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Tyler Durden's picture

The ECB & Greece - Lender Of Last Retort Attitude Must Stop





The ECB seems to be quite happy to comment on Greece, and most of the comments seem to say that Greece isn’t doing their part.  Well, what about the ECB?  What have they been doing for Greece?  So far, not very much and I think they need to start to play nicely with their holdings.  If the ECB just plays nicely, at no cost to the ECB, the situation in Greece would improve quickly and dramatically.  The ECB must go from being a lender of last retort to a bona fide contributor to Greece and a true lender of last resort. Maybe the ECB should “Ask not what Greece can do for you, but what you can do for Greece”?

 
Tyler Durden's picture

China Gives Up On Europe, Will Target Africa Instead





That China has finally given up on Europe is no news (granted, however, it will make it more complicated for various European newspaper to make up articles alleging China will bail out Europe now that this is no longer the case): after all even the Norwegian sovereign wealth fund has finally learned its lesson, and having been burned enough times, has made it quite clear it will have nothing to do with Europe's insolvent periphery. China, which has already lost enough money on Europe, has now decided to do the same. From Bloomberg: "China Investment Corp. has stopped buying European government debt because of an economic crisis on the continent, though it continues to look for new investments there, said CIC President Gao Xiqing. “What is happening in Europe right now is of course of concern,” Gao said yesterday in an interview in Addis Ababa, Ethiopia, during the World Economic Forum on Africa. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.” Sorry Europe: you had your chance. As for where China will invest its capital in the future? Why the one continent so far untouched by globalization, and which has the most debt capacity of all...

 
Tyler Durden's picture

Italian Economic Deterioration Accelerates: Q2 GDP Forecast To Drop More Than 1%





Overnight we got some good news on Italian industrial production. Well, get ready to scrap them as according to Italian Trade Union Confindustria, and validating the collapse as predicted by PMI indicators, Italy's Q2 GDP is now expected to shrink more than 1% in Q2: the worst print since 2009, cementing the country's "double dip", and that real-time industrial output in April, now that LTRO has fizzled, is expected to fall 0.6%. None of this should come as a surprise to anyone: after all the only way the periphery can rise is if it crashes hard enough to force the ECB to intervene again. Finally, the country that is next in line after Spain to nationalize its banks, need some pretext after all. Complete economic collapse will surely make stockholders, of other countries' banks at least, happy, as their Italian counterparty risk will soon be footed by the Italian taxpayers themselves.

 
Tyler Durden's picture

Bankia: The Failed Bank In The Coalmine





The Immortal Bard must have been referencing Madrid when penning these lines or, if not, would likely approve of their application this morning. The nationalization of Bankia, the third largest bank in Spain, is not some isolated event that is singular and alone in nature regardless of the expected dampening and muted words and phrases issued by the Spanish government. The cancer has been identified but not isolated and you may be assured that it remains in the lymph nodes of the two major banks in Spain. Fortunately, during America’s financial crisis, many of the sub-prime mortgages were securitized and no longer resided on the balance sheets of the American banks. In the case of Spain we find not only the majority of the mortgages resident at the Spanish banks but we find an added dimension which is a huge amount of money lent to Real Estate developers which is impaired and still on the books of the Spanish banks. Further, in my opinion, none of these loans have been accurately accounted for and they are being carried at whimsical valuations by the banks or pledged as collateral at the ECB where the Spanish bank funding jumped 50% in one month and now stands at $294 billion. Following the bouncing ball; there is now so much encumbrance of assets between pledged collateral and covered bond sales that the actual worth of the two major Spanish banks is now someplace between “not much” and “De minimis” should the situation deteriorate to the point of impairment.

