The Euro Bailout Fund (Which Does Not Exist) Is Being Delayed, As Germany Fires Back Against Broke EuropeSubmitted by Tyler Durden on 06/21/2012 09:52 -0400
Overnight, the WSJ had an interesting article starting with "Italy, France and Spain are trying to take a united stand against Germany in finding new ways to fight the euro-zone debt crisis." This merely confirms what Greece has been trying to tell us for months: that beggars can be choosers. Well, turns out they can't, because at the end of the day, the only thing that does matter is the Golden Rule as Mark Grant reminded us earlier. Which is why trying to force Germany to do anything will backfire massively - as a reminder: it is in Germany interest to keep Europe weak, the EURUSD low, and the periphery on the edge of insolvency (just memorize the bolded sentence - it is all you need to know about Europe). Case in point: "Germany's constitutional court said on Thursday it will need time to study the euro zone's permanent bailout mechanism after its expected approval in the German parliament next Friday, which could delay its scheduled start date on July 1." In other words, the bailout fund on which Europe's entire rescue dreams lie (and which will gladly subordinate European creditors) and which still does not exist, is now being delayed. You are welcome Europe. Love, Germany.
With West Texas Intermediate crude oil trading with an $80 handle, near two year lows, while stocks remain within a few percent of their four-year highs, one has to question just what it is that stocks believe about our bright new future of growth and demand that the all-important energy markets do not. Between Europe's recession, last night's dismal China PMI, and a significantly trending rise in US unemployment claims, it seems more likely that the global demand picture painted by the oil market is a better reflection of reality than the earnings/multiple picture painted by the nominal price of US equities. We know that bad is good when it comes to the front-running of Bernanke's print button but wouldn't bad being good raise the USD-nominal price of oil also?
The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations. We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.
Europe's approaching "Madoff Moment"...
There are only a few funds in the credit markets who are big enough to help manage a position the size of JPM's CIO office and, according to Bloomberg Businessweek, BlueMountain (one of the biggest) has helped JPM unwind their position by entering the market to take positions that it then sold on to the bank. This agency role is helping the bank to cover its tracks (and reducing the effectiveness and transparency of any and all DTCC data in the course of it), which argues perhaps once again for the exchange trading of these instruments (but that is another topic). While we would be sure that Blue Mountain took a wider than market bid-offer out of the middle of the brokerage move, it is nevertheless clearly a backdoor bailout of the bank's position by what is likely one of its major counterparties anyway (and why not). The activity pick-up this week makes perfect sense (as we noted yesterday) given the single-name CDS roll (and index options expiration) and as Bloomberg's Childs and Harrington note "If you were to need to move a large position, there should be greater liquidity around those days than other days, all else being equal," but as we have noted it remains unclear as to whether the original tail-risk position has been taken down at all (if so then doesn't that make JPM more risky implicitly?) or just the hedge of the hedge that got so out of hand thanks to Iksil's excess.
Two days ago we noted with muted disgust that Europe has legislated to scrap the use of rating agencies, who were everyone's best friend during the up-phase in the global ponzi, but now that deleveraging is accelerating and ratings downgrades are coming, are like the drunk guest who refuses to leave the insolvent party at 4 am. Sure enough, the time has come to enact rules to kick them out. But wait, there is much more. Moments ago Reuters reported that the European Central Bank is discussing a medium-term plan (as in indefinite) to scrap rating rules on euro zone sovereign bonds and instead set their value when used as collateral in lending operations on its own internal assessment, central bank sources said. You read that right: the ECB itself will decide what the collateral value is of pieces of paper it accepts, in exchange for other pieces of paper with the faces of famous dead people on one side (even if technically the whole operation takes place electronically). And to think that for some odd reason allowing drug addicts to write their own prescriptions is illegal. Apparently all is fair in love and breaking all rules of sinking monetary systems.
And since it's Mr. Moneybags, one "bonus" question for the readers regarding Maiden Lane fraud and the subsequent cover up when the GAO came a knockin'
And so the gaming continues: Initial Claims miss expectations of a 383K print, coming at 387K, a number which next week will be revised to 390K. This is the 7th miss in a row, and 23rd miss of the past 26 weeks. It is also the highest 4 week average since December. But the mainstream media has its soundbite: "initial claims decline by 2,000" because, lo and behold, last week's 386K print was revised to 389K. We have discussed this topic to death: little to add here. The ceremonial scripting by the BLS continues full bore. The only real data point in today's release: those collecting extended claims continue to hit the 99-week cliff, as 42K more drop off Komrade Samov's free lunch dole. Finally, judging by the somewhat muted positive market response to this latest piece of horrible economic news, the data was bad but not bad enough: we need a 400K+ print for the ES to get back to 1,400 it appears.
