Greece Has One Month To Plug A €1.2 Billion Healthcare Budget Hole
Submitted by Tyler Durden on 06/18/2013 - 18:16
Think Cyprus is the only country that will need a repeat bailout (as the FT reported earlier)? Think again. Cause heeeeere's Greece... again.... where as Kathimerini reports, a brand new, massive budget hole for €1.2 billion has just been "discovered." Only this time it is not some C-grade government service that can just be swept away: it is to fund the country's biggest healthcare provider, EOPYY. And the deadline is imminent: Greece has less than a month to plug it.
- Comments: 63
- Reads: 9,470
Guest Post: Why We Shouldn't Trust The Fed's Inflation Target
Submitted by Tyler Durden on 06/18/2013 - 17:24
It can’t be emphasized enough (I’ve emphasized it here, here and here) that there’s a close link between the Fed’s narrowing focus and the core, theoretical models that economists developed in the decades after World War II. These model builders naïvely ignored boom-bust cycles in credit and asset markets, just as the Fed disastrously eliminated the relevance of these cycles from its policy framework. Or, more precisely, policymakers reversed Martin’s maxim, spiking the punch bowl when credit and asset markets weaken but dismissing the case for action when the 'party gets going'. In order to explain, we thought it might be interesting to create one of those island economy stories to demonstrate a problem with the Fed’s policy framework - how the Fed’s inflation target can cause policymakers to do the exact opposite of what they should be doing.
- Comments: 16
- Reads: 7,319
SEC Uses HFT Firm-Designed Tool To Find That HFT Doesn't Cause Flash Crashes
Submitted by Tyler Durden on 06/18/2013 - 16:48
To summarize, the SEC which admits it was clueless in analyzing the modern, fragmented market (yet which found definitively that the culprit for the May 2010 flash crash was Waddell and Reed, and nobody else, using what technology at the time, nobody knows), uses a platform developed by High Frequency Trading firm Tradeworx... to reach a conclusion that High Frequency Trading firms are innocent of every flash crash resulting from an HFT algo gone haywire...
- Comments: 79
- Reads: 10,558
Market Echoes June 2012 FOMC As Dow Swings Most Since Oct 2011
Submitted by Tyler Durden on 06/18/2013 - 16:15
For the sixth day in a row, the Dow managed a triple digit gain/loss - the first time since Sep/Oct 2011 - as markets appear to playing out a perfect echo of last year's June FOMC meeting with a ~3% 4-day gain in the run-up to the decision only to give it all back in the next few days. In the same way as last year, despite the rally in stocks, VIX (hedging) is rising, credit is diverging (hedging), and bonds are bid (though this appears more a Taper-off trade this time). Today's volume was among the lowest of the year (even accounting for holiday trading days) but that didn't stop the Dow ended up within a Hilsenrath headline of its all-time highs (though VIX near YTD highs, credit near YTD high spreads, and bonds close to YTD high yields). Silver, gold, and copper were hit hard today (-1.8% on the week) as WTI surged back up to $98.50; the USD retraced back to unchanged on the week (JPY -1%); Treasury yields are now up 4-5bps on the week (unch today); and while stocks looked good off the Friday surge, the last few minutes today saw them give back some of the exuberance back as hedgers turned to sellers (helped by a smash'n'grab in HYG) but all-in-all, equity investors seem very confident that Bernanke won't let them down.
- Comments: 37
- Reads: 10,362
Chart Of The Day: When ETF Paper Beats Gold Rock
Submitted by Tyler Durden on 06/18/2013 - 15:47
Demand for physical gold across the world continues to surge at an unprecedented pace leading India to blame its soaring current account deficit, sliding currency and even deteriorating economy on it (even if failing in its attempts to regulate demand for the yellow metal), and yet gold continues to slide. How come? One word - paper, or rather, ETF paper.
- Comments: 166
- Reads: 22,290
Is The Credit Cycle Over?
