Archive - Jul 23, 2010
If Everything Is So Good, Why Am I Feeling So Bad?
Submitted by Econophile on 07/23/2010 23:06 -0500This week the S&P 500 was up 7.3% for the month, corporate earnings have been looking good, retail sales inched up last week, the CPI is low, interest rates are low, Dr. Bernanke is ready to pump money into the economy if things go awry, most European banks passed their stress test, and we've got a new financial markets regulation bill which will save us from economic collapse. What's to worry?
Comparing CPPIB and PSPIB FY 2010 Results
Submitted by Leo Kolivakis on 07/23/2010 22:13 -0500For all you pension buffs, a comparison of CPPIB and PSPIB FY 2010 results...
China Calls Our Bluff: "The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation but [U.S.] Rating Agencies Still Give it High Rankings"
Submitted by George Washington on 07/23/2010 19:13 -0500Here's the scary part ...
Musings on Kids and Asia
Submitted by Vitaliy Katsenelson on 07/23/2010 15:35 -0500China is not a black swan, because a black swan is a rare, significant, and unpredictable event. However, the consequences of what is transpiring in China and Japan are for the most part predictable (especially if I am writing about it). We don’t know when they will play out, but they are predictable.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 23/07/10
Submitted by RANSquawk Video on 07/23/2010 15:20 -0500RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 23/07/10
European Bank Stess Test Joke: This Insolvent Euro-Bank and Group of Central Bankers Met at a Bar and…
Submitted by Reggie Middleton on 07/23/2010 12:19 -0500So, a bank that is insolvent nearly two times over is found to have passed the European bank stress tests. Exactly what does it take to fail!!! Let's dig in and find out, shall we.
RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 23/07/10
Submitted by RANSquawk Video on 07/23/2010 11:57 -0500RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 23/07/10
Open Thread
Submitted by Tyler Durden on 07/23/2010 11:48 -0500Due to an intensive travel schedule over the next 24 hours, posting will be limited (and if prior travel experience is any indication, Greece riots over the next week may be anticipated). Please consider this thread open to mock, ridicule, debase and taunt the now completed Stress Farce, as well as to brainstorm anything and everything else that may be of interest.
Stress Test Update: Europe Calculates Cost Of Nuclear Holocaust At €0.69
Submitted by Tyler Durden on 07/23/2010 11:26 -0500Also Europe finds that :
- Full GoM clean up will be around 2 bucks
- The cost of the Large Hadron Collider was reduced to a couple of dimes
- The US budget "deficit" is estimated to actually be a $100 quadrillion budget surplus
- Merrill's expense tab at Hustler Club is only $19.95
- etc.
European Bank Investors, Don’t Look Now – You’ve Been Hoodwinked, BamBoozled…
Submitted by Reggie Middleton on 07/23/2010 11:13 -0500Yes. You're being hoodwinked, Bamboozled, and Lied to. Let's take a common sense look at the parameters and criteria published concerning these (no) stress tests...
Hypo Fails, All Other German, Portuguese, French Banks Pass Test
Submitted by Tyler Durden on 07/23/2010 11:05 -0500And we uncover that the German Landesbanks (the equivalent of the bankrupt Spanish cajas) did their own stress tests. Time for the PPT to step in with this pretext and soak up all offers. Totally pathetic BS.
Update 1: Somehow Bank of Ireland "passes" the test but needs over €2 billion in extra equity... uhm... WTF??? This is the point where the audience rushes the stage and burns the theater down.
Update 2: 5 Spanish cajas, 1 German and 1 Greek banks are eliminated on their quest to marry the US taxpayer. 84 other banks will soon be the recipients of far more US taxpayer generosity. And with that the season finale of the farce comes to a close.
Cleveland Fed Goes Che: Advocates Debt Forgiveness Over Bankruptcy For Corporate Debtors
Submitted by Tyler Durden on 07/23/2010 11:00 -0500The Cleveland Fed has spent another boatload of taxpayer money analyzing a topic so simplistic even a 5 year old would know the answer in advance, to wit: "Is debt overhang causing firms to underinvest?" Let's see here... Uh yeah. And you can keep the $1,000,000 "research" cost. While the paper is sufficiently entertaining courtesy of a few graphs, flow charts and general widgets, the conclusion is startlingly absurd. In essence the authors conclude (in less than definitive terms) that debt forgiveness may be the best outcome for highly leveraged companies: "The debt-overhang problem may be so severe that creditors can actually benefit from forgiving a portion of the debt. With excessively high levels of debt, the risk of default is large and the market value of debt is well below its face value. If the creditors forgive part of the debt in this situation, the lower debt burden helps realign the interests of the equity holders and the creditors. The firm’s effort and investment will rise, increasing the total value of the firm and the market value of the remaining debt. If this effect is strong enough, the market value of the remaining debt may be even higher than the market value of the total debt in the absence of debt forgiveness, in which case debt relief will ultimately benefit the creditors themselves." Well, now we know the reason for the financial cram up, in which stockholders were spared while preferred and sub debt was being raped back in 2008. Yet if this thinking is indicative of prevailing Fed ideology, the move for a wide-reaching, Federally-mandated debt repudiation may be just steps away. And just in case you note that the Chapter 11 process, in which existing underwater debt is converted into post reorg equity, is a perfectly logical, viable and working alternative, the authors will have none of such dogma: "A creditor takeover of the firm after it defaults is another potential solution to the debt-overhang problem. Creditors would have an incentive to undertake all profitable investment
opportunities. However, this solution is not satisfactory either, since
most investment opportunities depend on business continuity and
disappear or lose substantial value when default occurs and the equity
holders lose control of the firm." Because creditors obviously have no idea how to preserve business continuity if they end up being the equityholders....And in case you were wondering, author Filippo Occhino does have a Ph.D from a (semi) respectable institution.
David Rosenberg Looks At The Sugar High Light... And Picks The Dark
Submitted by Tyler Durden on 07/23/2010 10:48 -0500Whereas Alphaville presents several statutory observations by David Rosenberg as to a variety of reasons over which one "could" be bullishly inclined based on a goal seeked read of the data (if one so chose), his daily letter is once again capped with yet another bearish summation: the bad news more than drowns out all the positivity, even if that means that another double dip is practically priced in.
Guest Post: Normalization: Inflation, Deflation, and Convergence
Submitted by Tyler Durden on 07/23/2010 10:42 -0500A lot of talk about what the “New Normal” means. Here’s a contribution.
There are three essential ingredients to the one we have.
- Higher, less stable volatility
- Lower returns
- Unstable inflation expectations
All three of these contribute to the risk?on/risk?off mentality markets exhibit. The focus here is inflation expectations. Not only is it the fuel for the inflation?deflation debate, it is a leading indicator for the shape of the next normal coming up. The next step is a settling down of expectations.
The “Frontier” Markets are Beckoning
Submitted by madhedgefundtrader on 07/23/2010 10:29 -0500This is turning into a year when the world’s least liquid, most untradeable countries offering minimal amounts of public information and disclosure, are bringing in the best returns, shutting most of us out. The mainstream BRIC countries are becoming increasingly crowded. “Frontier” or “pre-emerging” markets are the place to be.









