Some thoughts on pensions seeding funds after my day trip to Toronto...
Troica Demands Deep Public Sector Cuts, Higher Taxes As Part Of Greek Bailout #2, Or My Big Fat Greek AnschlussSubmitted by Tyler Durden on 06/03/2011 11:37 -0400
So here it is:
- EU, IMF: GREECE NEEDS TO REINVIGORATE STRUCTURAL REFORMS (so, fire more people and generate more GDP with whoever is left?)
- EU, IMF: GREECE WILL REDUCE PUBLIC SECTOR EMPLOYMENT (so, fire even more peple)
- EU, IMF: GREECE TO REDUCE TAX EXEMPTIONS, RAISE PROPERTY TAXES (So, generate more GDP by taxing people more?)
- EU, IMF: `AMBITIOUS' MID-TERM PLAN, WILL MEET 2011-2015 TARGETS (If the targets are all Greek bankruptcy, yes)
- EU, IMF: OVERALL ASSESSMENT GREEK PROGRAM `SIGNIFICANT PROGRESS (uh, where?)
- EU, IMF: GREEK ECONOMY TO STABILISE AT TURN OF YEAR (Idiots)
And now, the people get angry. Expect live webcast from Syntagma square shortly.
And so here we are, with austerity measures and higher taxes occurring in Europe because of bankers’ greed and dishonesty. Having realized that their politicians aren’t going to do the right thing, the people are now openly expressing their disgust at the ballot box (Angela Merkel’s party is getting slammed in Germany for supporting the bailouts) and the streets (protests are occurring across Europe). And it’s just a taste of what’s coming to the US.
Just out on Bloomberg: GREECE SAYS EU-IMF REVIEW COMPLETED POSITIVELY
Of course, since this is merely another lie, nobody cares, but the robots will likely go nuts with the EURUSD any second.
...You will need it. The EURUSD has officially confirmed the much dreaded "Insane YoYo" formation. As a reminder the last time we had a dreaded chart spotting (The Hindenburg Omen from August 12, 2010), the Fed was forced to launch QE2 two weeks later. On a more serious note, the imminent announcement of a favorable Troica report on Greece will likely send the pair up 100 pips.
Here are the key scheduled events over the next several months in Europe. These are the known events. Uknown ones, such as the expulsion of Greece, or the unwind of the monetary experiment, a revolution here and there, are obviously not noted.
In addition to the weak NFP number expected today which should put further pressure on a dollar, already trading at a several week low, Greek Ta Nea reports that the catalytic announcement by the Troika on the Greek economy is expected to come out later today. Unlike previous rumors that Greece was expected to miss every bailout parameter, the rumor this time is that the report will show a "mixed picture" meaning that the market is supposed to believe that there is a risk that the next tranche, worth €12 billon, of Greece's current E110 billion aid package, may not be disbursed. Of course it will be: the last thing Europe's bankers will do, especially after all the recent posturing, is to shoot themselves in the foot, and before the weekend at that. As a result we expect a double whammy of USD hits, which however will mean that the EURUSD will soon be back to levels that are high enough (1.46-1.48) that will make the announcement of QE3 problematic, as the next step lower in the USD would likely lead to a EURUSD of 1.70-1.80.
The idea of turning the EU into a Bankster's Paradise (where you lose sovereignty to your creditors) slapped the Dollar down to it's lows of the day and boosted the EU markets and US futures and gave us our re-shorting opportunity on oil.
This morning, amidst news of Moodys cutting Greece's debt rating to Caa1, I came across a phrase I wish I'd thought of first, reading through a friend's morning commentary. The phrase? "Too Stupid to Stop". According to Bill Blain, Senior Director at Newedge in London, and self-professed Euro skeptic, "'Too Stupid to Stop' is based on politicians behaving as rational maximisers of their electoral objectives." He was referring to the real reason behind all the bank-demanded bailout loans for austerity measures throughout Europe. In the United States, that mantra can be extended to include appointed officials, like Treasury Secretary, Tim Geithner (still not admitting our record debt increase came directly from the $4 trillion worth of Treasury issuance and other forms of assistance extended to our banking system since late 2008, as we endure his stomach-churning 'show-begging' to the GOP for a debt cap raise) and Fed Chairman, Ben Bernanke (ditto). It also, of course, applies to congress people whose political survival depends on corporate and bank contributions and financial support, the ones that believe the Dodd-Frank bill changes anything. Rather than considering how governments have systematically done, and continue to do, the wrong (as in immoral, unfair, and uneconomically sound) thing by trying to preserve banks, any politicians possessing the ability to think independently (an oxymoron, I know) should be asking themselves instead, how clever they could be about closing them down. Take a cue from Iceland. But, the 'Too Stupid to Stop" behavior, prevents this from occurring.
