POSTS: THURSDAY 07-01-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
SOVEREIGN DEBT & CREDIT CRISIS
SPAIN / PORTUGAL
European Stocks Tumble WSJ
|European stocks dropped, with overnight losses in the U.S. and
Asian markets adding pressure after Moody's warned it may
strip Spain of its triple-A rating.
Moody's Place Spain's Aaa Sovereign Rating On Review For Downgrade
The CDS Wolfpack Is Now Coming After France... China
Germany's Export Boom Has Trade Partners Stewing
Prospering at the Expense of Others?
Merkel Averts Disaster as Wulff Wins German Presidency Vote
Chancellor Angela Merkel averted an unprecedented political
setback as her candidate for the German presidency, Christian
Wulff , won the largely ceremonial post only after three ballots.
Bank of England rate-setter fears new UK recession
Japanese manufacturers turn optimistic
Manufacturing growth slows in Asia FT
Post-crisis expansion appears to be losing steam
China taking wind out of Asia’s surge-
China Manufacturing Slows Again Amid Growth Concern
China’s success in cooling its economy is alarming investors
concerned that a slowdown in the engine of the global recovery may
help trigger another recession.
Morgan Stanley- Chinese Confidence Is Now Rolling Over
Morgan Stanley highlights how leading economic and
sentiment indicators are rolling over in China. For example,
Chinese confidence in their income prospects has pulled back:
Morgan Stanley's Business Cycle Signal has turned downward
Still, they continue to view downward trends in the data as
in-line with Chinese economic cooling efforts. Despite charts
such as the above, Morgan Stanley still believes China is
heading for a soft landing. Thus as we are likely to be hit
with more falling Chinese data points, we probably need to
remember that declining indicators aren't necessarily bad
news. Collapsing ones, though, probably are.
Although several key headline indicators registered a
decline in year-over-year growth rates from the high levels
achieved in late last year and early this year, in part
reflecting the base effect, underlying growth momentum is
still holding up reasonably well as demonstrated by resilient
sequential growth rates.
(Via Morgan Stanley, Headlines Belie Underlying
Resilience, Qing Wan, June 2010)
Warning signals of a double-dip recession
Watchdog says US needs to tackle debt fast
Deficit Panel Stresses Cuts WSJ
The CBO Issues Most Dire Warning On US Budget Yet, Warns US Debt Will
"Swiftly Be Pushed To Unsustainable Levels" ZH
Shell-Shocked Americans Still Aren't Buying Anything
This Chart May Spell Doom For The U.S. Economy
Deutsche Bank is particularly concerned
about this chart, the US MPF FCI (United States Monetary
Policy Forum Financial Conditions Index), because this chart
typically is at these levels during a recession or right
It has, in the past, predicted recessions. But it has also
been wrong, notably in 1994, 1995, and 2003, according to
Deutsche Bank. The longer the index is lower, however, the
more likely it will have an impact on GDP.
And its impact on GDP tends to be magnified in times of
great financial distress, according to DB.
Certainly, something to be concerned about, or at least
Europe's banks prepare for a day of reckoning
Breaking up banks would be 'catastrophic'
Markets unnerved by ECB loan fears FT
With $1 Trillion In Loans, The ECB Is The Biggest Guarantor Of
European Banks ZH
Crazy Treasury Bulls Get It Right
yields back down at crisis level belie optimism on the economy.
Investors flock to havens in tough year for equities
Top-tier government bonds and gold reap solid returns
Bond Guru Jeff Gundlach- The USA Will Default
Pragmatic Capitalist via BI
the full presentation here)
& LOCAL GOVERNMENT/b>
federal stimulus funds running out, economic worries grow
US states face hard budget choices FT
Banks around the world must refinance more than $5 trillion of
debts in the coming three years, a massive rollover that
poses threats to financial stability and growth.
U.S. Bailout of A.I.G., Forgiveness for Big Banks
to shut down the Fed?
