The bankruptcy of Energy Future Holdings, aka TXU, aka the largest LBO ever has been long in coming. As we previewed it most recently in September of last year, "if there was one deal that epitomized the last credit bubble, aside from the Blackstone IPO of course, it was the ginormous, $45 billion 2007 LBO of TXU, now Energy Future Holdings... the time to pay the piper for the last credit-fuelled binge has arrived and inevitable bankruptcy of this landmark deal is now just days away." It turned out it was more like months away, but it finally arrived, and moments ago, TXU finally succumbed to (lack of) cash flow reality, when it filed for a prepackaged Chapter 11 bankruptcy on Tuesday morning after months of negotiations with creditors aimed at speeding the restructuring of the private-equity backed utility's debt load of more than $40 billion. While it is unclear just how much total debt the company will ultimately restructure, it is likely that the final number will be greater than Enron's, making this also the largest ever non-financial bankruptcy in history.
Name The Continent: It Accounts For 7% Of The World's Population, 25% Of GDP And 50% Of Welfare SpendingSubmitted by Tyler Durden on 04/28/2014 21:21 -0400
Angela Merkel has a favourite mantra to offer troubled euro-zone countries: they should copy Germany. As The Economist notes, she put it last autumn: "What we have done, everyone else can do." Fifteen years ago, so she says, her country was widely regarded as the sick man of Europe; then it opted for fiscal austerity, cut labour costs and embraced structural reforms, turning it into an economic powerhouse. However, there is another mantra Mrs Merkel likes to repeat to her colleagues: Europe accounts for 7% of the world’s population, 25% of GDP and 50% of social-welfare spending. The Economist, and George Soros believe, Germany’s current course will exacerbate that problem as Europe's biggest economy is backsliding on structural reforms (as she preaches pre-growth reforms but implements anti-growth ones).
- U.S. Plans to Hit Putin Inner Circle With New Sanctions (BBG)
- Russian Billions Scattered Abroad Show Trail to Putin Circle (BBG)
- GE’s Alstom Bid Gains Steam as Hollande Said Not Opposed (BBG)
- Russia-West tensions pressure stocks, buoy oil prices (Reuters)
- Toyota Said to Plan to Move U.S. Sales Office to Texas (BBG)
- Egyptian court seeks death sentence for Brotherhood leader, 682 supporters (Reuters)
- Greece warned of 14.9 billion euro financing gap (FT)
- Comcast to shed 3.9 million subscribers to ease cable deal (Reuters)
- Big U.S. Banks Make Swaps a Foreign Affair (WSJ)
- Ukraine Accord Nears Collapse as Biden Meets Kiev Leaders (BBG)
- Novartis reshapes business via deals with GSK and Lilly (Reuters)
- Moscow Bankers See Fees Slide 67% as Ukraine Crisis Grows (BBG)
- Why ECB's QE will be Ukraine's fault: Draghi Gauges Ukraine Effect as ECB Tackles Low Inflation (BBG)
- As Phone Subsidies Fade, Apple Could Be Hurt (WSJ)
- Amazon Sales Take a Hit in States With Online Tax (BBG)
- Ford Speeds Up Succession Plan: Mark Fields, Auto Maker's No. 2, Seen Replacing Alan Mulally as CEO Ahead of Schedule (WSJ)
- U.S. force in Afghanistan may be cut to less than 10,000 troops (Reuters)
- IBM End to Buyback Splurge Pressures CEO to Boost Revenue (BBG)
Earlier today, the Central Bank of Russia announced that starting April 21, it would revoke the license of Moscow’s Bank Zapadny. According to reports, "the bank had cooked its books and failed to comply with regulations on the amount of assets a financial organization must maintain to ensure its stability, the central bank said." In other words, your typical FDIC Failure Friday only on Monday morning. Hardly notable. It is what happened next that was shocking. Shortly after the bank shutdown announcement, an armed man took three hostages at a Belgorod branch of precisely this failed Bank Zapadny. Tt appears this may simply be the latest case of a disgruntled bank client taking matters into his own hands. As RT reports, "he may be a client of the bank wishing to withdraw his deposit despite the bank losing its license.....Life News tabloid says it has identified one of the attackers as 46-year-old Aleksandr Vdovin, a client who holds the bank’s promissory notes for a large sum, and who decided to reimburse them at gunpoint."
