While Angelo Mozilo is working on his tan and pretending he did not engage in blatant 10(b)-5 fraud for years and years. Oh well, justice is served. Don't look for the Gerson Lehrman IPO any times soon.
- RAJARATNAM GETS 132 MONTH PRISON TERM FOR INSIDER TRADING. - BBG
Well, that's that.
- SLOVAK PARLIAMENT APPROVES EXPANSION OF EFSF RESCUE FUND, CONCLUDES RATIFICATION IN ALL EURO ZONE COUNTRIES -RTRS
- 114 voted for the EFSF, 30 against and 3 abstained from 147 present (out of 150
Now: perhaps we can finally get some details of what will happen next instead of just blind short covering squeeze on rumor-based headfakes? Oh wait, we won't? Because there are no real details and it is all just rhetoric?
Credit Suisse Buries European Banks, Sees Deutsche Bank And 65 Other Bank Failing Latest Stress Test, €400 Billion Capital ShortfallSubmitted by Tyler Durden on 10/13/2011 - 11:06
A day after Credit Suisse killed the Chinese bank sector saying that the equity of virtually the entire space may be worthless if NPLs double, as they expect they will to about 10%, the Swiss bank proceeds to kill European banks next. Based on the latest farce out of Europe in the form of the third stress test, which is supposed to restore some confidence, it appears that what it will do is simply accelerate the flight out of everything bank related, but certainly out of anything RBS, Deutsche Bank, BNP, SocGen and Barclays related. To wit: "In our estimation of what could be the “new EBA stress test” there would be 66 failures, with RBS, Deutsche Bank, and BNP needing the most capital – at €19bn, €14bn and €14bn respectively. Among the banks with the highest capital shortfalls, SocGen and Barclays would need roughly €13bn with Unicredit and Commerzbank respectively at €12bn and €11bn. In the figure below we present the stated results. We note RBS appears to be the most vulnerable although the company has said that the methodology, especially the calculation of trading income, is especially harsh for them, negatively impacting the results by c.80bps." Oops. Perhaps it is not too late for the EBA to back out of this latest process and say they were only kidding. And it gets even worse: "We present in this section an overview of the analysis which we published in our report ‘The lost decade’ – 15-Sep 2011. One of our conclusions was that the overall European banking sector is facing a €400bn capital shortfall which compares to a current market cap of €541bn." Said otherwise, we can now see why the FT reported yesterday that banks will be forced to go ahead and proceed with asset firesales: the mere thought of European banks raising new cash amounting to 75% of the entire industry's market cap, is beyond ridiculous. So good luck with those sales: just remember - he who sells first, sells best.
Today, instead of the traditional market observations by the Chairman of the Fermentation Committee, we share with readers a critical historical lesson from Art Cashin, focusing on an event that took place 89 years ago, which as Cashin says is "one of the most devastating economic events in recorded history and an important backdrop to Europe today. It all began with the efforts of a few, well-intentioned government officials." Many will know what we are talking about already...
A Slovak Twist: Slovakia's Sulik Announces EFSF Vote Has To Be Adopted By Constitutional Court FirstSubmitted by Tyler Durden on 10/13/2011 - 09:55
With everyone so certain the Slovak EFSF vote passage was just a formality, it was only a matter of time before Richard Sulik's SaS threw a wrench in the best laid plans.... Sure enough, as of a few minutes ago, Sulik has announced that he is considering getting the constitutional court involved, a process which if anything will create an indefinite delay in the EFSF ratification, even assuming there is no additional doublecrossing of the outgoing PM Radicova involved.
Well, their list of demands may be slow in coming, but when it comes to organizing a block party for the "Awake and Inspired", it took less than a month...
As we said earlier, "it was fun while it lasted." Now reality, and the pricing in of tomorrow's Berlusconi vote of "confidence" comes back with a vengeance. From Reuters:
- UNICREDIT SHARES HAVE BEEN SUSPENDED FOR EXCESSIVE VOLATILITY, INDICATED DOWN 7.8%
Fear not! the imminent surge in Italian CDS means that the Boot will report infinite EPS once its bonds hits zero: thank you JP Morgan.
