This does not sound like the sound of European consensus: "The leader of Finland’s euro-skeptic True Finns party, Timo Soini, said Europe’s crisis-handling mechanism “doesn’t work” and Greece will default on its debts as efforts to keep the country afloat have failed. He spoke today in a phone interview with Bloomberg Television." More like the sound of inevitability...We wonder how this will be spun by Trichet. In the meantime, things in carry land are getting worse and worse, as the USDJPY hit 79.60 overnight, a level at which the Japanese economy joins Europe and the US in full contraction mode. The summer of central bankers' discontent is coming fast and furious.
Euro Plunges On Dovish Trichet Comments, Says ECB Has Credibility Because Hiked First (What Does That Leave For The Chairsatan?)Submitted by Tyler Durden on 05/05/2011 07:41 -0500
- CPI rates likely to stay above 2% in coming months
- Risks on economy from Japan disaster
- Geopolitical tensions pose growth risks
- Paramount that rise in HICP inflation does not lead to second-round effects
- Risks to medium term inflation outlook are on upside
- Inflation expectations must remain firmly anchored
- Monetary analysis indicates underlying pace of monetary expansion picking up but moderate
- Confirm banks have continued to expand lending to private sector
- Governments need to achieve their fiscal consolidation targets in 2011
Most importantly: he says nothing about a June hike which was largely "priced in" by the Wall Street lemmingraty.
Another sign of the increased appreciation of gold as an important asset came from Germany today where Angela Merkel’s budget speaker and his opposition counterpart have urged Portugal to consider selling their gold. Norbert Barthle, Germany’s governing coalition budget speaker and his counterpart Carsten Schneider from the Social Democrats, the biggest opposition party urged Portugal to consider selling some of its gold reserves to ease its debt problems. They called for a review of Portugal’s request for financial aid to include gold and other potential asset sales. The German lawmakers did not specify who should buy the gold from the Portuguese central bank but given the challenges facing Germany and the Eurozone it is likely that the Bundebank and the ECB would be willing buyers – if the gold is not already encumbered due to Portugal’s membership of the Eurozone. Meanwhile creditor nation central banks continue to accumulate gold reserves as seen with the breaking news from the Financial Times that the central bank of Mexico has been diversifying their currency reserves (largely in dollars) into gold with the purchase of 100 tonnes of gold bullion in February and March.
Despite Portuguese Bailout Deal, Expected To Push Country Into 2 Year Recession, Yield On Its 3 Month T-Bill Auction Rises To RecordSubmitted by Tyler Durden on 05/04/2011 06:10 -0500
Even though Portugal announced somewhat sparse details of a €78 billion IMF/EU bailout late yesterday, the market was only modestly impressed, and even though Portuguese CDS dropped 29 bps to 620, according to CMA at 10:10 a.m. in London, the country still saw the yield on its just issued 3 Month T-Bills surge to a fresh all time record. From Reuters: "Portugal sold around 1.12 billion euros ($1.66 billion) in three-month T-bills on Wednesday, above the indicative offer, with yields rising from an auction late last month even after the country said it agreed a 78 billion euro EU/IMF bailout. The average yield rose to 4.652 percent from 4.046 percent in an auction on April 20. Portuguese debt premiums in the secondary market had risen sharply in the past two weeks on jitters about a possible Greek debt restructuring and concerns about Portugal's own fate, but retreated after the bailout deal." And to confirm that the market no longer really beleives in the bailout fairy, the Bid to Cover dropped from 2 to 1.9.
While the world is caught up in a wave of largely irrelevant for the capital markets euphoria, things in Europe are once again going from bad to worse, as the weakest link in the European rescue has once again said no. Reuters reports: "Finland's eurosceptic True Finns party said on Monday it was sticking to its pre-election stance that it cannot support Portugal's bailout package. We cannot with good conscience support Portugal's package nor the creation of permanent bailout mechanism. Neither do we approve the hike of Finland's guarantees in the temporary stability mechanism," the party said on Monday as its formal answer to Jyrki Katainen, the leader of National Coalition party, who is leading the talks to form the country's new coalition government." As has been reported previously, absent Finnish approval, the European rescue is virtually halted in its tracks, and means that there is no consensual green light for the EFSF rescue package. Additionally, as Europe has been kind enough to indicate in the past, "there is no Plan B." And to make things very clear, Finnish MP Soini that Greece is likely to restructure its debt and other will follow, but not under the ESM: "it is a structure that doesn't work." Needless to say the implications of a failed compromise on the bailout of not only Greece, but not Ireland and Portugal as well, means that should Finland retain its intransigence, the eurozone is pretty much over.
In other words, when this mess comes unhinged it’s going to be much, much worse than in 2008. And believe me, it WILL come unhinged.
And this time, when it does, the Fed will have NOTHING to stop it. The Fed’s already grown its balance sheet to roughly $3 trillion AND used every weapon it has to combat Round One of the Financial Crisis. So when the next round hits this time around, the Fed will be powerless to do anything about it.
Brief and comprehensive summary of the week's key bullish and bearish events
Do you believe all fairy tales end well? Not this royal property bubble..
While stocks seemed in a world of their own today relative to Treasuries, FX carry, PMs, oil, and even the USD, they managed to make solid gains amid above average volume following a series of dismal macro prints this morning. Credit outperformed but we outline why the velocity of moves may slow a little here.
We are right on track for the next American revolution but it's a slow train so grab those fish while you can, my friends - you may need them to barter with down the road!
Stocks ended the day higher, though off their highs, handily outperforming the HY and IG credit markets as the FX and PM markets exploded in the afternoon around Bernanke’s press conference. Divergence between high and low quality credit and equity suggests releveraging is starting to be priced in.
Gold And Silver Bubble? - Some Retail Investors Taking Profits And ETF And COT Data Suggest OtherwiseSubmitted by Tyler Durden on 04/27/2011 07:16 -0500
GoldCore submits: "Many of our clients have taken profits on certificates in recent days. Most continue to be prudent and continue to maintain a core holding (for portfolio diversification and financial insurance purposes) but there are definitely concerns amongst some of a bubble. Others have taken profits on certificates and bought gold and silver coins and bars (in secure storage or delivered). Recently orders for coins and bars have outweighed those for certificates and there is definitely an increased preference for physical coins and bars and for taking delivery. Our ratio of sell orders to buy orders is the highest it has ever been."
Silver and gold are lower today after the record nominal highs seen yesterday (gold marginally and silver significantly). Gold reached $1,518.30 per troy ounce, a nominal record, while silver climbed to $49.79 per ounce, its highest nominal level since the short term parabolic spike in 1980. A period of correction and consolidation has been expected for some time and it may ensue as gold and particularly silver are overbought in the short term. However, absolutely nothing has changed with regard the primary fundamentals driving the gold and silver markets.
- Fed Sweating the Details of First News Conference (WSJ)
- Ex-Morgan Stanley Economist Berner Tapped as Counselor to Geithner (WSJ)
- China Said to Raise Capital Adequacy Ratios for 5 Biggest Banks (Bloomberg)
- CIC Set for up to $200bn in Fresh Funds (FT)
- Monetary Policy in 3-D (Hussman) or a fancy and long way to say DV01 = $1.5 billion
- Japan Auto View Cut (WSJ)
- Asia Faces ‘Serious Setback’ on Rising Food Costs, ADB Says (Bloomberg)
- Some 500 Arrested in Syria Crackdown (Reuters)