The Government today agreed to request financial support from the European Union and the Euro Area Members States. The IMF will also be requested to assist in the provision of support. The Government welcomes the agreement reached at the Eurogroup meeting today that providing assistance to Ireland is warranted to safeguard financial stability in the EU and in the Euro Area...
A few days back we asked whether if as part of the now certain Irish austerity package, the imminent rise in the corprate tax rate for offshore companies based in Ireland would result in a crunch in the bottom line for US corporations such as Google. Now that a hike from the prevailing 12.5% rate is inevitable, US companies have launched an offensive to make it clear that only Irish citizens will be subject to the critical austerity measures. The Telegraph reports that "the Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country's low corporation tax rate is raised." If companies, which are purely circumventing much higher US corporate tax rates, also have to share the burden, they will simply depart from the already insolvent country, leaving it with even less tax revenues, thus accelerating the toxic loop of greater insolvency coupled with even less revenue. And since the IMF is backed primarily by the US, which is end-domicile to the bulk of the corporations in question, it is obvious that corporations have all the leverage and will most certainly get their wishes, further widening the chasm between the "corporation" and the simple Guiness-drinking, potato chewing peasant. In the brave new world, the pursuit of life, liberty and happiness appliues only financiers and corporations. Everyone else has been relegated to footnote status.
Vigilantes Home In On Portuguese Beacon As Opposition Claims Government Understated Debt And Deficit Figures By About 25%Submitted by Tyler Durden on 11/21/2010 15:45 -0400
With Ireland now a lost cause, the next country which will see its bond yields surge to new records is Portugal. And just so vigilantes don't miss the hint, the Portuguese opposition party has stated that the country's budget deficit and public debt are "higher than those reported by the government." The claim is that Portuguese debt is about 30% higher than claimed by official statistics: instead of 82% of GDP, it is actually 112%. With bankrupt Greece having lied about virtually every aspect of its comatose economy, it is not as easy to dismiss the announcement as merely political bickering, and is sure to leads to at least a modest double digit basis point jump in Portuguese spreads. And once Portugal is rescued, just after New Year's, then it will be time for those last two countries of the peripheral block: Italy and Spain. And after them, it's the core's turn.
Goldman's Jan Hatzius, who after flipping his view on the economy in early August, and taking all of the street with him, has recently flopped back to a semi-optimistic outlook. What is amusing is that despite his suddenly far more bullish outlook, he, as well as the entire Goldman team, continue to call for $2 trillion in total QE2. Of course the two are completely at odds with each other, but hey - if it means 2011 will be another record bonus year, why leave something as irrelevant as logic stand in the way of that 3rd French Polynesian island. On the other hand, Hatzius is certainly not stupid, so in continuing with his rhetorical device of an hypothetical interrogation, today Hatzius releases his latest Q&A, this time focusing on the future of Quantitative Easing. What is most notable, is that as of today, the Dutch strategist sees the possibility for less QE2 post June, contrary to his recent missives which expected QE2 to continue until the full $2 trillion of expected monetary base "printing" was fulfilled. Then again, as Ireland has so aptly demonstrated today, at this point it is no longer a question of whether any economic policy is viable in the long-run. All that matters is for putting enough lipstick on the bankrupt global pig for another few months at a time, so that yet another sovereign constituency can foot the bills in what has become a rolling global bailout of country after country.
And so the can has been kicked down the road one more time as Ireland's Brian Lenihan has just sold out his country to the IMF, the ECB and the Fed for a few extra years of puppet control. RTE reports that EU Finance Ministers are due to hold a conference call later this evening during which Ireland is expected to make a formal request for a financial rescue package. What is not discussed is how the Irish people, now likely furious at being manipulated over a lost cause will express their anger over being the latest sheep used to bail out Europe's ever more insolvent banking system. They can at least sleep soundly, that they won't be the last. After today's rescue of Ireland, the vigilantes will focus their undivided attention on Portugal and Spain - perhaps these two countries will be a little less timid when it comes to rescuing Germany's banking oligarchy.
