The finance minister has failed to convince Conservative MPs to approve his chosen tactic to get the financial help package for Greece fast through parliament. The finance minister had planned to "attach" the financial help to a draft law that had already passed most of the usual parliamentary hurdles. This plan, however, has now been rejected by the Conservative MPs who demanded a specific stand alone law. This may significantly delay the whole process of parliamentary approval. There is the possibility of fast track legislation that would take only about two weeks but the opposition would need to approve this. All this does not imply that the financial help will not be approved by parliament in the end, but it has significantly increased the possibility that the German part of the package will be disbursed only later. - Erik Nielsen
Game Over: EuroStat News Blows Up Greece - 3 Year Spread At Ridiculous 870 bps, 5 Year CDS Hits Record 565Submitted by Tyler Durden on 04/22/2010 - 08:11
We warned you (here and here). EuroStat reports that the Greek budget was really 13.6% of GDP and the Debt/GDP is more like 115.1%. Greek bond spreads explode to a ridiculous 562 bps on the news, 3 years are at 870, and 5 Year CDS is at 565.
RANsquawk Breaking News: Greek Fears Re-Ignited And RANsquawk European Morning Briefing- Stocks, Bonds, FX 22/04/10Submitted by Tyler Durden on 04/22/2010 - 08:03
RANsquawk Breaking News: Greek Fears Re-Ignited And RANsquawk European Morning Briefing - Stocks, Bonds, FX 22/04/10
In a stunning revalation, Reuters reports that according to South Korean intelligence, the Cheonan ship sinking in late March is due to a torpedo fired by a North Korean submarine. The Kospi is down just 1% right now: we have a feeling it won't stay that way for long once this news is digested. After many had thought that South Korea was clearly covering for what was an overt North Korean act of aggression, this news is sure to take the Pacific Rim market to the edge. If Seoul is overtly accusing North Korea, it can only mean that South Korea will demand direct or indirect retaliation against the North as its government has already come out looking like both incompetent and cowardly. What kind of retaliation by the North this would in turn generate is completely unknown and could potentially escalate into full out conflict. According to South Korean intelligence and the US military, North Kora is now stepping up "drills to infiltrate a submarine south of the naval border, and wage a surprise attack against the South." Next stop - war? It may even cause the S&P to end on a downtick in tomorrow's session. On the other hand, global thermonuclear warfare surely is a victory for the gamma radiation scraper bulls.
What do you do when you are the prime minister of a bankrupt country and your only recourse is to get the Washington D.C.-based IMF to come in and tell you you have to cut wages by about 120% and fire 75% of the country (especially after the same Germans you recently demanded WWII reparations from, mysteriously have decided in the eleventh hour to have their last laugh at your expense). Why, you send in the national guard, armed with fake six-pack ridged bulletproof vests and gas masks, to repeat the miracle of Thermopylae against the marauding population which has suddenly realized that the past 10 years of chimeric happiness were a one-time miracle thanks to Mr Goldman and fat, and somewhat stupid, uncle Almunia. The next thing you do, once you realize you are about to have a [revolution|uprising|civil war] is to declare a moratorium on your €300 billion of debt, make your people happy and stick it precisely to the same bankers that you complain about every single day for "speculating" against you. Tomorrow Greece will face the trifecta of a much delayed hangover as 1) its bonds hit 9% as the hedge funds who have been buying up in expectations of a snapback capitulate, 2) EuroStat declares its deficit was officially 14%, and 3) a Greek civil servant strike in their fourth national walkout this year.
Open Thread: This Reader Is Not Making Any Payments On Just Under $100,000 Of Credit Card Bills, Are You?Submitted by Tyler Durden on 04/21/2010 - 19:34
From the mailbag:
Brief update on my lenders' attempts to collect credit card debt. Stopped making all payments over a year ago.
BANK OF AMERICA $35,000
CHASE BANK $16,000
Chase Bank has been singularly aggressive, in January filing civil suit represented by Zwicker & Assoc. As to the others, collection company mailings and phone calls have mostly ended, leaving the impression that they are following the Chase case. Not at all surprising, but hopefully informative. Perhaps time for another solicitation of related anecdotes?
So, dear readers, which is it? Are you all dutifully filing taxes, paying off your bills, sending in your monthly mortgage checks and prefunding Goldman's now-quarterly bonus payments? Or have you maxed out your last remaining credit card to buy Kindles (that's a given) and bars of silver? Let us know.
On April 7, 2010 the President of Kyrgyzstan Kurmanbek Bakiyev fled the capital city of Bishkek that was under a state of emergency after antigovernment protesters started clashing with security forces following incidents that started in the Northern city of Talas, close to the Kazakhstan border. By the end of April 7, Radio Free Europe Radio Liberty was reporting 40 dead and 400 wounded, numbers that have over doubled since. In this context, one can only wonder which country in Central Asia could be next, if any, and which Central Asian leader could find himself out of a job and possibly on an airplane.
