Here Come The CACs: CDS Trigger Is Next

First comes the CACs. Then the forced debt exchange offer. Finally - default: as defined by both the rating agencies and ISDA, together with triggered CDS.

 

 

Greek CAC Trigger Walk Thru

While we have done our best to explain what the implications are of the actions of the various parties in the Greek/German/ECB/Euro swap/default/CAC/PSI/Austerity events, it is perhaps worth one more try to address how we see this playing out and exactly what the ECB just did. The weakness in GGBs today along with the rise in the cost of Greek basis packages (a hedged bond trade that looks to profit from a credit event or compression) suggest markets are beginning to wake up to reality but the dead-currency-walking behavior of the EUR (and ES) since last night's close suggests many remain sidelined or have all their chips on the constantly-tilting table. In the end every private holder will write-off 50 percent permanently and those that live in a mark to market world (fewer and fewer live in that world in Europe) probably lose another 20 points or so. CDS will be triggered and we will be told how great it was that Greece avoided a default and that it is an isolated case. Is that scenario priced in?

Central Bank Gold-Buying Increases by 500%

The World Gold Council recently released its own report for the gold market for 2011. It noted that while global demand for gold had hit a new all-time high in (nominal) dollar terms, it was merely reaching its highest level in 15 years in terms of tonnages. Hardly the signs of an “over-heated” market, as is regularly claimed by the flock of mainstream Chicken Littles clucking about a “bubble” in the gold market.
Indeed, investment demand rose by a mere 5% year-over-year. Arguably, even that number overstates the performance of the gold market in 2011, since (in the real world) much of what is mistakenly classified as “jewelry demand” should be classified as investment demand.
The reason for this is that in much of the developing world gold jewelry is considered a form of “savings” (or investment) rather than mere adornment. In 2011, jewelry demand actually declined, meaning that on a net basis true investment demand was likely essentially flat on the year.
Read More @ BullionBullsCanada.com

Classic Obama "Screw The Public" Move

Dave in Denver at The Golden Truth - 3 minutes ago

*When the public finally figures out just how much they've been screwed by the banking system, in collusion with the Government, there's going to be a violent revolution -* a friend of mine last night The $40 billion settlement deal the Government struck with the big banks over foreclosure fraud is not exactly what Obama is promoting it to be. In fact, it turns out that $30 billion of it will actually be paid for by the taxpayers. Did everyone see that particular detail being discussed in any of the U.S. media? Here's the Truth as reported by The Financial Times (London): ... more »

 

 

Comex Metals Calendar for 2012 and Something Nasty on the Way?

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Don`t Listen To Governments

Admin at Jim Rogers Blog - 1 hour ago

If you listen to governments, then you are not going to make a lot of money. Governments lie, distort and make mistakes. - in CNBC *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.* more »

 

 

A Correction Is Coming Very Soon

Admin at Marc Faber Blog - 1 hour ago

"Last year, emerging markets and Europe grossly underperformed the U.S. - say in the case of India by 40 percent. So from the lows in November, the emerging markets have now outperformed the United States. Now I think the markets are overbought and a correction is coming very soon. - in CNBC Related, iShares MSCI Emerging Markets Index ETF (EEM), ProShares UltraShort S&P500 ETF (SDS) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

Greek 1 Year At 629%, Biggest One Day Jump In Yield Ever

Ze Price Stabeeleetee...

Do We Really Know Greece's Default Will Be Orderly?

The equities market is acting like we know Greece's default will be orderly and no threat to financial stability. It is also acting like we know the U.S. economy can grow smartly while Europe contracts in recession. Lastly, the high level of confidence exuded by market participants suggests we know central bank liquidity is endlessly supportive of equities. What do we really know about the coming default of Greece? Whether we openly call it default or play semantic games with "voluntary haircuts," we know bondholders will absorb tremendous losses that are equivalent to default. We also suspect some bondholders will refuse to play nice and accept their voluntary haircuts. Beyond that, how much do we know about how this unprecedented situation will play out?

Senate Passes Payroll Tax Extension, Gas Price Increase Has Already Offset Benefits

In a 60-36 vote, Senate just passed the payroll tax extension, previously voted through by Congress. From Reuters: "The U.S. Senate on Friday passed legislation extending a tax cut for 160 million workers and long-term jobless benefits through December, clearing the way for President Barack Obama to sign the measure into law. The Senate approval by a simple majority vote followed the House of Representatives' approval earlier on Friday. The legislation, which also extends current payment rates to doctors through the Medicare health care program for older Americans, will add $100 billion to the U.S. deficit and is aimed at further stimulating the economy." As a reminder, all this means is that a repeat of the debt ceiling fiasco is now virtually assured before the presidential election as discussed here, which explains the GOP's willingness to pass this through as fast as possible with no offsetting spending cuts. As for the benefits of $1000/taxpaying household, the recent rise in gasoline prices has already offset those. One can only hope that crude prices are as susceptible to successful central planning intervention as all other assets, or else many more extensions will be needed before the year is over.

Global Financial Systemic Risk Is Rising - Again

Credit markets in Europe remain significant underperformers relative to equities this week, despite some short-covering yesterday that narrowed the gap. Global Financial Systemic Risk is rising again - dramatically. It seemed that the dramatic shift from early to mid-week was enough to scare some action back into the market and we can't help but feel that the rallies in Spanish and Italian govvies (on what was very likely thin trading) was all central banks, all the time. Today saw stocks rally in Europe to new post-NFP highs while credit leaked wider off its open and closed on a weak tone into the US long-weekend. The end of the week felt much more like covering to flat than any aggressive re- or de-risking which seems appropriate given the rising risk of binary events and an inability to hedge those jumps.

San Fran Fed Asks If "People Understand Monetary Policy"; Finds Those With "No High School Diploma" Don't

For their sake, we hope at least the answer from the Fed is "yes." Yet it is quite ironic that the subtext of this paper is that Monetary Policy can actually fail, when, get this, people don't grasp all the nuances of monetary policy. In other words, it is not the Fed's fault when it fails - it is the people's fault: "we fi?nd evidence that the relationship between unemployment and interest rates is not properly understood by households in the lowest income quartile, and by those with no high school diploma." Cue Kartik Athreya to explain to us all why only Ph.D.s understand the complexities of monetary policy when it works, and why it is those without a highscool diploma that are at fault, when it doesn't.

Soon To Be Former Treasury Secretary Geithner Subpoenaed Over Lehman Fail

In a late, and somewhat underplayed, story from the WSJ, it appears that we may finally get some answers on exactly what former-Treasury-Secretary-to-be Geithner knew and sanctioned in the lead up to the Lehman fail. More specifically how JPMorgan illegally siphoned billions of dollars from Lehman in the final days, potentially via Geithner's FRBNY-overseen tri-party repo market. We discussed this at length almost two years ago as the FRBNY was concerned at the ongoing risk of the market being structurally vulnerable to a repo run and furthermore why Lehman's suit against JPMorgan had grounds. Critically, with Geithner being the man at the helm of the entity that approved repo entry and exit and in the final stages clearly sided with JP Morgan as collateral calls rained down, it makes sense to at least find out what he knew and decided - under oath.

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