Fed Officials Avoid Talk of Further Stimulus to Stoke Growth BL
Fed Made Taxpayers Junk-Bond Buyers Without Congress Knowing BL
Federal Reserve Chairman Ben S. Bernanke and then-New York Fed
President Timothy Geithner told senators on April 3, 2008, that
the tens of billions of dollars in “assets” the government agreed
to purchase in the rescue of Bear Stearns Cos. were
“investment-grade.” They didn’t share everything the Fed knew
about the money.
DODD FRANK ACT
House Approves New Rules for Wall Street in 237-192 Vote BL
House Sends Finance Overhaul to Senate WSJ
|The House agreed to a sweeping rewrite of the nation's
financial regulations, moving the initiative one step closer to
becoming law. The focus now shifts to the Senate.
Senators delay vote on Wall St reform FT
Chris Dodd still optimistic of bill passing
Wall Street double act falls short
U.S. Regulatory Bill's Support May Weaken as Senate Delays Vote
Dodd-Frank bill is no Glass-Steagall FT
Opinion- The Dodd-Frank Financial Fiasco
|The bill all but guarantees bailouts as far as the eye can
see, while failing to address real problems like Fan and Fred and
our outdated bankruptcy code.
Derivatives Laws Could Cost $1 Trillion: ISDA
Bonds Beat Stocks by Most Since 2001 as Global Confidence Fades
There a Bottom in Sight for Commercial Real Estate?
RRESIDENTIAL REAL ESTATE - PHASE II
Foreclosed Homes in U.S. Sell at 27% Discount as Distressed Supply Grows
“We’re clearly creating more properties that will be sold at
distressed prices than the market is absorbing”
OKs homebuyer tax credit extension
Housing Aid Plan Set WSJ
long before a housing market crash?
Guest Post- Housing Market & Construction Costs- Builders Can’t Justify
EXPIRATION FINANCIAL CRISIS PROGRAM/b>
PENSION & ENTITLEMENTS CRISIS
GOVERNMENT BACKSTOP INSURANCE
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE/b>
Explaining Derivatives, And Goldman's Dominance Thereof, In Four Simple
Was AIG, In Addition To Being The Riskiest Company In The World, Also A
Precious Metals Manipulator ZH
A little under two years ago, there was a big debate in the
precious metals community, in which two groups of individuals were
arguing for and against possible silver market manipulation, via
arbing the COMEX and the OTC. On one hand you had such
distinguished economists/bloggers as Mish (here
here) and Jon Nadler of Kitco (here)
claiming there is no such thing as a COMEX-OTC arb because markets
are ultimately efficient, and the second a trade is effected in
one market, it implicitly affects all other markets, making spread
arbing, and thus "manipulation" impossible. On the other hand, you
had C.Loeb making precisely the opposite argument (here).
After a brief flare up, the debate died down, with a partial win
acceded to Nadler, who ended the debate with the following
rhetorical statement: "Also, by the way, why not NAME the
sinister manipulative banks in question? Why not ask them outright
as to the motives behind their positions (or better yet, who their
clients were) and whether or not they acted in a "willfully
nefarious" manner? Conclusion: One can take any database and make
it suit their conspiracy argument. That, however, does not make
for proof of any kind." In other words, Mr. Nadler was asking
for a bank to confirm it was arbing the COMEX-OTC spread, which in
turn would unwind his defense argument, and lend credence to the
claim that some players, due to their massive scale or otherwise,
succeed in manipulating the silver (or gold) market by profitably
spreading the legs of the trade in two completely different
markets and arbing this spread. For the longest time people looked
exclusively at JPMorgan for clues. Boy, were they wrong... and are
they about to be surprised that in addition to almost blowing up
the world, AIG FP has admitted that
it itself, as the
defacto risk mastodon and suicide bomber under Joe Cassano, with "$426
billion in total on and off balance sheet risk equivalent delta,"
was precisely just this spread manipulator. But don't take our
word for it. Take AIG's.
Presenting exhibit A: AIG production document
FRBNY-TOWNS-R1-210712 (pp 34-35) - highlight ours.