One of the more persuasive analyses on the fate of the EMU that we have read recently, comes, oddly enough, from JP Morgan, although not from the firm "proper" but from its somewhat more iconoclastic Private Bank division (which manages portfolios for the ultrawealthy). At the core of the argument, which is far more subtle and nuanced than any report by Ambrose-Evans Pritchard, yet which reaches the same conclusion on the viability of the Eurozone, is the now accepted schism between the core and the periphery, in virtually every aspect of their economies: "how can the European Central Bank simultaneously maintain the “right” monetary policy for inflation-phobic Germany and the weak periphery at the same time?" What many don't know, however, is that this very dichotomy was the reason for the collapse of the first attempt at a monetary union in Europe, the European Exchange Rate Mechanism, which ended with a loud thug back in 1992, "when the UK needed a much weaker monetary policy than Germany, which was overheating in the wake of Unification stimulus." Of course, instead of taking no for an answer, Europe merely upped the ante and layered monetary unification on top of an artificial political and customs union. The current state of affairs is all Europe has to show for it. So what happens next? Just as Dylan Grice suggested on Friday that China may have realized that its inflationary endgame has now entered its "out of control" phase, so too perhaps Europe, now accepts the realization that the same unsuccessful outcome as 1992 is inevitable and the premise of a European Union can finally be shelved. Yet in a world in which, as JPM claims, the need for an artificial European union to preserve the peace ended in 1954, and the far more critical peace-perpetuation mechanism - global corporatocracy - is far more important, perhaps Europe should instead focus on doing all it can to promote the interests of various multinational corporations, whose viability may be far more important to Europe's continued non-wartime status. Or perhaps that is the idea all along - with corporate viability more reliant on a healthy banking sector than anything else, are Europe's taxpayers now expected to pay for the 50+ years of peace and social welfare they have received by rescuing the various banks whose bad investments would not sustain one day without an explicit and implicit sovereign backstop. Is Europe essentially saying that should Europe's banks be impaired, that war will certainly follow? Or if the message is not too clear yet, perhaps it will be made soon enough...
With everyone chanting the praises of the "better than abysmal" economy, we decided to post a time lapse video (since cartoons are all that stand an even remote chance of attracting some attention)prepared by John Lohman, of just how the New Normal has been progressing, both since the starts of the great depression in December 2007, and more importantly, since the beginning of the "end" of the recession. The result may surprise you. As John points out: food stamps - the only thing keeping 43 million Americans from going postal." Hopefully the end of extended unemployment benefits coming December 1 won't be that first one additional straw on the camel's back that leads to a full blown fracture.
US Mint Reports Soaring November Month-To-Date Silver Coin Sales Surpass 2010 High Following Massive Rush Into Precious MetalSubmitted by Tyler Durden on 11/19/2010 17:09 -0400
Is Max Keiser's attempt to put JP Morgan out of business working following the mother of all silver physical squeezes? The price of silver has been stable in the past few days, but if the US official precious metal seller is to be trusted, this will not last long. According to the US Mint, sales of 1-ounce American Eagle silver coins are headed for the strongest month since at least May, Bloomberg reports. More details: about 3,175,000 of the coins have been sold this month, compared with 3,633,500 in May, according to data on the Mint website. Silver futures in New York touched a 30-year high of $29.34 an ounce on Nov. 9. American Eagle coins also are available in gold and platinum. The Mint said 62,500 ounces of gold Eagles have been sold in November. What is interesting is that sales of the coins continue at an astronomic pace despite the nearly 10% premium one has to pay over spot. What is more interesting, is that the Mint has not run out yet. Yet the refreshing thing, is that instead of buying paper certficates promising that one's presumed purchases of gold is held by the DTCC, Americans are once again going straight into physical. Here is hoping Keiser's plan ultimately unravels whatever the RICO suit against JPM and HSBC leaves untouched.
The Federal Reserve has decided to buy US Treasury bills for about US$ 600 billion in all, in monthly installments of about US$ 75 billion over eight months, until June 2011. However, this action will not achieve the desired goal of economic growth, nor will it change the US labour market, this according to most analysts and security traders surveyed by Bloomberg in its quarterly “Global Poll”. In fact, more than half of 1,030 experts who took part in the survey, expressed doubts about the Federal Reserve’s move. For more than 70 per cent of them, the Fed’s second round of quantitative easing (QE2) is largely an attempt to adjust the exchange rate of the US dollar against other currencies. Thus, according to such set of views, the Federal Reserve (de facto but not de jure the US central bank) wants to redress the trading disadvantage US manufacturers have accumulated over the last few decades and cut the US trade deficit.
Chris Martenson who recently launched a fascinating series of interviews and podcasts with a variety of the most interesting pundits in the world, chats with Ted Butler, discussing such germane items as why silver has such a compelling value story, the coming silver supply crunch, the argument behind the allegations of silver price manipulation, drivers behind the recent price action in silver, why price volatility will increase and the expected outcome of the CFTC’s investigation and why Ted thinks it will be "a bombshell for the silver market."