It took FT Alphaville offshoot FT Tilt precisely 9 months to learn that charging £1,000 a head for widely available information may not be the best business model (unless one is that "other" and probably only profitable FT business line DebtWire, which actually does have "expert network" level information now and then). One wonders just how successful some other financial blogs would be if they were spun off from their publicly traded corporate parents.
Jobless Claims 1K "Better" Than Expected 405K, To Be Revised To "Miss" Next Week; Record Trade Deficit With ChinaSubmitted by Tyler Durden on 10/13/2011 - 08:45
In today's weekly dose of BS from the BLS, we get the previous week's massive beat of 401K revised to 405K, cutting the 410K estimate beat in half. But what is important is that the expectation for this week of 405K was once again "massively beaten" by a whopping 1K at 404K. Of course, next week this number will be revised to 408K meaning the consensus was missed but no robots will care. As for the non-noise, non seasonally adjusted claims soared by 66,442 in the week from 332,394 to 398,836. Spin cycle to commence imminently. In some modestly good news, the "cliffers", those on EUCs and Extended benefits, which have declined by 1.3 million in the prior year, increased modestly by 2K, meaning those playing Xbox and collecting benefits actually rose for the week. In other news, the Trade Balance came in line with expectations, at a deficit of 45.6 billion. However, last month's number which gave all the banks hope that Q3 GDP was going to be a whopping beat and got so many Lemmings to re-revise their GDP forecast higher, was reduced from -44.8 billion to -45.6 billion, meaning Q3 GDP is right back down where it belongs. Most notably, the Chinese trade deficit hit a politically convenient record, increasing from $27.0 billion in July to $29.0 billion in August. Exports increased $0.2 billion (primarily soybeans, fish and shellfish, and nonferrous metals) to $8.4 billion, while imports increased $2.2 billion (primarily other household goods and toys, games, and sporting goods) to $37.4 billion. Expect Chuck Schumer's head to explode in 5...4...3...
- Political and debt concerns surrounding Italy together with a downbeat ECB’s monthly bulletin promoted risk-aversion
- Gilts received support following a well-received conventional Gilt auction from the UK, together with comments from BoE's Bean in favour of further QE
- The USD-Index gained amid risk-averse trade, which in turn weighed upon EUR/USD and GBP/USD
- The third quarter corporate earnings from JP Morgan beat on the EPS and revenue
- EU Bank Risks ‘Rapidly’ Growing, Andersson Says (Bloomberg)
- Inside the Fed Fight Over Bond Buys (Hilsenrath)
- France ready to give banks public capital (FT)
- Berlusconi Will Defend Government in Parliament as Confidence Vote Looms (Bloomberg)
- Germany urges treaty to strengthen bloc (FT)
- China's Appetite for Commodities Wanes (WSJ)
- China Exports Slow on ‘Severe Challenges’ (Bloomberg)
- Fed’s Plosser: Operation Twist is fiscal policy (Reuters)
Today's Economic Data Docket - And The Depression Rolls On With Yet Another 400K+ Jobless Claims NumberSubmitted by Tyler Durden on 10/13/2011 - 07:51
Today we get jobless claims and the trade balance, both largely irrelevant as they will merely confirm the downward trajectory of the economy. What matters are flashing headlines, HFT kneejerk responses, lies, rumors, innuendo, and endless bullshit.
Developing China’s M2 money supply has been rising by a large 20% and Russia’s by a very large 30%. Even developed countries such as Switzerland have seen money supply growth of 25%. Japan’s M2 is gradually moving higher after the ‘Lost Decade’ and after recent events exacerbating an already fragile situation. Global money supply growth is increasing by 8%-9% per annum. Meanwhile annual gold production is less than 1.5% per annum. We looked at money supply growth and charts regarding global money supply, debt levels etc in a comprehensive article in early August (‘Is Gold a Bubble? 14 Charts, the Facts and the Data Suggest Not’ - http://www.goldcore.com/goldcore_blog/gold-bubble-14-charts-facts-and-da... ) when gold was trading at $1,670/oz or much the same price level as today. The charts and conclusions remain apposite. In order to fight economic problems brought about due to too much debt, debt based paper and electronic currency has been created at historically high levels. There is no sign of this abating any time soon given the scale of the global financial and economic crisis.