Just after the FTSE Mib announced it is in process of breaking once again, we get notification that the Italian banks are resuming their rolling halts as predicted earlier this morning, with Intesa the first to go offline after plunging 7.9%. What next: any selling will be punshiable by death? Or will the Society for the Prevention of Cruelty to the Status QuoTM not go that far?
It is a day ending in -y, which means the TOTUS will be out there, somewhere, sharing all the juicy fiscal wonders still untapped and hidden deep in his magic sleeve, from whence they will be pulled after the American Jobs Act (the most recent Keynesian flashbang grenade to be lobbed at the middle class), fizzles out. Watch it live here.
It is too early to proclaim that ding dong, the vampire squid is dead, but it just dropped below triple digit range for the first time since March 2009. To anyone who enjoys to wager, this may be a good time to put some money that a Management/Buffet Buy Out (MBBO) of Goldman Sachs may be in the works.
For a Restructuring to Credit Event it has to meet some conditions. We have already been made to understand that anything that is “voluntary” is not a Credit Event. So if investors agreed to be paid back in another currency, it wouldn’t be a Credit Event in any case. But let’s just assume that with the bigger countries, some investors will resist any “voluntary” program. Then for a Restructuring Credit Event to occur, either the interest rate has to be lowered, some debt has to be forgiven, the maturity of the debt has to be extended, or the debt has to be changed to something other than a Permitted Currency. It is the Permitted Currency clause that would allow a country like Italy to keep all the terms of bonds the same, but pay back in Lire, and not trigger a CDS Credit Event. Permitted Currency includes the legal tender of any G-7 country. Germany and France could also play this game, but they have spent so much time defending the Euro they seem the least likely to do it. Italy on the other hand would welcome a weak lire. They could stop worrying about austerity and focus on getting a Ferrari in every garage in the Hamptons. Seriously, the Italian economy could perform extremely well if they revert back to making Lire legal tender (note, it does not say it has to be the only legal tender of a country, just that it has to be legal tender, so Italy could continue to use Euro while it re-introduces the Lire).
As Stocks Surge On Rumor Of Additional QE Measures, Someone Forgot To Tell Europe It Is Fixed: CDS RerackSubmitted by Tyler Durden on 09/12/2011 - 10:17
Even as stocks surge on the back of the latest rumor that yet another perpetually wrong Medley report has been released and states that the Fed may cut the IOER to zero in addition to Operation Twist (we have not seen the report nor have any interest in putting any faith in a "think tank" work product), someone has apparently forgotten to tell Europe it is all filed. Here is the CDS rerack, which unfortunately shows that this latest stock ramp is to be faded, especially since QE3-666 are already priced in, and will all eventually fail.
In The Meantime, ECB QE Is On In Full Force With About $100 Billion In Open Market Bond Repruchases In Past MonthSubmitted by Tyler Durden on 09/12/2011 - 09:58
And so the ECB's balance sheet, once upon a time clean of any monetization interventions, continues to deteriorate, and has now grown to a record €143 billion, after the bank disclosed €13.96 billion in PIIGS debt purchases in the prior week. This is an additional €70 billion since the SMP was expanded to purchase Italian and Spanish debt in early August (predicated by Italy complying with an Austerity prgoram that it has since made a complete mockery of). So for those complaining about the ECB pursuing Quantitative Easing, we wonder what one would call nearly $100 billion in bond repurchases in the open market in the past month: this is about as much as the Fed would purchase in its most active monetization month during either QE1 or QE2!
Nothing actually new here, but listening to Art Cashin retall the latest end of the world episode in that wise, grizzled voice of his brings a soothing element to what is set to be another dramamine-friendly week."Over the weekend, the battle has shifted. German authorities talk openly of the likelihood of a Greek default. They are said to be developing a plan to backstop German banks in the event of a Greek default. That puts pressure on other banks, especially French banks, since there is no Gallic backstop plan. Collateral damage could be to bring no bids to the next Greek auction, or make them pay such high rates as to make the auction toxic. The Euro crisis is quickly evolving into a Gordian Knot....U.S. markets are at near-critical levels. The uptrend line that caused the last bounce (S&P 1140) is around 1145. Key support levels are 1140, 1132, 1120 and ultimately 1101. The new Battle of Thermopylae is on the way."
