http://www.silverdoctors.com/nigel-farage-informs-merkel-it-is-time-for-the-uk-to-leave-the-european-union/#more-16915
and...
http://www.zerohedge.com/news/2012-11-08/we-arent-kansas-anymore
Submitted by Tyler Durden on 11/08/2012 12:49 -0500
Several countries such as Austria, Finland and the Netherlands have stated publically that they will not use any more of their country’s money for Greece. We shall see. Then there is the two year extension of payments asked for by Athens which would require another $40-50 billion in additional money and who is going to pick up this bill remains an open question. We may have reached the point in the road where new debt to pay off old debt coupled with a total increase in the debt burden is no longer politically acceptable to some nations and so gets quashed as Freya and Athena are locked in mortal combat. The tranche payments plus the extension payment total $78-88 billion and I expect a significant pushback from a number of nations. The PSI card has been played, the shove it under the rug card has been played, the hide the bacon card has been played, the band of brother’s card has been waved around and now, like at the end of a long drawn out dinner; who is going to pick up the tab?Cliff Hanging
Make no mistake; we are caught between three cliffs at present. Each of them presents a systemic challenge. The first is Greece because with a total of $1.5 trillion in debts a default would be cataclysmic. Thenext abyss is labeled “Spain” because they will be forced to the wall and the total price tag will amount to around $400-500 billion in my estimation. This includes bank debt guaranteed by the nation, their sovereign debt plus the regional debt that has been guaranteed by the nation. The actual debt to GDP ratio for Spain is about 245% and not the 90% number concocted by the EU to give the illusion of a prettier party dress. So much for all of the pledged money in the ESM fund; all gone and thanks for all the fish. Finally we have the “Fiscal Cliff” in the United States where some combination of entitlement’s reduction and new taxes will get implemented hopefully. These three and quite clear “Cliffs” should be bringing you back to Grant’s Rules 1-10: “Preservation of Capital” because if anything goes amiss on any of these dangerous walks then systemic shock could develop and your portfolios could take massive losses. Coupling the “Cliffs” with a stark recession in Europe and its contagion, a significant slow-down in China, declining earnings in America and you can begin to see the seriousness of our economic and markets position now; a lot of risk!“There she stood discussing financial prudence with the Munchkins. The road did not need to be yellow and money could be saved by leaving the bricks in their natural state. The Lollipop Guild did not need to have any more galas and the Lullaby League needed to cancel their annual dinner. She was shouting and waving her wand like the silly scarecrow trying to ward off the crows and then Dorothy’s house fell on her head. Had she only looked up; the Wicked Witch of the East would have been alive today. Always remember to look up!”
-The Wizard
A Simple Solution
I am a conservative fellow by nature; my Kansas City roots I suppose. I am good with some risk positions but I also want to go to bed at night without undue worries spilling over into my sleep and creating unpleasant dreams. I will forego certain opportunities to achieve a good night’s sleep. No matter which way we turn now we are faced by three rocky cliffs that cannot be ignored and any one of them could send the equity markets into a tizzy which is why I suggest bonds and senior debt as a much more comfortable place to park your cash. We have seen a tremendous compression in bonds by the way during the last four months so that the combination of the coupon and the appreciation has performed equally well, if not better, than the performance of the stock markets. In the case of America there is also the possibility and the odds are at about 90% here that many people and perhaps institutions are going to be faced with higher taxes. If you consider this carefully and toss in the comparison of “A” to “AAA” rated securities on an apples-to-apples basis then you have to look at Municipal Bonds as maybe the best answer to the use of money now as many yield significantly more than their taxable counterparts even without including the tax implications. There is decent liquidity in the Muni Markets and some of the balance sheets, especially of the States, are far superior to the balance sheet of the nation. If the $600 billion “Fiscal Cliff” of the United States is to be solved then I think you will see a substantial amount of compression in Municipal Bonds as people and institutions recognize the significant value of their safety and of their yield. Think what you like but present circumstances force the quote from the Wizard of Oz:
-Dorothy
Tranche will not be approved at Monday’s Eurogroup but likely end of the month, officials say
Greece is hoping that a meeting of eurozone finance ministers on November 19, or talks between European Union leaders three days later, will lead to officials agreeing to disburse the next bailout tranche of 31.5 billion euros.
Sources told Kathimerini that Prime Minister Antonis Samaras’s aides see these two meetings as the two most likely dates when Greece will finally get the nod from its lenders after several European officials made it clear yesterday that there would be no decision on the disbursement of the loan installment at Monday’s Eurogroup meeting.
Following a stormy vote in Parliament late on Wednesday on the latest austerity and reform package, which the government won with just 153 of 300 votes, attention quickly shifted to the stance of Greece’s lenders and the prospects for receiving the next bailout tranche.
“I don’t see how we would get to a decision next week,” said German Finance Minister Wolfgang Schaeuble. “Not all is lost, but not all is won.”
A number of other European officials spoke to media outlets anonymously to confirm that Greece should not expect a decision on the loan installment at Monday’s Eurogroup.
