he bottom line is that it looks like a Lehman like
event is about to be unleashed on Europe
WITHOUT an effective TARP like structure fully in plac
The road map for Europe is still 2008 in the US, with the
end game a country by country socialization of their commercial banks. The fact
is that the Germans are NOT going to pay for pan European structure to recap
French and Italian banks
there are only a handful of insolvent sovereign
European borrowers, while there are millions of bankrupt subprime households
The most likely scenario for these countries is full
bank nationalization followed by exit and currency reintroduction. Bring on the
Drachma TARP!!
The losses to the remaining union members from repo and
sovereign debt write downs at the ECB will be massive It will require
significant increases in public sector debt and tax collection for remaining
members. There is a reason why German CDS is 90bps and USA CDS is 50bps – Bunds are not a safe haven in
this world – and there is no place in Europe
that will be immune from this dislocation. Expect a massive policy response in
Europe and a move towards financial market nationlaization that will make the US
experience look like a walk in the park. Picking winners and losers
will be VERY HARD but let’s look at a few weak spots –SocGen 12b in market cap
(-70% this year) with assets of 1.13 trillion BNP 31b in market cap (-55% this
year) with assets of 2 trillion Unicredito 13b in market cap (-70% this year)
with assets of 1 trillion Intesa 14b in market cap (-70% this year) with assets
of 700b Compare this with the USA where we have - JPM 125b in market cap with
assets of 2.1 trillion BAC 70b in market cap with assets of 2.2 trillion
Importantly, France GDP is only 2 trillion and in
bank balance sheets are some 400% of that number. The banks are dead men
walking with massive leverage to both home country income as well as assets.
The governments are about to take charge and Europe
as a whole is about to embark on a sloppy financial market socialization
process that has been held back for nearly 2 years by 3 bailout
France
cannot bail out their system, banks assets are 4X times more than its GDP
ratings to consider impact of funding challenges on Credit Profile
oody's has concluded that BNPP has a sufficient
level of profitability
and capital that it can absorb potential losses it is likely to incur
over time on its Greek government bonds
and capital that it can absorb potential losses it is likely to incur
over time on its Greek government bonds
Agricole SA (CASA) by one notch to C from C+, and
(ii) A downgrade of the long-term debt and deposit ratings by one notch
to Aa2 from Aa1.
Given the current review for downgrade on SocGen's BFSR, an
upgrade is unlikely.
Similarly, an upgrade of the long-term deposit and debt ratings is also unlikely in the foreseeable future given the current review for downgrade on the BFSR.
The main factors which could lead to a lower BFSR include:
- a reconsideration of the bank's funding and liquidity profile within the context of its broader business model, and the impact of its current and future funding structure on other credit considerations, chiefly risk management and profitability;
- a prolongation or intensification of challenges to refinancing conditions, resulting in a weaker liquidity and / or funding position in Moody's view;
- increased sovereign risk in the euro area
- an unexpectedly sharp deterioration in the bank's capital markets activities;
- aggressive expansions of riskier activities or an actual failure in risk management;
- further significant asset quality deterioration, in the lending activities or in its structured credit-related exposures;
- increased uncertainty over the bank's ability to strengthen capital and liquidity in advance of Basel 3 requirements or deteriorating market conditions.
Similarly, an upgrade of the long-term deposit and debt ratings is also unlikely in the foreseeable future given the current review for downgrade on the BFSR.
The main factors which could lead to a lower BFSR include:
- a reconsideration of the bank's funding and liquidity profile within the context of its broader business model, and the impact of its current and future funding structure on other credit considerations, chiefly risk management and profitability;
- a prolongation or intensification of challenges to refinancing conditions, resulting in a weaker liquidity and / or funding position in Moody's view;
- increased sovereign risk in the euro area
- an unexpectedly sharp deterioration in the bank's capital markets activities;
- aggressive expansions of riskier activities or an actual failure in risk management;
- further significant asset quality deterioration, in the lending activities or in its structured credit-related exposures;
- increased uncertainty over the bank's ability to strengthen capital and liquidity in advance of Basel 3 requirements or deteriorating market conditions.
“China has to wait until it can see a clearer road map by euro countries for solving sovereign-debt problems,” Yu, who is based in Beijing, said in e-mailed comments today. The nation is not a lender of last resort for “troubled countries,” he added.
- WEN SAYS CHINA WILL CONTINUE TO INCREASE INVESTMENT IN EUROPE
- WEN SAYS CHINA IS WILLING TO EXTEND HELP TO EUROPE
- WEN SAYS EU SHOULD
RECOGNIZE CHINA'S
MARKET ECONOMY STATUS
- WEN SAYS HOPES FOR BREAKTHROUGH AT CHINA-EU SUMMIT NEXT MONTH
If Europe will be so kind to align itself with China in all future WTO escalations against the US, it
will be much appreciated.
if Europe likes it status
quo, it sure as hell better like being part of the Sino-Russian axis in the
coming trade wars, which incidentally will define the next reserve currency in
2-3 years.
