Over the past 48 hours, the world has been bombarded with a relentless array of soundbites, originating either at the ECB, or - inexplicably - out of Greece, the one place which has been explicitly isolated by Frankfurt, that the European Central Bank's QE will benefit everyone. Setting the record straight: it won't, and not just in our own words but those of JPM's Nikolaos Panigirtzoglou, who just said what has been painfully clear to all but the 99% ever since the start of QE, namely this: "The wealth effects that come with QE are not evenly distributing. The boost in equity and housing wealth is mostly benefiting their major owners, i.e. the wealthy." Thank you JPM. Now if only the central banks will also admit what we have been saying for 6 years, then there will be one less reason for us to continue existing.
Greece's bailout program is not working. After receiving hundreds of billions of Euros in new loans to stave off a sovereign default, Greeks are on the verge of electing a new government that may throw Eurozone politics into turmoil. How things will play out in Greece and abroad is anybody’s guess. But it is important to consider the factors which have contributed to the current state of affairs.
...over time, grand coalition governments may only serve to ossify the re-orientation of political allegiances along the mainstream vs. populist dimension. If economic malaise persists to the next election, support for populist parties is likely to build, as scepticism about the adjustments required to sustain Euro area membership rises. The Greek experience points in this direction. Were this experience to extend to larger and more systemically relevant countries (such as Italy or Germany), the implications for markets would be profound.
"The Greek political turmoil is likely to complicate matters for the ECB’s preparation of a sovereign QE programme. The prospect of the ECB potentially incurring severe losses is likely to intensify the debate within the Governing Council, where sovereign QE remains controversial. It could also make the start of a buying programme already on January 22 even more ambitious. In addition, the spectre of default could create new limitations on any sovereign QE design."
With Greek CDS surging to near post-bailout highs (and short-end bond yields back above 11%), it appears the market is anxious of the endgame as tomorrow's 3rd and final 'snap-election'-saving vote looms. Following Samaras fearmongering yesterday, it appears Germany is starting to fear the worst (and play down its effect), as Merkel's bloc states "the prospect of a Greek sovereign default is no longer a concern for euro member countries and financial markets," adding "hope that Greece’s international partners would pay if the country’s policymakers refuse to carry out necessary reforms is misplaced." However, as Bruno de Landevoisin notes, "what is at stake is none other than the prosperity of the common man pitted against the privilege of concentrated power."
What best shows that for Venezuela it is essentially game over, is that as the chart below shows, Venezuela’s international reserves declined $1.3 billion in the week after President Nicolas Maduro transfered $4 billion of Chinese loans to the central bank. In other words, the scrambling oil exporter was forced to burn one third of its Chinese bail-out loan to keep itself solvent. The country’s reserves dropped to $22.2 billion today, according to central bank data. As Bloomberg also notes, Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world’s highest inflation and widest budget deficit. The following day, Venezuelan bonds rose the most in six years in intraday trading. “If the plan was to calm the bondholders, then burning through a third of that money in five working days doesn’t do it in any way,” Henkel Garcia, director of Caracas-based consultancy Econometrica, said in a telephone interview.
George Soros Slams Putin, Warns Of "Existential Threat" From Russia, Demands $20 Billion From IMF In "Russia War Effort"Submitted by Tyler Durden on 10/23/2014 11:35 -0500
If even George Soros is getting concerned and writing Op-Eds, then Putin must be truly winning.
In October 2008, the month after Lehman failed and the Great Recession started, industrial bellwether Caterpillar underwent a series of 19 consecutive, record, declines in Global dealer retail sales declines, finally emerging from its unprecedented funk in May of 2010, just in time to celebrate the start of financial and economic Greece's collapse which ended with a sovereign default. Well, as of July 2014, that record is no longer valid, because starting with a -1% drop in Global retail sales in December 2012, CAT has now posted a new record of 20 consecutive global delaer retail sales declines, after a -9% Y/Y print for the month of July.
