The Nationalizations Begin: Argentina Takes Over Oil And Gas Producer YPF
Update 2: SPAIN SEES FIRMS' INTERESTS AS NATIONAL INTEREST, OFFICIAL SAYS; SPAIN ANALYZING RESPONSE TO ARGENTINA OVER YPF, OFFICIAL SAYS. Oops.
Update: TRADING HALT: YPF (NYSE)-NEWS DISSEMINATION. Translation: YPF shareholders - you have been Corzined. The money has vaporized. Jon Corzine has been appointed to the newly formed Argentina based Board of Dictators. Have a nice day
There are those who naively believe that any time the tables turn against a government, that government will quietly sit in the corner and play by the rules as its power erodes to zero. Probably the best example of just this is Executive Order 6102 when FDR, in a country that supposedly honors contract laws, issued Executive Order 6102, which effectively nationalized all private gold, no questions asked. And while we may not be there just yet, we are getting close, as demonstrated by the most recent developments in Argentina, where president Cristina Kirchner asked Congress to "expropriate" oil and gas producer YPF (which is majority owned by Repsol YPF) thereby "allowing the government to share ownership of the company with oil-producing provinces, a spokeswoman for Ms. Kirchner said Monday." What is the pretext for this move formerly associated almost exclusively with lawless, "communist" third world banana republics? Why "hydrocarbon self-sufficiency" of course. How soon until any and every government follows suit in a world in which excess liquidity sloshing around makes expropriation of vital energy producing assets a key prerogative? And how long until the resultant (accelerating) collapse in faith of the monetary system, leads government to declare "monetary self-sufficiency" and confiscate everything that is not nailed down. In exchange for worthless pieces of paper of course. Just to make it "fair". And just to return the favor, the market just sent Argentina CDS up by 60 bps, to just shy of 1000 bps. You know, because it's only "fair."
EUR Surging As FX Repatriation Rears Its Ugly Head Again
Back in October, there were those who were confused how it was possible that with European sovereign bonds exploding to their highest in a decade, while the EURUSD keep grinding higher. We explained it, and said to prepare for much worse down the road. Sure enough, much worse came, and was promptly forestalled as both the Fed expanded its swap lines and lower the OIS swap rate, and the ECB "begrudgingly" ceded to LTRO 1+2. But how did the EURUSD spike fit into all this? Simple - FX repatriation. This was explained as follows: "the sole reason for the EUR (and hence S&P and global 100% correlated equity risk) surge in the past 9 days is not driven by any latent "optimism" that Europe will fix itself, but simply due to the previously discussed wholesale asset liquidations (as none other than the FT already noted), which on the margin are explicitly EUR positive due to FX repatriation, courtesy of the post-sale conversion of USDs to EURs. Which means that the ever so gullible equity market has just experienced one of the biggest headfakes in history, and has misinterpreted a pervasive European, though mostly French, scramble to procure liquidity at any cost by dumping various USD-denominated assets, as a risk on signal!" It appears we are now back into liquidation mode, and the higher Euro spread surge, the faster EURUSD will rise as more and more FX is "repatriated." In other words, as back in the fall of 2011, the faster the EURUSd rises, the worstr the true liquidity situation in Europe becomes: a critical regime change.Argentina Default Risk Surges On YPF Nationalization, CDS Approach 1000 bps
It would appear that the recent renewed excitement down in the Falklands was indeed the writing on the wall for a nation that is now desperate enough to nationalize foreign entities.
Argentina, still unable to access capital markets years after its
restructuring appears to be hitting an irrational wall again as its CDS has exploded wider recently, and even more so today with the YPF news, to near 1000bps
- its widest in 4 months. Simply put this is not rational in any
game-theoretic strategy and is frighteningly indicative of a supreme
(irrecoverable) defection from friends-with-benefits status of the world
- indicative only of massive internal problems in the South American nation.
But do not worry, as Lagarde and her friends will just bring a bigger
bag around to the next G-20 meeting as we are sure the IMF's members
will have enough money to deal with Argentina AND Europe.
