Uncle Sam To The Rescue: IMF Creates New European Bail Out Facility, The "Precautionary And Flexible Credit Lines"

And here comes Uncle Sam:

• IMF APPROVES CREDIT LINE PROGRAM CHANGES TO PROVIDE LIQUIDITY
• IMF CREDIT LINE CREATES NEW SOURCE OF FUNDS FOR MEMBER NATIONS
• IMF ADDS EMERGENCY FUNDING TOOL TO ASSIST COUNTRIES IN CRISIS
• IMF NEW CREDIT LINE AVAILABLE FOR SIX MONTHS TO TWO YEARS
• IMF CREATES PRECAUTIONARY AND LIQUIDITY LINE
• IMF SAYS ACCESS UNDER 6-MONTH LIQUIDITY LINE COULD BE UP TO 500% OF MEMBERS QUOTA

And here is the math: Italy's quota is 7,882.3SDR; Spain is 4,023.4 SDR. Multiply by 5 and you get 40 Billion and 20 billion SDRs respectively, which  translates to $61 billion and $31 billion. A total of $91 billion in additional capacity? And that's it: enough to fund Italy and Spain for... two months. This is the best the regime can come up with? Are you SERIOUS?

 

 

"Whither Europe?" - UBS' George Magnus Asks What Happens After The ECB Prints

'By George' author, UBS George Magnus asks the right question, and one posed by Zero Hedge two weeks ago, namely even assuming Germany relents and allows the ECB to print, what happens then? "Some argue that Germany will, sooner or later, capitulate on this issue too, since the only real alternative to the ECB adopting a full lender of last resort role is the slimming down of the EZ in what would be dangerous, unpredictable and almost certainly acrimonious circumstances. If the crisis escalates alarmingly, the ECB does look a little more likely to be given the light to widen its remit, even if under conditions. But then what? How would German voters and the powerful banking elite react to ECB policies that would turn the Bundesbank white? And what would the political consequences of further printing of money be? I ask the questions not to disagree, but to emphasise that what many of us think as the logical way out also has consequences that may not be immediately transparent."

Gold Falls Again on Options Expiry –Supported by Global Debt Crisis & Iranian Oil Jitters

Recent years have seen a trend of gold and silver selling off aggressively in the run into options expiries. This pattern has been less marked in 2011 but was more frequently seen in recent years. Investors have complained to the CFTC about violations of law in the gold and silver markets and some have sued JPMorgan Chase & Co and HSBC Holdings Plc accusing them of conspiring to drive down prices, and reaping an estimated hundreds of millions of dollars of illegal profits. The sell off had all the hallmarks of a bear raid by concentrated leveraged shorts as the news flow was extremely gold positive – both from Europe and the US.  This most recent sell off may again be completely coincidental but the CFTC might want to keep an eye on such unusual trends in the precious metal markets in order to ensure fair and free markets and protect the interests of all investors.

One Massive Circle Jerk: Presenting The Scam That Is ECB Bond Purchase "Sterilization"

When discussing European sovereign bond purchases it is never polite to say the ECB "monetizes" when talking to "very serious people" -  after all they "sterilize", or in other words, don't see an actual balance sheet expansion, as they offload the entire cumulative balance (which as of this week was €194.5 billion) onto other financial institutions. In this way, the bank supposedly does not take on interest rate risk, which in a feedback loop, is the cause and event of such modestly unpleasant monetary expansion episodes as the Weimar republic. What few discuss, however, is just where the banks get the money to actually buy bonds from the ECB. Well, as it turns out, all the money used for sterilization comes from, you guessed it, the ECB, in what is one massive several hundred billion circle jerk. In essence what the ECB does, by pretending to not monetize and pretending to sterilize, is taking on not only interest rate risk one level removed, but also bank solvency and liquidity risk! In turn, this makes the central bank even more undercapitalized in practice than it is (and at 50+ leverage, it is already pretty, pretty undercapitalized), as once the banking dominos start crumbling, it will be the ECB that is left on the hook... and thus the Fed and the US taxpayer. So perhaps while Germany is complaining every single day about the possibility of outright money printing by the ECB, it will be wise to ask itself: who is giving Europe's insolvent banks, which just borrowed a record amount of short-term cash from the ECB to be recycled precisely into such indirect monetization, their cash?

