Archive - Apr 2010

Moore Capital, which was recently blamed for being a CDS "speculator" by Greece and the EU, discloses that it is in fact net long Greek duration (and its P&L is suffering as a result), according to a fund letter obtained by MarketWatch. It is thus not surprising that the fund is lamenting the botched Greek rescue, and the end of the EMU and hopes an effective bail out will soon be instituted. After all most leading hedge funds have been buying up Greek cash debt on the way down (and this certainly includes Paulson) without CDS hedging; they need it to avoid having the embarrassment of explaining to their LP how the only bet on global moral hazard so far this year has not panned out.

The finance minister has failed to convince Conservative MPs to approve his chosen tactic to get the financial help package for Greece fast through parliament. The finance minister had planned to "attach" the financial help to a draft law that had already passed most of the usual parliamentary hurdles. This plan, however, has now been rejected by the Conservative MPs who demanded a specific stand alone law. This may significantly delay the whole process of parliamentary approval. There is the possibility of fast track legislation that would take only about two weeks but the opposition would need to approve this. All this does not imply that the financial help will not be approved by parliament in the end, but it has significantly increased the possibility that the German part of the package will be disbursed only later. - Erik Nielsen

We warned you (here and here). EuroStat reports that the Greek budget was really 13.6% of GDP and the Debt/GDP is more like 115.1%. Greek bond spreads explode to a ridiculous 562 bps on the news, 3 years are at 870, and 5 Year CDS is at 565.

RANsquawk Breaking News: Greek Fears Re-Ignited And RANsquawk European Morning Briefing - Stocks, Bonds, FX 22/04/10

As I warned, Greece is ever closer to default (a default that is damn near guaranteed) while Ireland is probably in worse shape!!! Financial contagion begets economic contagion which breeds more financial contagion...

RANsquawk Breaking News: Greek Fears Re-Ignited

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 22/04/10

Christina Romer, chair of the president’s Council of Economic Advisers, is channeling J.M. Keynes. She stubbornly sticks to the Keynes Manifesto. In fact you could say that Keynes is Obama's chief economic advisor. These are the people who got us into this mess and we ask them to lead us out?

This decision will rank only second after his selection of the new Supreme Court justice in importance for the country, the economy, and your portfolio. The betting is that he will pick three monetary doves who will keep interest rates lower for longer, continuing the steroid injections of free money for the economy. The ghost of libertarian Ayn Rand will no longer be welcome on this board. Setting up a layup for the 2012 election.

In a stunning revalation, Reuters reports that according to South Korean intelligence, the Cheonan ship sinking in late March is due to a torpedo fired by a North Korean submarine. The Kospi is down just 1% right now: we have a feeling it won't stay that way for long once this news is digested. After many had thought that South Korea was clearly covering for what was an overt North Korean act of aggression, this news is sure to take the Pacific Rim market to the edge. If Seoul is overtly accusing North Korea, it can only mean that South Korea will demand direct or indirect retaliation against the North as its government has already come out looking like both incompetent and cowardly. What kind of retaliation by the North this would in turn generate is completely unknown and could potentially escalate into full out conflict. According to South Korean intelligence and the US military, North Kora is now stepping up "drills to infiltrate a submarine south of the naval border, and wage a surprise attack against the South." Next stop - war? It may even cause the S&P to end on a downtick in tomorrow's session. On the other hand, global thermonuclear warfare surely is a victory for the gamma radiation scraper bulls.

What do you do when you are the prime minister of a bankrupt country and your only recourse is to get the Washington D.C.-based IMF to come in and tell you you have to cut wages by about 120% and fire 75% of the country (especially after the same Germans you recently demanded WWII reparations from, mysteriously have decided in the eleventh hour to have their last laugh at your expense). Why, you send in the national guard, armed with fake six-pack ridged bulletproof vests and gas masks, to repeat the miracle of Thermopylae against the marauding population which has suddenly realized that the past 10 years of chimeric happiness were a one-time miracle thanks to Mr Goldman and fat, and somewhat stupid, uncle Almunia. The next thing you do, once you realize you are about to have a [revolution|uprising|civil war] is to declare a moratorium on your €300 billion of debt, make your people happy and stick it precisely to the same bankers that you complain about every single day for "speculating" against you. Tomorrow Greece will face the trifecta of a much delayed hangover as 1) its bonds hit 9% as the hedge funds who have been buying up in expectations of a snapback capitulate, 2) EuroStat declares its deficit was officially 14%, and 3) a Greek civil servant strike in their fourth national walkout this year.

Jim Bianco warns that "punishingly high" rates are coming in the second wave of the financial crisis. If he's right, it will be a bloodbath.

Olivier Blanchard, chief economist at the International Monetary Fund (IMF), talks with Bloomberg this morning about the prospects for an asset bubble in China. Blanchard, speaking from Washington, also discusses the impact of sovereign debt on global economic growth.

From the mailbag:

Brief update on my lenders' attempts to collect credit card debt. Stopped making all payments over a year ago.

BANK OF AMERICA   $35,000
CHASE BANK            $16,000
CITIBANK                 $30,000
DISCOVER                $10,000

Chase Bank has been singularly aggressive, in January filing civil suit represented by Zwicker & Assoc. As to the others, collection company mailings and phone calls have mostly ended, leaving the impression that they are following the Chase case. Not at all surprising, but hopefully informative. Perhaps time for another solicitation of related anecdotes?

So, dear readers, which is it? Are you all dutifully filing taxes, paying off your bills, sending in your monthly mortgage checks and prefunding Goldman's now-quarterly bonus payments? Or have you maxed out your last remaining credit card to buy Kindles (that's a given) and bars of silver? Let us know.

On April 7, 2010 the President of Kyrgyzstan Kurmanbek Bakiyev fled the capital city of Bishkek that was under a state of emergency after antigovernment protesters started clashing with security forces following incidents that started in the Northern city of Talas, close to the Kazakhstan border. By the end of April 7, Radio Free Europe Radio Liberty was reporting 40 dead and 400 wounded, numbers that have over doubled since. In this context, one can only wonder which country in Central Asia could be next, if any, and which Central Asian leader could find himself out of a job and possibly on an airplane.