ECB Calls Spain's Bluff... Or Does It? And Did Europe Just Check To The Fed?
While most of the early action today was driven by a baseless rumor
that the ECB would announce some magical recapitalization plan that
would put everything back into its normal (by this we mean somehow
sustainable) place, the alleged time when Draghi would make such an
announcement came and went... and nothing. Instead, the ECB, using the FT as its mouthpiece,
came out late in the day, however not with news that Europhiles wanted
to hear. As a reminder, as part of the proposed Bankia nationalization
scheme, Spain would inject Spanish debt into the insolvent entity,
thereby allowing it to pledge the debt for ECB repo cash. Or so the
thinking went. This was, in effect, Spain's bluff. The ECB has just
called it.
Japanese Bond Curve Inverts For First Time Ever As 3Y Cash Is Now King
For the first time ever, 3 year Japanese government bond (JGB) yields are trading below 1 year JGB yields
as the world's inexorable desire to repatriate, delever, and seek
safety while reaching for as much term yield as is still 'safe' come
home to roost. With Swiss rates already grossly negative and German
rates rapidly converging, the world's (d)evolution (since evolution
conjures a rebirth into something better) is shifting investors out the yield curve as ZIRP is here to stay forever,
wherever you look in so-called developed economies (who can print
their own money). In the last 4-5 weeks, 3Y Japanese bond yields have
dropped 6bps to around 10bps (pretty much the same as every other
maturity inside of 3Y) as the entire yield curve gradually flattens pushing out investor's perception of 'cash' to longer- and longer-maturities. Be careful what you wish for US equity investors, as the Keynesian Endpoint
is upon us (and perhaps, just perhaps that is why Central Banks of the
world are checking to the Fed, the ECB is playing hardball, and the Fed
remains on hold unless apocalypse occurs - which, by the way, is not
an 8% retracement of a 30% straight line rally).Biderman On Europe's Unquantified 'Delay-And-Pray' And US Government Criminal Fraud
Repress
extend-and-pretend; dismiss the can-kicking; and forget
fake-it-til-you-make-it; Charles Biderman of TrimTabs recalls Jim
Bianco's quote of the day on Spain's 'Delay-and-Pray' as the new normal for what is rapidly moving beyond farce in Europe. Beginning with the nations' own 'silly' perspective that the problem is 'unquantified' at the moment - implying it is in the trillions (which we already knew, but as long as they don't actually quantify it, it's not real
- like the tooth fairy) - Charles goes on to destroy the hope that
Germany can save them all (too big a problem now) and with state and
local debt mounting trouble upon trouble the only outcome is a failure
of the Euro. But it's not just Europe, between benefit payments and
deficits, unexpectedly low returns for pension funds (thank you Ben),
and union ignorance, the US is set for just as big a problem
(though given the printing press we may just last a little longer).
This leaves our union pension and government offocials with the same
solution of 'delay-and-pray' as they hide in ever more intricate ways
how much they are stealing from the future to cover the here-and-now. Biderman's back and this time he's really 'ranty' right to the end as he calls them out for criminal fraud.Spanish Bank Bankia restates "profits" to 3.3 billion euro loss/Spanish credit default swaps rise/ECB rejects Bank of Spain's plan on Bankia rescue/
Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 7 hours ago
Good
evening Ladies and Gentlemen:
Gold closed down today to the tune of $28.70 to $1548.60 with silver
also faltering by 62 cents to $27.77. They attribute the fall in all
commodities to the downgrade of Spain by Egan Jones. Gold and silver
fell at exactly 11:30 exactly the time of the Egan Jones announcement.
My bet is that the banking cartel are also playing their same usual
tricks as
Is The Bell Tolling For The U.S. Dollar?
Dave in Denver at The Golden Truth - 11 hours ago
*How did the dollar die? First it died slowly — then all at once...No
asset
is safe now. The only choice to hedge risks is to hold hard currency —
gold*(Zhang Jianhua from China's Central Bank) - source of quotes
LINK
The economic numbers reported this morning showed continued
deterioration
in housing and the overall economy. In addition, consumer and investor
confidence is starting to plunge again.