Submitted by Tyler Durden on 06/18/2013 - 15:21
No matter how much pushing on the market- or economic-string a central planner tries, eventually the risk-based pricing of credit (as opposed to nominal price based stocks) turns the corner from accepting rising leverage as potentially good thing for growth to worrying that cash flows are at risk from an over-generous management transfer to shareholders. The four-year bullish period of this credit cycle is nearing its historical average and leverage is near its cycle highs with near record numbers of firms raising leverage YoY suggesting the credit cycle is over.
- Comments: 38
- Reads: 11,824
Guest Post: The Real Story Of The Cyprus Debt Crisis (Part 2)
Submitted by Tyler Durden on 06/18/2013 - 14:52
As noted yesterday, and perhspa even more prescient now Anastasiades is back with the begging bowl, the debt crisis in Cyprus and the subsequent "bail-in" confiscation of bank depositors' money matter for two reasons: 1. The banking/debt crisis in Cyprus shares many characteristics with other banking/debt crises. 2. The official Eurozone resolution of the crisis may provide a template for future resolutions of other banking/debt crises. It also matters for another reason: not only is the bail-in a direct theft of depositors' money, the entire bailout is essentially a wholesale theft of national assets. This is the inevitable result of political Elites swearing allegiance to the European Monetary Union.
- Comments: 23
- Reads: 9,430
China Joins The Broken "Keynesian Multiplier" Club
Submitted by Tyler Durden on 06/18/2013 - 14:24
A week ago we showed a chart from Charles Gave which does a terrific job at explaining why the modern economic "science", in conjunction with the Fed's negative rate environment, have failed at their ultimate stated mission - to stimulate growth. The reason: the Keynesian multiplier, which has tracked the nominal US GDP 7yr average change with a very high correlation, is now negative. From Gave: "shows that the marginal efficiency of public debt, at least in the US (public spending in emerging markets from a low base usually improves productivity) has been declining structurally since 1981. And it seems that this marginal efficiency has now reached a negative level."... There is now another problem: as the chart below shows, China has developed a Keynesian multiplier problem of its own. Even as the Chinese politburo and the PBOC have been injecting an ever increasing amount of credit into the private sector - the primary source of Chinese growth - the incremental GDP growth has been trending lower, and lower, and lower...
- Comments: 37
- Reads: 8,102
FOMC Decision - "Real Fundamentals" Or "Reaction Function"
Submitted by Tyler Durden on 06/18/2013 - 13:52
It appears the plethora of talking heads discussing the FOMC's potential decision to 'Taper' - and the subsequent sell-offs in a number of risk-assets - believe this action has stemmed from better economic data (as the 'manipulated' unemployment rate has drifted faerie-like towards their target - but don't call it a threshold). However, as Barclays notes and we have been warning, there is another interpretation that is more worrisome for the market - that is a change in the Fed's 'reaction function'. As is clear from the minutes of the latest FOMC meeting, there is a growing concern over bubbles, technical dislocations, and the cost-benefits of a QE program out of control. The market's reaction to these two reasons for 'tapering' will be significantly different and reading the Fed tea-leaves even more critical than ever.
- Comments: 77
- Reads: 9,347
Hedging, Not Selling
Submitted by Tyler Durden on 06/18/2013 - 13:25
It appears that while investors seem loathed to sell their underlying positions, they are actively (and anxiously) hedging in equities and credit today...
- Comments: 40
- Reads: 9,328
Deja Lu, All Over Again
Submitted by Tyler Durden on 06/18/2013 - 12:59In what year was the following written:
The Federal Reserve appears on track to buy the entire [amount of] government debt it has committed to purchase, barring a sharp, unexpected shift in the economy's prospects. If anything, lingering weakness and renewed concerns about global credit markets may lead top officials to lean toward doing more rather than less. A recent batch of better-than-expected economic data, including a relatively upbeat reading on the job market, has raised questions about whether the Fed acted prematurely in pulling the trigger... The Treasury market has been selling off sharply, in part as a response to the somewhat brighter landscape.
