Did HSBC not get the memo: the collusive attempt to pass debit card fees has failed. We jest of course, but in the footsteps of Bank of America which experienced a mini online bank run some weeks ago, this would at least explain what the Mail Online has dubbed a "worldwide meltdown" in which online banking, ATMs and debit cards appear have been blocked, and no customer access is available. From the British publication: "Thousands of HSBC customers faced the ultimate embarrassment of having their cards declined this afternoon as the bank suffered a 'worldwide meltdown'. Fourty seven countries have potentially been affected in the world's second largest bank. Cards were rejected at tills, cash machines read that withdrawal limits for today had been reached, and the card enquiries phoneline was also down. Unsurprisingly there was pandemonium in HSBC branches up and down the country as people rushed to find out why their cards had rejected." Sure enough, a few hours after this started we get this: "HSBC SAYS AWARE OF `SOME PROBLEMS' ON ITS BANKING NETWORKS" Supposedly what is a "worldwide meltdown" to some is "some problems" to others. Perhaps the bank's ad execs can use that theme for its next Hegelian ad.
Former Bundesbank President Weber Warns Germany Will Be On The European Bail Out Hook For Up To 314% Of Its GDPSubmitted by Tyler Durden on 11/04/2011 - 11:52
Anyone wondering why Axel Weber was passed over when picking the next ECB head in exchange for Goldman plant Mario Draghi, only needs to read a piece from Sueddeutsche Zeitung in which the former German central bank head, and future UBS head, confirms he actually does math. As has been said on Zero Hedge since back in July 21, when we actually did the math and realized the EFSF will not work as it will leave Germany footing the bill for all of Europe, Weber in essence said precisely that... but did not stop there. As quoted by Bloomberg, "Former Bundesbank President Axel Weber said the plan to leverage the European Financial Stability Facility increases the likelihood that tax payers have to step in, Sueddeutsche Zeitung reported. Germany’s public debt would rise to 135 percent of gross domestic product if Italy and Spain were to tap the EFSF financial backstop, the newspaper cited Weber as saying in a speech in Frankfurt. As the sole guarantor to the EFSF, Germany could end up with a debt of 314 percent of GDP in an extreme case, Weber said." This in turn brings us back to our own conclusion from 5 months ago: "What happens when an already mortally wounded in the polls Angela Merkel finds herself in the next general election and experiences an epic electoral loss? We will find out very, very shortly." We are happy that finally the Germans are realizing that the opportunity cost to propping up their export sector (the Euro, hence a "weak" DEM) can potentially be the bankruptcy of their country. We wonder how long until someone bypasses that despotic regime in Greece and actually proposes a referendum in Germany, asking the people if they are truly willing to subsidize their corporations in exchange for drowning in debt for millennia? America has already done this and, trust us, it is not pleasant.
UPDATE: GRPN trades with a $25 handle
Groupon opens at a market cap of about $18 billion. We won't even pretend to know what the magical forward EPS for that valuation is. But no, the real bubble is in gold... The only question we have is whether GRPN will drop below its IPO price in a matters of days or hours. Oh, and where and when can we buy puts, of course.
Starting to feel lost in what is an interminable and constant barrage of rumors, lies, insinuations, speculation, and just broadly, headlines? Fear not: here is Reuters with what may be the most useful invention of the EMU collapse era: the intraday visual headline tracker.
UPDATE: BTPs trading with an 88 handle!
All it took was 30 minutes of reality-soaked headlines from Cannes and Draghi's heroic efforts to hold 10Y BTPs below 450bps have failed. BTPs have reached almost 456bps over Bunds now - only 6bps tight of all-time intraday record wides.
Back To European Sov Exposure: Moody's Will Downgrade Austria's Erste Over Attempt To Hide Billions In Sovereign CDSSubmitted by Tyler Durden on 11/04/2011 - 10:09
Before MF Global went bankrupt due to European sovereign exposure, the smart money was that Austria's Erste would be "it." After all, recall from our October 10 post "that Erste disclosed some major losses on its €5.2 billion CDS portfolio, consisting of "EUR 2.4 billion related to financial institution exposures, and EUR 2.8 billion related sovereign exposures". Why is this a surprise? UK-based financial advisory Autonomous explains: "The fact that Erste had a sovereign CDS portfolio which was not marked-to-market has left many investors scratching their heads. As a reminder the EBA stress test data showed Erste to have zero sovereign CDS exposure within its sovereign mix compared to the €2.8bn it now appears to have ‘fessed up’ to (taking a cumulative €460m hit). They also have €2.4bn exposure to banks via writing of CDS. The bulk is non-PIIGS but banks spreads have moved in the same manner as sovereigns (albeit wider and more volatile)." And there you have it: the bogeyman that everyone has been warning about, yet nobody has seen, CDS written (as in sold) in bulk against other sovereigns and other banks which up until now were only mythical, as they, to quote the EBA (which had Dexia as its safest bank) simply did not exist. Oh, they exist all right, and what they do is create a toxic spiral of accentuating losses whenever the risk situation deteriorates, creating positive feedback loops of ever increasing losses until the next Dexia appears... and then the next... and the next. Expect the market to latch on to this dramatic revelation like a rabid pitbull once the hopium high from today's EURUSD short covering squeeze wears off." Of course, the market ignored this loud warning bell, and next hting you know MF was under. This time it won't be so easy, especially since Moody's just announced it is about to downgrade Erste precisely for this reason. This move also explains why the market is suddenly rife with rumors of a broad Austria downgrade.