The European side seems some distance from the International Monetary Fund in terms of their assessment of Greek debt sustainability. According to the Financial Times, the IMF wants Greek debt to be at 120 percent of GDP in 2020, whereas the European Commission is proposing this figure should be changed to 125 percent of GDP in 2022.
Among the measures being discussed to reduce public debt are extending maturities and reducing the interest rate on its bilateral loans from 150 basis points to 80 points above interbank rates, and giving Greece the profits earned by the European Central Bank on some 50 billion euros’ worth of Greek bonds that it holds.
Yesterday ECB President Mario Draghi again ruled out the possibility of the lender accepting a haircut on the Greek bonds it holds. “The ECB is by and large done,” he said in reference to Greece. However, he added that any profits from the purchase of Greek bonds would be passed to national central banks and eurozone governments could then decide what to do with the money.
and......
http://www.zerohedge.com/news/2012-11-08/bank-england-halts-qe-after-potency-questioned
Submitted by Tyler Durden on 11/08/2012 07:38 -0500
http://www.zerohedge.com/news/2012-11-08/daily-us-opening-news-and-market-re-cap-november-8
Submitted by Tyler Durden on 11/08/2012 08:04 -0500
and....
http://ftalphaville.ft.com/2012/11/08/1252671/in-greece-antonis-sisyphus-took-another-painful-step-forward/
and.....
http://ftalphaville.ft.com/2012/11/08/1252381/sareb-is-incrementally-negative-for-spain-and-its-banking-sector/
and.....
http://www.zerohedge.com/news/2012-11-08/all-quiet-day-after-day-after
( Greece passes latest national poverty law dictated by the Troika - German finance Minister Schauble says don't expect money next week Greece )
Submitted by Tyler Durden on 11/08/2012 06:57 -0500
The euro crisis hangs like a sword of Damocles over our companies. Investments in large parts of Europe are basically dead [...] For German companies, Europe is not an export market, but the domestic market. [...] If in this common market there are considerable problems, such as now, then that's a big challenge for us.
NIGEL FARAGE INFORMS MERKEL IT IS TIME FOR THE UK TO LEAVE THE EUROPEAN UNION
and...
http://www.zerohedge.com/news/2012-11-08/we-arent-kansas-anymore
We Aren't In Kansas Anymore
- China
- default
- Equity Markets
- European Central Bank
- European Union
- Finland
- Greece
- Gross Domestic Product
- International Monetary Fund
- Netherlands
- Recession
- Sovereign Debt
Via Mark J. Grant, author of Out of the Box,
While the citizens of Athens rioted and threw Molotov Cocktails outside of their Parliament the elected officials narrowly passed the new austerity measures demanded by the Troika last night. They have a budget vote left, likely to be passed, and then the focus will shift to the IMF and the European Union and whether they will fund and how it will be done. The Greek government says it will run out of money on November 16 and the country has debt payments to be made on November 21. Last night’s vote in Athens was only the first page in the current chapter and there are a number of open questions left. Prepare for the European 'fiscal cliff'...
Will the IMF fund?
The International Monetary Fund has said that they will not unless it appears that the Greeks can pay back their debt. With an actual debt to GDP ratio now around 800% I think it can be said with certainty that the task is impossible even as the Troika says the same ratio is 190%. The difference between my number and their number is just what is counted. I count in exactly the same fashion as IBM or GE tallies up their balance sheet. I include all of the liabilities of the nation and then divide by them by their steeply declining GDP or revenues. I include the direct sovereign debt, bank debt guaranteed by Greece which is mostly used as collateral at the ECB. I count their $90 billion in guaranteed derivatives and I include the corporate debt in Greece that is guaranteed by the country along with their regional debt that is Federally backed. When all is said and done you arrive at my number by simple arithmetic and then division. The IMF has suggested that the ECB and the EU should take losses on their holdings, which both have refused to do to date, and so the IMF may refuse to fund either their part of the next tranche or provide any new money for the two year extension that has been asked for by Greece.Will the European Union Fund?
The International Monetary Fund has said that they will not unless it appears that the Greeks can pay back their debt. With an actual debt to GDP ratio now around 800% I think it can be said with certainty that the task is impossible even as the Troika says the same ratio is 190%. The difference between my number and their number is just what is counted. I count in exactly the same fashion as IBM or GE tallies up their balance sheet. I include all of the liabilities of the nation and then divide by them by their steeply declining GDP or revenues. I include the direct sovereign debt, bank debt guaranteed by Greece which is mostly used as collateral at the ECB. I count their $90 billion in guaranteed derivatives and I include the corporate debt in Greece that is guaranteed by the country along with their regional debt that is Federally backed. When all is said and done you arrive at my number by simple arithmetic and then division. The IMF has suggested that the ECB and the EU should take losses on their holdings, which both have refused to do to date, and so the IMF may refuse to fund either their part of the next tranche or provide any new money for the two year extension that has been asked for by Greece.Will the European Union Fund?
