MF Global Customers will not receive their money/Greek decision by Monday/ SLV shorts cover 17% of their shortfall/ Moody’s downgrades big Insurance companies in Italy/

Harvey Organ's - The Daily Gold and Silver Report


Good evening Ladies and Gentlemen:

We again started our day with another of those famous raid days.Even though Europe was down badly, the USA markets opened strongly on more juicing of figures.  The precious metals traded up with the algo players as  gold ended the day at $1727.60 up $1.00 by comex closing time.  Silver finished the day at  $33.47 up 8 cents. The attempted raid today was orchestrated for two reasons:

1. the rise in OI in silver with its accompanied silver deliveries
2. the rise in OI in gold.

The bankers allowed the Dow to rejoice with their fudged figures and so they let gold and silver rise with the general markets.

Let us head over to the comex and assess trading.

The total gold comex OI rose by a rather large 7010 contracts from 431,164 to 438,174.  The bankers licked their chops with that increase and their modus operandi was to remove those gold leaves from the gold tree.  With “great” news coming from the employment side, negated that activity and gold and silver rose.
The front options delivery month of February saw its OI fall from 452 to 385 for a loss of 67 contracts despite zero deliveries yesterday.  It seems that the only way that Blythe can remove gold longs is to pay them off with paper fiat bonus money in order to roll to a future month.  The next big delivery month is April and here the OI rose by almost 6000 contracts from 232,679 to 238,603.  The estimated volume at the gold comex was very light today at 162,453.  The confirmed volume yesterday was also tame at 151,273.

The total silver comex continues to baffle our bankers.  Even though silver was down yesterday for most of the day only to tread above the par line at the end of the comex session, saw its total OI rise again by 1749 contracts from 104,872 to 106,621.  These longs are all in very strong hands and it seems that they want metal and they will risk the consequences of a failure a la M.F. GLOBAL to obtain silver metal.
We are now approaching the big delivery month of March  (first day notice Wednesday, Feb 29./2012)
which is less than 2 weeks away.  Here the OI marginally fell from 34,175 to 32,232 as the March players rolled into April and July.  The estimated volume at the silver comex today came it at 52,185 which is fairly decent.  The confirmed volume yesterday was even better at 67,577 contracts.

Now let us begin with February inventory movements  in Gold

  February 16.2012                               :

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
3020 (HSBC)
Deposits to the Dealer Inventory in oz

Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
2 (200)
No of oz to be served (notices)
381 (38,100)
Total monthly oz gold served (contracts) so far this month
2793 (279,300)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month


We had very little activity in the gold vaults today.
We had no dealer deposit and no dealer withdrawal of gold

We only had one customer withdrawal and that occurred at HSBC to the tune of 3020 oz.

The fun begins in the adjustments:

we had an adjustment of 22,238 oz of gold adjusted out of Manfra and into a customer at Manfra.
Manfra specializes in the tiny 32 oz kilobars. It is difficult to say what occurred here. This has been the first
adjustment from Manfra in many years.

There was a second adjustment of exactly 500 oz where a customer leased gold to the dealer at Scotia.
The registered gold (dealer gold) lowers tonight to 2.449 million oz. or 76.17 tonnes

As of yet no gold enters the dealer comex, to take care of the 77 tonnes of gold delivered upon them in November, December and January.

The CME reported that we had only 2 delivery notices filed for today (200 oz of gold).  The total number of notices filed so far this month total 2793 for 279,300 oz.  To obtain what is left to be served upon our longs
I take the OI standing (385) and subtract out today’s deliveries (2) which leaves us with 381 notices or 38100 oz left to be served upon our longs.

Thus the number of gold oz standing in this delivery month of February is as follows:

279,300 oz (served)  +  38,100 oz (to be served)  =  317,400 oz.
we lost another 6700 oz of gold standing to cash settlements.  However, please notice the difference between gold and silver with respect to cash settlements.  In gold it is prevalent, in silver non existent these past two months.


the silver chart: February 16. 2012:

Withdrawals from Dealers Inventory nil
Withdrawals fromCustomer Inventory 790,009 (HSBC,Scotia)
Deposits to theDealer Inventory 596,255 (Brinks)
Deposits to the Customer Inventory nil
No of oz served (contracts) 0  (zero)
No of oz to be served (notices) 187 (935,000 oz)
Total monthly oz silver served (contracts) 585 (2,925,000 oz)
Total accumulative withdrawal of silver from the Dealersinventory this month 2,287,779
Total accumulative withdrawal of silver from the Customer inventory this month  6,491,035

Today we received some silver at the dealer  Brinks to the tune of 596,255 oz.  There was no dealer withdrawal so this silver so far just sits there and did not consummate any deliveries.

We had no customer deposits but did have the following customer withdrawal:

1.  Out of HSBC  7491 oz
2. Out of Scotia:  782,518 oz

total withdrawal by the customer; 790,009 oz

we had two adjustments;

1.  1,045 oz adjusted out of Brinks customer to the dealer Brinks in an apparent lease arrangement.
2.  30,685 oz adjusted out of HSBC dealer back to a customer’s account in a probable repayment of a prior liability.

The total registered silver tonight rests at 35.07 million oz.
The total of all silver rests at 129.1 million oz.

 The CME notified us that we had another zero notice day for the second straight day.  For 5 out of the last 6 trading days we have had zero notices filed.  And again for the 7th straight day we have witnessed the net open interest rise in the options expiry delivery month of February.  Somebody is anxious to get metal and yet there is no metal to give.  The total number of notices filed so far this month remain at 585 for 2,925,000 oz.  To obtain what is left to be served upon, we take the OI standing for February (187) and subtract out today’s delivery notices (0) which leaves us with 187 notices or 935,000 oz left to be served upon.
The raid today was trying to get these longs out of their hair with no such luck.

