Europe Launches Ban On All Policy Criticism By Scrapping Use Of Rating Agencies

Why are we not surprised? The EU has just voted to scrap the use of ratings agencies in the next step on the road to a ban of all policy criticism. Via Bloomberg,

• *EU LAWMAKERS APPROVE AMENDMENT TO END USE OF CREDIT RATINGS

It seems just a few years ago, when these very same ratings agencies were raising ratings and supporting banking systems, mortgage provision, and sovereign-inclusions-into-monetary-unions, that the political elite could not showing off their bronzed statues of AAA/AA-ness.
And in the most bizarre of twists, they would prefer if they were allowed to rate themselves:

• *LAWMAKERS CALL FOR EU TO ISSUE SOVEREIGN CREDIT RATINGS :MCO US

What Happened Into The Last FOMC Meeting?

The hopes and prayers of a legion of long-only managers, stock-brokers, retiring boomers, and TV personalities rest heavily on the shoulders of one Ben Bernanke and just as into the last FOMC meeting in April, equity markets are surging on self-delusion (amid fading volumes and plunging average trade size) - while Treasury markets remain far less sanguine. Will it be different this time?

 



Spain is Now Facing a Banking Crisis and a Sovereign Crisis At the Same Time

Posted by : Phoenix Capital...

Post date: 06/19/2012 - 08:48

   Spain is toast. I’ve already assessed that none of the key players (the IMF, the ECB, the EFSF, or the ESM) has the firepower to prop up Spain whose real capital needs...

The G-20 Farce: Saving The Eurozone From Collapse

Posted by: testosteronepit

Post date: 06/18/2012 - 19:22

Leading all others “by the nose through the ring.”

Net worth implosion: It's not just housing

Eric De Groot at Eric De Groot - 2 hours ago

The Great Recession which only massive liquidity inject hide the effects of another deflationary depression wiped out nearly 30 years of net worth gains (housing, stocks, jobs, etc) for the typical household. It's not over yet. Headline: Net worth implosion: It's not just housing Americans' net worth collapsed in recent years, but don't blame the housing market for it all. New Census Bureau... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Jim Rogers' Latest Investment Interview Shows Him Turning Into A China Bear

Eric De Groot at Eric De Groot - 2 hours ago

Jim Rogers represents boots on the ground in China and the surrounding area, so I follow his assessment of timing closely. "I expect the U.S. and Europe to slowdown in 2013 and 2014," says Rogers. "You have two of the largest economic blocks slowing down, so most of China — especially those dealing with Europe and the U.S. — will have problems." Rogers goes on to state that if the Chinese... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Greek leaders seek coalition, want to ease bailou

Eric De Groot at Eric De Groot - 2 hours ago

The old English idiom to have one's cake and eat too describes the European bailout. Cake or liquidity to infinity will be provided to anyone with an empty plate. Due to the quantity of cake being served and consumed, someone's bound to choke soon. Headline: Greek leaders seek coalition, want to ease bailout ATHENS (Reuters) - Greece's conservative leader pushed on Monday for... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Funding gap for state retirement benefits rises to $1.4 trillion

Eric De Groot at Eric De Groot - 2 hours ago

Continued deterioration in unfunded liabilities reflects the world’s growing financial crisis and self-reinforcing, vicious cycle already established the US Federal and State Budgets (Jim's Formula). Headline: Funding gap for state retirement benefits rises to $1.4 trillion By Allison Linn State governments face a gap of more than $1 trillion between what they say they will provide... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

What My Dad Taught Me About Money

Admin at Jim Rogers Blog - 4 hours ago

"Mr. Rogers describes himself as a "hard-core unemployed, international investor" and author of "A Gift to My Children." He's perhaps better known for co-founding the Quantum Fund with George Soros in 1973. He says he learned very early the importance of saving and had jobs at an early age. "Money doesn't grow on trees," he says. "You have to work for it and save," he says, noting that his father even made him pay for his own baseball glove." - *excerpt from the WSJ piece, What My Dad Taught Me About Money * *Jim Rogers is an author, financial commentator and successful internationa... more » 

The "Formerly Brilliant Dimon" And Maxine Waters Debate Delta Hedging And Negative Convexity Live

As if last week's bought and paid for by JPMorgan media circus in the Senate was not enough, in which Jamie Dimon played several bribed muppets like a fiddle, today we get part two. Momentarily, the Committee on Financial Services will pick up the baton where the Senate left off, and confirm to everyone that the people who lead this country, at least on paper, are some of the most incompetent, and outright clueless when it comes to financial matters. The same matters that have led America to the Second great depression, which has so far been prevented from wiping out 20% of the economy only courtesy of Bernanke's relentless money printing. Dimon's testimony, which is a replica of last week's, can be found here. In other news, Jamie Dimon is furious he never bribed Maxine Waters before. Now he will have to explain introductory math for absolute idiots. Karma is a bitch.