Gold Breaks Out As Tensions In Middle East, With Russia Intensify - Technicals and Fundamentals PositiveSubmitted by GoldCore on 08/08/2014 16:06 -0500
Gold is nearly 2% higher this week and its technical position has further improved (see key charts). On Wednesday, gold broke out of bullish descending wedge chart pattern that has formed in recent months. Another buy signal for gold came when gold rose above the 20 EMA and 50 EMA (exponential moving averages). Also positive is the fact that the price momentum oscillator (PMO) has turned up, indicating that a positive momentum shift has occurred.
what will make the Ukraine restructuring fascinating is if the "activist" bondholder investors, aka vultures, aka holdouts, are not your usual hedge funds, but none other than the Kremlin, which after accumulating a sufficient stake to scuttle any prenegotiated, voluntary transaction can demand virtually anything from Kiev in order to allow the country to make the required adjustments on its bonds to avoid an outright sovereign default. Because who else can't wait for Putin Capital Management LP?
The years-long court battle over Argentina's sovereign debt default appears to have ended... badly for Argentina (and apparently well for Elliott Management). As WSJ reports, the U.S. Supreme Court on Monday rejected Argentina's appeal (and mutually assured destruction threats that it "could trigger a renewed economic catastrophe with severe consequences for millions of ordinary Argentine citizens."; leaving in place a lower-court ruling that said Argentina can't make payments on its restructured debt unless it also pays holdout hedge funds that refused to accept the country's debt-restructuring offers. Argentine USD bonds are down 10 points on the news ahead of President Cristina Fernandez addressing the nation at 9pm local time.
Since Ukraine is the only wildcard variable in the news these past few days, it was to be expected that following i) the end of the large Russian military drill begun two weeks ago and ii) a press conference by Putin in which he toned down the war rhetoric, even if he did not actually say anything indicating Russia will difuse the tension, futures have soared and have retraced all their losses from yesterday. And not only in the US - European equity indices gapped higher at the open this morning in reaction to reports that Russian President Putin has ordered troops engaged in military exercises to return to their bases. Consequent broad based reduction in risk premia built up over the past few sessions meant that in spite of looming risk events (ECB, BoE policy meetings and NFP release this Friday), Bund also failed to close the opening gap lower. At the same time, USD/JPY and EUR/CHF benefited as the recent flight to quality sentiment was reversed, with energy and precious metal prices also coming off overnight highs.
Global gold prices may have been manipulated on 50% of occasions between January 2010 and December 2013, according to analysis by Fideres, a consultancy. Pension funds, hedge funds, commodity trading advisers, futures traders and ordinary investors are likely to have suffered losses as a result. Many of these groups were "definitely ready" to file lawsuits.
Several hours ago, and a day after the latest truce lasted about a few minutes before the the shooting returned and resulted in the bloodiest day of Ukraine's protests so far, there was hope that the situation in Ukraine may finally be getting resolved, when Ukraine's President Viktor Yanukovich announced plans for early elections in a series of concessions to his pro-European opponents. As Reuters reported earlier, Russian-backed Yanukovich, under pressure to quit from mass demonstrations in central Kiev, promised a national unity government and constitutional change to reduce his powers, as well as the presidential polls. He made the announcement in a statement on the presidential website without waiting for a signed agreement with opposition leaders after at least 77 people were killed in the worst violence since Ukraine became independent 22 years ago. This comes in the aftermath of S&P's announcement overnight that the Ukraine will default in absence of favorable changes.
So is this the favorable change that everyone has been expecting. Nope.
Argentina is a country re-entering crisis territory it knows too well. The country has defaulted on its sovereign debt three times in the past 32 years and looks poised to do so again soon. Its currency, the peso, devalued by more than 20% in January alone. Inflation is currently running at 25%. Argentina's budget deficit is exploding, and, based on credit default swap rates, the market is placing an 85% chance of a sovereign default within the next five years. Want to know what it's like living through a currency collapse? Argentina is providing us with a real-time window.