Seeking Alpha

FocalPoint Anal...'s  Instablog

FocalPoint Analytics
Send Message
I own and operate an analytical services/ research company.
My book:
The Internet in Everyday Life (Chapter 19)
  • Stability Of The European Union (19) April 18, 2013 To  283 comments
    Apr 18, 2013 5:45 PM

    Stability Of The European Union (19) April 18, 2013 To July 6, 2013This instablog is designed as an interactive News Concentrator devoted to news and discussions about the debt and associated problems in the EU and its member states.

    The top portion of the instablog contains useful background information/ charts.

    Up-to-date news content is posed in the comments area. So if you are interested in current news, read the comments.


    A picture is often worth a thousand words. Here we have the Percent Economic Growth Rates for three countries: US, Greece, Germany. Note the distinct downturn in the US Economic Growth Rate.

    Here is National debt as a percentage of GDP in 2009 for the Euro Zone. Look at Greece and Italy.

    Here is Government deficit as a percent of GDP for 2009. Look at Greece and Ireland. Look at UK and Spain.

    Here is the all important Jobs Picture as of March 2010. Look at Greece, Spain, Ireland and France.


    What is the EFSF?:

    The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the Eurozone to combat the European sovereign debt crisis. The €110 billion bailout to Greece is not part of the EFSF guarantees, but a separate commitment.

    When you look at the Guarantee commitments by the different euro zone countries [] you will see something interesting. Greece, Ireland, Italy, Portugal, and Spain (i.e., the PIIGS) account for over one-third (36.7%) of EFSF commitments. All by themselves, Italy and Spain have a financial commitment of almost one-third (29.8%) of the total EFSF commitment.

    (October 23, 2011) I added this nice summary graphic of the Dominoes effect associated with the European debt crisis. You can also see the graphic and the accompanying article with the following link:

    (October 23, 2011) Guest Post: The European Financial Crisis In One Graphic: The Dominoes Of Debt. From: Zero Hedge, by: Tyler

    The original copyrighted graphic is from Charles Hugh Smith (" 2011)

    Added February 9, 2012

    Greek General Government Debt Percent GDP

    (March 10, 2012)

    Unemployment for individuals less than 25 rose to 51.1 %, twice as high as three years ago as budget cuts imposed by the European Union and the International Monetary Fund as a condition for dealing with the country's debt problems have caused a wave of corporate closures and bankruptcies.

    Fantasy Greek GDP Growth Rates:

    In the fantasy report "Greece: Preliminary debt Sustainability Analysis" dated February 15, 2012 which I referred to as the "Deus ex machine" report one of the EUs key economic assumptions was that Greek GDP growth in 2012 would be -4.8% and -1% in 2013.

    The Greek economy saw growth rates of:

    -0.2% in 2008,
    -3.3% in 2009,
    -3.4% in 2010,
    -6.9% in 2011
    -7.5% in fourth quarter of 2011.
    (Data from John Mauldin report

    I plotted the Greek GDP data below and projected the GDP values for 2012 and 2013 based on the current data. I also plotted the Greek GDP projections from the Deus ex machine report - blue line.

    There is no Greek stimulus, jobs are in freefall. Which projection do you believe?

    (March 29, 2012) Greek Deposit Run Update: Hopeless And Getting Worse.


    Added April 27, 2012

    Q1 unemployment is now one quarter of the working population or 24.44%, up nearly 2% from the 22.85% as of December 31

    (click to enlarge)

    Global PMI Changes from March to April 2012

    (click to enlarge)

    From: ZeroHedge


    (click to enlarge)

    From: ZeroHedge -

    Ten Year Bond Yield Curves as of 7/20/2012

    From: The Disciplined Investor

    (click to enlarge)

    Here are some interesting charts on Italy sourced from Bloomberg's BRIEF
August 7, 2012, available on "The Big Picture"

    I verified the shadow economy figures in the following sourced article about shadow economies:

    Shadow Economies: Size, Causes, and Consequences by FRIEDRICH SCHNEIDER and DOMINIK H. ENSTE, Journal of Economic Literature
Vol. XXXVIII (March 2000) pp. 77-114

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)



    (click to enlarge)

    From: Labor Force Survey by the Hellenic Statistical Authority January 10, 2013

    (click to enlarge)

    From: Labor Force Survey by the Hellenic Statistical Authority January 10, 2013

    (click to enlarge)

    This chart is based on the data from the Hellenic Statistical Authorities Labour Force Survey published January 10, 2013.

    This shows the rate of change of unemployment among age groups from 2011 to 2012.

    Yet the Greek government, under the direction of the Trokia, is about to initiate an even more Draconian series of spending cuts and tax increases.

    Remember the IMFs fantasy report? GDP was supposed to start increasing again in 2012. Instead, it continued to fall, and this is one of the reasons why. They are systematically forcing people out of their jobs. No jobs, no income, no income, no spending.

    Yes, the 15-24 age group has unemployment at 56.6%, but as this chart shows, the older age groups are suffering a higher rate of increase of unemployment. So they are rapidly catching up.


    Latest youth unemployment chart as of May 31, 2013


    Remember, the top portion of this insta contains some useful historical information. CURRENT NEWS is posted in the comments area.

    WARNING: This is a no Troll Zone. If you are disruptive, your comments will be deleted.

Back To FocalPoint Analytics' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (283)
Track new comments
  • Author’s reply » Link to the old concentrator:
    18 Apr 2013, 05:55 PM Reply Like
  • Tic. Toc. Twelve days left on the clock
    18 Apr 2013, 06:03 PM Reply Like
  • >FPA-


    What would be the outcome should Germany and other supporters of a bailout scheme just say- 'I'm done with this mess- Come back to me with your own solution.'


    I realize that a wad of investment already in the soup by the have-gots would be by the boards, but since everybody blames them for insisting on the profligates paying their own debts and the spendthrifts don't feel like doing that what are the other options for them and the repercussions/options to the rest of Europe, the euro and the rest of the world?


    I have been a creditor of bankrupt companies on several occasions but basically accepted the bankruptcy committee's decision on creditor hierarchy and cents on the dollar. Should these clowns just declare bankruptcy? Is that what Argentina did a few years back?


    What sayeth thou?


    19 Apr 2013, 02:42 PM Reply Like
  • Author’s reply » The reason the Germans and the ECB can't walk away is because they are bailing out German and EU banks including the ECB.


    On the first Greek bailout, about 19 percent of the bailout loan went to Greece to allow it to continue to spend more than it brought in. About 58% went to the ECB and Non Greek Financial holders of Greek debt. About 23% went to Greek Financials though at this point, all of that is likely held by the ECB.


    So most of the money that is being provided is being used to "bailout" German and EU banks, including the ECB. If a country defaults, the banks in the EU creditor countries loose their investments. Those investments include sovereign debt bonds, and they include the bailout loans. This situation is not unique to Greece. The same situation exists in all the debtor countries.


    Those bailout loans do not come for free. The ECB charged 5.5% on the first Greek loan. The Greeks said they needed the terms reduced, so the interest rate was cut to 3.5% with the second loan, BUT the loan repayment period was more than doubled from seven years to a minimum of 15 years. Note that word "minimum".


    Using a simple loan calculator, under the terms of the original loan 5.5% payable in 7 years, Greece would have to come up with 20,708 Euros in interest for each 100k Euros borrowed. When you drop the interest rate to 3.5% but more than double the repayment period to a minimum of 15 years, 28,678 Euros in interest is required to be paid for each 100k Euros borrowed. That's a 38.5% increase in the total interest payment. This was spun as a victory for the Greeks, but as you can see, it's no victory.


    EU banks are over exposed to high risk loans. In an article appearing in the April 2012 economist, Barclays Capital states that lending by listed European banks exceeds their deposits by $1.3 trillion. American banks, by contrast, are awash in deposits, with a funding surplus of $1.3 trillion.
    In other words, the loan to depost ratio [LDR] of European banks makes them quite unstable. If they go down, EU and particularly German taxpayers are going to have to pay the bill. The politicians can't allow that to happen, or if it happens, they need to hide it.
    19 Apr 2013, 08:45 PM Reply Like
  • "American banks, by contrast, are awash in deposits, with a funding surplus of $1.3 trillion."


    I particularly liked that second article. Lots of interesting details and things that I had never really considered. Anyway, "surplus" is relative, AFAIK, to fractional reserve standards. so our banks may look "fat, dumb and happy", but at least one of those adjectives is suspect. Care to guess which?


    20 Apr 2013, 06:50 AM Reply Like
  • Fitch downgraded UK from aaa to aa+. Huffington Post writes the basis they use is flawed.
    20 Apr 2013, 12:20 AM Reply Like
  • >FPA-


    Thanks for the clarification. Is your consensus generally accepted as the way it is by the banks on the hook? And/or are there other scenarios that could get everybody out on bail?


    Windwood Trader
    20 Apr 2013, 08:59 PM Reply Like
  • Author’s reply » I don't know of any win win situation. People that have influence will come out ahead. Those with knowledge may survive and some might also come out ahead. The rest are going to have pain inflicted, or be slaughtered. The banks situation and where the money from the "bailouts" is going is a matter of public record.
    21 Apr 2013, 06:21 PM Reply Like
  • German Chancellor Angela Merkel said on Monday that euro zone members must be prepared to cede control over certain policy domains to European institutions if the bloc is truly to overcome its debt crisis and win back foreign investors.

    22 Apr 2013, 09:20 AM Reply Like
  • Of course, Germany not included.
    22 Apr 2013, 09:45 AM Reply Like
  • I posted this on the previous concentrator as I was catching up.
    22 Apr 2013, 05:56 PM Reply Like
  • Author’s reply » April 25, 2013
    Spain unemployment hits record high


    Unemployment has risen once again in Spain to another new record of more than six million, 27.2% of the workforce.
    25 Apr 2013, 06:22 AM Reply Like
  • Author’s reply » April 26, 2013


    Spain Slashes "Growth" Outlook, Projects Higher Deficit, Delays Deficit Reduction


    * Spain revises down 2013 growth forecast to -1.3 % of gdp vs -0.5 %


    * Spain to delay deficit reduction 2 years as unemployment rises.


    * Spain sees unemployment at 27.1% in 2013, 26.7% in 2014
    26 Apr 2013, 12:56 PM Reply Like
  • Author’s reply » Cyprus Deal Has 100M Euros Penalty Clause


    If Cyprus breaks its deal with international lenders about to put up a 10 billion euros ($13 billion) bailout, the government will have to pay a 100 million euros ($130 million) fine, according to its memorandum of agreement.


    It also means that the clause could be activated if Cyprus repays the loan earlier than the 20 years allotted.
    Another interesting concept in representative government provided by the EU. If a countries legally elected government refuses to vote for the Cyprus bailout agreement, the EU will fine the government and its taxpayers 100M Euros.
    26 Apr 2013, 02:12 PM Reply Like
  • The fine is peanuts, but why the penalty for early payment ? Someone wants high interest rates & return .... maybe interest rates stay low longer than we think ?
    26 Apr 2013, 02:44 PM Reply Like
  • "maybe interest rates stay low longer than we think ? "


    I've been saying that for a while. It would not surprise me to see the 10yr not go over 2% for the next 10 yrs. Maybe longer.


    "Another interesting concept in representative government provided by the EU."


    The EU has been doing this since the beginning. They've always kept holding elections until they got the result they wanted.
    26 Apr 2013, 02:49 PM Reply Like
  • >HOOP-


    " It would not surprise me to see the 10yr not go over 2% for the next 10 yrs. Maybe longer."


    Since we are still in de-leveraging mode, and the velocity of money is at its lowest point in recent history I agree with your comment- 2% for the next several years at least. That, and I don't see a reason for the money velocity to increase so it could be longer- Looking at the Japanese rates as an example.


    I think currency devaluation is more likely due to the quant easing.


    Windwood Trader
    26 Apr 2013, 04:07 PM Reply Like
  • The EU has been doing this since the beginning. They've always kept holding elections until they got the result they wanted.


    The EU version of "elections-wac-a-mole".
    26 Apr 2013, 03:01 PM Reply Like
  • Actually I think a big part of this election issue in the past and part of the present is the way they elect ministers who elect a prime minister. The Japanese have really perfected the Wac-A-Mole issue with Prime ministers over the last 30 years. Aug 93 to June of 94 they had three prime ministers. They really crank through them. How can a ship of state get anywhere when you keep changing boat captains and instructions.
    27 Apr 2013, 09:01 AM Reply Like
  • JPM & Cyprus is probably who broke the gold mkt. :


    26 Apr, 8:29 PM According to CME reports, J.P. Morgan accounted for nearly all of the physical gold sales at Comex in the last three months, writes blogger Mark McHugh. The sales, representing nearly 2M ounces, is 74% more gold than the U.S. Mint delivered through its American Eagle program in all of 2012. The very idea of "broad-based" selling is a farce, says McHugh. “One thing’s very clear: When it comes to selling physical gold, J.P. Morgan is acting alone.” 14 Comments [Financials, Commodities]
    27 Apr 2013, 08:18 AM Reply Like
  • The scope is astounding:

    27 Apr 2013, 12:05 PM Reply Like
  • JPM selling gold, That's probably how they beat earnings a week or so ago.
    27 Apr 2013, 01:29 PM Reply Like
  • They may have been desperate to placate a cash balance sheet. Depends upon when they bought as to whether or not the gold sales contributed.
    27 Apr 2013, 04:13 PM Reply Like
  • This Times Global edition article from June 2012, although somewhat dated is really good at explaining the European debt crisis, its causes and outcomes actual and expected. Why some countries did not follow IMF guidelines and as a result, why they are now well under water.



    Windwood Trader
    28 Apr 2013, 11:08 AM Reply Like
  • Interesting reading, mentions Cyprus and why Russians prefer the UK to their own laws. Of particular note, see the age of these holders.


    Billionaires flee tax havens:

    29 Apr 2013, 05:15 AM Reply Like
  • has lot's of articles on the EZ..:


    UK house prices & sales rise
    Less Austerity as Italy refocuses on growth
    then a SA article:


    IMO, the austerity is a two edged sword, Merkel is right in that some of this austerity had to happen. Not collecting taxes and spending had spun out of control. As that is reigned in & fixed....they have to focus on growth. 30% unemployment wont work. The key is when the tide turns and they feel they have done enough.
    I think this is propping mkts. in that it may be nearer than we think.
    29 Apr 2013, 07:06 AM Reply Like
  • Author’s reply » April 28, 2013
    Greek Lawmakers Approve "Reform Laws"
    Greek lawmakers have approved "reform laws" designed to unlock €8.8 billion of rescue loans from the EU and IMF. The law, which was a condition for further aid installments, passed easily with the solid backing of the three parties comprising Greece's ruling coalition.


