Archive - Oct 20, 2011 - Story

Just out from Reuters:

LIBYA'S GADDAFI DIES OF WOUNDS SUFFERED IN CAPTURE NEAR SIRTE -- SENIOR NTC MILITARY OFFICIAL

All we can say is be careful who you shake hands with. Next up: burial at sea.

While the only market moving events today will come out of Europe, where we will learn just how much of a ponzi scheme the EFSF will be, we will also get largely irrelevant and ignored for anything but HFT kneejerks data on claims, the Philly Fed index, existing home sales, and speeches from several Fed officials.

COT data in the US shows that speculative sentiment has fallen dramatically which is bullish from a contrarian perspective. The Got Gold Report reports that silver futures market data is the most bullish it has been since 2003 - eight years ago. Silver was priced at about $4.40 per ounce then. Large commercial shorts have dramatically reduced their positions after the selloff in recent weeks suggesting that we are likely at or very close to silver bottoming. While the figures for gold are not as dramatic they too show that speculative positions and sentiment has been reduced significantly. Venezuela will repatriate some gold reserves held abroad before December 24th, Central Bank President Nelson Merentes told reporters today in Caracas according to Bloomberg. “I can’t give you an exact date for security reasons,” Merentes said. Venezuela will keep an unspecified portion of its gold reserves in foreign institutions, he said. In August, President Hugo Chavez ordered the central bank to repatriate $11 billion of gold reserves as a safeguard against volatility in financial markets. Venezuela held 211 tons of its 365 tons of gold reserves in US, European, Canadian and Swiss banks as of August.

• France, Germany Split on Crisis Solution (Bloomberg)
• Franco-German deadlock over ECB’s role in rescue fund (Telegraph)
• Merkel Risks Own Downfall to Save Greece (Bloomberg)
• Sustainable debt needed to qualify for EFSF support (Reuters)
• Bill Would Give Residence Visas To Foreigners Who Spend At Least $500,000 To Buy Houses In The U.S. (NYT)
• Couldn't happen to a nicer person: SAC Capital Faces Second Deal Probe (WSJ)
• Bullard Says Fed Policy ‘Appropriately Easy’, Relapse Unlikely (Bloomberg)
• Eurozone leaders meet in Frankfurt (FT)
• Geithner: TARP Refinancing Under Lending Program ‘No Mystery’ (WSJ)

It was only a matter of time before following banning everything else that it could, and that is not under its control, Europe would go after the only thing that matters: the First Amendment. From Bloomberg: "Michel Barnier, European Union. Financial Services Commissioner, wants to give the European Securities and Markets Authority the power to temporarily prohibit credit-rating companies from publishing ratings about ailing countries, Financial Times Deutschland reports. Such a ban could prevent ratings from being published at “inappropriate moments” that could have negative effects on the financial stability of nations as well as on the global economy, the proposal states, according to the German newspaper." Next up: ban on anonymous blogs whose disclosure of the truth could have "negative effects on the financial stability of nations as well as on the global economy." After all the proposal has already been floated by one Todd Martin os Morgan Stanley and currently SocGen fame, with whom, we must admit, we forgot to preclear this post. Full FTD report here. Read it before it has been "filtered" by Europe's commission on truth sterilization.

Following two poor bond auctions in the overnight session from Spain and France, things once again looked set to fall apart in both the stock futures and the FX (EURUSD) markets until the latest deus ex appeared after the latest report by international creditors on Greece’s finances  recommended paying the next installment of aid to Greece as soon as possible. Naturally: after all such a payment is merely passthru funding which Greece hardly sees one sent of, and the bulk of the capital is immediately recycled to creditors in the form of interest expense and debt maturities. Bloomberg quotes “The Commission services recommend the sixth disbursement to Greece to take place as soon as possible: as soon as the agreed prior actions on fiscal consolidation, privatisation and labour market reform, which were announced by the government, have been legislated,” the report by the so-called troika of officials from the European Central Bank, EU Commission and IMF said. Of course, were the Troika to allow full disbursement without any "stern" warnings over the deterioration in the Greek economy, in which nobody works any more, the Finance Ministry is occupied and a general strike is the "new normal", it would have been beyond farcical. Which is why the Troika noted that the Greek debt ratio, which exceeded 140% of GDP at the end of 2010, will remain “at very high levels for many years,” according to a draft report by the Troika. “If fiscal consolidation and privatization targets are respected, and growth responds to structural reforms, the debt ratio may start declining from 2013 onwards...When compared with the outlook of a few months ago, the debt sustainability has effectively deteriorated’." And it will continue deteriorating because Greece now knows too well it can demand anything and everything from Europe and it will get it, since nobody at the Troika can ever refuse to fund the insolvent country's monthly pre-alimony payment.