IIF Steering Committee Holds Only 20% Of Greek Bonds Subject To PSI

Earlier this morning, to much fanfare, the various member of the IIF steering committee announced that they would all gladly be part of the voluntary haircut that would chop off over 70% of their hair. The FT described this development as follows: "A large grouping of private creditors agreed on Monday to take part in the multibillion-euro Greek debt swap in a significant step forward for Athens as the country struggles to avert a sovereign default. Twelve banks, insurers, asset managers and hedge funds in the steering committee of bank lobby group the Institute of International Finance said in a statement that they would take part in the bond exchange. Members of the IIF steering committee include BNP Paribas, Deutsche Bank, National Bank of Greece, Allianz and Greylock Capital Management. A spokesman for the IIF said this represented a “substantial” amount of the €206bn in Greek bonds held by the private sector that banks managing the swap are trying to involve. Analysts estimate that institutions represented by the IIF make up about 50 per cent of the private sector bonds."Private Investors Holding About 20% of Greek Debt to Join Swap...The 12 members of the creditors’ steering committee that said today they would join in the exchange have debt with a face value of about 40b euros ($53b), compared with the 206b euros of Greek bonds in private hands, according to data compiled by Bloomberg from company reports." If so, this means that a whopping 80% of the bonds subject to exchange are unaccounted for, and more importantly, it means that the likelihood of a major blocking stake having organized is far greater than even we expected. Bzzz. Analysts, as so often happens, may have been wrong to quite wrong.  According to just released data from Bloomberg analysts analysts may have overestimated the substantial amount... by about 150%. From Bloomberg: "

 

 

Dallas Fed's Fisher "Perplexed" By Wall Street "Fetish" With QE3 And Disgusted With The Addiction To "Monetary Morphine...

And now for some pure irony, we have a member of the Fed, granted a gold bug, but a Fed member nonetheless, one of the same people who not only enacted ZIRP, but encourage easy money every time there is a downtick in the market, complaining about, get this, Wall Street's "continued preoccupation, bordering upon fetish" with QE3. The irony continues: "Trillions of dollars are lying fallow, not being employed in the real economy. Yet financial market operators keep looking and hoping for more. Why? I think it may be because they have become hooked on the monetary morphine we provided when we performed massive reconstructive surgery, rescuing the economy from the Financial Panic of 2008–09, and then kept the medication in the financial bloodstream to ensure recovery....I believe adding to the accommodative doses we have applied rather than beginning to wean the patient might be the equivalent of medical malpractice." So let's get this straight: these academic titans, who for one reason or another, are given free rein to determine the fate of the once free world with their secret decisions every two or three months, are completely unaware of classical conditioning, discovered by Pavlov nearly 90 years ago, also known as a salivation response. The same Fed is shocked, shocked, that every time the market dips, the red light goes off, and the "balls to the wall" crowd scream for more, more, more free money. Really Fisher? Really? Oh, and let us guess what happens the next time the S&P slides into the tripple digits: will the Fed a) do nothing, thereby letting the market slide to its fair value in the 400 point range, or b) print. Our money, in the form of hard yellow metal, is on the latter, just like we predicted, correctly, back in March 2009 in " Bailoutspotting (Or The Search For The Great Financial Methadone Clinic" that nothing will ever change vis-a-vis the great market junkie until it all comes crashing down.

Biggest 3-Day Slump in 3 Months for High-Yield Bond ETF

The ever-so-popular high-yield bond ETF, HYG, is suffering its biggest 3-day drop since Thanksgiving as higher beta assets are underperforming and the up-in-quality and up-in-capital-structure trade gathers pace post LTRO 2. Even with last week's ex-divi date, we note that this loss of the last 2-3 days wipes out the yield that was 'reached for' of the last 2-3 months. It seems all too easy to buy high-yield bonds when they are on the rise but underlying that ETF is a portfolio of 'junk' assets - some better and some worse obviously - that are increasingly being driven top-down by the fast-money action in this newfound ETF's liquidity (as dealer inventories dwindle). This leaves them prone to just-as-fast exits as the secondary high yield bond market remains 'illiquid' away from benchmark size and ETF-bound assets providing little underlying 'pricing' evidence of market value. This is the largest underperformance of the high-yield market relative to the equity market since the recent rally began.

