How A Previously Secret Collateral Transformation With The Bank Of Italy Prevented Monte Paschi's NationalizationSubmitted by Tyler Durden on 02/09/2013 20:47 -0400
The endless Italian bailout story that keeps on giving, has just given some more. It turns out Italy's insolvent Banca dei Monte Paschi, which has been in the headlines for the past month due to its role as political leverage against the frontrunning Bersani bloc, and which has been bailed out openly so many times in the past 4 years we have lost track, and whose cesspool of a balance sheet disclose one after another previously secret derivative deal on an almost daily basis, can now add a previously unannounced bailout by the Bank of Italy to its list of recent historical escapades.
Worldwide, politicians are not exactly famous for honesty. However, Europe is a very special case… where just about everyone is lying on just about everything involving the economy and banking system.
Up until now, Argentina's descent into a hyperinflationary basket case, with a crashing currency and loss of outside funding was relatively moderate and controlled. All this is about to change. Today, in a futile attempt to halt inflation, the government of Cristina Kirchner announced a two-month price freeze on supermarket products. The price freeze applies to every product in all of the nation’s largest supermarkets — a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies’ trade group, representing 70 percent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government’s news agency Telam reported. As AP reports, "The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1."
The other half of the reason for today's Italian stock market collapse is the well-known to our readers scandal involving Italian bank Monte Paschi, which also refuses to go away due to its massive political implications three weeks ahead of the Italian elections. Yet the reason why little if anything has been mentioned about what may soon be a nationalization of the third largest (and just as insolvent) Italian bank in the mainstream US press is the resulting humiliation for the current ECB head, ex-Goldmanite Mario Draghi, who has been aggressively pushing to become a bank supervisor of all European banks as ECB head, yet with every day new revelations emerge about how epically he failed to supervise a major Italian bank right under his nose as head of the Bank of Italy. The latest in this developing scnadal which not even the market can ignore any more comes once more from the Bank of Italy, which has once more changed its story. Recall that as recently as January 23 Mario Monti vowed to Davos that nobody knew nothing: BANK OF ITALY SAYS MONTE PASCHI HID DOCUMENTS ON TRANSACTIONS. This was a sentiment that was vouched by the Bank of Italy itself, which pled complete ignorance and accused then BMPS management of everything. Turns out Monti and the Bank of Italy both lied.
Before today's NFP number, the biggest news of the day was the substantial slowdown in European LTRO repayments, which ground to a halt from last week's repayment of €137 billion, to only €3 billion. Whether this is because banks decided that there is no more need to telegraph their health by keeping "excess liquidity", or because they actually did need to €878 billion in additional LTRO funding is unclear for now, although the overnight nationalization of a Dutch bank coupled with a return of Italian bank problems where Monte Paschi is next on the nationalization conveyer indicates that as always, nothing has been fixed in Europe. A full post-mortem of today's second LTRO repayment comes from Goldman, which concludes that as of the two repayments, the excess cash in the European financial sector is now in tune with the open market operations' reduction. When the next scramble for liquidity hits, it means that banks in the continent will once again start crawling to the ECB for incremental cash.
Earlier today we got one hint that not all is well in the European banking system, as far less than the expected €200 billion was tendered back to the ECB in the second LTRO repayment operation, when just 27 banks paid back some €3.5 billion. Another, perhaps far bigger one, comes courtesy of AAA-rated Netherlands, which just experienced its first bank failure since 2008 following the nationalization of SNS Reall NV, as the previously announced bad loan writedown finally claimed the bank. As a reminder, half a month ago we got news that "SNS Reaal NV (SR), a Dutch bank and insurer struggling to wind down a money-losing real estate lending unit, fell the most in more than two months after a report said it may have to post a 1.8 billion-euro ($2.4 billion) writedown on property-finance loans." Today we got the inevitable conclusion: nationalization, one which will cost taxpayers about $5 billion to avoid contagion to what many see as Europe's "strongest" banking system.
After two consecutive down days in the market, it was time to get real, and like clockwork the dollar and yen devastation started right out of the gate in overnight trading, when first the USDJPY exploded higher, followed promptly by the EURUSD, both of which hit new period highs, of over 92, and just why of 1.37 respectively. And with not one funding currency around to push risk higher, but two, futures have ramped enough to undo all of yesterday's losses and then some. Bad news was either promptly ignored, such as China's official PMI coming in at 50.4, below expectations of the 50.6 print, or offset by conflicting data, with the HSBC China PMI print moments after at 52.3, higher than the 52.0 expected, taking us back to early 2012 when the Chinese PMI was contracting and expending at the same time.
Back in 2011, BlackRock's Larry Fink revealed one of the great unspoken truths of capital markets, namely that "markets like totalitarian governments." They also like authoritarian socialism, sprinkled in with a healthy dose of nationalization, because as Bloomberg reports, one of the biggest beneficiaries of over ten years of the "glorious socialist revolution" in Venezuela, coupled with over 1000 nationalizations by the bed-ridden and roughly 15 times deceased Hugo Chavez (if one believes all the rumors), is none other than Goldman Sachs, which generated some 681% in returns due to "aligning its interests" with those of the unshakable Venezuelan ruler.
