Fitch

Following the recent downgrades of many of the major European banks and insurers and last year's comments by Fitch on insurers' inability to pass on losses to policyholders, the hot-topic of ASSGEN, ALZ, and the rest of the capital-impaired forced-soakers-up-of-new-issue-demand in the European insurance market are under new pressure as The WSJ points out today that new 'rightly punitive' capital rules have been watered down. The 2014 introduction of 'Solvency II' - the insurers' equivalent to banks' Basel III capital rules - did indeed attempt to create risk-weighted capital requirements and better balance assets and liabilities within these firms. However, as Hester Plumridge notes, regulators bowed to industry pressure (again) adding the ability to shift discount rates to get around low-rate-implied valuations for their annuity streams and the introduction of a 'countercyclical premium' to avoid the growing (and negative) spread between distressed assets and rising liabilities. As Plumridge concludes, "a solvency regime that ignores all European sovereign credit risk looks increasingly unrealistic. Investors could end up none the wiser." After some systemic compression, the last week or so has seen insurers start to deteriorate as perhaps the market will enforce its own capital expectations even if regulators are unwilling to.

A lesson to be learnt from the individuals who continue to buy European Debt

Now everybody's bank bashing, of course the reason to bash the banks is 4 years old, despite Bove-like analysis to the contrary. I will discuss this on CNBC for a FULL HOUR tomorrow from 12 pm to 1pm.

The complacency of the markets is amazing given the risks at hand. I don't think I'm that smart, so is it that so many others are that stupid? It can't be, can it?

"The European Union suffers under Germany” ruffled some feathers, but Greek reform rebellion gives Angela Merkel and others what they’ve been looking for: plausible deniability.

Heading into the North American open, EU equity indices are trading lower following reports that Eurozone Finance Ministers have dismissed as incomplete a budget presented to them by the Greek party leaders. In addition to that, EU lawmakers have warned Greece of more intensive involvement in the Greek economy to improve tax collection and accelerate the sale of state-owned assets. The Greek Finance Minister Venizelos said that Greece must make a “final, strategic” decision Greek membership in the Eurozone over the next six days as it decides on new austerity and reform measures or faces leaving the single currency. However, according to sources, German finance minister told MPs, Greek reform plans would bring debt to 136% of GDP by 2020, instead of targeted 120%. So it remains to be seen as to whether Greece will be able to meet the looming redemptions in March. Of note, analysts at Fitch said that the ongoing Greece talks stating that the country must secure an agreement to cut its debt burden in the next few days to prevent a “disorderly” default.

European stocks advanced today following reports that the ECB is said to be willing to exchange Greek bonds with EFSF. In addition to that, although a vast majority of officials remain adamant that no haircuts will be applied, WSJ report indicated that the concession by the ECB will contribute to the Greek debt reduction, and the concession depends on the overall debt agreement being set. However it remains to be seen what effect using the EFSF for such spurious purposes will have on the demand for EFSF issued bonds in the future. Still, the renewed sense of optimism that debt swap talks are nearing an end depressed investor appetite for fixed income securities, which in turn resulted in further tightening of peripheral bond yield spreads. The stand out was the 10-year Spanish bond, amid a syndicated issuance from the Treasury. Going forward, Greek PM is scheduled to meet party leaders on a loan deal at 1300GMT, while other reports have suggested that the Troika is keen on meeting Greek parties individually. There is little in terms of macro-economic data releases today, however the US Treasury is due to sell USD 24bln in 10y notes.

The MF Global Trustee has just released their preliminary report on the progress in uncovering where the vaporized cash went. Bloomberg notes:

• MF GLOBAL DIDN'T ALWAYS RECORD CASH MOVEMENTS, TRUSTEE SAYS
• TRUSTEE SAYS MF HAD SHORTFALL IN COMMODITIES FUNDS START OCT 26
• MF BROKERAGE TRUSTEE TRACED $105 BLN IN CASH MOVEMENT
• MF COMPUTERS COULDN'T TRACK VOLUME IN FINAL DAYS, TRUSTEE SAYS

Of course, we know that MF Global is the only company to not follow Fiduciary Principles 101 (client cash commingling) but also Accounting 101 (T square, debits, credits, and all that boring and apparently irrelevant in a time of uber-kleptocracy, stuff) leaving us wondering just how much of that unrecorded cash may be found in unrecorded suitcases in unrecorded bank vaults.