3 Charts On The US Consumption Crash Dead-Ahead

Average US gas prices are over 13% higher since late December 2011, back at June 2011 levels, and do not look set to drop any time soon. The anecdotal impact of this rise in a significant segment of the real US consumer's spending habits is unmistakable, as we discussed earlier, but it is more important to note where we have come from when considering the macro impact. Q4 macro data was 'juiced' by the significant drop in the price of energy as the 4-5pt drop in Energy-and-Utilities spend enabled 'visible' consumption to rise during that time (obviously helped by government handouts also). Just as occurred in the latter part of 2008, as the consumer was forced to spend more on Energy, so the visible consumption dropped notably and given the significance of the current data 'drop' in energy spending, when the current gas prices filter into this data, we would expect, as Credit Suisse points out, consumption on more discretionary spending will drop significantly, especially with the gridlock in Washington. Perhaps this is just the 'crash' that Bernanke needs to run-the-presses again as conditionality will increasingly force investors to reject the buy-and-keep-buying trend as they recognize that QE3 can't start until things get worse, and buying in anticipation of QE3 means it will never happen?

McCain Calls For US To Lead Effort To Begin Syrian Air Strikes

Just a headline from AP for now:

• Sen. McCain calls for US to lead 'international effort' to begin air strikes on Syria.

Looks like operation "Enduring Brent Crude Freedom" is about to commence.

Net Asset Values of Certain Precious Metal Trusts and Funds

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Markets Are Overbought, A Correction Is Coming

Admin at Marc Faber Blog - 1 hour ago

Markets are overbought, technically they have deteriorated, and we have very heavy insider selling, so I think a correction is coming. - *in CNBC earlier today* Related, ProShares UltraShort S&P500 ETF (SDS), iShares MSCI Emerging Markets Index ETF (EEM) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

Impoverished US Consumers Drown Their Sorrows In Outdoor Dining

While phrases like 'eat the rich' or 'fatter-cats' might come to mind, the rise in discretionary spending on dining-out, that has surged post 2009 crisis lows, has now regained levels not seen since 2007. The percentage of discretionary income spent on dining-out may conjure images of filet mignon and Margaux, but it is critical to understand that the sub-index contains all restaurant-eating including Denny's, McDonalds, and the other QSRs; and in the current weakening income environment, it is a safe-bet that much of this spend is not headed to Delmonico's. With food stamps at record highs, real disposable personal income growth stagnant, and real consumer spending decelerating rapidly the difference between consumer sentiment and real consumer actions seems to highlight the hope-filled 'bubble' we find ourselves in as the first quarter is off to a very weak start for spending trends. As Bloomberg notes, a perfect example of weak concrete data, but optimistic sentiment.

Chris Martenson: Japan Is Now Another Spinning Plate In The Global Economy Circus

For those who are in a hurry today, the bottom line is that Japan is in serious trouble right now and is a top candidate to be the next black swan. Here are the elements of difficulty that concern me the most, each one serving to reduce Japan's economic and financial stability:

• The total shutdown of all 54 nuclear plants, leading to an energy insufficiency
• Japan's trade deficit in negative territory for the first time in decades, driven largely by energy imports
• A budget deficit that is now 56% larger than revenues (!!)
• Total debt standing at a whopping 235% of GDP
• A recession shrinking Japan's economy at an annual rate of 2.3%
• Renewed efforts underway to debase the yen

As I wrote a shortly after the earthquake in March 2011, Japan is facing an economic meltdown. If it is not careful, it may well face a currency meltdown, too. These things take time to play out, but now almost exactly a year after the devastating earthquake of 2011, the difficulties for Japan are mounting -- as expected.

De-Investifying China

The overnight news that China's economic growth forecast was cut is notable in that it brings to mind the complexities (and realities) of the shift from an investment-led economy to consumption-led sustainability. As Bloomberg BRIEF's Economics note pointed out this morning, China is ranked fourth highest out of 170 countries for its reliance on investment (investment-to-GDP of 49%). The fix requires increasing incomes, internationalization of the yuan, and liberalization of interest rates. The latter is perhaps most troublesome (though all are hard to centrally plan together) as the mis-allocation of capital to large cash-rich SOEs relative to the broader (and potentially more growth-tastic) individual borrower or SME leaves what George Magnus of UBS calls a 'sequencing' problem for the powers that be. His concern is that China gets the downside risks of an investment decline before the upside potential from restructuring the economy towards household spending occurs. Critically, the investment-centric economy is not one of industrial capex or export-oriented expansion but inward-facing construction and infrastructure meaning a slowing of investment-led strength is implicitly ending the property boom. In China it’s very simple: you want to keep both eyes on the state of property markets.