Several countries such as Austria, Finland and the Netherlands have stated publically that they will not use any more of their country’s money for Greece. We shall see. Then there is the two year extension of payments asked for by Athens which would require another $40-50 billion in additional money and who is going to pick up this bill remains an open question. We may have reached the point in the road where new debt to pay off old debt coupled with a total increase in the debt burden is no longer politically acceptable to some nations and so gets quashed as Freya and Athena are locked in mortal combat. The tranche payments plus the extension payment total $78-88 billion and I expect a significant pushback from a number of nations. The PSI card has been played, the shove it under the rug card has been played, the hide the bacon card has been played, the band of brother’s card has been waved around and now, like at the end of a long drawn out dinner; who is going to pick up the tab?Cliff Hanging
Make no mistake; we are caught between three cliffs at present. Each of them presents a systemic challenge. The first is Greece because with a total of $1.5 trillion in debts a default would be cataclysmic. Thenext abyss is labeled “Spain” because they will be forced to the wall and the total price tag will amount to around $400-500 billion in my estimation. This includes bank debt guaranteed by the nation, their sovereign debt plus the regional debt that has been guaranteed by the nation. The actual debt to GDP ratio for Spain is about 245% and not the 90% number concocted by the EU to give the illusion of a prettier party dress. So much for all of the pledged money in the ESM fund; all gone and thanks for all the fish. Finally we have the “Fiscal Cliff” in the United States where some combination of entitlement’s reduction and new taxes will get implemented hopefully. These three and quite clear “Cliffs” should be bringing you back to Grant’s Rules 1-10: “Preservation of Capital” because if anything goes amiss on any of these dangerous walks then systemic shock could develop and your portfolios could take massive losses. Coupling the “Cliffs” with a stark recession in Europe and its contagion, a significant slow-down in China, declining earnings in America and you can begin to see the seriousness of our economic and markets position now; a lot of risk!“There she stood discussing financial prudence with the Munchkins. The road did not need to be yellow and money could be saved by leaving the bricks in their natural state. The Lollipop Guild did not need to have any more galas and the Lullaby League needed to cancel their annual dinner. She was shouting and waving her wand like the silly scarecrow trying to ward off the crows and then Dorothy’s house fell on her head. Had she only looked up; the Wicked Witch of the East would have been alive today. Always remember to look up!”
-The Wizard
A Simple Solution
I am a conservative fellow by nature; my Kansas City roots I suppose. I am good with some risk positions but I also want to go to bed at night without undue worries spilling over into my sleep and creating unpleasant dreams. I will forego certain opportunities to achieve a good night’s sleep. No matter which way we turn now we are faced by three rocky cliffs that cannot be ignored and any one of them could send the equity markets into a tizzy which is why I suggest bonds and senior debt as a much more comfortable place to park your cash. We have seen a tremendous compression in bonds by the way during the last four months so that the combination of the coupon and the appreciation has performed equally well, if not better, than the performance of the stock markets. In the case of America there is also the possibility and the odds are at about 90% here that many people and perhaps institutions are going to be faced with higher taxes. If you consider this carefully and toss in the comparison of “A” to “AAA” rated securities on an apples-to-apples basis then you have to look at Municipal Bonds as maybe the best answer to the use of money now as many yield significantly more than their taxable counterparts even without including the tax implications. There is decent liquidity in the Muni Markets and some of the balance sheets, especially of the States, are far superior to the balance sheet of the nation. If the $600 billion “Fiscal Cliff” of the United States is to be solved then I think you will see a substantial amount of compression in Municipal Bonds as people and institutions recognize the significant value of their safety and of their yield. Think what you like but present circumstances force the quote from the Wizard of Oz:
“Toto, I’ve got a feeling we aren’t in Kansas anymore.”
-Dorothy
Risk Off(er)
Submitted by Tyler Durden on 11/08/2012 - 10:44
Because AAPL was not enough, Grexit is now back and fully frontal:
- EU MINISTERS TO DELAY GREEK AID CALL FOR WEEKS, OFFICIAL SAYS
And dump. Funny how all the horrible news are hitting after the election.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_08/11/2012_469182
EU keeps Greece waiting for loan
Tranche will not be approved at Monday’s Eurogroup but likely end of the month, officials say
 |
Sources told Kathimerini that Prime Minister Antonis Samaras’s aides see these two meetings as the two most likely dates when Greece will finally get the nod from its lenders after several European officials made it clear yesterday that there would be no decision on the disbursement of the loan installment at Monday’s Eurogroup meeting.
Following a stormy vote in Parliament late on Wednesday on the latest austerity and reform package, which the government won with just 153 of 300 votes, attention quickly shifted to the stance of Greece’s lenders and the prospects for receiving the next bailout tranche.
“I don’t see how we would get to a decision next week,” said German Finance Minister Wolfgang Schaeuble. “Not all is lost, but not all is won.”
A number of other European officials spoke to media outlets anonymously to confirm that Greece should not expect a decision on the loan installment at Monday’s Eurogroup.
