Macro news from Europe has refuted claims made last week that the ESM fund would be doubled to EUR 1tln, with a German spokesman commenting that the country is not of mind that ESM resources should be increased to that level. Discussions concerning the management of the EFSF and the ESM from German members of parliament have spurred talks that the funds could be run in parallel and even together in an emergency scenario. The ECB’s Weidmann has commented on his confidence in the Eurozone and the German economy, stating that current stagnation is temporary and that we should see a recovery in the Eurozone during 2012. Financial stocks have shown volatility this morning following comments from French and German Finance Ministers that banking regulations may be relaxed under the Basel III agreement, however this was later denied by the German Finance Minister.
Reuters report that the EU has agreed to freeze the assets of the Iranian central bank and ban all trade in gold and other precious metals with the Iranian Central Bank and other public bodies in Iran. According to IMF data, at the last official count (in 1996), Iran had reserves of just over 168 tonnes of gold. The FT reported in March 2011 that Iran has bought large amounts of bullion on the international market to diversify away from the dollar, citing a senior Bank of England official. Currency wars continue and are deepening. Many Asian markets are closed for the Lunar New Year holiday which has led to lower volumes. Of note was there was an unusual burst of gold futures buying on the TOCOM in Japan, which has helped the cash market to breach resistance at $1,666 an ounce. Investors are also waiting for euro zone finance ministers to decide the terms of a Greek debt restructuring later today. This would be the second bailout package for Greece.
The "risk on" phases lasted a whole 3 hours (thank you FT Deutschland for forcing the latest EURUSD short squeeze round). And now, for the other side:
- CYPRUS FINANCE MINISTER NOT SURE GREEK RESTRUCTURING WILL BE CONCLUDED THIS WEEK
- EVERYTHING IS OPEN ON GREEK DEBT TALKS - CYRPUS FINANCE MINISTER
As expected. As further expected, look this rumor to be refuted, confirmed, refuted, and finally confirmed at least 10 more times before the end of the day, even as hedge funds are preparing to file papers.
- IMF begging ECB for cash, ECB begging Germany for cash... all is well: Lagarde Says Europe Must Boost Firewall (WSJ)
- More rumors of inflation targeting: Bernanke near inflation target prize, but jobs a concern (Reuters)
- A Sears Wager Stings at Goldman (WSJ)
- Draghi Makes Euro Favorite for Most-Profitable Carry Trades With Rate Cuts (Bloomberg)
- Euro zone finance ministers to rule on Greek debt talks (Reuters)
- "Reserve Currency" - Iran Said to Seek Yen Oil Payments From India Amid Sanctions (Bloomberg)
- Hackers-for-Hire Are Easy to Find (WSJ)
- Florida’s Republican Primary Pits Romney Money Against Gingrich Momentum (Bloomberg)
- YouTube hits 4 billion daily video views (Reuters)
- Carnival CEO Lies Low After Wreck (WSJ)
- Fed Forecasts Could Awaken Treasurys (WSJ)
As of a few hours ago, Goldman's Francesco Garzarelli has officially told the firm's clients to go ahead and short 10 Year Treasurys via March 2012 futures, with a 126-00 target. While Garzarelli is hardly Stolper (and we will have more on the latest Stolpering out in a second), the fact that Goldman is now openly buying Treasurys two days ahead of this week's FOMC statement makes us wonder just how much of a rates positive statement will the Fed make on Wednesday at 2:15 pm. From Goldman: "Since the end of last August, we have argued that 10-yr US Treasury yields would not be able to sustain levels much below 2% in this cycle. Yields have traded in a tight range around an average 2% since September, including so far into 2012. We are now of the view that a break to the upside, to 2.25-2.50%, is likely and recommend going tactically short. Using Mar-12 futures contracts, which closed on Friday at 130-08, we would aim for a target of 126-00 and stops on a close above 132-00." As a reminder, don't do what Goldman says, do what it does, especially when one looks the firm's Top 6 trades for 2012, of which 5 are losing money, and 2 have been stopped out less than a month into the year.
When we predicted on Thursday that the most recent record number of EUR shorts would take the EURUSD over 1.30 on Friday following a spurious rumor that the IIF and Greece had reached a deal, it turns out we were one work day off. As it happens, the EURUSD has just taken out 1.3000 following an FT Deutschland report that Greece and the IIF have reached a broad agreement. It would be funny if only it wasn't so predictable. The source- unidentified government officials. Either way, it appears this will be the on again, off again rumor that drives risk today, since there are no fundamental economic news. Per Bloomberg, banks and EU, IMF, ECB still trying to agree on coupons, so it actually is not a deal but hey, who cares. Coupon for the new, long-term debt after the voluntary haircut should be somewhere above 4%. Troika still pushing for a 4% ceiling. Deal may be concluded in next few hours. Top level talks were interrupted Saturday, continued Sunday by “experts”. Troika experts want to calculate today if Greece can still meet the goal of cutting total debt to 120% of GDP by 2020. And so on. Of course, since just one hold out hoping for "legal arbitrage" and par recoveries, will force the retroactive implementation of CACs, which in turn will trigger CDS, which in turn will force a subordination of debt claims, all of this is moot.