A month after the short sale ban was implemented in French and Spanish banks, we thought it important (and perhaps educational for our European politician readers) to note the performance - French banks are down 14% and Spanish banks -8%. Can we finally put to rest the idea that a speculative cabal of mean short-sellers is responsible for the market's jitteriness? Perhaps it is simply a market trying to discern reality from manipulated machinations?
European Liquidity Blow Out As Euribor-OIS, USD Libor, And ECB Deposit Usage All Soar To Yearly HighsSubmitted by Tyler Durden on 09/12/2011 - 09:04
There are only three charts that matter currently for a snapshot of the liquidity pulse in Europe. And unfortunately, it continues to be in V-Fib, according to the Euribor-OIS (spread between central bank and interbank borrowing or explicit riskiness in non-printing press backstopped market), the 3M USD LIBOR (or the funding need for USDs), and the ECB Deposit Facility Usage (lack of safe alternatives on where to plant bank cash). Well, the first is at 84.9bps, +2.9, the widest since March 19, 2009, the second is at 0.343, up from 0.338%, and the widest since August 18, 2010, and deposit facility usage is at €182 billion, the widest since July 2010.
Just when one thought Wall Street could not become more full retard, here comes David "Kermit" Bianco who, perfectly oblivious of the world ending one broke European country at a time, has just released the following: "S&P 500 2011 year-end target remains 1400, 12-month target raised to 1450 from 1400 12-month target raised on time value and conviction in 2012 EPS being ~$100 barring recession." Barring recession? Has this "strategist" even looked at a TV in the past three months, let alone exited the island of lunatic asylum that is Manhattan? But wait, the humor continues, although we are 100% confident this joke of a snake oil salesman will be on CNBC any minute. As a reminder, Bianco had an S&P price target of 1650 until October 6, 2008, or after the Lehman bankruptcy. He would end up being off by only well over 100%.
- Sources close to the situation said during the weekend that Moody's may cut credit ratings of major French banks including Societe Generale, BNP Paribas and Credit Agricole. However, SocGen’s CEO downplayed the news, and ECB’s Noyer said that French banks have no liquidity issues
- German economy minister Roesler didn’t rule out an orderly Greek bankruptcy. However, a German Economy Ministry spokesman said that instruments for an orderly Greek debt insolvency is not currently being readied
- UK’s ICB, in its report, recommended “ring fencing” UK banks’ retail arm, which will incur a cost of between GBP 4-7bln. However, it gave the banks till 2019 to implement those measures
Update: NO CONTAMINATION FROM EXPLOSION AT FRENCH MARCOULE NUCLEAR SITE - FRENCH POLICE: RTRS... hopefully the accuracy here is better than at Fukushima
The following story is very fluid and we are following closely. Minutes earlier shares of french EDF have come under selling pressure following broad headlines of a explosion at a French nuclear power plant. Here is what we have found so far...
It is not often that you can look at stock futures implying an open of down more than 1% and wonder why they are so optimistic. European credit can be summed up as "the horror, the horror, the horror". XOVER hit 808 or 35 wider on the day. Main is at 202, or +11. Financials are a mess - Fins Snr is 315 or +22 on the day. All are back to near their wides. SocGen stock is below 16 and DB was down almost 10% and 46% on the year. And that was the good news! Greek bonds are dropping again. Yield is largely meaningless for Greece, but it is still eye-catching to mention that Greek 1 year bonds yields more than 100% at a price of 53.5% of par. With the 10 year bonds at 45% of par, the yield inversion is almost over, and the next phase is for the market to create a rumor that Greece is going to be trading "flat" (trading with no accrued is the final step before default).