As Greece Launches Latest 2 Day General Strike, Unions Warn Of Austerity "Death Spiral" - A Primer On Greek PoliticsSubmitted by Tyler Durden on 10/18/2011 - 12:54
A few days ago we pointed out that Greece has now effectively shut down following a relentless barrage of strikes and occupations which not only have halted the economy, but now prevent the economy from even collecting tax revenues (one wonders if the country has finally borrowed the ink it needs to print tax forms, from Ben Bernanke). It appears the irony of the vicious loop whereby more austerity means more strikes, means less tax revenues, means bigger budget deficits, means more austerity, means even more strikes, has not been lost on the population, and now, according to Reuters, local unions warn that the country "risks sliding into a "death spiral" if the government continues to slash salaries and lay off workers instead of cracking down on tax evasion and raising money from the rich, the head of the biggest public sector union said Tuesday. "This will exacerbate recession, unemployment and state revenues will continue to fall, creating a death spiral. It must not continue," Tsikrikas told Reuters in an interview and urged lawmakers to reject the package when it is voted in parliament Wednesday and Thursday." He is right, and unfortunately for him, as the attached Nomura primer on near-term Greek politics indicates, both parties have no upside in severing monetary ties with Europe and realize all too well that unlike what G-Pap is saying, specifically that the country is being held hostage by strikes and protests, it is Greek strikes and protests that are holding Europe and its taxpayers hostage. However, since productive Europeans have no problem with that, it will continue indefinitely, even as the Greek economy grinds to a halt and nobody does or produces anything, and the entire country becomes a permanent ward of the European state, receiving its bi-monthly IMF bail out funding which in turn is flipped right back and used to pay off European bank interests. Rinse. Repeat.
The typical American household is insolvent: its debts exceed its assets. There is nothing fancy about calculating insolvency: if debts exceed assets, the enterprise is insolvent. By this measure, most American households are insolvent, if their real assets are marked to actual market. The typical American household is thus in service to its debt, not to its assets, and to the holders of that debt. This is debt-serfdom: serfdom in service to the owners of debt, debt that may well always exceed the value of the household's assets. This is debt-serfdom for life. If we look at the American household as an enterprise, then we have to differentiate between unproductive, trapped capital, assets held in a house or retirement account, and productive, free capital which can be moved in and out of productive assets to earn a return which increases free cashflow income in the present....Wealth and income do not flow from servicing debt incurred by trapped assets, it flows from productive free capital. Thus the typical household toils not to increase productive capital that can be deployed to increase household income but to service their crushing debts. How else can we describe this situation other than debt-serfdom?
S&P Downgrades Over 20 Italian Banks, Says Difficult Climate Is Neither "Transitory" Nor "Easily Reversed"Submitted by Tyler Durden on 10/18/2011 - 12:05
Another day, another pervasive downgrade action by S&P. "In our opinion, renewed market tensions in the eurozone's periphery, particularly in Italy, and dimming growth prospects have led to further deterioration in the operating environment for Italian banks. We also think the cost of funding for Italian banks will increase noticeably because of higher yields on Italian sovereign debt. Furthermore, we expect the higher funding costs for both banks and corporates to result in tighter credit conditions and weaker economic activity in the short-to-medium term. We do not believe that this difficult operating climate is transitory or that it will be easily reversed. In our view, funding costs for Italian banks and corporates will remain noticeably higher than those in other eurozone countries unless the Italian government implements workable growth-enhancing measures and achieves a faster reduction in the public sector debt burden. Consequently, we envisage a situation where the Italian banks may well be operating with a competitive disadvantage versus their peers in other eurozone countries. At the same time, we think all banking systems across the eurozone, including Italy, may raise their commitment to reinforcing banks' capitalization."
For every seemingly irrational move in stocks, there is always an explanation. This time we look to Nanex who advises us that concurrent with the latest market surge between 11:35 am and 11:40am, there was a parallel spike in HFT quote churning. Traditionally, this has been associated with market drops in high volume days, although with volume in the past 48 hours nothing to write about, it appears that HFT quote surges tend to translate to market spikes when there is no coordinated high volume activity. Interestingly, this time it is a coincident if somewhat lagging indicator. We will observe how algos will react the next time there is a sharp move either higher or lower in stock to see whether robots are a cause or an effect.
