"We could now be at a crossroads," warns Deutsche Bank in its annual default study report. As the 'artificial bond market' is exposed and yield curves flatten on Fed rate hikes so carry risk-reward is reduced and default cycles have often been linked to the ebbing and flowing of the YC through time with a fairly long lead/lag. With HY defaults having spent 12 of the last 13 years below their long-term average (with the last 5 years the lowest in modern history), "a perfect default storm could be created for 2018 if the Fed raises rates in 2015."
At the New York Fed’s evocatively named workshop, “Chapter 9 and Alternatives for Distressed Municipalities and States.”
To think it was just recently in September of last year when the S&P, seemingly unaware of the tragic reality facing Greece in just a few months (by reality we meen democratic elections which overthrew the previous regime which was merely a group of Troika picked technocrats), upgraded Greece to B and said "The upgrade reflects our view that risks to fiscal consolidation in Greece have abated." Well, the risks have unabated, and two months after S&P flipflopped and downgraded Greece back to B- on February 6, moments ago it downgraded it again, this time to triple hooks, aka the dreaded CCC+. But, as City AM reports, the biggest news is that the Greek Finance Minister "will on Friday meet with infamous sovereign debt lawyer Lee Buchheit, who has helped numerous countries restructure their debt. Buchheit is a partner at top US law firm Cleary Gottlieb."
A new St. Louis Fed study finds that the delinquency rate for student borrowers in repayment is 27.3%, meaning nearly one in three of the Americans laboring under a debt load that has now swelled to $1.3 trillion are more than a month behind on their payments. Ackman says there's "no way they are going to pay it back." We can hear the "cancel the debt" cries now.
* Fall 2015 turning point - civil unrest and riots globally says forecaster Armstrong
* European banks will collapse and “blood in the streets”
* Advocates diversification and holding bullion coins familiar to public such as $20 gold coins
* “Your portfolio has got to include everything … including bullion”
Berlin is drawing up contingency plans as Germany prepares for an increasingly likely Greek default, Zeit reports. The new plan purportedly is designed to prop up the Greek banking sector in the event Athens misses a payment, but it's contingent upon the Syriza government acting less "taxi-driver-ish" at the reform negotiating table. In the event Greece will not cooperate, Germany is prepared to let them go but Brussels will help "facilitate" the transition to the drachma (that currency Goldman recently said the country "can't just print").
- China growth slowest in six years, more stimulus expected soon (Reuters)
- EU charges Google over shopping searches, to probe Android (Reuters)
- A Chinese Paradox: Slow Growth Is Good, Stock Bubbles Welcome (BBG)
- Draghi Seen Dispelling Duration Doubts About QE Program (BBG)
- IEA Sees OPEC Supply Jumping Most in Four Years on Saudi Surge (BBG)
- SEC Reaches Settlement with Former Freddie Mac (WSJ)
- Kerry says confident Obama can get final deal on Iran (Reuters)
- Regulators Call for Short-Term Loan Changes to Handle ‘Too-Big-to-Fail’ (WSJ)
- Florida Doctor Linked to Sen. Robert Menendez Indicted for Medicare Fraud (WSJ)
If yesterday stocks surged on the worst 4-month stretch of missing retail sales since Lehman, one which BofA with all seriousness spun by saying "it seems not unreasonable to suspect that the March 2015 reading on retail sales gets revised up next month", then the reason why futures are now solidly in the green across the board even as German Bunds have just 14 bps to go until they hit negative yields and before the ECB is fresh out of luck on future debt monetization, is that overnight China reported its worst GDP since 2009 together with economic data misses across the board confirming China's economy continues its hard landing approach despite a stock market that has doubled in the past year.
The panic buying by China’s newly-minted, day trader hordes took a breather on Tuesday which we think presents as good an opportunity as any to assess what factors might intervene to derail the self-feeding margin madness that has Shanghai and Hong Kong partying like it’s 1999 on the Nasdaq.
"Fu$k the Fundamentals!": Negative Rates In EU Will Absolutely Wreck the Very System the ECB Sought to SaveSubmitted by Reggie Middleton on 04/14/2015 12:09 -0400
The dude that called the Pan-European Sovereign Debt Crisis in 2010 is making it clear that the ECB is playing with fire, but will never admit it's getting burned.
Without the support of the ECB, the country’s banking system would be shut off from international markets and likely collapse.
Despite all the money-printing, bond-buying, ponzi-scheming; the looming reality of a possible Greek default is spreading rapidly across the rest of peripheral European bonds. Greek 3Y bond yields are up 167bps, breaking over 23% today. The last week has seen Italian, Portuguese, and Spanish bond risk rise 12-16bps - a dramatic move off such low Q€-driven bases. Already there is chatter that Spain's resurgent Podemos party will look to negotiate restructuring their debt, which merely confirms the fact that for all the bluster, EU leaders are scared stiff of the implications of 'allowing' Greece to exit...
- Shale Oil Boom Could End in May After Price Collapse (BBG)
- Oil above $58 on U.S. shale output report, Mideast (Reuters)
- Ackman Says Student Loans Are the Biggest Risk in the Credit Market (BBG)
- Alibaba Disputes U.S. Group’s Claim it Tolerates Fake Goods on Taobao (WSJ)
- Petrobras takes steps to avert a technical default (FT)
- Yen’s Drop Is Approaching Its Limit, Says Abe Adviser Hamada (BBG)
- 'Slicing and dicing': How some U.S. firms could win big in 2016 elections (Reuters)
- Fed official warns ‘flash crash’ could be repeatedv (FT)
Judging by the recent action in equity futures, the continuously rangebound US market since the end of QE may be entering its latest downphase, catalyzed to a big extent by the recent strength in the JPY (the EURJPY traded down to 2 year lows overnight), especially following yesterday's not one but two statements by Abe advisor Harada saying a USDJPY at 125 isn't "justified" and a 105 level would be appropriate. A level, incidentally, which would push the Nikkei lower by about 20% and crush Japanese pensions which are now mostly invested in stocks. Not helping matters was the pause in the Chinese and Hang Seng stock bubbles, with the former barely rising 0.3%, while the former actually seeing its first 1.6% decline after many days of torrid, relentless rises.
Update: as always is the case in Europe, nothing is confirmed until it is officially denied by officials, so here you go: GREEK GOVT OFFICIAL DENIES FT REPORT GREECE PLANNING DEFAULT
It should hardly come as a surprise that after the latest round of Greek pre-negotiation negotiations with the Troika, in which the Greek representative was said to behave like a taxi driver, who "just asked where the money was and insisted his country would soon be bankrupt" and in which the Eurozone members "were disappointed and shocked at Athens' lack of movement in its plans, and in particular its reluctance to talk about cutting civil servants' pensions" that the next Greek step is to fall back - yet again - to square zero: threats of an imminent default. Which is precisely what, according to the FT, has happened "Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April."