There's that name again: BlackRock, the world's largest asset manager, and the firm that was forced to deny last Wednesday it is in any trouble courtesy of accumulating unknown amounts of Italian bonds (how about a nice little Cusip list there Rick Reider?), just made the news following a report in Reuters that the firm anticipates massive haircuts in 3 of the 5 PIIGS. From Reuters: "Debt restructuring in Greece, Portugal and Ireland with write-downs for private creditors of 75 percent to 80 percent are needed to help stop Europe's debt crisis turning into a global meltdown, said BlackRock, one of the world's largest asset managers. "Governments are falling, bond yields are zig-zagging by whole percentage points and markets around the world are locking up: the euro zone turmoil risks turning into a global crisis," BlackRock said in a research note on Monday." So, let's see: Greece, Portugal and Ireland... But not Italy of course? The country that has the second largest amount of debt in Europe is somehow excluded from a very conflicted BlackRock's "objective" analysis. Why is that? "BlackRock also said the European Central Bank should buy more bonds and that policymakers should provide more details on the rescue fund and implement fiscal discipline without hurting growth, according to the note." Is BlackRock betting the farm that the ECB will bail it out? That didn't work too well for MF... Seriously, Rick, some CUSIP level breakdown of your Italian exposure would be terrific. Even if it is at the "net" level. We can wait. So can the market.
If you use your calculator on this one, you wouldn't have to hear me say I told you so!
German Chancellor Angela Merkel said on Monday that Europe could be living through its toughest hour since World War Two as new leaders in Italy and Greece rushed to form governments and limit the damage from the euro zone debt crisis.
Financial markets on Monday took heart on relief that a key Italian bond auction drew decent demand from investors and hopes that new leaders in Greece and Italy would take decisive action to breathe new life into their sick economies.
Since the derivatives and housing market implosion of 2008, America and the rest of the world has been spiraling down a chasm some in this country still refuse to take note of. The question has never been whether there “will be” a full scale financial disaster. The end to that chapter of this story was already written years ago. Rather, the real question has been “when” will this inevitable event culminate? Sadly, speculation on the matter has met an irreconcilable road block. The fact is, all the necessary elements are in place to bring down our fiscal shelter not in five years, not in one year, not in six months, but today. That’s right…..the economy as we know it has the potential to derail completely before you wake up for your morning poptart. Some skeptics might shrug off this statement as mere sensationalism for effect. I wish that were the case. Frankly, I would enjoy writing a little fiction for once. The truth is far too bizarre and disturbing lately. In the case of economics, traditional views and standards have gone completely out the window in a way that I and probably every other analyst in the field have never heard of or encountered. All expectations are now null and void. Manipulation of the marketplace is no longer a subversive and secretive process, but open government and central banking policy! Who could have guessed five years ago, for instance, that U.S. taxpayers would be saddled with bailouts of the EU? Who could have predicted that global stock market psychology would be dominated for over a year by the debt drama of a country as economically insignificant as Greece? And, who could have foreseen that destructive fiat stimulus policies would soon be common knowledge events amongst the citizens of various faltering nations?
Gold ETF data shows continuing safe haven flows and diversification into gold. Global holdings of gold rose last week, by nearly 897K oz, their largest weekly rise since the week ending Aug 5 2011, when holdings rose by a net 1.089M oz, according to Reuters. Total gold ETF holdings stand at around 68.854M oz, up a full 1.749M oz in the last month. November is shaping up to show the largest monthly inflow since July. So far this month, holdings have risen by 947K oz. Goldman Sachs today reaffirmed that it remains overweight in commodities. On gold it says it will roll over its Dec 11 long to Dec 12. "We expect gold prices to continue to climb in 2011 and 2012 given the current low level of US real interest rates, and as a result recommend a long gold position. Credit Suisse has said that gold may climb over $1,800 in the coming days with negative real interest rates as the ‘key driver’.
