Sovereign liquidity – Mike Whitney’s morning thoughts
by ilene - December 3rd, 2010 2:09 pm
Mike wrote to me this morning,
"Whoa! Have you seen this article? Sovereign liquidity, what lies beneath
"Am I misreading this or has Trichet pulled out the bazooka? My question: High ranking US officials from the Treasury flew to Spain yesterday. Do you or Phil think the Fed is on a euro bond spending spree to prevent a crash (because the Germans won’t support EU--QE?) Never a dull moment, Mike"
Excerpt:
Here’s a perfect end to a week in which the ECB has apparently bashed peripheral bond markets into submission. Apparently.
Watch those bid-offer spreads.
We couldn’t quite believe this chart of the bid-offer spread on ten-year Spanish government bonds, made by Divyang Shah of IFR Markets, when we saw it. But it checks out, and is worrying (click to enlarge):
(Still not at the May 2010/Greek crisis nadir… yet.)
Source: Sovereign liquidity, what lies beneath, by Joseph Cotterill
http://ftalphaville.ft.com/blog/2010/12/03/426946/sovereign-liquidity-what-lies-beneath/
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Thursday Thrust – Just Buy the F’ing Dips!
by Phil - December 2nd, 2010 8:04 am
It’s very sad when you can get your best financial advice from cartoon characters.
I apologize for the language but this video pretty much says it all. As the man in green says: "Buy the f’ing dip, you f’ing idiot." That’s the entirety of the market strategy we are being trained like Pavlov’s dogs to follow. Also as the man says "Now, don’t forget this only works if you go out and tell all your friends and family to do the same. That way, when they are buying more expensively than you, you can sell back to them and collect your money."
Of course it’s a Ponzi scheme but it’s a gigantic, legal one and the best thing about it is that the Government FORCES everyone to play so you never run out of suckers. When there is a lack of actual new sucker/investors to put money in, the Government steps in with stimulus or buys equities (QE1) or buy Treasuries from the banks so they can have free capital to buy equities with (QE2). They debase the currency and drive inflation higher while talking it up even more so and virtually penalizing people for saving money and not shopping. In this way, the US Government places a tax on every single citizen through a systemic devaluation of their lifetime accumulation of wealth as well as unfavorable savings and inflation conditions that are aimed to force money into equities and commodities.
What is the logic to this? Well, none if you are a government that actually cares about the long-term benefit of 310M people but we haven’t had a government that was "for the people" since they put two in the back of Kennedy’s neck so why complain about it now? What we should be doing is celebrating the sheer stupidity of the situation and enjoying the ride as this stock market roller coaster clacks up the tracks – towards a drop that is certain to have investors screaming all the way down but, for now, let’s listen to what the Bernanke Bears have to say in their latest cartoon about the Bank America crisis with WikiLeaks as well as their advice on NFLX and CRM:
Now, what could be more simple than that? Just take all your money out of bank stocks and put it into NetFlix. Well, maybe not NFLX as we…
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Irish Citizens Sold Down the River in “Firepower of Stupidity”
by ilene - November 21st, 2010 11:14 pm
Mish writes about how Irish Citizens Sold Down the River in "Firepower of Stupidity" - Ilene
Courtesy of Mish
Today the Irish Government sold its citizens into debt slavery by agreeing to guarantee stupid loans made by German, British, and US banks. Those loans fueled one of the biggest property bubbles in the world. Ireland has since crashed.
Ireland Agree To Bailout
Please consider Ireland Seeks Bailout as ‘Outsized’ Problem Overwhelms Nation
Ireland applied for a bailout to help fund itself and save its banks, becoming the second euro member to seek a rescue from the European Union and the International Monetary Fund.
Irish Prime Minister Brian Cowen said he expects talks on the package to be completed in the “next few weeks.” Finance Minister Brian Lenihan said the loan will be less than 100 billion euros ($137 billion), though he refused to give any further details at a press conference in Dublin today.
“A small sovereign like Ireland faced with an outsized problem that we have in our banking sector, cannot on its own address all those problems,” Lenihan said. Ireland may not draw down on the entire loan, he said.
While Ireland may not fully use any cash it gets from the EU and IMF, Lenihan said the size of the package “is important to demonstrate” the “firepower that stands behind the banking system.”