Ackman Down $100 Million On JCP Today: Who Else Is Getting Blowtorched On The JCP Cremation?

Remember when Whitney Tilson praised every drop in the price of JC Penney stock as a gift from heaven, give or take? Well the gods really are generous to the Sharpe ratio 0.000 asset manager of few hundred million in stock call equivalents, all of which are now deeply underwater. Because if Tilson liked JCP at $27 one short month ago, he must absolutely love it at $21 where it is today after collapsing over 10% overnight. After yesterday's announcement of the departure of the company's president, the stock is getting blowtorched and is now down to 2 year lows. Someone else who better be doubling down is retail "genius" Bill Ackman who is down $100 million on the stock today alone, and will need to seriously defend his these or, well, else. Who else is getting pulverized? See below.

Here's Why Spanish Bonds Are Rallying

Between markedly higher yields at the Spanish T-Bill auction (which has been spun as 'successful' due to demand?),  a step in the right direction for ESM (from the German courts), and a dismal ZEW survey, finding a reason for the outperformance of Spanish bonds this morning - where 10Y bond spreads have rallied around 20bps (but remains above 7% yield) is a guess at best. However, while this fulcrum security is encouraging risk-on (reality-off) around the world, we suspect in a sorry-to-disappoint way, that the marginal bid on Spanish bonds is in fact once again the CDS-bond arbitrage trading community. Since last Monday's open (post Spanish bailout), the spread between the Spanish bonds and CDS has widened to over 100bps (from around 0bps). This underperformance of bonds relative to CDS has again and again provided an arbitrage opportunity at around these levels and given the thinness of the Spanish bond market, we suspect some renewed arbs (trying to lock in 80-100bps of 'risk-free' carry and convergence) were the real drivers of Spain's strength. So, be careful in believing what you are seeing as sometimes the whole picture is obscured when you don't know where to look - as 10Y Spanish bonds are 20bps tighter while 10Y CDS are 12bps wider. And once the spread between CDS and bonds is gone then away goes that marginal bid for bonds - so now you know what to watch for a signal of pending weakness in Spanish debt.

The Inevitability Of US-China Conflict

The question of whether conflict between US and China is inevitable is among the most important for the world as the US-China relationship, as JPMorgan's Michael Cembalest notes, is likely to be one of the most important issues of the 21st century. The inevitability view is sometimes explained by the thesis that countries rarely rise economically without also doing so militarily. The chart below looks at the major economic powers of the world since the year 1 at various intervals. Ignore for the moment some of the abstract issues which this kind of data involves; it’s pretty clear that China’s rise, fall and subsequent rise is something that hasn’t happened a lot over the past 2,000 years, and that the United States is on the front lines of having to adjust to it. Cembalest's recent interview with Henry Kissinger noted the impact of China's troubled relations with the West during the 19th century, which remains on China's political consciousness, and how China might define its interests in different ways than the West would, whether they relate to global energy security, North Korea, global warming, currency management or trade.

And Now, For The Prime Attraction: Subordination Vs Moral Hazard

We have long been concerned at the implicit and explicit subordination of both financial and sovereign bondholders in Europe by the actions of their overlords political elite in pursuit of short-term liquidity fixes to insolvency issues. As talk of the ESM coming to life in the short-term and a 'Redemption Pact' in the intermediate term - which as Goldman describes involves mutualizing a portion of each country's debt (resulting in a partial upgrade of the existing pool of Eurozone sovereign bonds) in a European Redemption Fund (ERF) and, in the process, extending debt maturities (kicking that can) onto the public sector's balance sheet. As with all these mutualization schemes, the ERF ineluctably raises the twin problems of  'moral hazard' and 'subordination', which need to be mitigated. Goldman discusses these two sides of the same coin as it notes subordination is explicit when the ESM intervenes (and also with the ECB's SMP) but a little less obvious in the ERF (though still as painful) which is, we note, perhaps more appealing to keep the masses unaware.

