Archive - Mar 9, 2012
Greece Has Defaulted: Here Is Where We Stand
Submitted by Tyler Durden on 03/09/2012 19:33 -0500After reading this, everyone should have a fairly good grasp of what happened not only today, but ever since the great (and quite endless) European financial crisis took center stage, and what to look forward to next...
“A harder Default To Come”
Submitted by testosteronepit on 03/09/2012 19:18 -0500In Greece, only 36% of the population work. And now the system is locking up.
Chris Martenson Interviews Robert Mish: Front-Line Evidence That We are Nowhere Near a Gold Bubble
Submitted by Tyler Durden on 03/09/2012 18:54 -0500
Robert Mish has been a precious metals dealer for nearly 50 years and knows what a gold bubble mania looks like. We are nowhere near that stage, in his opinion. Instead, he sees a US populace largely unappreciative of holding precious metal as a store of wealth, and engaged in a slow process of dis-hording their gold and silver to eager foreign buyers who are more than happy to take the bullion back to their shores. In terms of where we are on the gold mania spectrum, he sees us at a "2" out of 10. But he foresees a very rude awakening ahead as the populace eventually wakes up to the increasing damage our over-debted global economy is doing to the purchasing power of world currencies. Because when the general investor finally realizes the protection the precious metals offer against currency debasement, much of the retail supply will already be out of the system in very tight hands, and largely overseas. Moreover, when supply gets tight, there will be more challenges to obtaining physical bullion during a buying mania than there were during the last one in 1980. There are many fewer local sources to exchange bullion these days as much of that business is now transacted by online vendors dependent mail delivery to ship product, which are more vulnerable to supply chain disruptions. And be sure you're aware of how the form you hold your bullion in will affect the price you get during a buying frenzy, when refining capacity is overwhelmed. You may find you gold or silver sells at a hefty discount because it's not in a preferred format for trade.
No More QE? Bill Gross Isn't Buying It, As Total Return Fund MBS Holdings Surge To New All Time High
Submitted by Tyler Durden on 03/09/2012 18:22 -0500
The Fed may be using the WSJ to spread rumors of sterilized QE, but Bill Gross ain't buying. According ot the latest update from the world's largest bond fund, the firm lowered its holdings of cash and synthetic Treasury exposure to 38% of total from 41% (even as AUM increased from $250.5 billion to $251.8 billion), while hiking MBS to 52% of AUM: not the highest relative exposure ever, but at $131 billion in Mortgage Backed Debt, certainly the highest in absolute terms. Margin cash declined slightly from $87.7 to $78.1 billion, but one thing that appears to have increased even more is Gross' conviction that QE 3, or to borrow a recent euphemism, THE NEW QE, is coming and it will be all about mortgage backed debt. Of secondary note is that after extending the effective duration of its holdings to an all time high 7.58 years in October 2011, the fund has rapidly cut duration and was at 5.68 at last check as holding in the 1-3 year bucket saw a substantial jump: indicating the ramp up in short duration MBS paper.
The Fed Cannot and Will Not Be Unleashing QE 3 Next Week...
Submitted by Phoenix Capital Research on 03/09/2012 18:16 -0500For all this talk and hype, QE 3 is nowhere to be found. And it won’t be showing up anytime soon unless a full-scale Crisis hits. The reason for this is that the political landscape in the US has changed dramatically with the Fed becoming more and more politically toxic. As a result of this, the Fed (with few exceptions) has begun to shift into damage control mode.
The European Bailout-And-Borrow Train Has Run Out Of Track
Submitted by Tyler Durden on 03/09/2012 17:24 -0500
The first instinct of any card-carrying Eurocrat is to reach for his wallet, or as clear-thinking MEP Daniel Hannan points out, someone else's wallet. His prophetic words with regard the bailout-and-borrow bandwagon, that Europe remains on, running out of track are so critical that they bear repeating as he remains incredulous that his fellow MEPs still see the one solution to a debt crisis as yet more debt...
Did BP Cause Damage to the Gulf Sea Floor … Which Is Leading to Ever-Larger “Natural” Oil Seeps from the Macondo Reservoir?
Submitted by George Washington on 03/09/2012 16:52 -0500Has BP Made “Natural” Oil Seeps In the Gulf Larger?
Short Greek Bonds vs Long Apple: No Contest
Submitted by Tyler Durden on 03/09/2012 16:43 -0500
One may be surprised to learn that in the past 6 months NASDApple is not the best performing "asset class." Sure, it has generated a respectable 43% return since last September when the Greek 1 Year bond crossed a 100% yield for the first time ever (or a cash price of 54). That was also the time when many were saying to buy Greek bonds as there was no chance the yield could tumble much further (probably the same ones who said to buy AAPL). As it turns out, now that the saga of Greece is officially over, and its existing debt is being "retired" at a final price of about 19 cents of par, here is the final tally: shorting Greek bonds since September 2011 has generated 63%, while being long Apple returned 43%. And that's with virtually every hedge fund and their mother entering the Apple hedge fund hotel. So yes - sometimes going against the conventional groupthink does generate the best results. Now if only one could short the "new" Greek bonds at par, the return would be 80% in a millisecond as the bonds will break for trading under 20 cents.
Germany Wants New European Constitution: "There Are New Centers Of Power In The World."
Submitted by Tyler Durden on 03/09/2012 16:16 -0500
Germany wants to "reignite a debate over creating an EU constitution to strengthen the bloc's ability to fight off financial troubles and counter-balance the rising influence of emerging economies". Guido Westerwelle noted that Germany EU leaders "need a new constitution... as there are new centers of power in the world." A key change that Germany wants for instance is an amendment to incorporate tighter regional oversight of government spending and allow the EU court of Justice to strike down Spain's a member's laws if they violated fiscal discipline. Here comes the 'Pro-Quo' to the Greek Bailout 'Quid'!
