As If On Cue After My Step By Step Illustration Of A Spanish Default, Spanish Yields Climb at Auction As Pressure ContinuesSubmitted by Reggie Middleton on 12/16/2010 09:24 -0500
Spain takes one step closer to a bailout, then eventual restructuring (aka, default), thus far exactly as forecast by BoomBustBlog. For those not keeping track, it is currently the financing premium leader among the non-bailed out PIIGS group.
Following yesterday's threat to the country's Aa1 rating by Moody's, Spain was put in the unpleasant position of having to raise €3 billion in 10 and 15 year bonds. Not surprisingly, the auction was as close to a disaster as it could be, considering it had the ECB's backing. In its final bond auction the country managed to raise just €2.4 billion (€1.782 billion in 10 years and €619 million in 15 years), with the 10 Year yielding 5.446% and the 15 Year 5.932. These rates compare to 4.615% and 4.541% previously: obviously many are concerned by this massive jumpin rates. The Bid To Covers came at 1.67 and 2.5, compared to 1.84 and 1.44 previously. Obviously, at these rates, ongoing funding for the country is unsustainable considering the internal cost of capital. Luckily, this is the last bond auction for the year for Spain.
Foreclosure Activity Plunges By Record Amount In November As Fraudclosure Forces Banks To Halt EvictionsSubmitted by Tyler Durden on 12/16/2010 00:46 -0500
The latest report from RealtyTrac indicates that, as expected, November foreclosure activity has fallen off a cliff. In November "default notices, scheduled auctions and bank repossessions were reported on 262,339 U.S. properties, a 21 percent decrease from the previous month and a 14 percent decrease from November 2009. One in every 492 U.S. housing units received a foreclosure filing during the month." This is the largest Y/Y and M/M drop in RealtyTrac's records. “Foreclosure activity decreased dramatically in November, with fewer than 300,000 properties receiving a foreclosure notice for the first time since February 2009,” said James J. Saccacio, chief executive officer at RealtyTrac. “While part of the decrease can be attributed to a seasonal drop of 7 to 10 percent that typically occurs in November, fallout from the foreclosure robo-signing controversy forced lenders and servicers to hit the pause button on many foreclosures while they scrambled to revamp their internal procedures and revise or resubmit questionable paperwork.” It's a good thing then that our very own, and very corrupt, attorneys general are about to announce a major settlement that will wipe the slate clean and allow the conveyor to crank out 1000 foreclosures a day once again... And all manner of thing shall be well.
Nic Lenoir On Why The Euro Is About To Crash And Burn, And Why His Concern For The "New Normal" Is Not Slow Growth But Civil WarSubmitted by Tyler Durden on 12/15/2010 17:45 -0500
Today 6 countries in Europe were the theater of riots. I highlighted in the past that voting turn-out has been on the rise in the past 8 years after a steady decline the 3 previous decades. During the credit boom fat and happy citizens had no time to vote, too busy producing or even more so consuming. Now with unemployment through the ceiling and poor economic perspectives people have started voting again. The next step is that they realize that no one in the political spectrum currently has any guts or brain and therefore no one offers a real credible fair solution, at least for now. When they do they burn things up. Because things are a little worse in Europe economically, and because the people there actually do realize the people in power are monkeys, they have now reached that stage of realization where burning things up is the logical response. Don't think the US will remain immune to this symptom of the new normal (unlike El Erian I have not revised up my forecast, and my concern is not slow growth but civil war).
EURUSD whoosh. Somehow the fact that Europe is insolvent is once again lost on the markets who need Moody's to remind them. Let's see how the upcoming Spanish auction will fare under these circumstances. From Moody's:"Moody's Investors Service has today placed Spain's Aa1 local and foreign currency government bond ratings on review for possible downgrade. The main triggers for placing the rating on review for possible downgrade are: (1) Spain's vulnerability to funding stress given its high refinancing needs in 2011. This vulnerability has recently been amplified by fragile market confidence. (2) A potential further increase in the public debt ratio should the cost of bank recapitalisation prove to be higher than expected so far, whether to meet higher-than-expected asset impairments or simply to retain the confidence of the wholesale markets. (3) Increased concerns over the ability of the Spanish government to achieve the required sustainable and structural improvement in general government finances given the limits of central government control over the regional governments' finances."
A round up ...
Will Spain Default? The Answer Is Not Hard To Determine If You Take An Objective Look At The Numbers And Recent History!Submitted by Reggie Middleton on 12/13/2010 14:05 -0500
Let's compare Spain to other nations that have defaulted in the recent past and see if there are any similarities. Surprise, surprise. We all know that Spain is big enough that if it goes, there goes that Euro-thingy experiment.
We have already broadly discussed the recent euphoria in the market which especially in the Nasdaq has hit 5 year+ extremes. And as always in times of such irrational exuberance, the disconnect between perception and reality is truly astounding. David Rosenberg presents his views on the latest developments in the market's ongoing fight with manic-depressive disorder.
