Ray Dalio Issues Stark Warning: Spanish Collateral Is Running Out
Confirming what we described in detail in March, Bridgewater's Ray Dalio notes in his Daily Observations that "Spanish banks' collateral is running out in a way that could force them into an ELA."
The manager of the largest hedge fund in the world - so not some
self-perpetuating political mouthpiece - estimates that the Spanish
banking system has only a few hundred billion euros left in eligible
collateral and that some of the weaker banks are likely already getting
close to a point where their collateral is exhausted. Critically, if
this occurs, then Spanish banks will need to turn to its own Emergency
Liquidity Assistance (ELA) program. An ELA for Spanish banks
would likely be several times the size of those in place for Greece and
Ireland, further fracturing the uniformity of central bank standards
across the eurozone, and the magnitude of funding coming
through the national central banks could accelerate rapidly. This
increasing Balkanization of European central banks and funding
capabilities only entrenches the impossible task of fiscal union as
'more' sovereign control transfer will be required in return for any
core backstopping. Furthermore, those who are hoping for LTRO3: no collateral, no deal! Which the IMF just confirmed is a flashing red warning:- IMF: COLLATERAL AT ECB VULNERABLE TO DOWNGRADES, MARGIN CALLS
Dow 13,000: Need. Moar. QE
No Comment.
Italian Regulator Extends "One Week Only" Shorting Ban Through September 14 Due To "Persistent Conditions"
Europe is so fixed, and so jawboned to death, that the Italian
regulator who launched this year's BanWagon episode of financial stock
short selling bans with what was supposed to be just a one-week ban of
shorting, has just extended the ban for nearly two more months, through
September 14. The reason: "persistent conditions" - in other words Europe appears to be only fixed and stuff on a transitory basis. But yes, absolutely nobody could see this coming.
More obama... "Change You Can Believe In"...
46.5 Million Americans, Record 22.3 Million US Households, On Foodstamps; 8,753,935 On Disability
America's
transition into a welfare state continues, as May saw a new all time
high number of American households, 22.3 million to be exact, enter
technical poverty and collect foodstamps. At the individual level, 46.5
million Americans lived off foodstamps, a 222,157 increase in the
month, or nearly three times the number of people who found jobs in June
according to the BLS. Next month this too will be a record, as it is
currently just 17,367 before the previous all time high set in December
of 2011. The good news, and we use the term loosely, is that the
average benefit per household rose from all time lows of $275.82 to
$276.76. Surely, the bottom is in and just like housing, there is on
blue skies ahead.
Cashin Notes Hilsenrath Is To The Fed As Greg Ip Is To The ECB
Whether it is central bank policy leaked as a strawman or as Stephen
Roach notes, Jon Hilsenrath is the new Fed head (as what he writes -
prompted by 'friends' - must be adhered to for fear of disappointing
markets), UBS' Art Cashin notes a strange coincidence this week. While
WSJ's Hilsenrath is the unofficial floater-of-ideas-and-saver-of-markets
in the US, it appears The Economist's Greg Ip is the ECB's unofficial
suggester-in-chief. As the avuncular Art notes "Mario Draghi's comments
stunned the markets. What prompted the timing of the move? We'd like
to present a possibility"
BTFD...
What Does Gold Know That All Other Asset Classes Don't?
Presented
with little comment as it appears Gold (and Treasuries) are not as
ebuliently following the 'Hilsenrathian' path of most ignorance to NEW
QE - as GDP beats, stocks near multi-year highs, and housing
recovering on its own just does not seem like the recipe for extreme
Bernanke action.
Forget The Election Cycle, Its Policy Uncertainty That Counts
While
anticipation of the election cycle's 'can't lose' perspective on
markets is widespread, there is a somewhat more concerning cycle that
accompanies it that we suspect will be much more critical this election
year than in recent times. As Barclays notes, the 'policy
uncertainty cycle' into presidential elections is very notable -
especially in the 4-5 months immediately prior to the election. The reason this is concerning is simple - in recent years 'policy-uncertainty' has been extremely highly correlated to market-uncertainty
(VIX, for example) suggesting that we are due for a rather large risk
flare over the next few months. Believing in the omnipotent capabilities
of central banks (or governments) to levitate markets in an election
year is all well but if the path to that 'outperformance' includes a
20% dip, does anyone stay to benefit? With fiscal drags of $200bn to
$650bn based on election-outcomes, it seems the policy-uncertainty cycle
is not priced in at all.
