Someone Does NOT Want To Be Long Over The Weekend
In
the last few minutes of the European week, major financials have been
crushed. It appears that someone (or perhaps a lot of 'someones')
really do not want to be long into the weekend. Credit Agricole is -11%
on the day, having fallen 12.3% in the last hour!! Senior financial
spreads also reversed all their gains and closed wider on the day.Jury Finds DoubleLine's Jeff Gundlach Breached Fiduciary Duty To TCW
Just out from Bloomberg:- Jeffrey Gundlach Found Liable for Breach of Fiduciary Duty
- TCW wins trade secret claim against Gundlach
- TCW wins no punitive damages against Jeffrey Gundlach
Is China Ready To Pull The Plug?
There are two mainstream market assumptions that, in my mind, prevail over all others. The
continuing function of the Dow, the sustained flow of capital into and
out of the banking sector, and the full force spending of the federal
government are ALL entirely dependent on the lifespan of these dual
illusions; one, that the U.S. Dollar is a legitimate safe haven
investment and will remain so indefinitely, and two, that China, like
many other developing nations, will continue to prop up the strength of
the dollar indefinitely because it is “in their best interest”. In
the dimly lit bowels of Wall Street such ideas are so entrenched and
pervasive, to question their validity is almost sacrilegious. Only
after the recent S&P downgrade of America’s AAA credit rating did
the impossible become thinkable to some MSM analysts, though a
considerable portion of the day-trading herd continue to roll onward,
while the time bomb strapped to the ass end of their financial house is
ticking away. China, being the second largest holder of U.S. debt next
to the Fed, and the number one holder of dollars within their forex
reserves, has always been the key to gauging the progression of the
global economic collapse now in progress. If you want to know what’s going to happen tomorrow, watch what China does today.
September 16, 2011, at 12:50 am
by Yra Harris in the category General Editorial |
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by Yra Harris in the category General Editorial |
Print This Post | Email This PostDear CIGAs,
After Secretary Geithner told the CNBC audience that he was going to Poland as an observer of the ECOFIN meeting on Friday, it seems he changed his mind. U.S. policymakers have woken up to the fact that the European credit crisis is the real deal and risks sending the entire global financial system into a period vicious cycle of asset liquidation. The Obama administration has come to realize that a severe credit crisis can certainly undermine the JOBS PROGRAM AND ANY OTHER STIMULUS PROGRAMS IN THE WORKS. If the world frets of a U.S. renewed recession, then imagine the global trepidation of a simultaneous credit crunch in Europe. A EUROPEAN MELTDOWN WOULD BRING THE U.S. TO INCREASED UNEMPLOYMENT AND A CERTAIN DEFEAT FOR THE OBAMA ADMINISTRATION.
The summer vacation in Europe is over and it is time to SOUND THE TRUMPETS calling for renewed vigour from the world’s financial authorities for massive amounts of liquidity. Swap lines were the jolt from the defibrillator of economic therapy as the ECB and others try to halt the arrest of the European banking system. Of special interest is that the FED, SNB, BOE and the BOJ were the central banks named as the providers of DOLLAR SWAPS for Europe–the Canadians were missing from the list of usual suspects. Again, it seems that the G-7–with White House prodding–wants it to appear that policy makers are attempting to get ahead of a potential financial calamity in the European banking system. The DOLLAR SWAPS will also buy the ECB some time and room for manoeuvre as it relieves some of the pressure on ECB bond purchases.
It was noted that there has been very little use of the present seven-day swap facilities but the authorities seem to be more worried about end-of-year funding problems and thus moved to provide a 90-DAY FACILITY. It was noted in a WSJ article that the swap lines have been underutilized as European banks were using private deals to borrow DOLLARS by pledging DOLLAR ASSETS to U.S. banks. If there was plenty of DOLLARS available, then today’s announcement was an example of Hank Paulson pulling the “bazooka” and letting the markets know that the global policymakers are serious about Europe. Any liquidity addition of a SYMBOLIC NATURE in a zero-rate environment should boost all asset prices, and, once the FOG OF WAR clears, WIND UP PUTTING A NEW BID TO GOLD.
