International Monetary Fund
- Euro Ministers Spar on Collateral for Loans (Bloomberg)
- Treasury Secretary Timothy Geithner ignored President Barack Obama’s order to consider dissolving Citigroup (Politico)
- Lagarde warns IMF could withhold Greek loan (FT)
- Spain to Impose New Wealth Tax (WSJ)
- Looming U.S. decision on Taiwan risks China rift (Reuters)
- GM Adjourns Union Talks With No Agreement (Bloomberg)
- UBS $2 billion loss to trigger investment bank retreat (Reuters)
- European Bank Blowups Hidden With Shell Games (Bloomberg)
- House Republicans Push Stopgap Spending Bill (NYT)
- Geithner urges unity in tackling euro zone crisis (Reuters)
- An article in the Imerisia newspaper said that participation in the Greek debt rollover has exceeded 82%
- UBS shares fell more than 8% in early trade after news emerged that a trader at its investment bank unit has caused a loss of around USD 2bln
- GBP received a boost following higher than expected retail sales data from the UK, together with a rise in the BoE's 12-month inflation forecast
- SNB said that it will continue to aim for 3-month LIBOR at 0, and is aiming to defend a EUR/CHF target of 1.2000
From Eric Sprott: "In many of the funds we manage at Sprott, we’ve transitioned out of gold bullion and into gold equities to better participate in the continuation of the trend indicated above. As long-time investors in this space, we can assure you that the production growth rates will be significantly higher in the junior stocks. They continue to trade at discounted valuations, and we believe they offer the best opportunity to build exposure. Margin expansion is the key metric for this industry, and the market is now acknowledging the miners’ improvement in margin capture – which has occurred despite the increase in capital and operating costs. We meet with a large number of gold mining management teams on a weekly basis, and based on those meetings, it appears that the average cost of producing an ounce of gold today, all in, is now around $800. At $1,200 gold, these companies can capture roughly $400 in EBITDA. At $1800 gold, however, they’re now capturing $1,000 per ounce in EBITDA - representing an increase of 150% in profit margin. That is significantly far above what any other equity sector has been able to generate over the past year. Amazingly – despite this new reality for gold producers, we are still finding opportunities in select gold and silver mining companies that can be purchased today at 2-3 times their 2-year-out forecasted cash flow. These multiples are based on the current gold and silver spot price, and if these companies hit their production targets, and gold and silver continue their appreciation – we may discover that these stocks were trading at less than 1 times 2-year-out cash flow today. Having been in the business for many years, we can tell you that investing in a stock at 1 times 2-year-out cash flow tends to be a winning proposition – let alone in an industry that literally mines the world’s reserve currency out of the ground."
The Biggest EURUSD Bull, Goldman's Thomas Stolper, Throws In The Towel, Cuts His Forecast Across The BoardSubmitted by Tyler Durden on 09/14/2011 14:17 -0400
Three things are sure in life: death, taxes, and betting against the calls of Goldman's Thomas Stolper. Sure enough:
- We lower our EUR/$ forecast path slightly but keep the same upward-sloping trajectory.
- Our new EUR/$ trajectory is 1.40, 1.45 and 1.50 in 3, 6 and 12 months, from 1.45, 1.50, 1.55 previously.
- The recent increase in the Euro area’s fiscal risk premium is likely to persist.
- Very large short EUR/$ positioning is likely to last in the near future.
- But the underlying Dollar downtrend should drive EUR/$ higher over time.
- We discuss the CHF and safe-haven currencies after the SNB’s commitment to intervene.
- Our new EUR/CHF forecasts are 1.21 flat in 3, 6 and 12 months.
Every "solution" to the European debt crisis, whether it is ECB purchase, EFSF, Eurobonds, or BRIC's, fails to account for the fact there are really two types of bonds out there. There are those that are trading and marked, and those that remain on some bank balance sheet unmarked. That is a key distinction. If all Greek bonds were marked at 45 (or even had 55 points of reserves held against them) then there would be a lot of potential solutions.
In what seems like the first honest words from a central banker in months (albeit an ex-central banker), Mario Blejer (who presided over the post-default Argentina in 2001) has some first-rate advice for G-Pap and his fellow Greeks. From an interview in Buenos Aires, Bloomberg notes the following notable quotes:“Greece should default, and default big, you can’t jump over a chasm in two steps.”
