Egan Jones Downgrades Italy From BB+ To BB, Projects 157% Debt/GDP By 2014
In the face of ponzi-enabling status quo adversity, Sean Egan is not one to mince his words. Sure enough, here comes today's downgrade of Italy from BB+ to BB, an event which has reminded BTPs, if not stocks for now, just what reality is. From the report: "La Acido Vita - from La Dolce Vita, life in Italy has become sour of late; even without the concerns about Greece, Italy is in miserable shape. Over the past 3 fiscal years, total debt has grown by 14.3% while GDP has shrunk by 2.4%. The annual government deficit of EUR68B and the debt to GDP of 119% place additional pressure on credit quality. Furthermore, Italy will probably have to provide additional support to its banks and will see some pressure on its economy. We expect that Italy's banks will continue turning to the ECB and Italy for support. In 2012, the Republic of Italy needs to finance EUR320B of debt and is likely to experience increasing yields and restricted access without external intervention. As of this weekend the yields on the 6 month notes were 6.5%; rates have been rising despite ECB purchases. The major issue is whether the IMF will become involved and if so, whether the face value of the debt will be cut. Italy cannot support all of its debt." And what is probably worse is that according to what are likely very optimistic projections, EJ sees Italian debt/GDP rising from 127% in 2011 to 157% in two years. Indicatively, the cutoff ratio for a CCC-rated sovereign credit in Egan Jones' view is 150% debt/GDP. Say hello to the triple hooks.Judge Rakoff Humiliates Mary Schapiro By Nullifying Citi MBS Settlement, Calls It "Neither Fair, Nor Reasonable, Nor In Public Interest"
Once again Judge Jed Rakoff, also known as the only person in the Southern District of New York who calls out the SEC consistently and routinely on their corruption, has ruined the day for both Mary Schapiro and for Vic Pandit, by making the proposed $285 million MBS fraud settlement wrist slap null and void, and setting a trial date for July 16, 2012 in which Citigroup will actually face a jury and defend itself to peers instead of to future Citi employees in the form of SEC porn addicts. It is unclear if the reversal is a bigger slap in the face for Citi or for the SEC, but one thing is certain: both parties are to be massively embarassed as a result of this ruling which essentially says that both entities are culpable - the first of committing a far greater crime than the $285 mm fine deems fit, and the second of being a complicit enabler of precisely this kind of criminal behavior which it then fines with some token amount and things can continue as they were. And just like in the case of SEC vs BofA, Rakoff crucifies the SEC's worthless organizationL: "the Court concludes, regretfully, that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest." He continues: "Most fundamentally, this is because it does not provide the Court with a sufficient evidentiary basis to know whether the requested relief is justified under any of these standards. Purely private parties can settle a case without ever agreeing on the facts, for all that is required is that a plaintiff dismiss his complaint. But when a public agency asks a court to become its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt, the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance." It really, really is time for Schapiro to resign after this gross public smackdown by a member of the court who has just chided her for not doing precisely what she is paid millions to do. That said we can only hope that Rakoff does not drop the ball like he did last time around when he was about to sue Ken Lewis yet pulled out in the last minute. Realistically, what happens is SEC will fine Citi with a much greater fine, probably $500MM or so, and Rakoff will end up approving the settlement, because as the status quo slowly implodes, nothing really changes until everything finally crashes.
MF Global looting can continue! Missing funds and fees likely to go higher: Guest Post by MFGFacts.com
11/28/2011 - 09:59
Dear Santa, Please Send Hopium
Any upside wiggle is certain to generate hopium for a Santa Claus rally and
beyond. The market is due for a short term bounce after heavy selling and
technical damage. Watch for a retest of the 11/21 breakdown gap. Nasdaq
Composite with exchange volume: Caution is warranted until the message of
the market changes. Don't count it, though. Cycles are repeating, but the
daily noise of greed,...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
You Have To Live With Volatility
You’re better off by investing in equities than in government bonds and in
cash for the next 10 years. You have to live with volatility. I’m not all
that bearish about stocks.
*Related, iPath S&P 500 VIX Short-Term Futures ETN (VXX), SPDR S&P 500 ETF
(SPY), iShares MSCI Hong Kong Index Fund ETF (EWH)*
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Japanese Stocks Are Very Cheap
They will soon start losing money on the money invested abroad so a massive
amount of that money is going to come back home. I doubt that will go into
bank deposits or bonds because interest rates are so low. Then at least
they can go to commodities or stocks. - *at a forum in Tokyo*
*Related Tickers, iShares MSCI Japan Index ETF (EWJ) *
*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 Blo... more »
Wonder
why futures are up over 2%? It appears all it takes is two
strategically placed and false rumors, since denied. That and of course
the fact that US consumers are literally spending as if there was no tomorrow.