Ever want to know what a documentary that spits the truth about the rating agency scam and overall Ponzi would look like if it actually aired on international TV???

You've just crossed over...

Festive Friday fun:

• FITCH TAKES RATING ACTIONS ON SIX EUROZONE SOVEREIGNS
• ITALY LT IDR CUT TO A- FROM A+ BY FITCH
• SPAIN ST IDR DOWNGRADED TO F1 FROM F1+ BY FITCH
• IRELAND L-T IDR AFFIRMED BY FITCH; OUTLOOK NEGATIVE
• BELGIUM LT IDR CUT TO AA FROM AA+ BY FITCH
• SLOVENIA LT IDR CUT TO A FROM AA- BY FITCH
• CYPRUS LT IDR CUT TO BBB- FROM BBB BY FITCH, OUTLOOK NEGATIVE

And some sheer brilliance from Fitch:

• In Fitch's opinion, the eurozone crisis will only be resolved as and when there is broad economic recovery.

And just as EUR shorts were starting to sweat bullets. Naturally no downgrade of France. French Fitch won't downgrade France. In other news, Fitch's Italian office is about to be sacked by an errant roving vandal tribe (or so the local Police will claim).

That Europe has been unable to do the simplest thing, and come to a conclusion in its negotiation with Greek creditors, now running into its six month, is not very surprising. After all this is Europe, where nothing gets done before the deadline, only in the case of Greece the deadline also means the risk of runaway contagion. And as of today there are about 53 days left before the March 20 Greek D-Day. Yet the one thing European should at least be able to do is to have their story straight on what happens once Greece defaults. If nothing else, to show solidarity for optics' sake. Alas, it can't even do that. Because just overnight we have two diametrically opposing stories hitting the tape. On one hand we have Spanish economic minister Luis de Guindos telling Bloomberg TV in Davos that the euro region could withstand a Greek default. This is very much in line with the Jamie Dimon line of thinking that there will be limited fallout. Yet on the other hand, it is that perpetual bag of hot air, Europe's very own head propaganda master Jean Claude Juncker, who ironically told Le Figaro that a Greek default must be avoided at all costs as it would lead to Contagion (read tipping dominoes all over the place). Too bad that both Fitch and S&P said that a Greek default at this juncture is inevitable. And while Juncker's statement in itself is absolutely true, the fact that discord is appearing at the very core of European propaganda - the one place it can afford to stay united until the very end - is troubling indeed. Especially since Juncker also told Le Figaro that Germany can not be asked to do everything alone. Is that a quiet request for the Fed to keep bailing out Europe since the ECB apparently has no interest in doing so?

After Wikipedia and Wikileaks shone light on science, history and politics, Wikirating may bring open source financial transparency to the web. Attempting to iron out structural problems of traditional rating procedures, Wikirating is open source, fully transparent and retrieves its results from participants input. Initiated by Austrian mathematics Dorian Credé and and finance whiz Erwan Salembier, ratings are derived from weighted user input. They stress to point out that their model will improve with rising user input who also have a say in improving the formulae used.

All you need to read.

The USS Europa Discorida story just gets more and more surreal.

• ITALY PROSECUTORS WIDEN RATINGS AGENCY PROBE TO FITCH, UNDER INVESTIGATION FOR MARKET ABUSE, INSIDER TRADING - INVESTIGATIVE SOURCE
• ITALY FINANCE POLICE SEARCHING FITCH OFFICE IN MILAN, ANSA SAYS

S&P maybe? Sure. But piss off the French rating agency? As if anyone even trades in collusion with the completely unmoving announcements by the most irrelevant of the NRSROs? This is just the definition of irrational Italian scapegoating which will do nothing to help Italy-French relations, but at least it will provide "justification" for Fitch's evil downgrade when it comes - after all it was obviously in retaliation for the Italian police just doing its job. Finally, how long would an Egan-Jones office in Milan stand before it was burned to the ground: 1 week? 1 day? 1 hour?