The Case-Shiller 20 city index of housing showed that the small bounce
in
housing prices that was expected in March from February was actually a
lot
smaller than expected. Year ove... more »
With
so many countries vying for the dubious honor of “Sick man of Europe,”
ConvergEx's Nic Colas looks at some of the academic literature related
to how doctors make sound diagnostic decisions. The medical
profession suffers from many of the challenges we all face in
making sound judgments, fighting off inherent biases and shortcuts to
make consistent decisions based on the facts. The one
difference is that medical professionals must often make their
decisions “On the fly,” with life or death often in the balance. In
contrast, European policymakers have, thus far, had the luxury of time
in addressing the region’s challenges. But if the pace of crisis picks
up in the coming months, the ECB/IMF as well as other monetary and
fiscal policy bodies will have to move more like an army field surgeon
than careful diagnostician. The ongoing challenges in Greece,
Spain, Italy and other European countries could be considered either
economic malpractice or misdiagnosis. Will they see
“Austerity” as the cure for every ailment, or will they remain
flexible? Will they remain overconfident and (potentially) overplay
their hand? It is tempting to say that policymakers should
follow the Hippocratic Oath and “First, do no harm.” Sadly, the
situation in Europe is beyond that simple recommendation.
Is there a bottom in housing? It is entirely possible. However, for all the reasons stated herein, both financial, economic and psycholgoical, the "calls" for a housing recovery may be a bit premature. This is particularly true if our estimation of an economic recession in the next 18 months comes to fruition. The strains on the housing market caused by a recession will cause a secondary decline in housing. The reality of a recession is not a question of "if" — it is only a question of "when" and how bad will it be?
Update: It appears that when a company calls the market's bluff with a forced strategic alternatives announcement
coupled with the phrase "challenging financial performance", the
market does not like it very much. Stock now down 13% and sliding.
RIMM stock was just halted, preceding an announcement that JPM and RBC have been retained for "strategic purposes", as well as an operating loss warning for Q1 and notification of major headcuts. In other words, the endgame for RIMM is here: either the company finds a suitor or it may well be game over. For the benefit of RIMM longs we sure hope FB is eager to spend some of its cash soon if not quite soon.
The 4th day in a row when US equities disconnected (rallied) from credit markets - will this reversion be different.
NYSE volumes were dismal (near the year's lowest) which seemed the
perfect recipe for some stock-ramping tom-foolery - apart, that is, for
FaceBerg of course. Yesterday's futures action in sync with global
risk-assets continued into the morning with Europe open but TSYs led
markets lower in the US pre-open until the plethora of miserable macro
data was enough to spur the bad-is-better brigade who bid stocks up into
the US open and just beyond only to see Spain's downgrade drag the
spirits of every Treasury, FX, credit, and commodity trader down. The
flush into the European close was the lows of the day for stocks (and
TSY yields) with the former accelerating back up to its highs of the
day by the close and the latter leaking higher in yields and filling the divergence gap. However, IG and HY credit spreads were far less sanguine than US equities in the afternoon even though HYG swung from significantly cheap to its fair-value (and stocks) to considerably rich by the close. EURUSD managed to get back over 1.25
at the close which seemed to provide some comfort that everything
wasn't crash landing and while the USD implicitly weakened into the
close (to end unch from Friday), it did little to redeem commodities
back from their European-close plungefest. Treasuries ended higher in
yield marginally from Friday's close while ES managed +1.4% potentially
on the back of window-dressing - even though heavy volume came as
equities crossed the trendline support. VIX fell less than 1 vol and held above 21% while Facebook vols were skewed 65%/55% (Put/Call) and volumes 5 to 4 in favor of Puts as it closed -10% at its lows.
The
Swiss National Bank may have pegged the EURCHF (and as noted earlier,
is progressively accumulating losses defending the barrier - even as
EURCHF options are leaning further and further towards the peg
breaking), but what about its bonds? At the current rate, Swiss
debt, which is quite negative, with 2 year bonds now trading at record
NEGATIVE rates, will repay itself quietly in a few short decades:
ahhh the benefits of compounding. And for an example of how this is
done, hours ago, the government issued debt at a rate of 0.62%. Oh sorry, we forgot the negative sign.
It is becoming clearer and clearer that some new policy option is required in Europe
- but as JPMorgan's Michael Cembalest excellent cartoon description of
the never-ending circular arguments among European leaders would put it
- you would have to be a wide-eyed optimist to believe it will be a decisive one.