Because while the prospect of democracy returning to Greece may have been killed (for now), the world is discovering that not only will nothing else be accomplished at the "No We Cannes't" meeting, but the world will now be fully focused on Italy which unlike Greece, is not quite so easily fixable. Europe's propose solution: make italy an IMF protectorate. We give this plan exactly 24 hours before massive failure, and before attention returns to the top news of the week: the EFSF is a complete dud, and Europe will never be able to fund the €1 trillion bailout fund.
- BERLUSCONI SAYS ITALY AGREES TO EU MONITORING
- BERLUSCONI SAYS IMF TO CARRY OUT `CERTIFICATION' EVERY 3 MONTHS
- BERLUSCONI SAYS ITALIAN DEBT HELD MOSTLY HELD BY ITALIANS - like Mario Draghi
- BERLUSCONI SAYS ITALY HAS NEVER HAD TROUBLE SERVICING DEBT
And in other headlines, confirming just how impossible any form of organized decision-making is in Europe, how ironic it is to think that Obama will ever say no to his banker masters, or just how happy China will be to bail Europe out after it is about to be snubbed all over again, here they are...
As BTPs broke 450bps over Bunds and approached the dreaded 88 handle, suddenly someone decided 6.3% yields were more than acceptable (and well worth holding over a weekend including the Greece vote!!). It seems the SMP is back in action with Draghi at the helm...it certainly seems he has no problem for now purchasing bonds!!
US Needs To Generate 262,500 Jobs Monthly To Return To Pre-Depression Employment By End Of Obama Second TermSubmitted by Tyler Durden on 11/04/2011 - 09:29
We will simply copy and paste, with the appropriate adjustments, the form text we put up after each and every NFP report calculating the number of people that have to be added by the end of a hypothetical second Obama term. Using the October boilerplate: "Every few months we rerun an analysis of how many jobs the US economy has to generate to return to the unemployment rate as of December 2007 when the Great Financial Crisis started, by the end of Obama's potential second term in November 2016. This calculation takes into account the historical change in Payroll and includes the 90,000/month natural growth to the labor force, and extrapolates into the future. And every time we rerun this calculation, the number of jobs that has to be created to get back to baseline increases: First it was 245,500 in April, then 250,000 in June, then 254,000 in July [then 261,200 in October]. As of today, following the just announced "beat" of meager NFP expectations, this number has has just risen to an all time high 261,200 262,500. This means that unless that number of jobs is created each month for the next 5 years, America will have a higher unemployment rate in October 2016 than it did in December 2007. How realistic is it that the US economy can create 16.2 million jobs in the next 6261 months? We leave that answer up to the US electorate."
While we have commented on the technical minutia of the LCH's margining rules and their blended AA benchmark, 450bps over Bunds remains a clear line in the sand in the market's mind. With Italy ever so graciously accepting (and if we believe the headlines - requesting!!) IMF's observation/supervision, it seems real money continues to leave the country's bonds in droves. With 10Y BTP yields breaking 6.3% today, the spread over Bunds just passed 450bps once again - will Draghi step up to the plate?
And back to the old gimmicks: the Birth Death adjustment has now "added" 530 jobs in 2011, or 42% of the total 1,256K jobs added in 2011, and the October number of 102K is 31K greater than a year earlier. Truly business formation in the current recession is soaring...
Nonfarm Payroll Increase Less Than Expected At +80K, Unemployment Rate Drops To 9.0% Vs 9.1% ConsensusSubmitted by Tyler Durden on 11/04/2011 - 08:33
Once again, Goldman was correct. From the report, "Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment in the private sector rose, with modest job growth continuing in professional and businesses services, leisure and hospitality, health care, and mining. Government employment continued to trend down." While October missed consensus by 15K, September was revised from 103K to 158K. The change in private payrolls was +104K on expectations of 125K (down from an upward revised 191K), while manufacturing payrolls, or whatever is left of them, was +5K on expectations of +2K. The labor force participation ratio was flat at 64.2%, just off the 30 year low. What is truly hilarious, and what confirms the L should be permanently scrapped from the BLS is that the initial August NFP number of 0 has now been revised twice to 104,000 or whatever suites the US policy at the time.
The G-20 is almost over and it looks likely to end with some indications that the IMF will put more money into Europe in some form and that all the leaders will pledge to continue to work together to resolve the debt crisis. Since resolve doesn't involve letting Greece default and remain in the Euro (the best solution for that country) we will have to continue to guess at what resolve means. The economic data out of Europe was weak. Europe is already in a recession. Using every ounce of political energy and available funds to prop up the price of bank shares, seems a horrible waste and is unlikely to do much for real companies and the economy. In the end it still seems like default or print are the most likely options and all these games that are being played to nudge the can a bit further are draining scarce and valuable resources from projects that might be a lot better for everyone in the medium to long term.
No IMF, EFSF Participation In European Bailout: Merkel Says G20 Fails To Reach Agreement On IMF Resources, Nobody Wants Any Piece Of EFSFSubmitted by Tyler Durden on 11/04/2011 - 08:06
Yesterday we reported that the latest deus ex machina in the endless European bailout was to proceed with IMF monetization and failing that, just a narrower US-funded bailout of Europe. That ain't happening.
- German Chancellor Merkel says the G20 failed to agree on IMF resources
- German Chancellor Merkel says will make sure that the IMF has sufficient resources, but also new instruments
And it gets worse:
- German Chancellor Merkel says hardly any countries in G20 have said they will participate in the EFSF
Which means we are back to the old and now expired fallback deus exes: China and the magical, wonderful and totally unfunded EFSF. No wonder the EURUSD is dropping on the news, as for the BTP-Bunds spread, well, following the Merkel announcement that Italy has to come under IMF monitoring, see below...