    Where is most of the loan going?
    May 20 is the maturity date of bonds totaling 5.6 billion euros. Four billion of that amount is owed to the ECB, the rest is in the portfolios of the national central banks of the eurozone.


    So at LEAST 64% of the RESCUE loan goes to the ECB and various EU state central banks. Hence, the Greeks are bowering yet more money to repay these bonds at full market price. Bowering money to repay bowered money. I said at least because its likely that more


    What's in the "Reform Laws?"
    The BBC reports, some 15,000 state workers will lose their jobs by the end of next year and the new tax measures are projected to generate an additional 5.9 billion euros in state revenues [Taxes] for the period from 2013 to 2017.


    Lies, Lies and More Lies:
    All this after the Greek prime minister Samaras said “There will be no more austerity measures,” in a televised speech to his conservative party’s political committee on March 9th.


    What is actually going to happen?
    Tax revenues will plummet as further resentment builds against austerity and increasingly less people pay taxes, and more and more workers migrate to the shadow "cash-based" economy, where no taxes are paid at all. After all, the Greek Finance Ministry reported earlier today that March tax revenues plunged, missing the Troika target by a massive 9.3%.
    29 Apr 2013, 07:23 AM Reply Like
  • "to the shadow "cash-based" economy, where no taxes are paid at all."


    There is a difference between levying a tax, and levying a tax you can actually collect.
    29 Apr 2013, 08:00 AM Reply Like
  • Well said, it would have been better to just write debt off and move on. These new bailouts where it goes to the ECB...unless it reduces principle 1:1 so the net debt doesn't change just makes things worse.
    29 Apr 2013, 08:03 AM Reply Like
  • >FPA-


    Very nice synopsis of what to expect in Greece- Thank you.


    It seems that no one wants to acknowledge the elephant in the room. What caused the crisis? Whose fault is it? What has to be done to repair the damage?


    These issues are being ignored by the folks that benefited and continue, in great part to benefit from the largess of the last several years by running up the tab expecting others to be on the hook for the bill. No one is willing to make the moves to fix their own problems preferring to lay the blame elsewhere.


    I don't see the attitudes improving, the lies stopping nor the answers coming.


    As was stated in prior posts- 5.....4.....3.....2......


    Windwood Trader
    30 Apr 2013, 09:29 AM Reply Like
  • SAs doing weird things this morning. Don't know if this will post.


    Cancelling debt is a form of unavoidable tax, however it runs the risk of nobody ever letting you tax them again, by not lending to you.


    Inflation is one of the most unavoidable taxes. In the short term its in the US interest for the ECB to print like mad. The tax on the folks in the EU via inflation (they can't export it like the Fed can), would make things cheaper for us in the US via the imports we get from them. In short they would tax themselves, and send that wealth to us. I would like to see enough inflation in Europe to make a 5 series M class cost about $25k.


    Print ECB, print.
    29 Apr 2013, 08:08 AM Reply Like
  • Hoops, what chances do you give the ECB printing and/or lowering rates this week? Do you think they will be able to spur inflation?
    29 Apr 2013, 08:24 AM Reply Like
  • I think there is a 50/50 chance of lowered rates, but in the big scheme of things it peanuts.


    A real meaty stance by the ECB would be to stand behind all ECB bank deposits, get very loose with collateral they accept for advances, and get very loose with the terms they give for those advances.


    See the problem with a pledge and an advance at an CB is the terms. The terms will typically be something for 90 days, that can be rolled over for 90 days. So if they do something like LTRO, which was three years, on steriods, then they could ramp up inflation, and give us the benefit.


    Right now they are just pussy footing around compared to what they could do, but they are afraid, because Europe has a much longer history with inflation than does the US, and the scars of that still run deep.


    Another example of what the could do, would be allow consumer loans to be pledged at a 0% haircut, and offer to extend advances in perpetuity. So a bank could offer a credit card at 5% and pledge the balances at the ECB for an advance for 25 bps that would never go away. Then the banks would have all kinds of courage to extend credit, shift the chances of loss to the ECB, people would get credit cards that they would spend like crazy, prices would start to spiral as the money in circulation sky rocketed, and the Dollar/Euro relationship would go down to parity. Stuff coming into the US would be much cheaper giving us money in our pockets, and we would all have a grand ole time until the inflation in Europe caused the Euro to be shunned by the rest of the world and the people in Europe couldn't earn enough wages to keep up with inflation. Then the bubble would collapse, and they would be worse off than they are now, but in the mean time, they would have made us better off.
    29 Apr 2013, 09:06 AM Reply Like
  • Your last paragraph is essentially what the US is trying to do, right? Export inflation by making dollar denominated commodities cheaper for other countries getting them to spend more. The other countries like Asia are benefitting but not Europe. Do you have thoughts on why its not helping europe? I know Italy's austerity program was 60% higher taxes and only 40% budget cuts sucking away the consumer spending that should be happening in such a situation.


    Do you think the US policy is to continue holding down commodity prices until Europe turns a corner, but it may almost never happen, so when does inflation start flowing back into the US regardless of the lack of the US consumer spending?
    29 Apr 2013, 09:26 AM Reply Like
  • Yes. The US is attempting to bail out Europe as well. Remember the dollar swaps are still in effect via the Federal Reserve, though its not a huge volume.


    "I know Italy's austerity program was 60% higher taxes and only 40% budget cuts"


    This is there problem. The talk of austerity is misleading. It implies that there just isn't enough rich people paying their fair share. Well think of what that means. Its the old Scrooge line. If Scrooge would just share, then we would all have our problems solved. The problem with that is that it is specious reasoning.


    What happens to an ECB note when it is taxed? Its taken into the relevant sovereign treasury and then rereleased back into the economy. The difference is that it is spent in a vote getting fashion for a politician rather than in a fashion that spurs innovation. The reason for this is gov spends to subsidize consumption because that is its incentive structure. It can do so, because gov is the only entity with the option of legitimate force. Private actions require enticement. To entice someone you must improve quality and supply and lower price. That innovation is what allows an economy to advance. The learn to produce more and in less time. That gives them more income. That income pays for their consumption.


    By having gov take the ECB notes out of the system and then put them right back in for political purposes encourages less productivity and less income. So what you are seeing in Europe and the US and practically everywhere else in the world is a dilution of paper, because we are creating more paper in relation to our perceptions about our ability to create assets for consumption (income).


    Europe thinks expropriation taxes (taking CB notes into the treasury) is some sort of income for the gov and thus some sort of income for the society. Well if a parent charges more management fees to the sub, did overall income of the consolidated entity go up? This is bascially Europe's model for their economy.


    What they are not including in their tax burdern are the regulations that can't be paid for with their level of technology. They simple can't produece enough supply to keep pace with their note creation. What they need to change are their labor laws and their welfare state (just like the US). If they did that, they could get more liberal with ECB note creation because then asset creation would go up and their cost of production would go down, making them the safe haven for capital and labor in the world.


    But the unions control the gov, and the average person is dependent on a perpetual gov bail out. So what do you think the odds of growth in Europe are? For the forseeable future, Europe will constantly battle its current situation with blow up after blow up as the average person constantly watchs their standard of living decline. That will keep capital flowing to the US and keep our interest rates down. Until there is some large macro change, we are looking at decades of malaise, and the macro change would have to come from a cultural change that broke the conventional wisdom. With so many people in gov schools, that is unlikely to happen.


    Europe is no where near a real growth strategy. They don't even know what it looks like anymore.
    29 Apr 2013, 10:11 AM Reply Like
  • I agree. The malaise will last for decades in the western economies. Europe has already been in a malaise for decades and I believe the creation of the Euro was their attempt at a stimulus. It was conjured up in 93 with the Maestricht Treaty and then implemented on an accounting basis in 1999 in most countries. If we look at the employment picture from 1999 to right before the finciacial crisis it shows that countries like Spain, France, Greece and Ireland's unemployment rates were dropping up to 2008 (Germany's actually went up). When global growth stopped the purchasing power the stronger Euro gave those countries became meaningless because now the unsustainable government debt swallowed private growth and innovation. Each country lacked the ability and/or desire (from past history with hyper-inflation especially in german) to devalue their currency individually to bring the debt in line by driving inflation/taxing people. Without massive macro and cultural changes the Eurozone's only option is to cautiously spur inflation but more so hope to ride the back of the US stimulus measures even though that is failing. I guess we will see how hard they try this week.
    29 Apr 2013, 10:50 AM Reply Like
  • As long as they keep raising taxes to try and keep paying for spending that makes them less productive, they will never solve their "debt crisis".



    Their problem is that they don't understand that aggregate demand is driven by income and income is driven by productivity and productivity is driven by price sensitivity and price sensitivity is driven by a coercion free market. This is why wealth redistribution at the point of the gun results in less and less to be redistributed. The gun means coercion, and more you have coercion polluting your market the less free it becomes and the less price sensitive it becomes and the less productive it becomes, and guess what, when productivity goes down, there is no reason to employ anyone.
    30 Apr 2013, 08:02 AM Reply Like
  • Nature always has markets, because all humans are programmed to survive. So trying to impose taxes you can't collect isn't evidence of gov's superior regulatory ability. Its evidence of its incompetence.

    29 Apr 2013, 10:35 AM Reply Like
  • Or capacity for evil. Power can do that to people.
    30 Apr 2013, 08:40 PM Reply Like
  • Author’s reply » April 30, 2013
    Cyprus "lawmakers" approve "bailout".
    30 Apr 2013, 12:02 PM Reply Like
  • >FPA-


    Wonder how long that approval is good for?


    30 Apr 2013, 12:37 PM Reply Like
  • At least one or two riots.
    30 Apr 2013, 12:39 PM Reply Like
  • Author’s reply » An interesting summary of current conditions in the EU...
    Twenty Signs That The Next Great Economic Depression Has Already Started In Europe


    *1 The unemployment rate in France has surged to 10.6 percent, and the number of jobless claims in that country recently set a new all-time record.


    *2 Unemployment in the eurozone as a whole is sitting at an all-time record of 12 percent.


    *3 Two years ago, Portugal's unemployment rate was about 12 percent. Today, it is about 17 percent.


    *4 The unemployment rate in Spain has set a new all-time record of 27 percent. Even during the Great Depression of the 1930s the United States never had unemployment that high.


    *5 The unemployment rate among those under the age of 25 in Spain is an astounding 57.2 percent.


    *6 The unemployment rate in Greece has set a new all-time record of 27.2 percent. Even during the Great Depression of the 1930s the United States never had unemployment that high.


    *7 The unemployment rate among those under the age of 25 in Greece is a whopping 59.3 percent.


    *8 French car sales in March were 16 percent lower than they were one year earlier.


    *9 German car sales in March were 17 percent lower than they were one year earlier.


    *10 In the Netherlands, consumer debt is now up to about 250 percent of available income.


    *11 Industrial production in Italy has fallen by an astounding 25 percent over the past five years.


    *12 The number of Spanish firms filing for bankruptcy is 45 percent higher than it was a year ago.


    *13 Since 2007, the value of non-performing loans in Europe has increased by 150 percent.


    *14 Bank withdrawals in Cyprus during the month of March were double what they were in February even though the banks were closed for half the month.
    [The reason for these withdrawals is because the banks stole the depositors money... but in the end, there is zero doubt that Cyprus will be entering a depression as their economy has been destroyed.]


    *15 Due to an absolutely crippling housing crash, there are approximately 3 million vacant homes in Spain today.


    *16 Things have gotten so bad in Spain that entire apartment buildings are being overwhelmed by squatters...


    *17 Child hunger has become so rampant in Greece that teachers are reporting that hungry children are begging their classmates for food. [and searching trash cans]


    *18 The debt to GDP ratio in Italy is now up to 136 percent.


    *19 Twenty-five percent of all banking assets in the UK are in banks that are leveraged at least 40 to 1.


    *20 German banking giant Deutsche Bank has more than 55 trillion euros (which is more than 72 trillion dollars) of exposure to derivatives. But the GDP of Germany for an entire year is only about 2.7 trillion euros.

    30 Apr 2013, 11:04 PM Reply Like
  • An excellent summary of the declining conditions in the EZ.


    Thanks again, FPA.
    1 May 2013, 01:47 AM Reply Like
  • >FPA-




    This one should go on the bulletin board as a reminder.


    Windwood Trader
    1 May 2013, 09:51 AM Reply Like
  • Rallys against EU austerity for May day.

    1 May 2013, 08:57 AM Reply Like
  • HFT goes to the EZ big time ....IMO, mkt. stability has occured here because these guys have been under close scrutiny after the flash crashes.


    Read this and see just what they are doing, its amazing:
    1 May 2013, 04:28 PM Reply Like
  • LT: Noises being made to address some of the related issues.



    1 May 2013, 05:22 PM Reply Like
  • I had seen that, and the article states some things coming later by Germany, but I see nothing happening that negatively affects this other than banning it.
    Watch out for a flash crash over there too after they drive prices up.
    1 May 2013, 05:30 PM Reply Like
  • Euro Crisis has saved Germany & the north tons of money:


    A study commissioned by the German Bertelsmann Foundation showed this week that if Germany were to return to its old Deutschmark, its annual GDP would be 0.5 points lower between 2013 and 2025, resulting in a loss of 1.2 trillion euros over the 13 years - half the size of the German economy in 2012.


    more here in the article:
    2 May 2013, 05:30 AM Reply Like
  • It has now been said. Expect bank withdraws to increase across EZ.

    2 May 2013, 09:47 AM Reply Like
  • Author’s reply » May 2, 2012
    The European Central Bank cut interest rates for the first time in 10 months on Thursday and held out the possibility of further policy action to support the recession-hit euro zone economy.


    Responding to a drop in euro zone inflation well below its target level and rising unemployment, the ECB lowered its main rate by a quarter percentage point to a record low 0.50 percent.
    2 May 2013, 02:09 PM Reply Like
  • There are several economists discussing Europe AND the US that say DE-flation is the real risk world-wide- not inflation.
    2 May 2013, 05:20 PM Reply Like
  • >Windwood Trader ... Deflation has always been the over hanging fear since the first time the credit markets locked back in 2008. It is the reason for QE & ZIRP. It is why we endure TBTF banks and debt instruments will not be written down and serviced at full face value. It is why bankruptcy, reorganization, breakup in the financial sector has not happened and will not happen.


