Ratings Agencies

Europe is far too reliant on Germany and the other ‘strong’ countries for the various individual nations to be able to take care of their own problems - particularly if any localized bank recapitalizations are to be in addition to the already pledged EFSF contributions by each nation (left). What is far more likely is some kind of ‘bazooka’ or ‘shock & awe’ (to use two tired cliches) approach using the newly-approved EFSF. If France had to recapitalize BNP and Soc Gen to the tune of €11 billion in addition to its €158 billion stake in the EFSF (as is widely suspected), it could well kiss goodbye to its AAA rating now that the ratings agencies seem to have finally found religion (Italy & Spain saw downgrades this week) and that, for a country currently running a debt-to-GDP ratio of 84%, would NOT be a good thing. Whether a ‘station-to-station’ plan is in the works or not, it will rely on a nice, orderly procession from one country to the next and I think it has been made abundantly clear over the last year that Europe DOESN’T do ‘orderly’. There is absolutely no way that the Eurocrats can stop the markets turning their collective eyes towards the next domino in the line at every point in the process. As they struggle to ‘fix’ the Greek situation, the markets have already done it for them and Greek 1-year bonds now yield 166%. Job done. Next up? Whether the architects of a solution are ready for it or not, it’s Spain and Italy... and France.

All you need to read.

There are few opinions in the middle regarding the China story. People are either convinced China is a juggernaut that can’t be stopped and will become the dominant world power (a recent, global Pew Poll found that 47% of respondents think China is or will be the dominant global power), or they see a colossal bubble that will burst and cause worldwide mayhem. While some might think my world-view has a negative slant, I tend toward what I think is healthy skepticism that causes me to view things in a more realistic manner. Based on the facts as I understand them, the Chinese government has created a commercial and residential real estate bubble in an effort to keep peasants employed and not rioting in the streets. In the case of the US subprime mortgage bubble, critical thinkers like Steve Eisman and Michael Burry figured out it was a bubble three years before it burst. Jim Chanos and Andy Xei have been warning about this Chinese bubble for over a year. They have been scorned by the same Wall Street shills who denied the US housing bubble. As Eisman and Burry proved (reaping billions), just because you are early doesn’t mean you are wrong.

All you need to read.

Geithner said US banks aren't at risk, shares spiked. He's considered a (super)hero by some. I say look to track record, TRUTH, facts & actual accomplishments for our new superheroes! Here are some Goldman Sachs FACTS Geithner forgot to mention!!! Must have left them home with his cape...

All you need to read.

The boss at the IASD says that the EU banks are fudging the books on Greek debt.

In what is perhaps the biggest face-palm moment of the day, the SEC's summary report on credit raters found 22 pages worth of supervisory failure and conflicts of interest concerns at each and every one of our NRSROs. However, perhaps the most notable headline, via Bloomberg was potentially much more litigiously serious:

*SEC SAYS `LARGE' CREDIT RATER APPEARED TO LEAK PENDING RATING

*SEC DECLINED TO IDENTIFY WHICH RATER MAY HAVE LEAKED DECISION

Now who could it be?

Bloomberg reports: Sales of U.S. Existing Homes Increased More Than Forecast

Special Note: In this latest Alt-Market piece we try something a little different; short fiction based on fact. Make no mistake; while the characters and events in this story are products of imagination, the issues presented and their probable consequences are anything but fantasy. The message? What will you choose to be in the face of hardship and crisis; a mountain? An impassable obstacle to tyranny? Or, a silent and beaten passenger of the Redline?

Self explanatory is the title...

I'm going to appear on the Max Kesier Show Tuesday and will do something that very few rarely do. I will walk through a hypothetical (actually, not so) run on the bank and show in detail what the fallout will be. This post will serve as a detailed outline.

"Look at what I say, not at what I do! We have no liquidity problem." Listen, if you have to sell $96 billion of mismarked assets when you DON'T need liquidity, imagine what needs to be done if you have a liquidity problem!

This post, in and of itself, should demonstrate to the entire Sell Side of Wall Street, the MSM/pop media outlets and all who may follow them that BoomBustBlog forensic research and analysis is simply superior to much of what is available and significantly overpaid for in terms of investment advice and opinion.

The embargo has been lifted and here are the headlines, which are eeriely reminiscent of the Jackson Hole speech, courtesy of Bloomberg:

• BERNANKE: POLICY MAKERS SHOULDN'T DISREGARD ECONOMY'S FRAGILITY
• BERNANKE SAYS FED HAS `A RANGE OF TOOLS' FOR MORE STIMULUS
• BERNANKE SAYS SUBSTANTIAL FISCAL TIGHTENING COULD HURT RECOVERY
• BERNANKE SAYS FED PREPARED TO USE TOOLS `AS APPROPRIATE'
• BERNANKE SAYS INFLATION `EXPECTED TO MODERATE' IN COMING Q'S
• BERNANKE SAYS FED SEES `GREATER DOWNSIDE RISKS' TO OUTLOOK
• BERNANKE: POLICY MAKERS SHOULDN'T DISREGARD ECONOMY'S FRAGILITY
• BERNANKE: U.S. FINANCES COULD `SPIRAL OUT OF CONTROL'