At Least One Italian Export Is Soaring: Gold
When one thinks PIIGS, one usually imagines countries with collapsing economies, 50%+ youth unemployment, and current account deficits so large they are about to drag down the ECB, Bundesbank and Germany. And while that is absolutely correct for the most part, there is one product which the PIIGS, or in this case Italy, are all too happy to export in size. Gold, and not just to anywhere, but to that ultimate safe haven - Switzerland. From BBC: "Italian exports of gold ingots to Switzerland have soared in recent months, data has shown. Exports to Switzerland were 35.6% higher than in February 2011 "mainly because of sales of non-monetary raw gold", statistics agency Istat said. This followed a 34.6% year-on-year rise in exports to Switzerland in January." And the absolutely funniest attempt at spin ever: "Experts say improvements in the trade deficit could be a sign that Prime Minister Mario Monti's economic reforms are starting to take effect." Uhm, when the country is exporting the only real asset it has for when it will need to backstop its own currency following the inevitable collapse of the EUR, this is not exactly a sign that the country's reforms are taking effect, but rather that everyone else in Europe is stockpiling the precious metal in advance of "some" event, which is coming.
LTRO Bank Stigma Widest Since LTRO Announcement
Since we first suggested in early February
that investors should be underweight LTRO-encumbered banks relative to
un-encumbered banks, and summarily dismissed Mario Draghi's lies with
regard any stigma associated with LTRO loans, the spread has increased
from around 50bps to almost 140bps today. The move today has taken LTRO
Stigma (the spread between banks that took LTRO loans and those that
did not) to the widest it has been since the announcement of the LTRO
program. So while financial spreads in absolute terms are not
back to their very early January widest levels quite yet - the
differentiation between the encumbered and unencumbered is gaping wide.
Perhaps this helps to explain why a further indicator of funding stress - the 3Y EUR-USD basis swap - is deteriorating rapidly
(at a similar velocity as was seen heading into the crisis epicenter
last year) meaning European banks are increasingly willing to pay a
higher premium for USD funding - not a sign of a healthy market in any
way.
from INETeconomics:
Leading thinkers speak out on what they believe is at the core of the problem of the world’s monetary and financial system. Featuring: Joseph Stiglitz, Gillian Tett, David Tuckett, Stephen Kinsella, John Kay, David Weinstein, Steve Keen and Dirk Bezemer.
Leading thinkers speak out on what they believe is at the core of the problem of the world’s monetary and financial system. Featuring: Joseph Stiglitz, Gillian Tett, David Tuckett, Stephen Kinsella, John Kay, David Weinstein, Steve Keen and Dirk Bezemer.
Today’s Items:
How bad do things have to be for the Fed
AND the European Central Bank to talk of easing on the same day? With
the markets beginning to tank, we now have people in both the Federal
Reserve and the European Central Bank hinting at more easing. Now, why
are there people in these two big institutions chiming away at the same
time? Could it be we are about the see the mother of all downturns?
Next…
China’s Economic Growth Falls to Nearly 3-Year Low
http://Boston.com (updated since AP link went down)
China’s Economic Growth Falls to Nearly 3-Year Low
http://Boston.com (updated since AP link went down)
Growth in the world’s second-biggest
economy, China, declined to 8.1 percent in the three months ending in
March. Last year’s sharp plunge in demand for China’s exports due to
the U.S. and European economic woes forced China leaders to ease
controls on bank lending to help struggling manufacturers. In short,
western consumers are not able to export as much inflation to China as
before; therefore, the Chinese leadership are stepping up to help, if
that is what you want to call it.
History has proven that once the debt to
GDP ratio reaches about 100%, like in the U.S. now, economic growth
seizes to a halt. Bond yield will soar to draw in the speculators who
think they will get their money back plus interest. All along, there
will be massive currency printing that will drive down the value of the
currency until the proverbial credit card is destroyed. In other words,
get out of paper and digital schemes and get into something tangible
and perhaps stack-able.
Here are the 5 food medicines that you need.
1. Garlic
2. Honey
3. Apples
4. sunlight
5. Turmeric
1. Garlic
2. Honey
3. Apples
4. sunlight
5. Turmeric
(ed note)...Our sponsors are a great place to start...