Imagine that it is possible for both GOLD and STOCKS TO RALLY. Time to examine the GOLD/CURRENCY charts as the fear of deflation causes all the world’s central banks to throw monetary caution to wind created by helicopter rotors. The SWISS NATIONAL BANK HAS ESTABLISHED A NEW LEVEL OF INTERVENTION FOR THE ENTIRE FINANCIAL SYSTEM. EUROPE entered the arena today, which makes me wonder what the quid pro quo will be for Japan’s cooperation: Will the BOJ get the nod of approval for a new effort to drive the YEN lower? With a G-20 meeting next week in Washington the markets will be on heightened alert.
Quick Hitter: An article in today’s London Telegraph by Ambrose Evans-Pritchard is a must read (“China to ‘liquidate’ US Treasuries, not dollars”). The bottom line is that China will demand securities as they begin to sell BONDS. Will the U.S. authorities allow the Chinese SWFs to purchase U.S. corporate assets as they sell off their treasury holdings? This has been an issue of NOTES for a long time and we look for it to surface again as the BOND market reaches ridiculous levels.
More…
Singapore As A Financial Center
Admin at Jim Rogers Blog - 2 hours ago
Singapore is certainly going to be the financial center of what you call
Southeast Asia. - *in The WSJ*
*Tickers: iShares MSCI Singapore Index Fund ETF (NYSE:EWS)*
*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.*
Cautious consumers pull back on retail spending
Eric De Groot at Eric De Groot - 2 hours ago
I find no disagreement with the headline below. The downward acceleration of
gold adjusted retail sales suggests trying times ahead not only for the US
households but also economy. Consumption, representing over 70% of GDP, is a
key driver of US economic growth. The pressure to do something domestically
is mounting. Headline: Cautious consumers pull back on retail spending
WASHINGTON (AP)...
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I Could Make The Case That Gold Is Cheaper Now Than When It Was At 300 Dollars Per Ounce
Admin at Marc Faber Blog - 3 hours ago
In fact, I could make an analysis to show that the price of gold today is
probably cheaper than when it was 300 dollars per ounce based on the
increase in government debt, based on the increase in monetary base in the
United States and based on the expansion of wealth in Asia. - *in Beacon
Equity*
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Gold Is Slowly Breaking Its Chains of Control
Eric De Groot at Eric De Groot - 3 hours ago
Gold's price behavior and leveraged money flows continue to reflect a market
that's breaking its chains of control. Experienced traders can 'feel' a
change rhythm within the trend. Mathematics also confirms a market in
transition. The subtle downward shift of the regression line within the
scatter plot of price change to the composition of leveraged money flows
represents the decay in the paper...
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Looks Like George Kaiser Looted Taxpayer Money
Dave in Denver at The Golden Truth - 9 hours ago
using Solyndra has his vehicle, Goldman Sachs as an adviser and Barack
Obama's blessing and help. Read these two articles from Zerohedge, in
conjunction with my previous posts on this matter:
LINK1 LINK2
As the Taxpayers who were fleeced for over $500 million dollars, we deserve
the Truth. I doubt Obama's Presidency can handle it if the Truth gets
confirmed. The Treasury Inspector General has opened an inquiry into this.
