De Telegraph reported on Thursday that Van Lanschot bank had tapped the LTRO for 750 million euros. Quoting Floris Deckers, Chairman of the Board of Managing Directors, "What would you do if you saw a 50 euro note lying on the sidewalk. We're earning a nice margin on it. We don't need it for financing or liquidity."
More on this story at Reuters here:
As the week's panacea event (no, not iPad3) draws ever closer, overnight news our of Argentina may be critical for any fence-sitting Greek PSI holdouts. As Reuters reports, a US judge has ruled in favor of a holdout creditor forcing Argentina to pay $650mm interest and principal on their long-forgotten defaulted/restructured debt. Argentina defaulted on $100bn bonds in 2002 and has yet to return to the international capital markets. While the Argentinians continue to litigate holdouts, the judge's decision in favor of these so-called 'vulture funds' (an affiliate of Elliott Management) offers renewed confirmation of considerable payouts in time for Greek bond PSI holdouts. Argentina's whiny reasoning that "bondholders who did not take part in the 2005 and 2010 debt swaps do not deserve full recovery because it is unfair to bondholders who accepted less" sums up the perspective of cram-downs and forced action that sovereigns will try to take. The vulture-fund litigation (and successful precedent here) blocks any new debt operations by Argentina until settlement is reached. This coincides with Bingham McCutchen's committee of Swiss-law Greek bond holders who look set to holdout or 'protect the rights of bondholders' as there appears to be several investors actively considering all of their options, including litigation - but as noted above, litigation can take years (though returns could conceivably be very large given par payouts of bonds trading sub-20% currently).
German lawmakers are to review Bundesbank controls of and management of Germany’s gold reserves. Parliament’s Budget Committee will assess how the central bank manages its inventory of Germany’s gold bullion bars that are believed to be stored in Frankfurt, Paris, London and the Federal Reserve Bank of New York, according to German newspaper Bild. The German Federal Audit Office has criticised the Bundesbank’s lax auditing and inventory controls regarding Germany’s sizeable gold reserves – 3,396.3 tonnes of gold or some 73.7% of Germany’s national foreign exchange reserves. There is increasing nervousness amongst the German public, German politicians and indeed the Bundesbank itself regarding the gigantic risk on the balance sheet of Germany's central bank and this is leading some in Germany to voice concerns about the location and exact amount of Germany’s gold reserves. The eurozone's central bank system is massively imbalanced after the ECB’s balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week, 31% bigger than the German economy, after a second tranche of three-year loans. The concern is that were the eurozone to collapse, Bundesbank's losses could be half a trillion euros - more than one-and-a-half times the size of the Germany's annual budget. In that scenario, Germany’s national patrimony of gold bullion reserves would be needed to support the currency – whether that be a new euro or a return to the Deutsche mark. The German lawmakers are following in the footsteps of US Presidential candidate Ron Paul who has long called for an audit of the US’ gold reserves. It is believed that some 60% of Germany’s gold is stored outside of Germany and much of it in the Federal Reserve Bank of New York.
Murdochgate may just taken a detour into the tragic following reports that two senior Murdoch journalists have attempted suicide. MSNBC reports: "Two senior journalists working for Rupert Murdoch's News International have apparently attempted suicide as pressure mounts at the scandal-hit publisher of the now-defunct News of the World. The suicide attempts follow weeks of intense scrutiny of the role of The Sun, another Murdoch paper, in the phone-hacking scandal and police bribery case. The man and the woman, who were reportedly involved in separate incidents, were rescued in time, a friend of one of them said, according to a report Tuesday on stuff.co.nz....The two journalists who attempted suicide have been checked into the hospital, according to a report Tuesday by the Financial Times. The newspaper reported that their care is being paid for by News International. The London Evening Standard reported that other News International journalists are “terribly stressed and many are on the edge.” The company has reportedly offered psychiatric help to any journalist who wants help." While certainly sad, it is curious why one would move to such a dramatic step instead of simply putting one's belongings in a box, and walking out of the office door for good. Especially if one is innocent of anything. Just how putrid will the Murdoch spying stench be when all is revealed, and just how high up does it go in other parallel media organizations who most certainly acted in comparable ways in the pursuit for that most elusive commodity - information? And will this be the end of any near-tragic stories associated with the billionaire media mogul? Somehow we doubt it.
Some of these 15 swans are blacker than others....
So much for Venizelos' best, final, and most importantly only deal. From Reuters: "Most Greek pension funds holding Greek sovereign debt have agreed to take part in a bond exchange to ease the country's debt burden but four have refused to do so, a Greek official said on Tuesday. The pension funds have come under pressure from workers' unions worried the writedown on Greek debt holdings will affect the viability of their funds. About eight or nine funds have agreed to take part but pension funds for journalists, police, the self-employed and hotel workers - which hold Greek debt worth 2 billion euros - have refused, the official said."
In what can only be the most ironic of stories today, Reuters is reporting that Citigroup has become the first financial services client for IBM's Jeopardy-playing human-cognitive 'machine' Watson. While IBM expects the financial services segment to provide significant revenues, we worry that Congress will enact some protectionist policy as thousands of highly paid extrapolators analysts are suddenly outsourced to a non-eating, non-bonused, non-champagne-buying, non-tax-paying server farm somewhere. Supposedly Watson offers a 'huge marketing edge' as the government-owned bank is likely to use the uber-computer for "risk management (as opposed to stock picking)" as it offers a 'more global picture' combing through 10-Ks, prospectuses, loan performances, and earnings quality while uncovering sentiment and news not in the usual metrics. We look forward to the next conference call as Vikram is replaced by a Siri-Watson discussion of why TBTF exists.