United Welfare States of America: In 2011 Nearly Half The Population Received Some Form Of Government BenefitSubmitted by Tyler Durden on 01/23/2012 - 00:02
While politicians may debate whether or not America is the most "generous" (with other generations' money of course) socialist welfare state in the history of mankind, the undoctored numbers make the affirmative case quite clear and without any chance for confusion. The single most disturbing statistic: in 2011 nearly half of the population lived in a household that receives some form of government benefit, which in turn accounted for 65% of total federal spending, or $2.5 trillion, and amount to 15% of GDP. And yet some people out there still think these people, long since indoctrinated to do little but mooch off the welfare state (which will continue subsidizing its existence so long as debt rates are so low that the government can issue trillions each year without fears of consequences) will halt their iTunes purchases, will voluntarily stop subsisting on the government's teat, or will rebel against a government which is their only source of income? Why? Especially since something tells us that there will be a peculiar overlap between this 50% and the 50% of Americans that pay zero taxes.
After months of increasingly aggressive shareholder activism, the long-standing co-CEOs (Balisillie and Lazaridis) of the struggling Blackberry maker have resigned as the former COO takes over as CEO and former-exchange executive takes over as chairperson.
- *RESEARCH IN MOTION CO-CEOS/CHAIRMEN QUIT POSTS :RIM CN, AAPL US
- *RIM NAMES BARBARA STYMIEST INDEPENDENT BOARD CHAIRMAN :RIM CN
- *RESEARCH IN MOTION NAMES THORSTEN HEINS PRESIDENT, CEO
Research In Motion has clearly morphed into Activism-in-Motion as the Globe and Mail reports: "The catalyst for change appears to have been the entry of a new personality: reserved but revered investor Prem Watsa, the CEO of Fairfax Financial. Mr. Watsa, who has been called Canada’s Warren Buffett." While chatter appears to be that change-is-good, G&M go on to note, "Critics of the company’s performance may not be immediately impressed by a management shakeup that involves so little fresh blood." as the Playbook fiasco is fresh in many people's minds but perhaps new CEO's Heins view that "We are not at a point where we try to define a strategy, that’s done" will not hearten those looking for real change.
As the name implies. What is funny is how only after the advent of the Federal Reserve in 1913 did Financial crises expose increasingly more of world GDP to a crisis state. But at least the Fed and ECB tell us all they do is enforce price stabeeletee. Could they be lying!? We thought it was all the gold standard's fault for causing unprecedented economic volatility... Guess not. From History Shots: "The giant wave in the top section of the graphic depicts the percentage of world GDP by region in crisis during the 200 year period. It includes the four major financial crisis types (sovereign default, banking, currency, and inflation) along with stock market crashes. The bottom section provides a detailed chart of all sovereign defaults by country, region and year. It shows the repeating nature of sovereign default, a central theme of Reinhart and Rogoff's book."
The market will look for any signal on the pace of discussions over the ESM pre-funding details and the fiscal compact. Flash PMIs in the Eurozone and the IFO will also be key to watch given market fears over the activity impact of tight fiscal policy linked to the Eurozone fiscal crisis. Attention will likely shift to the US this week. Q4 GDP will likely exceed 3% mostly due to one-off drivers and less so due a genuine pick-up in final demand in our view. The FOMC statement and press conference are unlikely to lead to a change in US monetary policy. However, we will be focusing on the publication of the FOMC participants’ views of appropriate policy (specifically the path for the federal funds rate and guidance for the size of the balance sheet going forward). In addition, President Obama will give his State of the Union speech Tuesday night.
After almost a century of the centrally planned dollar we’re delighted to present a timeline of the most amusingly disturbing speeches delivered by the Federal Reserve & Co.
The CDS index market remains one of the most liquid sources of hedges and positioning available (despite occasional waxing and waning in volumes) and is often used by us as indications of relative flows and sophisticated investor risk appetite. However, as Kamakura Corporation has so diligently quantified, the broad CDS market (specifically including single-names) remains massively concentrated. This concentration, evidenced by the Honolulu-based credit guru's findings that three institutions: JPMorgan Chase, Bank of America, and Citibank National Association, have market shares in excess of 19% each has shown little to no reduction (i.e. the market remains as closed as ever) and they warn that this dramatically increases the probability of collusion and monopoly pricing power. We have long argued that the CDS market is valuable (and outright bans are non-sensical and will end badly) as it offers a more liquid (than bonds) market to express a view or more simply hedge efficiently. However, we do feel strongly that CDS (indices especially) should be exchange traded (more straightforward than ever given standardization, electronic trading increases, and clearing) and perhaps Kamakura's work here will be enough to force regulators and the DoJ to finally turn over the rock (as they did in Libor and Muni markets) and do what should have been done in late 2008 when the banks had little to no chips to bargain with on keeping their high margin CDS trading desks in house (though the exchanges would also obviously have to step up to the plate unlike in 2008).
Lots of questions, and answers, from UBS in this Q&A on the Greek default/restructuring, much of it already covered previously, but the only one that matters is this: "Would the restructuring make the Greek situation sustainable? No. Sorry, but no is the answer. Even with full repudiation of the Greek debt, the situation would not be sustainable. In that event, the deficit would move to the primary balance, 5-6% last year. Not sustainable. And the current account deficit would be in the high single digits. Not sustainable either." So you're telling me there's a chance?
But wait, we thought Greece and the ECB had an upper hand? Wouldn't they exercise said upper hand by now, considering its now 9pm in Greece on a Sunday, the day before the critical European finmin meeting by which point the Greek deal was supposed to be in place?