Because for a whole lot of consumer there may not be once the bill
comes in. Ironically, the same can be said about European banks, only
they never even got a 10% of iPad. Because while stocks may be doing
their usual oversold Manic Monday thing which surprises no one at this
point, European liquidity is as bad as it ever was. As the ECB reported,
cash deposited by risk averse banks soared by €19 billion overnight to
a December 7 3M ECB USD repo pre-reset high €256 billion. And what is
worse, that all important metric of the 3 month EUR/USD basis swap not
only did not improve but has continued to deteriorate, dropping 1.9 bps
to -148, the worst since October 10, 2008. What is ironic is that
while we know banks have a USD funding problem, they also seem to be
having a EUR sourcing issue, despite being able to pull as much cash
from the ECB as they want. That is of course assuming they have
sufficient collateral for the repo market. Which then begs the
question: is the European liquidity crisis shifting to one of
evaporating repoable assets? And if the repo market is drying up, that
means that the ECB will soon be forced to accept staplers are
worthwhile collateral before it all falls apart.Moody's: "The Probability Of Multiple Defaults By Euro Area Countries Is No Longer Negligible"
If all it takes for the ES to soar by over 30 points is some propaganda about US consumer spending (pretty much ridiculed by all at this point), and two outright lies about Europe being fixed, the following factual statement by Moody's should certainly send risk soaring now that bizarro mode is fully on: "over the past few weeks, the likelihood of even more negative scenarios has risen. This reflects, among other factors, the political uncertainties in Greece and Italy, uncertainty around the final haircut imposed on holders of Greek debt, the emphasis in the recent Euro Summit statement on the conditional nature of the existing support programmes and the further worsening of the economic outlook across the euro area. Alternative outcomes fall into two broad categories: those involving one or more defaults by euro area countries (in addition to Greece's PSI programme); and those additionally involving exits from the euro area. The probability of multiple defaults (in addition to Greece's private sector involvement programme) by euro area countries is no longer negligible. In Moody's view, the longer the liquidity crisis continues, the more rapidly the probability of defaults will continue to rise." Oddly enough, for once Moody's is not alone.Grand Plan 2 Or Grasping At Straws?
On October 27th we rallied 40 points in SPX and hit 1285. So far today we are up 32 points and are at 1185. About the only positive thing I have to say is that 1185 is cheaper than 1285. The reasons for the rally are largely based on headlines and rumors out of Europe and being too pessimistic about what happens if there is no “solution”. The IMF bazooka does not seem to be there (offically denied), the EFSF is nothing like what was promised, Euro-bonds seem practically impossible in any time-frame and 'fast-treaty-ing' remains a pipe-dream, Greece is closer to actual restructuring as it starts direct negotiating, and while Thanksgiving Sales were up it seems the main reason for a market rally is the amrageddon-like scenario of the break-up and the typical belief that 'the-worse-it-gets, the-better-it-will-be-in-the-end', so buy.Venezuela Repatriates ‘People’s Gold’ Due to Gold’s ‘Historic’, ‘Symbolic’ & ‘Financial’ Value
Reuters reports the first shipment of gold bars arrived home in Venezuela on Friday “amid wild celebrations.” Excited crowds lined the roadside waving big Venezuelan flags and chanting "It's returned! It's returned!" as a convoy of soldiers and armored cars carried the gold ingots from Maiquetia airport to the central bank in Caracas. The President of the central bank, Nelson Merentes traveled into the city at the head of the convoy. He did not say how much gold bullion was brought back in Friday's shipment but said the bullion came from several European countries. "Our gold is being stored in the vaults," Merentes told the cheering crowds, sporting a baseball cap that read "The Central Bank of Venezuela with the People." "It has historic value. It has symbolic value. And it has financial value," bank chief Merentes said about the first shipment. "Each box of gold weighs 500 kilograms and is worth about $30 million,” Merentes said before cheering crowds. “We’ll bring the rest back little by little.” Merentes is in favor of the move and said, "The country's finances will be backed by autonomous wealth, so we are not subject to pressure from anyone," UPI reported. “This guarantees that if there are financial problems in the international markets our gold will be safe here at home,” Merentes said. Drums and sirens sounded out across the square as many in the crowd sang "Forward comandante!" in support of the president. Some waved homemade signs that said: "The gold has returned thanks to Chavez!" and "Long live our sovereignty!"European Equity And Credit A World Apart
European
equity markets began to rally around 830ET on Friday. Credit bottomed
around 1130ET Friday with XOver and Sub financials the worst
performers. Since then, equities have soared - almost entirely
recovering last week's loss on the back of officially denied bazookas