If you think that investigation will be anything other than a white wash,
then you also probably still believe that Tim Geithner never cheated on his
taxes a... more »
Gold Gives Ground As Europe/Germany Decides Its Future
The markets are breathing a collective sigh of relief as the major global players, with the exception of the Chinese, are now sitting at the same table determined to forge a path through this political and economic malaise. Gold is trending lower as the risk trade is reduced. It is a relief that the U.S. administration has dispatched their boy wonder, Messrs Geithner, to Europe, whether he can calm nerves and create a political consensus is the question. The European Project is at a fork in the road, do they bind themselves together politically and fiscally and socialise the burden where rich pick up the tab for poor or do they withdraw into their domestic political worlds and turn their backs on what is arguably the greatest economic union in the history of the world. The nexus of the issue is the same as it has always been, can you have an economic union without political union. The answer would seem to be..... maybe, as long as nothing too serious happens, but the moment the economic cycle shifts down a gear, domestic populations suffering from economic contraction will go tribal and look after their own first. A thought provoking paper by the UBS economist, Paul Donovan, articulated the choices facing Europe in a paper "How to break up a monetary union" written in February 2010. His central thesis is that in its current form the Euro just does not work, especially a one size fits all interest rate policy. Here are some excerpts from his excellent report.The Three Eurostooges Hit The Tape Ahead Of The Polish Ecofin Meeting
As the Eurozone prepares for the Ecofin meeting in Poland, where the consensus among Unicredit, Barclays, and BNP analysts and pretty much everyone else is that there would be a discussion for the EFSF to be leveraged under a TARP-like solution, the three Eurostooges, Juncker, Rehn and Trichet have hit the tape with various soundbites. Here is the European partyline which luckily never changes.Frontrunning: September 16
- Euro Ministers Spar on Collateral for Loans (Bloomberg)
- Treasury Secretary Timothy Geithner ignored President Barack Obama’s order to consider dissolving Citigroup (Politico)
- Lagarde warns IMF could withhold Greek loan (FT)
- Spain to Impose New Wealth Tax (WSJ)
- Looming U.S. decision on Taiwan risks China rift (Reuters)
- GM Adjourns Union Talks With No Agreement (Bloomberg)
- UBS $2 billion loss to trigger investment bank retreat (Reuters)
- European Bank Blowups Hidden With Shell Games (Bloomberg)
- House Republicans Push Stopgap Spending Bill (NYT)
- Geithner urges unity in tackling euro zone crisis (Reuters)
Daily US Opening News And Market Re-Cap: September 16
- European equities traded higher supported by news of a coordinated action by various central banks to enhance USD liquidity in order to ease funding concerns surrounding European banks
- EU’s Juncker said that the Eurogroup discussed collateral issue, and collateral will be given for Greek loans at an appropriate price
- EU's Rehn said France, Italy, Belgium and Spain have all ratified more flexible EFSF, adding that the first step in Eurobonds is a feasibility study which the Commission will present this autumn
- Moody’s and S&P placed UBS ratings on review for a potential downgrade
Greece Purposefully Inflated Its Deficit Numbers To Get EU/IMF Assistance
In news that will likely not surprise many, Greek newspaper Eleftherotypia reports that according to a just terminated member of the Greek Statistical Authority, Greece artificially misrepresented its 2009 15.4% deficit number to Eurostat in order to obtain aid from the EU and IMF. Per professor Zoe Georgantas "The deficit was artificially inflated in 2009 to show that the country had the largest deficit across Europe, including that of Ireland was 14% in order to justify all these severe measures against the country. And we presented in the Eurostat 15,4%." While there appears to be a substantial political back story here, and we would be careful at taking these claims at face value, the last thing Europe needs is for its people to realize that they have been duped (and continue to be so), by the PIIGS countries, which as we pointed out before on several occasions, have figured out that the balance of power in capital extraction is entirely in their favor, and paradoxically see their position strengthened, the weaker they are, as the Eurozone has no alternatives but to keep ploughing ever more capital into these bankrupt nation. As such it would not be surprising if Italy's official deficit has also, like in Greece, been substantially misrepresented in an adverse light recently,after being shown to be far better than reality for years, simply to have a stronger political case for demanding more EU and IMF funding.What Happens If/When Greece Defaults And A Primer For Next Steps For The Euro Area