    The wrong people (meaning the ones that engineered this disaster) would be hurt severely. There are no Capitalists at the top of the business & financial world unless it is forced upon them and God only knows how important our worlds' rich people are.
    2 May 2013, 05:36 PM Reply Like
  • DRich, Spot on!! The problem will resolve itself in the end because they can only hold their proverbial finger in the dyke for so long. I worry about the unwind that comes after the collapse bringing in huge amounts of inflation as all those dollars come rushing home as many cash in their bonds to survive and everyone else follows suit to avoid the price drop in the bonds and collapse of the dollar. Last man through the door gets screwed. China, Japan, banks, hedge funds etc, the door is just not big enough for them all to fit through at once.
    2 May 2013, 05:55 PM Reply Like
  • >DRich & DG-


    I agree with both of you.
    I just want to be sure that my tax dollars are being used to bail out a TBTF fat-cat banker.


    I wouldn't feel totally had if they were not.
    2 May 2013, 06:06 PM Reply Like
  • WT it might be a lot worse than that. They might be getting used to keep some congressman or senator in office. Talk about getting royally taken to the cleaners.
    2 May 2013, 06:16 PM Reply Like
  • Nigel Farage's party beats the Tories and take 26% of the vote.

    3 May 2013, 05:21 AM Reply Like
  • Charlie Munger on Europe and HFT here in the USA

    3 May 2013, 03:56 PM Reply Like
  • Munger must working some rule change to get gov to make him richer and the rest of us poorer the way buffet promotes estate taxes. He definitely has the populist rhetoric down pat. He sounds just like Toohey.
    4 May 2013, 06:16 AM Reply Like
  • Here comes corporate tax reform...of course with Lobbyists

    3 May 2013, 03:57 PM Reply Like
  • People still think corps pay taxes. People pay taxes, and when the money medium is monopolized with a central bank, inflation is your tax. The only thing income taxes do is just send fed notes to the treas where they are cancelled and can no longer be used to bid up assets prices in the economy. New income taxes would sink the equities markets.
    4 May 2013, 06:20 AM Reply Like
  • "Norway is dipping into its oil fund to support its economy, a surprisingly expansionary move considering Norway’s economy is expanding and one of the best in Europe. Norway is spending NKr125billion ($21.4 billion) or 3.3% of its sovereign wealth fund to try to lessen Norway’s dependence on the oil industry. That said, it is still surprising to see a country with a growing economy try to stimulate it further. "


    I would not be surprised to see them invest it in solar panels. Norway would be a great place for that.
    8 May 2013, 09:39 AM Reply Like
  • Yes interesting Jhooper -- and they are rebalancing by restraining the high activity level in the petroleum sector through increased taxes on oil companies:

    8 May 2013, 09:50 AM Reply Like
  • Author’s reply » Nothing good will come of this.
    8 May 2013, 10:34 AM Reply Like
  • Jhooper
    "I would not be surprised to see them invest it in solar panels. Norway would be a great place for that."
    As Norway is so far north I'll put that under sarcasm.


    As to its attempt to reduce its oil use Norway subsidies EVs to the tune of $8,200 a year and the get to use the bus lane.


    "How much is Norway's pro-electric car stance actually costing the country--and can any of the country's techniques really be used elsewhere?
    Probably not, concludes Reuters. That's not to say that the market for electric cars won't grow elsewhere, but it might have to do so more organically than the heavily incentivized methods used by Norway.


    $8,200 in savings per year


    The country's various subsidies for electric vehicles amount to as much as $8,200 per car--every single year."


    Is it any wonder, EVs sell very well in Norway?
    8 May 2013, 10:34 AM Reply Like
  • "As Norway is so far north I'll put that under sarcasm."


    Yes. I used to live in North Pole, Alaska. In summer the days were long, but the light was very weak, although it did get into the 90s sometimes. In December the sun would come up around 10:30, skirt along the horizon and then be gone by 3:30 or so.


    You had to plug your battery in during the day in the winter, because the gold would kill the chemical reactions. I wonder how the EVs hold up in the cold. I'm thinking its time for a class action lawsuit against the EV mfgs for false advertising against the hapless consumer.
    8 May 2013, 10:45 AM Reply Like
  • Norway's policy statement is that they realize oil is a finite commodity and as a result the country is developing and encouraging alternatives to oil even though they are sitting on a gazillion barrels of the stuff.


    These folks are one of the true enlightened mind countries in a forest of Neander thinking slaves to oil countries.


    8 May 2013, 11:32 AM Reply Like
  • All they would have to do is have the most competitive wage laws in Europe, the most competitive regulatory markets, the lease amount of welfare, and the least amount of taxation. If they already do, then they establish these policies in relation to the world.


    In short, if they had the most Federalized system, where the govs only worked to protect property rights and nothing else, what you would get is a market for govs that only protect property rights, which would mean competition between the lower levels of gov as to who could be the most efficient in protecting property rights.


    By doing this, they would become the worlds haven for capital and labor, and oil would become a tiny sliver of their economy. They aren't educated to think this way, so they will just have to be happy wasting their oil money on some price blind gov scheme.
    8 May 2013, 12:16 PM Reply Like
  • Author’s reply » Percent Greek unemployed February 2012 to February 2013


    AGE 15-24 54.1 to 64.2 Increase by 18.7%
    AGE 25-34 29.0 to 36.2 Increase by 24.8%
    AGE 35-44 18.5 to 23.7 Increase by 28.1%
    AGE 45-44 16.3 to 20.2 Increase by 23.9%
    AGE 45-64 11.9 to 16.7 Increase by 40.3%
    AGE 65-74 3.8 to 8.0 Increase by 110.5%

    Greece’s economy is finally beginning to heal, according to the country’s finance minister.
Yannis Stournaras said “the worst is over” and the country had “reached the bottom of the trough”.
    It all depends on what you consider success dosn't it? Mr Stournaras said Greece could be in a position to return to international debt markets by May 2014... wonderful... but at what COST? If youth unemployment continues to increase at 18.7% per year, it will be at 76.2% in 2014. What are tax revenues going to look like as larger and larger portions of the countries economy go underground? Less tax revenues means they will not be able to service the debt on those new issue sovereign bonds.
    What about existing Greek sovereign bonds?
    Investment firm Morgan Stanley is urging investors to buy Greek government bonds. According to the Wall Street Journal, the head of the external strategy of the American bank said that “... Greek bonds constitute a top choice that guarantee a stable income for this year”.
    Want to bet what Morgan Stanley is doing with their Greek Bonds?
    9 May 2013, 09:15 AM Reply Like
  • OT but is anyone trading Facebook FB or Nokia NOK ?


    4:59 PM Facebook (FB) is partnering with Nokia (NOK) to offer free access to Facebook services (provided carriers support it) to buyers of the new $99 Asha 501, which is aimed at emerging markets. The deal helps the 501 better compete against low-end Android competition, and extends Facebook's efforts to grow its emerging markets base by offering free/discounted access. 44M of the 54M monthly users Facebook added in Q1 came from outside of North America or Europe, and many were likely mobile-only. Monetizing these users remains a challenge. [Tech] 8 Comments
    11 May 2013, 03:20 AM Reply Like
  • Regarding national debt and current balance figures-
    Or, questions no one wishes to acknowledge:


    Does it matter that our CAB is six times larger than the next highest country or that our national deficit is higher than that of the next five countries put together?


    What will happen when our currency is no longer the world reserve currency?



    12 May 2013, 09:06 AM Reply Like
  • Yes WT -- that chart is one I keep track of regularly. Cash in Yuan, Norwegian Kroner, Singapore dollars and Australian dollars have been good USD diversification tools for the long term. Whenever there is a "safe haven" pump for the US dollar -- its a great time to get a bargain on these relatively strong currencies.
    12 May 2013, 09:33 AM Reply Like
  • Thanks, MJ-


    Now I have to figure out the best way for me to obtain some safer currency- I'm sure there are options like saving accounts, sovereign notes and even just currency.


    12 May 2013, 11:24 AM Reply Like
  • FPA>


    Might this not be a good time to do another "Hedge Shack?"


    I still have my $PSEC from the 2011 Hedge Shack, thank you very much!


    12 May 2013, 11:43 AM Reply Like
  • Author’s reply » You rememeber the Hedge Shack :)


    The hedge shack was about QE on and off... I don't think we have a QE off event comming, but I do think a correction is on the menu. I will try to provide some different ways to play the correction, but I don't know if I will have time to get the insta out before the event...


    For those of you wondering what this is all about, I have been working on a macro market model, and I noted on the Quick Chat that it's signaling the possibility for a correction starting next week.
    12 May 2013, 01:25 PM Reply Like
  • I went 50% cash last week, I noticed that AEP (utilities) dropped >5% and then the article out late friday about the "fed rat" saying the fed has it's exit plan, just not when to implement it.
    I may go more cash this week.

    12 May 2013, 05:57 PM Reply Like
  • 6:42 PM Italy is no longer "master of its own destiny," says George Soros, referring to what he believes is the country's perpetual dependence on coordinated action from its EU partners and the ECB. Speaking to an audience in northern Italy, Soros predicted the respite Italy has seen in terms of borrowing costs (ITLY) and spreads to German bunds "will not last long [as] the situation is far from being in balance." Last week, Italy auctioned 12-month bills at a euro-era record low yield. Comment! [Global & FX]
    12 May 2013, 06:45 PM Reply Like
  • Hedge Funds buy Greek Bank debt

    13 May 2013, 10:13 AM Reply Like
  • 9:44 AM National Bank of Greece (NBG +10.7%) continues to party after late April news it's received enough private capital support to avoid being nationalized. The stock (really a call option) is about a double in less than a month. NBG makes up 7.2% of the holdings of the Greece ETF (GREK +2.1%). [Financials, On the Move] Comment!
    13 May 2013, 10:29 AM Reply Like
  • Lazard was a good brokerage...I find this interesting & worrisome at the same time


    10:18 AM Lazard's (LAZ -0.9%) brokerage unit - Lazard Capital Markets - is exploring strategic options, says a spokesman, including a sale or joint venture. The firm is the latest to look at changes amidst a slow-trading environment (and what is done is more likely to be electronic), and customers unwilling to fork over as much for recommendations. [Financials] Comment!
    13 May 2013, 10:27 AM Reply Like
  • Spain protest "From indignation to rebellion." Things might be heating up.

    13 May 2013, 11:53 AM Reply Like
  • Good for them. The lower tier of the EU have been electing people that upon entering office have become bank tools. The Greeks just recently took on more debt to pay interest only on debt they can't pay. Thank-you Goldman & Duetsche Bank et al for selling structured instruments. If Default is not allowed there aren't many options left.
    13 May 2013, 12:05 PM Reply Like
  • If Spain can't generate some productive economic activity the older portion of the population with minimal savings will be "freezing in the dark" within a decade. Or sooner.


    The real shame is that there is massive abandoned housing in the country that the banks will NOT mark to market and sell cheap because of accounting/solvency issues. Yet everyone in the business knows the bank asset numbers are fiction. And the empty housing is slowly stripped of copper or decays. Billions of dollars worth.


    Effective ownership and operation of those properties might generate a boom in vacation and/or retirement homes for well to do foreigners. The income just might give the Spanish economy a start to recovery. But they must figure out how to devalue first. No good choices left to them on that front.


    But this is what happens when the government tries to be all things, especially to the big money boyz. Corruption is the scourge of government "business" and the end of decent governance.
    13 May 2013, 12:28 PM Reply Like
  • Here is another clue as to what is coming and when: (don't forget the fed rat's note released Friday & utilities already discounted too)


    12:43 PM The mortgage REITs are lit up bright red (MORT -1.9%), again led by American Capital Agency (AGNC -3.5%) and American Capital Mortgage (MTGE -3%), with Annaly (NLY -3.1%) not far behind. Yes, the 10-year Treasury yield is a 3 bps higher, but there's also rare action in Fed Funds futures, now pricing in a whopping 50 bps in rate hikes by this time 2016. AGNC presents at the JMP Conference at 2 ET. [Financials, On the Move] 8 Comments
    13 May 2013, 01:12 PM Reply Like
  • 2:13 PM Defensive stocks such as utilities (XLU -0.4%), which have led this year’s market surge, are fading, and investors should consider cyclical sectors such as tech and energy for long-term value, BlackRock's Russ Koesterich recommends. The utilities sector is overpriced and probably has more room to fall, but investors starved for yields should look at dividend-paying companies from outside the U.S. Comment! [Energy, Tech]
    13 May 2013, 02:26 PM Reply Like
  • Emerging markets debt
    Pimco's $PEMDX has been in my portfolio for a while. The emerging market group has had to prove themselves while the big overseas borrowers have borrowed on their AAA reputations.


    Result? I believe EM debt has better returns and may be a lot safer.


    Windwood Trader
    13 May 2013, 05:16 PM Reply Like
  • Are you being sarcastic when you say a " whopping 50 basis points"?
    Half a percent in rate hikes expected by 2016--another three years,is next to nothing, given how low the rates are now and how long they have already been held.
    13 May 2013, 06:24 PM Reply Like
  • A lot safer than what? There is inherent risk just because it's emerging market. Just ask those of us who has ever invested in Mongolia, Malaysia or Viet Nam.
    13 May 2013, 06:26 PM Reply Like
  • OG, I didn't write the "whopping" part, but I do believe the world will keep rates low much longer than we think. How long or how low I have no idea.
    Japan is now following the fed, and we havn't got to the EZ yet when they go for growth instead of austerity.


    I agree with you on the risk of emerging mkts. Too much risk for me.
    13 May 2013, 06:35 PM Reply Like
  • OG-


    Malaysia is an emerging market country. Its debt (sovereign) is currently rated "A".
    I don't believe either Vietnam nor Mongolia qualify as emerging market countries by most investment firms- they are mostly considered "Frontier countries". I would consider "frontier countries" as very risky indeed.


    Emerging debt mutual funds and ETFs on average have much lower betas than a direct investment in a single country's debt instruments, sovereign or corporate.
    Mutual funds like Fidelity's FNMIX, rated 4 stars by Morningstar and PIMCO's PEMDX rated 3 stars, BlackRock Emerging Debt portfolio also 3 stars all have betas at 1.00 or lower, Sharpe ratios above 1.55 and outperform the Barclay's bond index by 15-20% over 3 years. That to me is getting a lot of return for reasonable risk.