Guest Post: Enjoy The Central Bank Party While It Lasts

Central banks are printing money all over the world. New names have been given to what is really an age old phenomenon. Desperate governments have traditionally debased their currencies when they have no other way of financing their deficits. So far the world’s central banks have been “lucky”. Thanks to the prior global bubble ending in 2008 and the realization that the so-called advanced countries are reaching the end of their borrowing capacity, the world is in a massive deleveraging mode which tends to be deflationary. For the moment the central banks can get away with printing all the money they want without massive increases in consumer price indexes. The public doesn’t connect increases in prices of commodities like gold or oil with the current bout of money printing. But if history is any guide, this money printing will matter and the age of deflation and deleveraging will be followed by an age of inflation.The coming battles over solving the problems of the bankrupt American government will not be pretty. It will be a bit more difficult for an American president to preach patriotism to the affluent in these circumstances. Although, if there is a war with Iran, he might try.

How Long Until The Bank Of Israel Has To Be Bailed Out On Its Apple Investment?

In what was likely the most ominous news from last week (and a near certain top for the stock) we reported that now none other than the Israel Central Bank was going long shares of AAPL. While the implications for stocks in general are extensive and were previously discussed, it is worth noting that the Israel Monetary Authority now has a big MTM loss on its Apple investment (although as Greece and the ECB have taught us, a central bank can book a "profit" even when a given security is trading at an all time low, and completely irrelevant of what one's cost basis is). And where Israel is, it is quite certain that other central banks have boldly ventured as well. So how long until the Fed has to open an FX swap line with Tel Aviv to bailout Stanley Fischer in this latest of hare brained schemes to keep the Ponzi system going? And how long until it has to be extended to the nearly 250 hedge funds who are now also long the stock, with the universe of incremental buyers disappearing by the day? What is most stunning is that Apple dipped a modest 3% intraday... Which just happened to be the biggest decline since November 2010.

European Credit Signals LTRO Ineffectiveness

Blinded by the light of the European equity market, one could be forgiven for thinking that LTRO 2 has indeed had some stabilizing impact on the European (and even the world) economy market. However, just as we have been aggressively pointing out, this is not the case (or at least not a sustainable case) as we see the 'LTRO-stigma' rising - now 10-15bps wide of its post-LTRO best levels - as LTRO-behooven banks trade notably wider (worse) than non-LTRO-subservient banks. What is very clear is that European credit markets, which are now trading at their worst levels post LTRO are much more concerned at the unintended consequences of the massive subordination and dependency than the equity market appears to be. Senior financial credit spreads are underperforming as they re-price for the broad subordination that has occurred but investment grade and high-yield credit in Europe is dramatically wider today even as stocks levitate. With ECB deposits breaking records and bank funding costs rising (as opposed to the hoped for drop), it seems unlikely that all this freshly minted collateralized cash will find its way out to the real economy and do anything but further zombify European banks and implicitly drag economic growth down (as credit markets appear to be better at discounting once again). As Europe closes, credit is pushing even lower to its worst in over a week.

Lombard Street On Computer Models Versus Looking At The Facts

"Emotions exceeding known parameters cause extreme events, such as stock market booms and busts. They are self-reinforcing spirals upward and especially downward that, once established, keep diverging from equilibrium until the driving forces fade or stronger counter forces reverse them. Ever-increasing desires for accumulating ever greater wealth faster and faster ignited a credit bubble that spiralled upwards until it burst in 2007 from a lack of new borrowers. The multi decade credit bubble and its bursting were extreme events. No model recognized the credit bubble or its collapse and no model is giving any indication of the plethora of problems now brewing in Europe."

Couple Lives In $1.3 Million, 4,900 Square Foot Home For Five Years Without Making A Single Mortgage Payment

Wonder how Americans can afford to buy millions of iGadgets, a second LCD TV for the shoe closet, and eat at restaurants more than almost any time in the past despite plunging net income? Simple - increasingly fewer pay the biggest staple bill in a US household: their mortgage. The following story of Keith And Janet Ritter, who have lived in their Fort Washington, MD $1.29MM, 4,900 square foot McMansion for 5 years (which they purchase with no money down) without ever making a single mortgage payment, and who are not even close to being evicted, may explain much about the way US society currently operates, and why other perfectly responsible and hard-working taxpayers (who do have to pay for their mortgage) continue to fund tens of billions in Fannie and Freddie losses who are first on the hook to absorb the implicit losses by allowing families such as the Ritters to live in perpetuity without paying, and the banks to keep said mortgage on the books at par without any impairments.

