The Full "Three-Days-To-Eurocalypse" Soros Interview

In a no-holds-barred interview with Bloomberg TV's Francine Lacqua, the increasingly droopy-faced George Soros remains as sprite-minded as ever in his clarifying thoughts on Europe. His diagnosis is spot on: "Basically there is an interrelated problem of the banking system and the excessive risk premium on sovereign debt - they are Siamese twins, tied together and you have to tackle both" and summarizes the forthcoming Summit 'fiasco' as fatal if the fiscal disagreements are not resolved (and as of this afternoon, we know Germany's constant position on this). His solution is unlikely to prove tenable in the short-term as he notes "Merkel has emerged as a strong leader", but "unfortunately, she has been leading Europe in the wrong direction". His extensive interview covers what Europe needs, the Bund bubble, GRexit, post-summit contagion, and Mario Monti's impotence.

Moody's Downgrades Spanish Banking Sector By 1-4 Notches

The long anticipated downgrade of the recently bailed out Spanish banking sector has arrived. Moody's just brought the hammer down on 28 Spanish banks. Also apparently in Spain banks are now more stable than the country: "The ratings of both Banco Santander and Santander Consumer Finance are one notch higher than the sovereign's rating, due to the high degree of geographical diversification of their balance sheet and income sources, and a manageable level of direct exposure to Spanish sovereign debt relative to their Tier 1 capital, including under stress scenarios. All the rest of the affected banks' standalone ratings are now at or below Spain's Baa3 rating." Can Spain borrow from Santander then? They don't need the ECB.

On The Verge Of A Historic Inversion In Shadow Banking

While everyone's attention was focused on details surrounding the household sector in the recently released Q1 Flow of Funds report (ours included), something much more important happened in the US economy from a flow perspective, something which, in fact, has not happened since December of 1995, when liabilities in the deposit-free US Shadow Banking system for the first time ever became larger than liabilities held by traditional financial institutions, or those whose funding comes primarily from deposits. As a reminder, Zero Hedge has been covering the topic of Shadow Banking for over two years, as it is our contention that this massive, and virtually undiscussed component of the US real economy (that which is never covered by hobby economists' three letter economic theories used to validate socialism, or even any version of (neo-)Keynesianism as shadow banking in its proper, virulent form did not exist until the late 1990s and yet is the same size as total US GDP!), is, on the margin, the most important one: in fact one that defines, or at least should, monetary policy more than most imagine, and also explains why despite trillions in new money having been created out of thin air, the flow through into the general economy has been negligible.

Gold Daily and Silver Weekly Charts - Big Bounce on 'Flight to Safety'

SP 500 and NDX Futures Daily Charts - Risk Off on Euro Summit Concerns

Very Unusual Activity In Silver

Dave in Denver at The Golden Truth - 3 hours ago

*"Who else would recklessly dog-pile on a market like that?" -* long time Comex silver trader I didn't realize Obama's new campaign slogan was "Forward" until I saw an Obama ad while I was watching the 60 Minutes piece on Novak Djokovic (which was very well done, by the way). It added even more humor to the above "bumper sticker." I hope someone produces it because, even though I never put stickers on my car, I would put that one proudly on my rear bumper. I also found this fundraising campaign by Obama to be quite appalling: LINK The message from the TOTUS (Teleprompter of ... more » 

 

 

Obama Issues Statement On SCOTUS Arizona Immigration Law Ruling

Just out from the TOTUS, who manages to convert a Supreme Court slap into a piece of pre-election propaganda like no other.

 

Comments on the Deciphering Silver article

Trader Dan at Trader Dan's Market Views - 4 hours ago

To all; Thanks for the comments and feedback on the recent article entitled "Deciphering Silver". Glad it was helpful. To the skeptics - I would suggest you look far more closely at the comparison chart of silver and the CCI. It is evident you fail to understand just how hedge funds treat the risk on/risk off trades. When the CCI moves lower, silver will GENERALLY move lower along with it. When the CCI moved higher, silver generally moved higher along with it, especially since September of last year when the chart pattern between the two has been almost identical. The charts simply... more » 

 

 

Can You Afford To Die In America? An Infographic

While few want to think about their death, its becoming increasingly popular for folks to prepare for the inevitable by pre-planning their own funerals (we assume a little like England's soccer team yesterday). While cremation is rapidly gaining on straight-up-burial, funeral costs remain high; and despite non-traditional options like 'Angels Flight Inc.' which launches your ashes in fireworks or 'Space Services Inc.' which sends you posthumously into orbit around the moon, the following infographic is a guide to budget-busting your own 'happy-ending'.