    Windwood Trader
    15 May 2013, 10:11 AM Reply Like
  • This is probably a good time to get into one of the japanese etfs!
    16 May 2013, 09:22 AM Reply Like
  • Yes, that sounds compelling. And you are right, I tend to mix up frontier markets with emerging markets, while some of the emerging markets are pretty darn mature.
    16 May 2013, 09:25 AM Reply Like
  • OG-


    I went into $SCJ all cap index right after the Japanese announced their BB look alike program.


    Up 6% so far. I will be adding to it.


    Windwood Trader
    16 May 2013, 10:01 AM Reply Like
  • OG-


    I'm in the hunt for a well run Frontier Market MUTUAL fund as I feel any Frontier equity collection needs to be selectively monitored and don't feel an ETF will be able to do that. I will pay the extra fees to accomplish that.
    Fidelity already has FSEAX - Emerging Asia, but I hear that Templeton has a new frontier fund just starting up.


    16 May 2013, 10:11 AM Reply Like
  • WT- what countries do you want to see in a frontier market fund?
    . There are more markets that I would want to see excluded than what I would feel comfortable Including! (Does that make sense? I mean I know what to be fearful of, but don't know where the solid opportunities are.) So, what is your criteria for a frontier markets investment? Do you want it to include African investments, as an example? this topic would make a good instablog with some shared research imo.
    16 May 2013, 11:28 AM Reply Like
  • Oy, Gee and everyone: Greetings. I'm in garrison today so I dropped by to catch up. With banks now wanting to charge depositors for the privilege of letting them keep their money in the bank. Governments stealing depositor money (Cypress) and raising taxes while depressing interest rates it's difficult to see any upside or an end to this mess. There is money to be made to be sure. That being said it's become evident that governments will continue to punish savings to encourage investment in equities. Investment in equities leads to fleecing of investors. I will continue to maintain a defensive posture with solid dividend payers, PM and real estate.
    16 May 2013, 01:57 PM Reply Like
  • Oy, Gee: Greetings. I've been looking at the Congo as a frontier market worth investing. I haven't dropped any money there yet but I may after the next "Correction.".
    16 May 2013, 02:01 PM Reply Like
  • "what countries do you want to see in a frontier market fund?"


    Springer got me interested in Sri Lanka. They look to be on track for 15-20% per year growth the next five or so.- I'm opening a Ceylon Bank account- Don't think you have to any more but it makes life easier to invest there.


    Thailand- busy now, Maybe Vietnam and Singapore also- They are attracting investors (Singapore may be emerging not frontier).
    I haven't looked at Africa with the exception of So. Africa's gold miners- Kloof for one.


    17 May 2013, 04:48 PM Reply Like
  • "The Eurozone’s current recession is officially the longest in the common currency era at six quarters, outpacing the 5 quarter dip from 2008-2009. That means that the Eurozone has been in recession 11 of the past 20 quarters. On a country-by-country basis, France is back into recession, Italy continues to contract, while Germany managed to swing back to slight growth. "
    16 May 2013, 09:17 AM Reply Like
  • "Greece was upgraded to B- from CCC+ by Fitch based on improving prospects for the economy. Greek 10-year bonds are in 56 bps to 5.82%, their lowest level since June 2010, and the Athens stock market has risen 80% over the last year. "
    16 May 2013, 09:18 AM Reply Like
  • "5-year Japanese Government Bonds (JGBs) are now trading wide of 5-year German Bunds for the first time in 20 years. The selloff in JGBs is spilling over into other G10 markets, as both core European sovereign bonds and US treasuries are wider for the month as well. We note that USTs and French bonds have become highly correlated over the past 6 weeks."
    16 May 2013, 09:19 AM Reply Like
  • "The Bank of Japan (BoJ) has announced plans to pump Y2.8 trillion (US$28 billion) into money markets on Friday to try to stem the rise. The BoJ appears surprised by the selloff in JGBs over the last few sessions, since the Yen/USDollar cross broke 100. The trend is a reversal from the initial reaction, which saw global yields rally as BOJ buying was expected to crowd out traditional buyers of JGBs, sending them into international markets. The selloff in JGBs corresponds to a rise in breakeven rates, suggesting that the BoJ’s attempt to build inflation expectations is working. "
    16 May 2013, 09:19 AM Reply Like
  • The BOJ hit the Chinese tripline...


    Now we see whether or not China is content with their haul of Japanese corporate technology plants, or will play for time while they maintain the vacuum. Given the sitrep with REEs and other key minerals, it could go either way... Right now I believe we are near a decision point for China that will see them shift from their long time strategy to draw Western (and Japanese) technology companies into their web - to a new stance to support their new cartels (primarily the large downstream value-added manufacturing stream flowing from their domestic lockup of key raw materials). This could include a reversal of their cheap RMB/yuan policy, as well as other strategic moves (like undercutting the BOJ's strategy).


    IF China decides they still need some key tech attracted into their tiger trap economy, we can expect them to fight the BOJ in the opposite direction, pushing the yen's value up to encourage Japanese corporations to relocate factories to China... But I believe this time is past, and they will follow Plan A (above).
    16 May 2013, 09:48 AM Reply Like
  • Japanese companies in China found out what happens when the govts clash. The locals turn out to trash your offices.



    I wonder if any Japanese business is thinking of opening there after that situation last year. It could easily happen again and there appears to be some shift in trust with the Japanese I know and those my wife talked to this past March. She was there for a month. China is not this wonderful source of cheap stuff anymore. Its much more menacing than that.


    But of course there are other issues going on in asia with govt clashes. Hope this is all just posturing.

    16 May 2013, 10:08 AM Reply Like
  • This is a link to a Project Syndicate debate btw Soros and Hans-Werner Sinn a professor at University of Munich on the rationale of Germany leaving the Eurozone or allowing the creation of Eurobonds, a subject that would be rejected by the German people.


    Another alternative discussed is the splitting of the Eurozone, North/South which sounds a bit fuzzy but may be possible. Germany has the most skin in the game already and is reluctant to do more.


    Comparisons are made to Alexander Hamilton and the major US financial catastrophe of the early 1800s, also to Japan's bank collapse of 1997 and the following 25 years of stagnation.


    A long but very interesting debate with a lot of insight-



    Windwood Trader
    16 May 2013, 11:43 AM Reply Like
  • "The Swiss franc dropped to its lowest level versus the Euro (the EURCHF cross rose to CHF1.26) in two years after the Swiss National Bank suggested cutting rates to negative territory and that they could “raise” their Euro floor of CHF1.20. The SNB also indicated it was concerned about the hot housing market in the country; however, we are unclear how cutting rates would help those concerns. The SNB foreign currency dropped 1% in April to 433.6 billion francs (US$ 462 billon). The SNB had built the reserves during the credit crisis as it sought to protect its currency from rising too fast. "
    22 May 2013, 10:00 AM Reply Like
  • FPA,
    During this time of little news about the problems of Europe, I want to thank you for taking the time and effort to keep this Insta going. The media isn't keeping us very well informed, especially now. I wonder what is going on behind all those closed doors and what kind of nefarious plans the Eurocrats are hatching to further subdue the population of Europe. It may be paranoia setting in, but it looks like Europe is the testing ground for policies and procedures to be used in the rest of the western world.
    22 May 2013, 01:49 PM Reply Like
  • Author’s reply » Thanks SD... It is quiet, but their are hints... I believe the number one EU priority is to push through some kind of fiscal union without treaty changes... I see that as a trap because once that happens, it should considerably raise the pain level if countries subsequently want to leave the EU Fiscal Union.


    I think the initials of the Fiscal Union pretty much describe what will happen to citizens in those countries that join a fiscal union. The EU is tyranny.


    That free trade agreement being worked on between the EU and the US will reduce our economic freedom in exchange for making the rich and powerful more rich and powerful.
    22 May 2013, 04:45 PM Reply Like
  • I think this fellow has a useful perspective.


    A picture of capital destruction in Germany
    22 May 2013, 07:13 PM Reply Like
  • >SM-


    Thanks- That graphic says a lot.
    I believe it may soon be a financial picture of the planet. Many countries are lowering their rates to be more competitive in the world trading arena. Japan has had virtually zero interest for over twenty years, twenty years of stagflation. Growth has been just about zero.


    The US growth is a myth. The only growth the US companies have is when a growing company is acquired. Turkey just lowered their rates as well, as we discussed.


    The main growth opportunities lie in the frontier countries, primarily in south-east Asia.


    There are also some mature and emerging markets that will thrive, like Norway, Iceland, Mexico, Chile and Columbia plus a few more.


    I still do some advisory stuff for older people and the clueless, but I don't know what to tell them anymore.


    This whole situation is FUBAR.


    Windwood Trader
    22 May 2013, 08:15 PM Reply Like
  • that last paragraph says is all, as we get older and hopefully wiser it is a tough situation to call much less advise.


    IMO, I am a firm believer the baby boomers drove the growth in the USA. Now that they are older and pulling back it has caused what we have had happen the last 4 years and also will slow growth in the future & maybe forever.
    22 May 2013, 08:27 PM Reply Like
  • Entrepreneurial animal spirits. Free enterprise still exists somewhere in Greece.


    Greek Prostitution Soars By 150% As Youth Unemployment Hits 75% In Some Areas

    23 May 2013, 12:22 AM Reply Like
  • I want to thank all you guys for the information shared so freely and also to the host. I have learned immensely from it.


    See my next post.
    23 May 2013, 11:59 AM Reply Like
  • NEW YORK, May 23 (Reuters) - Shares of American Electric Power dropped as much as 54 percent while Nextera Energy sank 62 percent on Thursday, both falling sharply at the opening.
    In AEP, numerous trades were done in the $20 and $30 range all in the first seconds of trading. The stock hit a low of $22.28, but was last trading at $47.80, down 1.6 percent. Nextera hit a low of $30.37 before recovering to trade last at $77.78, down 1.7 percent.
    The New York Stock Exchange was not immediately available to comment.
    23 May 2013, 11:59 AM Reply Like
  • Investors watched in horror this morning as shares of American Electric Power Co (NYSE: AEP) crashed 54% on the open. NextEra Energy (NYSE: NEE) was also affected. Its stock dropped 62%. Both stock later recovered and traded down by only a few percent.
    The crash resulted from an order imbalance. Importantly, trades were not subject to limit up/ limit down rules because trades took place before 9:45, when restrictions begin. In August new rules will expand limit up/ limit down for the full day, but as of now those rules do not exist.
    The crash added to jitters, creating an uncomfortable vibe as investors looked across the Pacific to Japan's battered stock market.
    News Provided by Acquire Media Corporation
    23 May 2013, 12:00 PM Reply Like
  • A while back we mentioned that High Frequency trading was moving to the EZ with microwave speed. Can you imagine what these guys will do over there?


    How long before regulators and gov't takes action? I mean how long does it take to pass a reg to include pre-mkt ?
    23 May 2013, 12:02 PM Reply Like
  • LOL, there was no lack of a regulation, just the fact that they had to leave enough time in the regulation for their cronies to make their pound of flesh before it went into effect...


    The problem is not that there is no regulation, but that its inept/incompetent in nature, if not outright corrupt. A sweeping housecleaning is desperately needed in the regulatory agencies. They must have deadwood stacked around like, well, deadwood.
    23 May 2013, 01:28 PM Reply Like
  • that's my point TB, I mean u could take APPL to "zero" in the pre market and then it open at $400/sh Nice gain for an "order imbalance"


    Who the hell would make a reg and leave that loophole, and even better as I said, how long could it take to close it ?
    I gurantee if you were in charge, less than 5 minutes.
    23 May 2013, 01:32 PM Reply Like
  • >LT-
    That would mean fighting the Fat Cats AND the Banksters. Tough row to hoe I'm afraid. I wouldn't bet against them doing the same thing tomorrow with another stock- Maybe (AAPL)?
    23 May 2013, 04:42 PM Reply Like
  • WT, It's about time they Fat Cats & Banksters got reined in. I will make a prediction that at some point they pay a high price for their corrupt practices. One may even go out of business. One of the options for SAC capital is going out of business now.
    23 May 2013, 09:10 PM Reply Like
  • >LT-


    (Also posted on QC #257)


    Seems to me the SEC ought to be stopping that nonsense right now, from opening bell to closing bell.


    Having that window until August is simply a challenge for engagement to the manipulators.


    25 May 2013, 03:04 PM Reply Like
  • Author’s reply » SPAIN'S BANKS FACE 10BN EUROS MORE PROVISIONS / THE FINANCIAL TIMES. Etiquetas: Banks And Banking, Spain


    Spanish banks will need to put aside extra provisions of up to €10b to cover loans that borrowers will struggle to repay, according to an internal estimate by the Bank of Spain.


    According to recent data, Spanish banks rolled over more than €200b of loans before they expired, often because corporate borrowers would be unable to repay their debt on time and in full.


    The €10bn estimate is the first official assessment of the likely impact of the central bank’s new approach towards these refinanced loans.

The Bank of Spain believes that the risks emanating from this practice, known as “extend and pretend”, have not been fully covered and is pressing all banks to reclassify their refinanced loans according to tighter standards by the end of September.


    The new regime will make it harder for banks to treat refinanced loans as if they were performing normally, in turn forcing lenders to take additional provisions.

“Our banks will need more provisions,” a senior official at the Bank of Spain told the Financial Times. “The provisions will affect their results, but the question is by how much.


    We cannot know for sure but we think the impact will be between €5bn and €10bn across the system.”

The new round of provisions is expected to make a significant dent in profits at a time when Spanish bank earnings are already under severe pressure in their home market. Spain is mired in a two-year recession, with both companies and households suffering the aftermath of a debt-fuelled housing bubble and soaring unemployment.
    No, it's not €10b it's actually €200b in unperforming loans that will need to be written down, or written off.]
    23 May 2013, 09:54 PM Reply Like
  • I wonder if, as was done by American banks during the early days of the meltdown, any refinancing terms are strongly punitive. There was a time, early on, when many (most?) of the now long-since foreclosed and shadow-inventoried properties were still inhabited by gainfully employed inhabitants who might well have managed to make payments based upon something other than a subprime contract festooned with fees, fines and escalating interest rates...


    The banks held onto these things like a lead life preserver as they sank along with their underwater and long-abused customers.


