other hand, Asia appears to be
in much worse shape than it was at this time last year and could be a
drag on the world economy going forward. Very few people trust any of
the economic data coming out of China, making it difficult to gauge the
situation there. Some of the smartest people we know have very dim
views. The Chinese have been a leading growth engine for the last two
decades and are largely credit with leading the world out of the
recession in 2009. A change in their economic circumstances could really
upend things." Yet the best thing is his summary of the current
investing climate in our utterly and hopelessly reactionary broken
markets.The Market Is Overbought
Related, SPDR S&P 500 Index ETF (SPY)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
The Risks Of Countries Leaving The Euro
If some country would say, "We’ve had enough, we’ll exit the euro", if
Greece does that it's not going to be a disaster. But if Greece, Portugal,
Spain, Italy do it, then it would have a huge impact on the derivatives
market. - *in CNBC*
Related, Banco Santander (STD), National Bank Of Greece (NBG), Ishares
Italy ETF (EWI), IShares Spain ETF (EWP)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Brazil: Their New Government Is Making Many Mistakes
Brazil is wonderful and I am very bullish on commodities. These two are
commodity countries, but Brazil is normally not a very well-managed country
and their new government is making many mistakes and of course the market
there was very high.
All emerging markets ran up a lot in 2009 and 2010 and that is why I
started shorting emerging markets, mainly on price because most of them
just went up too much.
Related ETFs, iShares MSCI Brazil Index ETF (EWZ)
*Jim Rogers is an author, financial commentator and successful
international investor. He has been frequently featured in Time, T... more »
Gold stocks continue being plagued by the hedge fund ratio trade
The HUI continues to lose value against the price of gold bullion as
evidenced by a continued deterioration in the ratio of the price of the HUI
to the price of an ounce of gold.
We are reminded continually of two things that have led to this abysmal
performance of the gold shares which are rapidly losing speculative
interest in favor of the ETF.
The first is the risk of investing in companies that are subject to
surprises which happened to Hecla and recently to Kinross. Hedge funds and
other large investment groups or players seeing this say to themselves,
"Why risk this sort o... more »
Art Cashin Shows US Stock Traders Have Left The Building
Though it won't come as a surprise to too many who have seen us point to US equity outflows and the dreadfully declining volume on the NYSE, we leave it to UBS' Art Cashin to uncover where the real action is - and more importantly where it really is not. The experienced Cashin points to the early excitement as Asia and Europe remain active and the dramatic ebb as both of these markets head off to supper, leaving just US traders (and investors we assume) sitting on their hands, twiddling their thumbs, and generally not playing the game (aside from the general rumor-mongery that appears to be rising day by day).China Brings US Treasury Holdings To One Year Low, Russia Cuts Treasury Exposure By 50% In One Year
Today's TIC data confirmed what Zero Hedge readers have now known for quite some time: namely that foreigners are selling US paper. And while we have used contemporaneous Custody Account data from the Fed to present that in the past 7 weeks foreigners have sold a record amount of bonds, we now get confirmation via TIC that in November the selling continued, especially at the biggest non-Fed holder of US paper, China, which saw its holdings down to $1,132.6 billion, the lowest in the past year. Yet where the selling is just relentless is in Russia, which has quite demonstratively slashed its US Treasury holdings in half in the past year from $176 billion to under $80 billion. Putin is not happy, and is not afraid to show it.
2012 Gold Estimates Lowered By Banks - But Remain Bullish
The world's biggest primary silver miner, Fresnillo, had flat silver production in 2011. Output is only expected to remain stable in 2012. African Barrick Gold said on Wednesday fourth quarter gold production fell 11% and missed its annual production targets. Despite price rises seen in 2011, gold and silver mining is remaining static contrary to claims by gold bears that higher prices would lead to increased production and therefore increased supply. Geological constraints may be impacting mining companies ability to increase production of the precious metals. Standard Bank has said it lowered its average 2012 gold price forecast by 6 percent to $1,780 an ounce, but continues to expect prices of the precious metal to touch new highs in the latter half of this year. "We maintain that gold will reach new highs this year but, given our dollar view, we believe that these highs will be reached only in the second half of 2012," the analyst said in a note. Standard Bank expects the U.S. dollar to gain strength, especially against the euro, over the next quarter. A few other banks have recently lowered price forecasts for gold, including ANZ and Credit Suisse – however the majority remain bullish on gold’s outlook for 2012.Headline PPI Drops By 0.1%, Core PPI Rises By 0.3%, Highest Y/Y NSA Jump Since June 2009, BLS To Change PPI Weights
Mixed picture in today's PPI which saw headline prices decline by 0.1%, on expectations of a 0.1% increase, driven by a 0.8% drop in both food and energy finished goods. Alternatively, core PPI rose by 0.3%, with the same +0.1% consensus, and is the largest M/M increase since July 2011. Just as curious, the Year over Year change in the NSA PPI of 3.0% is the highest in the series since June 2009. It appears money printing even in the face of multi-trillion debt deleveraging can be inflationary. Finally, and in pulling a page straight out of the BLS playbook, the BLS announced it would change the weighting in its PPI categories. "The new weights, which will be introduced in February 2012 with the release of January 2012 index data, will be based on shipment values from the year 2007. These value weights come from the Census of Manufactures, the Census of Mining, the Census of Services, and the Census of Agriculture. PPI weights have been based on 2002 census shipment values since January 2007. All PPIs will be affected by this weight update, including all the industry net output indexes, as well as indexes for traditional commodity groupings. In addition, weights will be updated from the 2002 to the 2007 census for all stage-of-processing indexes, durability of product indexes, and special commodity-grouping indexes. This weight revision will not change any arithmetic reference bases for indexes, the dates when PPIs were set to 100." This is a lot of words to say that going forward even more inflation will be crammed into smoothed core price indices, so as to completely ignore any swings in the margins. Because after all who cares about energy and food?
Goldman Misses Top Line, Beats EPS On Comp Cut, Pays Average Employee $367,057 In 2011
Cutting down to the chase on Goldman's numbers, the top line was weak, with the company reporting $6.05 billion in total Q4 revenue on expectations of $6.39 billion. The primary reason was a decline in all segments Year over Year with Investment Banking tumbling 43% to $863 Million, Institutional Client Sales down 16% to $3.1 billion, Investment Management down 16% (great work Jim O'Neill) to $1.3 billion, and finally Goldman Prop, or as it is politically correctly now known, Investing and Lending, down 56% to just $872 million, although much better than the massive Q3 loss of $2.5 billion. All this was offset by compensation benefits of $2.2 billion, which resulted in a Q4 Compensation Margin of 36.5%, down from the 44.5% average previously in 2011. As a reminder, back in Q4 2009, Goldman had negative compensation expense of $519 million to make its EPS. The result was total comp of $12.2 billion in 2011, or 42.4% compensation payoff, compared to $15.4 billion in 2010. Yet since the company let the axe fly, cutting total staff from 35,700 at December 31, 2010 to 33,300 at year end 2011, or the lowest since Q1 2010, average trailing 12 month compensation per employee rose to $367,057.06, also known as "not much" for Mitt Romney.IMF Says 2 Year "Funding Gap" Hits $1 Trillion
First we learn the LTRO may be €1 trillion, then €10 trillion, now the IMF tells us it has misplaced $1 trillion. The world may be going totally broke but at least it does in style - in perfectly round 12 digit numbers.- IMF SAID TO SEE POTENTIAL 2-YEAR FINANCING GAP AT $1 TRILLION
- IMF SAID TO SEEK RAISING LENDING RESOURCES BY $500 BLN
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