Stocks Slump But Commodities Jump Despite USD Pump

US equities dumped out of the gate from the day-session open - after drifting lower with Europe all night/morning. Regimes shifted as Europe closed with Gold and Silver spurting higher (with the latter outperforming to play catch-up from last week) which led to the start of a correlated risk-on move in stocks (egged on in a 'ignorant' way but Oil strength from its increasing war-premium given the middle-east turbulence.) The levitation on low average trade size and low volume was mind-blowingly algorithmic as ES came to rest for the last hour almost perfectly at VWAP (and EURUSD seemed pegged at 1.25). Just like on Friday though, with a few minutes to go, ES dropped rapidly on heavy volume and average trade size as it would appear institutional sell orders plagued the market. The close took us back into the down-trend channel and back to 10-day lows for stocks. Modest USD strength (and JPY strength on carry-unwinds) left Oil lower from Friday but well off its lows as the rest of the commodity complex surged. Treasuries gained back all of Friday's losses ending at Thursday's low yields with 30Y outperforming. Financials and Energy sectors were worst with the major financials ending down 5-7% from the pre-downgrade close now. HYG (and HY) outperformed in the short-term but as we noted earlier remains a convergence trade than an indication of rotation or strength. The late-day dump in stocks lifted VIX back over 20% ending up 2.3 vols as implied correlation lifted back above the 70 'crisis' levels once again.

The Absurdity Of NATO

The NATO system — set up to oppose the Warsaw Pact system, which no longer exists — functions the same way — rather than dissipating risk, it allows for the magnification of international tensions into full-on regional and global wars. In the late 20th century the threat of nuclear war proved a highly-effective deterrent which limited the potential for all-out-war between the great powers, offsetting much of the risk of the hyper-fragile treaty system. Yet the potential for magnifying small regional problems into bigger wars will continue to exist for as long as NATO and similar organisations prevail. We do not know exactly what arrangements Syria has with Russia and China — there is no formal defensive pact in place (although there is one between Syria and Iran) though it is fair to assume that Russia will be keen to maintain its Syrian naval assets, a view which is supported by the fact Russia heavily subsidises the Syrian military, and has blocked all the UN-led efforts toward intervention in Syria. After the Cold War, the Warsaw Pact was allowed to disintegrate. Until NATO is similarly allowed to disintegrate, the threat of magnification will remain large. Could a border skirmish between Syria and Turkey trigger a regional or even global war? Under the status quo, anything is possible.

Here's Why High Yield Credit Is Not Selling Off Like Stocks (Yet)

The last few days have seen high-yield credit markets remain remarkably resilient in the face of an equity downdraft.  Both HYG (the high-yield bond ETF) and HY18 (the credit derivative spread index) have remained notably stable even as stocks have lost over 3% - and in fact intrinsics and the underlying bonds have improved in value modestly. HY bonds are much less sensitive to interest rate movements (especially at these spread levels) and so, in general, this divergence in performance is aberrant (especially with equity volatility also pushing higher in sync with stocks and not with credit). So why is high-yield credit not so weak? The answer is surprisingly simple. As we argue for weeks from the end of LTRO2, credit markets were far less sanguine than stocks and have leaked lower ever since. This 'relative' outperformance of high-yield credit over stocks appears to be nothing less than the last of the hope-premium bleeding out of stocks and re-aligning with credit's more sombre 'reality' view of the world. Given the sensitivity of HYG (and HY) to flows, and the weakness in risk assets, we would suspect that outflows will now dag both lower as they resync at these higher aggregate risk premium levels.

The US Presidential Election: A Race Between The Two Most Unqualified Public Servants In A Century?

While the extreme polarization of our political parties has been discussed often, the upcoming Presidential election is perhaps more notable in another way. Given Obama’s experience as a Senator and Romney’s single term as Massachusetts governor, the 2012 election is as light on 'high-level public sector experience' as we have seen in many decades. The implications are subject to debate, but as JPMorgan's Michael Cembalest points out: there’s no question that it’s an anomaly; or at a minimum, a throwback to the elections of the 19th century, when this kind of thing was more common. At a time when confidence in all institutions (non-financial business, banks, Congress, the Fed, etc) are close to multi-decade lows, this is not a surprise. Why should experience count for anything? Throw the bums out and hand the reins over to outsiders! Still, Michael (like us) finds this chart disconcerting, even though it’s hard to explain why. Do politicians who have not wielded substantial power underestimate the consequences of being wrong? It’s easy to be dead sure about something if you haven’t created a public policy train wreck of your own.  

 

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