Paul Krugman's Past: "Social Security Is A Ponzi Scheme And Will Soon Be Over"
heard rumors of China,
Russia and Brazil all bail out Europe
Dutch Finance minister: question is no longer whether but
how Greece
goes bankrupt.
We are studying scenarios in secret together with the Dutch central
bank (DNB) and also with other countries. We are looking at our own economy,
our government finances, the financial sector and consequences for Europe. The Dutch financial sector is
increasingly beginning to prepare for a bankruptcy of Greece. S
Disparate markets – stocks, bonds, currencies
Average correlations between the 10 major sectors of the
S&P 500 have reached 97.2%, from 82.1% just three months ago. That’s the
highest level of such common price action since the Financial Crisis. Gold and
silver have continued to provide actual diversification
- U.S. stocks seem to be walking the picket lines in front of the capital markets, chanting in unison. Well, not literally, of course. But just look at the correlations between the 10 industry sectors of the S&P 500. At 97.2% average correlation, U.S. stocks are moving in lock step to a degree we haven’t seen since the depth of the Financial Crisis. This is not the normal course of business, to say the least. More commonly, some stocks go up while others decline.
- Many other asset classes are apparently siding with stocks, and moving alongside them – sort of a sympathy strike. These include High Yield Bonds (which have many equity-like financial characteristics but are, ultimately, not stocks), the Australia Dollar, and developed as well as emerging economy stock markets.
- The only assets that still have some independence left in them – call them the rugged individualists – are gold and silver. These precious metals still show negative correlations to stocks (negative 55% for gold and negative 35% for silver).
- The correlations we note among industry sectors are profoundly and dysfunctionally high. They come, in my opinion, from the underlying concern over a second financial crisis caused by the default of Greek or other European sovereign debt and the resulting stress caused to the financial system. The only reason it won’t matter whether you own utility stocks or tech stocks or health care stocks is if the world’s major banks can’t open for business the next day.
- Stock markets around the world, but especially in the U.S. and Europe, are trying to fine tune this existential calculus. If there is a 5% chance of a Greek default, then where should stocks trade? OK… Now how about 10%? Now 20%? Now back to 5%? Now what if U.S. banks need another bailout because their counterparty exposure is higher than we think? You get the idea. Markets are trying to discount the survival rate of another cross-border financial pandemic. That is why they move in lock step.
- Gold and silver traders have gotten too used to the negative correlation trade with stocks. This is, in fact, an unusual relationship for precious metals to stocks. The correlation should actually be zero. You can begin to hear the frustration in traders’ voices on days like Monday, when gold doesn’t rally on a drop in the market. Here’s a news flash: it is not supposed to move opposite to stocks. It is only supposed to move independently of them.
- The stability of high quality bonds (we use the iShares iBoxx Investment Grade Corp ETF, symbol LQD, to track this asset class) in a tumultuous period has been unexpected and frankly impressive. Investment grade bonds are still up over 4% on the year, and their correlation to stocks is negative 24%. Not as inversely related as the precious metals stats I noted above, but far better than the 89% correlation to stocks exhibited by High Yield Bonds.
- If the basic thesis here is correct – that correlations will stay high as long as markets are worried about solvency more than individual stock fundamentals – then we probably have several more months of lock-step price action. And with this comes high volatility, for many of the same reasons.
“Greece
should default, and default big, you can’t jump over a chasm in two steps.”
"Rescue
programs backed by the International
Monetary Fund and European Central Bank
are “recession creating” efforts that will leave Greece saddled with
more debt relative to the size of its economy in coming years and stifle
growth"
“It’s
totally ridiculous what is going on,” Blejer, 63, said. “If you assume that
these countries do everything that is in the program, they do all these
adjustments and privatizations, at the end of 2012 debt-to-GDP will be bigger
than this year.
The Argentine government kept a firm stance, and finally got a deal in 2005 by which 76% of the defaulted bonds were exchanged by others, of a much lower nominal value (25–35% of the original) and at longer terms. In 2008, President Cristina Fernández de Kirchner announced she was studying a reopening of the 2005 swap to gain adhesion from the remaining 24% of the so-called "holdouts", and thereby fully exit the default with private investors.
We have revised our EUR forecast significantly lower, and we now expect EURUSD to decline to 1.30 by year-end and 1.25 in Q1 2012, before stabilizing in the second half of next year
d the largest number in the 52 years for which
poverty estimates have been published;
t is hard to count the number of times that China
has come in to buy European bonds or that a successful auction was a sign that
the crisis was over, I only have so many fingers and toes after all. ow is China going to save Italy with 1.6 TRILLION EUR of
debt? China
could buy up all the 156 billion EUR of Portuguese debt if it wanted to
solve the "contagion" there. They haven't done it.