Thus the total number of silver oz standing in this non delivery month of February is as follows:

2,925,000 oz (served)  +  935,000 oz (to be served upon)  =  3,860,000 oz.
we gained another  280,000 oz of silver standing.
We are advancing in total oz and incredulous as it seems, we may reach 5.0 million oz this month.

Let us now proceed to our ETF’s SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

Feb 16.2012:




Value US$:70,549,272,793.6

Feb 15.2012:




Value US$:71,205,521,752.05

FEB 14.2012:




Value US$:70,754,228,534.78

we  gained 3.02 tonnes of  gold into the GLD London vaults. 

And now for silver Feb 16 2012:

Ounces of Silver in Trust 308,381,076.800
Tonnes of Silver in Trust Tonnes of Silver in Trust 9,591.72

Feb 15.2012

Ounces of Silver in Trust 309,449,951.200
Tonnes of Silver in Trust Tonnes of Silver in Trust 9,624.97

Feb 14.2012

Ounces of Silver in Trust 310,518,841.000
Tonnes of Silver in Trust Tonnes of Silver in Trust 9,658.22

Feb 13.2012
Ounces of Silver in Trust 311,879,302.200
Tonnes of Silver in Trust Tonnes of Silver in Trust 9,700.53

despite the huge demand for silver, we lost another 1.068 million oz from the SLV today.  In 3 days we have lost 3.498 million oz from the SLV.

And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive 4.7 percent to NAV in usa funds and a positive 4.9% to NAV for Cdn funds. ( Feb 16 2012.).
2. Sprott silver fund (PSLV): Premium to NAV rose slightly  to  6.83% to NAV  Feb 16.2012 :
3. Sprott gold fund (PHYS): premium to NAV rose slightly to  3.20% positive to NAV Feb 16. 2012). 

I would like to bring to you, this latest Ted Butler commentary.  Ted Butler received many emails from Blackrock, the sponsor of SLV asking him to stop defaming it and the SLV as to their massive short position. In a little over 2 weeks, the SLV announced that the shortfall is down 9% to 17.7 million oz(shares) from 26.6 million shares/oz. I guess that this was the reason that silver rose from $32 to $34.00.
Ted Butler believes that all of the SLV silver is unencumbered.  My belief is that we have one inventory for 3 entities: 

2. Comex (silver and gold)

(courtesy Ted Butler)


Theodore Butler


February 16, 2012 – 8:19am
In December, I made public an article discussing the short position in the big silver ETF, SLV. At that time, the short position in SLV shares was in excess of 25 million shares and would run up to 26.6 million shares by mid-January. I hold that the shorting of shares in SLV is both fraudulent to shareholders of SLV and is manipulative to the price of silver. That’s because shorted shares of SLV do not result in physical silver being deposited into the Trust and leave the Trust, effectively, with shares not backed by metal to the extent of the short interest. (There is supposed to be one ounce of silver deposited for every share issued according to the prospectus and short selling circumvents that requirement.) Because physical silver is not bought and deposited on shorted SLV shares, the normal price impact of more demand on the physical silver market is also circumvented. That constitutes price manipulation.
As a result of many of you writing to the sponsor of SLV, BlackRock, there were a number of consequences. For one, as previously mentioned to subscribers, within days of the publication of the article, lawyers representing BlackRock demanded, in no uncertain terms, that I cease what they claimed was defamation of their client and my publication of email addresses of top officers. More importantly, another consequence may have revealed itself late last week with the release of short interest data as of Jan 31. The new report indicated that the short position in SLV plunged by more than 35%, or by more than 9.4 million shares, from 26.6 million to under 17.2 million. This is the lowest level of shares held short in SLV in almost a year. The number of shorted shares in SLV is still too high, at over 5.3% of all outstanding shares issued, but at its peak last spring, the shorted shares represented more than 12% of total shares outstanding.
The timeline on all this suggests that the most plausible explanation, at this point, is that BlackRock or someone in position to influence the SLV shorts to reduce their short position, did exert such influence. The sudden reduction in the short position came as prices were rising strongly, something not witnessed previously and also suggestive of an outside influence. Certainly, big future increases in the SLV short position will negate the explanation that BlackRock saw the merits of the allegations against the shorting of SLV and moved to curtail it. For now, however, it looks like the short covering in shares of SLV is as it appears, namely, as a result of the matter being brought to BlackRock’s attention and them acting on it. Thanks to all who took the time to write in.
Potentially, this could be a big deal in silver. Unlimited shorting in hard metal ETFs can have a very negative influence on the price of silver. At two previous significant tops in the silver price, in 2008 and 2011, the short position in SLV was at record high levels. I believe these record short positions in SLV were a strong influence in the price of silver breaking badly on both occasions. Eliminating and then preventing excessive short positions in SLV in the future will eliminate the incentive of large short sellers to rig prices lower and insure that SLV shares are issued in accordance with the terms of the prospectus and have real metal backing.
This is not my first initiative in attempting to influence how the SLV is run. As a silver analyst, the Trust is an important factor in the silver market since it is the world’s leading silver investment vehicle and the largest single stockpile of silver on the planet. Not to focus on it would be a mistake. Back at the end of 2007, after the SLV had been trading for a year and a half, I asked you to write to Barclays (then the sponsor of the Trust) and ask them to publish the list of serial numbers, weights and hallmarks for the bars that were held in the Trust. Up until that time, I had made a big deal about holding silver in professional storage only if you had the serial numbers and weights of every 1000 oz bar held for you. It seemed only fair that the SLV be held to the same standard.
Within a couple of months, much to their credit, Barclays agreed that the full bar list would be published and updated regularly. I believe to this day that only because so many of you wrote to them and because it was a simple and constructive suggestion that aided Barclays and SLV shareholders that Barclays quickly agreed to the listing the bars.
Just like was the case with Barclays, it’s only fair for a tip of the hat in BlackRock’sdirection for any possible involvement by them in the reduction in the SLV short position. Let’s hope it lasts. Let’s also hope that the CFTC follows through and finishes their silver investigation soon. In the meantime, it’s important to recognize that sometimes we succeed in trying to bring about change and that bodes well for the future.
Ted Butler
February 15, 2012