The European side seems some distance from the International Monetary Fund in terms of their assessment of Greek debt sustainability. According to the Financial Times, the IMF wants Greek debt to be at 120 percent of GDP in 2020, whereas the European Commission is proposing this figure should be changed to 125 percent of GDP in 2022.
Among the measures being discussed to reduce public debt are extending maturities and reducing the interest rate on its bilateral loans from 150 basis points to 80 points above interbank rates, and giving Greece the profits earned by the European Central Bank on some 50 billion euros’ worth of Greek bonds that it holds.
Yesterday ECB President Mario Draghi again ruled out the possibility of the lender accepting a haircut on the Greek bonds it holds. “The ECB is by and large done,” he said in reference to Greece. However, he added that any profits from the purchase of Greek bonds would be passed to national central banks and eurozone governments could then decide what to do with the money.
“It’s up to the governments to decide whether they want to use these profits for Greece,” he said.
and.....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_08/11/2012_469194
|
and......
http://www.zerohedge.com/news/2012-11-08/bank-england-halts-qe-after-potency-questioned
Bank Of England Halts QE After "Potency Questioned"
- Bank of England
- Barclays
- Bloomberg News
- BOE
- Citigroup
- European Central Bank
- Gross Domestic Product
- Japan
- Lloyds
- Mervyn King
- Monetary Policy
- Quantitative Easing
- recovery
- United Kingdom
In what may be the most disturbing news of the day, moments ago the BOE announced it is halting its own version of QE3, and capping the asset purchase program at £375 billion after "some policy makers questioned its effectiveness in supporting a recovery that remains lackluster." Could it be that even that peculiar Homo Sapiens subspecies known as "economist" is starting to realize that when applying the same "remedy" time after time to absolutely no avail, and where even the market no longer responds to unlimited injections of liquidity, then perhaps it is time to end said "remedy" altogether? And how long until the voodoo shamans in the dark lit room at Marriner Eccles follow through? Sadly, if Japan, and its 9 (so far) rounds of easing, is any indication, we have a lot more pain to go before what has been glaringly obvious to every hotdog vendor and shoeshine boy is also understood by Economics Nobel prize winners.
From Bloomberg:
and......The nine-member Monetary Policy Committee led by Governor Mervyn King kept its target for asset purchases at 375 billion pounds ($598 billion) today, ending its third round of quantitative easing. The decision was forecast by 35 of 45 economists in a Bloomberg News survey. The remainder had forecast an increase of as much as 50 billion pounds.Today’s move suggests the London-based central bank may focus on credit-boosting initiatives such as the Funding for Lending Scheme to ignite growth. Increased inflationary pressures may also have prompted policy makers to hold fire even as surveys point to renewed weakness after the U.K. economy surged 1 percent in the third quarter.
BOE Deputy Governors Paul Tucker and Charles Bean both suggested in recent speeches that asset purchases may no longer have the same impact on the economy as when first introduced in 2009. At the same time, Martin Weale has questioned whether loosening policy is right with inflation above the central bank’s 2 percent target.
The UK needs more hedonically edible iPads because inflation appears to be an issue:
Inflation was at 2.2 percent in September and King said last month that recent energy costs increases mean it will stay above the goal “well into next year.” Renewed signs of price pressures combined with the third-quarter gross domestic product data and comments from MPC members led banks including Citigroup Inc. and Barclays Plc to abandon forecasts of more QE today.
“The widespread expectation of unchanged policy marks a sharp turnaround from forecasts just a few weeks ago that QE would be expanded,” said Chris Crowe and Blerina Uruci, economists at Barclays in London. “This is partly due to evidence of firmer inflationary pressures.”The MPC had new growth and inflation forecasts at today’s meeting, which it will publish next week. Minutes of the meeting, showing how the committee members voted, will be released on Nov. 21.
Finally, since one never says never in Keynesville, it is likely only a matter of time before the insanity returns:
Even with QE halted, the Bank of England still has the FLS, which it set up with the U.K. Treasury and is aimed at boosting lending. The program began in August and as of last month, 30 financial institutions had signed up, including Lloyds Banking Group Plc and Barclays.
“QE still has a benefit and those benefits will stay there -- they’re not unwinding any purchases,” said Alan Clarke, an economist at Scotia Capital in London. “And they won’t close the door on it, they’ll leave their options open.”
And now, we look forward to the ECB confirming that when it comes to failed monetary system, for every good cop there is at least one absolutely insane cop.
http://www.zerohedge.com/news/2012-11-08/daily-us-opening-news-and-market-re-cap-november-8
Daily US Opening News And Market Re-Cap: November 8
- Across the Curve
- Bank of England
- BOE
- Bond
- British Pound
- China
- Crude
- European Central Bank
- Futures market
- India
- Italy
- Monetary Policy
- Natural Gas
- Nikkei
- NYMEX
- United Kingdom
- Volatility
From RanSquawk
- European sources say the chances of Spain applying for ESM aid by the end of 2012 are receding, and the ECB is not in a hurry to activate their OMT program.
- ECB, BoE keep their monetary policy unchanged - alongside expectations.