We can no longer borrow dollars. U.S. money-market funds are not
lending to us anymore," a bank executive for BNP Paribas, we're creating a
market in euros. This is a first. . . . we hope it will work, otherwise the
downward spiral will be hell
Now that the situation is bordering on catastrophe,
analysts are suggesting that the government is set to start nationalizing France's
banks
Now that the situation is bordering on catastrophe,
analysts are suggesting that the government is set to start nationalizing France's
banks
Italian Economy Minister Giulio Tremonti said on
Thursday that Asian investors are reluctant to buy Italian bonds because it
sees they are not being bought by the European Central Ban
Tiger's Robertson
Europe
is on financial collapse
Default in Greece for sure:
- Good shorts: hun,
- Long: Norway, Singapore, Canadian – very well country
- Great technology companies: apple – 3X price, google, dot.com
- Visa, mastercard: very appealing – risk of default is taken by the banks, not by the companies
- Gov try to continue to exist
Faber:
a silent QE3 is already underway, considering that M1 growth
(cash and near-cash deposits) has accelerated to the fastest expansion in 35
years. The only question is how far they will move and what the impact might be
on asset markets.
I have 25 per cent in
real estate and real estate-related equities here in Asia,
25 per cent in gold, 25 per cent in stocks and 25 per cent in cash
Indian markets will not go lower to those 2008 levels, but
would go lower from the current levels to, may be, 12,000-15,000 levels. From
their low in 2009, the Indian markets till recently rose to 21,000, which is
almost 100 per cent returns. I do not call this a bear market rally, but a bull
market. We now have had the beginning of a bear market.
We never really had a recovery in the Western world. The
stock markets went up because of the money printing and support in 2009. I do
not know when it will happen in 2012 or in 2018, but the next crisis will be
worse than the one in 2008
When the US
went into World War II, total credit as a percentage of the economy was 140%.
We are now, without the unfunded liabilities, at 279% and with the unfunded
liabilities, probably around 800%
ccording to some statistics the gold price today should be
worth between $6,000 per ounce and $10,000 per ounce
Jim Rogers:
If Greece
defaults, some other countries will default too—Italy,
Spain, Ireland and a few others If this
happens the euro will go down a far amount. But I would buy all the euro I
could at that point because then that would mean that Europe
is going to have a very strong, sound currency. It would be a lot of pain
between now and then, but boy if that happened in the next month or so, buy all
the euros you can
Commodities : food, gold à
if ec is better, or gov print money à go up, like in 70's
because there are shortages and gov print money
Short stocks: don't
China:
they try to cool down the economy, India,
Australia
– world economy won't go forward
Natural resources: agriculture,
decrease of economy à the average age of agricultures is very high
The world moves as from UK to US, now from US to CHINA
According to the IMF, the
pool of supplementary resources are only to be activated when "needed to
forestall or cope with a threat to the international monetary system something
biggest must be coming.
We own gold for protection
against: failing currencies, lagging economies, and fear of inflation
every gold producer in the BIG
GOLD portfolio except one has initiated or increased its dividend this
year, many of them several times. The current dividend yield of the gold
industry is 0.75%
Plus d'un milliard d'euros va
être investi dans le bâti wallon. Pour la période 2011-2014, 450.000 chantiers
Creditor: Singapore, china, korea,
japan, Taiwan,
10.9 million, or 22.5 percent,
of all residential properties with a mortgage were in negative equity at the
end of the second quarter of 2011,
ROubini
At the same time, hopes that
strongly growing emerging markets (EMs) can decouple from the G7 downturns are
now being dashed: The latest global PMIs suggest a massive slowdown of growth
in EMs from China, Taiwan and South
Korea in Asia to Brazil
in Latin America and Turkey
and Russia in emerging Europe. It is clear that we are at stall speed in the
global economy
Meanwhile German finance minister
Schaeuble commented that it was not possible for Greece to exit the EUR. Yet it was
an FT headline that Italy
had been in talks with China
for them to buy bonds and invest in strategic companies (note similar stories
have appeared in the past re Greece,
Portugal and Spain)
that cemented a more positive risk appetite.
DAX breaks 5,000 on
impending Greek default, Italy's
industrial production goes negative
The Greek 2 year
yield is at 57%. The Portuguese 2 year yield is up to 15.7% (after falling
below 12% in August). Also the Irish 2 year yield is at 9.3% (below 8% in
August).
The next few weeks are "make or break" for the next Greek bailout.
The next few weeks are "make or break" for the next Greek bailout.
Nouriel Roubini :
“I thought a few months ago that the perfect storm would be 2013, but now, the
economic weakness in the U.S., eurozone and U.K. is front-loaded,” “So we're
going to double-dip earlier. The climax of it could be 2013 or it could be
already earlier,” “It depends on what policy tools are available " With
the eurozone in crisis, facing a record-high cost for insuring bank debt, there
is a 60% probability that most advanced economies will fall into a recession, .
Roubini said. “In the short term, we need to do massive stimulus; otherwise,
there's going to be another Great Depression,” “Things are getting worse, and
the big difference between now and a few years ago is that this time around,
we're running out of policy bullets.”
The European Central Bank must
signal this week that it will cut interest rates, reversing the "biggest
mistake" it has made in the past 10 years,
imob rom:
http://www.freakonomics.com/2011/09/12/tiger-vs-dragon-a-demographic-comparison-of-india-and-china/
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