With each passing day bringing us new predictions in the form of research reports, white papers, analyses, and plain old rants on what a Greek default would mean for the Eurozone, for the Euro, for markets, and the for world in general, it is clear that absolutely nobody knows what will happen. Alas, since this topic will be with us for a while until the can kicking finally fails, many more such prognostications will be forthcoming. Today, we present three different pieces, one from Reuters, which gives a 30,000 foot perspective, one a slightly more technical from Citi, looking at a Greek default from a rates point of view, and lastly, a primer from Goldman's Huw Pill, looking at the aftermath of the current situation for the euro area, with or without a Greek bankruptcy. While we have no idea what will happen to global markets should Greece default, and it will, we are 100% certain that we will present many more such analyses in the future as more and more people piggyback on the Cassandra bandwagon.Consumer Confidence Beats Expectations As Consumer Expectations Tumble To Lowest Since 1980, Inflation Outlook Rises
The UMichigan read for consumer confidence came slightly better than uber-depressionary, printing at 57.8, on expectations of 57, and better than the apocalyptic 55.7 from August. To put the number in perspective, it is the second lowest since February 2009. To algorithms all that will matter, however, is that it is rising. What they will completely ignore is that consumer expectations, or the outlook for the future, just dropped yet again, from 47.4 to 47, the lowest print since May of 1980! More troubling to the Fed is the read on inflation expectations, which after declining for months, rose in both 1 year (from 3.5% to 3.7%) and 5 year (from 2.9% to 3.0%) expectations.
Risk Drifts Lower On News Germany To Delay EFSF Implementation Until 2012, Abysmal Debt Rollover Participation
Update: more bad news as Reuters reports that participation in the Greek private sector debt initiative at just under 75% according to financial sources. This is a miserable miss to the required 90% and means that the debt rollover initiative is basically dead in its tracks, as 25% of the bondholders will become holdouts and seek to derail the entire Bailout #2 process in return for massive "nuisance value" payments. Problem is nobody will pay said demanded payment.Those seeking a reason for the sudden drop on no news, can attribute the weakness in the EURUSD and its 1.000 correlated derivative, the US policy vehicle known as the stock market, to the following news making the rounds brought to us by RanSquawk, namely that Germany is likely to delay ESM legalisation beyond year end of 2011. Specifically, "facing a storm of protest from within its own ranks, Germany's ruling coalition government has delayed discussing the ESM in cabinet meaning that legislation on the Eurozones permanent rescue fund, will not likely be in place by end of this year as hoped." As a reminder, Stark quit due to disagreement over the SMP's usage. This most recent update means the SMP program, not only will not end as was expected originally in September, but will be forced to monetize Italian debt for at least three more months, and likely much longer, until the EFSF is activated, some time in Q1 2012. This also means that the ECB's SMP program, currently pregnant with €140 billion of PIIGS bonds, will expand to double its size by the end of the year, further pushing the zEURo lower as Europe continues with its explicit debt monetization on the books, and not as was envisioned before, using an SPV in the form of the EFSF.
Anatomy Of A Squeeze
While
little has really been said or done this week with regard to solving
any of the structural issues facing Europe, macro data globally has
hardly been encouraging, and micro (earnings) have not aggressively
beaten earnings, the equity and credit markets have ripped higher. While
many have talked of short squeezes, which obviously are at the heart
of every trend turn (whether micro or macro), we thought it useful to
get some context on this move to judge when/if it will ever stop.Jon Stewart Brings Solyndra Mainstream: "That Custom Tailored Obama Scandal You Ordered Is Finally Here"
The biggest scandal to rock the White House since Bill Clinton needed a refresher on the definition of the word "the"
has gone fully mainstream after Jon Stewart dedicated his segment last
night to "That Custom Tailored Obama Scandal You Ordered." His summary: "Fox News call your doctor, because the erection you currently have is going to last longer than 4 hours." Spot on. One thing is missing, however: someone should advise Jon that the missing link, Goldman Sachs, is also, and quite naturally, involved.
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