UnoccupyWallStreet: As 200,000 Depart, And The Rest Face Plunging Bonuses, A Look At Wall Street From The "Other Side"

“This is something very different,” said Huw Jenkins, a former head of investment banking at UBS AG who’s now a London- based managing partner at Brazil’s Banco BTG Pactual SA. “This is a structural change. The industry is shrinking.” In his latest pseudo-profile piece, Bloomberg's Max Abelson captures some of the very much unspoken and tacit changes on Wall Street, which over the past several years has become the poster child of all that is wrong with the world, despite the fact that Wall Street does not exist in isolation from Washington, and the true enabler of all the criminal behavior are those men and women in the US Congress and Senate, whose conscience can be bought by the highest bidder. And while not a single person in DC is going to lose their job over the economic catastrophe of the past several years, Wall Street is preparing for one of the biggest layoff rounds ever. As Abelson reports, "John Brady, co-head of MF Global Inc.’s Chicago office, was having a vodka cocktail at the Ritz- Carlton in Naples, Florida, overlooking the Gulf of Mexico, on the day his company reported its largest-ever quarterly loss. "Wow, the sun just set,” Brady said to his wife and two colleagues attending a conference with him, he recalled in an interview. “I hope it doesn’t set on MF Global.” A week later, on Oct. 31, the firm led by former Goldman Sachs Group Inc. co-Chief Executive Officer Jon Corzine collapsed. Brady and 1,065 colleagues joined a wave of firings that has washed away more than 200,000 jobs in the global financial-services industry this year, eclipsing 174,000 in 2009, data compiled by Bloomberg show. BNP Paribas SA and UniCredit SpA announced cuts last week, and the carnage likely will worsen as Europe’s sovereign-debt crisis roils markets." While it will hardly evoke nary a tear from most, those curious at how the "other side" is faring with what may well be the worst bonus season on Wall Street, and the biggest layoff wave, in 3 years are encouraged to peruse the following profiles.

Video: Libertarianism and Austrian Economics

Admin at Jim Rogers Blog - 1 hour ago

Investor Jim Rogers answers two questions relating to libertarianism and how he discovered Austrian Economics. *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.*

Spanish Yield Curve Inverts Most Since 1994

Submitted by Tyler Durden on 11/22/2011 - 10:39 2s10s 2s10s Yield Curve The spread between Spanish 2Y and 10Y bonds has dropped to record lows as the yield curve inverts most since 1994. Troughing intraday at -12bps at its most inverted, today's as-good-as-failed Spanish bill auction sends an ugly message to the market that risk appetite is non-existent. At -5bps, if we end today at this level, it will be the first inverted close since August 1994.

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If I Could Go Back In Life I Would Study Economics Again

Admin at Marc Faber Blog - 1 hour ago

If I could go back in life I would definitely study economics again. What I have noticed in life is, if you are a lawyer or if you are a medical person, you don`t have the geographical freedom as I had in economics. I could practice economics anywhere in the world, in Latin America, in the Middle East, in Asia...and I could travel a lot and see the entire world. *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

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Revisiting Zurich

Admin at Marc Faber Blog - 4 hours ago

*Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

What's Lost With the Demise of the Euro? Only What Was Unsustainable

Scaremongering aside, the demise of the euro does not end European integration. It only means that which is unsustainable has been relinquished and a return to stability is finally possible. So the euro is doomed. Toast. History. This will lead to:

1. The end of civilization
2. The end of European integration
3. The start of new Dark Ages
4. The return to a sustainable reality

The correct answer is 4. The euro was an unsustainable, self-destructing extension of the integration that has long simplified trade, travel and work throughout the EU (European Union).

 



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If You Want To Get Rich...

Admin at Jim Rogers Blog - 4 hours ago

“If you want to get rich, don’t go into investment banking. Instead, become a farmer”. - *in Daniels Trading* *Related stocks: John Deere (DE), Mosaic (MOS), Potash (POT)* *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.*

Anti-Tilson: The Gift That Keeps On Giving

Our favorite trade since Friday, November 11, when Whitney Tilson went public with his short GMCR, Long NFLX theses, namely to do the opposite and Buy GMCR and Sell NFLX has now returned 40% in 6 days. And we don't even collect 2 and 20, nor do we organize hedge fund hotel symposia.

Italy Welcomes Its New Brussels Overlords

It was nice knowing you "sovereign" Italy. Next time get a "technocrat" PM/FinMin who is not a certified card carrying agent for a major banking cartel.

• MONTI SAYS EUROPE'S INDICATIONS ARE IN ITALY'S BEST INTERSETS
  
• MONTI SAYS EU CAN HELP ITALY DEVELOP BETTER POLICIES
  
• MONTI SAYS EU IS NOT A `CONSTRAINT' FOR ITALY
  
• MONTI SAYS ITALY'S PROGRAM PRESENTED TO EU IS `STARTING POINT'

Oh, and good luck finding that gold, a topic which finally makes the mainstream FT several weeks after Zero Hedge tentatively suggested that it's gone... It's all gone.

If You Own CSJ, We Would Sell

One of the most crowded trades around is short-dated credit - especially short-dated positions in higher yielding debt. Its the Goldilocks trade - not too hot (low duration and things will be ok for the short-run) and not too cold (carry and yield advantage is relatively good) - for every fixed income manager with new money to put to work. However, recent events are bringing stress into the here-and-now and jump risk (or more immediate concerns of significant credit events)is rising. Credit curves have flattened significantly in the last few weeks and are back to 'normal' given spread levels but it is the composition of the CSJ ETF (short-dated credit bond fund) that is most worrisome. Heavy exposure to Supranationals, Agencies, and Financials - all of which we have highlighted in recent weeks as showing significant systemic weakness - makes us and Peter Tchir of TF Market Advisors nervous.