The Irish turmoil has also reopened tensions about the governance of the euro region after German Chancellor Angela Merkel last month called for bondholders to foot more of the bill of European bailouts. Her stance, criticized European Central Bank President Jean-Claude Trichet, sparked a bond market selloff.
Bondholders Should Foot Entire Bill
Trichet is pissed about common sense statement by German Chancellor Angela Merkel about who should foot the bill. Actually, Merkel did not go far enough. When you make stupid loans you pay the price. Or at least you should.
But no! Trichet as well as the Irish Prime Minister seem to think that Irish taxpayers should bail out the Irish banks (which is in reality a bailout of German, and UK banks that made piss poor loans to Ireland).
Why the average Irish citizen should have to bail out foreign bondholders is beyond me, but I do note that the same happened in the US with taxpayers footing an enormous bill for Fannie Mae, Freddie Mac, and…
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Testy Tuesday – Trichet Talks Tough at High Noon
by Phil - October 12th, 2010 7:40 am
Anti-Claud is coming to town!
You’d better not print, you’d better not ease you’d better not contract or your wages will freeze - Jean Claude Trichet is coming to town… The EU’s Central Banker has a lunch meeting at the NY Economic Club and there is no one who knows better when Bernanke’s sleeping and when the recovery is fake, so we’d better pay attention, for the country’s sake! THIS is the most powerful banker in the World, not the hollow Bankster puppet we have setting US policy, and Trichet has fought easy money tooth and nail -even as the US embraced it this year.
As you can see from the Chart on the right, Europe is a bigger (slightly) trading partner of China than the US and a MUCH bigger buyer of US goods than China by a factor of 3. The strong Euro lowers Europe’s trade imbalance as they have to send less Euros to both the US and our peg-partners in China for the same amount of goods they bought last year while the same goods they sold last year ship out in exchange for larger amounts of foreign notes.
With the Bank of Japan this week boosting its asset- purchase plan and the U.S. Federal Reserve mulling a similar shift, Trichet said last week that ECB policy makers are in the “same mood” as a month ago and for now remain committed to phasing out their unlimited lending program. That boosted the Euro back to $1.40 for the first time since February. The ECB and Fed compose “two different schools of thought,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “The ECB is looking at their own economy and seeing some signs of a revival. They’re very concerned about going down the line of the Fed.” Now Mr. Trichet will attempt to school us this afternoon – not coincidentally, on the same afternoon that the Fed Minutes will be released and QE2 mania is likely to peak out.
As noted yesterday by Zero Hedge, "While risk assets may hit all time highs courtesy of free liquidity, the economy, also known as the middle class, will be stuck exactly where it was before QE2… and QE1." The article does a great job of outlining my long-standing premise that money simply cannot be printed fast enough to overcome…
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Trichet Reiterates Austerity Message; Germany Plans More Borrowing Cuts; Will the Treasury Rally Last?
by ilene - July 4th, 2010 2:47 pm
Trichet Reiterates Austerity Message; Germany Plans More Borrowing Cuts; Will the Treasury Rally Last?
Courtesy of Mish
Once again and with greater force, Europe has snubbed its nose (and rightfully so) the Keynesian clowns in US academia and the Obama administration.
Bloomberg reports Trichet Calls on EU Governments to Reduce Budget Deficits to Boost Growth.
European Central Bank President Jean- Claude Trichet pressed governments to trim their budget deficits, saying such action would boost economic growth by improving confidence of consumers and investors.
“We are in a period where we have to manage budgets very tightly,” Trichet told journalists in Aix-en-Provence, France. “I have no problem with austerity, rigor. I call this good budgetary management.”
Trichet said today that deficit reduction won’t choke growth and a failure to stem budget gaps would be equally risky for the recovery.
“Confidence is key for growth, and if you cannot have confidence in the sustainability of the fiscal policies then you have no growth because you have no confidence,” he said. “The two things are complimentary.”
Germany to Reduce Deficit by 80 billion euros ($100 billion) over five years
Reuters reports Germany plans to cut new borrowing in savings drive
Germany plans to cut net new borrowing by some 80 billion euros ($100 billion) over five years, reducing supply of Europe’s benchmark debt and adding pressure on other euro zone members to tighten their own public finances.
The draft budget for 2011, which the cabinet plans to approve on Wednesday for ratification in parliament in November, will anchor a 34 billion euro reduction in new issuance over the next two years compared to earlier plans.