In Q2 America Added $2.33 In Debt For Every $1.00 In GDP
As noted before,
courtesy of the GDP revision, all the kneejerk reactions in the past 3
years to various GDP headlines (preliminary, first and final revisions
at that), were all for nothing. In fact, today's GDP number will be
revised and re-revised in the next two months, then re-re-re-revised at
the annual revisions in 2013, 2014 and 2015. In other words, the number
after (and likely before) the decimal comma is irrelevant. One thing
however stands, and that is the trendline change in actual GDP compared
to the change in debt used to "buy" said GDP. Which is why we present
our favorite chart showing how much more total federal debt was added
per quarter over the GDP. Bottom line: in Q2, the US added $274.3 billion in debt while adding $117.6 billion in GDP (from the revised data: Q1
GDP of $15,478 billion rising to just $15,595 billion in Q2). Probably
what is more indicative, is that in Q2 the delta change between debt
and GDP rose from 2.28x in Q1. But that too is largely noise and will
be revised. What won't be revised is that over the past two years, the
US has added 2.42x more debt than it has added GDP.
Hilsenrath Has Spoken: GDP Is Worse Than Expected After All, "Won't Constrain Fed"
Just after the GDP number was released, we joked that the only
opinion on the sub-standard Q2 US economic growth that matters is that
of Fed uberchairman Jon Hilsenrath:
Only Hilsenrath's take on the GDP matters
— zerohedge (@zerohedge) July 27, 2012
Turns out we were not joking: the Fed mouthpiece has just released
his take on the GDP. His bottom line: Inflation Data Won’t Constrain
Fed. In other words, the Fed ignores the modest beat to expectations,
and has given the green light after all.
More European Any- And Every-Thing Promises Jerk Market Higher
Well it had to come, hope was fading. Special delivery via telephone from her vacation (via Bloomberg)...
- *MERKEL, HOLLANDE READY TO DO ANYTHING TO PROTECT EURO REGION
- *MERKEL, HOLLANDE: EU INSTITUTIONS, STATES MUST MEET COMMITMENTS
- *PASOK'S VENIZELOS UNDERLINED NEED TO EXTEND PROGRAM TO TROIKA
Translation (for non-European-speakers): Europe promises to talk
much more. Also promises to not actually do anything as long as it
takes.
- Germany, France: must implement June summit conclusions
quickly. Market ramps on hope that the event that ramped it in June, is
implemented
In summary, the Eurozone is committed to preserving itself. Truly breaking news which will trigger all EURUSD stop losses
FaceBerg Sinking At -40% Below IPO Level
Presented
with little comment - except to not that everyone's favorite social
media site that will 'figure out mobile' is now down 40% from its IPO
price...
GDP Market Reaction - NEW QE-Off Trade (For Now)
From
the swings and lows of historical revisions to beats across the board
of GDP data this morning, it seems the market's pre-occupation with NEW
QE is now being faded (modestly for now). Treasuries are 4-5bps higher
in yield, S&P 500 futures down around 5pts, Gold down $10, and the
USD up modestly. For now, it's QE-off, though no-one seems convinced
as EURUSD falls - which fits better with the Fed won't print but ECB
will perspective. Meanwhile, FB has a $22 handle.
Q2 GDP Beats Expectations As Historical GDP Data Revised
US Q2 GDP printed
at an annualized rate of 1.5%, just slightly above expectations of
1.4%, and a 25% drop from the Q1 rate of 2.0%, with personal consumption
plunging as a key contributor from 1.72% to just 1.05%, and government
once again being less and less a detractor from "economic growth."
Inventories "added" 0.32% to GDP, a number which in Q3 GDP will subtract
from economic "growth." Now whether this headline number is bad enough
for the Fed to decide on more QE, is up to Hilsenrath to decide. But
in a Bizarro world in which only horrible data boosts the market,
today's modest beat will likely not make the market happy, nor sellers
of newsletters in which the only strategy is hope and prayer. And just
as important, today the BEA revised historical GDP data retroactively.
Of note 2010 GDP was revised from 3.0% to 2.4%, while Q3 2011 GDP was
revised from 3.0% to 4.1%, indicating that the slowdown we are
experiencing is in fact far worse than previously expected. It also
shows that HFT trigger buying or selling on GDP data is completely
meaningless as today's data will be revised violently higher or lower in
a year, making it completely irrelevant.
