Marc Faber Sees 100% Probability Of Global Recession In 2013
From around two minutes into this CNBC clip, Marc Faber brings the conversation back into sharp focus. Noting that "whenever
everybody focuses on just one thing - Greece and Europe in this case -
there are other things that are far more important - such as a
meaningful slowdown in India and China - going on that are being
ignored". But remaining on the topic of Europe, Faber
consistently opines that the next event risk will be the Greek exit -
even though Faber suspects strongly that Germany will cave to Eurobonds
eventually - as he comments that the longer the delay of a
restructuring/default/exit/euro-bonds takes the higher the probability
of a gigantic systemic failure. This subject brings up
(at around 3:30) an interesting perspective that the European market
would be oddly relieved (not plunging 50%) if Greek exited the Euro as
there would be some clarity (though Faber adds that bank and insurance
stocks would likely be crushed). At five minutes in though, Faber ramps up the rhetoric noting that while stock indices are not performing terribly, there are many economically sensitive (and luxury) stocks that are down very significantly
- which suggests to him that the huge asset price run of the last
decades in come to an end prompting the question of the day from CNBC's
Cramer-stand-in "You're not looking for a recession in the US are you?"
Faber, in his calm, thoughtful way responds, "I think we will
have a global recession late this year, early next year", to which a
stunned Wapner asks for odds (surely 30%, 50%?) of this recession -
"100% certainty" comes the reply to leave Wapner throwing in the towel on any positive spin as Faber suggests the only 'investment' in this case is 'Cash USD' and investors must own some gold.S&P Junks Nationalized Bankia, Downgrades Various Other Banks
If according to S&P recently nationalized Bankia is junk, what does that imply about Spain?Bankia Bailout Costs Rise Again, Now At €19 Billion, €4 Billion Increase Overnight
Spanish Bonds Slump To 17 Year Lows Amid Choppy Week
Aside from Spain (-0.3%) and Greece (-11.8%),
European equity markets are ending the week green - albeit marginally -
as we can only assume the hopes and prayers of every banker are being
discounted into the price of corporate liabilities (an 'event' will
happen but don't worry as the ECB/Germany will cave). Corporate and
financial credit markets also ended the week tighter - with financials
the high beta players on the week, hugely outperforming on Tuesday but
fading into today's close. Today was not a pretty end to the week in credit
though as both sovereigns, corporates, financials, all peaked early in
the day and pushed to near their lows by the close. Senior financial
bond spreads actually closed wider on the day - at their wides - and Spanish sovereign bond spreads exploded over 35bps wider from earlier tights to end at theu widest since April 1995.
Italian bond spreads also jumped 32bps wider from their morning tights
but end the week -9bps and France gave back almost half its sovereign
bond gains of the week today. EURUSD remains the story, breaking below 1.2500 for the first time since early July 2010
as it seems the FX markets remain much less sanguine of the endgame
here than do equity markets (with sovereign credit getting closer to
FX's world view and corporate credit closer to equities but fading
today). Europe's VIX remains above 30% (though our VIX-V2X compression trade is performing well as US VIX elevates).IAEA Says Has Found Highly Enriched Uranium In Iran
Yesterday, when looking at recent naval developments in the Arabian Sea, we suggested that things involving Iran had gotten quiet. Too quiet. It appears that it may indeed have been the lull before the storm. Just out from Bloomberg and Reuters:- IAEA SAYS URANIUM PARTICLES ENRICHED UP TO 27% AT FORDOW SITE, HIGHER THAN REPORTED LEVEL
- IRAN DOUBLED 20% URANIUM OUTPUT IN QUARTER, IAEA SAYS
- IAEA INSPECTORS SAY NO GUARANTEE ALL NUCLEAR MATERIAL PEACEFUL
- IRAN TELLS INSPECTORS THAT 27% URANIUM A TECHNICAL GLITCH
Real federal deficit dwarfs official tally
Eric De Groot at Eric De Groot - 5 hours ago
If household income was taxed at 100%, interest payments on existing debt
would be addressed. Debt monetization or QE to infinity is no longer a
policy choice. It's a necessity unless a self-sustaining economic recovery
materializes from the sea of centralized liquidity. Headline: Real federal
deficit dwarfs official tally The typical American household would have
paid nearly all of its...
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US to Backstop the Anglo-American Derivatives Exchanges with Fed Dollars - 'Too Big To Fail'
Today’s Items:
This is perhaps the best description of
euro-bonds that I have seen so far. It is the fiscal version of
co-signing a loan for your unemployed alcoholic cousin who has a
gambling problem. Anyone paying attention can see that bailouts tend to
only reward bad past behavior, encourage bad future behavior, and make
the debt bubble larger.