The federal government also aims to cut spending to 307.4 billion euros next year, a 3.8-percent decrease from plans made before a "debt brake" law was passed in 2009, details of the draft made available to Reuters on Sunday showed.
The budget is the latest chapter in Germany’s drive to consolidate public finances, a move that has drawn criticism from some other large countries that say it is too early to withdraw support enacted during the financial crisis.
Unions have promised stiff resistance and industrial action looks likely — a threat that could rise as cuts in social services deepen and health care costs rise as planned.
In addition, some politicians from within Merkel’s ruling coalition say the measures are
…
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Prepare NOW: They “Get It”
by ilene - June 7th, 2010 12:31 am
Prepare NOW: They "Get It"
Courtesy of Karl Denninger at The Market Ticker
Anyone who doesn’t believe that "they" (the powers that be) "get it" at this point needs to remove their head from their ass:
G-20 central bankers and finance ministers agreed in a joint statement today that “within their capacity, countries will expand domestic sources of growth.” At the same time, European Central Bank President Jean-Claude Trichet told reporters that Europe’s best contribution to the global rebound is to achieve fiscal sustainability.
Those two are polar opposites. You just heard Trichet admit that what everyone wants they cannot have.
Look folks, if you currently spend 11% of GDP by borrowing money and blowing into the economy to prop it up and you achieve "fiscal sustainability" (defined as not doing that any more) GDP will inevitably contract by the amount of stimulative borrowing you withdraw.
Geithner said at a press briefing today that “credible commitments to fiscal sustainability over the medium term” are needed to generate a durable recovery. Spain’s Finance Minister Elena Salgado said at a separate European press briefing that deficit reduction should come “no later than 2011.”
Game’s up folks – that’s six months out.
Let’s be straight with everyone here. These are the current deficit additions for the first five months of 2010 (click for a larger copy):
That’s nearly $700 billion in five months. Annualized it’s $1.68 trillion. Last year’s total was $1.647 trillion.
Ignore the CBO and other government claims. That which is borrowed is that which is owed, and the increase in that which is owed over a year’s time is the true deficit in the budget, irrespective of all claims otherwise.
This comes out to roughly 12% of GDP. If we contract that deficit spending in 2011 to the European standard of no more than 3% of GDP then either GDP contracts by the difference (8-9%) or the government extracts that from you in the form of taxes.
Either way you don’t have it – it is either not produced and thus not paid or it is produced and stolen. Irrespective of how it is achieved you are going to see roughly 10% of your…
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G-20 an Amazing Success; Another Look at the Impossible
by ilene - June 6th, 2010 9:16 pm
G-20 an Amazing Success; Another Look at the Impossible
Courtesy of Mish
In relative terms, as economic summits go, the recent G-20 meeting was a spectacular success.
Unfortunately, one might not get that impression from the Bloomberg headline G-20 Coordination Fails as Governments Clash on Recovery Recipe.
Global policy makers are starting to clash over their individual prescriptions for recovery as Europe demands lower budget deficits while the U.S. warns against pushing exports instead of domestic demand.
At a meeting of Group of 20 finance chiefs in Busan, South Korea, June 4-5, Treasury Secretary Timothy F. Geithner said the world cannot again bank on the cash-strapped U.S. consumer to drive growth and urged other nations to stimulate their own demand.
Global policy makers are starting to clash over their individual prescriptions for recovery as Europe demands lower budget deficits while the U.S. warns against pushing exports instead of domestic demand.
At a meeting of Group of 20 finance chiefs in Busan, South Korea, June 4-5, Treasury Secretary Timothy F. Geithner said the world cannot again bank on the cash-strapped U.S. consumer to drive growth and urged other nations to stimulate their own demand.
The conundrum is that governments are all trying to harness a rebound in trade, which the Netherlands Bureau for Economic Analysis last week estimated grew 3.5 percent in March, more than double February’s pace.
Companies from French beverage maker Pernod Ricard SA to Japan’s Toshiba Corp. and Nissan Motor Co. are counting on foreign demand to stoke earnings.
In the U.S., President Barack Obama aims to double exports over five years, while China is refusing to bow to international pressure to allow an appreciation in the yuan, which it has held at 6.83 per dollar for almost two years to help its exporters.