 
Tyler Durden's picture

Europe's Most Parabolic Chart Goes Parabolic-er





Two weeks ago, we showed that when it comes to parabolic charts, Europe sure has a variety to choose from. Yet none are quite as parabolic as the chart enabling it all: the Bundesbank's TARGET2 claims toward the rest of the Eurosystem, or as we have repeatedly explained (and as Jens Wiedmann confirmed), the sunk cost that Germany will have to foot once the Euro experiment ends, and the EMU falls apart.. which judging by recent developments in Greece, and now Spain, could be as soon as in a few weeks. The number as of April 30? €644,182,010,456.05, which is exactly 25% of German GDP, and an increase of €28.6 billion in April and €181 billion in 2012 alone! Putting this number in perspective, imagine that the Fed had "assets" totalling $3.85 trillion that everyone knew are totally worthless, and meant that it would have to print a like amount in fresh money as replacement "capital" when D-Day came. This "money" represents a receivable that the Bundesbank will never, repeat never, get back, once Greece exits the Eurozone, and sets a precedent for all the other insolvent European countries, leading to the end of the European monetary experiment. It also means that the asset base backing the liability side of the Bundesbank will soon get obliterated. So the real question is: do German taxpayers feel like sinking costs which will never be repaid, and which serve merely to preserve the myth of viable German export markets, thereby keeping the illusion that the German intra-Eurozone export industry is alive and well, while in the process obliterating the balance sheet of their far more prudent central bank? Or will the German population say "genug" and force the Bundesbank to stop funding the current account deficit ways that it has been enabling for years? The choice is theirs. Just don't come crying to the Fed when this number is 100% of GDP and everything falls apart.

 
Tyler Durden's picture

Guest Post: What Austerity?





By mainstream media accounts, the presidential election in France and parliamentary elections in Greece on May 6 were overwhelming verdicts against “austerity” measures being implemented in Europe. There is only one problem. It is a lie. First off, austerity was never really tried. Not really. In France for example, according to Eurostat, annual expenditures have actually increased from €1.095 trillion to €1.118 trillion in 2011. In fact spending has increased every single year for the past decade. The debt there increased too from €1.932 trillion €1.987 trillion last year, just as it did every year before. Real “austere”. The French spent more, and they borrowed more. The deficit in France did decrease by about €34 billion in 2011, but that was largely because of a €56.6 billion surge in tax revenues. Again, there were no spending cuts. Zero. Yet incoming socialist president François Hollande claimed after his victory over Nicolas Sarkozy that he would bring an end to this mythical austerity: “We will bring back Europe on a track for jobs, growth and the future… We’re no longer doomed to austerity.” This is just a willful, purposeful distortion. What the heck is he talking about? Certainly not France.

 
Tyler Durden's picture

Goldman's Thomas Stolper Comes Clean On The EURUSD: Even More Confusion Ensues





Because the market sure could do with some humor on this blood red morning, we bring you FX strategist extraordinaire Thomas Stolper, who sadly does not give us the latest fade trade, but decides instead to come clean with pearls as: "On our EUR/$ forecast, last revised in January, we have been both right and wrong." Surely the "right" part is what he is worried about: after all if Goldman prop (whatever it is called these days) can't take the other side of the clients' trades, nobody gets paid. Yet Tommy still gets paid the big bucks: Why? For insights like these: "Cyclical forces and continued fiscal stress account for the lack of a EUR/$ rally...and we see little chance that they resolve themselves near term for EUR/$ higher." So cutting right to the good stuff: "Our structural, long term thought framework has not changed; we think global macro and flow fundamentals still argue for a weak USD and this theme will likely overwhelm other currency market developments on a one to two year horizon." We get it: the EURUSD can't go higher, but the USD is going lower. Mmmk.

 
Tyler Durden's picture

Guest Post: The Yemen Underwear Bomb and Other Hobgoblins





Today it was widely reported that the CIA thwarted a “plot by al Qaeda’s affiliate in Yemen to destroy a U.S.-bound airliner using a bomb.”  This bomb, which was to be concealed in a pair of underwear, was designed as an improvement over what Umar Farouk Abdulmutallab attempted to use to blow up an airliner over Detroit on Christmas Day of 2009.  This bomb was upgraded and designed to specifically avoid metal detectors. At first glance it would appear to be a job well done by the world’s leading domestic affairs meddlers. The truth was finally revealed as the would-be bomber was, in fact, a double agent of the CIA. When considering the nature of the state, this new instance of government supported terrorism is unsurprisingly comparable to previous cases. The alleged Yemen “underwear” bomber was just another fabricated spook in the long line of mounting justifications to keep the war on terror and its profiteers going; no matter the cost.  As long as the American people are still easily whipped into a frenzy over forged menaces from afar, their blood and treasure will go on to be squandered on military boondoggles and redundant intelligence agencies.  War and fear end up becoming a way of life.  And so does the state’s command over what could be a life of peace and tranquility for the nation it supposedly protects. This isn’t conspiracy theory; just a recognition of the various hobgoblins, as H.L. Mencken described them, invented to justify encroaching totalitarianism.