Overnight, European bourses were all in the red as a Greek default is just not priced into the equation.
The Euro/USA cross retreated into the 1.29 handle further shaking up Europe.  The stigma on the banks that use the LTRO financing is in full view for investors as they shy away from banks that use this discount window.  For the first time in over three weeks, Italian 10 yr bonds fell badly in yield as they are now trading at 5.79%.

(courtesy zero hedge)

Overnight Sentiment Sours As Reality Returns

Tyler Durden's picture

While these pages have been warning for about a month that a Greek default is precisely what Europe wants, a self-deluded market has been ignoring this reality. That is no longer the case as the default (pardon the pun) thought is now one of Greek default. As for the assumption that “it is all priced in”… that too is being scrapped as revisionist histories of Lehman come to mind. As a result the EURUSD is drifting ever lower, and has been trading with a 1.29 handle for the first time in weeks. Needless to say, Europe is on the verge of panic as the nearly 2-month impact of the LTRO is now truly gone, and with unmistakable stigma (sorry Jernej Omahen – read this) associated with LTRO banks, we shudder at the thought how many banks will voluntarily subject themselves to being seen as desperately needing European Discount Window access in two weeks. Moody’s downgrade of key insurance companies and threat to cut most banks, has not helped. Finally, some unpleasant news out of China, where commerce ministry said that the trade outlook is “grim” while a research with the Chinese Academy of Sciences said that Chinese EFSF contribution should be capped at Spain’s €92.6 billion, rounds out the rout. So while we wait patiently as reality in Europe truly seeps into risk prices, here is Bloomberg with a summary of overnight catalysts.
  • Bund yields moderately lower, 1.1 to 2.5bps; Treasury yields mixed, with 2-, 3-yr yields higher vs lower further out curve
  • A Greek default is inevitable and the chances of the country being pushed out of the euro are increasing, which could push U.S. 10-year yield to ~1.50%, according to Standard Bank
  • UBS, Credit Suisse and Morgan Stanley’s credit ratings may be cut by as many as three levels by Moody’s
  • Italian bonds fell, driving 10-year yields to 5.79%, a two-week high, as European officials struggled to reach agreement on a financial rescue for Greece
  • PPI probably rose 4.1% Y/y in January, economists estimated before today’s report; Bernanke speaks in Virginia
  • A record rally in European credit markets ground to a halt as the unraveling rescue plan for Greece fueled concern of a default triggering turmoil in the euro region


Last night Moody’s warns of a possible downgrade on many global banks and security firms.
Moody’s stated that they might cut by three notches the likes of UBS, the largest bank in Switzerland, Credit Suisse, and Morgan Stanley. The banks that are threatened for two notch downgrades are the two big French banks, Credit Agricole, and BNP Paribas, together with the largest German bank Deutsche Bank,
the big British banks,  HSBC and Barclay’s and the USA’s Goldman Sachs.  The reason for the downgrades:
Greece and fellow PIIGS nations debt spiraling out of control:

(courtesy Reuters)

Moody’s warns may downgrade global banks, securities firms

Thu Feb 16, 2012 8:27am EST

(Reuters) – Moody’s warned on Thursday it may cut the credit ratings of 17 global and 114 European financial institutions in another sign the impact of theeuro zone government debt crisis is spreading throughout the global financial system.

It was reviewing the long-term ratings and standalone credit assessments of a range of banks, Moody’s added. Markets were unaffected by the Moody’s announcement.

“Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” the ratings agency said in a statement.

It said among 17 banks and securities firms with global capital markets operations, it might cut the long-term credit rating of UBS, Credit Suisse and Morgan Stanley by as much as three notches following the review. It said the guidance was indicative.

Among the banks that might be downgraded by two notches are Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings, and Goldman Sachs.

Bank of America and Nomura were included in those that might be downgraded by one notch.

The U.S. rating agency said in a separate statement its action on 114 financial institutions from 16 European nations reflected the impact of the debt crisis and deteriorating creditworthiness of its governments.

It cited more fragile funding conditions, increased regulatory burdens and a tougher economic environment for its review of banks and securities firms with global reach.

Moody’s salvo follows rounds of downgrades in European sovereign ratings as the euro zone’s struggle to keep its weakest link Greece afloat has been driving up borrowing costs and straining finances of other nations.

Last Monday, Moody’s cut the ratings of six European nations including Italy, Spain and Portugal and warned it could strip France, Britain and Austria of their top-level AAA grade.

Standard & Poor’s cut France’s and Austria’s top ratings and downgraded seven other euro zone nations last month. It also cut the euro zone’s bailout fund by one notch.

