Is Illinois Worse Off Than Greece with a Little LTCM and Bear Stearns Thrown In? In Case You Didn’t Know…Submitted by Reggie Middleton on 08/23/2010 15:10 -0400
What does Illinois have in common with Bear Stearns, Ambac Financial, LTCM and Greece? Come on fellas, let's roll the dice. I've got some pension money in case I come up snake eyes...
John Taylor was on Bloomberg TV Friday, and in this extended version of his interview, the head of the world's largest currency hedge fund said that the euro will fall, equities could head lower, credit spreads will widen sharply and government bonds will rally.
The U.S. is in worse fiscal shape than Greece measured by the fiscal gap--the present value difference between all future expenditures and receipts. Will America have a Greek style debt crisis?
Things are so back to normal in Europe that even a country living exclusively on ECB life-support can barely pull off a 3 month Bill auction. The interest on the just auctioned off €1.95 in Bills which had to be completed as else Greece will be officially bankrupt (as opposed to just make believe) with existing bills rolling and no more cash in the Treasury, was a whopping 4.05%, compared to 3.65% in the most recent April 20 auction. Yet despite this ridiculous yielld, the Bid To Cover still declined from 4.61 to 3.85. Also compare this to the 4.65% yield on the 26-Week Bills issued last week, and you get a postcard picture of financial health emanating from the beaches of the Aegean. One thing is certain: Euribor and short-term funding are completely unavailable to any Greek institution.
Greece Pretends It Has Capital Markets Access By Continuing To Sell Ultra-Short Term Debt At Astronomical SpreadsSubmitted by Tyler Durden on 07/16/2010 07:57 -0400
After a frabjous placement of 6 month bills last week (at just under a whopping 5%), Greece continues the charade of pretending it has capital markets access by announcing it will sell another €1.5 billion of 3 month bills on July 20, 2 days before the Stress Farce results are announced.
In staying with the once again popular trend of beating much lowered expectations (see Alcoa), Greece, which had previously decided against auctioning off 1 Year Bills for fear of lack of interest, managed to place €1.625 in 6 month bills in which local institutions purchased the bulk of the auction as foreign interest was muted. According to the PDMA who apparently still tracks the charade of ECB bailed out Greek banks recycling ECB money to then buy sovereign debt, the auction produced a yield of 4.65 percent for 26-week T-bills, up from 4.55 percent in a previous April 13 auction. The bid-cover ratio was 3.64 versus 7.67 in the previous auction.
Greece Scraps Plans To Sell 1 Year Bills On July 13, Will Just Issue 6 Months, As €2.2 Billion In Bills MatureSubmitted by Tyler Durden on 07/09/2010 08:07 -0400
So the Greek debt agency, headed by a former Goldman banker, sniffed around, did some reverse inquiry, and discovered that nobody wants to be locked into its debt for more than 6 months, not even with the explicit backing of the ECB. The result: the widely fanfared Greek auction on July 13 which was supposed to indicate some return to capital markets access, and had been planned to be a combination of 6 and 12 Month Bills, will now be just 6 Months. So explain to us again what the point of the whole "confidence boosting" exercise is again?
Greece Starts to Restructure in Real Time, Exactly As We Predicted - Rendering EU Stress Tests As Credible As Platinum Laced Frog FartsSubmitted by Reggie Middleton on 07/07/2010 12:30 -0400
I've written blog posts calling government officials liars when they said the Greek crisis was over, written posts calling for inevitable haircuts while the bulls said the Greek crisis was overblown, and even put up with BS EU stress tests that won't even account for the possibility of default - or its economic cousin, restructuring. Well, how ironic that the EU puts out the criteria for its banks stress tests sans default/restructuring scenarios today, the same day that Greece releases a press release of a broad restructuring of its hospital debt. Hmmmm.... As realistic as platinum frog farts!
Erik Nielsen On The World Cup, The European Round Up, And On Wednesday's Huge Day For The ECB And GreeceSubmitted by Tyler Durden on 06/28/2010 07:56 -0400
We have already had our say about Denmark's World Cup performance. It was not lost on Erik Nielsen. It has not had as much of a dire impact on his outlook, as his European round up is summarized: "that’s the way Europe looks from my unbelievably green garden on this gorgeous afternoon. I shall now pour myself some sort of chilled and lovely summer drink and turn to my favourite book." Something tells us this is not Hayek. More importantly Erik points out why Wednesday will be a very important "micro event" day for Europe: the ECB's 12 month LTRO, whose impact on Libor and Euribor we discussed previously, matures on the 1st, and also on Wednesday "Greece formally falls out of the indices because of their downgrade. How much selling will that cause? I have no clue, but I would fail to understand why investors would have waited till the last day to get rid of their Greek bonds when they have known about the issue since June 15." Yet Erik points out something curious: "the Greek governments intends to roll over 3, 6 and 12 month treasury bills maturing in July; a total of about €3.5bn. Auctions are expected on Tuesday 13th and on Tuesday 20th July." And he wonders:"Why are they doing it? Could it be that they are responding to demand from banks and other investors who have started to appreciate that a debt restructuring the next 12 months is very unlikely and therefore looking for high-yielding assets? If so, this would be a mis-guided move, in my opinion, and – frankly – I hope the IMF and EU would tell them to back off." Looks like yet another shoe in the European collapse may be due to drop this week.