Can the euro survive a Greek exit? Not
likely. Some members of the financial elite have already given up on
the entire euro-zone altogether. So, when the euro collapses, plans need
to be made; so that, people will not be awakened too quickly; thus,
bank holidays. When completed, perhaps a new currency backed by gold –
even partially, with a common central political authority, will come
into being. The results, of course, will be bad for everyone, not
prepared, on both sides of the pond.
Because of the excess of digital dollars,
as compared to physical dollars, there may be backwardation of physical
dollar bills. This would be especially true during a bank holiday
where there would be glut of unusable electronic deposits, but a
shortage of dollar bills. In addition, in a crisis, people want to move
from top to bottom of the pyramid of liquidity where physical gold and
silver are; however, there isn’t enough of the stuff at the bottom;
therefore, keep stacking.
Next…
Media Blackout As Obama Appoints First Ever Assassination Czar
http://blog.alexanderhiggins.com
Media Blackout As Obama Appoints First Ever Assassination Czar
http://blog.alexanderhiggins.com
Obama has designated John Brennan as the sole person in charge of designating people to be assassinated.
In addition, to the media blackout, the ACLU lawsuits and requests get denied because the government can neither confirm nor deny the programs exist. Don’t you just love the most transparent government in American history?
In addition, to the media blackout, the ACLU lawsuits and requests get denied because the government can neither confirm nor deny the programs exist. Don’t you just love the most transparent government in American history?
Recipients of government cheese err… food
stamps err… food benefit cards are selling them on eBay or Craigslist.
This fraud is costing $750 million a year and government officials want
it stopped. After all, only big-to-fail banks are allowed to screw the
government and get away with it. More than 46 million people receive
food stamps with an average monthly benefit is $132 per person. With
that in mind, the government want states to step up and help stop the
abuse.
Leading academic and industry experts
have validated a new process that directly produces electric energy from
the conversion of water vapor to a new, more stable form of Hydrogen.
The capital costs are estimated to be about $100 per kilowatt which is
ten times less than of fuel cells. If put into production, water could
be the commodity to own.
Japanese Girl-Band Wants You (To Buy Japanese Government Bonds)
Whether it was Captain America's roadshow or Uncle-Sam 'wanting' your help, the US always seemed to maintain some semblance of class when propagandizing its citizens into buying its government bonds. Whether for patriotic or xenophobic reasons, it appeared to work. Japan, though, with its increasingly desperate demographic situation, deficits, downgrades, and well, general malaise of Koo/Keynesian-stuffed economic stagnation has turned to the next best thing - the all-girl band AKB48. As The Telegraph notes today, the all-female pop group will headline a summer campaign for "reconstruction bonds" aimed at financing projects in regions hammered by last year's quake-tsunami disaster. The debt campaign will see AKB48 - comprising about 90 performers, ranging in age from early teens to mid-20s - joined by sumo wrestling's champion Hakuho and female football star Homare Sawa, Japan's Jiji press agency reported. The group's bubblegum pop and synchronized dancing has proved a huge hit with young girls. Perhaps more disturbingly (and why Japan chose them maybe?) - running the gamut from girl-next-door to sultry temptress, the band also has a substantial male following - many of whom are older - who support a vast merchandising industry. Japan has the industrialized world's worst public debt, amounting to more than twice its gross domestic product - topping hard-hit eurozone countries including Greece, which have drawn fire from foreign investors over their fiscal management. All of this makes us wonder - Forget AKB48, how long until AK47 in musical, or primarily otherwise, format is used to encourage lending to sovereigns all around the "developed" world?
The Argument Industry - Hyping Controversy And Avoiding Solutions
That much of the "news" is artifice and propaganda is a given. How can a society make good decisions about its future when the "facts" such as the unemployment rate are massaged and manipulated, and so many of the "reforms" are simulacra designed by the very wolves supposedly being tamed? Answer: it can't. The same question can be asked of a society in which the "editorial" side of the mainstream media is dominated by an "Argument Industry" that pours gasoline on every conflict and avoids solutions like a vampire avoids the Cross and garlic. Finding solutions would decimate the "Argument Industry" and slash profits. That leaves us with the same question: How can a society make good decisions about its future when every challenge is conflated into extremes that cannot abide compromise or even recognize "outside the box" solutions? Answer: it can't.European Stocks On Verge Of 50%-Off Greek Light Special
It seems the clarion call for central bank intervention to save us all is growing louder as following Citigroup's imploring letter earlier in the week, SocGen has done its homework on the impact of a Greek exit from the Euro and finds Euro Stoxx could drop by 50% under a contagion scenario.