European CDS Rerack: Germany Back To Triple Digits

In addition to broad bloodletting across the board, with Belgium and Spain getting crushed as noted earlier, the core confusion continues with Germany back in triple digits, and the UK, which has roughly 500% total debt/GDP including all debt - corporate and private, or double Germany's, still shockingly in double digits. This won't last long.

Austria, Belgian Bonds Crushed

Yesterday we posted a note on Austria, titled "35 Seconds Of TV Air Time Explaining Why Austria's AAA Rating Is Doomed" which among other things demonstrated in very vivid fashion, why courtesy of its massive Hungarian and broadly Eastern European exposure, an Austrian downgrade is virtually imminent. The follow up news that the Austrian Central Bank has henceforth forbidden any incremental Eastern European loan issuance is merely the cherry on top, and confirms that Austria's biggest banks are now on the verge. As the chart below demonstrates which shows Austria benchmarks (which like Spain we expect will be promptly changed to a lower yielding piece to buy 1-2 days of breathing room), the hammering has returned. And elsewhere, Belgium is also getting annihilated as the ECB is now left with far too many plates to juggle.

Revised Q3 GDP Drops By 20% To 2.0%, Misses Expectations Of 2.5% By 2 Standard Deviations

So much for the miraculous inventory expansion. JPM's Michael Feroli was spot on: the strategist who predicted a significantly below par revised Q3 GDP print of 2.0%, was right on the dot. Advance GDP dropped from 2.5% to 2.0%, missing expectations of an unchanged print. The impact was entirely due to Inventories detracting from growth, with the Private Inventory number declining from -1.08% to -1.55%. And to those expecting a surge in Q4 GDP based on inventory restocking, which would be virtually all Wall Street economists who missed today's number by 2 standard deviations, we have one thing to say: it ain't happening. In fact, liquidations are coming first, fast and furious with Personal Consumption coming at 2.3%, and missing estimates. Needless to say futures, are not happy.

Waiting To Exhale

You can feel the tension. Traders with one eye on European bonds prices deteriorating and the other eye watching the headlines, hoping for some positive news. Without a doubt the situation in Europe has deteriorated. Spanish t-bills priced above 5%. Greek bonds at new lows. French and Belgium debt under pressure. The banks are struggling too. The desperate pleas and self-righteous demands for the ECB to do something have reached a crescendo. The market is clinging to hope that the ECB or IMF or China or anyone will step up and do something or anything. We may still get a print it all rally, but I am getting more hopeful that Europe will finally do the right thing and take some near term pain to create a sustainable rally and economy.

Commerzbank Monkeyhammered On Insolvency Concerns

A few months ago, we noted that according to SocGen, Commerzbank is Germany's second most undercapitalized bank... Right after Deutsche Bank. Today, the market appears to have figured this out. Following media reports that the bank is in desperate need to raise €5 billion to satisfy capitalization requirements, the stock has gotten pummeled and at last check was down just under 9%. And articles such as the aptly titled "Commerzbank Bankrupt Again" from MM News are not helping.

Spain Election And Benchmark Switch Rouse Duds, As Country Pays Record Yield In Bill Auction

It has been a busy morning for the ECB already, as the central banks has been buying up Spanish short-dated bonds following yet another disastrous auction out of Spain, this time a 3 and 6 month Bill auction. Reuters reports: "Spain's Treasury paid the highest yields recorded in 14 years to issue 3 billion euros ($4 billion)of short-term bills on Tuesday, a sign that a resounding election victory for the centre-right People's Party on Sunday has done little to soothe investor nerves. The average yield on the 3-month T-bill more than doubled to to 5.11 percent from 2.292 percent one month earlier, the highest level since the bill was re-introduced in 2003. It sold 2.01 billion euros and was 2.9 times subscribed, after 3.1 times at the October auction. The 6-month T-bill saw yields jump to 5.227 percent from 3.302 percent at the last auction, selling 0.97 billion euros at a bid-to-cover ratio of 4.9 after 2.6 in October" Ironically, yesterday's pathetic attempt to mask market weakness, when Spain forced data vendors to switch their benchmark bonds, as was reported by the FT first, has not fooled the market: "Just a day after borrowing costs soared in a lacklustre auction, the yield on 10-year Spanish debt, which moves inversely to prices, dropped by about 35 basis points on Friday, mystifying traders. However, it has emerged that Thomson Reuters and Bloomberg, the main providers of government bond price data, were asked by the Spanish Treasury to change the main quoted benchmark price, from the new 10-year bond launched on Thursday back to an older one." The result: once again pervasive credit market weakness, which has since spread ot Italy, and at last check forced Draghi to also start buying BTPs. One wonders just how quickly Europe would implode if the buyer of last resort was to actually take a 24 hour vacation.

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