Spain Discussed €300 Billion Full Bailout, Germany "Uncomfortable"
While the EUR was soaring, and Spanish bond yield were (very briefly)
plunging in the past 48 hours, the reality behind the scenes was very
different than what was blasted publicly in the headlines. Namely,
Spain was on the verge of requesting a full blown sovereign bailout,
one which would see it become the next country after Greece, Ireland
and Portugal to fall under the Troika's control. From Reuters: "Spain
has for the first time conceded it might need a full EU/IMF bailout
worth 300 billion euros ($366 billion) if its borrowing costs remain
unsustainably high, a euro zone official said. Economy Minister Luis de Guindos brought up the issue with German counterpart Wolfgang Schaeuble in a meeting in Berlin last Tuesday as Spain's borrowing costs soared past 7.6 percent, the source said. If needed, the money would come on top of the 100 billion euros already agreed to prop up Spain's banking sector, stretching
the euro zone's resources to breaking point, and Schaeuble told de
Guindos he was unwilling to consider a rescue before the currency bloc's
ESM bailout fund comes on line later this year." So why the sudden
attempt to talk up European risk in the last two days? Simple - Germany did not agree to fund Spain's bailout. Which
meant it was suddenly up to Europe's apparatchiks to jawbone markets
into cooperation. "De Guindos was talking about 300 billion euros for a
full program, but Germany was not comfortable with the idea of a bailout now," the official told Reuters."
— zerohedge (@zerohedge) July 27, 2012
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Draghi In A Box
The
jawboning party has come and gone, leading to a nearly 100 bps move
tighter in Spanish spreads (from all time records of 7.6% just three
days earlier), and now the hangover is here. Or, as Bloomberg puts it, Draghi is now in a box. "European Central Bank President Mario Draghi has boxed himself into a corner.
Spanish and Italian bond markets rallied yesterday as investors cheered
Draghi’s signal that the ECB is prepared to intervene to reduce
soaring yields. Now he has to deliver, or face deep disappointment on financial markets, analysts said. The
risk in doing so is alienating key policy makers on the ECB council,
such as Bundesbank President Jens Weidmann. The Bundesbank reiterated
its opposition to bond purchases today." If this seems like a Catch 22
in which the ECB loses regardless of the outcome, that's because it is.
Luckily, no matter which path Draghi chooses, the time for talk is
over, and now he has to act. Because with every day the ECB does
nothing, the more credibility it loses.
Frontrunning: July 27
- Bundesbank Maintains Opposition to ECB Bond Buying (WSJ)
- Greek Budget Talks Stumble as EU Urges Samaras to Deliver (Bloomberg)
- Fortified by euro, Finns take bailouts on the chin (Reuters)
- China Job Market for Graduates Shows Stress on Slowdown (Bloomberg)
- China Exports Fade as Inflation Eludes Targets: Cutting Research (Bloomberg)
- Japan Falters as Ito Calls for Euro Buys to Rein in Yen: Economy (Bloomberg)
- Government weighs social insurance reforms (China Daily)
- Colombia’s Split Central Bank to Weigh First Rate Cut Since 2010 (Bloomberg)
As Europe Desperately Attempts To Talk Down Bond Yields Further, Bundesbank Finally Says "Nein"
Following two days of desperate attempts by the ECB to talk down record peripheral bond yields without any actual action, it is only logical that while Merkel is on holiday, we get a third day of talking to buy some time purely thanks to rhetoric and jawboning, before the Chancellor comes back and spoils the party. Sure enough, here it comes via French Le Monde, whose host nation knows very well that after Spain and Italy, France is next:- ECB PREPARING TO BUY SPANISH, ITALIAN DEBT, LE MONDE SAYS
- BUNDESBANK SAYS IT HASN’T CHANGED STANCE ON ECB BOND BUYING, REMAINS OPPOSED TO FURTHER BOND BUYING BY THE ECB
- HOLLANDE-MERKEL TO SPEAK BY PHONE AT 1 PM ON HELP: LE MONDE
- STREITER SAYS `DOESN'T KNOW' ABOUT MERKEL-HOLLANDE CALL
The Great American Swindle
Dave in Denver at The Golden Truth - 1 hour ago
*Facebook is turning out to be the poster child for everything that is
corrupt on Wall Street. From fraudulent representation of financials to
the fleecing of widows and orphans. *- Dave in Denver, May 22, 2012
After posting its first earnings report as a full-blown public company,
Facebook stock is down over 14% from last night's close as I write this.
It hit a new low of $22.28 earlier. From IPO ($38) to low, Facebook stock
has lost 41.3% of its value in just 51 days of trading as a public
company. That represents a $33 billion dollar loss in wealth. Given that
the report... more »
First - Smithfield - Now - Pilgrims' Pride
Trader Dan at Trader Dan's Market Views - 1 hour ago
With the grain markets the center of the commodity universe this year on
account of the fierce drought that has gripped the midWest for what now
seems like an eternity, commodity firms have been reaping a bonanza pushing
the "buy those grains" theme for new speculators.