It was a peculiar session on Wednesday. If one looked at the benchmark expiring crude oil contract, one saw a market unable to build on Tuesday’s gains, a market that was lightly lower despite a generally improving mood among investors that he economy is coming right. In a lower front-month crude contract, traders saw a very disappointing weekly DOE report, which had shown builds in all three major categories, in marked contrast to the more prmosing report that had come out Tuesday evening from API, which showed drawdowns in all three categories. One might also have seen the stronger US dollar, the very mild gains in the DJIA and lingering concern over the impact of last week’s volcanic eruption in Iceland, which had grounded most of Europe’s air transportation fleet up through yesterday. Most of Wednesday’s inputs were bearish.
Richard Koo Says If Banks Marked Commercial Real Estate To Market,It Would "Trigger A Chain Of Bankruptcies"Submitted by Tyler Durden on 04/21/2010 - 18:22
Richard Koo's latest observations on the US economy are as always, a must read. The critical observation from the Nomura economist explains why the realists and the naive idealists are at greater odds than ever before: the government continues to perpetuate, endorse and legalize accounting fraud in the hope that covering everything up under the rug will rekindle animal spirits. The truth, as Koo points out, is that were the FASB to show the real sad state of affairs, the two core industries in the US - finance and real estate, would be bankrupt. "If US authorities were to require banks to mark their commercial real estate loans to market today, lending to this sector would be extinguished, triggering a chain of bankruptcies as borrowers became unable to roll over their debt." In other news Citi, Bank of America, and Wells just reported fantastic earnings beats on the heels of reduced credit loss provisions. Nothing on the conference call mentioned the fact that all would be bankrupt if there was an ounce of integrity left in financial reporting, and that every firm is committing FASB-complicit 10(b)-5 fraud. One day, just like Goldman's mortgage follies, all this will be the subject of epic lawsuits. But not yet. There is some more money to be stolen from the middle class first, by these very firms.
Paging Christine Varney. Finally, what Zero Hedge has been pounding the table on for months is starting to make it through to (some of) the ruling elite. In an interview with Dylan Ratigan, Bernie Sanders, who unfortunately is not quite representative of the prevailing DC groupthink yet), says: "it is not just a too big to fail problem, it is monopolistic control of the economy and the incredible concentration of ownership. If Teddy Roosevelt were here right now, the guy who broke up all the big special interests in his day: if he believed that two-thirds of the credit cards were being issued by four banks, does anyone think we should not be breaking these guys up."
The argument for breaking them up is blatantly simple: to protect taxpayers against another TBTF episode, as well as to preempt their concentration of ownership which means "unbelievable power and monopolistic influence over the whole economy."
Sanders, following in William Black's footsteps, is also painfully blunt: "the issue is not whether Congress regulates Wall Street, it's the degree to which Wall Street regulates Congress."
Spreads managed to hold onto modest widening today in the US as IG underperformed HY, indices underperformed intrinsics, single-name activity was extremely muted, and low beta underperformed high beta. Notable underperformance in Europe, spreading idiosyncratic sovereign risk to SovX to FINLs to Main and up to XOver was not enough to upset the optimistic US investor today, though it was one of the least convicted days in a long time.
John Paulson, the hedge fund investor behind the toxic CDO
referenced in the S.E.C. complaint, ratcheted up his
nobody-saw-it-coming rhetoric, with a letter nominally addressed to his own investors but clearly intended for a broader audience of ignoramuses and amnesia victims:
"It is easy to forget that before the collapse, the
overwhelming view of investors, ratings agencies and economists was
that the housing market was strong and would continue to get stronger."
The opposite is true. Nobody was saying that the housing
market was strong and would continue to get stronger during the weeks
prior to April 26, 2007, the closing date of Goldman's notorious Abacus 2007-AC1.
There are countless ways to discredit Paulson's statement, just as
there are countless ways to discredit his claim that he operated in "good faith." (As Vanity Fair was kind enough to point out, Paulson's bad faith manipulations were first highlighted here on HuffPo seven months ago.)
Recently we posted seismic readings of Iceland's Katla volcano, which indicated the tremors around the area have increased substantially in the last few days. Today, the Associated Press covers just how much of an imminent threat an eruption at Eyjafjallajokull's cousin, Katla, could be.
Delegations from the IMF, European Commission and ECB – a reported total of 20 people – are arriving in Athens today to start negotiations on the macro conditionality of the rescue package. Its been indicated that the IMF loan could be a 3-year Stand-by worth up to €12-15bn, co-financed by a €30bn package of bilateral loans from the other 15 Euro-zone members disbursed during the next 12 months. Meanwhile, markets are reacting very negatively although– to my knowledge – there are no new news. - Erik Nielsen, GS
Eariler today there was an auction of €3 billion 30 Year Bunds that failed to attract enough demand to cover the offer: only €2.752 billion in bids were collected, with just €2.458 was sold. This is the first failed bond auction in Germany in over a year. This puts into question the entire premise of entities like PIMCO who believe that German bonds are the go-to flight to safety. Of course, this could be a temporary blip in light of the uncertainty of how Germany will handle Greece now that German opposition has said it would not bail out the troubled PIIG - in many ways this in itself is a game changer for the EMU, or just an artifact of the maturity of the 30 Year: presumably the "flight to safety" sweetspot is focused in the 3-7 year range. On the other hand, peripheral weakness should have generated incremental demand for Bunds if conventional wisdom is correct. What is certain is that auction weakness was instrumental in facilitating weakness at countries like Portugal, and Greece. Although the latter certainly does not need the help.