- Obama to China: Behave like "grown up" economy (Reuters)
- President Hu: US woes not yuan-related (China Daily)
- U.S. readies defenses against Europe spillover (Reuters)
- Another one discovers that Gross is in fact net: Euro Risks Hit Banks (WSJ)
- Global security trumps economics at APEC conference (Washington Post)
- New Italian, Greek governments race to limit damage (Reuters)
- Asia a priority for Canada after U.S. delays Keystone (Reuters)
- All major economies headed for slowdowns: OECD (Reuters)
- Japan Ends Recession as Quake Scars Heal; Outlook Dim (Guardian)
- Bundesbank warns against intervention (FT)
Unlike in the past week, when the ECB had a clear agenda of getting Berlusconi out, and thus let 10 Year BTPs tumble to a record low price of 82 cents before even pretending to intervene, all it took today was a modest drop from 88.80 to 87.80 before Mario Draghi sent his bond traders out in the market lifting every offer. As for the sell off catalyst: the auctioning off of €3 billion in 5 year bonds which cleared at a record 6.29%, the highest pricing yield since 1997. This compares to the last auction of 5.32% on October 13 and a bid to cover at the current auction of 1.47 compared to 1.34 last. Yet once again, mysteriously like last week's 1 year auction, the bonds came in well inside of the prevailing yield just before the auction which was 6.43%. Once again one wonders: precisely how do these auctions continue to clear with no tail whatsoever, and why would anyone buy the bonds in the primary market at a price that is much higher than the secondary one. But we can wonder: in the meantime the EFSF will assure us it is not a ponzi scheme. Either way, just as the 10 Year BTP price threatened to take out early support following a very aggressive selloff beginning just as the 3 Year came to market, the ECB stepped in and started buying bonds up. No wonder the EURUSD is well below the Friday closing price, and trading at 1.3670 at last check. For those interested, below are the kneejerk Wall Street analyst responses to the Italian auction.
All is well ... the EFSF will quietly monetize the radiation ...
Germany makes contingency plans to deal with the fallout from the debt crisis.
A Sunday ramble...
If there is one thing one can say about the insolvent European continent is that despite everything, it is a bastion of truth, and a knight of see-thru disclosure. After all, who can forget such brutally honest statements as "Greece will not default", or the follow ups: "Ireland is not Greece", "Portugal is not Ireland", "Spain is not Portugal", "Italy is fine", "Italy has turned down money from the IMF", "The IMF has never offered any money to Italy", and then the old standbys, "the ECB will not be a lender of last resort", "the EFSF will use 4-5x leverage", wait, make that "the EFSF will use 3-4x leverage", and last but not least, "Europe is not America" and "it is all the fault of evil CDS speculators." Well we have one more to add to the list: "the EFSF is not an illegal ponzi scheme" - because after the mindboggling report in the Telegraph yesterday that the EFSF has bought hundreds of millions of its own bonds, exposing the scam in the heart of the Eurozone for anyone to see, the European rescuer of last resort (at least until the ECB comes out monetizing and Eurobonds are issued)has no choice but to join in the parade of truths and as Reuters reports "said on Sunday that it did not buy its own bonds last week, denying a British newspaper report that it spent more than 100 million euros ($137 million) to cover a shortfall of demand. "The EFSF did not buy its own bonds and the book was 3 billion euros," an EFSF spokesman said, referring to the 3 billion euros raised in last Monday's 10-year bond issue." We are certain that in order to dispel rumors about its fraud-i-ness, the EFSF will promptly submit a full breakdown of the entities that received bond allocations (we know that Japan is good for €300 million, that China is good for €0.0, and that as Merkel said one week ago, "hardly any countries in G20 have said they will participate in the EFSF." So, because we believe everything that comes out of Europe, we are patiently waiting to see just who it was that bought EFSF bonds when nobody else did. And yet what is most troubling to us, is that it took the world 5 minutes to completely agree that the EFSF is a ponzi scheme, with nobody doubting this supposedly "refuted" disclosure for even a second. Perhaps that tells you more about the current state of Europe than anything else...
The European Union next week unveils its third broadside against credit rating agencies since the financial crisis began, and this time the Big Three face a direct hit where it hurts.
Thursday's mistaken downgrade by Standard & Poor's of France's sovereign debt won't help a sector seen by policymakers as an "oligopoly" that fomented and exacerbated market turmoil globally and more recently in the euro zone.
Bunga Bunga Era Is Over: Italian Parliament Approves Budget Reform, Paving Way For Berlusconi ResignationSubmitted by Tyler Durden on 11/12/2011 12:50 -0400
The Italian Bunga Bunga era is now over. Last week, after losing the vote of confidence, Berlusconi said that he would resign the minute the parliament voted through the 2012 budget reform. As of minutes ago, this has just happened, after 380 parliamentarians effectively voted to kick Silvio out. As per Reuters: "The Italian parliament gave final approval to a package of economic reforms in a vote on Saturday which clears the way for the resignation of Prime Minister Silvio Berlusconi and the formation of an emergency government. Berlusconi, who failed to secure a majority in a crucial vote on Tuesday, promised to resign once parliament passed the law, demanded by European partners to restore market confidence in Italy's strained public finances. He is expected to hand in his resignation to President Giorgio Napolitano later on Saturday. Former European Commissioner Mario Monti is expected to be given the task of trying to form a new administration to face a widening financial crisis which has sent Italy's borrowing costs to unmanageable levels." Of course, if Monti is unable to get the required majority of support, the country will proceed with general elections, which will throw the BTP yields into yet another maelstrom. And even if Monti succeeds in forming a technocratic "consensus" government, the question still remains: just how will he succeed in implementing the required austerity where Silvio failed?