Comparing the progress of the European Monetary Union with structural
changes in the US around the end of the 19th century, it is arguable
that more time is needed before judgment is passed but they may not get
the chance. The resolution of a staggering EUR10 trillion in peripheral sovereign, household, and corporate debt may not wait.
Durable unions are signaled by signs of wage convergence and
unilateral transfers of wealth to smooth regional income difference - while
a lender of last resort appears to be most people's solution, it
likely will not be enough given the competitive divergences.
3 Years...2,282 posts... to help keep YOU informed...and only 7 Donations (Thank You Donors) Total raised $165.00...
Please Donate...
Thank You
On Europe's Economic Malpractice, Misdiagnosis, And Biased Maltreatment
With
so many countries vying for the dubious honor of “Sick man of Europe,”
ConvergEx's Nic Colas looks at some of the academic literature related
to how doctors make sound diagnostic decisions. The medical
profession suffers from many of the challenges we all face in
making sound judgments, fighting off inherent biases and shortcuts to
make consistent decisions based on the facts. The one
difference is that medical professionals must often make their
decisions “On the fly,” with life or death often in the balance. In
contrast, European policymakers have, thus far, had the luxury of time
in addressing the region’s challenges. But if the pace of crisis picks
up in the coming months, the ECB/IMF as well as other monetary and
fiscal policy bodies will have to move more like an army field surgeon
than careful diagnostician. The ongoing challenges in Greece,
Spain, Italy and other European countries could be considered either
economic malpractice or misdiagnosis. Will they see
“Austerity” as the cure for every ailment, or will they remain
flexible? Will they remain overconfident and (potentially) overplay
their hand? It is tempting to say that policymakers should
follow the Hippocratic Oath and “First, do no harm.” Sadly, the
situation in Europe is beyond that simple recommendation. Nationalized Bankia Director Will Not Receive Millions In Severance
Earlier today we reported of an instance of fiduciary impropriety so gross and abhorrent - namely the director of insolvent and nationalized Bankia preparing to receive €14 million in severance - that the public outcry was furious and instantaneous. The result: less than 12 hours later Expansion reports that according to Bankia president Jose Ignacio Goirigolzarri, the management of the the firm will waive their pension rights, and the infamous Aurelio Izaquierdo will not get his accrued pension when leaving the firm. Now, if only anyone in America had half the guts to do what it took Spain less than a day to turn around...First ECB, Now China Says Has "No Plans For Massive Stimulus"
First the ECB kicked the stimulus junkies in the crotch in the after hours session, now the PBOC is about to eat their faces for breakfast as both rumors causing overnight and intraday stock ramps are systematically denied. From Bloomberg: "China has no plan to introduce stimulus measures to support growth on the scale unleashed during the depths of the global credit crisis in 2008 according to the nation’s state-run Xinhua News Agency. “The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said yesterday in the seventh paragraph of a Chinese-language article on economic policy, without attributing the information. “The current efforts for stabilizing growth will not repeat the old way of three years ago." And with that the rug is pulled out from below anyone praying for non-Fed stimulus.Housing Recovery - Hope And Reality
Is there a bottom in housing? It is entirely possible. However, for all the reasons stated herein, both financial, economic and psycholgoical, the "calls" for a housing recovery may be a bit premature. This is particularly true if our estimation of an economic recession in the next 18 months comes to fruition. The strains on the housing market caused by a recession will cause a secondary decline in housing. The reality of a recession is not a question of "if" — it is only a question of "when" and how bad will it be?
Waiting For Godot: Existential Eurocrisis Edition
RIMM Announces Pursuit Of Strategic Options, Retention Of JPM And RBC, Operating Loss For Q1
Update: It appears that when a company calls the market's bluff with a forced strategic alternatives announcement
coupled with the phrase "challenging financial performance", the
market does not like it very much. Stock now down 13% and sliding.RIMM stock was just halted, preceding an announcement that JPM and RBC have been retained for "strategic purposes", as well as an operating loss warning for Q1 and notification of major headcuts. In other words, the endgame for RIMM is here: either the company finds a suitor or it may well be game over. For the benefit of RIMM longs we sure hope FB is eager to spend some of its cash soon if not quite soon.