- Focus turns to ECB President Draghi's press conference due at 1330GMT/0730CST, alongside the weekly jobs data from the US.
- Market Re-CapEuropean equities have made tentative progress this morning, led by the technology and basic materials sectors. The European morning was relatively peaceful until a flurry of activity on the back of European sources commenting that Spain are unlikely to seek ESM aid until the end of the year, and the ECB are not in a rush to commence bond-buying using their OMT facility. The delay of expectations of purchases has taken its toll on the Spanish debt markets which, despite completing their 2012 issuance smoothly today, show signs of strain as the 10yr yield breaches 5.81%, and the yield spread approaches 450bps against the German benchmark – the level at which LCH begin to review margin requirements. The pain in Spain has also impacted the EUR currency, with the major EUR/USD pair printing a two-month low of 1.2720 this morning.Both the ECB and BoE selected to keep policy on hold at their respective meetings, alongside expectations, with focus now turning to Draghi's presser, where he is likely to face a grilling on the state of the OMT program.
Greek news late yesterday has failed to stir risk sentiment, with the parliament passing the austerity bill marginally, as the governing coalition still face their budget proposal this weekend, and European leaders have reiterated their belief that no resolution will be reached in the next few weeks.
***
EU & UK Headlines
Sources have commented that Spain is unlikely to seek ESM aid this year, and the ECB are not in a hurry to commence bond-purchases under their OMT program. The news translated into selling across the curve in Spanish debt markets, bringing the Spanish 10yr yield to multi-month highs of 5.8%, and widening the SP/GE 10yr yield spread towards 450bps, and bringing EUR/USD to two-month lows.The ECB left its key benchmark interest rate unchanged at 0.75%, as expected, deposit rate unchanged at 0% and marginal rate unchanged at 1.50%. Dec Euribor saw volatility following the rate decision, with an immediate move to the downside as there was an outside chance of the ECB cutting the deposit rate, however this was quickly pared.The Bank of England kept their benchmark borrowing rate and QE asset purchase target unchanged at 0.5% and GBP 375bln respectively - alongside expectations. As there were outside bets that the MPC could move to expand their asset purchases, Gilt futures saw immediate weakness, with the 30yr Gilt falling to fresh session lows, and the 10s/30s spread tightening.
The Spanish Treasury completed their 2012 issuance target this morning, selling EUR 4.8bln across three lines against the target of EUR 4.5bln. Spanish 10yr yields did not see any relief, as focus remained on the aforementioned source comments that Spain is less likely to request aid formally by the end of 2013.
EquitiesEuropean equities have made tentative progress ahead of the North American open, despite weakness in the EUR and the flagging Spanish bond market. The technology and basic materials sectors lead the gains, however the FTSE-MIB in Italy is suffering losses. The Spanish source comments did bring the IBEX-35 into the red briefly, but the index has recovered from the losses at the midpoint of the trading day, with all eyes looking toward Draghi at 1330GMT/0730CST.****
FX
The EUR currency remains weak despite last night's news that the Greek parliament passed their austerity bill through parliament. The EUR/USD pair came under significant selling pressure following the Spanish source comments, bringing the pair to two-month lows of 1.2720 this morning, and failed to recoup the losses despite the Spanish treasury selling bonds smoothly.With the Bank of England choosing to stand their ground at their rate announcement, GBP recovered the mornings losses to bring GBP/USD back into positive territory, and pressing EUR/GBP to session lows. Despite the gains in the GBP currency, the GBP/USD pair has been unable to reclaim the 1.60 handle, with attention now turning to next week’s Quarterly Inflation Report from the Bank.****
and....
http://ftalphaville.ft.com/2012/11/08/1252671/in-greece-antonis-sisyphus-took-another-painful-step-forward/
Pushing a fresh austerity package (the price of financing the next stage of the country’s bailout) through parliament on Wednesday night cost the Greek government and Antonis Samaras, the centre-right prime minister, dearly. And while there is no guarantee a repeat performance can be staged, there is every probability the boulder will slip and one will be demanded.
From the ekathimerini:
The [asuterity] vote… came at a cost for the coalition as it lost several MPs. PASOK leader Evangelos Venizelos ejected six lawmakers from his party for voting against the package. This included former minister Costas Skandalidis, who was rumored to be mounting a leadership challenge. The move reduces the number of PASOK lawmakers to 27.One MP was ejected from New Democracy, reducing the conservative party’s tally of deputies to 126.
JP Morgan’s Alex White (who gifted us that headline) took another stab at summing up just how weak the government now is and how dangerous the near-term might be (our emphasis):
[T]he government has now lost more than a third of its majority in 5 months and it is unclear how much further it can be tested. We expect the crisis within PASOK to worsen; its current collapse to just 26 seats could easily presage a leadership challenge. One possible challenger was expelled from the party last night, but rivals to the current leader look to have called a meeting today which might lead to the start of a split. Even if this is avoided, we think there are dangers of the government unravelling further if the Eurogroup is unable to show Greece a quick reward for its efforts next week (more defections could easily happen). Last night’s vote has demonstrated just how brittle the coalition is; while it has passed an important test, another serious challenge could be fatal.