Italian Scandal Widens As Italy's Third Largest Bank Set To Get Third Bailout In 3 Years; Draghi, Monti ImplicatedSubmitted by Tyler Durden on 01/26/2013 13:09 -0400
While little has been said in the mainstream western press about the ongoing fiasco surrounding Siena's Banca Monte dei Pasci, Italy's third largest bank and the world's oldest which may get its third bailout in three years - or even be nationalized - as soon as today, for fears that it may break the thin veneer of "recovery" in the European financial system, the situation on the ground in Italy is getting more serious by the minute, and will have implications on both next month's general election, on Mario Monti, on Silvio Berlusconi, on frontrunner for the Prime Minister post Pier Luigi Bersani, and reach as far up as the head of the ECB - Mario Draghi.
The platinum group of metals (PGMs) have received some perhaps unwarranted attention in recent weeks as the 'coin' idiocy came and went; but, it is noteworthy, as Eric Sprott points out that with demand rising and supply under pressure, the outlook for investment in physical platinum and palladium is increasingly compelling. The following infographic (and various supply and demand dynamics) provides a succinct picture of what these metals are used for, where they are produced, and the supply/demand imbalances.
Are German industrialists getting cold feet?
Fairness Doctrine Backfires: After Depardieu Backlash, French FinMin Says Superrich Tax "Plan B" Would Be TemporarySubmitted by Tyler Durden on 01/06/2013 15:20 -0400
Back in July, when news of what we dubbed the French "Fairness Doctrine" first emerged, i.e., the new socialist government's intent to tax the evil millionaires at a 75% tax rate, we had two observations: i) that "we are rotating our secular long thesis away from Belgian caterers and into tax offshoring advisors, now that nobody in the 1% will pay any taxes ever again" and, somewhat contradicting the above, ii) that "The good news is that with the entire world set to adopt 100%+ taxes on "wealthy" individuals as defined arbitrarily by Ph.Ds, there will be no place to hide." Well, the US promptly followed France into a lite-version of the Fairness Doctrine, which proved us half right, yet one place that has refused to increase its tax rate for the poor or rich, keeping it at the flat 13% for individuals is Russia, which explains why following last week's news that Russia had granted famous French expat millionaire Gerard Depardieu citizenship, the actor best known as Obelix and Rasputin, eagerly rushed to accept his new red passport in Sochi following a bearhug from none other than Vladimir Putin.
Shinzo Abe's re-election on the basis of his monetary policy aggression plans have sent the JPY reeling (as he hoped for) and the NKY soaring - but it is his more aggressive perspective on patriotism that could lead to far greater problems. As the Chinese Academy of Social Sciences recently noted,all eyes are fixed on Abe as "Japan’s nationalization of the Diaoyu Islands destroyed the framework for keeping a balance, which means ‘shelving a conflict'," a Chinese diplomatic source said, adding that "China has no political methods to return the situation to the (pre-nationalization) state. Therefore, there are no other ways except for looking for a new framework." As a precondition for establishing the framework, an executive of the think tank said, "Prime Minister Shinzo Abe should not take actions that heighten the tensions further. It is the same as a game of go. If Japan escalates the conflict, China will be prepared to respond to the move." As a result, Japan-China relations will enter into a highly volatile period, ruining any hope of a resurgence in Japan's real economy, and more worryingly, the think-tank concludes, China's conflict with Japan is inevitable.
Another boring session, worsened by year end inactivity… Good close. Fiscal Cliff haggling on-going with a positive spin this time and Risk riding high.Spain catching up and paring yesterday’s soft patch, as is Italy. ESToxx at the highest since Aug 2011. Credit very squeezed. EUR strong. Merry Mood!
"I Saw Mommy Kissing Santa Claus " (Bunds 1,42% +5; Spain 5,29% -12; Stoxx 2647 +0,7%; EUR 1,322 +50)
The man who singlehandedly fought the administration over the idea of converting Fannie and Freddie into the latest taxpayer-funded handout machine, FHFA head Ed DeMarco, and refused to write down Fannie and Freddie home loans in yet another Geithner-conceived debt forgiveness scheme, whose cost like any other non-free lunch will simply end being footed again by yet more taxpayers (what little is left of them), appears to have lost the war, and with the second coming of Obama appears set to be replaced as head of the FHFA. The WSJ reports that "The White House has begun preparations to nominate a new director to lead the agency that oversees Fannie Mae and Freddie Mac as soon as early next year, according to people familiar with the discussions. This would pave the way for President Barack Obama to fill what has become one of the most important economic policy positions in Washington." And so the impetus for as many as possible to default on their mortgage in a wholesale scramble to obtain debt forgiveness, will soon take the nation by storm, while the contingent liability will be transferred to those who still believe that taking out debt should be a prudent activity and one that takes into account future cash flows. In other words, the solvent middle class - those who were prudent stupid enough to save when they should have simply be doing what the government does and spend like a drunken sailor, preferably on credit, will soon be punished once more. And like it. Because according to the new broke normal "it's only fair."