- Cotton prices jump as India bans exports (FT)
- Goldman’s Asia Unit Lost Money First Time Since 2008 on Soured Stock Bets (Bloomberg)
- Meet Mark Spitznagel, Ron Paul's L.A. hedge-fund guy (SPCR)
- U.S., Israel Pull Closer on Iran (WSJ)
- IBM’s Watson Gets Wall Street Job After ‘Jeopardy’ Win (Bloomberg)
- US Senate OKs Bill Aimed at China Subsidies (Reuters)
- Czech Banks May Need More Funds in Crisis (Bloomberg)
- Banker Bonus Limits Sought by EU Lawmakers (Bloomberg)
- Volcker Rule Needs Extensive Revisions Amid Feedback, SEC’s Gallagher Says (Bloomberg)
Swiss money manager and long term bear Marc Faber, aka "Dr Doom", says political risk in the Middle East has increased significantly with war between Iran and Israel “almost inevitable”, and precious metals and equities investments offer some safety. "Political risk was high six months ago and is higher now. I think sooner or later, the U.S. or Israel will strike Iran - it's almost inevitable," Faber, who publishes the widely read Gloom Boom and Doom Report, told Reuters on the sidelines of an investment conference. Brent crude traded near $123 per barrel in volatile trade on Tuesday on fears of a disruption in Iranian supplies. Israeli Prime Minister Benjamin Netanyahu showed no signs of backing away from possible military action against Iran following a Monday meeting with U.S. President Barack Obama. "Say war breaks out in the Middle East or anywhere else, (U.S. Federal Reserve chairman) Mr Bernanke will just print even more money -- they have no option...they haven't got the money to finance a war," said Faber. "You have to be in precious metals and equities ... most wars and most social unrest haven't destroyed corporations - they usually survive," he said. He said that Middle East markets had largely bottomed out, though regime changes from the Arab Spring revolutions were unlikely to be investor-friendly.
In what should come as a surprise to nobody, German banks have announced that they will accept the terms of the Greek PSI whose outcome is due on Thursday. Because as Reuters points out, German banks already have had the time and opportunity to park the bulk of their Greek exposure with the failed German bad bank, which is explicitly funded by the government (thus making the cost to the German government even higher): "While Greek sovereign debt owned by German lenders has a face value of roughly 15 billion euros ($20 billion), in most cases they have already written down that value in their books by about three quarters. FMS Wertmanagement, the biggest creditor with an exposure of nominally more than 8 billion euros, will accept the deal, a person close to the lender said on Monday. FMS, the bad bank set up to hold the toxic assets of bailed-out former bluechip lender Hypo Real Estate, is to formally decide on accepting the debt cut later this week, the person said." German banks... German banks... where else have we seen this today? Oh yes: "Die Welt said that more than half of the 800 lenders that tapped the ECB's 3Y LTRO last week were German, consisting mainly of small savings and cooperative banks." Thank you Jim Reid - so while Bundebank's Jens Weidmann huffs and puffs about the LTRO, it is his own banks are the biggest beneficiaries, in no small part to hedge against Greek exposure. But yes - at least following the absorption of tens of billions in intermediary capital via a variety of channels, German banks can now accept a 70%+ haircut, even if they continue to complain about it in the process: "Commerzbank, which had originally invested almost 3 billion euros in Greek sovereign bonds but has written down its exposure to 800 million, said last month it had little choice but to take part in the bond swap. At the time, chief executive Martin Blessing said: "The voluntariness (of the Greek debt swap) is about as voluntary as a confession at a Spanish inquisition trial."" The Spanish Inquisition appears to have won yet again.
Citigroup have said that they believe that gold will rise to $2,400/oz in 2012 and by $3,400/oz in “the coming years”. However, Citi’s Tom Fitzpatrick warned of price weakness in the short term and said there is a “real danger” that there may be a correction to $1,600/oz which would provide an even better buying opportunity. Citi are also cautious near term on oil and silver. Production of gold in Australia slid again last year, despite gold fetching higher nominal prices than ever before. According to gold experts, Surbiton Associates, 264 tonnes of gold were produced last year, two tonnes less than in 2010. The 264 tonnes equated to about 8.5 million ounces and ensures that Australia remains a major player in gold, with only China producing more last year. The United States was the world's third-biggest producer with 240 tonnes. Australia's gold production was well below the nation's production peak in the late 1990s. This further suggests the possibility of peak gold production. Of the world’s four biggest gold producers (China, Australia, the U.S. and South Africa), only China has managed to increase gold production in recent years and this Chinese gold is used in China to meet the rapidly growing demand for gold jewellery and coins and bars as stores of value in China.
- China cuts 2012 growth target to 7.5 percent, stability key (Reuters)
- Freom the Fed scribe himsef - Fed Takes a Break to Weigh Outlook (WSJ)
- Greek bond swap deal rests on knife-edge (FT)
- Lenders Stress Over Test Results (WSJ)
- China to Curb Auto Production Capacity, Promote New-Energy Car Development (Bloomberg)
- China military spending to top $100 billion in 2012, alarming neighbours (WaPo)
- Warning: A New Who's Who of Awful Times to Invest (Hussman)
- EU to push quota for women directors (FT)
- Romney Advances As Obama Gains (WSJ)
- Saudi Aramco Raises Oil Premium for April Sales to Asia, U.S.; Cuts Europe (Bloomberg)