Oh, so the arb does exist...
There are about 249,999 other pages we need to go through to
find additional supporting and incriminating evidence to this
formerly Strictly Confidential Internal Risk Analysis, but a very
relevant question at this point for Mr Nadler is: now that you
have your confirmatory smoking gun, does that change your thesis?
And a much more critical question for the gentlemen at the COMEX:
just how was the world's arguably biggest trader at the time,
AIG-FP, arbing your market and the OTC, and just how much of this
falls under the confines of "legal"? And, lastly, maybe the most
critical question - who inherited these positions, who unwound
them, and, if no unwind occurred, who is currently in possession
of AIG-FP's "large exposure in the Comex vs OTC arbitrage trades"?
Market Now Just 15% Above 666 Lows, 22% Off 2010 Highs, When Priced In
It may come as a surprise to some that when the market's
performance is expressed in the opposite of infinitely dilutable
paper, we are currently just barely 15% higher than the
generational S&P low of 666. As the chart below demonstrates, the
S&P expressed in gold is plunging, and has dropped 22% from its
2010 highs, down 18% from the beginning of the year, and just 15%
higher than March 5, 2009. As Russia and GLD have been
demonstrating so aptly over the past 5 months, gold is not
dilutable, and can not be contaminated with various Greek
sovereign bond holdings. It is, in summary, pure, and is immune
from that strain of 100% lethal, and printerborne,
Central Banking syphilis where one's paper rots off. Which is why
the Dow may easily pass 36,000. The issue is that at or about that
time, the Dow to Gold ratio will be 1. Note also, the downward
channel in the SPX/Gold index: each day this channel is not
broken, is another day that Bernanke pops a few extra Ambien.
Relentless Equity Fund Outflows- ICI Reports Another $1.2 Billion
Redeemed, 8th Straight Week Of Outflows ZH
Crunchtime for mutual funds has arrived. On one hand they are
getting slammed with the S&P now almost -8% YTD causing a collapse
in the funds' own equity values. On the other hand, investors have
now withdrawn $30 billion in cash, forcing a feedback loop where
selling begets selling, and even more redemptions. Ah, the beauty
of a Keynesian system falling apart. And let's not forget that
fund cash levels are at all near record lows to begin with. If the
market slide can not be contained, and if consumers who already
have zero faith in the market retrench even more, it could be the
beginning of the end for the fund industry. More relevantly, ICI
has just reported $1,248 million in outflows from domestic equity
mutual funds: this is the eighth sequential week of outflows since
the Flash Crash, and a period during which $32 billion has been
FLASH CRASH - HFT - DARK POOLS
VIDEO TO WATCH
INTERESTING ARTICLES - GENERAL
CHART OF THE DAY- America's Debt Problem Will Be Fine If Politicians Just
Do Absolutely Nothing BI
The Congressional Budget Office shows us below how U.S.
long-term debt will stabilize and actually be okay, if the
government simply does absolutely nothing.
Matthew Yglesias argues:
See that line where the debt:GDP ratio is stable? That’s
what happens under current law. If congress changes
nothing, or the president vetoes everything, then this is what
happens. No apocalypse. But nobody believes that’s
going to happen. Nobody believes the Bush tax cuts will fully
expire. Nobody expects the AMT phase-in to happen. Nobody
expects physicians’ Medicare reimbursement rates to be held in
check. And though I think he’s mistaken about this, Doug
Elmendorf is skeptical that some cost-saving elements of the
Affordable Care Act will ever be implemented. That’s the
“alternative fiscal scenario” in which the debt level
But note that congress doesn’t need to do these things that
it’s projected to do under the alternative fiscal scenario.
Congress can stick to current law, and we’ll be fine.
QUOTE OF THE WEEK
If you feel comfortable being in the US dollar you would feel
comfortable living in Chernobyl selling Real Estate.
ZHHstrong> - Zero Hedge, BI - Business Insider,
WSJ - Wall Street Journal, BL -
Bloomberg, FT - Financial Times