Pimco's Michael Gomez, who recently shared the floor with Hugh Hendry, Marc Faber and Nassim Taleb, and who was likely the key voice in Pimco's recent decision to accumulate German Bunds, shares insights on the euro, Greece and new investment opportunities. Based on this Bloomberg TV interview, it is likely that PIMCO will soon be accumulating a variety of Polish and Brazilian sovereign bonds, as well as corporate bonds in Brazil, Mexico and Russia, with an emphasis on the first. With tens of billions in dry powder, PIMCO will likely have an increasingly risky EM exposure as it departs from its traditional MBS/UST portfolio.
EU Announces Immediate And Highly Indeterminate "Action" To Be Taken On Greece, No Disclosure What It IsSubmitted by Tyler Durden on 02/11/2010 08:04 -0500
The non-bailout bailout is here. Or is it? They really should have used Larry Summers. Van Rompuy says "determined and coordinated action if needed" will be provided. Uh, it is needed. But what is the deal? And what are the details? Greek 2s10s 40 bps steeper to +93 bps as 2 Year trades 56 bps lower to 4.97%.
As just stated, the action of the last four trading days presents a few challenges. One scenario suggests that the rescue rally runs out of steam today or tomorrow. It then could reverse sharply to the downside, retesting or penetrating Friday’s intra-day lows.
A second scenario suggests that the rally hangs on, consolidating as it again tests the 1105/1110 area. There are also a variety of chart patterns that may be forming. The S&P looks to have a budding head and shoulders showing up on the napkins. Robert McHugh sees a potentially ominous wedge topping formation in the S&P. For today, the napkins suggest resistance in the S&P sits at 1083/1088 and then 1094/1099. Support looks like 1058/1063." - Art Cashin
Goldman is not making any friends today (to be expected - Greece likely does not need Goldman's creative swap accounting anymore - after all, they (Greece, not Goldman) are bankrupt right? Why else would they need a bailout). Earlier we first reported about Goldman's novel read of the "revised" Greek budget. It appears Greece is not too happy with this and is already blaming Goldman for data misinterpretation. We await Erik Nielsen's mea culpa.
More as we get it.
Goldman's Erik Nielsen lands the bombshell that the Greek deficit mysteriously increased from €29.4 billion to a shopping €37.9 (keep in mind, this is not Bernanke notation where only quad- prefixes impress people at this point). This increases the (running) 2009 budget deficit from 12.2% to 16%! While certainly not the last time we hear of "prior revisions", the question of just how patient Germany will be, should this number approach, oh say, 50% once the artificial support of various Goldman swaps expires (and at 50% the BSDs like Goldman will surely round up to 100%), is very much open.
A story of some folks who stumbled and why. This story could be Greece or Spain in a year or two.
This latest on Greece, this time from Dow Jones. Why is Obama speaking about windmills as the future of global moral hazard, Larry Summers edition, is being decided in Berlin? From DJ: "Finance Ministry spokesman Michael Offer said EU members wanted to develop further recapitalization measures that calm the markets."
Crazy pill time. More disinformation as we get it. Is Germany merely probing to see the market reaction to leaks? If the Bund collapses can they just call the whole thing off?
First Greece, Now Spain: Moore Capital, Brevan Howard, Paulson As Well As JPM And Goldman Implicated In Spanish CDS RoutSubmitted by Tyler Durden on 02/09/2010 09:47 -0500
Yesterday we reported on "concerted hedge fund attacks" rumors involving Greece. Today, via Alphaville, it appears that the mysterious hedge fund cabal strikes again, this time in Spain, and, more relevantly, this time there are names associated. If indeed these are the actors set on setting the world ablaze, they are more than likely the same ones who are involved in Greece, Portugal, Dubai, and elsewhere. Presenting: Moore Capital, Brevan Howard and Paulson & Co... Oh and JP Morgan and, ahem, Goldman Sachs.
Greece just implemented pension reforms in an attempt to shore up its public finances and others will follow suit...
As we look forward, we ask, who now determines the variation margin on Greek CDS (and Portugal, and Dubai, and Spain, and, pretty soon, Japan and the US), the associated recovery rate, and how much collateral should be posted by sellers of Greek protection? If Greek banks, as the rumors goes, indeed sold Greek protection, and, as the rumor also goes, Goldman was the bulk buyer, either in prop or flow capacity, it is precisely Goldman, just like in the AIG case, that can now dictate what the collateral margin that Greek counterparties, and by extension the very nation of Greece, have to post on billions of dollars of Greek insurance. Let's say Goldman thinks Greece's debt recovery is 75 cents and the CDS should be trading at 700 bps, instead of the "prevailing" consensus of a 90 recovery and 450 spread, then it will very likely get its way when demanding extra capital to cover potential shortfalls, since Goldman itself has been instrumental in covering up Greece's catastrophic financial state and continues to be a critical factor in any future refinancing efforts on behalf of Greece. Obviously this incremental margin, which only Goldman will ever see, even if the CDS was purchased on a flow basis, will never be downstreamed on behalf of its clients, and instead will be used to [buy futures|buy steepeners|prepay 2011 bonuses|buy more treasuries for the BONY $60 billion Treasury rainy day fund].
In essence, through its conflict of interest, its unshakable negotiating position, and its facility to determine collateral requirements and variation margin, Goldman can expand its previous position of strength from dictating merely AIG and Federal Reserve decision making, to one which determines sovereign policy! This is unmitigated lunacy and a recipe for financial collapse at the global level.
With Greece getting all the imminent default attention, have we forgotten California? Jim Grant chimes in.
In the pre-math of the Greek collapse, conspiracy theories are swirling about who keeps blowing Greek CDS spreads wider. The answer, so far completely unconfirmed, is that a large US investment bank (we "wonder" just which US investment bank dominates the sovereign CDS market), and two major hedge funds are behind the CDS "attacks" on Greece, Portugal and Spain. According to Jean Quatremer, and his Coulisses de Bruxelles, UE blog, the plan involves blowing spreads to record levels, and is prompted by the hedge funds' anger at not having been allocated substantial amount of the recent €8 billion GGB issue, in order to lock in profits from their CDS long exposure. Being thus unhedged with a short bias, their alternative is to continue buying protection else risking to mark losses on their extensive CDS short risk exposure.
The Run On Greece Is Here: Investors Pull Out €10 Billion From The Troubled Country; Crisis Escalation ApproachesSubmitted by Tyler Durden on 02/07/2010 14:28 -0500
Remember the proverbial run on the bank? Well, that was the norm (or rather the outlier) before governments decided to backstop entire financial industries residing within their territory. As a result, the post-Lehman version of "the bank run" will henceforth be referred to as "the country run" and for an example of one in practice, look no further than Greece. The Guardian reports that investors have pulled a stunning €8-10 billion since the Greek crisis commenced in earnest last November. If true, this is the beginning of the end for the troubled EMU-member country.