    By this point its doubtless far too late for resetting terms to help the floundering Spanish economy. Too bad.
    23 May 2013, 10:03 PM Reply Like
  • TB, I agree totally. Just wondering if the reason for not offering homeowners low interest money of say 1-3% is because all the holders thought they were hedged with mtg. insurance and derivatives.
    I know from my real estate dealings now, some sub-prime lenders still don't want to do a short sale on reasonable terms. It takes forever to find the holders of the notes and deal with them, also they have mtg. insurance. So the little lender has mtg. insurance and the big fish hold those Hundreds of trillions $$ of derivatives that the world can not stand to trigger.
    23 May 2013, 11:00 PM Reply Like
  • One could hope that the bank leaders would have known better, LT, but obviously not. The near-death experience of every large bank in the country SHOULD have taught them a lesson, but again, obviously not. I discount their faith in the derivative scheme (after all, does the Ponzi operator ever believe in his own product?), but the universal truth is that in a crony capitalist/socialist system, the banks benefit from all three aspects. They are cronies of the top rank - able to abuse the remnants of the capitalist system with apparent impunity - and their risks are transferred seamlessly to the society they prey upon. Having skirted corporate death by a whisker, however, even this sort of support (which after all is merely political, and the political winds can shift in an instant, and have in the past) should leave them chastened and more aware of their own mortality.
    24 May 2013, 08:15 AM Reply Like
  • 3:25 PM China's exports of rare earth metals have rallied in recent months, a trend attributed to low rare earth prices and Japanese demand. But Molycorp (MCP -2.9%), whose shares have jumped 30% in the past two weeks, says it might be premature to assume a firm turnaround in global demand: "Inventories have been built up over the past several years, and they are returning to more normal levels now." [Commodities, On the Move] 4 Comments
    24 May 2013, 05:35 AM Reply Like
  • We are seeing the first signs that the more rare (and expensive) REE stockpiles in the West are once again being consumed quicker than the export quotas from China (who provides nearly 100% of this category's world supply, unlike the "lighter" REEs) will support.


    Prices will firm up due to this factor almost regardless of overt market demand.


    I still think the more common elements will remain cheap through most of this year, though I anticipate a slow improvement as the remnants of the private Chinese REE operators close down their businesses and sell off their remaining goods. After that happens, the Chinese REE cartel will be in full control...


    And then we see what they want to do with that control. They could elect to drive prices down to destroy their Western competition (like MCP and Lynas), which of course the idiot leaders in the West will doubtless not even notice so long as supplies are plentiful NOW (which millisecond existence so neatly aligns with their collective attention span)...


    OR they could let prices float, crank up their pet Inner Mongolian REE Exchange, and make loads of money selling overpriced REEs.


    Unfortunately, I believe this decision will not be made based upon capitalistic guidelines.


    So this is as it was, a broken sector with massive geopolitical risk.
    24 May 2013, 08:24 AM Reply Like
  • TB, btw, I tried to post that on the REE board but kept getting an error msg.
    Maybe time for a new board ?
    24 May 2013, 08:50 AM Reply Like
  • Author’s reply » Cyprus banks recorded a record outflow of 6.4 billion, or 10% of its entire deposit base in April.
    The only way this could happen is if people with big money are being allowed to take it out. The little people are still stuck with a 300 Euro per day limit on withdrawals.


    The EU's policy has reduced "Trust" among bank depositors throughout the EU. The banks better get that EU fiscal union agreement into effect soon to lock people in so the banks can continue to make their highly speculative plays with other peoples money.
    29 May 2013, 11:42 AM Reply Like
  • >FPA-


    I guess Russians don't have to play by the same rules as everybody else, 'cause they're SPECIAL!
    29 May 2013, 01:05 PM Reply Like
  • Author’s reply » The Russians recently reduced the terms of their loan to Cyprus... I would think letting some Russians depositors get their money out was part of that deal.
    29 May 2013, 02:36 PM Reply Like
  • Is anyone watching the astounding performance of the National Bank of Greece?
    30 May 2013, 11:04 PM Reply Like
  • >optionsgirl ... As Art Laffer has said before ... Debt is Wealth, so I guess it only makes sense ... to someone.
    30 May 2013, 11:13 PM Reply Like
  • The National Bank of Greece turned a profit this quarter--2 in a row--and went up 479% in one day. It will probably go down as fast as it came up, but there is still plenty of opportunity there, for those who tolerate the risk and volatility. It went up around $5.75--in one shot.
    It's not likely the EU will let them sink anymore than the Fed let the big banks fail, imo.
    You can take a stock like Apple, which moves more than $5.75 in a day, and buy one share, and take the cost of one share of Apple, which closed at $451.78, and buy 63 shares of NGB @ $7.07 a share. Which do you think will do better after 12 months? I bet NGB will be the better performer!
    31 May 2013, 12:16 AM Reply Like
  • And therein lays the reason we have no economic activity or growth. No financial entity is allowed to fail. Commodities have turned from useful things to society into assets to be collateralize.


    How something that has an income of (2623.92M) a book value of (2.88) per share and earnings of (2.75) can be called "profitable" ... I don't get it. If you had watched the financial gab sessions over the past couple of weeks (even Cramer mentioned it) you would have heard that the National Bank of Greece was an "interesting" spec play. I noticed, but I don't believe in encouraging them even if it seems like fast money.
    31 May 2013, 12:40 AM Reply Like
  • OG, I read or posted where the hedges oversubscribed to the last bond offering, so figured the stock would follow but didn't dream of that much in a day.
    Makes me look like the fool I am for not buying a few weeks ago.


    I'm not a big enuff fish to fool with the EZ anywhere now. Cramer just touted RBS.


    I am holding more cash now than anytime over the past 4 years. Markets are frothy to me. Japan delayed the US correction. Now the EZ is trying to advance, too hard to figure. No fundamentals driving things now.
    There will be another day to buy, and I have a list. Just gonna go with the long term stuff and wait it out here.
    31 May 2013, 05:13 AM Reply Like
  • (NBG) up to $8.45 @ 10:00
    31 May 2013, 10:15 AM Reply Like
  • Author’s reply » Here is an article that claims some confusion exists on NBG..
    31 May 2013, 01:01 PM Reply Like
  • Here's the reality --weaved together on ZH via Bloomberg and some other sources. The charts are awesome. It elegantly illustrates the disconnect between stock performance and reality that we discussed above.
    Re: Latest ECB Warning
    31 May 2013, 06:25 AM Reply Like
  • In our shiny new crony capitalist/socialist world, danger for investors has clearly defined short, medium and long term categories.


    The short term danger is picking the wrong crony to invest in.


    The medium term danger is picking the wrong side in an election.


    The long term danger is of course the day when the political system inevitably collapses of its own dead weight.
    31 May 2013, 08:24 AM Reply Like
  • Author’s reply » I added the latest chart on under 25 unemployment in EU countries.
    It's at the bottom of the Insta's header.
    31 May 2013, 09:33 AM Reply Like
  • 1:20 PM The dollar (UUP, UND) could be entering the end of a 10-year downtrend, says Nomura's Jens Nordvig. We've gotten used to the greenback rallying during panics, but of late the dollar's headed higher for maybe other reasons - better relative economic performance, an improving trade deficit, even a smaller budget shortfall. "This is the type of shift that is just starting," he says. "It can be a multi-year phenomenon." [Global & FX] 5 Comments
    31 May 2013, 05:00 PM Reply Like
  • >FPA-
    Intent of small business re: hire or lay off-



    Labor participation rate, UNDER-employment and unemployed-
    43.9% of labor pool employed compared to 55% of pool employed in December '09.



    How long before the misery that is the Euro-Zone comes to visit us? Maybe sooner than we think.


    Windwood Trader
    1 Jun 2013, 02:16 PM Reply Like
  • 15,000 anti-austerity protestors in 3 cities in the EZ.
    1 Jun 2013, 09:07 PM Reply Like
  • They want somebody else to pay their bills while they continue to party-


    Windwood Trader
    2 Jun 2013, 07:39 PM Reply Like
  • gotta love this one


    9:21 AM Recently, the market learned that youth unemployment in Italy hit 40% in April to go along with a 36-year record high of 12% overall unemployment. Never fear though, Italy's trade union CGIL is out with its estimate of when the Italian economy will recover pre-crisis (un)employment levels: 2076, a mere 63 years from now. (original article) 14 Comments [Global & FX]
    2 Jun 2013, 02:47 PM Reply Like
  • LT: Must be depending on a declining birth rate.


    2 Jun 2013, 03:44 PM Reply Like
  • It's the Japanese model. They are going to start counting robots as "workers".
    2 Jun 2013, 05:05 PM Reply Like
  • TB: if they can just get the robots to reproduce at a higher rate ... :-))


    Just don't let the Japanese male design that - won't be any male robots! =>8-O


    2 Jun 2013, 05:12 PM Reply Like
  • You have to love the Italian optimism!
    2 Jun 2013, 03:40 PM Reply Like
  • 5:48 AM The eurozone may be experiencing the region's deepest crisis since World War II, but there are still countries that are considering joining it. Tomorrow, the European Commission is expected to recommend that Latvia become the bloc's 18th member at the start of 2014 after it was deemed to have met all the requirements such as low inflation and debt. Latvia's leadership is apparently keen on euro entry, the populace less so. [Global & FX] Comment!
    4 Jun 2013, 08:39 AM Reply Like
  • "Latvia's leadership is apparently keen on euro entry, the populace less so."


    Well of course. A monopolized money medium is a great way to steal from the general productive populace via a stealth tax, and that's how the leadership gets to buy votes, stay in office, and get rich all the while the people they promise to help get poorer and poorer, thus ensuring the leadership always has the sales pitch that they need to stay in office to help the poor (you see this in the US as well. A welfare underclass, must always stay the welfare underclass, to make sure there is a voting block to keep the people in power who will always be promising to help the welfare underclass).


    What you will see (and indeed have seen in Europe) is a vote will continually be held until the leadership gets the result it wants, namely, the power to stealth tax the producer populace to buy votes so the leadership can stay the leadership and get rich.
    4 Jun 2013, 10:06 AM Reply Like
  • 4:00 AM Things seem to be looking up in Spain, where the number of people filing for jobless benefits fell for the second consecutive month in May, dropping 2% to 4.89M. The news follows yesterday's release of data that showed a sharp improvement in the country's manufacturing PMI. Bloomberg has a feature that cites exports as a major factor behind the beginnings of Spain's recovery. [Global & FX, Top Stories] 1 Comment
    4 Jun 2013, 08:40 AM Reply Like
  • The new Conservative government is starting to rein in some of the more egregious government waste, including subsidies to various green energy initiatives, who are screaming loudly (of course).


    All just a coincidence, of course, though recapturing some of the 8 million jobs (most of them union jobs in utilities and large industry) lost to the green energy experiment was one of the determining factors in the political switch.
    4 Jun 2013, 12:30 PM Reply Like
  • 5:09 AM A British parliamentary report could raise the idea of splitting RBS (RBS) into a good bank that can be privatized and a state-run bad bank that would hold the company's toxic assets. However, the report is unlikely to wholeheartedly endorse the idea. One problem is that Chancellor George Osborne says that splitting RBS would require the government to totally nationalize it first at a cost of up to £10B. [Financials] 1 Comment
    4 Jun 2013, 08:42 AM Reply Like
  • The Scots currently giving thought to independence may put a bit of a spin on the gyrations as well.
    4 Jun 2013, 11:44 AM Reply Like
  • CVX assets released stock could pop a bit


    Argentina's Supreme Court has overturned a judge's order to freeze Chevron (CVX) owned assets in the country, opening the way for the company to proceed with a $1.5B venture with YPF (YPF) to develop shale oil and gas. Chevron's assets were initially frozen at the request of Ecuadorean plaintiffs who are trying to enforce a $19B award against the oil major over toxic waste in the Amazon.
    5 Jun 2013, 06:34 AM Reply Like
  • Author’s reply » Oh Yeah... I had to comment on this news... My comments are in the brackets [ ].


    IMF Admits Mistakes on Greece Bailout


    The International Monetary Fund has admitted to major missteps over the past three years in its handling of the bailout of Greece, the first spark in a debt crisis that spread across Europe.


    * In an internal document marked "strictly confidential," the IMF said it badly underestimated the damage that its prescriptions of austerity would do to Greece's economy, which has been mired in recession for the last six years.


    * The IMF conceded that it bent its own rules to make Greece's burgeoning debt seem sustainable and that, in retrospect, the country failed on three of its four criteria to qualify for aid.


    ** The fund stressed that the response to the crisis, coordinated with the European Union, bought time to limit the fallout for the rest of the 17-nation euro area. It described the rescue as a "holding operation" that "gave the euro area time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy."


    The IMF stated that an immediate restructuring would have been cheaper for European taxpayers, as private-sector creditors were repaid in full for two years before 2012 using the money borrowed by Athens. Greece's debt level thus remained undented, but it was now owed to the IMF and euro-zone taxpayers instead of banks and hedge funds.


    [This confirms the Bank Risk Transfer to Taxpayers Mechanism.]
    The reason for the "bailout" was to "bailout" the European Banks. The Debt was than effectively transferred to the IMF and euro-zone taxpayers.


    This "Bank Risk Transfer to Taxpayers Mechanism" was identified on this blog back in January. ]


    [Here the IMF admits to openly lying]
    *** Over the last three years, a number of senior IMF figures, including Managing Director Christine Lagarde, have repeatedly said that Greece's debt level was "sustainable" - likely to be repaid in full and on time.


    Yet the document described the uncertainties around the rescue as "so significant that IMF staff was unable to vouch [guarantee] that public debt was sustainable with a high probability.


    **** The IMF's latest periodic review of how the bailouts are going, said that Greece's European creditors MAY HAVE TO CONSIDER SPEEDING up the debt relief promised in the second deal.


    ***** The Greek Finance Ministry declined to comment on this IMF document.
    [Of course the Greek Finance Ministry declined to comment. They declined because this report tells us that the Greek Finance Ministry has been lying all along. For example, this news article appeared on May 30th.


    Stournaras Disputes OECD forecast
    The OECD report released on May 29 forecast that the Greek economy would shrink by 4.8 percent this year and 1.2 percent next year. The OECD further expects unemployment to reach 27.8 percent this year and 28.4 percent in 2014, while the country’s debt is estimated at 175.1 percent of GDP in 2013 and 180.6 percent in 2014.


