Futures Flat With Greece In Spotlight; UBS Reveals Rigging Settlement; Inventory Surge Grows Japan GDPSubmitted by Tyler Durden on 05/20/2015 07:00 -0400
The only remarkable macroeconomic news overnight was out of Japan where we got the Q1 GDP print of 2.4% coming in well above consensus of 1.6%, and higher than the 1.1% in Q4. Did it not snow in Japan this winter? Does Japan already used double, and maybe triple, "seasonally-adjusted" data? We don't know, but we do know that both Japan and Europe have grown far faster than the US in the first quarter.
Following an Illinois Supreme Court ruling that struck down a pension reform plan aimed at closing a $100 billion funding gap, Moody's downgrades Chicago to junk, giving the city the dubious distinction of being the only major city "in recent history" to carry such a low rating other than Detroit. Chicago now faces accelerated payments to creditors of more than $2 billion.
Systematic Corruption Has Metastasized throughout the U.S. ... Making Our Once-Great Nation Deathly Ill
To paraphrase H.L. Mencken, anyone who wants the government and Federal Reserve to create a housing recovery, deserves to get it good and hard, like a four by four to the side of their head. Subprime mortgages, subprime auto loans, and subprime student loans driven by preposterously low interest rates are the liquefying foundation of this fake economic recovery. Most rational people would agree that loaning money to people who will eventually default is not a good idea. But it is the underpinning of everything the Fed and government apparatchiks have done to keep this farce going a little while longer. It will not end well – Again.
In a critical disclosure this past Friday which quietly flew under everyone's radar, the Bundesbank director responsible for bank supervision, Andreas Dombret, who is also a member of the board of the European Central Bank’s Single Supervisory Mechanism told Bloomberg in an interview in Johannesburg that "German banks should expect to lose at least half of their investments in bonds of Austrian bad bank Heta Asset Resolution AG and make the appropriate provisions... I think this situation has to be taken seriously by the German banks... if I were to put a number on this I would say it should be a minimum of a 50 percent provision for potential losses."
The Cop Is On the Take
"A relatively low-profile entity in Austria – Pfandbriefbank Oesterreich AG (Pfandbriefbank) – is becoming the next critical chapter in the Austrian banking system story." - Daiwa
Fraud grows in good times because rescission is rarely sought (or granted) when asset values rise. Fraud is not a problem, till it is.
Dear Greek readers: the writing is now on the wall, and it is in very clear 48-point, double bold, and underlined font: when the ECB "leaks" that it is modelling a Grexit, something Draghi lied about over and over in 2012 and directly in our face too, take it seriously, because it is time to start planning about what happens on "the day after." And incidentally to all those curious what the fair value of peripheral European bonds is excluding ECB backstops, the ECB has a handy back of the envelope calculation: a 95% loss.
Central banks' ability to distort markets, inhibit price discovery, and create systemic risk is alive and well as ECB asset purchases ripple through euro money markets. "The ECB’s liquidity bazooka will likely create the conditions for all rates money markets to stay in negative territory. This would represent a very challenging environment for investors, especially those focusing on the euro money markets, whose resilience to negative rates has not fully tested yet," Barclays warns.
Under normal circumstances, after 2008's conflagration of the calamitous collateralizations, we shouldn’t have seen such irrational, reckless, greedy behavior from Wall Street for another generation. But, Wall Street didn’t have to accept the consequences of their actions. They were bailed out and further enriched by their puppets at the Federal Reserve, the lackey politicians they installed in Washington D.C., and on the backs of honest, hard-working, tax paying Americans. The lesson they learned was they could continue to take excessive, reckless, unregulated risks without concern for losses, downside, or consequences.
The levels of spin and denial are reminiscent of the run-up to the 2007 crisis. We and many others were ignored for highlighting the dangers facing the Irish and global economy then and are being ignored again now.
Maybe one day investors, or at least the 1%-ers, will finally grasp that in a centrally-planned world in which the central banks themselves assure that there is "no risk", there is also no point in paying billionaire hedge fund managers 2 and 20 to "hedge" away risk, since there simply is none left. However, since most people are too lazy to do any work (this includes hedge funds themselves), and would rather piggy back on other people's work (such as the rating agencies back in 2005-2007) that day is still far away. So for the time being, to satisfy everyone's natural curiosity why hedge funds continue to suck so bad, here are their biggest long, and far more importantly short, positions.
The Russian economy continues to suffer. The absolute desolation of the oil market effectively destroyed the economy in Russia, which is incredibly dependent on the commodity. Job’s have been lost, the standard of living has collapsed and now the once proud Russian bond, is being attacked.
Standard and Poors, what some call, “the international credit watchdog” slashed Russian debt to BB+, one step below what the markets consider investment grade.
S&P Downgrades Greece, Suggests Worst Case Scenario With Bank Runs And "Capital Controls": Full ReportSubmitted by Tyler Durden on 02/06/2015 14:14 -0400
And the hits keep coming. On the heels of a demand for repayment of ECB's profits from GGB bond gains and to extend the T-Bill limit to give the nation time to negotiate with EU leaders (i.e. a Bridge Loan) which Jeroen Dijsselbloem already dismissed earlier in the day, S&P just piled on...
GREECE RATINGS CUT TO B- FROM B BY S&P; MAY BE CUT FURTHER
This downgrade comes just 5 months after upgrading Greece because "risks to fiscal consolidation in Greece have abated." EURUSD is not moving much (having already cratered after US payrolls) but Greek stock ETFs are sliding once again.