As First Greek CDS "Anstalt" Appears, A Question Emerges: Did Banks Not Square Off Margins?
Submitted by Tyler Durden on 03/09/2012 15:25 -0500The irony is not lost on us that Bloomberg is reporting that KA Finanz, an Austrian bad-bank supported by the Austrian government, faces as much as a €1 billion need for funding to cover its exposures to Greek CDS (coughcreditanstaltcough). In a statement this morning, which we noted in a tweet, the bank noted "activation of the CDS with an assumed loss ratio of about 80% would mean an additional provisioning charge of EUR 423.6 million". KA Finanz's total amount of Greek CDS exposure is around EUR1bn. What is shocking and should be of great concern is that we have been led to believe that very little net cash will change hands on the basis of the $3.2bn net aggregate market exposure. This was based on the now false premise that variation margin was maintained and transferred throughout the process (as we note below from recent IMF filings). What appears to have happened is that dealer to dealer variation margin has been, let's say, less rigorous as perhaps all collateral was netted up across all exposures (or simply ignored on the basis of government backstops). The far bigger question then is: are banks simply marking ALL sovereign CDS at par, and not paying off cash to other dealers? Remember it only takes one counterparty in the chain to turn net into gross and quality collateral seems tied up a little right now at the ECB (or with margin calls).
ISDA CDS Trigger Decision Is Unanimous
Submitted by Tyler Durden on 03/09/2012 14:53 -0500In light of today’s EMEA Determinations Committee (the EMEA DC) unanimous decision in respect of the potential Credit Event question relating to The Hellenic Republic (DC Issue 2012030901), the EMEA DC has agreed to publish the following statement:
The EMEA DC resolved that a Restructuring Credit Event has occurred under Section 4.7 of the ISDA 2003 Credit Derivatives Definitions (as amended by the July 2009 Supplement) (the 2003 Definitions) following the exercise by The Hellenic Republic of collective action clauses to amend the terms of Greek law governed bonds issued by The Hellenic Republic (the Affected Bonds) such that the right of all holders of the Affected Bonds to receive payments has been reduced. The EMEA DC has resolved to hold an auction with respect to the settlement of standard credit default swaps for which The Hellenic Republic is the reference entity. To maximise the range of obligations that market participants may deliver in settlement of any such credit default swaps, the EMEA DC has agreed to run an expedited auction process such that the auction itself will take place on March 19, 2012. In light of this expedited auction process, market participants should submit any obligations that they would like to include on the list of deliverable obligations to ISDA as soon as possible.
ISDA Finds Greek Credit Event Has Occurred Reports Bloomberg
Submitted by Tyler Durden on 03/09/2012 14:47 -0500Total confusion around this, as there is no formal Press Release from ISDA yet, but since this one comes from Bloomberg, let's assume they have double checked their data. From Bloomberg:
- ISDA EMEA DETERMINATIONS COMMITTEE: RESTRUCTURING CREDIT EVENT
- ISDA SAYS CREDIT EVENT HAS OCCURRED WITH RESPECT TO GREECE
- COMMITTEE DETERMINES AUCTION TO BE HELD ON MARCH 19
- ISDA EMEA: AUCTION TO BE HELD ON OUTSTANDING CDS TRANSACTIONS
This despite refutations from ISDA 15 minutes ago that no decision had been reached. Of course, if this is a spoof PR that has gotten half the media world confused, the farce will be 100% complete.
Three Charts Of Equity Complacency Pre-ISDA
Submitted by Tyler Durden on 03/09/2012 14:17 -0500
UPDATE: Equity reverted down to Vol, Implied Correlation, CONTEXT, and credit - credit leaking further down now
Equities have drifted sideways at their highs for the last few hours. Meanwhile, credit markets have sold off, Volatility and implied correlation have pushed higher, and broad risk assets (CONTEXT) has leaked lower. Complacency, or do stock momo algos know something everyone else doesn't?
Guest Post: Our "Let's Pretend" Economy: Let's Pretend "Job Growth Is Best Since 2006"
Submitted by Tyler Durden on 03/09/2012 14:12 -0500The Ministry of Propaganda and its media minions are announcing that "job growth is on a tear" and the "best growth since 2006." How about we look under the hood of the employment euphoria? Here is an example of the Ministry's work: Best U.S. employment growth in 12 years Almost all the data agree — labor market’s on a tear.
Over the past six months, the number of people who are employed has risen by 2.3 million — an average of 385,000 per month. That’s the best growth since early 2000, when the dot-com bubble was in full flower. Since August, the unemployment rate has fallen by 0.8 of a percentage points, to 8.3%. For adults over 25, the jobless rate has fallen to 7%.
In other words, people who generally work full time so they don't have to share a bunk in a flop house or live in their parents' basement are almost fully employed, as 'full employment" typically generates an unemployment rate of 5% just due to churn. Would we as a nation be better off dealing with the truth rather than believing fantasies that prop up the Status Quo and the Fed's dearly beloved measure of the economy, the stock market? How often does accepting illusion help us navigate real life? Short answer: never.
Papademos Speaks - Point And Counterpoint
Submitted by Tyler Durden on 03/09/2012 13:52 -0500The fearless ECB-plant leading the Greek people on an unelected basis has spoken. Here are the key points and counterpoints





