Portugal

Analysts Respond To "Unsourced" Reports Of Open-Ended ECB Monetization

For whatever reason, yesterday's unsourced Spiegel report that the ECB is actually contemplating open-ended monetization with arbitrary yield targets on various European nations is the talk of the town, if only for a few more hours until, just like last year, the proposal is summarily dismissed, only to be reincarnated once Spanish yields pass north of 8% again. In the meantime, it has allowed those very well paid sell-side strategists to present their erudite opinions, which naturally do not matter in the grand (and not so grand) scheme of things as long as Germany sticks to the 9-9-9 plan.

"The Euro Crisis May Last 20 Years" - The European Headlines Are Back

In Europe, the "no news" vacation for the past month was great news. The news is back... As is Merkel.

  • "The Euro Crisis May Last 20 Years" - Welt
  • German finmin: no new aid programme for Greece - Reuters
  • Westerwelle Opposes Relaxing Greek Aid Terms: Tagesspiegel
  • Euro Countries Plan Strategies to Prevent Break-Up: Sueddeutsche (via Bloomberg)
  • Deutsche Bank Among Four Said to Be in U.S. Laundering Probe - Bloomberg
  • Bundesbank Vice-Head Opposes Schaeuble’s Banking Proposal: WiWo (via Bloomberg)
  • Westerwelle Opposes Relaxing Greek Aid Terms: Tagesspiegel
  • German Industry Group Head says No Place In Greece For Eurozone: WiWo  (via Bloomberg)
  • German Taxpayer Association Head Criticises ESM: Euro am Sonntag (via Bloomberg)
  • Spain says there must be no limit set on ECB bond buying - RTRS
  • France Favors Greece Rescue Package, Opposing Germany: Welt (via Bloomberg)

Guest Post: What To Do When Every Market Is Manipulated

What do the following have in common? LIBOR, Bernie Madoff, MF Global, Peregrine Financial, zero-percent interest rates, the Social Security and Medicare entitlement funds, many state and municipal pension funds, mark-to-model asset values, quote stuffing and high frequency trading (HFT), and debt-based money? The answer is that every single thing in that list is an example of market rigging, fraud, or both. How are we supposed to make decisions in today’s rigged and often fraudulent market environment? Where should you put your money if you don’t know where the risks lie? How does one control risk when control fraud runs rampant? Unfortunately, there are no perfect answers to these questions. Instead, the task is to recognize what sort of world we happen to live in today and adjust one’s actions to the realities as they happen to be. The purpose of this report is not to stir up resentment or anger -- although those are perfectly valid responses to the abuses we are forced to live with -- but to simply acknowledge the landscape as it is so that we can make informed decisions.

The Portuguese Run Out Of Gold To Sell

"Business has gone from great to terrible in a matter of months. The sad truth is that most of my clients have already sold all of their gold rings," is anecdotal evidence of a growing trend that Bloomberg reports in Portugal. The central bank holds more gold relative to the size of the country’s economy than any euro country, mostly accumulated during former dictator Antonio de Oliveira Salazar’s 36 years in power, based on data compiled by the World Gold Council. The law prevents proceeds from selling any gold reserves from going toward the government’s budget. With the Portuguese unemployment rate at a euro-era record of 15 percent in the second quarter, citizens are wondering who will help bail them out now that their job and gold are gone: "We have no more gold to save us from being kicked out this month," encapsulates a growing trend in debt crisis-stricken Europe as household gold supplies dry up after record prices and a deepening recession prompts a proliferation of places to exchange the metal for money.

The Hoarding Continues: China Has Imported More Gold In Six Months Than Portugal's Entire Gold Reserve

While the highly "sophisticated" traders that make up the gold market continue to buy or sell the precious metal based on whether the Fed will or will not do the NEW QE tomorrow (or just because, like Bruno Iskil, they have a massive balance sheet, and can create margin position out of thin air with impunity), China continues to do one thing. Buy. Because while earlier today we were wondering (rhetorically, of course) what China is doing with all that excess trade surplus if it is not recycling it back into Treasurys, now we once again find out that instead of purchasing US paper, Beijing continues to buy non-US gold, in the form of 68 tons in imports from Hong Kong in the month of June. The year to date total (6 months)? 383 tons. In other words, in half a year China, whose official total tally is still a massively underrepresented 1054 tons, has imported more gold than the official gold reserves of Portugal, Venezuela, Saudi Arabia, the UK, and so on, and whose YTD imports alone make it the 14th largest holder of gold in the world. Realistically, by now China, which hasn't provided an honest gold reserve holdings update to the IMF in years, most certainly has more gold than the IMF, and its 2814 tons, itself. Of course, the moment the PBOC does announce its official updated gold stash, a gold price in the mid-$1000 range will be a long gone memory.