Gold`s Unusual Price Behavior
Admin at Jim Rogers Blog - 28 minutes ago
It's extremely unusual for any asset in history to move higher for 11
straight years. That's why I expect the recent correction in gold to
continue. - *in Stock House*
*Related, SPDR Gold Trust ETF (GLD), Newmont Mining (NEM), Goldcorp (GG),
Barrick Gold (ABX)*
*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.*
This Is The Beginning Of A Downward Trend
Admin at Marc Faber Blog - 3 hours ago
Over the last few months, the market has acted very badly. There are less
new highs, the volume has dried out, insider sales have picked up, and this
is the beginning of a downward trend. We may easily have a correction of 10
to 20 percent here. - *in Fox Business*
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.*
Finance: It Has Always Worked This Way
Admin at Jim Rogers Blog - 3 hours ago
When I went to Wall Street in the 60`s nobody went to Wall Street. In the
50`s, 60`S, and 70`s, Wall Street was not important. Then we had a big bull
market for 30 years and it became extremely important. Everybody got an MBA
and everyone wanted to go into finance. But that has happened many times in
history.
In the beginning of the 20th century, for the first 30 years of the 20th
century, finance, they were the kings, they ruled everything. Then we had
the big collpase in the 30`s and it became disastrous again until the 80`s.
It has always worked this way. - *transcript from a re... more »
Small firms avoiding loans, citing slow recovery
Eric De Groot at Eric De Groot - 3 hours ago
Repeat of the 1930's. Headline: Small firms avoiding loans, citing slow
recovery NEW YORK (CNNMoney) -- Small firms are faring better, but they
aren't seeing enough fortune ahead to justify taking on debt to grow. The
slow pace of the economic recovery is to blame, because while consumer
demand keeps growing, it just hasn't been strong enough for most firms to
rationalize investing in...
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content, and more! ]]
Rising Consumer Expectations Imply Higher Gold Prices
Eric De Groot at Eric De Groot - 3 hours ago
But the measure of consumer expectations rose to 72.5 from 69.8, hitting
its highest level since September 2009. Rising expectations has the media
giddy about the prospects for future economic growth and the gold crowd
huddled together in fear. While perception sets short-term reality, it does
NOT control long-term market forces. The sovereign debt crisis, largely
believed to be contained to...
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content, and more! ]]
The Invisible Hand Already Has Its Chair
Eric De Groot at Eric De Groot - 14 hours ago
Keeping gold below $1800 is a formidable but doable challenge as long as investors don't do the unthinkable by standing for delivery in great numbers. Why would they do that? London taxes physical delivery at 20%. The COMEX expects all contracts, even those under duress, could be settled in cash. Yet, despite today's structural assurances history also tells us that nearly all paper trading... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
Anyone Who Bought 10Y Spanish Bonds This Year Is Now Underwater
Anyone who bought the 10 year Spanish bond this year is now down money.
It does have a 5.85% coupon, so if you bought the prior lows on Jan.
6th, you have earned 1.6% of carry. Anyone else has lost more and not
earned as much interest. This bond is bouncing up and down today on no
volume, but we think we are very close to levels that could see a mass exodus of stop loss trading on levered positions.Another Empty Obama Promise
The
extent of Obama’s duplicity continues to grow apace. And yes — it’s
duplicity. If you can’t or won’t fulfil a promise, don’t make it. From
Bloomberg: "Two years after President Barack Obama vowed to
eliminate the danger of financial institutions becoming “too big to
fail,” the nation’s largest banks are bigger than they were before the
credit crisis." And the hilarious (or perhaps soul-destroying)
thing? The size of the banks isn’t even the major issue. AIG didn’t have
to be bailed out because of its size; AIG was bailed out because of its
interconnectivity. If AIG went down, it would have taken down assets on
balance sheets of a great deal more firms, thus perhaps triggering even
more failures. So the issue is not size, but systemic
interconnectivity. And yes — that too is rising, measured in terms of
gross OTC derivatives exposure, as well as the size of the shadow
banking system (i.e. pseudo-money created not by lending but by
securitisation) — which sits, slumbering, a $35 trillion wall of
inflationary liquidity ready to crash down on the global dollar economy.Liquidity Isn't Capital
At
the start of April, ECB's Draghi noted, "let's keep in mind that it
[the LTRO] is not capital", adding that "if a bank does not have
capital, it would be better to raise it now". Given the rapidly fading
glow of LTRO's liquidity flush, the seemingly 'wasted' ammunition that
Spanish and Italian banks have fired at the sovereign bond bears and the
complete and utter lack of capital raising that has occurred, perhaps
it is no wonder that credit spreads on the major European financials
have exploded back to near their wides once again (LTRO-encumbrance
aside). As Barclays notes today, the major financials alone look set to
need over EUR120 billion in capital to bring their credit risks down to
acceptable levels to be able to openly access capital markets once
again. This means a median 30% of current equity market capitalization has to be raised. Just as we pointed out again and again, not only is the LTRO an encumbrance
of bank balance sheets (and therefore increasingly subordinates all
existing bond-holders implicitly reducing recoveries in a worst case
scenario) but it delayed much-needed decision-making by giving the banks an 'out' for a few months.When Does This Travesty Of A Mockery Of A Sham Finally End?
