Euro Plunges On Fitch Double Tap, Comments From Merkel

Chinabot is in full fail mode, after a sticksave attempt to save the currency following the Italian downgrade by Fitch was monkeyhammered with the Spanish downgrade which was not only two notches, but sent the country's rating to below that of S&P and Moodys. Adding fuel to the fire is an errant comment from Merkel who has said that Eurobonds are "absolutely the wrong way to go", and lastly, a last minute notification from Fitch which goes for Trifecta by saying that Portugal remains on outlook negative, and the result is visible on the attached chart.

Chinese Move to Control Global Gold Market

October 6, 2011, at 8:24 pm
by David Duval 

Asian gold buying during the evening in North America is probably a leading indicator of how the Chinese will soon dominate the global gold market.

The Chinese Mean To Control The Global Gold Market
Robert Lenzner, Forbes Staff
Get ready for the Pan Asian Gold Exchange, scheduled to open in June, 2012 in Kunming City, Yunman Province– the gateway to all of Southeast Asia. This is serious, as the Pan Asian Gold Exchange is a part of China’s five year plan– which means it is part of China’s strategy for dominance in global financial markets and the global economy.
Pan Asian will allow Chinese to speculate in gold futures contracts or buy physical  gold through an account with a bank or broker. All 320 million customers of the giant  Agricultural Bank of China  will. simply be able to use their Renminbi, the Chinese currency, from their bank accounts to  trade gold. Sounds bloody dangerous doesn’t it.
It means the spot market in gold could be headed for China– and away from London’s Metals Exchange or the Comex in New York. I’d like to know who is going to oversee and regulate all this action.  For example, when the Comex raises margin requirements to dampen speculative fervor– will  China bew governed by that? I doubt it very much.
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PrimeX - The Time For The Next "Subprime Trade" Has Come

Several years ago Paolo Pellegrini, Kyle Bass, Michael Burry and several other visionaries were well ahead of the conventional wisdom groupthink curve by not only sensing that the housing market was massively overvalued and riding on the crest of a huge leverage bubble (many others agreed) but by finding a ridiculously cheap, low theta way of expressing an uber-bearish long-term outlook with negligible downside and virtually unlimited upside by purchasing billions in ABX index notional at a cost of a few basis points, and watching it explode as one after another asset manager figured out just what "subprime" means and why it may not be conducive to a healthy career in finance. Virtually all of them ended up being very, very rich in just a few short years having had the foresight and, more importantly, the way to express that vision. Lightning may be about to strike twice as the Subprime implosion of 2007 becomes the Prime implosion of 2011. Back in December 2009, when musing on the very interesting topic of the advent of a new ABX-like index, this time tracking Prime mortgages, we asked, rhetorically as so often happens, "Will The New ABX Prime Index Be The Reason For The Next RMBS (And Thus, FHA/GSE) Collapse?" (for more on this index which MarkIt now markets as PrimeX see here). And while the rest of the world is fretting about Europe, Morgan Stanley, lack of decisive political decision-making in a pseudo union of 17 different countries, lack of decisive monetary intervention, a Chinese hard landing and everything else that makes front pages these days, slowly our prediction is starting to come true. But you won't hear about it anywhere else, because if the market understands that in addition to a global solvency crisis, America has another Subprime contagion on its hands actually being expressed in the markets as we type, and potentially costing banks, pension funds and various asset managers billions in losses behind the scenes, that may well be the last straw.

 

 

Guest Post: CME Actions Both Confirming And Contradictory

Given the actions of the CME Group, the governing body of the futures exchange, we should expect an imminent reduction in silver futures margins.  Margin increases were stated to be tools of volatility suppression, yet have been nearly universal in their amplification of volatility and only in one direction (down).  But now that the exchange has reduced the margin requirements for its e-mini financial sector product (XAF), should we not expect a similar move for silver or gold?

 

 

Epic, Grotesquely Surreal Friday Humor

Yesterday, during a conference organized by Bank of America titled "Banking & Insurance CEO Conference", whose key purpose was to defend insolvent Italian banks such as Intesa Sanpaolo (which was downgraded the very same day by Moody's) against the evil market and people spreading destructive truths, something grotesquely surreal happened. Specifically, Slide 9 from the prepared slide-deck happened. "What is Slide 9" you ask? Basically, it is Intesa's core defense of its "viability" which presents the EBA Stress Test result, according to which its Core Tier 1 ranks "among the best under the adverse scenario." Who is the best? Seek and ye shall find. The rest, as they, say is epic history...

