• Sprott Money
    05/05/2016 - 06:02
    Why is a Deutsche Bank mouthpiece suggesting “negative retail deposit rates or perhaps wealth taxes”? The answer is to (supposedly) stimulate our economies.

Ratings Agencies

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17 Macro Surprises For 2013





Just as Byron Wien publishes his ten surprises for the upcoming year, Morgan Stanley has created a heady list of seventeen macro surprises across all countries they cover that depict plausible possible outcomes that would represent a meaningful surprise to the prevailing consensus. From the "return of inflation" to 'Brixit' and from the "BoJ buying Euro-are bonds" to a "US housing recovery stall out" - these seventeen succinctly written paragraphs provide much food for thought as we enter 2013.

 
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Greece 'Selective Default' And Geithner's 'Selective Memory'





Late last night S&P placed Greece into “Selective Default” again, raising the issues, once again, of the $90 billion in Greek derivatives, the Greek bank bonds guaranteed by the country and now at the ECB, some central banks and some commercial banks where some clause may get triggered, various clauses in repos, inter-bank lending contracts and guarantees by Athens of various corporate entities all potentially seeing triggers. In the meantime, because Americans hate to be left out of anything, we continue to behave like fools. The raising of the tax rate on the wealthy will operate the country for about eight days and it seems like the savants in Washington have forgotten that there are three hundred and forty-eight days left in the year. Secretary Geithner’s ,“We are prepared to go over the fiscal cliff,” has all of the dramatics of some bluff on World Wide Poker. The focus on redistribution of wealth is a secondary consideration when you cannot pay your bills. We propose that unhappy Americans unite, buy the Abaco islands from the Bahamas, they need the money, and begin our own island nation and let the 46.5 million on food stamps fend for themselves. We honestly feel that way some days as the idiocy in Washington D.C. seems to recognize no boundaries.

 
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Yelling 'Fundamentals' In A Crowded 'Corporate Bond Market'





Thanks in large part to the supply-constructing yield-compressing repression of a few 'apparently well meaning' bad men running the central banks of the world, the divergence between fundamental weakness and credit spread 'strength' is at record levels. The overwhelming 'technical' flow of funds from investors combined with an 'end of equity' cult and belief that tail-risks have been removed (OMT) juxtaposes with earnings crumbling, ratings downgrades, and the exogenous fact that a complex system means a systemic crisis is inevitable (especially after such ongoing volatility suppression). As Citi's Matt King notes, while "it is almost impossible to predict exactly when they start," the desperation for yield has led to highly unstable equilibria - as what investors can't earn they will lever; via lower-quality 'levered' assets (PIKs and BB/CCCs for example) or 'levered' vehicles (CLOs and structured credit). Sure enough, margins (street repo haircuts are low and NYSE margin accounts high) look very 2007-like. While yelling 'fire' in a crowded theater will typically get the people moving, it seems the movie that is playing in corporate credit is simply too engrossing for many to listen.

 
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EU Allowing Rating Agencies To Be Sued For Errors Should Backfire Spectacularly - Cause Massive Downgrades Across The Continent!





If common sense was truly common, the rating agencies should get the shit sued out of them unless & until they start downgrading EU countries en masse, and quite quickly. Read this & you'll have all you need to start suing! Hmmm, the best laid plans....

 
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Why I Paid Up For That Negotiations Class





Senator Reid’s frustration that progress had stalled as he blamed the Republicans for not bargaining fairly in trying to iron out a compromise signaled to Speaker Boehner that the Democrats will play hardball as well. However, yesterday’s Wall Street Journal article, via quotes from Erskine Bowles, claimed the White House will be flexible when proposing a raise to the top marginal tax rate.  This perceived increase in the probability of a near term accord appropriately rallied stocks aggressively. We question why Mr. Obama would leak his best alternative to a negotiated agreement (BATNA) so early in the process, for classic bargaining strategy suggests keeping that information close to the vest as long as possible. Complicating matters, Mr. Obama declared a preference to strike a deal by Christmas which approximates the Friday, December 21 “zero barrier”.  Ironically, if the Republicans acquiesce to yesterday’s posturing by Mr. Bowles, then the likelihood of a Moody’s and/or Fitch downgrade rises, for the ratings agencies would almost assuredly be disappointed by a lower than anticipated level of incremental revenues.

 

 
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The Beginning Of The Great French Unwind?!?!?!...





The French banking problem is woefully unrecognized, although I'm sure the rating agencies will pick up on it this time next year, after the collapse and/or bank run.

 
Tyler Durden's picture

Rah, Rah, Rah And The European Cheerleaders





Listening to Rehn, Van Rompuy, Juncker and their cohorts is rather like listening to the cheerleaders at the football game and their advice on financial matters is probably right in-line with the knowledge of the cheerleaders; but then I don’t want to insult the cheerleaders. Everything is always “good, fine, hailed, welcomed” and the sunrise is always moments away. Europe officially entered into a recession it was just announced this morning. The economy in Europe is so bad now that a picture is only worth two hundred words. The Europeans blame everything on the ratings agencies lately. There is some wisdom to this. “Moody” is how they are feeling and “Standard & Poor” is what they will be feeling soon. Recently in Spain it was reported that a teacher asked one of her students what his father did for a living. The little boy said his father did a striptease in one of the clubs in Madrid. The teacher was shocked and asked if this was true. The young fellow said, “No, he is the head of corporate credit for Bankia but I am too embarrassed to tell anyone.”