Today, Greek CDS hit an all time wide in spread. For the first time, this unpleasant phenomenon seems to have registered in the minds of Greek oligarchs, as finally, after months of dithering, the country is taking serious steps to moderate its bankruptcy. The steps in question are asset sales, and the assets in question are islands including portions of Mykonos, and all of Nafsika. So if you work in Goldman and need a nice place (with a non extradition treaty in place very soon) to stash the several hundred gold bar collectionamassed over the past two years of record bonuses, here is your chance for a nice, cheap offshore vault, ironically in the very country whose finances you overrepresetned for years.
Markit reporting that Greek Bund Spreads have suddenly exploded by 65 bps to 776, the highest since May 7, and inches away from the all time record of 900 bps, even as CDS blows out to over 900 bps. The reason quoted is that traders have cited forced index selling and the absence of central bank buying: have banks finally left Greece to dry? Or is it just that Greece is once again caught lying, pardon, having to issue a public retraction: apparently German Handelsblatt ran an interview with Greek finance minister George Papaconstantinou, in which the Greek was "misquoted."According to Market News: "Some of the headlines issued earlier Wednesday on the basis of an interview Greek Finance Minister Giorgos Papaconstantinou gave to German business daily Handelsblatt were based on an erroneous version of the interview placed by the paper on its website. Papaconstantinou did not say in the latest interview with Handelsblatt that Greece would get its deficit-to-GDP ratio below 3% by mid-2012; that and some other headlines were based on an older interview the paper accidentally published. In the actual interview, according to the print version of the newspaper, Papaconstantinou said, "Of course not," when asked if he expects his fiscally troubled country to go bankrupt." The credibility-deficient minister also noted: "The country will “absolutely” endure the crisis without
restructuring its debt, he vowed, since such a step “would exclude Greece for a long time from the financial markets." The punchline was the conclusion that Spain and Portugal are “in a much better position” than Greece. Which bring us to our next point - Portugal's 5 year auction which came in at 4.657%, almost a full percentage point worse compared to the last auction on May 26, which closed at an average yield of 3.70%. Portugal may be better, but at this rate of collapse it means absolutely nothing.
Massive four notch downgrade. Titlos SPV has now sprung, more troubles for the NBG. From Moody's which is currently without a head of sovereign research: "This uncertainty represents a risk that leads Moody's to believe that Greece's creditworthiness is now consistent with a Ba1 rating, a rating which incorporates a greater, albeit, low risk of default."
It is well-known by now that the IMF and EU have no credibility left. What, however, was not known, is that even bankrupt little Greece is now in on this secret. In the latest attempt by the veryrecipient of US and European taxpayer generosity to muscle around the bailout providers, Reuters reports that Greece is now actively trying to renegotiate the terms of its pension reform. The initial focus item: "officials said they wanted the EU and IMF to agree full pensions should be payable after 37 years of contributions instead of 40, as set out in the deal, and allow the reform to be implemented later than foreseen." Of course, should the IMF relent and give in to this, Greece will immediately demand that all Austerity requirements are null and void as they tend to lead to such unfortunate events as stormings of parliament and possible future civil war. Furthermore, with austerity now a pan-European phenomenon, look for increasing back and forth negotiations to begin all across the PIIGS and the core, as, surprisingly, nobody in Europe is all that eager to keep working the second they hit 50 years of age. Look for a plunge in the EUR if the IMF even considers engaging in terrorist negotiations. Which of course is the plan all along.
This is Wall Street value added at its purest. The day when the stock price of National Bank of Greece (NBG) is trading within millimeters of its all time low set during the March 2009 lows, and following a 70% straight decline from highs hit in September of last year, JPMorgan analyst Paul Formanko has officially submitted his bid for the client wealth destroyer of the century title (despite the guaranteed shoe-in of every Goldman Sachs "sellside analyst" for this title), by downgrading the soon to be insolvent Greek firm (which as even Formanko acknowledges has >200% of core equity exposure to GGBs) from Overweight to Underweight. The stock which now trades at around €10/share was initiated by Paul with an Overweight in May 2008, a rating from which he has never wavered, with just his price target moving up and down. His most recent PT on NBG: €25/share. Yet something happened between yesterday and today: Paul decided that the firm is no longer worth his old price target... or even half of it. His new expected price: €9.80, a 60% discount for all those who were dumb enough to listen to Paul as recently as yesterday, not just when he slapped a €45 price target at initiation in May 2008, or a €36 PT in September of 2009. And just to prove that Paul is man of action, he has also gone and downgraded every single Greek bank in his coverage universe from Overweight or Neutral to Underweight with a comparable price target cut.
Spain Passes Austerity Measures, As Fed's Tarullo Lies That Swap Lines Not A Bailout To Anyone, "Certainly Not Greece"Submitted by Tyler Durden on 05/20/2010 15:38 -0400
Another PIIG with massive GDP cuts coming to a Fed FX swap funded bailout trough near you. And speaking of Fed-funded FX swaps, here is the joke du jour courtesy of the NY Fed's Tarullo: "Federal Reserve swap actions not a bailout for anyone, and certainly not a bailout for Greece." What was that line from Macbeth... And yes, The Fed is definitely bailing out Europe with its FX swaps, and most certainly Greece. But at least Tarullo comforted those who have been brainwashed enough to listen to his ramblings that the Fed has no further action under consideration regarding the European bailout. Judging by our unimpressed response, the force is weak with that one.