Moody's Says It Expects To Place US Rating For Downgrade Review If No Progress On Increasing Statutory Debt LimitSubmitted by Tyler Durden on 06/02/2011 13:31 -0400
From Moodys, which now appears to have been hacked by Greece (in what may or may not be considered an act of war): "If the debt limit is raised and default avoided, the Aaa rating will be maintained. However, the rating outlook will depend on the outcome of negotiations on deficit reduction. A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody's to change its outlook to negative on the Aaa rating....Although Moody's fully expected political wrangling prior to an increase
in the statutory debt limit, the degree of entrenchment into
conflicting positions has exceeded expectations. The heightened
polarization over the debt limit has increased the odds of a short-lived
default. If this situation remains unchanged in coming weeks, Moody's
will place the rating under review." Translation: unless America promises to increase its total debt to 120% of GDP in one year, the current debt which is just under 100% will be downgraded.
These seem to be becoming quite popular lately: This particular one was titled: "Let them buy bonds." We are waiting to see how it will be revised following today's wonderful "Bailout #2" news.
Done Deal: Reuters Reports New Greek 3 Year "Adjustment Plan" Has Been Agreed On, Can Kicked For Another 3 YearsSubmitted by Tyler Durden on 06/02/2011 12:49 -0400
Just out from Reuters:
- According to a source, programme will involve new international funding to mid-2014, apportionment yet to be agreed
- According to a source senior Eurozone officials agree in principle on new 3-year adjustment plan for Greece
- According to a source, private sector involvement will be limited to avoid a credit event
Congratulations Europe: you just screwed your taxpayers, but at least bought your insolvent banks 3 more years of bizarro world existence.
- Fed mouthpiece Hilsenrath speaks: No QE3 for now - Fed Holds Steady as Economy Slows (WSJ)
- Fed May Signal Balance Sheet Will Stay at Record (Bloomberg)
- Fed Owes U.S. Stakeholders Accounting on Loans as People’s Bank (Bloomberg)
- China will have to tackle local govt debt (Reuters)
- Biggest HFT firm in the world to sell HFT counter-measures: Getco Expands Client Business, Offers Algorithm to Funds (Bloomberg)
- Greece Is in Line For a New Loan (WSJ)
- E.coli outbreak in Europe caused by new toxic strain (Reuters)
- The Chanos thesis is delayed: Banking regulator plans to shift 2-3 trillion yuan ($300-$470 billion) in debt off the books of local governments (Shanghai Daily)
- Kan: Ready to Step Down After Finishing Quake Work (WSJ)
COMEX Registered Silver Bullion Inventories Fall Sharp 38.5% in Two Weeks – Risk of COMEX Silver Default RemainsSubmitted by Tyler Durden on 06/02/2011 07:35 -0400
Spot gold and silver prices rose slightly again this morning after hitting a one-month high yesterday as equity markets internationally came under selling pressure. The Moody's downgrade of Greece and worryingly poor US economic data again pushed investors to seek the safe haven of bullion. Gold reached new record nominal highs in sterling yesterday (£945.62/oz) as the pound fell on concerns about the UK economy. The supply situation in the silver market gets more interesting by the day. Registered COMEX silver inventories have fallen to multiyear lows at 29,631,268 ounces. In the last 5 days they fell from 32,132,903 ounces to Tuesday’s holdings of 29,631,268 ounces. As can be seen in the table below registered silver inventories fell every single day last week leading to a sharp fall of 8.4% in 5 days. Registered silver inventories are down a sharp 38.5% in just two weeks – from 41,044,280 to 29,631,268. The possibility of an attempted cornering of the silver market through buying and taking delivery of physical bullion remains real. However it would be very difficult to corner the silver market due to the very small nature of the silver bullion market. A COMEX default remains a risk as does a massive short squeeze which could see silver surge as it did in the 1970s and again recently leading to silver targeting the inflation adjusted record high of $140/oz.
Following years of inactivity it has now become cool to be the first rating agency to pull the trigger on another insolvent sovereign. After yesterday's downgrade of Greece by Moody's to Caa1, today Dagong decided to one up its American counterparts and downgrade the country with the 250% debt/GDP: Japan. From Xinhua: "Chinese ratings provider Dagong Global Credit Rating Co. Ltd., on Thursday cut its rating for Japan's local and foreign currency sovereign credit by one level to A+ and AA- respectively. The rating agency said the downgrade took into consideration Japan's political situation, economy, fiscal revenue and expenditure, as well as debt revenue. Expecting a mild recovery of the Japanese economy and no significant deterioration of Japan's sovereign debt financing within the next 12 months, Dagong put the country's credit outlook as "stable."" As Richard Koo noted yesterday, the probability that the Japnese economic situation will deteriorate absent stimulus is very high. Unfortunately, the problem is that since there is little to no spare money available "out there" the ability to kick the can down the road with another Keynesian band aid is severly limited. Expect to see many more downgrades of Japan, and not just Dagong, before the year is over.