While not directly under the purview of finacial matters, a topic that has received much attention recently are the now two consecutive censures of MSNBC hosts: first Keith Olbermann, and now Joe Scarborough for political donations. The reason given by MSNBC (NBCsubsidiary) president Phil Griffin is that "since [Scarborough] did not seek or receive prior approval for these contributions, Joe understands that I will be suspending him for violating our policy." As for Olbermann: "Days before the November 2 congressional elections, Olbermann gave contributions of $2,400 each to Jack Conway, the Democratic candidate for U.S. Senate in Kentucky, and to two members of the House of Representatives from Arizona, Raul Grijalva and Gabrielle Giffords." Presumably the decision to censure the two arose out of NBC News, MSNBC's broadcast partner, which attempts to protect the news organization's image as unbiased. Zero Hedge is all for unbiased reporting, even at such purportedly extremely far from the center stations as MSNBC and Fox News. After all, both of these are watched purely for entertainment purposes, and serve to merely create an echo chamber environment. Yet one station, which is also under the control of NBC, and which should pursue neutrality more than anything due to the sensitive nature of its coverage, is financial station CNBC. Which is why we were very surprised to discover that none other than Larry Kudlow recently donated $1,000 to former Connecticut Congressman Chris Shays. We wonder whether this means we actually may a day or two without supply-side general extraordinaire Larry Kudlow at the CNBC helm since obviously NBC will strive to enforce objectivity at all of its broadcast partners?
Looking at the CFTC Commitment of Traders data for the past week confirms that the momentum unwind continues. In Treasury's net spec positions in both the 2 and 5 Year tumbled (from -11,125 to -35,142, and from 152,782 to 102,885 respectively) even as bets that prices on the 10 Year would jump almost doubled (from 58,661 to 97,346). After chasing curve steepening, specs are now going all in on a major 2-10 flattening. The same thing is evident in commodities, where spec bets on five key categories all declined week over week. Lastly, the unwind in dollar shorts, and everything else longs is accelerating: dollar net spec increase from 6,315 to 10,827 as all other FX (except the GBP) saw spec bullish interest decline.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 19/11/10
Why Pimco's Purchase Of Another $30 Billion In MBS (Much Of It On Margin) May Be Very Bad News For Bank Of America (And Taxpayers)Submitted by Tyler Durden on 11/19/2010 14:23 -0400
Bill Gross continues to telegraph that an MBS monetization announcement is just a heart beat away. Either that, or the firm is now fully convinced it will be able to putback every single MBS in its book (and then some) to some soon to be sad shell of a bank (read- Bank of America and/or Wells Fargo). In October, Pimco's Total Return Fund saw its margin cash jump by the most since February 2009: the time when the full QE1 was announced: at $28.1 billion in margin cash, the firm increased it dry leverage powder from $7.6 billion to $28 billion. And where did this money go? Virtually all of its went in Mortgage Backed Securities, which stood at $100 billion as of October 31. This is a $50 billion increase in the past two months, and brings the total to the highest since February 2009, again - just before the Fed started monetizing UST and MBS/Agency debt in earnest. As Gross never does anything without a reason (and fundamentals are never a "reason" for the Fashion Island denizens) there are only two possible explanations: either Gross knows that the Fed will have no option but to promptly shift from monetizing MBS in addition of USTs (now that rates have once again started leaking wider), a topic we have covered repeatedly in the past, of the firm is convinced it will be successful in getting the BofA's to accept all of its putback demands, and possibly more. As both outcomes will result in a material profit on all recent purchases, the bottom line is that taxpayers (either via QE or via TARP2) are about to make the GEM (Gross-El Erian-McCulley) even more valuable.
After RINO, Is Muddy Waters About To Sacrifice Orient Paper (NYSE: ONP) On The Altar Of Chinese Stock Fraud?Submitted by Tyler Durden on 11/19/2010 16:09 -0400
Now that RINO is on its deathbed following the Muddy Waters report that started it all, it is time to give the specialized research shop some kudos...And move on to their next (or technically previous) target - Orient Paper. With RINO likely to open just north of 0 if at all (and will do so on the Pink Sheets), investors are curious which other name brought to you courtesy of the NYSE overeagerness to float any garbage, is just minutes away from becoming the next Chinese fraud export du jour. We present ONP, or Orient Paper, which Muddy Waters has been even more bearish on (since late June), and has a target price of $<1.00 (in essence, barely a liquidation recovery). The research report begins boldly enough: "We are confident that ONP is a fraud. Its purpose is to raise and misappropriate tens of millions of dollars" and then goes on to prove its allegations. The stock was last trading at $5.88. The only question is how much lower can it go.