Japan’s new prime minister, Naoto Kan, enters office with a reputation for favoring a weak yen after saying as finance minister that he wanted the currency to fall “a bit more.” French Prime Minister Francois Fillon said June 4 the euro’s drop below $1.20 is “good news” after a gain that was “penalizing our exports.” Britain’s Osborne said last week in Beijing he is “keen” to make the U.K. more trade-driven.
‘Who Will’ Buy?
“If everyone’s expecting to export their way out of trouble, who will be buying?” said Alvin Liew, a Singapore- based economist for Standard Chartered Plc. “Countries may
…
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France Worries About AAA Rating; UK Economists Urge Greece to Abandon Euro; Spanish Prime Minister Losing Support; Japan’s Industrial Output Weakens
by ilene - May 31st, 2010 6:07 pm
France Worries About AAA Rating; UK Economists Urge Greece to Abandon Euro; Spanish Prime Minister Losing Support; Japan’s Industrial Output Weakens
Courtesy of Mish
Inquiring minds might be interested in an international roundup for Memorial Day. Let’s take a look at top stories about France, Germany, Greece, the EU, Spain, and Japan.
French Finance Minister Says "Keeping AAA Rating a Stretch"
As Eurozone trade unions prepare to battle over various austerity programs, the French budget minister warns on credit rating.
France admitted on Sunday that keeping its top-notch credit rating would be "a stretch" without some tough budget decisions, following German hints that Berlin may resort to raising taxes to help bring down its deficit.
Euro zone trade unions are preparing for possible confrontations in the coming week if governments impose austerity measures or labor reforms unilaterally. But ministers made clear they were ready to take unpopular steps to prevent the Greek debt crisis spreading to their economies, although doubts are growing about whether the Spanish government in particular has enough support to get its way.
Budget Minister Francois Baroin indicated on Sunday that France should not take for granted its AAA rating, which allows Paris to borrow relatively cheaply on international markets and finance its big budget deficit.
"The objective of keeping the AAA rating is an objective that is a stretch, and it is an objective that, in fact, partly informs the economic policies we want to have," Baroin said. "We must maintain our AAA rating, reduce our debt to avoid being too dependent on the markets, and we must do this for the long term," he told Canal+ TV in an interview.
France has forecast its deficit will hit 8 percent of gross domestic product this year, but aims to bring it down to within the European Union’s 3 percent limit by 2013.
UK Economists Advise Greece to Abandon the Euro
The Times Online reports Greece urged to give up euro
THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.
…
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The Roof Is On Fire
by ilene - May 20th, 2010 4:00 pm
The Roof Is On Fire
Courtesy of Karl Denninger at The Market Ticker
The Euro Zone is in serious trouble, and Britain and we are next.
The game’s up folks.
Many people talk about us "printing" money. Indeed, there’s a large brokerage that runs advertisements on CNBS with that exact claim, over and over and over. Ron Paul and Peter Schiff have run this mantra for years.
This chart says something else entirely:
THERE HAS BEEN NO PRINTING GOING ON!
No, what’s been happening is worse.
Worldwide governments have borrowed and spent huge percentages of their GDP in a puerile attempt to protect a criminal class that has looted the public and bribed the legislature - THE BANKS.
There was always a point where this would fail, but it is flatly impossible for anyone to know exactly where it was beforehand.
But mathematically, there was a point where it would fail.
The gamble that Bernanke, Trichet, Obama, Bush, Paulson, Geithner and everyone else in the world took is that we could do this for a short period of time and that in doing so private demand would pick up and return us to "stability."
THESE PEOPLE DID NOT STUDY THE ABOVE CHART, AND THEY’RE F^#KING IDIOTS FOR BELIEVING THAT WHICH WAS TRIED IN 2003-2007, WITH A HIGHER DEBT LOAD THAN WE HAD THEN, WOULD WORK NOW WHEN IT FAILED IN 2003.…
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Meet The Latest Member Of The Plunge Protection Team: The European Central Bank
by ilene - May 20th, 2010 1:34 pm
Courtesy of Tyler Durden
The long-debated topic of whether the ECB intervenes on behalf of the euro can now be put to rest. 120 pip move in a minute is not a short cover. It is, and always has been, forced central bank intervention. Bernanke is so happy Trichet is doing his work for him for the time being. Be very wary of buying stocks on this intervention, as Central Bank involvement now at best leads to a 12 hour temporary "fix" to the market that Bernanke et al want to sustain.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(