Moody’s on Thursday also downgraded the insurance financial strength ratings (IFSR) by one or two notches of several insurance companies, which it said related to their investment and operating exposures to Spain and Italy.

These included Unipol Assicurazioni SpA, Mapfre Global Risks, Assicurazioni Generali SpA and Allianz SpA. It affirmed the IFSR of Allianz SE, AXA SA, Aviva Plc and their subsidiaries, but cut the outlook on the rating to negative from stable.


Asian shares and the euro were weaker on Thursday on concerns about another delay in cementing a bailout for Greece. Traders said markets didn’t not show any specific reaction to the Moody’s announcement.

In its review of European financial institutions, Moody’s said that once completed, the ratings would “fully reflect the currently foreseen adverse credit drivers.”

European banks’ bond holdings of struggling euro zone nations Greece, Portugal, Ireland, Spain and Italy have trapped Europe in a vicious circle.

The falling value of the debt puts pressure on banks, which in turn weighs on lending and economic activity, making it tougher to sustain the growth that governments badly need to shore up their finances.

The biggest single group among the 114 institutions under review were headquartered in Italy, followed by Spain, with more than 20 each. Nine were headquartered in Britain, 10 in France and seven in Germany.

Moody’s said nine of the 17 banks with global reach are included in the list of 114 financial institutions in Europe.

European Union leaders have been trying to put a financial “firewall” around the nations most afflicted by the euro zone debt crisis.

But jittery market sentiment suffered a fresh setback on Wednesday when several EU sources told Reuters that the euro zone was considering a delay in parts of a second bailout plan for Greece.

Moody’s said that for 99 European financial institutions, the standalone credit assessments have been placed on review for downgrade. For 109 institutions, the long-term debt and deposit ratings have been placed on review for downgrade.

For 66 institutions, the short-term ratings have been placed on review for downgrade.

(Additional reporting by Wayne Cole in Sydney: Writing by Tomasz Janowski and Neil Fullick; Editing by Ramya Venugopal)


 Both sides are demanding more concessions as we approach the deadline for the Greece rescue.
The bankers are demanding for budget controls on spending.  With the Greek economy spiraling out of control with unemployment at over 20% and a big drop in GDP of 7%, I doubt that Greece can do anything more;

(courtesy Bloomberg/author James Neuger)

Europe Demands More Greek Budget Controls in Rescue Struggle

By James G. Neuger
(Adds markets in 10th paragraph. )For more debt-crisis news, see EXT4.)
Feb. 16 (Bloomberg) — Europe’s creditor countries struggled to bridge divisions over a rescue of Greece, seeking more control over how future aid is spent as the clock ticked toward a possible default next month. Stocks and the euro fell.
In a replay of the brinkmanship that marked the early stages of the Greek crisis two years ago, euro-area finance ministers extracted concessions from political leaders in Athens intended to pave the way for the endorsement of a 130 billion- euro ($171 billion) aid package next week.
While “further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of program implementation,” Europe is set to make “all the necessary decisions” on Feb. 20, Luxembourg Prime Minister Jean-Claude Juncker said in an e-mailed statement after chairing a conference call of finance chiefs late yesterday.
Greece’s plea for more aid on top of the 110 billion euros awarded in 2010 has stirred recriminations on both sides of Europe’s north-south economic divide, with taxpayers in better- off countries rebelling against further handouts. Each day lost brings Greece closer to a March 20 bond redemption when it must make a 14.5 billion-euro payment or become the first country in the euro’s 13-year history to default.
Greece made “substantial further progress” by outlining 325 million euros in additional savings and providing written pledges from the leaders of its two main parties not to backslide on the budget cuts, Juncker said.
Meeting Conditions
Greece has now met all conditions set by the European Union and International Monetary Fund for the lifeline, Finance Minister Evangelos Venizelos told reporters in Athens after the 3 1/2-hour telephone consultations.
Before the call, Finland and the Netherlands had appealed for the postponement of a new program until elections as early as April produce a full-time Greek government that replaces the caretaker administration, one European official said. In that scenario, the euro area would arrange a bridge loan to get Greece past the March payment, the official said.
“Ultimately the question is whether Greece has political will to sort out their economy and fulfill the conditions,” Finnish Finance Minister Jutta Urpilainen told reporters in Helsinki yesterday.
Juncker’s post-call statement didn’t address the question of a possible interim loan. It indicated that there is no accord yet on a proposal to set up an escrow account to ensure that the aid money goes to paying creditors.
Tensions over Greece pushed the euro down 0.4 percent to $1.3012 at 8:20 a.m. in Brussels. Futures on the Euro Stoxx 50 Index slid 1 percent.
A delayed decision on public support for Greece until after the still-unscheduled election would risk snagging a separate component of the package: a bond exchange by private investors designed to wipe 100 billion euros off of Greece’s debt.
While some German finance officials see the merits of putting back approval of a multi-year aid program until after the Greek election, Chancellor Angela Merkel hasn’t made her stance clear yet, the European official said.
Merkel’s Concern
Buoyed by an uptick in opinion polls, unemployment at a two-decade low of 6.7 percent and European backing for a German- designed fiscal discipline treaty, Merkel has warned in recent weeks of the risks of letting Greece default or pushing it out of the euro.
The leader of Europe’s dominant economy is also under pressure from Italy’s new prime minister, Mario Monti, who has emerged as the spokesman for economically depressed southern European countries struggling against German-imposed austerity.
A former European commissioner who leads an interim government in Rome, the nonpartisan Monti said Greece is being put under unbearable strains and traced the origins of the crisis to moves by prior German and French leaders to soften the euro’s deficit rules.
“The very tough approach being taken toward Greece today may lead us to regard this as being excessive, and it probably is,” Monti told the European Parliament in Strasbourg, France yesterday. “There are no good guys and bad guys. We all need to feel jointly responsible.”
Sarkozy’s Campaign
By twinning fiscal savings with an economic overhaul in Italy, Monti has earned respect in Germany just as Merkel’s chief crisis-management partner, French President Nicolas Sarkozy, plunges into a reelection campaign that polls indicate he will lose.
Greece has squandered credibility by missing targets for deficit reduction, economic reforms and asset sales that were set for the first aid package. As a result, the once-taboo notion of a departure or expulsion from the euro has crept into the mainstream political debate.
In Athens, political leaders responded with alarm to the threats from northern Europe. Early yesterday, Venizelos said wealthier countries are “playing with fire” by toying with the idea of booting Greece out of the euro.
The head of Greece’s second-biggest party, New Democracy’s Antonis Samaras, was dragged into another German-Greek spat when he was blamed by German Finance Minister Wolfgang Schaeuble for holding up economic reforms.
Samaras was defended by Karolos Papoulias, Greece’s largely ceremonial president, a veteran of the anti-Nazi resistance during World War II.
“I don’t accept the ridiculing of my country by Mr. Schaeuble,” the 82-year-old Papoulias said in Athens. “I don’t accept it as a Greek. Who is Mr. Schaeuble to ridicule Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not just our own freedom, not just our own country, but the freedom of all of Europe.”
In solidarity with 11 million Greeks reeling from two years of spending cuts and tax increases, Papoulias said he would work for free, giving up an annual salary estimated by Bloomberg at 300,000 euros.
–With assistance from Rebecca Christie and Jonathan Stearns in Brussels, Kasper Viita in Helsinki and Marcus Bensasson, Eleni Chrepa and Maria Petrakis in Athens. Editors: James Hertling, Ben Livesey
To contact the reporter on this story: James G. Neuger in Brussels at
To contact the editor responsible for this story: James Hertling at