Keep interest rates at zero, whilst printing trillions of dollars, pounds and yen out of thin air, and you can make investors do some pretty extraordinary things. "Central bankers control the price of money and therefore indirectly influence every market in the world. Given this immense power, the ideal central banker would be humble, cautious and deferential to market signals. Instead, modern central bankers are both bold and arrogant in their efforts to bend markets to their will. Top-down central planning, dictating resource allocation and industrial output based on supposedly superior knowledge of needs and wants, is an impulse that has infected political players throughout history." The result was always a conspicuous and dismal failure. Today’s central planners, especially the Federal Reserve, will encounter the same failure in time. The open issues are, when and at what cost to society?
“Bail-in” means that the bank’s owners - the shareholders, and creditors - the bondholders and now even depositors, will be line to absorb losses banks will incur, before outside sources of finance may be called upon. Deposit confiscation cometh ...
- Ukraine Says Russia Exporting ‘Terror’ Amid Eastern Push (BBG)
- Civil War Threat in Ukraine (Reuters)
- China Shoe Plant Strike Disrupts Output at Nike, Adidas Supplier (BBG)
- Mt Gox to liquidate (WSJ)
- Ex-Co-Op Bank Chairman Charged With Cocaine Possession (BBG)
- Goldman Sachs plans to jump-start stock-trading business (WSJ)
- Credit Suisse first-quarter profit falls as trading tumbles (Reuters)
- U.K. Unemployment Rate Falls to Five-Year Low (BBG)
- Lawmakers Back High-Frequency Trade Curbs in EU Markets Law (BBG)
- Yahoo's growth anemic as turnaround chugs along (Reuters)
- Spain ETF Grows as Rajoy Attracts Record U.S. Investments (BBG)
After tens of millions in legal fees, a river of negative press, and ripple effects to other local municipalities, we have U-turned and are back to where we started.
- The counter-HFT-attack begins with first target - dark pools: Dark markets may be more harmful than high-frequency trading (Reuters)
- Malaysia Jet Team Hears Pings Consistent With Black Box (BBG)
- At Toyota as Humans Steal Jobs From Robots (BBG)
- ‘Reverse Auctions’ Draw Scrutiny (NYT)
- Death knell sounds for Brazil’s economic strategy (FT)
- Technology Traders Head for the Exit as Put Trades Surge (BBG)
- NSA Uses Corporate News to Spread Propaganda and Silence Dissent (TruthDig)
- Holcim, Lafarge agree to merger to create cement giant (Reuters)
- Any minute now: Investment Jump Seen From Macy’s to Berkshire After 2013 Fizzle (BBG)
- India kicks off world's biggest election in remote northeast (Reuters)
Dispassionate big picture overview.
The reasons to hold gold (and silver), and we mean physical bullion, are pretty straightforward. So let’s begin with the primary ones:
- To protect against monetary recklessness
- As insulation against fiscal foolishness
- As insurance against the possibility of a major calamity in the banking/financial system
- For the embedded 'option value' that will pay out handsomely if gold is re-monetized
The punch line is this: Gold (and silver) is not in bubble territory, and its largest gains remain yet to be realized; especially if current monetary, fiscal, and fundamental supply-and-demand trends remain in play.
The risk that creditors, savers and bondholders, rather than taxpayers will bear the brunt of rescuing a bank in trouble form part of the first credit ratings given to 18 of Europe's biggest banks yesterday by new ratings agency, Scope.
A week ago we wrote: 'While it has been public for a long time that i) JPM is eager to sell its physical commodities business and ii) the most likely buyer was little known Swiss-based Mercuria, there was nothing definitive released by JPM. Until moments ago, when Jamie Dimon formally announced that JPM is officially parting ways with the physical commodities business. But while contrary to previous expectations, following the sale JPM will still provide commercial gold vaulting operations around the world, it almost certainly means farewell to Blythe Masters." Sure enough:
JP MORGAN COMMODITY CHIEF BLYTHE MASTERS LEAVING, WSJ SAYS
Farewell Blythe: we hope your replacement will be just as skilled in keeping the price of physical gold affordable for those of us who keep BTFD every single day.
After ramping in overnight trading, following the spike in Japanese stocks following another batch of disappointing economic data out of the land of the rising sun and setting Abenomics which sent the USDJPY, and its derivative Nikkei225 surging, US equity futures have pared some of the gains in what now appears a daily phenomenon. Keep in mind, the pattern over the past 6 consecutive days has been to ramp stocks into the US open, followed by a determined fade all the way into the close, led by "growthy" stocks and what appears to be an ongoing unwind of a hedge fund basket by one or more entities. Could the entire market be pushed lower because one fund is unwinding (or liquidiating)? Normally we would say no, but with liquidity as non-existant as it is right now, nothing would surprise us any more.