    However, speaking on the sidelines of the OECD ministerial conference in Paris, the Greek Finance Ministry Stournaras stated: I believe the GDP will be just under +1 percent (next year). His view was also backed by the annual report of the Bank of Greece, which expects Gross Domestic Product to contract 4.6 percent this year followed by growth of 0.6 percent in 2014. He also said that the European Commission and the International Monetary Fund disagreed with the OECD forecast as well.


    This position has just been undercut with the latest IMF report.


    We also have this from Mr. Stournaras on May 4th:


    Greek Finance Ministry Stournaras: “The Worst is Over”
    Stournaras said “the worst is over” and the country had “reached the bottom of the trough”. Greece’s crisis-hit economy is finally beginning to heal, according to the country’s finance minister ahead of a crucial report by the International Monetary Fund which is likely to be more positive than in the past.


    Unfortunately, for Mr. Stournaras the IMF's new "strictly confidential" report directly refutes Mr. Stournaras.


    In its review Wednesday, the IMF said that it is questionable whether Greece will be able to pay its obligations if it continues to hold unhealthy levels of debt well into the next decade. Debt projections are extremely sensitive to any delays, it said. "Should debt sustainability concerns prove to be weighing on investor sentiments even with the framework for debt relief now in place, and strong program implementation by the Greek authorities notwithstanding, a more front-loaded approach to debt relief would need to be considered," the fund said. [Front-loaded approach to debt relief means reduction in debt amount - AKA haircut.]


    Euro-zone officials promised in May 2012 to cut the value of Greece's outstanding debt IF Athens lives up to its vow for more budget cuts, higher revenues and a restructuring of the country's broken economy.


    The European Commission:
    In talks next week, Greece will ask for permission to cut certain value-added, or sales taxes, arguing that an increase in restaurant taxes, for example, has generated less revenue not more by crimping spending. Conversely a cut in the tax rate for eateries, the government says, could actually boost revenue by drawing in more diners. So far, however, officials at the European Commission have been cool to the idea.


    The commission, which is the European Union's Brussels-based executive, comes in for special criticism in the IMF document. The report says the European commission "tended to draw up policy positions by consensus, had enjoyed limited success with implementing [fiscal conditions]…and had no experience with crisis management." It adds that the commission focused more on "compliance with EU norms than on growth impact" and "wasn't able to contribute much to identifying growth-enhancing structural reforms."
    The commission declined to comment on the report.


    The paper noting that there were "marked differences of view within the troika, particularly with regard to growth projections." While the growth projections were wildly incorrect, Greece still had to meet the same targets of cutting its deficit. In fact, "The fiscal targets became even more ambitious once the downturn exceeded expectations."


    The IMF had originally projected Greece would lose 5.5% of its economic output between 2009 and 2012. The country has lost 17% in real gross domestic output instead. The plan predicted a 15% unemployment rate in 2012. It was 25%.
    Slowing the pace of austerity would have helped Greece's economy, but wasn't politically possible, the fund said.


    "While earlier adjustment of the targets could have tempered the contraction, the program would have then required additional financing," which neither the IMF nor euro-area governments were prepared to give, the document said.


    [In other words, when revenues failed to meet expectations, cuts were increased so the goal in debt reductions were met. So as the economy failed, more and more taxes and cuts were forced, setting the economy into a death spiral.]


    In Athens, the left-wing main opposition party, Syriza, said the country's conservative-led coalition government should seek a swift change of course following the IMF's admission.


    "We should immediately abandon these harsh austerity policies that have brought the country to the brink of a humanitarian crisis. These policies are not working. ... The dogmatic insistence in pursuing these policies should end," Syriza spokesman Panos Skourletis said.


    "This also provides the government with an additional argument to seek the cancellation of a portion of the debt _ we are talking about the debt held by the official sector." [That's the ECB - good luck with that!]


    Two interesting questions here are 1) WHY was this report released, and 2) WHO released it?


    It clearly attacks the credibility of the IMF, and the European Commission. It calls for the ECB to accept a haircut on its loans. Something the ECB cannot do without changes in the law. It seems that the intent of releasing the report is to undermine confidence in the crisis management abilities of the IMF, the European Commission, and the ECB. Why would the IMF release something that confirms it's leaders are liars??


    My first guess is the report was released as an attempt to provide support for a rapid approval of a European Monetary Union, something that Merkel recently came out against pursuing at this time. If that was the motivation, I suspect it will backfire as the report described the existence of the Bank Risk Transfer to Taxpayers Mechanism. Taxpayers should be enraged that their government and its representatives are covertly backing up high-risk, high-profit investments by banks and effectively passing the risk but not the profits to the taxpayers.


    Anyone have any other thoughts on why this report was released and who was responsible for that release???
    6 Jun 2013, 03:46 AM Reply Like
  • I am sure that it is to get laws changed, but not sure it's limited to just the creation of of the EMU.


    Countries like Germany has always hated Greece for their relaxed atmosphere, low taxes, early retirement and vacations have cost German corps money to match it. They got their revenge and raped them of public assets in the process.


    It was all a plan once the dominoes started to fall. Just like a conspiracy .. it became just too easy an opportunity to pass up. Greece had gotten out of hand with free money & debt, but so did the rest of the EZ, France should be in the mix too.
    6 Jun 2013, 05:05 AM Reply Like
  • Oops, we just raped you, Greece!


    So sorry. Can we kiss and make up now?
    6 Jun 2013, 08:57 AM Reply Like
  • Bail out the banks at the tax payers expense. Sounds like the same game plan in use everywhere except Iceland.
    7 Jun 2013, 04:18 PM Reply Like
  • 9:59 AM KKR enters the European property market, making its first purchases - 3 U.K. shopping malls for £112M, the cap rate apparently being 6.5%. The properties were originally nearly sold to Starwood Capital for about £125M. [Financials] Comment!
    6 Jun 2013, 10:44 AM Reply Like


    Germany's opposition Social Democrats demanded that Chancellor Angela Merkel come clean about the risk of losses on government loans to Greece before a looming election, after the IMF said Athens may require additional debt relief as early as next year.


    Carsten Schneider, budget expert for the SPD in parliament, accused Merkel and her Finance Minister Wolfgang Schaeuble of being dishonest with voters by trying to push back a discussion of Germany's exposure to Greece until after the September 22 vote.


    This is supportive of an interpretation that the strictly confidential IMF report was released as a means to negatively influence Merkel's reelection chances by uncovering the risk of loses on German government loans to Greece.


    Furthermore, I suspect the French under Hollande were behind the release.


    Hollande is arguing that eurozone countries should combine their political and financial resources to eventually create a common government with a budget, the power to tax, and the capacity to borrow. He favors easing back on debt reduction measures to help the French economy grow while keeping his socialist programs intact. But Merkel has so far dismissed pooling public finances for fear that Germany would end up paying for financially weaker countries' [like France] mistakes.


    Merkel has particularly singled out the importance of economic and labor reforms in France and has recently come out against a rapid implementation of a deeper monetary union.


    I find it interesting that within five days of Merkel 's announcement that she was against a rapid implementation of a deeper monetary union at this time [], and her insistence that France must make the economic and labor reforms they promised [ ] that a "strictly confidential" report highlighting the real possibility of losses on German government loans to Greece is made public. Hollande and his policies are in deep trouble, and Merkel not getting elected removes a powerful source of opposition to his plans.


    6 Jun 2013, 12:07 PM Reply Like
  • Merkel (and her own party, less the Bavarians of course) is a fan of USofE ideas, as is Hollande, but she cannot (because of the Bavarians of course) operate too openly toward that agenda without splitting her own party down the middle and wrecking their chances of maintaining power (or even being a large 2nd chair when the Left/greens win come September).


    This is electioneering as well... With an outside "ally" meddling in German elections.
    6 Jun 2013, 12:12 PM Reply Like
  • "Hollande is arguing that eurozone countries should combine their political and financial resources to eventually create a common government with a budget, the power to tax, and the capacity to borrow."


    Hey guys, let's gang bang Greece and Cypress!


    Oh and isn't Latvia looking hot today!

    6 Jun 2013, 12:57 PM Reply Like
  • I wonder how much Latvia wants to borrow once it's in.
    6 Jun 2013, 04:44 PM Reply Like
  • Rattie, kudos on pulling together the above update on the IMF, etc.
    Many thanks for your fantastic summary. I have a hard time following it and grasping what it all means, and this sure helped. (Until I walk away from the computer and forget again...)
    6 Jun 2013, 06:45 PM Reply Like
  • >OG


    It gets MUCH worse as you get older.
    6 Jun 2013, 07:25 PM Reply Like
  • Author’s reply » The German constitutional court is reviewing the ECBs OMT bond-purchasing program. However, it's been pointed out that the OMT has no legal terms sheet.


    I would think the legally binding terms of the OMT would be needed to make any kind of favorable ruling with respect to the legality of the OMT within Germanys constitutional guidelines. I don't see how the court can do anything but delay the proceedings here [kick the can]. Any other action could be quite telling.
    11 Jun 2013, 02:01 PM Reply Like
  • Yes, I believe you are correct, FPA. Its embarrassing, really. The prime mover for the US of E effort cannot make the necessary changes to their internal legal framework because the ruling coalition also includes the German nationalists, who would tear the government apart if this was done.


    Again, I agree, this will be delayed so that the coming Left/Green administration can handle the reorganizing of the German constitution along US of E lines. The Bavarians will still throw a fit, but from a position safely distanced from the seats of power.
    11 Jun 2013, 02:17 PM Reply Like
  • Greece is apparently closing down (at for a while) their version of the BBC. I find this amazing considering that for oppression to have a chance, the state must control the media. It appears to have employed about 2700 union employees, which is also amazing, because the lack of separation between union and state, is often the last union to be broken.
    11 Jun 2013, 02:19 PM Reply Like
  • You're right, jhooper. It just shows how truly screwed up the Greek government really is. Throwing away their primary method of BSing the myrmidons has the rotation for the lifeboats inverted.
    11 Jun 2013, 02:23 PM Reply Like
  • Author’s reply » Yesterday, the Greek government pulled the plug on its ERT, the Greek national broadcaster (public funded TV). When the ERT reopens, they will reopen with drastically reduced staff.


    Samaras, the New Democracy Conservative leader, took the action over the objections of his coalition partners, the PASOK Socialists and Democratic Left (DIMAR) who weren’t notified until earlier in the day.


    The Greek media knew that Samaras had discussed the closure of ERT with several close advisers and government officials and saw the move as one that would show his determination to carry out the structural reforms being demanded by the Troika. [Troika officials immediately left town on the news.]


    Sourced leaked that the premier brought up the issue with his coalition partners, PASOK and DIMAR and that they REFUSED to give their consent for ERT to be closed down even though Greece has promised the Troika it would sack 2,000 civil servants this summer, 4,000 by the end of the year and 14,000 by the end of 2014.


    The ministers from the two junior parties did not sign the legislative act published in the Government Gazette yesterday allowing public enterprises to be shut down but can do nothing about it, leaving them no where to turn unless they decide to walk away from the coalition, which would bring down the government. They have previously said they wouldn’t do that.


    The announcement prompted terse responses from both coalition partners, who said they had not been involved in the decision, and sharp criticism from opposition parties. PASOK said in a statement that the party supported “bold and genuine reforms” but opposed “irresponsible and dangerous public relations stunts.”


    PASOK also slammed New Democracy for sidelining the junior partners. “A coalition government comprising three partners cannot function through faits accomplis,“ adding that “important matters must be decided by all party leaders.”


    DIMAR issued a statement saying that it “radically disagreed” with the closure of ERT, adding that it was “inconceivable” for a European country not to have a state television channel, even for an hour.


    SYRIZA leader, Alexis Tsipras, called on both coalition partners to take “a clear position” on the move, which he described as “a coup d’etat” and said his party was considering bringing a censure motion against the government if it goes ahead with the closure.


    [Considering bringing a censure motion??? It’s long past time to throw this Troika puppet out on his ear. ]


    From: Theguardian:


    Greek coalition in disarray after state broadcaster's closure


    Greece's fragile coalition government is in disarray after the prime minister tipped the country into an unexpected crisis following a decision to shut down the state broadcaster with immediate effect to meet bailout austerity measures.


    The draconian move on Tuesday night, designed to prove that the government was serious about tackling the bloated public sector, has left the Greek public in shock, leaving 2,700 unemployed and prompting two general strikes planned for Thursday.


    Thousands of protesters gathering overnight outside ERT's headquarters in Athens and journalists inside defied government orders to stop operations, occupying the building and keeping a makeshift news service going on the internet. "This is a blow to democracy," said ERT newsreader Antonis Alafogiorgos at the end of the main TV station's final broadcast on Tuesday night.


    From EBU director general, Ingrid Deltenre:
    "In every country where the troika have turned up, the public service broadcasters have been put under enormous pressure ... they push governments to something and the result is wrong," she said.
    I am in total agreement with Ingrid Deltenre. The EU Troika wants to control the news outlets. They have attempted to gag journalists all over Europe. It’s long past time for the Greeks to stop these Financial Fascists.
    12 Jun 2013, 03:37 PM Reply Like
  • "It’s long past time for the Greeks to stop these Financial Fascists. "


    Hey, if you are going to make a deal with the Devil, you better be ready to dance to his tune. This is always the case. If you want gov rationed healthcare, you better be ready to accept it when they tell you a major public official needs the pace maker instead of you. You better be ready to only eat the food they tell you to eat, get up and exercise when they tell you to, and be ready to watch your children die from lack of medicine because gov union official was on break when it was time to order more medicine.


    The people of Greece sold their souls to the unholy alliance of politicians and gov unions. The Greeks had their souls sucked out, and now they want the rest of Europe to pony up. That of course comes with strings, and now they are shocked that the strings are attached.


    The ONLY solution for Greece (and for any group of people in the world for that matter) is to abandon an economy that hopes the use of coercion will trump the realities of natural law. The coercive economy is polluting all the markets of the world, and if Greece actually had the intelligence to abandon these failed policies and use their gov only to protect property rights, then Greece would become the haven of capital and labor for the entire world. Exponential prosperity would reign, instead of trickle down entitlements and redistribution. Productivity would soar, and so would the Greek standard of living.