The Greek problem seems to have migrated to the periphery as bond yields for Italy, Portugal and Spain rise.
The delay in the funding of the Greek rescue is playing havoc to the rest of Europe:

(courtesy Reuters)

EURO GOVT-Greek deal delays pressure periphery

 Italian, Spanish yields rise as Greek deal delayed again

* Bunds rally but not seen breaking range just yet

* Spain, France sell bonds as periphery rally fades

LONDON, Feb 16 (Reuters) – Yields on lower-rated euro zone government debt rose on Thursday as officials considered delaying further aid forGreece, heightening fears of a disorderly default if a solution cannot be reached before a bond repayment falls due next month.

Ten-year Italian and Spanish bond yields were both around 5 basis points higher on the day although they were off their highs after Spain completed a debt sale.

Euro zone finance ministers held a three-hour teleconference on Wednesday but failed to agree a second aid package for Athens, putting off any decision on the matter until Monday at the earliest.

Ten-year German Bund yields retreated towards the lower end of this year’s trading range. Traders said there was room to move lower but markets would need to believe a Greek default was imminent to break below the 1.74 percent lows.

“It looks like 1.75 percent in 10-year yields is turning out to be the most likely target now the longer this Greek thing is dragging on and with the Germans still putting up some resistance,” a trader said.

March Bund futures were 31 ticks higher at 139.40, with 10-year yields 3 bps lower at 1.83 percent.

“The mood music around Greece is pretty awful,” a second trader said. “People have enjoyed a good risk-on rally for the first six weeks of the year and are now becoming rather more circumspect.”

Spain sold just over 4 billion euros of 2015 and 2019 government bonds with demand for each of the three lines on offer higher than at previous sales.

“Spreads versus Germany have widened in the past couple of sessions and – in our view – it was one of the key factors supporting today’s auction,” said Annalisa Piazza, market economist at Newedge Strategy.

“Spanish spreads still remain very far from the record wide levels seen in the fourth quarter of 2011 and the recent re-widening must have been seen as a good buying opportunity.”

Spain has raced ahead to complete a third of its 2012 fund raising, supported by strong demand from domestic banks.

“You get the impression banks are using their ECB proceeds but in terms of the key question, which is real money or the broader investor base getting involved, we don’t see that materialising yet,” said DZ Bank rate strategist Michael Leister.


With the peripheral bond rally – fuelled by cheap three-year European Central Bank funds – starting to reverse in the last 10 days, RBS recommends moving from tactical long positions to shorts.

“The periphery should have been rallying more than actually seen over the past week if the carry trade into the (ECB operation) was still huge, and while the short ends remain somewhat underpinned, the absence of further yield compression here is a warning.”

With banks leading the recent rally, a back-up in the iTraxx senior financials credit default swap index in recent sessions was also a warning, RBS said.

France also sold 8.45 billion euros in bonds with maturities of up to five years, finding solid demand, and 1.7 billion euros of inflation-linked bonds, while the Netherlands was in the market with its first five-year dollar-denominated bond.

“This bond offers appeal for those investors who wish to have dollar-denominated assets but have the decreased credit risk that is associated with holding paper of one of the few remaining sovereigns that is rated AAA by all of the major ratings agencies,” Rabobank strategists said in a note.