He also argues that vested interests are getting more aggressive:
Yesterday’s developments also suggested that implementation of the agreed measures may be close to impossible. In addition to the fact that the government was effectively blackmailed by its own parliamentary clerks, it faced direct challenges to its authority from key vested interests. The Greek Supreme Court declared the measures unconstitutional, because they included elements which would amend judge’s salaries. The prognosis on implementation today looks at least as bleak as it has done at any point in the past. There is little sign of vested interest groups accepting the need for fundamental change, which will make it harder for the Troika to provide a constructive report on Greece.
That the moral hazard dilemma is getting worse:SYRIZA, Greece’s radical left opposition, had a good night. The party leader, Tsipras, repeated his assertion that Greece would never be forced out of EMU, even if it repudiated its debts. He argued that ‘the EU needs Greece at least as much as Greece needs the EU’. His argument, while resistant to logic, is gaining increasing traction. Many in Greece still believe that the Troika reforms are essentially optional; that there is a sustainable path which involves saying ‘no’ (and repudiating the existing debt stock). Prime Minister Samaras played into this by implying that while some of the measures in the package were necessary, others were ‘painful and unjust’; this is only likely to encourage a long-term shift to the view that the Troika approach can be repudiated. Moral hazard in Greece is moving in a direction which should concern the Troika.
And finally asks, what’s next?
The Prime Minister – like his predecessors – has become Sisyphus, endlessly trying to drag Greece’s debt burden up the mountain, and fighting to pass measures like the ones agreed yesterday. Deterioration in Greece’s fiscal position keeps pushing him back down, and forcing a repeat performance. Last night Samaras insisted that there would be no need for Greece to take any additional future steps in the direction of fiscal consolidation; suggesting that it has already reached the top of the hill. This is very unlikely to be the case. Greece’s fiscal position remains unsustainable over the longer-term, and there will be further days of reckoning in parliament, even if the Troika eventually agrees to OSI. Each one of these tests weakens Greece’s political class still further, with this vote coming dangerously close to breaking the government. We expect the coalition to survive the coming weeks (although there are still dangers that it doesn’t), but the medium-term prognosis looks even shakier this morning.
and.....
http://ftalphaville.ft.com/2012/11/08/1252381/sareb-is-incrementally-negative-for-spain-and-its-banking-sector/
Some more details about Spain’s bad bank are filtering through, mainly on how it might function in practice. And analysts are finding that the more they find out, the more concerns they have.
Bank of Spain released its presentation on the Asset Management Company, known as Sareb by its Spanish-language acronym, last month. At the time, it raised eyebrows, including our own, about how they were planning on pricing the assets. (Based on “real economic value” with some adjustments. Ireland’s Nama showed how open to interpretation that measure was…)
On Thursday Credit Suisse’s Ignacio Cerezo and Andrea Unzueta summed up their latest thoughts on AMC following a meeting with Cuatrecasas, legal advisers to the EU bank recap fund FROB. Overall, they see the new details that emerged as ” incrementally negative” for both Spain and its banking sector.
There’s the issue of limited loss sharing (our emphasis):
Other than the discount implicit on the transfer price (avg. 50%), there is no further protection for investors on additional losses (loss sharing); meaning that in an event in which the discount proves insufficient, the cost falls on investors and not on previous asset holders (as in NAMA).They also note that the bad bank is likely to be getting all the large and most difficult-to-sell real estate:The measurement for excluded property assets (those below the €100,000 for assets and €250,000 for loans) is based on net figures (i.e. after the application of both RLDs), which in our view takes out of the equation those easier to sell finished households, leaving the bad bank with larger, mostly unfinished properties.This is something that real estate consultants also warned about last week. From Reuters :Between 60 and 65 percent of the foreclosed property and bad loans to be hived off by the banks will relate to undeveloped land and half-built projects, according to forecasts compiled for Reuters by real estate consultants Jones Lang LaSalle and CBRE.CBRE gave the higher figure for this category which investors will probably shun, put off by high risks and costs such as having to rip down abandoned shells of buildings that no one would ever want to occupy.Cuatrecasas were also able to give Cerezo and Unzueta a bit more colour on what the bad bank will be allowed to do with these assets. Happily, demolition is an option:In what relates to assets, the AMC (bad bank) has the ability to sell, rent, complete and demolish finished and unfinished product and can use land in the development of joint ventures. With regards to credit, it can sell loans, manage debtors (restructure loans) and provide additional funds (to improve recoveries). Vendor financing is under consideration.The bad bank will need to raise around €2bn of private funds before the end of the year, but happily the participation of EFSF or any similar fund would be counted as private. There’s also the possibility of healthy Spanish banks getting involved:The equity base of the AMC is expected to represent 8% of the assets (with the remaining 92% constituted by debt). This financial structure will need to be readjusted as additional assets come in, and the private investors do not necessarily need to be the same ones.A participation of the EFSF, the European Investment bank or any other institution of similar nature, would qualify as “private”, with the maximum 50% public participation explicitly related to the Spanish public sector. Discussions about healthier institutions participating in the equity base in exchange for assets continue. Before Dec 2012, c. €2bn of private funds need to be raised, for the AMC to start functioning.Overall, Cerezo and Unzueta argue that the bad bank will continue to pose problems for the Spanish economy and banking and real estate sectors:Though not game changing, we see some of the details above as incrementally negative for Spain and its banking sector, with the reactivation of the property market increasingly looking as a slow and gradual process, which will continue to negatively weigh on the sector until confidence on property valuations is restored (which requires the reactivation of the market, in our view).We continue to see downside risk to healthier banks’ earnings related to higher property impairments than those mandated by existing regulation.
