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In the News Today July 6th, 2010
Relevant news clips…
CNBC reports Banks Too Big
to Fail, Too Big to Bail Out: Roubini:
Europe faces the quandary of being
unable to afford to bail out banks that are still considered too big
to fail, while the global economy is heading for a slowdown economist
Nouriel Roubini told CNBC.
Governments are running out of ways
to counter a “massive slowdown” or the risk of a double-dip recession,
Roubini said.
“A year ago we had all these policy
bullets,” he said. “We could push down rates to zero, we had
(quantitative easing), we could do a budget deficit of 10 percent of
GDP (or) backstop the financial system.”
“Banks at this point are too big to
fail, but also too big to be bailed, especially in Europe where the
sovereigns are in trouble and therefore the ability to backstop the
financial system is not there,” he said.
Roubini said he was unimpressed with
the
June US employment report, pointing out that the
jobless rate fell because of a large number of discouraged workers
leaving the labor force, and also noted recently weak data on
manufacturing, retail sales and housing.
“Everything signals a slowdown of
the US, a slowdown of Europe, a slowdown of Japan and a slowdown of
China,” he said.
BoomBustBloggers should be well positioned to take advantage of this
development. Starting January of this year I made it clear that the EU
was “Ovebanked,
Underfunded, and Overly Optimistic: The New Face of Sovereign Europe”
Sovereign Risk Alpha: The Banks Are
Bigger Than Many of the Sovereigns
This is just a sampling of individual
banks whose assets dwarf the GDP of the nations in which they’re
domiciled. To make matters even worse, leverage is rampant in Europe,
even after the debacle which we are trying to get through has shown the
risks of such an approach. A sudden deleveraging can wreak havoc upon
these economies. Keep in mind that on an aggregate basis, these banks
are even more of a force to be reckoned with. I have identified Greek
banks with adjusted leverage of nearly 90x whose assets are nearly 30%
of the Greek GDP, and that is without factoring the inevitable run on
the bank that they are probably experiencing. Throw in the hidden NPAs
that I cannot discern from my desk in NY, and you have a bank that has
problems, levered into a country that has even more problems.
Texas Tar Balls Mean Oil
Spill Has Spread to Entire Gulf:
More than two months after oil from
BP’s blown-out seafloor well first reached Louisiana, a bucket’s worth
of tar balls that washed onto a pair of Texas beaches means the crude
has arrived in every Gulf state.
Oil is still on the move, but the
fleet of skimmers tapped to clean the worst-hit areas of the Gulf of
Mexico is not. A string of storms has made the water too
choppy for the boats to operate for more than a week off Florida,
Alabama and Mississippi, even though the gusher continues.
The number of tar balls discovered
in Texas is tiny compared to what has coated beaches in other Gulf
states. Still, it provoked the quick dispatch of cleaning crews and a
vow that BP will pay for the trouble.
“Any Texas shores impacted by the
Deepwater spill will be cleaned up quickly and BP will be picking up
the tab,” Texas Land Commissioner Jerry Patterson said in a news
release.
The oil’s arrival in Texas was
predicted Friday by an analysis from the National Oceanic and
Atmospheric Administration, which gave a 40 percent chance of crude
reaching the area.
“It was just a matter of time that
some of the oil would find its way to Texas,” said Hans Graber, a
marine physicist at the University of Miami and co-director of the
Center for Southeastern Tropical Advanced Remote Sensing.
Also in Bloomberg: BP
Appeals to Sovereign Funds for Support Against Bids and `Killing’
BP’s Leaking Macondo Oil Well Will Take Mud, Precision Pressure:
British oil company BP
is seeking support from sovereign wealth funds in the Middle
East and Asia to defend itself from any takeover bids while it deals
with its massive U.S. oil spill, a senior UAE source said on Tuesday.
BP executives have held talks with a
number of sovereign wealth funds (SWFs) including Abu Dhabi, Kuwait,
Qatar and Singapore, the source told Reuters under condition of
anonymity.
“BP is seeking a strategic partner
so it doesn’t get taken over by other major oil companies such as Exxon
and Total,” the source said. “It’s BP that is approaching the
sovereign wealth
funds not the other way round. They are the ones in need of a
partner.”
The Government of Singapore
Investment Corp (GIC), one of two sovereign wealth funds in the nation,
already owns around 0.7 percent stake in BP valued at $122 million,
according to Thomson Reuters data.
As my readers may remember, I projected losses for BP in the
anticipation of potential insolvency. Those numbers were quite
conservative, and the pessimistic case projections are already proven
too optimistic. I will plug in new numbers for BP if the situation
warrants further analysis. See BoomBustBlog
Bankruptcy Search: Focus on British Petroleum and Collateral Damage:
an objective look at the prospects of BP’s potential insolvency.
I will attempt to post some meaty proprietary analysis around the
following news stories later on today. Expect a full26 page
(Pro/Institutional version, retail is condensed) HSBC forensic report
and a strategic analysis of Google, plus a haircut analysis of Italy
sovereign debt over the next 24 to 48 hours.
- Italy Is the Ticking Time
Bomb: Economist - Fed’s Fisher Warns of US
Economic Slowdown - EU Reveals Backup Plan
for Troubled Banks - China’s Property
‘Collapse’ Will Hit Banks: Rogoff - iPhone Supply Chain
Highlights Rising Costs in China - Australia Keeps Rates
Unchanged, Stays Upbeat on Asia - Citigroup Weighs Moving
Proprietary Traders: Report - HSBC Clients in US Tax
Probe: Report
- advertisements -
so are the bankers working on some kind of hostile takeover of the sovereigns through debt addiction?
Bailouts are just corporate methadone.
Since the inception of daytrading and HFT/Prop trading by the big firms, why can't they just create a seperate market for 401k/IRA etc.. plans ( typical buy and hold long term investments and such)? It would be like two seperate exchanges completely. Let each market value itself.
Let the HFT/Derivative/MBS/etc.. idiots and day traders trade their silliness and kill each other all they want, and let the people trying to save for retirement invest in a seperate market. It is obvious the craziness began once daytrading was made legal, and ever since then the markets have been out of whack and getting worse.
It is time to address the real underlying problem, instead of creating ways to hide and cover up the facts. No one wants to participate in the scam on Wall St. anymore and it is evident.
Iceland and North Dakota have the right idea. What the hell do they have in common you ask? Iceland has told the bankers to go to hell in a hand basket preferably! And North Dakota owns their own central bank, enjoying the fruits of their own labour with the lowest unemployment rate of the nation.
Time to join the winners and end private banking once and for all time. Banks are here to service people and economies - not the other way round!
Pull all your money out of banks and join a local credit union. Have nothing to do with the global banking cartel. Do not keep feeding them - let them starve and wither for want of funds. Sell your bank stock and invest the proceeds in your local credit union. Keep your local economy strong. Most importantly - pass the message.
Have em fail and let god sort out the debt.
Gotta love it.
Remember when pre-CDS evils, everything was blamed upon off balance sheet special purpose vehicles, the SPV's?
So Europe, in its infinite financial engineering wisdom (subsequent to way back then having wanted to out law those evil SPV's) now sets one up to bail out the very nations financing the SPV and guaranteeing it's performance, utilizing the very currency which is itself, the locus of the turmoil.
Sounds solid to me. AAA's across, anyone?