First and foremost; nothing is happening in the European Union without the agreement of Germany. They have the gold and they will make the rules regardless of the words bandied about proclaiming brotherly love and the solidarity of the European nations. This is all drivel, just politics and a subject that can be ignored as you concentrate on what is really important. When Germany speaks, on a scale of 1-10 with 10 being the most important; Germany is a 10 and the only 10 on the Continent.
Looks like the long-anticipated E-bay auction for Santorini may be closer than expected: in the aftermath of Greece's now absolutely bankrupt status, whereby the comatose patient is kept alive only thanks to a Made in Germany ventilator, it was only a matter of time before the country started with the Blue light special firesales. Sure enough from Bloomberg: "National Bank of Greece SA is preparing to sell an Athenian Riviera resort, visited by world leaders and movie stars for more than half a century, in a test of the country’s ability to sell assets amid concern that it will leave the euro. The 3.3 million-square-foot Astir Palace complex has already drawn investors’ interest, according to Aristotelis Karytinos, general manager of real estate at the lender. The Athens-based bank and Greece’s privatization fund, which owns part of the property, will put out a public tender in coming months, he said." Why is the Astir Palace unique? "Since its opening in 1960, the resort’s guests have included Jackie Onassis, Nelson Mandela, Tony Blair, Jane Fonda and Frank Sinatra, according to the resort’s website. Astir Palace in 1993 and 2009 hosted the Bilderberg conference." Something tells us we know just where the winning bid for the last remaining Greek assets may come from.
Even as Moody is now about a week late on its Spanish bank downgrade where the banks are rated higher than the sovereign (which obviously is kept in check to prevent yields on bonds from soaring even more), here comes the next wholesale bank downgrade:
- Moody's expected to announce ratings downgrade for UK banks this evening - Sky Sources
- Exclusive: Big news - I'm told Moody's will announce downgrades of some of world's biggest banks, incl in UK, after US mkts close tonight. - Sky's Mark Kleinman
Looks like that fabricated 2 notch Margin Stanley downgrade (because 3 notches just won't do - those 4 months of Gorman-led "negotiations" made that painfully clear) is about to strike. The real question is: What Would Egan Who Do?
- German court may delay ESM bailout fund ratification (Reuters)
- New dangers lurk for rudderless Spain (Reuters)
- SEC Said to Depose SAC’s Cohen in Insider-Trading Probe (Bloomberg)
- With Europe broke, Asia is Wall Street's new dumb money: Riskier Bets Pitched To Asia's Rising Rich (WSJ)
- Spain expected to request bank aid after debt test (Reuters)
- Lawmakers Push for Overhaul of IPO Process (WSJ)
- Israel: "all options" open after Iran talks fail (Reuters)
- Canadian housing boom to grind to a halt (Financial Post)
- Italians Dodge Property Tax in Test for Monti’s Austerity (Bloomberg)
- ORCL earnings must have been good: Oracle CEO Ellison to Buy Most of Hawaiian Island Lanai (Bloomberg)
Hours before Spain is expected to present the bank "assessment" from Roland Berger and Oliver Wyman on its comprehensive bank insolvency status, the country sold €2.22 billion of two-, three- and five-year government bonds, in a sale which saw solid demand but yields that are simply laughable and are completely unsustainable, culminating with a record yield on 5 year paper. Per Reuters, the Treasury sold 700 million euros worth of a 2-year bond, 918 million euros worth of a 3-year bond and 602 million euros of a 5-year bond, beating a target to issue up to 2 billion euros of the debt... In a nutshell: big demand for paper that will leave Spain pennyless. Not very surprising, and as Elisabeth Afseth from Investec summarized, "They got it away, it's about the most positive thing you can say about it." Elsewhere the German economy continues to deteriorate from carrying the weight of the PIIGS on its shoulders, with the Mfg PMI and Services PMI both missing estimates of 45.2 and 51.5, and printing at 44.7 and 50.3, respectively. This was a 3 year low for German PMI and now all but confirms that the economy will enter a recession at the next GDP update. But all this pales in comparison with the latest update of the Greek comedy where we learn that the three parties forming Greece's new coalition government have agreed to ask lenders for two more years to meet fiscal targets under an international bailout that is keeping the country from bankruptcy, a party official said on Thursday. This came a few hours after a German parliamentary group officially spoke against a time trade-off for Greece. Which means that beggas will not be choosers after all.