Japan's Kokusai Liquidates Remainder Of Euro Sovereign Exposure, Just As European Primary Issuance Supply Surges

When we discussed the specifics of the ongoing European bank run, we cited from the NYT which noted the actions of a core Japanese mutual fund with European sovereign exposure, namely that "earlier this month, Kokusai Asset Management in Japan unloaded nearly $1 billion in Italian debt." The Nikkei has just reported that this was merely the beginning: "Kokusai Asset Management Co. has sold all Spanish and Belgian government bonds that were part of its flagship fund, Global Sovereign Open, The Nikkei learned Monday. As of Nov. 10, Spanish and Belgian bonds accounted for 1.8% and 3.1% of the fund, respectively. The share of the bonds in the fund's portfolio fell to zero as of Thursday." Just what prompted this drastic move and very loud slap in the face of the European confidence building exercise? "A Kokusai Asset Management official said the company sold off the bonds, amid widespread concerns about the outlook for Europe's sovereign debt crisis to avoid hurting the value of the fund, given volatile prices of the bonds. The mutual fund operator had already divested the fund of all its French government bonds in October and all Italian bonds in early November." It is safe to say that where one core asset managers has been (and no longer is), everyone else will shortly follow. For the simple reason that it is now if not cool to not have European exposure, it is certainly required by one's LPs to cut down on all European bonds. Kokusai is merely the canary: expect everyone else to go ahead and dump the €741 billion in non-domestically held Italian (and then all other European sovereigns) bonds. Good luck ECB buying these in the secondary market. And one market where the ECB can do nothing by charter, is the primary issuance one, where as the following update from Morgan Stanley shows, things are getting from from bad to worse.

Jim O'Neill Describes Europe's Surreal Times, Asks If Germany And The Euro Area Even Want The Monetary Union Any Longer

Among the traditionally meandering permabullish ramblings of a man who continues to ignore the disconnect between reality and his view of the world, tonight's note by GSAM loss leader Jim O'Neill "Surreal Times" has a very ominous rhetorical question inbetween all the bullish propaganda: "The ECB doesn’t seem to regard 10-year Italian bonds as a bargain and, of course, it is rather tricky as they need to be sure that Monti will deliver. In turn, this means that what is really important is that Mario gets support from those in the background and, ultimately, the Italian voters. And then there is Spain. And still, of course, the troubling Greek situation. And ultimately, the complex world of Berlin and Frankfurt. As many European newspapers are asking in recent days, does Germany actually really still want the EMU? And, as I shall now provocatively ask, does the Euro Area? All very surreal." No Jim, all very logical, because for the first time in decades, Europe is finally starting to do the math and realizes it is failing miserably. It is those stuck in a world in which combined total exports are greater than total imports by over $300 blilion: a mathematical lunacy, who think that what is happening is "very surreal." To everyone else, the right phrase is "very much expected."

Presenting Russell Napier's Greatest Hits

Two weeks ago, courtesy of Gresham's Law, we brought to our readers Jim Grant's greatest hits: a compilation of the most memorable TV appearances by the famous newsletter writer. Today, we are happy to present another controversial luminary - Russell Napier: the renowned financial historian and consultant for CLSA, as well as author of the engrossing Anatomy of the Bear, who only together with Albert Edwards, has predicted that the S&P would eventually drop to 400. Napier has articulated some fantastic insights on the generational cycle, bear market bottoms and currencies in recent years. His insights, unlike those of TV pundits whose soundbites are only there to fill the gap between two ad segments, are always something to look forward to.




Man Arrested In New York Terror Plot

Just hitting the headlines, probably related to Mike Bloomberg's 7:30 pm announcement:

• NY AUTHORITIES ARREST MAN IN BOMBING PLOT, N.Y. TIMES REPORTS
• MAN WANTED TO DETONATE BOMB IN BUILDING WITH GOVT WORKERS: NYT
• NY TIMES SAYS MAN WAS ARRESTED WITHIN THE LAST 24
• MAN HAD BEEN UNDER SURVEILLANCE FOR A YEAR, N.Y. TIMES REPORTS
• NY AUTHORITIES TO ANNOUNCE CHARGES AGAINST MAN TONIGHT

That's it for now

ES Opens -1% As Oil, Gold, And FX Carry Leak Lower

UPDATE 2: NEW YORK MAYOR TO HOLD NEWS CONFERENCE AT 7:30 P.M. (0030 GMT) ON TERRORISM-RELATED ISSUE - CNN
UPDATE: ES 1201 seemed to spur some serious volume for the overnight session.
While EURUSD had managed to clamber back into the green from a modest 25pip drop (bouncing off 1.3500), carry crosses (most specifically AUDJPY) are ebbing lower and Oil and Gold's soft opening is dragging equity futures to a dismal start. ES opened -13pts (around 1%), below its 50DMA (first time since 10/10) and at its lowest in over a month. With TSYs not open yet, ES is mildly lower than CONTEXT but we would expect the implicit shift in 2s10s30s to sync up with equity derisking.




Now Spain: Debt Crisis Claims Another Government

Spain's opposition conservatives swept commandingly into power and into the hot seat Sunday as voters enduring a 21.5 percent jobless rate and stagnant economy dumped the Socialists —the third time in as many weeks Europe's debt crisis has claimed a government.

Antibiotic-resistant infections spread through Europe




Debt Crisis Contagion: The Euro Zone's Deadly Domino Effect



It's All About Gold Now


 
How Can The America People Ever Trust Congress Again After Learning Of The Rampant Insider Trading That Has Been Going On?



Real Estate:  Why Home Prices Won't Bottom Out


  
MF Global and Derivatives Disinformation



Student Loan Default Rates Surging Largely Due to For-Profit College Expansion



Foreclosure Crisis Only Halfway Over



Regulators close small banks in Iowa, Louisiana for total of 90 bank failures in 2011

If you find useful information, please consider making a small donation, to help cover some of the labor and cost for this blog.

Thank You

I'm PayPal Verified