What has happened however is that corn prices have reached a point where
the market is doing what it is supposed to be doing, namely shutting off
demand.
First we learned that Smithfield, the nations' largest pork producer, began
importing corn from Brazil. Even with the shipping costs to the EAst Coast,
South Ameri... more »
US economic growth slowed to 1.5 pct. rate in Q2
Eric De Groot at Eric De Groot - 1 hour ago
Same old song and dance of consumption at the expense of savings. Chart 1:
Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption
Expenditures As A %GDP Average from 1947 Chart 2: Savings (SAV) As A %GDP
Average from 1947 Headline: US economic growth slowed to 1.5 pct. rate in
Q2 WASHINGTON (AP) -- The U.S. economy grew at an annual rate of...
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content, and more! ]]
India Is Not A Place For Investors
Admin at Jim Rogers Blog - 1 hour ago
India is not a place for investors, but it's a fabulous country for
tourists. - *in Quote Corner*
*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.*
Middle East Tensions & Oil Prices
Admin at Marc Faber Blog - 2 hours ago
The Middle East will go up in flames with a military confrontation and the
oil price will go higher. - *in Arabian Money*
*Related: United States Oil Fund ETF (USO)*
*
*
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Low Interest Rates Are Not Enough: El-Erian
Eric De Groot at Eric De Groot - 4 hours ago
What El-Erian calls the great global interest rate convergence (GGIRC), the
convergence of interest rates steadily zero across developed and emerging
economies, occurs when the demand for money erodes over time as the economy
slowly contracts. In the last great global convergence from 1920 to 1952
interest rates on US long bonds fell from 5.67% to 2.64%. Demand for money
has fallen...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
Durable goods orders ex-transportation fall in June
Eric De Groot at Eric De Groot - 4 hours ago
The overwhelming need to maintain the illusion of an economic recovery will
force the Fed to act sooner rather than later. Chart: Real Business Core
Capital Spending: Real or CPI-Adjusted New Orders of Durable Goods ex.
defense and aircraft (RBCCS) and YOY Change Headline: Durable goods orders
ex-transportation fall in June WASHINGTON (Reuters)- - New orders...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]Today’s Items:
Forget the movie “Big Trouble in Little China“,
according to Gordon Chang, China may be in big trouble. More bubbles
may be popping in China as the ensuing global economic collapse
accelerates. This is one the main reasons that the Chinese, even
though their economy is still growing above the official 5% growth for
now, are concerned enough to backstop their economy with physical gold.
In Hong Kong, they are completing work on
its largest gold vault due to open in September which can hold 22% of
the gold that is supposedly held within Fort Knox. Not saying that
Fort Knox is empty; however, the vault could be used as a large
janitorial closet. Anyway, this signals the growing interest from
China, currently the world’s second largest consumer of gold, in owning
physical gold bullion.
As a harbinger of what is to come to the
U.S., the economic crisis that is sweeping Europe is starting to hit
Britain really hard. During the fourth quarter of 2011, the UK economy
shrunk by 0.4 percent. During the second quarter of 2012, the UK
economy shrunk by 0.7 percent. The economic slowdown is very likely to
get even worse.
By now, many know of the severe U.S.
drought; however, the drought is spreading from the U.S. to Asia and it
is now in Southern Europe. The monsoon season in Asia is 22% below
normal. In Southern Europe, the heat wave is causing corn crops,
responsible for 16% of global exports, to wither. Better get your food
supply, and protection, ready now before the riots come to a
neighborhood near you.
Looks like Newsweek, will become a digital
magazine by next year. Of course, because it will only be digital, it
will most likely require a subscription to access. The question is,
with so many other more reliable sources, why would anyone want to pay
for this digital rag site that is a digital version of “Air America”?
Obama still does not have a clue when it
comes to the 2nd Amendment of the U.S. Constitution. He states that
AK-47s belong on battlefield, not the streets. Well, according to both
Holder and Obama, they also belong to Mexican drug cartels as well.
In regards to the streets… One look at Detroit, or Chicago, and they
are essentially a battlefield. Do not trust a government that does not
want you to have a gun. As Thomas Jefferson stated, “The tree of
liberty must be refreshed from time to time with the blood of patriots
and tyrants.” In short, the 2nd amendment is to allow the people to
protect themselves from a tyrannical government that has forgotten the
U.S. Constitution.
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