We all know the Status Quo's response to the global financial meltdown of 2008 has been a travesty of a mockery of a sham--smoke and mirrors, flimsy facades of "recovery," simulacrum "reforms," and serial can-kicking, all based on borrowing and printing trillions of dollars, yen, euros and yuan, quatloos, etc. So when will the travesty of a mockery of a sham finally come to an end? Probably around 2021-22, with a few global crises and "saves" along the way to break up the monotony of devolution.
Housing Repenetrates Alleged Bottom As NAHB Index Misses By Most In 22 Months
It
seems all that confident over-extrapolating of warm-weather-based
foot-traffic into closed sales and a recovery in housing was, as we
vociferously warned, simply wrong. There's no schadenfreude here as this
was too obvious for anyone except the blinkered hopium peddlers as
even the NAHB is forced to admit things aren't so rosy in
home-sales-land "interest expressed by buyers in the past few months has yet to translate into expected sales activity".
The NAHB Index fell for the first time in 7 months, dropped the most
in 10 months and missed those glorious expectations by the most in 22
months - quite an impressive set of statistics.Foreigners Bought Most Stocks Since May 2011 In February, As Foreign Flows Become Manic Depressive
The February TIC data is out and here are the notable items. Total long-term purchases across all securities classes came in at an underwhelming $10.1 billion on expectations of a $42.5 billion increase, although when combined with Short-Term transactions, the total rose to $107.7 billion, greater than expected. However, since this series includes extensive irrelevant noise, tracking just LT data on a sequential basis, shows that in February foreign purchases of the 4 key security classes (TSYs, Stocks, Agencies and Corporate bonds) came in at a relatively weak $24.8 billion, down from $95.7 billion in February, of which $15.4 billion was US Treasurys. What is notable is that equities accounted for $7.6 billion of this total, the largest foreign purchase of US equities since May of 2011. Well, if US consumers will not buy stocks at least foreigners stepped up, and it also explains where at least some demand came from. It also means that the 6 month moving average of foreign stock dumping has finally reversed from all time lows. However, what chart 1 vividly shows, is that over the past several months foreign flows into US securities, previously stable regardless of global events, has also become Risk On - Risk Off, with ever increasing a monthly amplitude. In other words everyone now has a 30 day attention span tops. Finally, now that the UK has been "disambiguated" from Chinese data, and thus saw its holdings drop to a realistic $103 and about to slide into double digit territory for the first time in years, Chinese holdings in turn tose to $1178.9, the highest since the big selloff in December, while Japan continues to find better bargains in US paper, with its holdings soaring to a record $1.095.9 billion.
AAPL Breaks $600 The Wrong Way
UPDATE: AAPL $585 -3% at one-month lows
Volume picking up rapidly as the hedge fun horde starts to find exit doors are smaller than they hoped for...
Art Cashin On The Forgotten Geopolitical Risk
No, not Italy, and certainly not Spain. Egypt.European Credit Weak As Stocks Near Friday Highs
European
equity prices are pushing up towards Friday's highs, as Spanish and
Italian sovereign bonds mysteriously surge back to unchanged on the day
- but European corporate and financial credit markets are notably
wider. Financials, most notably, remain underperformers and
significantly worse than Friday's worse levels - seemingly treating with
disdain yet another false hope in equity markets.
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