The answer...
- Comments: 94
- Reads: 15,575
The Cyprus Bail-In Blows Up: President Urges Complete Bailout Overhaul (Full Letter)
Submitted by Tyler Durden on 06/18/2013 - 12:18
Cyprus' President Nicos Anastasiades has realized (as we warned was inevitable), too late it seems for the thousands of domestic and foreign depositors who were sacrificed at the alter of monetary union, that the TROIKA's terms are "too onerous." Anastasiades has asked EU lenders to unwind the complex restructuring and partial merger of its two largest banks leaving EU officials "puzzled", according to a letter the FT has uncovered, as "essentially, he is asking for a complete reversal of the program." The EU officials claim that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which voted down a first agreed rescue before succumbing to a similar deal nine days later. The FT goes on to note that although the letter does not request it explicitly, Mr Anastasiades is in effect asking for further eurozone loans on top of the existing EUR10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time. The return of beggars-can-be-choosers we presume - or just token gestures to recover some populist support as the enemy of my enemy is my friend.
- Comments: 91
- Reads: 14,986
NSA Foiled NYSE Terrorist Plot, We Now Learn
Submitted by Tyler Durden on 06/18/2013 - 11:59
To think it only took the world's most (in)famous whistleblower to get the NSA to disclose that it had heroically managed to prevent terrorist attacks involving the New York Stock Exchange (we supposed they refer to the Manhattan-based TV studio and not the actual exchange where the servers are now housed in Mahwah, NJ) and the NY Subway. Because whereas there was a time in the past when the various US secret services would scurry at the opportunity to disclose their expertise to the general public, now it is a false negative that is supposed to disprove a positive (pervasive spying on the US population is good for you because...). Of course it takes one non-false positive to disprove a false negative, namely the Boston Bombers, who as far as we recall, used cell phones to communicate. But so much for details: now please praise the NSA, and also comply with the Administration's push to rescind the second amendment. Or is Obama no longer pushing for "arms control"?
- Comments: 282
- Reads: 19,235
Goldman Slams Abenomics: "Positive Impact Is Gone, Only High Yields And Volatility Remain; BOJ Credibility At Stake"
Submitted by Tyler Durden on 06/18/2013 - 11:16
While many impartial observers have been lamenting the death of Abenomics now that the Nikkei - essentially the only favorable indicator resulting from the coordinated and unprecedented action by the Japanese government and its less than independent central bank - has peaked and dropped 20% from the highs, Wall Street was largely mum on its Abenomics scorecard. This changed overnight following a scathing report by Goldman which slams Abenomics, it sorry current condition, and where it is headed, warning that unless the BOJ promptly implements a set of changes to how it manipulates markets as per Goldman's recommendations, the situation will get out of control fast. To wit: "Our conclusion is that the positive market reaction initially created by the policy has been almost completely undone. At the same time, a lack of credible forward guidance for policy duration means that five-year JGB yields have risen in comparison with before the easing started, and volatility has also increased. It will not be an easy task to completely rebuild confidence in the BOJ among overseas investors after it has been undermined, and the BOJ will not be able to easily pull out of its 2% price target after committing to it."
- Comments: 60
- Reads: 11,406
When Correlation Is Causation
Submitted by Tyler Durden on 06/18/2013 - 10:58
It is all too easy to dismiss endless charts showing long-run correlations that have become useless in the current liquidity-fueled boom in stocks and real estate in the US with the "well, correlation is not causation" meme, but in Spain, we suspect, few will argue that the relationship between the surging unemployment rate of the OMT-bound nation and its delinquent loan growth is hard to argue with. With both at record highs (and the latter picking up once again after a temporary haitus of seeming banking delays offered some hope), it appears the southern European nation is going from worse to worst.
- Comments: 25
- Reads: 9,251
