Archive - Mar 1, 2012

Somehow, following three years of defaults, the world has only now figured out that the ISDA CDS trigger determination committee is made up of the same bankers, who stand to lose everything in the case of global out of control contagion, such as that which may occur if an unwelcome CDS trigger sends the house of cards collapsing, and force mark to market losses on all those institutions which hold impaired debt at par (all of them). As a result, the ISDA meeting which is currently in process is expect to find absolutely nothing, and we agree, however not for that particular 'conspiratorial' reason, but because ISDA is waiting for the PSI outcome for a realistic finding on a credit event. Because after all ISDA is not stupid: they don't want to appear like a pushover - remember how vehemently ISDA had opposed a Greek CDS trigger in the days when Europe still was not prepared for this outcome -  but on the other hand wants to preserve some CDS market credibility, which would disappear if none of the recent events in Greece were to trigger CDS. Yet more Greek creditors are getting impatient. Even as the first ISDA meeting has to find (that there has been no CDS trigger), the association's determination committee has just released that it has gotten a second question whether a "Restructuring Credit Event occurred with respect to The Hellenic Republic?" We find it rather odd (or not really) how suddenly quite a few requests are springing out of the woodwork by creditors who obviously are interest in a Greek default. As such the PSI gets quite interesting, because if the pre-PSI action is any indication, quite a few creditors are rather interested in triggering just the event they now consistently badger ISDA with.

Battle talk.

Consume beverages at your own risk...

Regular readers are all too familiar with the saga of Goldman Sachs, which back in December 2010 called for a new American golden age, only to crash and burn as the economy not only slid right back into its depressionary glidepath but had to be bailed out by the Fed yet again. Sure enough, back in December of last year, the same firm made a surprising forecast, being the first of many (as others naturally jumped on the Goldman bandwagon), calling for an imminent housing bottom. Naturally, we scoffed at said proclamation. Two months later, which have seen two months of deteriorating conditions and declining prices, Goldman is out, saying that it may have just been kidding. From Goldman's Hui Shan: "In December 2011 we published a new house price model for 147 metro areas that pointed to a decline of around 3% from mid-2011 through mid-2012 before stabilizing in the year thereafter. Excess supply and negative house price momentum were the main drivers of the projected decline over the subsequent four quarters. In the year thereafter, the model suggested that house prices would stabilize as the negative momentum faded. Our model also pointed to substantial variation in house price appreciation across metro areas. Although city-by-city house price dynamics are particularly difficult to model, we projected increases in Detroit, Miami and Cleveland, but significant declines in Portland, New York and Atlanta during the next two years. Since publication of this forecast--which was based on Case-Shiller house price data up to 2011Q2--house prices have weakened anew....The implications of these changes are threefold: First, we now see a somewhat weaker near-term house price outlook. Specifically, we forecast that house prices will decline by 3.3% from 2011Q3 until 2012Q3, and by an additional 1.1% between 2012Q3 and 2013Q3. Second, the expected bottom in house prices is pushed out from end-2012 to mid-2013. Third, the long-run outlook for house prices is not significantly affected by our update." So for anyone basing their housing recovery call on Goldman, sorry - Goldman was only kidding. Again.

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