and.....
http://www.zerohedge.com/news/2012-11-08/all-quiet-day-after-day-after
( Greece passes latest national poverty law dictated by the Troika - German finance Minister Schauble says don't expect money next week Greece )
All Quiet On The Day After The Day After
- Australia
- Bank of England
- BOE
- Bond
- British Pound
- Corruption
- David Bianco
- European Central Bank
- Fibonacci
- Fitch
- Germany
- Greece
- Gross Domestic Product
- Initial Jobless Claims
- Monetary Policy
- Nikkei
- Quantitative Easing
- SocGen
- Tax Revenue
- Trade Balance
- United Kingdom
- Yuan
The much anticipated Greek vote on "self-imposed" austerity (just like all those other votes on "self-imposed" austerity before it, all of which failed to impose any austeritybut merely guaranteed further corruption and certified the Greek inability to be effectively governed) came, saw and passed... and nothing: the EURUSD is now well lower than before the vote for one simple reason - the vote was merely a placeholder to test the resiliency of the government, which following numerous MP terminations, has seen its overall majority drop to 168 of 300, which includes the members of the Democratic Left who voted against the Troika proposal. Which means any more votes on anything split along austerity party lines and the vote will likely no longer pass. And, as expected, Germany already picked up the baton on kicking the can on funding the Greek €31.5 billion payment (due originally many months ago) when Schauble said that it will still be too early to make a Greek decision net week.
***
Market-wise, Europe is limping into the US open, with the EUR weaker again due to not only a report that Spain may not seek an ECB bailout this year (as said here over and over, Spain will not seek a bailout until the 10 Year SPGB is back at or above 7%) but also a Market News report that the ECB is now reluctant to actually activate the OMT bond-buying program: of course, why "start" when one can have their broke country and eat it too fund it at near-German levels . Paradoxically, Spain also sold €4.76 billion in 2015, 2018 and 2032 debt (more than the expected €4.5 billion) at muted conditions, thereby the market continues to encourage Spain not to request a bailout, although this may not last, as promptly after the bond auction Spanish debt tailed off, the 2Y and 10Y both sold off, and the Spain-Bund spread is back to 445 bps, the widest since October, and means Spain can finally be getting back in selloff play: and probably not at the best possible time just as everything else, which was in suspended animation until the Obama reelection, also hits the tape.
***
What to watch for today, from SocGen:
Central bank meetings will be centre-stage today, with both the BoE and the ECB on the agenda. The BoE is expected to keep its monetary policy unchanged, namely key rates at 0.50% and Asset Purchase Target ATP at GBP 375bn. Expectations of further quantitative easing have abated after recent positive surprises in the UK.The ECB is also expected to opt for the status quo. Market reaction will depend on the press conference. However, we don't expect Mr Draghi to deliver a different message to the one from the October meeting. The ECB president is likely to repeat that the OMT programme remains an ECB tool, but comes with conditionality. It will however be interesting to see if he makes any specific comments after the autumn forecasts the EC released yesterday. Nevertheless, he will continue to make clear the euro's survival is a top priority and that the ECB will do all it can to play its part. From an economic standpoint, both growth and inflationary risks are likely to be biased to the downside. All in all, this month's ECB meeting is not likely to make a big difference for market participants: the economic situation does not warrant a rate cut (for now), and the ball is still in Spain's court regarding whether or not the OMT will be activated,.
Lastly, EU finance ministers will meet to discuss the EU budget. Don't expect much progress here, as UK prime minister David Cameron has already vowed to veto an accord if it's unacceptable.All in all, EUR/USD and swap rates (both US and EUR) will remain driven by risk sentiment today. As the latter is fragile, keep an eye on technical levels as EUR/USD is approaching its 32.8% Fibonacci ratio at 1.2740, while 10Y EU swap rates are nearing a support at 1.65%, and 10Y US swap rates are converging towards a support at 1.65%.
The comprehensive recap comes, as usual, from DB:
Overnight the Greek parliament passed the austerity bill which includes cuts to pensions, public sector salaries, tax hikes and increases in the retirement age. The final vote was 153 for the motion (out of 300 MPs) vs 128 against with 18 abstentions and came amid a second day of protests of almost 100,000 people outside parliament. The coalition came out somewhat bruised, with PM Samaras expelling one member from the New Democracy party with coalition partner PASOK expelling six lawmakers for their failure to support the bill. The Greek parliament reconvenes on Sunday (11th) to vote on the 2013 budget, after which the Eurogroup meeting is expected to approve the next EUR31.5bn bailout payment on Monday (12th) -- if all goes according to plan.