Just out by the only rating agency that is even remotely credible. "Synopsis: Across the valley - GS recorded $2.96B in investing and lending losses and a $378M decline in IB revenues, totaling a $3.34B decline. Hence, the total loss of merely $393M is respectable. Furthermore, given the political pressure, now is not the time to show robust results. The major issues facing GS is the cost of complying with the Volker rule (look for some changes or exemptions from the proposed rule), changes in senior management (to appease Sen. Levin) and a still weak IB and trading environment. However, with the demise of most of its major competitors, GS benefits from the lack of competition, attractive LT trading opportunities, and various forms of federal government support. Other raters might take neg. actions."
Did they find the TOTUS just in time? Anyway, you know the drill: "pass this bill" and "god bless" - 1 shot; "win(ning) the future" - 2 shots; the "99 percent" or the "1 percent" - chug bottle.
A truck carrying President Obama's Presidential teleprompter, seals, podiums and $200,000 worth of audio equipment has been stolen north of Richmond. Worst (or best) case, this means a premature end to the president's "informational" (and mass alcohol poisoning enabling) tour.
All it took to unwind two weeks of rumors and lies were a few factual articles. Such as this one from the AP: "Disagreement between France and Germany may prevent eurozone leaders from reaching a crucial deal on a second rescue package for Greece this weekend, a person familiar with the negotiations said Tuesday....Investors around the world hope a comprehensive plan to fight the debt crisis, including final details on Greece's second bailout, will keep the debt turmoil from pushing the global economy back into recession. Signs that such a plan is proving slower to clinch caused markets to slide on Tuesday. Germany is pushing for banks to accept cuts of 50 percent to 60 percent in the value of their Greek bonds, while France is insisting that leaders should only make technical revisions to a preliminary agreement reached with private investors in July, the person said. France on the other hand has been reluctant to back bigger losses for banks, since French banks are among the biggest holders of Greek government bonds. Its position is supported by the European Commission, the EU's executive. Commission officials said last week that technical revisions to the July deal with the banks are necessary because changed market conditions had made the deal more expensive for Greece and the rest of the eurozone." And so on. Are we the only ones dazed, confused, and tired beyond comprehension with this endless, ridiculous, pathetic, grovelling Groundhog Day bullshit? Stop risking civil and international war just to satisfy your bureaucratic vanity. THERE IS NO MONEY! YOU KNOW IT, WE KNOW IT, THE PEOPLE KNOW IT. ENOUGH!!!
Just as the bottom was about to fall from the market, here comes the ECB cavalry with its tactical ultra short-term bailout in the form of several billion in Italian BTP purchases. Since this is nothing but a liquidity injection which does nothing to resolve deep, structural and solvency problems, we give this latest intervention attempt about half an hour in halflife. And once the market processes the news from the FT that the EU bank on naked CDS shorting will become permanent, look for everyone short sovereigns to unwind synthetic positions and to rotate shorts into cash bonds. Good luck ECB.
Below we refresh the very simple correlation chart showing the EURUSD and the spread between French OATs and German Bunds, a spread which has soared to all time wides now that France is once again the target of vigilantes on fears of an imminent French downgrade. According to this alone, the EURUSD us now about 1300 pips rich, an ES-implied level of just about 1,000. We expect reality to rear its ugly head very soon.
Because The Financial Short Ban Was Not Enough, Europe To Proceed With CDS Short Selling Ban Imminently, Accelerate Terminal UnwindSubmitted by Tyler Durden on 10/18/2011 - 09:49
Just because Europe did not learn any lessons with the financial shorting ban which made everything much worse, here comes this...
- EU LAW TO BAN NAKED SOVEREIGN CREDIT DEFAULT SWAPS WITH COUNTRY OPT-OUT IF RISK TO SOVEREIGN DEBT MARKET -- EU SOURCES
- EU SAID TO BE CLOSE TO DEAL FOR CURBS ON NAKED SOVEREIGN CDS
- NAKED SOV. CDS DISCUSSIONS PART OF TALKS ON SHORT-SELLING LAW
- SCHAEUBLE SAYS COSTS OF NAKED SHORT SELLING OUTWEIGH BENEFITS
This means that cash Sovereign bonds are about to go bye bye as the only recourse will be to short the living daylights in good old-fashioned govvies. And so we move one step closer to the final unwind courtesy of idiot European bureaucrats who are handing free money on a silver platter to the skeptics...