    Then they could leave the EU, and eventually the EU would come begging to them. Then the Greeks could turn the tables and dictate terms to the EU.
    12 Jun 2013, 04:08 PM Reply Like
  • Maybe I am minimizing this in my mind, but it doesn't mean there is no greek television, right? It's not a total black out, Just not the state run channel, and that is temporary.
    I realize this isn't like stopping the funding for PBS which is not government run, but why can't the Greeks get tv coverage outside of the state run programming? Who needs state run television, anyway? Don't they have to cut costs for real? Why shouldn't a public broadcasting operation get cuts?
    12 Jun 2013, 04:21 PM Reply Like
  • Author’s reply » Well lets first look at the act itself. I don't know of any democratic government that could pull the plug on their countries national broadcaster without any discussion with the leadership of the different political parties and open discussions of the proposed action in the press. It’s a public broadcasting company paid for by the people. Where is their voice in the decision process?


    This is not the action of a democratically run government; it’s the act of a totalitarian government.


    The dictator that did this can argue all he wants about how wasteful the operation was. But the primary point is that a democratically elected president does NOT have the authority to make that kind of unilateral decision. And if he does not understand that concept, than I argue he needs to be removed. This action needed to be vetted by the people’s representatives, such as they are. The dictator did not ask his collation members for their approval because he knew he was not going to get it. So he made the decision on his own. You don’t do that in a democracy.


    Watchdogs of democracy:
    Yes, the Greeks have access to other sources of TV and Radio. But that is not the point. Public broadcasting is one of the important pillars of a free society. Here is what the European Broadcasting Union had to say on the subject.


    The European Broadcasting Union (EBU) expressed “profound dismay” on behalf of Europe’s entire public service media community at the developments.


    In a letter sent to the Greek Prime Minister, Antonis Samaras, the President of the EBU, Jean Paul Philippot and the EBU Director General, Ingrid Deltenre urged Samaras “to use all his powers to immediately reverse this decision”.


    According to the EBU, the existence of public service media and their independence from government lie at the heart of democratic societies, and therefore any far-reaching changes to the public media system should only be decided after an open and inclusive democratic debate in Parliament – and not through a simple agreement between two government ministers.


    In the letter, the EBU stresses the importance of public service media as an essential pillar of democratic and pluralistic societies across Europe.


    The EBU President and DG go on to highlight that “While we recognise the need to make budgetary savings, national broadcasters are more important than ever at times of national difficulty. This is not to say that ERT need be managed less efficiently than a private company. Naturally, all public funds must be spent with the greatest of care.”
    Abuse of Power:
    YES, the current operation was wasteful, and it's unlikely that the current operation was fulfilling the watchdog role. The problem here is that the action taken was a clear abuse of power. That is the fundamental issue. The dictator demonstrated that he thinks he is not bound by democratic principles. Actually, that might be true in today’s Greece. But to openly deify the illusion of democracy.... that’s a direct insult to every Greek citizen. It illistrates a gross errror in judegmet.


    Of course, I am biased in my opinion here. To me, membership in the EU represents a loss of democratic rule. I have been against the transfer of investment risks from European banks to peripheral country taxpayers all along. I have openly labeled the EU as a financial tyranny. I said all along that the Greeks should have defaulted and gone through a proper bankruptcy. I think that action would have been better for the Greek people. So anything I say on this subject needs to be examined for my anti-EU bias.
    12 Jun 2013, 05:41 PM Reply Like
  • WELL SAID!!!
    12 Jun 2013, 06:03 PM Reply Like
  • we all agree good job
    12 Jun 2013, 07:35 PM Reply Like
  • "Where is their voice in the decision process?"


    They gave that up when they decided long ago to let Greece become a facist country. The ultimate expression of democracy is special interest. They fell for the old bromide of "family", "the collective", "the common good", and they got what you all ways get when you fall that false advertising - concentrated benefits and diffuse costs. You create the situation where you sell your liberty for security, and you wind up with neither. So the Greek facists have just been overtaken by even better facists. If they had just focused on a free market all these decades, the EU would be begging them for a bailout. Instead they got suckered by the false advertising of people who promised to wipe out false advertising, and now they are paying the price.


    As long as Europe lets people in gov try to regulate the economy, their crisis will never be over. People in gov have no idea how to regulate an economy. They can't provide guard rails or limits or long term goals, all they can do is subsidize consumption (theft) which will just result in booms followed by busts. They will never come up with some super special formula that will some day perfectly spread the wealth and solve all their problems. All they are going to do is move from crisis to crisis while the rich get richer and the poor get poorer. That's the only outcome for a gov regulated economy, because gov's rely on force, and force can only be used to transfer wealth or to defend against wealth transfer. It can't be used to create wealth.


    This blog should be called the "Perpetual Instability of Europe, Whether Unionized or Not".
    12 Jun 2013, 09:29 PM Reply Like
  • Yes, Rattie, good job. I did a little reading up on Greek TV after your original post. Most of the TV is state sponsored. There is some cable but the free TV is state run and the government is slow to issue licenses for alternatives. There is some local, terrestrial television in Greece (doesn't use satellites, it uses radio frequencies.)
    12 Jun 2013, 09:04 PM Reply Like
  • OG: I was about to make a similar point. There is PUBLIC television which is sponsored by donations from individuals and corporations. Then there is GOVERNMENT television which is tax supported (you have NO choice as to whether you pay for it).


    If the paychecks are written by any government entity then it is GOVERNMENT television. Not something I would want to pay for with my taxes. Government-in-power propaganda is so easy in those cases. Failure to report on events that are embarrassing to the government is even more likely.
    13 Jun 2013, 10:36 AM Reply Like
  • Actually I believe the bulk of what we call "Public" TV is indeed paid by government, at Federal, State and even Local levels. The constant fundraising just adds additional monies from private individuals and corporations to the kitty.


    The fact that this creates the mistaken impression that government does NOT control Public TV is perhaps even worse than a situation where it is paid straight from the public purse only, is under the complete and open control of the Government, and everyone knows this...


    And can discount everything coming from it as suspect and likely self-serving agitprop.


    LOL, if the Greek government had any smarts, they would have emulated NPR and sucked in corporate and private (even international) donations to fund it, while retaining control as needed by their agenda. Yet another bit of evidence of just how clueless they really are.
    13 Jun 2013, 11:07 AM Reply Like
  • Corporation for Public Broadcasting


    >>The CPB's annual budget is composed almost entirely of an annual appropriation from Congress plus interest on those funds.[3] For fiscal year 2012, its appropriation was US$445.2 million, including $1M in interest earned). The distribution of these funds was as follows:[4]


    -$222.36M for direct grants to local public television stations;
    -$79.87M for television programming grants;
    -$69.18M for direct grants to local public radio stations;
    -$26.65M for PBS support;
    -$22.85M for grants for radio programming and national program production and acquisition;
    -$22.21M for CPB administrative costs;
    -$7.04M for the Radio Program Fund.


    Public broadcasting stations are funded by a combination of private donations from listeners and viewers, foundations and corporations (59.4% of 2010 total revenues of all stations), state and local taxes (21.8% of 2010 total revenues), local and national underwriting, and federal funds, principally through the CPB (15.5% of 2010 total revenues).[5]<<


    The read the next section on Political Composition of the CPB Board:
    13 Jun 2013, 12:15 PM Reply Like
  • Author’s reply » Samaras OK’s Temporary ERT Broadcast
    Hounded by howls of protests within Greece and Europe over the closing of the national broadcaster ERT, Prime Minister Antonis Samaras has reportedly agreed to let information programs resume with a limited staff until a new, pared-down operation begins later in the summer.


    Samaras says “A temporary committee … can be appointed to hire a small number of (ERT) employees, so that the broadcast of information programs can begin immediately.”


    A DIMAR spokesman said his party had rejected similar proposals hours earlier for a compromise operation of ERT until the new station was formed. A PASOK statement also dismissed the prime minister’s proposal. Both minority partners want Samaras to rescind the decree closing ERT, and fully reopen it pending a waste-cutting overhaul.


    The three party leaders are due to meet on June 17 for a crucial session that could decide what happens with ERT and the government itself.
    14 Jun 2013, 07:55 PM Reply Like
  • FPA: They really do seem to be in terminal lock mode. But will the troika REALLY yank Greece's chain when they fail to make the promised cuts? I ain't waitin' up nights for the announcement.
    15 Jun 2013, 01:18 AM Reply Like
  • Rattie, This can not be good for the stability of EZ.


    IMF Tells Greece To Plug Holes Or It Pulls The Plug

    20 Jun 2013, 03:20 PM Reply Like
  • Author’s reply » Thanks for the link Guns.
    First of all, shame on ZH for publishing that chart which implies that todays drop in the S&P was due to the IMF's announcement. Todays S&P drop is far more likely associated with the FEDs announcement yesterday about an up coming down ramp in QE in conjunction with an on-going correction.


    The IMFs announcement is a continuation of their effort to force the ECB and EU big banks to restructure Greek debt level which the IMF knows is unsustainable.


    In other words, haircuts on the bonds held by the ECB and EU big banks. Basically, they are saying they will force the Greeks to default by stopping aid payments in July. This is going to be tough sledding for the ECB because of the German elections.


    I think the most likely course of action will be for the ECB to extend the terms on the bonds (roll them over) and reduce the interest payments. That actually is a kind of haircut, but it’s not an obvious haircut. There is going to be quite a bit of political calculus here as I suspect the EU banks would need capital injections on a roll over with reduced interest payments.


    The interesting question for me is what is the IMF afraid of? Are they trying to prevent a haircut on their loans? I am not clear on the motivation for annoying the tigress.
    20 Jun 2013, 05:07 PM Reply Like
  • FPA, IMO the ECB is afraid of the PIGGS, not Greece. Italy & Spain are still huge and if they let Greece off the hook guess who would demand the same, they can't afford that. Cyprus was the latest example.


    It's sad that they keep destroying the economy over $3 Billion? Once they get everyone else refinanced at zero rates they will run Greece out, they hate them & Cyprus.
    20 Jun 2013, 05:59 PM Reply Like
  • Author’s reply » I think that's a good explanation for the EU's reluctance for doing the rollover LT.
    21 Jun 2013, 01:55 AM Reply Like
  • Hey! It's summertime! What's a summer w/o the EZ heating up?


    Also, China is reeking havoc, in BOTH metals and finance, and I believe today's action was as much about China as it was about tapering, which probably won't happen this year. Quad witch coming tomorrow.


    We may have another 2% drop from here, and then I think the buyers will sweep in.
    20 Jun 2013, 05:16 PM Reply Like
  • Maya, it didn't take long to get a 5% correction and something had to trigger it.
    I almost knew it was coming cause home loan rates shot up 2 weeks ago 1/2 - 1% on nothing. The big banks are getting in better shape now and they all want rates to go higher so they get easy higher profits while they still get free money and ___ forbid they let the consumer have any more cheap money.
    It might help get them back on their feet, pun intended.


    and you are correct that with China & Greece it gave the bears the ammo they needed. We've had a big run, they bulls were ready for a pullback too, question is how much?
    20 Jun 2013, 06:02 PM Reply Like
  • LT: I don't think we're going to fall much more than 2% more (though admittedly, I haven't studied charts like SPX, yet). Too many people and firms out there that are wallowing in cash, awaiting this pullback.


    As Trip and I have been saying for some time, there's sector rotation going on...again.


    Cash is looking really good on days like yesterday and today. But also, if you've been holding onto cash the whole year waiting for a pullback, you've still would have missed an 11% gain, and in certain sectors, a whole lot more gain.


    Months ago I went on yellow alert about China, especially after seeing Leslie Stahl visit China, and seeing a skyscraper city as large as Manhattan in the middle of nowhere, just plain cease being built (and from other sources I've since learned the thieves then started coming in and stealing the copper).


    Relatives of mine who've been in China for the past couple of years, all confirmed Stahl's conclusions.


    China may be more counterproductive to the US markets than Europe for the balance of this calendar year.


    OT: I began reading Tom Clancy's latest titled "Vector Threat" last night, and it was amazing that in the first 40 pages the setting was in Turkey, where 5 murders simultaneously took place, all who were Khadafy supporters hiding in exile, and then China, where the prose spoke largely about China's politburo going ape over spending on infrastructure, and how the real estate boom bubble was beginning to pop. The widely popular leader of China then put a pistol to his head and killed himself.


    How prescient!


    Of course, the person Jack Ryan murdered in Turkey was the most compelling, as he was watching himself on the murdered's computer monitor while doing the murdering. Someone was watching him, and all the other murders were recorded, too. Captivating stuff.
    20 Jun 2013, 06:46 PM Reply Like
  • The PE of the dividend stocks still seem too high to me. The pullback might be more like 10+%.
    20 Jun 2013, 06:57 PM Reply Like
  • SHB: Certainly a possibility. And actually, I'm hoping for just that. Would love to enter into a couple of new long positions, which will have even higher yields with more potential for growth, too.
    20 Jun 2013, 07:03 PM Reply Like
  • >SHB


    "The PE of the dividend stocks still seem too high"


    I agree with your thought, however with the 'new normal' in interest income I believe the bidding will keep dividend yields lower than in days of old along with commensurately higher PEs.


    I don't think 10 year Ts will change much in the next six months so 2.25-2.3% makes dividend stocks look pretty good at their current levels. Maybe a bit of ups and downs allowing for corrections but with a subtle tilt up in the end.


    Windwood Trader
    24 Jun 2013, 08:38 AM Reply Like
  • Author’s reply » Here are my thoughts:


    We just started a certain kind of price corrective process. Based on my analysis of 30 years of S&P data, these types of corrections almost always occur in multiple waves spaced over several months. In other words, you don't get one down pulse, you get multiple down pulses with partial recoveries in-between.


    In addition, we have an up-coming QE taper/off event. In the past, the QE on - off effect started with the announcement, not the actual on - off event. In addition, the market does not suddenly correct after a QE off event. The down trend is spaced over a substantial time period.


    We also have what appears to be a liquidity crisis in China. I have no idea of the effect of that on our markets, but I would think it will increase market variability, and might move funds into dollars.


    Than we have the EU. Greece was just discussed. What was not discussed was Cyprus. Cyprus just sent a letter to the EU saying they want the terms of their bailout modified. So that mess is also up in the air.


    Finally, the EU appears to be going deeper into recession. Just a few days ago it was noted that European car sales dropped to a 20 year low. The economy goes as car sales go. If the EU goes deeper into recession, it has to hit our economy.


    My takeaway:
    All of these situations suggest we are in for some significant volitality. I doubt we will be hitting bottom in the next month. When QE is removed, share prices will be based on earnings.