Housing Starts Post Biggest Drop Since August 2011 As Permits Rise

We just got another indication of how US housing has "bottomed"... if only in terms of promises and strong words. While permits, or promises that at some point in the indefinite future, a house will be built, soared from 723K to an annualized rate of 780K, the highest since September 2008, on expectations of a 730K print, actual holes dug, or Starts plunged from a revised 744K to 708K, the biggest miss of expectations of a modest improvement from the pre-revision number since April 2011, and the biggest sequential drop since August 2011. And while recently all the starts strength was in multi-family units as America prepares to become a renter society, in May it was actually the 1-unit houses that saw an increase from 500K to 516K units, as multi-family tumbled from 236K to 179K. So much for the REO-To-Rent plan? Finally, looking at actual completions, the number tumbled by 10.3% from an annual rate of 667K to 598K in May.

Humpty Van Rompuy Has Fallen Off The Wall

Europe also allows for sovereign debt to be counted as risk-free assets and not marked-to-market. Many nations, Spain is one example, allow for Real Estate loans, mortgages and even commercial loans to be carried at face value as a matter of financial engineering. I think it is a bad joke but the bite has come. This occurs when the loans no longer pay and the revenues are no longer present no matter how you carry them on your books. Then, if the banks try to off-load the properties they have assumed they take losses which are real losses and have to be accounted for on the books or they are securitized and placed as collateral at the ECB which then hides the problem for a while but not indefinitely and the “indefinite” has run out of time which is why any number of banks are calling “Uncle” and why the sovereign nation nations are crying “Uncle” and trying to deflect their problems first back to the ECB and then to find some new scheme so that the country does not fall victim to the Men in Black. All fine, all dandy, but, once again, the central issues are not dealt with and all of the schemes like all of the King’s men and horses cannot put Humpty back together again.
Humpty has fallen off the wall.

Daily US Opening News And Market Re-Cap: June 19

After a volatile morning’s trade, European equities are making gains. Having progressed through the session, markets saw a distinct period of volatility wherein peripheral 10-yr government bond yield spreads tightened markedly with their German counterpart, with the Spanish 10-yr yield making a test, but stopping short of a break below the 7.00% handle. The moves came in the wake of a relatively smooth Spanish T-Bill auction, which saw decent bid/cover ratios albeit with markedly higher yields on their 12- and 18-month lines. A modest relief rally was also observed when markets received confirmation that a recent ruling from the top German court regarding information on the ESM’s configuration does not bar the fund from coming into action and taking effect. In terms of data, markets have shrugged off a particularly poor ZEW survey from Germany, however a substantial weakening was observed in GBP following the release of the first deflationary May reading of CPI since records began. The pullback in cost-push inflation has given markets further reason to believe the BoE may conduct additional QE, as the price-level pressures have eased across the past two months.

Overnight Summary: All Must Pray For Saint Bernanke Absolution

The key headline in the overnight session was that China was willing to add a token pittance to the IMF "warchest" even as it itself is struggling to find ways to stimulate its economy. Ignore that China had demands of a complete quota overhaul that would see China nearly on par with the US in voting rights, something the US, which incidentally have exactly $0.00 to the bailout effort, would agree to. The amount that warchest has increased to is now $456 billion. It was $430 billion in April just to keep things in perspective. Hardly the Deus Ex the EURUSD is trying hard to make it appear. In the meantime, a gaping hole, as large as $350 billion has opened in Spain. And that excludes the hundreds of billions that will shortly be needed by Italy. Also out of Greece we get rumors that a government may or may not be formed. As to how long said pro-bailout government will last when over half the country voted against he memorandum, that is a different question entirely. Overall, expect a quiet session with everyone praying loudly that Bernanke will launch a new LSAP program tomorrow. If the Chairman does something far less spectacular like merely expanding Twist or raising the maturity of bonds for sale from 1-3 year to 1-4 year, the market will not be happy. Lastly, the G-20 came, ordered lots of shrimp Ceviche at the best restaurants Las Ventanas and One and Only Palmilla has to offer (charge the taxpayers of course), and conquered nothing. But issued a statement that they hope things will fix themselves all over again. In short: nothing but solid reasons for the futures to be up, up, and away.