Where Gas Prices Are Highest

Think the US has it bad with its "soaring" gas price, which is now back to $3.75 per gallon? Think again. Here, courtesy of Bloomberg, is a list of the countries whose gasoline cost puts what Americans pay at the pump to shame. In order of descending gas prices, below are the 20 places in the world where one does not want to "fill 'er up."

The Financial Decline In Europe Continues

As Industrial Production falls -0.6% in Europe and as the economy shrinks -0.2% there is once again a good reason to pause to consider the ramifications for this going forward. When you sit back and take a hard look at the last two years you begin to learn a few things. If you just stick to the actual data and forget the rhetoric that surrounds it the picture becomes clearer. Each and every projection for Greece, Spain and Italy that has been forecast by the EU and the IMF has been wrong; dead wrong. Europe is getting worse and not better. Whether you turn your attention to Greece, Spain, Italy, Portugal or even Ireland; it is getting worse. Nowhere on the Continent are things improving and even in France and Germany the financial strains are beginning to show. It is not a question of Euro-bear or Euro-bull; it is just the numbers as they come rolling out month after month. It is the banks, it is the sovereigns and grand visions must, in the end, give way to the facts.

Overnight Sentiment: Bad News Is Good On More Hope And Prayer

It is just getting stupid. Europe officially enters recession, Japan GDP declines nominally, China admits to food inflation which locks the PBOC out of easing for months, UK inflation is again rising faster than expected which will soon force the BOE to reevaluate its latest easing episode, Brent is once again rising on supply fears and middle east war fears to a 3 month high, corporate revenues have never been worse in this recession cycle and what happens? Futures spike following a very visible invisible finger pushing ES higher by 0.5% at 9 pm Eastern and setting the scene for trading throughout the night. And since the market has reverted back to full retard mode full of hope of an absolution from the Fed, this time at the August 31 Jackson Hole meeting, which will be very disappointing as Ben will say absolutely nothing yet again, why not take the S&P to new 2012 highs? After all well over 100% of QE3 is now priced in. Finally, expect the ES to surge by 10 points should advance retail sales miss wildly the consensus of a +0.3% print. After all, inverted is the NKI.

Phoenix Capital Research's picture

As for backstopping EU deposits... no entity on earth has the capital to do this. Total Eurozone deposits stand at €15 trillion. Even deposits at the current EU “problem” countries (Spain, Italy, Portugal and Ireland) are €5.5 trillion. That’s nearly TWO TIMES the size of the ECB’s balance sheet and over FOUR TIMES the size of the various EU bailout funds (the EFSF and ESM, the former of which only has €65 billion in capital left by the way).

European Q2 GDP Contracts 0.2%, German Growth Beat Offset By Plunge In ZEW

The two major overnight data points were European Q2 GDP which printed at -0.2%, or the expected continuation of the European double dip. As SocGen explains, these numbers continue to paint an all too predictable picture of growth in Europe, with expansion in Germany driven by exports and consumption, growth in France stagnating and deep recessions continuing in southern  Europe. The European GDP pattern is now expected to be a copy of 2011. Amongst the country details, growth beat expectations in Germany (+0.3 q/q), Austria (0.2%), Slovakia (+0.7%) and the Netherlands (0.2%) but this was offset by deep declines in Finland (-1.0%) and Portugal (-1.2%). Amongst data already published we know Italy declined 0.7%, Spain declined 0.4% and Belgian GDP declined 0.6%. And while the market was clutching at the German GDP beat straw, it was the German ZEW Survey which threw a cog in the spikes of German economic perception, after the number came at a whopping -25.5, declining for the 4th consecutive month and far below expectations of -19.3, and a drop from the already negative -19.6. Finally, while there may be hopes that this is the bottom, already weak IP data confirms that the weakness in Europe has continued into Q3 and as such as the continental contraction will likely not stop contracting for the foreseeable future.