In the following Financial times (London England) commentary, Samaras did send a two page letter to the EU leaders outlining his commitment to the austerity measures agreed to and voted in the Greek Parliament on Sunday. However, Finland, Holland and Germany were not impressed.  Talks then centered on postponing the elections and putting in a non elected government into Greece along with a bridge loan of 16 billion euros to pay out the bond holders of the March 20 bond coming due.

Peter Tchir in two commentaries below discusses the nonsense of this.

However, first the Financial times article posted last night:

(Financial times/author Karin Hope)

Greek rhetoric turns into battle of wills

The battle of wills between Athens and its eurozone lenders has intensified, with Greece’s finance minister accusing “forces in Europe” of pushing his country out of the euro while his German counterpart suggested postponing Greek elections and installing a new government without political parties.
The tongue-lashing by Evangelos Venizelos, who is expected to stand in April elections as leader of the centre-left Pasok party, came as his government scrambled to meet escalating demands from international lenders that must be met if Athens is to avoid a full-scale default.

Greece took a step closer to meeting those demands when Antonis Samaras, head of the centre-right New Democracy party and the presumptive next prime minister, sent a two-page letter to European Union leaders on Wednesday vowing to implement the austerity measures included in the €130bn bail-out programme.

The letter, which came along with a similar missive from George Papandreou, the former prime minister who remains head of Pasok, was demanded by EU leaders as a condition of the deal. But the letter was received coolly in Brussels, particularly as Mr Samaras reiterated his stance that “modifications might be required” to the programme.

There were signs a group of triple A-rated governments, including Germany, Finland and the Netherlands, were hardening their stance towards Athens. During a conference call among eurozone finance minsters, the three countries suggested they may want additional letters from other smaller Greek parties and openly discussed the possibility of postponing Greek elections.
Ahead of the call, Wolfgang Schäuble, the German finance minister, said in a radio interview Greece might delay its polls and install a technocratic government that does not include politicians like Mr Venizelos and Mr Samaras, similar to the model currently in place in Italy.
Karolos Papoulias, the Greek president, fired back during a visit to military chiefs at the defence ministry: “We are all obliged to work hard to get through this crisis, but we cannot accept insults from Mr Schäuble. Who is Mr Schäuble to insult Greece?
“Who are these Dutchmen, who are these Finns? We have always defended not only the freedom of our own country, but the freedom of Europe,” Mr Papoulias added.
Meanwhile, a poll published on Thursday showed support for Mr Samaras’s New Democracy party slipping, although it would still win most votes if an election were held now. The poll by VPRC for Epikaira magazine put New Democracy on 27.5 per cent, with Pasok on 11 per cent, representing a decline of 3-4 per cent in ND’s share of the vote from previous polls, while Pasok’s share increased by the same amount.

The two parties may form a coalition government to implement reforms after a general election in April, according to analysts.
The three leftwing parties, which oppose Greece’ s second €130bn bail-out, together have the biggest slice of the vote, reflecting popular anger with austerity, but their fractious leaders would not consider co-operating in government, the analysts said.
Further increasing the pressure on Athens, eurozone leaders were preparing to move forward on a debt restructuring for private holders of Greek bonds without immediately approving the full €130bn bail-out. The move would continue to starve the Greek government of funds even as Greece’s private creditors agreed a separate deal.
According to a timetable obtained by the Financial Times, eurozone parliaments would be asked to approve €93.5bn in aid to begin the debt restructuring in a matter of days, but deliberate remaining funds for the Greek government in early March.
“We continue to work under the assumptions of the October programme with the clear intent to help secure financial and economic viability of Greece,” said a senior Dutch official. “But time is running out and we insist that the Greek political leaders help us help them.”
A Greek finance ministry official said Athens had agreed to other demands which lenders want ahead of a meeting of eurozone finance ministers on Monday, including €325m of additional spending cuts, which were made primarily in the defence and local government budgets.


In this Reuters article, it seems that Europe has a total mistrust for Greece and probably rightfully so.

It is hoped that they could begin tomorrow with an agreement on the PSI private bond holders of Greek debt, culminating with the bigger agreement on Monday.

(courtesy Reuters/Dina Kyriakidou, and Leferis Papdimas)

Greece seeks Monday bailout deal, EU questions remain

ATHENS | Wed Feb 15, 2012 6:18pm EST

(Reuters) – Greece expressed hope it can secure its second EU/IMF bailout in as many years and a deal on easing its debt burden next week, but its euro zone peers made clear the months of increasingly ill-tempered argument are not quite over yet.

Finance Minister Evangelos Venizelos said the Greek side had met the final two demands set by the European Union and IMF to seal the 130 billion-euro rescue, which Athens needs to avoid a chaotic default when big debt repayments fall due in March.

But a government official in Germany, which has got involved in testy exchanges with Athens over its will to tackle its problems, said the Greek side still had questions to answer.

Greece pinned its hopes on a meeting of euro zone finance ministers on Monday, after talks in Athens and at the euro zone level failed to produce a deal to avert a Greek bankruptcy which could shake financial markets around the globe.

Venizelos told reporters late on Wednesday the cabinet had decided how to plug a 325 million-euro gap in the 3.3 billion euros of extra budget savings this year which the EU and IMF are demanding.

And he noted that the leaders of both parties in the government of Prime Minister Lucas Papademos had given written undertakings to implement the austerity measures, which provoked a night of fighting, arson and looting in Athens on Sunday.

Exasperated euro zone finance ministers in the Eurogroup had demanded both steps be taken before making a final decision on the bailout.


With mistrust of Athens running high, EU sources told Reuters that euro zone officials had considered whether it was possible to delay part or all of the rescue deal while still avoiding a disorderly default.