How many times can we rally on the same story. Back in April of this year, there were big stories about Chinese buying European sovereign debt. At the time the Greek 10 year bond was trading at almost 60 then. It is below 40 now. The Greek 2 year bond was at almost 70, now it too is at 40. The Italian 5 year bond yielded less than 4%, today it is almost back to its highs of 5.5%. I am quite positive that I can find articles quoting Chinese support for Greece going back to March 2010 when Greece issued a new bond in what was deemed a VERY SUCCESSFUL auction. I have written about it before, but it seems worth mentioning again. In March 2010, Greece issued a 5 billion EUR 10 year bond. It had a 6.25% coupon and was priced at 98.942 It traded up and the whole market breathed a sigh of relief that the auction had gone so well. It is hard to count the number of times that China has come in to buy European bonds or that a successful auction was a sign that the crisis was over, I only have so many fingers and toes after all. None of those actions was enough to save Greece from some from trading at prices far below what investors a year ago thought were conservative recovery rates. And Greece only has about 330 billion EUR of debt. How is China going to save Italy with 1.6 TRILLION EUR of debt? China could buy up all the 156 billion EUR of Portuguese debt if it wanted to solve the "contagion" there. They haven't done it. Again, if this was new news, or had shown any sign of working in the past, I would be more excited. This seems like a story that is trotted out every few months, provides an initial pop, and then bonds return to their grind lower in price.
How many times can the idiotic market keep falling for the same old rumor over and over and over again? Yes, for those wondering what caused this epic surge in stocks on massive volume look no further than the following FT headline which is precisely the same as what we have seen every single other "Chinese white knight" time, namely that Italy is in talks with China Investment to buy bonds, assets (it also makes it perfectly clear who the real "IMF" is). That said, this is at least the 4th time that China has "bailed out" Europe in 2011. We give this latest rumor a 15 minute half life.
Last week, Zero Hedge first brought to readers the infamous UBS report, which has since made the global rounds, and which essentially laid out the binomial tree for Eurozone survival as follows: either the EUR survives, or we get Civil war. In keeping with the schizophrenia of the TBTF banks whose number one goal is to cover their ass by predicting the two opposite possible outcomes, so as to avoid being sued by sovereigns once the dominos start falling, here is the firm's much respected economist George Magnus, who in his latest release of "By George", does a comprehensive framing of the agenda in the Eurozone. His conclusions: don't believe the European bureaucrat PhDs - there is much more here than meets the eye. To wit: "The dilemma over where to draw the lines between integration and sovereignty lies at the core of the fiscal union debate. The policy agenda has to recognise this, and not assume that fiscal union, one way or another, is eventually a ‘gimme’, even though logic would say it should be. Parallel to the logic are the politics and vested interests, the German Constitutional Court notwithstanding, which say fiscal union only one theoretical outcome, and maybe a long shot. Most likely, the political limits to fiscal integration have not yet been reached, but if there are further moves towards but not reaching this goal, they will most certainly be on German, and therefore, limited, terms. We may conclude that while the Euro system is not about to break up, its viability as it stands is far from assured." Maybe not "about" - give it a few weeks though...
We now know that the US is an Onion Republic, which leaves open the question: what is Greece... because we are getting very vegetably challenged here. According to the Bank of Greece, household and corporate deposits declined for the 7th month in a row, dropping by €1 billion euros in the July. Since January 2010, total deposits have declined from €233 billion to just €187 billion, or €46 billion, or 20% of the entire deposit base. Once again, we make it very clear that no matter what the government does with sovereign tax collections, spending cuts and stop gap liquidity boosts, as long as the deposits outflow continues, nothing else matters. And speaking of tax collections, according to Dow Jones, completing the unbelievable Greek farce, is the news that tomorrow in addition to the now standard customs officials and taxi drivers, among those striking will be the country's tax collectors as well. So.... just how will Greece collect those so very precious taxes it needs to pretend it is in compliance with the Troika's demands for deficit cut compliance in order for the country to get the next IMF tranche which will stave off bankruptcy for one more month. As a reminder, Greek cash runs out on October 17.
- Sources close to the situation said during the weekend that Moody's may cut credit ratings of major French banks including Societe Generale, BNP Paribas and Credit Agricole. However, SocGen’s CEO downplayed the news, and ECB’s Noyer said that French banks have no liquidity issues
- German economy minister Roesler didn’t rule out an orderly Greek bankruptcy. However, a German Economy Ministry spokesman said that instruments for an orderly Greek debt insolvency is not currently being readied
- UK’s ICB, in its report, recommended “ring fencing” UK banks’ retail arm, which will incur a cost of between GBP 4-7bln. However, it gave the banks till 2019 to implement those measures