They believe the reason why the eurozone market is holding up
relatively well - despite the rising risk of a Greek exit - is that
contagion has not really spread yet, which is then 'discounted' away
based on expectations of a central bank put to save the world. In the
case of a disorderly break-up (the only kind there can be realistically
in our view), they expect eurozone profits to decline for two years, a
rise in bond yields (raising cost of funds), a rising equity risk
premium, and the implicit drop in P/E multiples. A Greek exit
alone (with no contagion) would likely knock 10% off Euro Stoxx but the
significant rise in correlations across the euro-zone suggests the
idiosyncratic becomes systemic very rapidly.And Scene: Nigeria Cutting European Exposure
When Nigeria, yes "spam email Nigeria", is getting out of Dodge, it's game over. From Bloomberg: Nigeria May Reduce Euro Holding to Minimize European Risk.
We have nothing to add.
Friday Humor Part 1 - The Reverse Nigerian Scam Email
Best if read in the context of the "Nigeria gets out of Dodge" post from earlier.Presenting JPM's Uber-Prop Trading Desk: Meet The SIO Inside The CIO
Remember when Jamie Dimon told the world the CIO stories were a "tempest in a teapot" during the firm's Q1 conference call the very same day we accused the CIO of being the world's biggest prop desk (aside from the Fed of course) and that the JP Morgan was merely "hedging" its positions? It appears that just like Vegas, it's the lie that keeps on giving. Because as it turns out in addition to being a massive undisclosed loss leader courtesy of 'unlimited downside' CDS pair trades (anyone remember DB employee Boaz Weinstein?) which have yet to be unwound, and which may have a total book loss of up to or over $31.5 billion as explained before, that was merely the tip of the prop-trading iceberg. The WSJ reports: "The JPM unit whose wrong-way bets on corporate credit cost the bank more than $2 billion includes a group that has invested in financially challenged companies, including LightSquared Inc., the wireless broadband provider that this month filed for Chapter 11 bankruptcy protection. The group within the CIO doing the distressed equity investing is known as the Special Investments Group. Whether it should be part of the CIO in the future is something that Matt Zames, who was put in charge of the CIO this month after the losses were disclosed, is evaluating, according to a person familiar with the bank. He is also examining whether the bank should keep some of these investments, the person said... The Special Investments Group last year took a $150 million stake in closely held LightSquared, in a deal that J.P. Morgan lost money on, according to a person familiar with the bank." But, but, surely they were hedging their offsetting position in er, uhm, non-satellite, telegraph stocks? In yet other words, an SIO within the CIO... once again Wall Street's only value added shines through - baffle them with acronym-based bullshit. And of course, everyone is busy hedging, hedging, the firm's other positions... Or not: as these are pure play directional prop bets. And all are funded by, you guessed it, your deposit dollars. Which one day will go boom, when JPM suffers a loss so large that not even the Fed bails them out any more (Jon Corzine anyone?).Consumer Sentiment Highest Since October 2007 As Europe Implodes
No
comment necessary, but a reminder that for a market pricing in LTRO,
QE, China Easing (or Cheasing), good news is truly horrible news.The Ten IPO Commandments
There's
been a lot of hand-wringing about busted Initial Public Offerings of
late, but the process itself is hardly rocket science. Like Tolstoy's
comment about families, every "Happy" IPO is essentially the same,
while every miserable one is different in its own way. There
are rules to the successful IPO, and today we offer up ConvergEx's Nic
Colas' manual, a step-by-step checklist for investors to assess if an
offering is on track. From maintaining the illusion of
scarcity to managing company and investor expectations, the road from
salesforce "teach-in" to final pricing is narrow but well-marked.Bank Of Russia To Buy “Considerable Figure" Of Gold Tonnage In 2012
Today, the deputy chairman of Russia's central bank, Sergey Shvetsov,
said that the Bank of Russia plans to keep buying gold on the domestic
market in order to diversify their foreign exchange reserves. "Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov
told Reuters on the sidelines of a financial conference in Milan.
Russia's gold and foreign exchange reserves fell to $514.3 billion in
the week ending May 18, from $518.8 billion a week earlier. However,
they have risen from the $498.6 billion seen at the end of 2011. Yesterday,
Shvetsov said that Greece has plans for a parallel currency and that
it is a “necessity” for Greece to leave the euro.
Four Euro Divorces But No Funeral (Yet)
"We think the ramifications of a Greek exit are more serious than the market anticipates",
is how Morgan Stanley starts their European strategy report this week.