 
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Spanish Banks May Face €17 Billion Margin Call As ECB Found To Lie About Collateral Haircuts





Mario Draghi has reassured the world that no matter how much 'crap' collateral is taken on to the ECB's balance sheet, their risk management process is rigorous and ensures the safety of the entity's capital thanks to well-devised haircuts and collateral. Once again, it appears from a report in Die Welt (via Bloomberg), Draghi lied, as the ECB is now checking terms on some lending to Spanish banks that may have already contravened the ECB's mandate allowing overly generous terms to be offered on the Spanish banks' collateral. As Bloomberg notes, the issue surrounds EUR80bn relatively short-dated T-Bills which were wrongly classified as rated 'A' instead of the 'B' that agencies - except DBRS! - had assigned (a vast difference) - which would imply (if the ECB re-assigns the correct rating) the affected Spanish banks would have to produce up to EUR16.6bn in additional collateral (cash or quality collateral that is non-existent in Europe). This of course "casts doubt on the quality of the ECB's risk management" and merely serves to confirm the Juncker-ian lies we have come to expect from Europe's leaders (economic and political). As Die Welt notes: "Critical observers ask: who actually controls the ECB?"

 
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Guest Post: Only Global Banks Will Benefit From A Cyber-Attack On The U.S.





A cyber attack does not have to be limited to a single country and its networks.  It could be used to strike multiple countries and fuel a global firestorm of systems failures.  Globalists need a macro-crisis, a world-wide catastrophe, in order to present their “global solution” to the desperate masses. This solution will invariably include more dominance for them, and less freedom for us.  A global crisis can also be used to manipulate various cultures to forget concerns of sovereignty and think in terms of one-world action.  Surely, a worldwide breakdown can only be solved if we “all work together and all think alike”, right...? Without a doubt, a cyber attack serves the interests of elitist entities and banking monstrosities like nothing else in existence.  Set off a nuke, start WWIII, turn the U.S. dollar into stagflationary dust; a cyber attack tops them all, because a cyber attack can lead to them all while maintaining deniability for the establishment.  The fact that whispers of cyber threats have turned into bullhorn blasted propaganda should concern us all.  Are we being conditioned for a cyber event in the near future?  That remains to be seen.  However, none of us should be surprised if one does occur, especially in light of the many gains involved for globalists, and all of us should be ready to dismantle and expose any lies surrounding the event before the American public is whipped into a 9/11 style frenzy yet again

 

 
Tyler Durden's picture

Presidential Election Preview 2: Where They Stand And Why It Matters





The 2012 US presidential election is perhaps one of the most unique and important elections in recent history from an economic perspective (with the time-line rapidly approaching). In choosing its leader for the next four years (for which we provide a handy 'where-do-they-stand' cheatsheet), we agree with Goldman that the country will likely be determining the path for near-term economic growth, medium-to-longer term fiscal stability and monetary policy at a time when the stakes are exceptionally high - whether or not the US economy returns to recessionary conditions in 2013, the US sovereign debt rating and the broader credibility of the US government to Americans and foreigners alike all hang in the balance. Goldman sees three factors that set the 2012 election apart.

 
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Lest We Forget





Leading up to the American Financial Crisis. We all had the data, we all saw the sub-prime mess, we all saw the leverage, we all saw the money handed out for nothing and the non-disclosure documents, we all saw the lack of credible ratings supplied by the ratings agencies and yet we went on like it would all continue forever. We ignored it all. We turned our backs but then; we got scalped and so the prime questions must be asked: Are we wise men or are we fools? Did we learning anything from the last go round? Should we act now before we are scalped again considering we only have one head? Since the American Financial Crisis the world has lived off the largesse of the major central banks. It has been a slippery slope and each capital injection or “save the world” speech has been met by risk-on and higher markets as liquidity floods the system. It is a judgment call on our part but we think we are about done with the effectiveness of moves by the central banks.

 
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Preparing For The Revelation





In the spirit of the European Bank Stress Tests and in the continuum of the Ring around the Rosie concocted by Brussels we are about to be handed another slew of numbers that will show that Spain is fine, prospering and running along just with no difficulties at all; thank you. This data is being prepared by the German firm Oliver Wyman, the German consulting firm. You may recall that we were supposed to have audited financials by the end of September, which was promised by Spain, however that was apparently canceled and there is no such audit underway. So much for the promises of Spain. We can tell you now, with surety, that the evaluation that we will be handed by Oliver Wyman will have all of the value of the paper found in the 'banos' of any restaurant in Madrid.

 
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