Greece needs the funds to avoid bankruptcy when 14.5 billion euros of debt repayments fall due on March 20.

“The big issue of the 325 million euros has been finalised and this helped the discussion,” Venizelos said following a lengthy telephone conference call with his euro zone peers.

The Eurogroup had been due to meet in Brussels on Wednesday but its Chairman Jean-Claude Juncker scaled this down to a teleconference, complaining that Greek political leaders had failed to provide written commitments or plug the savings gap.

Greek party leaders have a reputation for working right up to deadlines, or beyond them, raising tensions with the Eurogroup which fears that they will avoid implementing the austerity package in full after elections expected in April.

However, conservative leader Antonis Samaras, the front runner to become the next prime minister, provided his written undertaking to the EU and IMF on Wednesday shortly before the Eurogroup conference call. Socialist leader George Papandreou wrote a similar letter.

Venizelos said he hoped euro zone officials could tie up all the issues before the ministerial Eurogroup meets on Monday, opening the way for a bond swap deal with Greece’s private creditors, known as PSI, which will reduce its debt mountain.

“These issues will be prepared at a Euro Working Group meeting on Sunday in Brussels so that, with good faith, the final decision for the approval of the (bailout) programme is taken and the public announcement of the PSI is made on Monday,” he told reporters.

Greece had said it must initiate a debt swap deal with private sector bondholders by Friday to meet the March 20 debt deadline. It was hoping to win the euro zone’s backing for its second bailout this week. If that backing now comes on Monday, it is possible the debt swap could start mid-next week.


After the three-hour conference call among the 17 euro zone ministers, Juncker issued a statement saying progress had been made, but provided few details. However, he made clear some matters remained open on making sure the bailout plan is carried out in full.

“Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing,” he said.

One government official in Germany, where public opinion is hostile to bailing out Greece, was cautious.

“Questions remain that are very important to Germany and other member states about the sustainability of the programme,” said the official, who declined to be named.

German Finance Minister Wolfgang Schaeuble appeared to question whether Greece would stand by the austerity package after the elections.

“When you look at the internal political discussions in Greece and the opinion polls, then you have to ask who will really guarantee after the elections … that Greece will stand by what we are now agreeing with Greece,” he told SWR2 radio.

Greek President Karolos Papoulias, who holds a largely ceremonial role, fought back, saying: “Who is Mr Schaeuble to insult Greece?”

(Additional reporting by Dina Kyriakidou and Karolina Tagaris in Athens, Luke Baker in Brussels and Gernot Heller in Berlin; writing by David Stamp; editing by Andrew Roche)


In this Peter Tchir release,he describes the latest European/Greek drama as reaching the “pound of flesh”
stage as the European players seem frightened to provide the huge rescue package knowing full well that the new euros supplied will just go down a sink-hole.  The Europeans however are frightened of a Lehman plus 10 event. Here Tchir describes the clueless events shaping the last few days:

1. Delay the implementation of the bailout.
2. Ask for a delay in the elections.
3. Give a 16 billion euro bridge loan to cover the bonds due on March 20.2012  (14.6 billion euros + interest)

He describes the bridge loan as nonsense as this will never be repaid as the money provided will be permanent and not temporary.
Can you imagine the Greek populace storming the Bastille if they delay elections?

He does a further commentary on Apple stock which is over 3% of the S and P as well as a section on high yielding bond paper which has not seen any new entrants.

(courtesy Peter Tchir)