Frontrunning: June 19

• With big conditions, China Offers $43 Billion for IMF Crisis War Chest (Reuters)... US offers $0.00
• Mexico is not Spain: Mexican Yields Drop to Record as Spain’s Borrowing Costs Soar (Bloomberg)
• And live from Las Ventanas al Paraiso: G-20 Leaders Focus on Banks as Spain's Woes Challenge Merkel (Bloomberg)
• German Constitutional Court Gives Victory to Opposition in ESM Suit (WSJ)
• EU Europe’s Leaders Urged to Resolve Crisis (FT)
• Backing Grows for One EU Bank Supervisor (FT)
• Greek Leaders Close to Coalition, Aim to Ease Bailout (Reuters)
• China Economy Improves in June, Commerce Minister Chen Says (Bloomberg)
• China Looks for Loan Boost (WSJ)

 

Spain Sells 1 Year Bills At Record Post-Euro Yield, ING Says Spain To Need €250 Billion More; German ZEW Implodes

In a meaningless "test" of investor appetite for Spain's Thursday issuance of 2, 3 and 5 years bonds, Spain today sold €3.04 billion in 12 and 18 month bills, well inside the LTRO maturity, and completely meaningless from a risk perspective - after all even Greece is issuing Bills. Yet for some reason the market which continues to be dumber by the day, somehow took the "successful" auction as an indication that there is actual demand for standalone Spanish subordinated debt. And what a 'success' it was: €2.4 billion in 12 month Bills were sold at 5.074%, the highest since at least 2003 and possibly on record. This is more than 2% greater than the same such auction at the end of May. In other words, Spain just locked in absolutely unsustainable 1 year rates. It also sold €639 million of 18 month paper at 5.107% compared to 3.302% less than a month ago. The good news: bids to cover for the two maturities, from 1.8 and 3.2, to 2.2 and 4.4 respectively. And of course they would: Spanish banks found what little LTRO cash they had lying around and in act of total desperation tried to do a carry trade whereby 3 year paper priced at 1% is used to buy 1 year paper yielding 5%.







Today’s Items:

First…
G-20 Said to Discuss Mix of Global Stimulus If Needed
http://www.bloomberg.com

From deficit reductions to a mix of stimulus measures, members are trying to address the worldwide fiscal disaster before it gets worse. As these members come closer to a common position, will it be a unified sound fiscal policy, or a tail told by a group of idiots, full of sound and fury, signifying nothing.

Next…
Romney: US Won’t Send Checks to Europe
http://news.yahoo.com

Goldman Sachs backed Romney, despite to get Ron Paul supporters, is stating that he will not bail out Europe. While this sounds great, the old saying about politicians still holds true… How do you know when a politician is lying?  His lips are moving. Another question to ask is did he happen to say the privately owned Federal Reserve won’t send checks either?

Next…
SEC To Now to Supervise US Ratings Agencies
http://thedailybell.com

The SEC, who could not regulate a runny nose, has tapped Bankster Thomas Butler,
who has no regulatory background and has never worked for a rating agency, to oversee U.S. rating agencies. This is a clear attempt to silence the warning sirens of Washington’s complete and total fiscal irresponsibility. Expect rating agencies to fraudulently raise their credit rating of the U.S. to AAA with a positive outlook in the very near future. When they do, expect politicians to tell the American suckers err… taxpayers that their private retirements are being moved to U.S. Treasuries because they are safer.

Next…
20 Reasons Why America’s Next Bank Holiday Will Be a Nightmare
http://www.shtfplan.com

Here are a few…
1. Personal and corporate checks, along with money orders, may not be honored.
2. Credit, debt, gift, and food stamp cards might not be accepted.
3. Automated regular payments, like for utilities, may shut down.
4. Most Americans have less than $300 cash in their homes.
5. Bank safe deposit boxes may be inaccessible.

Next…
Government Report: Dangerous Vaccines
http://www.naturalnews.com

82 million doses of taxpayer-funded vaccines were given to 40 million children in 2010, at a cost of $3.6 billion. Now, a recent report issued by the Inspector General at the U.S. Department of Health and Human Services contains shocking information. Millions of vaccines administered to children every single year are being improperly stored and are considered dangerous. A way for the medical establishment to profit on death.

Next…
Body Organs to be Taken Without Consent
http://www.telegraph.co.uk/

People in Wales could soon have their organs removed after death, even if they never expressly signed up to be donors when they were alive. A situation, that no-doubt, will catch on in other areas of the world. Another way for the medical establishment to profit on death.

Next…
Border Patrol Group Calls for Holder’s Resignation
http://www.washingtontimes.com
http://townhall.com
http://www.cbsnews.com
http://www.youtube.com

The National Border Patrol Council, which represents 17,000 Border Patrol agents, have called for Eric Holder’s resignation for his part in the slaughter of agent Brian Terry, and 200 Mexican Nationals, during Operation “Fast and Furious”, which the apparent aim was to attack the 2nd amendment of the U.S. Constitution by blaming U.S. gun dealers for murders in Mexico and the U.S.

Finally, Please prepare now for the escalating economic and social unrest. Good Day

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