 

European Commission Warns Spain Deficit Slippage Is ‘Serious’ and ‘Grave’

Spain risks being fined under new EU rules for a “grave” breach of budget limits, the European Commission warned on Monday, despite Jose Manuel Barroso stating that he was confident the country would fulfil its commitments.
by Telegraph staff and agencies, Telegraph.co.uk:

Addressing reporters during a visit to Vienna, Mr Barroso said the Commission had not yet seen Spain’s 2012 budget and needed more information about the “slippage” Madrid had in 2011 so he could not comment in detail.
But he added: “I have no doubts that the government will honour its commitments with respect to the stability and growth pact.”
Spain’s new 2012 budget target is easier than originally agreed under the eurozone’s austerity drive, putting a question mark over the credibility of the European Union’s new fiscal pact.
Read More @ Telegraph.co.uk

6 Articles and Videos You Don’t Want to Miss

by David Schectman, MilesFranklin.com:
How many times have you heard “The Oracle”, Warren Buffett pontificate that gold is a bad investment because it doesn’t throw off dividends or pay any interest? I bet this is one chart he doesn’t want you to see!

Since Friday, I have come across six interesting and very informative articles and videos. If your time is limited, I would prefer that you view the following links first, and then consider reading the rest of the Daily. The information contained in this grouping falls under the “can’t miss” category.
Read More @ MilesFranklin.com

Racism, Ron Paul and the Battle over the Right to Bear Arms: An Interview with Adam Winkler

Bank of America In Trouble?

by Matt Taibbi, RollingStone.com:

It looks like Bank of America might have started circling the drain before the Occupy movement even had a chance to launch its campaign against the company. For weeks now there have been ominous signs of trouble at the bank, and yesterday we heard yet another dark piece of news.
Last year, there was an uproar when Bank of America announced a plan to slap customers with a monthly $5 fee for debit card usage. The bank eventually backed off that plan when the public and some politicians cried foul.
Now it seems the company is going to try to put a new package on the same crappy idea and sell it again. This time, the plan is to add charges that range from $6 to $25 a month. From an MSNBC report:
Read More @ RollingStone.com

Sentiment Hit Hard By Big Gold Sell-off – Could Be More Falls to Come

Gold has been drifting downwards again as investor sentiment has been hit hard by the big, apparently paper, gold sale which caused the price dive last week – the intention of those who initiated it.
by Lawrence Williams, MineWeb.com:
That the gold market can be manipulated on COMEX by big forward paper sales now seems to be obvious from the major dive suffered by gold last week when the yellow metal initially fell over $60 in a matter of minutes – and then got pushed down further before making a relatively minor recovery. Talk about shades of the big end-April-early May silver sell-offs last year when silver was knocked even further in percentage terms, initially by a huge out-of market hours sale, widely believed to be a concerted move by big short sellers seeing the need to drive prices down to cover huge potential losses.
What is particularly worrying for the markets though is the massive effect this has had on sentiment for gold investors. Some comments see the big gold sale as a move to drive weak holders out of the market so the big boys can maintain control. A cynic would see this as yet another way big money tries to manipulate markets to make huge returns at the expense of the small investor as money is just used with little more purpose than just to make more money – no real productive use of it here.
Read More @ MineWeb.com

You Cannot Build a Strong Economy or a Bull Market on Fudged Numbers and Lipstick

by Graham Summers, GainsPainsCapital.com:
Let’s say that you just spent a large sum, to the tune of several trillion Dollars, bailing out various businesses that were literally run into insolvency by shortsighted and greedy business practices.
Having spent this money, your next concern becomes avoiding popular outrage as sooner or later folks will find out that this money was practically given away and that everyone else got a raw deal.
So, at that point your primary focus must become convincing the world that your policies worked and that you did in fact save the world.
How do you do this?
Read More @ GainsPainsCapital.com

Australian Gold Production Drops in 2011

by Roman Baudzus, GoldMoney.com:
Recent data from the consulting firm Surbiton Associates in regard to Australian gold production for the year 2011 have failed to meet market expectations for average production. Last year Australia defended its position as second largest gold producing country after China, but in comparison with 2010 Australian gold production dropped by two tonnes. In 2011 Australian mining companies produced a total of 264 tonnes (8.5 million troy ounces) of gold. But commodity markets were expecting data to show an increase in gold production. Nevertheless, with rising gold prices at the global markets, despite this production decline most Australian mining companies have increased their profits.
Read More @ GoldMoney.com

If You Had To Disappear, Where Would You Go?

by Simon Black, Sovereign Man:
Here’s a fun question to ask yourself: if you had to disappear and live out the rest of your days below the radar, where would you go?
Think about it seriously for a moment… it’s an interesting thought experiment. Assuming you had a dream team of angry creditors, bounty hunters, private investigators, and/or government agents chasing after you, where would you go?
There are several countries where disappearing is a relatively easy thing to do. We’ve talked about a few of them in the past– places like Morocco, Brazil, Lebanon, and the Philippines.
Venezuela is also one to consider.
Read More @ SovereignMan.com

Silver and Gold to EXPLODE Higher, and Why the Monetary Base Will Never Shrink

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