Debt Divergence Dominates Dull Day Even As FaceBerg Sinks Deeper
The 4th day in a row when US equities disconnected (rallied) from credit markets - will this reversion be different.
NYSE volumes were dismal (near the year's lowest) which seemed the
perfect recipe for some stock-ramping tom-foolery - apart, that is, for
FaceBerg of course. Yesterday's futures action in sync with global
risk-assets continued into the morning with Europe open but TSYs led
markets lower in the US pre-open until the plethora of miserable macro
data was enough to spur the bad-is-better brigade who bid stocks up into
the US open and just beyond only to see Spain's downgrade drag the
spirits of every Treasury, FX, credit, and commodity trader down. The
flush into the European close was the lows of the day for stocks (and
TSY yields) with the former accelerating back up to its highs of the
day by the close and the latter leaking higher in yields and filling the divergence gap. However, IG and HY credit spreads were far less sanguine than US equities in the afternoon even though HYG swung from significantly cheap to its fair-value (and stocks) to considerably rich by the close. EURUSD managed to get back over 1.25
at the close which seemed to provide some comfort that everything
wasn't crash landing and while the USD implicitly weakened into the
close (to end unch from Friday), it did little to redeem commodities
back from their European-close plungefest. Treasuries ended higher in
yield marginally from Friday's close while ES managed +1.4% potentially
on the back of window-dressing - even though heavy volume came as
equities crossed the trendline support. VIX fell less than 1 vol and held above 21% while Facebook vols were skewed 65%/55% (Put/Call) and volumes 5 to 4 in favor of Puts as it closed -10% at its lows.Swiss Debt Is Now Repaying Itself
The
Swiss National Bank may have pegged the EURCHF (and as noted earlier,
is progressively accumulating losses defending the barrier - even as
EURCHF options are leaning further and further towards the peg
breaking), but what about its bonds? At the current rate, Swiss
debt, which is quite negative, with 2 year bonds now trading at record
NEGATIVE rates, will repay itself quietly in a few short decades:
ahhh the benefits of compounding. And for an example of how this is
done, hours ago, the government issued debt at a rate of 0.62%. Oh sorry, we forgot the negative sign.Guest Post: It’s Not Like I Can Talk To My Neighbor About This Stuff…
There’s a rather peculiar tribe of people in northern Uganda known as the Ik that has completely mystified anthropologists for decades. You see, the Ik are unlike just about any other people on the planet in that they shun cooperation, community, and even family. Due to the constant disruption of national boundaries in Africa coupled with terminal drought and famine conditions, the Ik have a very limited means of survival. As such, their culture epitomizes the ‘every man for himself’ mentality. Family means nothing. One brother could be starving to death, and the other brother with a belly full of food, and neither would have the slightest thought of sharing. It simply does not register with them. Each member of the tribe typically spends long periods in isolation searching for food and water. Their only reason for marriage is simply that it’s more convenient to build homes in pairs. Nothing else is shared… and most of the time, an Ik husband and wife will seldom be home at the same time. Children are occasionally produced from conjugal relationships, generally because they scare off birds and pests from the agricultural fields. By the age of 3, Ik children are kicked out of the home and left to fend for themselves. And they’re not weaned off, either, it’s sink or swim. All of this sounds shocking to westerners.On Europe: "A Willing Lender Of Last Resort May Not Be Enough"
It is becoming clearer and clearer that some new policy option is required in Europe
- but as JPMorgan's Michael Cembalest excellent cartoon description of
the never-ending circular arguments among European leaders would put it
- you would have to be a wide-eyed optimist to believe it will be a decisive one.
Comparing the progress of the European Monetary Union with structural
changes in the US around the end of the 19th century, it is arguable
that more time is needed before judgment is passed but they may not get
the chance. The resolution of a staggering EUR10 trillion in peripheral sovereign, household, and corporate debt may not wait.
Durable unions are signaled by signs of wage convergence and
unilateral transfers of wealth to smooth regional income difference - while
a lender of last resort appears to be most people's solution, it
likely will not be enough given the competitive divergences.3 Years...2,282 posts... to help keep YOU informed...and only 7 Donations (Thank You Donors) Total raised $165.00...
Please Donate...
Thank You
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