***
Looking at the day ahead, the main focus will on the post- meeting announcements from the ECB and the BoE. The ECB’s statement is expected at 12:45pm London time followed by the usual focus on Draghi’s press conference at 1.30pm. The market is not expecting any major policy changes from the ECB but it will be worth watching for any hints on Greece or Spain from Draghi at the Q&A. The BoE’s statement is due at midday today and again the market is not expecting any change to interest rates and the asset purchase program but this week's poor data has slightly increased the risks of further action. Data wise the German and French trade data will be interesting as recent data from core Europe has been generally on the softer side. In the US we get the first initial jobless claims print post-Hurricane Sandy, together with the September trade balance data. However markets will mostly be trying to work out all the risks concerning the fiscal cliff.
and.....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_08/11/2012_469041
PASOK MP Androulakis quits PASOK, which loses seventh deputy
Andreas Loverdos calls for urgent meeting of PASOK's parliamentary group
PASOK, which shrank from 33 to 27 deputies after Parliament's vote on the new austerity package late Wednesday, looks set to lose one more MP as Mimis Androulakis on Thursday announced he's quitting the once-dominant Socialist party.
In an interview with To Vima radio on Thursday, Androulakis, a writer and former member of the Greek communist party, also said that he would vote against the new budget on Sunday.
On Wednesday, Androulakis voted in favor of a controversial package of cost-cutting measures demanded by the country's foreign lenders. He had earlier said he would oppose the measures.
The package was approved with a tissue-thin majority as tens of thousands of demonstrators ringed the House.
Meanwhile, another PASOK heavyweight, Andreas Loverdos, on Thursday called for an urgent meeting of the coalition partner's parliamentary group. Loverdos is widely seen as one of the challengers to embattled party chief Evangelos Venizelos.
In a letter sent to Venizelos on Thursday, the former health minister said a meeting was necessary to discuss the “deep crisis” plaguing the party.
Recent surveys have polled PASOK at fifth place.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_08/11/2012_469068
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http://www.telegraph.co.uk/finance/debt-crisis-live/9662732/Debt-crisis-live.html
11.15 Spain's desperate need for cash could see it sell a century-old palace in the heart of Madrid, according to reports.
Castellana 19, built in 1903 and later used to house Spain’s stock-market regulator, could be sold as part of a plan to raise cash from 100 prime properties, sources told Bloomberg. The property was valued at €28.7m (£22.9m) in 2010.
Spain is seeking to generate more money from state asset sales as it tries to avoid following Greece, Ireland and Portugal, which were all forced to head to Brussels for a full-scale international rescue.
Last month, the government said that it had selected 100 buildings that could be privatised by the end of 2016.
10.47 All European countries must become more competitive or face “irrelevance,” according to Germany's finance minister.
Wolfgang Schaeuble told a conference in Hamburg that the trust Europe regained among investors remained "fragile" and that leaders would need to "muddle through" in solving the crisis.
10.25 This is worth a post on its own:
Greek youth unemployment now stands at 58pc.
That's FIFTY EIGHT percent.
10.17 The Greek unemployment rate hit another high of 25.4pc in August, official figures show.
This means that there are now almost 1.3 million Greeks out of work,according to El.Stat. The August rate compares with 18.4pc a year ago and 24.8pc in July 2012.
There were also 3.37 million Greeks classed as "economically inactive" in August. This means that they were not working or looking for a job.
09.58 Spain has got debt auction away this morning at slightly lower rates than at a previous auction.
The country sold almost €1bn of three-year debt at average yields of 3.66pc. This compares with an average rate of 3.956pc at last month's auction. Demand was higher, with 2.83 bidders for every bond on offer (v.1.98).
It also sold €3bn a new five-year bond at average yields of 4.68pc, and €731m of bonds maturing in 2032 at average yields of 6.328pc.
The 20-year issue was last sold in October 2010, when the average interest rate was 4.78pc.
The country had planned to sell €4.5bn of debt this morning.
09.37 Meanwhile, Britain is reportedly seeking veto rights on theEuropean Banking Authority to ensure that it won’t be overruled by the ECB at board meetings, according to a German newspaper.
Handelsblatt, which cited unnamed EU diplomats, said that Britain was willing to approve the ECB's role as the eurozone's banking regulator in exchange for such rights.
09.19 The euro crisis is hanging like “sword of Damocles” over German companies, according to the president of the Gesamtmetall manufacturing employers’ association. Martin Kannegiesser told Die Welt:
The euro crisis hangs like a sword of Damocles over our companies. Investments in large parts of Europe are basically dead [...] For German companies, Europe is not an export market, but the domestic market. [...] If in this common market there are considerable problems, such as now, then that's a big challenge for us.
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