They have raised their probability of a Euro break-up to 35% but the
most likely outcome they foresee is a Euro divorce with Greece's exit
preceded by strong contagion via three main transmission channels: the
sovereign, the banking sector, and the political situation. Italy,
Spain, Ireland, and Portugal are unsurprisingly the most at risk of
material contagion and they recommend investors stay positioned defensively across risky assets as we remain in the 'Crisis' stage of the so-called C.R.I.C. cycle - and they note that unlike so many knife-catching US equity and Italian bond buyers, it is not sensible to try to pre-empt the Response phase of C.R.I.C. cycle. There appears to be four scenarios (and evolutions) for the future of Europe
(from Renaissance to Divorce with Staggering On and an awkward 'Italian
Marriage' in between) and we drill into the four additional
possibilities under the divorce scenario for insight into the effects various risky asset classes will feel in each case.It Begins: Spanish Region Of Catalonia Demands A Bailout
Yesterday we mocked the fact that the Bankia's bailout costs are doubling with each passing day. Today, things just got "Messi-er":
SPAIN'S CATALONIA REGION NEEDS GOVERNMENT HELP, RUNNING OUT OF DEBT FINANCING OPTIONS-CATALAN PRESIDENT - RTRS
So... if broke Bankia can rehypothecate Ronaldo, can Barcelona
demand delivery of Messi and pledge him as ECB collateral too? Or was
he nationalized by the government in retaliation for that whole
"Argentina" thing?A Tale Of Two Cities
Euro bonds “didn’t find much support” at the EU conference.
-Jean-Claude Juncker
Encapsulated in these two comments is the problem that Europe is now facing. Two views, two radically different positions and no agreement on a middle ground because there is not one. Of course the periphery countries, the weaker nations want Eurobonds because it would dramatically drop their cost of funding. Of course Germany and their stronger EU countries do not want it because it would dramatically raise their cost of funding. Nations, in the end, will act in their own self-interest, this has been proven more than enough times in history, which is why I stand by my conclusion that Eurobonds will not be forthcoming regardless of the polite rhetoric attached to them.“A majority of European Union leaders at a Brussels summit this week backed joint euro-area bonds.”
-Mario Monti
Europe: "It's Like Asking A Bicycle Repairman To Fix A Jet Engine"
Newedge: "Last thing I asked before I went traveling was "try not to break anything" while I’m away. I get back this morning and it looks like a bunch of teenagers have had a particularly messy drug-fuelled rave in the market’s front room. The day-on-day charts hide the roller-coaster ride we've seen on the back of the Euro. Bond markets are in lock-down awaiting what-ever-next “liquidity bomb” the authorities can find to drop. Aside from some minor bond crosses, there has been zip activity outside zero-coupon bunds, gilts and treasuries. There is more liquidity in the Atacama desert."Daily US Opening News And Market Re-Cap: May 25
European stock futures saw a jump higher at the cash equity open as the Eurostoxx broke through yesterday’s high of 2160. Comments from the Italian PM from late yesterday, who said that the majority of ministers are in favour of Euro bonds was noted but the move was largely technically driven with stops tripped on the ascent. In reaction to this the European bond yield spreads in the 10yr part of the curve tightened aggressively with OAT’s outperforming once again edging back toward the psychological 100bps level. Meanwhile in the FX market the USD weakened in early trade on the renewed risk appetite which bolstered the gains in EUR/USD alongside touted option defence by a Swiss name at the 1.2500 level. Commodity linked currencies such as the AUD was the main benefactor of a moderate move higher in crude futures and precious metals but has been capped so far by offers at 0.9800. Into the North American open prices have pared, with European equities in the cash and futures both slipping into the red, excepting the DAX. A distinctly light calendar from the US with only the May final Michigan report due, coupled with an early closure in the Treasury pit today, ahead of the Memorial day holiday, means that volumes will likely decline into the latter stages of the US session today.Overnight Sentiment: Off The Lows
With US markets already checked out ahead of the holiday day weekend, and Europe acting abnormally stupid (PIIGS bond spreads plunging, then soaring right back), there is little newsflow to report overnight, except for a key report that China loan growth is plunging in what is a major risk flag proudly ignored by all algos (but not the SHCOMP which dropped 0.7%). Futures have followed the now traditional inverse pattern of selling off early in the Asian session, then ramping following the European opening on nothing but vapors of hope. All that needs to happen today is a drop early in regular trading, following by a major squeeze on the third consecutive baseless rumor for the week to be complete, and for stocks to actually post an increase even as the EUR crashes and burns. Unless of course we get a rumor that Europe will be open on Monday even as the US is not there to bail out risk assets.I'm PayPal Verified
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