This week, EU leaders will try to agree on limited EU treaty changes at a summit (December 16-17). The aim is to establish a permanent rescue mechanism for countries in financial difficulties. On Monday and Tuesday (December 13-14) foreign affairs ministers will meet in Brussels to prepare draft conclusions. The BBC claims to have obtained a draft communiqué. We will analyze if a new European Stability Mechanism (ESM) has any chance to save the Euro. It will be interesting to see how far the idea of eBonds (supra-national bonds issued by the EU to funnel money towards countries in difficulties) will get amidst opposition from the two largest contributors – Germany and France.
Watch this story. It will prove to be the story of 2011.
- Must read: The eurozone is in bad need of an undertaker (Ambrose Evans-Pritchard)
- If China Blows Up, So Will Every Other Market (Forbes)
- China Risks `Rush' to Tighten in 2011 After Inflation Surges (Bloomberg)
- China Said to Plan for at Least $1.1 Trillion of New Lending (Bloomberg)
- Spotlight On Banks' Exposure in Europe (WSJ)
- Backers and critics see passage of Obama tax deal (Reuters)
- Irish Sovereign Debt Default Would Be Far From Armageddon (Bloomberg)
- Paul Myners Op-Ed: Break up Britain’s uncompetitive big banks (FT)
- No New Normal for 2011 in Forecasts for 11% S&P 500 Gain (Bloomberg)
For those who still don't get it ...
"Federal Reserve Chairman Ben Bernanke said in a recent television interview that economic growth was not “self sustaining.” This description also applies to an economy that is in a classic growth recession. A growth recession is characterized as an economy where GDP grows but the unemployment rate also moves higher. A close look at the U.S. economy bears out Chairman Bernanke's description. The economy has been expanding for 17 months, yet both the labor force participation rate and the employment to population ratio stand at new cyclical lows and beneath the cyclical lows of the prior expansion. This is an unprecedented development (Chart 1). For the past 19 months, the unemployment rate has been above 9%, underscoring the harshness of labor market conditions. The employment to population ratio, which is a better measure of labor market conditions than the unemployment rate, was at the cyclical low of 58.2% in November, matching the lowest reading since 1984." - Van Hoisington
CFTC Commissioner Bart Chilton Reveals "One Trader" Controls 40% Of Silver Market, As Silver Holdings Of SLV Hit All Time RecordSubmitted by Tyler Durden on 12/11/2010 13:39 -0500
After we reported a week ago that JPMorgan was trying to corner the copper market, many noted this was not surprising, considering the bank's comparable approach in manipulating various other precious metal markets. Naturally, we extrapolated that the main reason why the CFTC continues to refuse to delay implementation of position limits is precisely due to the JP Morgan's need to control commodity pricing precisely due to such manipulative trading practices: "As for the CFTC, we now know why they are so intent on delaying the size limit discussion:
after all, any regulation will be forward looking - better let JPM
accumulate all commodities it can and distribute these via hidden
channels to affiliated subs before the ever so busy Gary Gensler corrupt
cronies decide to raise their finger on what is increasingly an ever
more blatant market manipulation scheme. At least in this case, JPM will
push the price higher unlike what it is doing courtesy of its gold and
silver manipulation. However, the PM market (especially Asian accounts)
will soon make sure Blythe Masters is looking for a job within 3 months
as we predicted a few weeks ago." The only problem with this story is that so far, is that unlike copper, JP Morgan's now legendary paper short in the silver market, long taken for granted by the "less than in mainstream" community, has been persistently ignored by the broader media due to the a lack of concrete evidence. Hopefully that will now change: courtesy of a speech delivered by none other than the CFTC commissioner Bart Chilton, who continues to expose the CFTC and the banker cartel's illegal market manipulation practices, we now have proof that "one trader held over 40 percent of the silver market." As this trader is either JP Morgan directly, or various Blythe Masters proxies, we can only hope that finally the broader outcry against JPM's ongoing attempt to suppress precious metal prices (insert Mike Krieger/Max Keiser "Crush JP Morgan" campaign here) will force the bank to finally unwind its shorts. And if not, perhaps the market speculators will do it for them: as of Friday, the SLV ETF held an absolute record 10,941 tonnes of silver, an increase of 163 tonnes for the week.
PIMCO Shares Its Thoughts On The BAB Dilemma; Discloses How It Is "Protecting" Itself From A Worst Case ScenarioSubmitted by Tyler Durden on 12/10/2010 15:03 -0500
From Pimco, which is heavily invested in munis, and has a very vested interested in the extension of the BAB program:
- The initial catalyst for the selloff in the tax-exempt muni market
was the sharp selloff in the U.S. Treasury market. Also, a significant
increase in supply weighed heavily upon the muni market.
- It now appears that the BABs program could be in jeopardy, as a
provision to extend the program has not been included in the current
Senate tax bill.
- The supply of tax-exempt municipals remains robust at a time when
many investors do not have the cash flow to add to their muni holdings.