 

Fitch Downgrades Italy To A+, Outlook Negative

Fitch Ratings-London/Milan-07 October 2011: Fitch Ratings has downgraded the Italian Republic's (Italy) foreign and local currency Long-term Issuer Default Ratings (IDRs) from 'AA-' (AA minus) to 'A+' (A plus) and the short-term rating from 'F1+' to 'F1'. The Outlook on the long-term ratings is Negative. The Country Ceiling of 'AAA' has also been affirmed. The downgrade reflects the intensification of the Euro zone crisis that constitutes a significant financial and economic shock which has weakened Italy's sovereign risk profile. As Fitch has cautioned previously, a credible and comprehensive solution to the crisis is politically and technically complex and will take time to put in place and to earn the trust of investors. In the meantime, the crisis has adversely impacted financial stability and growth prospects across the region. However, the high level of public debt and fiscal financing requirement along with the low rate of potential growth rendered Italy especially vulnerable to such an external shock.

And Spain... Fitch Downgrades Spain To Aa- From Aa+, Two Notch Cut, Outlook Negative

Really close to France now...

Cracks In America's New Economic Norm

Eric De Groot at Eric De Groot - 2 hours ago

The civilian labor force and total nonfarm employment expanded by 423 and 103 thousand, respectively. Yet, despite this obvious mismatch, the civilian unemployment rate held 9.1%? What gives. As the old saying goes, there's more than meets the eye here. The civilian labor force has been steadily contracting since 2009. This means the workers unable to find full jobs have increasingly given up... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

As Dexia Nationalization Rumors Spread, A Compression Trade May Be In Order

As Peter Tchir, of TF Market Advisors,  observes in the note below, the inevitable as predicted by us a week ago, is about to become a reality. In light of the imminent nationalization of Belgium's biggest bank, it may be time to compress the CDS of Dexia, which also as suggested last week, should trade in line with Belgium, while Belgium itself blows up. The only risk to this trade is that ISDA actually does its job for once, and proclaims Dexia to have experienced a credit event - thus triggering the CDS. Alas, since this will set a very bad precedent for all the other banks due to be nationalized, we would tend to discount the possibility of this happening.

Market Snapshot: Dispersion Rising As EU Financials Underperform

While US equities are well off their post-NFP euphoria highs, the hope that Europe is solved remains. However, today's price action in European equity and credit markets and the very significant divergence between the effervescent equities and calm credits suggests concerns growing among professional traders. We noted yesterday that financials did not rally as much as other credits and equities into the European close and that trend continued today with subordinated financials majorly underperforming and seniors underperforming all other assets. Given that the 'plan' upon which this rally is based is to 'fix' banks, the underperformance of their credits prompts the question - why are we still rallying? In line with equities, and sucked there by the ever-increasing correlations, TSYs, 2s10s30s, precious metals, oil, and carry pairs are all tracking in a risk supportive manner with EUR clinging to 1.35 into the close. US financials are underperforming so far.

Hedge Fund Pound-O-Rama: Full Performance Update Through Month End

Well, a month end update only for those funds who still report their P&L to HSBC. Others, such as Paulson, apparently deem it below them to post an update when they are doing less than swell, shall we say. In other news, redemptions will continue until morale improves.

"Your Alpha Is Burning" - Fighting Greek Fire with Fire: Volatility, Correlation, and Truth

From the mind that brought you the Great Vega Short comes the next masterpiece on liquidity, volatility, contagion and everything else. "Volatility is change and the world is changing. The truth is that Greece will default. The truth is that if our leaders continue to deny our problems history tells us the US will eventually default. These shocking events will hurt many people, markets will collapse, life savings will be lost, there will be violence, upheaval, and massive political change but you know what? The world will not end. When it is all said and done people will work, they will spend time with their children, they will cry, laugh, and love... life will go on. We will find a way to prosper if we relentlessly search for nothing but the truth, otherwise the truth will find us through volatility."