    I can see making money playing the pulses, but a lot of price movement occurs after hours, so it's a dangerous game. Frankly, I am not a good enough trader to play that game.


    The model I have gave me advanced warning of this correction. As a result, I got out high and am now sitting on cash. I am taking a watch and wait posture.
    20 Jun 2013, 07:50 PM Reply Like
  • FPA, the last paragraph is me too. Especially watch & wait. Banks wanted interest rates up, and Big Ben wanted to cool the stock mkt, and housing off just a bit. He got his wish without making any changes, rumors did it and he can fix it with a press conference.
    He's in the drivers seat. If he were to leave, Kaos could happen.
    20 Jun 2013, 08:21 PM Reply Like
  • "In addition, we have an up-coming QE taper/off event."


    Maybe not.



    There almost seems to be a concerted jawboning effort going on here. It seems to me the Fed is using jawboning to test the markets. So they talk up QE tapering, and if the market sells off, they come back and say, "just kidding".


    Also, the Fed's predictions of economic growth and inflation still show quite a bit of weakness. It sounds as if BB is out in Jan, and the likely candidate seems to be Yellen. Yellen really wants to print, and she has been talking about the "Quit Rate", which hasn't gone up for a long time.


    So, all this tapering talk, may be just that, talk. Its just the Fed testing the waters, and at the same time, talking down commodity prices. Germany wants its gold back, and it appears the Fed doesn't have it. So to get it, they have to buy it up, which would drive the price up. If you can talk it down, then you can buy it at cheaper prices, and thus not fear having anyone notice a jump up in price when you buy so you can deliver to Germany.
    21 Jun 2013, 08:55 AM Reply Like
  • Jawboning?


    Or Vanna Hilsenrath gettin' the job done?
    21 Jun 2013, 04:13 PM Reply Like
  • FPA: Thanks for your viewpoints. I'm in no way eager to dive full tilt back into the markets. In fact, I pretty much want to not make any new investments for a least a couple of months.


    Did buy some Royal Bank of Scotland preferred yesterday, but that's about it for now, excepting the LINE play, which has in my opinion dynamics that made sense to add to the position in front of a rather controversial acquisition, only to chop the position back in half at a later date (my only stock that was up today!).


    Over in QC we've been talking about a choppy summer ahead for months. Nothing has changed my mind toward that respect. In fact, things may be more choppy than I had previously thought. But I still don't see a big correction coming, or that we're in a 20% correction right now through the summer.


    We need a wash out, a cleansing, as the markets have come too far too fast. Almost every year has a 10% correction, and I think you're right, that it will come in waves. We're in wave one now. And overall, measuring the whole wave process, we might go down 12 or 13%, but not 20%, because the FED sugar spigot isn't turning off just yet.


    Always a pleasure to read your insights. And I'm glad your in cash.


    Sell in May, looks like it was the right play.


    20 Jun 2013, 08:34 PM Reply Like
  • Here is what I heard at a Schwab on-line trading event on macro-economics yesterday, so I throw it out here for you since you are addressing the EU and the drop yesterday:
    The VIX (which actually reflects options writing=hedging by institutions on the S&P and is not the "fear index" reflected by the press) hardly moved at all on Wed during the first leg down, and moved just a little on Thursday. That means one of two things: either the institutions were not prepared for yesterday's action, or they were not part of it much for lack of concern that the downturn would be ongoing. Tonight, Europe is up, Asia is mixed but better, gold is up and US futures are, too.
    21 Jun 2013, 04:24 AM Reply Like
  • I find this interesting, but ever since the TVIX sorta went bust the VIX has not been as relevant.
    IMO, the big boyz on Wall St. have been hedged with individual stocks like Apple, Gold & Silver shorts, utilities, and other single stocks or sectors. So they arn't interested in the VIX. Short term traders can do the index ETF's.
    I sorta agree with Maya on the correction not going too far. But, the sleeper I still think is Bernanke quitting and also what happens to preferreds and muni's. Did Schwab say anything about this ?
    21 Jun 2013, 05:09 AM Reply Like
  • New rules for the rating agencies when rating the EZ. Just Bizarre, imo.
    No, the Schwab talk didn't really address preferreds or munis or Bernanke's retirement from the Fed.There was some talk about interest rates in general, but mostly in relation to elevating the inflation rate to 2%+/- and reducing unemployment to 6.5% +/- and the probable time line.
    Re: VIX: I wasn't talking about institutions trading the VIX. I was talking about the fact that they didn't write additional hedges, so the VIX didn't move much--still pretty low volatility despite yesterday's very bad day.. Sorry if that wasn't clear. Hope this explanation helps. You are right, as a metric the VIX is not particularly reliable, LT. I think that Schwab lecturer said it doesn't move around 80% of the time!
    Re: Silver falling to $12.-14--that is further than the tea leaves say on the charts, but it certainly is possible. Last time silver was falling like crazy I took small nibbles every time it fell through another dollar from the $13 area all the way down to $7. It worked then--in a few years it was up near $40. But who is to say that will happen again?
    21 Jun 2013, 07:08 AM Reply Like
  • I am confused by the comments about the VIX. It was up 23.14% yesterday.



    Am I missing something?
    21 Jun 2013, 07:09 AM Reply Like
  • Yeah, take a look at the five day chart and press the line so you can see when it starts moving. According to this Schwab lecturer (I don't remember his name) the VIX was slow to respond to the fall yesterday. It certainly looks that way from the day before. it had very little activity despite the fact the market was already falling. The real push came in the afternoon yesterday, and even then it is fairly low volatility. Not a lot of participation is what he was saying. I don't think he just reads the chart. I think he looks at volume and open interest numbers and what kind of hedges are being put on.
    21 Jun 2013, 07:33 AM Reply Like
  • The big move yesterday was at the open (@2 points up) and then another 2 point jump began at 2:00. That is what I saw and why I believed it was a big day for the VIX. Are you looking at VXX or TVIX by chance.
    21 Jun 2013, 07:46 AM Reply Like
  • OT, PM's ... IMO gold still has a ways to go down, maybe a lot.


    Real question is Silver, it dropped below $20 yesterday. How low do you think it will go and where to start buying ?
    I am think $12-14
    21 Jun 2013, 05:53 AM Reply Like
  • Author’s reply » The VIX increased by 23% on Thursday. It had to increase by a large amount because as you point out, the VIX is mostly a measure of current volatility. The consensus is that the VIX does not have much predictive value regarding future market movements.


    Re the economy, it was just reported that the St. Louis Fed's James Bullard says the FED's own Summary of Economic Projections marked down its assessment of both real GDP growth and inflation for 2013, and yet simultaneously announced that less accommodative policy may be in store.


    So the FED is planning to taper QE even though their own economic projections point to a weaker economy.
    21 Jun 2013, 07:10 AM Reply Like
  • Thanks Rattie, Concerning the VIX, I thought I was losing my mind or something was wrong with the copper colander. That stuff on the fed is very frightening because it seems to indicate they intend to taper NO MATTER WHAT. That could be very.... ummm, shall we say exciting times in the market!!!
    21 Jun 2013, 07:18 AM Reply Like
  • The consensus is that the VIX does not have much predictive value regarding future market movements.


    I think the reason for that is because volatility can be either up or down. One never knows the direction for sure but it will be volatile is all the VIX will tell you. For those who remember this term, the VIX just lets you know it will be an "E" ticket ride most likely with both ups and downs.
    21 Jun 2013, 07:23 AM Reply Like
  • Re: VIX


    Cramer had a nice piece on the VIX/S&P correlation on his 21 June Mad Money report. His piece concentrated on the VIX as a confirmation of a reversal.


    This link is from my Twitter link grab so it may or may not work-



    22 Jun 2013, 08:26 AM Reply Like
  • Cramer has went from totally bullish to totally sour on the mkt. after Bernanke this week. He has an article on Mad Money that says he would rather be a seller now.
    He really doesn't trust how bad this correction may be without stimulus or with tapering. He thinks the global economies are not ready and shock waves will be felt globally.


    I know most are not fans of him, but he has been right more than wrong on this.
    Combine this with my post down below....lot's of big world moves going on to pressure us into succumbing to what the big boyz want which is more and more risk free returns that favor them.
    22 Jun 2013, 08:50 AM Reply Like
  • OK- but that is not what Schwab guy said. I am probably just not explaining it clearly enough and I am sorry for that.
    He said he does not view it as a "fear" indicator so much as an indicator that the institutional investors are hedging the market, and that those institutional investors did not do all that much hedging yesterday(until it picked up in the afternoon. Despite the VIX increasing by over $3.00+) It does not measure retail investors response at all. He thought it wasn't a particularly large move considering that the DOW was down over 300 points.
    21 Jun 2013, 07:47 AM Reply Like
  • That makes sense. Most retailers do not mess with options so its folks like you OG and the institutional investors that create the VIX indicator.


    Obviously we need you to get up and get your coffee and start trading before 2PM from now on. Would it help if I had coffee delivered?
    21 Jun 2013, 07:52 AM Reply Like
  • Yes, please. I'll take an Irish coffee, please. Let's put some whiskey into that brew.
    . I have no idea what this market is going to do to me today. I have been selling puts that all expire today. Most are below the strike price because of yesterday. I might be owning stock on puts I expected to expire worthless.
    21 Jun 2013, 07:57 AM Reply Like
  • OG, da boyz did this to you, as it was the only way to get you to own stocks ! LOL


    and dg, everyone is confused
    21 Jun 2013, 08:46 AM Reply Like
  • OG, Acceptable?



    And a song to go with it, for the NSA, IRS, CIA, SEC and the administration. (Caution--language issues)

    21 Jun 2013, 09:06 AM Reply Like
  • I feel like that leprochaun, except I've got a sign on my back that says "kick me!"
    21 Jun 2013, 10:30 AM Reply Like
  • All the investors have that sign on their back.


    Wonder if we could pose a leprochaun on the white house lawn and another over at the capital building?
    21 Jun 2013, 10:45 AM Reply Like
  • Now for giggles, since this is Friday, where does the market go today. Will folks be worried over the weekend and bail later in the day or buy the dip.


    Since my gut says they will bail in the afternoon my head has to conclude it will be a buying day. I am conflicted as you can obviously see.
    21 Jun 2013, 07:58 AM Reply Like
  • From the way the markets are reacting today it seems we are all conflicted. I guess my gut and head are not alone.
    21 Jun 2013, 11:50 AM Reply Like
  • Are the camera about to be switched back on in Europe?

    21 Jun 2013, 08:42 AM Reply Like
  • getting a 404 error telling me I am lost.

    21 Jun 2013, 09:10 AM Reply Like
  • The link is working now. I was worried I had gotten lost......for the weekend.
    21 Jun 2013, 09:51 AM Reply Like
  • Sell in the morning, buy in the afternoon.


    Weather report for Friday:


    Pop-up Flash Rotations mixed with thunder and lightning throughout the day. Those with thin skins should stay indoors and avoid exposing themselves to the high UV (ultravolatile) conditions.


    5 Day Extended Forecast available soon...
    21 Jun 2013, 08:43 AM Reply Like
  • Whole lot of ugly can happen over the weekend- I think I will just watch the fireworks from the viewing stands.
    21 Jun 2013, 09:46 AM Reply Like
  • That's what I've been doing!
    24 Jun 2013, 02:48 PM Reply Like
    24 Jun 2013, 04:52 PM Reply Like
  • Author’s reply » June 21, 2013 (Reuters) - Greece's small Democratic Left party has decided to pull its ministers from the three-party ruling coalition, a senior party official confirmed on Friday.


    "On the basis of developments and the prime minister's policies [unilaterally closing down ERT], the Democratic Left has decided to withdraw its ministers [two ministers and two deputy ministers in the cabinet] and general secretaries from government," Dimitris Hatzisokratis, a member of the party's executive committee, told Reuters after an emergency meeting of the party's lawmakers.


    They can manage without the Democratic Left, but the departure is a significant blow, making it tougher to pass unpopular reforms demanded by foreign lenders and emboldening the hard left opposition waiting in the wings.


    "The government can't last for long in its new shape. The horse-trading will begin, there will be more crises, they won't be able to push reforms," said John Loulis, a political analyst.
    21 Jun 2013, 08:50 AM Reply Like
  • I am sure this will fix the problems there. Recovery soon to follow./s
    21 Jun 2013, 09:09 AM Reply Like
  • Here is an interesting article on the jump in US interest rates and it's cause w/ a few predictions:

    22 Jun 2013, 06:12 AM Reply Like
  • Blackrock (iShares) sees the ten year treasury at year end around 2.25%- Little changed from now.

    22 Jun 2013, 02:45 PM Reply Like
  • Charts for scenarios of QE3 tapering.



    23 Jun 2013, 08:42 AM Reply Like
  • EU bank bail-out talks deadlocked over saver protection:

    24 Jun 2013, 09:02 AM Reply Like
  • Two stumbling blocks are liable to paralyze the EU for the next 3-4 months:


    1. August. The entire continent (and particularly its leadership) goes on vacation. There will be pressure, therefore, to conclude important business in July, BUT...


    2. September. German elections with much trouble for the current ruling coalition, including inside the coalition between the 2 factions. Note that the critical talks with the EU about easing upcoming emission standards for CO2 (death stroke for Germany's higher end automotive industry) have stalled. Not sure whether this is because everyone is planning their vacation, or because the Brussels bureaucrats correctly believe they can cut a better deal with the new Left/Green coalition which will be running Germany in a few months...
    24 Jun 2013, 09:49 AM Reply Like
  • trip: If you are correct on #2 then German GDP will trend down if the luxury cars are impacted by CO2 legislation. That can't be good for the overall EU economy. Especially if much of the sales come from outside of the EU.
    24 Jun 2013, 12:02 PM Reply Like
  • This will hit their EU sales, but ROW will continue (and we could see a shift of production out of the EU, such as occurred with BMW, Ford and VW bringing facilities to the US).


    Carbogeddon has its downside.
    24 Jun 2013, 12:29 PM Reply Like
  • Indeed! Now Voldemort wants even more regulation especially on coal fired power plants. This of course will lead to higher electric bills for consumers and businesses alike. Unfortunately the consumer will pay for all of it with higher prices for everything. Businesses can pass at least part of the increased cost to customers. Households don't have that option so the costs will be absorbed by less discretionary spending on other things. Does that sound like a formula for growth?
    24 Jun 2013, 05:18 PM Reply Like