 
Tyler Durden's picture

Guest Post: Be Careful What You Vote For





All this talk of promoting growth rather than austerity misses the point entirely. Who is going to give the Greeks, or the French for that matter, the amounts of money they would need to fill the almighty hole in which they find themselves along with most of the rest of Europe, the UK and dare I say it the US? If your answer involves a central bank don’t pass Go and head straight for jail which is where the banksters and their politico/media fan club should all be anyway.

 
Reggie Middleton's picture

How Does Facebook Drum Up So Much Frothy Interest For Its Overpriced Shares? Help From The Media, Goldman, et. al.





Here I issue an old school challenge to Goldman Sachs, both the Morgans, and the tabloidal MSM in regards to the Facebook IPO and simple fundamental valuation!!! Have at Thee!

 
Tyler Durden's picture

Greece: Next Steps





The Greek elections culminated with the worst possible outcome: 2 votes short of a majority for the pro-bailout New Democracy and Pasok parties. So what happens next? Well - two things: expect to see random stop hunting ramps in the EURUSD and ES on false rumors that despite the math, a pro-bailout coalition government is being formed. It isn't, but it will take out all FX and ES stops to the upside first as skittish shorts get burned as usual on planted fake headlines. More importantly, and as predicted last week, we will likely see yet another Greek election as the political vacuum in Athens is likely too big to be circumvented in a few days. Below we present a summary of immediate next steps as summarized by the WSJ. Yet one thing we want to bring attention to is that as we pointed out first on Saturday, a key even over the next two weeks, during a time when Greece will most likely not have an active government in place is the May 15th maturity of €430 million in international-law bonds whose holders have not agreed to the terms of the PSI and thus demand full payment... of money that Greece does not have. Finally we already know that Norway is the biggest non-PSI compliant entity out there. So will we finally see the first Greek PSI-related lawsuit on May 16 if and when Greece fails to make a payment? We will know in 9 days whether the European soap opera gets even more exciting than usual as various European countries start suing each other in international court, especially when one of the countries will have no government for the foreseeable future.

 
Tyler Durden's picture

A Preview Of Monday Morning In Europe





While most will be following what appears to be an almost certain Hollande victory in the French presidential runoff elections tomorrow (InTrade odds around 10%), it is very likely that the Greek election will have a greater acute impact on the political and financial facade of Europe, especially in the short term. As we noted in what we dubbed our first (of many) Greek election previews, the biggest problem facing the new political regime will be its near certain inability to form a coalition government (with just 32.6% of the vote going to PASOK and New Democracy)  that does not undo most of what has been achieved through popular sweat and tears over the past 2 years to assist Europe's bankers in transferring what little Greek wealth remains to fund the insolvent European bank balance sheets. This in turn could begin the latest cascading contagion waterfall, which coupled with an anti-austerity drive emanating from a newly socialist France will threaten to topple Angela Merkel's carefully constructed European hegemony.

 
Tyler Durden's picture

Guest Post: One Simple Rule To Stop Unnecessary Wars





The trouble is that war is a great excuse for weapons contractors to make lots of money, and weapons contractors happily fund war-mongering politicians into power. That’s the self-perpetuating military industrial complex. So the problem then lies in differentiating the necessary actions from the unnecessary. I propose a simple heuristic for this purpose, one that if introduced would also render the war-mongering politician — the Congressman who votes to authorise, or the President who signs the authorisation into law — personally responsible:

If you start a war, you have to fight. If you cannot fight, then your nearest fit relative has to fight.

 
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