among other failed rumors. Corporate credit markets are outperforming
financials (which are only back to Thursday levels) but the credit
markets in general are massively less sanguine than the over-excited
equity market for now.Art Cashin: "Sitting On The Edge"
Forget any overly complex and meandering explanation you have heard about today's market action. The real reason for the bounce is simple: oversold market coupled with yet another short squeeze (NYSE Group biweekly short interest data showing shorts spiking in the first two weeks of November due out today). Art Cashin explains.ECB Passes €200 Billion In Cumulative PIIGS Bonds Purchases: Now Monetizing 30% More Each Month Than The Fed
For a bank that everyone is bashing for "doing nothing" the ECB sure continues not only to be active in the open market but monetize well more than the Fed: in the past week the ECB's SMP program announced it purchased €8.581 billion in PIIGS bonds in the open market, which brings total notional purchases to €209.1 billion over the life of the program since inception on May 14, 2010. However, due to interim maturities, about €5.5 billion have matured from the total holdings, which means that on a net basis, total purchases have only now passed €200 billion for the first time, and are now at EUR 203.5 billion. More importantly, since the resumption of the SMP program in August, the ECB has bought €131 billion in PIIGS bonds, or about $176 billion. This works out to just under $60 billion per month (and no, it is not sterilized when the sterilizing banks exist solely courtesy to ECB funding as noted before) and is just modestly less than what the Fed monetized on a monthly basis at its peak QE, and about 30% more than what the Fed does now during Operation Twist! ($45 billion monthly at last check) So... Who was it that said the ECB needs to print more?
More "Change You Can Believe In"...
Average New House Price Drops To Lowest Since 2003
Today's new annualized home sales print was 307k, below expectations of 315k (yet oddly better than last month's downward revised which moved from 313k to 303k, wink wink nudge nudge Census bureau). This is not to be confused with the actual number of houses sold which came at a whopping 25k, and the third month in a row in which under 500 homes sold in the over $750,000 category. Yet the most notable data point was the average new house sale price which dropped to $242,300. This is the lowest price since 2003! Something tells us that an MBS LSAP is pretty much guaranteed at this point.
Gold vs Wine: We Have A Winner
One may not be able to eat gold, and one can certainly drink wine (in fact, in moderation it is encouraged by the surgeon general), yet when it comes to the age-old competition of which one makes a better wealth-preserving investment, we finally have a clear winner.
ES 13 Points Rich To Intrinsic Risk Value
Since
just before the US equity day session open, ES has diverged
dramatically from what was a highly correlated trajectory with global
risk assets with ES now 13pts higher than the broad basket of risk
assets would suggest. European credit markets are rolling over - notably
off their highs, European sovereigns are leaking wider (BTPs from
-25bps to -10bps now and Portugal +75bps), US TSYs are 6bps off high
yields of the day and 2s10s30s is dropping fast, Oil has cracked back
through $99 (2.5% off highs), and AUDJPY is losing steam. European
financials were underperforming in credit-land and now we see US
financials drop from best performer to sixth (admittedly still +3%) as
EURUSD starts to leak back into the EUR close.As "Fine Wine" Rolls Over, Will Stocks Follow?
It appears that #FineWine is trending, because barely 30 minutes have passed since we posted the correlation chart between wine and gold, that Newedge sends out a comparable correlation chart showing that if one uses Wine as a leading, or even coincident, indicator for overall risk and (alcohol infused) liquidity, then the bottom is about to fallout of stocks. From NewEdge: "Bottoms up! One of our "fringe" indicators, the Fine Wine Index (based on the 100 most actively traded wines at global auctions) continues to sag here, making a fresh 1 year low for October.... Adding to the long list of indicators failing to corroborate the recent "risk on" animal spirits."
No New Shorts In Early November As NYSE Short Interest Drops To 3 Month Low
Following the market drop in early November, it was widely expected by most, us included, that stock shorts would pile in once again, only to be burned by moves like today's, which is more of an attempt to flush out even more shorts by hitting limit pain thresholds, than buying on any actual fundamental improvements. Curiously, as the just released NYSE data, the short interest at November 15, not only did not increase in the previous two week period, it dropped to a 3 month low of 14.1 billion shares, just down from October 31. Which means that there were no new weak hands, and that all the algos who are pushing the market higher on hopes that short covering will take it even higher once a limit waterfall begins are likely to be disappointed. And with fundamentals completely irrelevant, this data update also likely means that shorts will take this opportunity to reshort the market.
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