A Pound Of Flesh, An Aapl A Day, Cheap HYG Vol

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From Peter Tchir of TF Market Advisors
A Pound Of Flesh, An Aapl A Day, Cheap HYG Vol
Europe has moved into the “pound of flesh” stage of negotiations.  Everyone just wants to make their point and the probability of a deal is dropping by the day.  Europe is running out of time, and is just clueless.  Yesterday has to confirm that even for the most optimistic person out there.  They decided they should wait until the elections.  Then they realized they had to deal with the March 20th bonds.  Then they came up with a “bridge loan”.  Clearly they didn’t bother to look up the definition of a bridge loan.  A bridge loan is a loan that is meant to be temporary and has such punitive rates over time that the borrower is heavily encouraged to pay it back with new debt.  This is just a “small” loan but one that is permanent and probably never getting paid back.  I’m not sure if they asked the contributors whether they wanted to put up €16 billion which is somehow now “small”.  Then noise came out that maybe Greece just shouldn’t have elections.
The Troika and Greece have been negotiating all this time and no effort was spent on figuring out a plan in the event of default.  They are scrambling to come up with one.  I remain convinced that Greece could do well in default if it is managed properly, but the chances of them doing anything properly is low.
The LTRO and its “infinite” capacity to lend to banks made everyone too complacent.  Somehow the market took the backstop line as meaning bank credit risk was virtually non-existent.  While we thought LTRO provided a lot of value to banks, it is not a cure all, and banks highly levered (stuffed to the gills) with bad loans are not completely safe.  We are seeing a turnaround in CDS spreads for European banks.  They are off the wides of earlier this morning, when the index got to 254 bps but the trend is disturbing.  This is the graph as yesterday.  Today’s move isn’t included, but we are giving up most of this year’s gains and although still much better than pre-LTRO, it is worth watching.  So many people were talking about how “riskless” financials had become post LTRO that this move has to be hurting a lot of people.  They avoided financials in Europe for most of last year, only to pile in near the tights.
I’m not the first person to note Apple’s parabolic move, nor will I be the first to point out that parabolic moves tend to end badly, but it is worth repeating.
It has been on a tear and yesterday had some of the makings of capitulation as it screamed higher in the morning only to reverse and fade hard.  Is that the end of the up move?  Maybe not, but since it makes up about 3.7% of the S&P 500 it needs to be watched.  Financials have been weak for about a week or so, but that move was masked in the indices by the performance of Apple.  Another thing to worry about from the long side.
And finally, let’s look at the high yield market.  HYG just had two days without any new share creation.  That breaks a trend of almost relentless inflows.  Is retail finally done throwing money at high yield?  Without those new flows, the market could be at some risk, especially with the robust new issue calendar.  HYG is trading at a discount to NAV.  I don’t believe it is really at a discount, this is more of a function that NAV is still being marked closer to the offer side of the market in spite of the fact that the market has switched from being well bid, to well offered.
I am being told that many “credit hedge funds” are still sitting on 30% cash or something like that, so there is plenty of money on the sidelines.  I continue to think that the concept of cash on the sidelines for a hedge fund is silly.  They should be having longs and shorts.  They should not just be beta funds (in spite of the fact that many are).  So if a fund is supposed to have long and short ideas, the “cash on the sidelines” argument is foolish.  Also, many funds use CDS, so they may in fact be levered but have cash on the sidelines.  If you write 100 million of IG17 CDS, you only use a couple million of cash (as collateral), but that doesn’t mean you are “underinvested”.  And finally, for the beta chasing funds, it means that they are 70% invested.  So the long biased type funds have 70% of their money invested in a market yielding about 7%.  So in the month of February, their carry would be about 0.625%.  If the bonds drop 2%, they are down about 1% of NAV on the month.  How many of these funds have that tolerance?  Hedge funds always act as though they are levered because they cannot stomach negative months, and really, who out there “loves” high yield when it is providing low yields.
I really like buying puts on HYG.  The implied vol is about half of that of the S&P, and I think a 4-5% move in the S&P will result in a 3-5% drop in HYG, so buy March puts on HYG to play an overall correction, and more importantly a correction in high yield.  The flows are slowing, the market is rich, and liquidity is non-existent.  The street has already done a self-imposed Volcker rule and is not taking much risk, and it is very safe to assume, that the average desk has used whatever risk limits they have to build up a little inventory because let’s face it, they like the carry, and figured they could sell the bonds to the ETF’s as they got more inflows.


Graham Summers, of Phoenix Capital Research, as to what a Greek default might cause:

February 16, 2012
Greece is Not Lehman 2.0… As I’ll Show You, It’s Far Far Worse…

Investors simply do not understand the significance of Greece. Comparisons are being made to Lehman, but these comparisons are moot for the following reason: Greece is a country not a private institution.
This is not a subtle difference. True, Lehman’s derivatives were spread throughout the global financial system just as Greek sovereign debt is. However, investors are missing the true scope of the fall-out a Greek default would create.
First, let’s think about Lehman. When Lehman went under, half of the other institutions that were in trouble had already been merged with larger entities (Bear Stearns, Merrill Lynch) or had been nationalized (Fannie and Freddie). Those that were still standing after Lehman went under, changed to bank holding companies (Morgan Stanley, Goldman Sachs) in order to receive special access to Fed lending or were nationalized (AIG).
None of these options exist regarding the sovereign crisis in Europe today. If Greece defaults, Portugal can’t merge with Spain. And Italy can’t be nationalized by Germany or suddenly change itself to a new type of country that gets special treatment from the ECB (it’s already getting special treatment from the ECB by the way).
This cuts to the core issues for sovereign defaults in the EU. Here are the facts regarding those EU countries on the verge of collapse:
1)   You cannot solve a debt problem with more debt
2)   Austerity measures slow economic growth which in turn makes it harder to meet debt payments
This is simple basic common sense. But these are the policies being promoted by EU leaders: we’ll give you more money if you implement more austerity measures to get your finances in order.
The fact of the matter is that there is simply no way on earth that Greece can get its finances in order (short of amassive default). Greece has terrible age demographics, a lack of economic growth, and cultural issues (e.g. paying taxes is for suckers) that make it impossible for the country to solve its financial problems.
In plain terms, Greece racked up too big of a tab and simply doesn’t have the means of paying it. End of story. The world needs to realize this. Because Greece will default and it will default in a big way,
The impact of this will be tremendous. For one thing, pretty much everyone is lying about their exposure to Greece. Consider Germany for instance. According to the Bank of International Settlements German bank exposure to Greece is only $3.9 billion (though they state this is only on an immediate borrower basis).
This is a bit odd as according to The Guardian German banks have nearly 8 billion Euros’ worth of exposure to Greek debt. And they only include 11 German banks in their analysis. However, of those 11 banks, THREE of them have Greek exposure equal to more than 10% of their total outstanding equity.
But even these numbers are far below the mark. By my own analysis, which I recently shared with subscribers ofPrivate Wealth Advisory one of the “strongest” banks in Germany alone, by its own admission, has twice the exposure to Greece that the Guardian claims. And this is one of the strongest banks in Germany.
So, when Greece defaults, the fall-out will be much, much larger than people expect simply by virtue of the fact that everyone is lying about their exposure to Greece.
Secondly, when Greece defaults, the other PIIGS (Italy, Ireland, Spain, and Portugal) will have to ask themselves… “do we opt for austerity measures and more debt which obviously didn’t work for Greece and will only stifle our economies more? Or do we also default?
That’s a very tough question to answer. But I’d wager more than one of them will opt for default. And if you think European bank exposure to Greece is understated, you don’t even want to know how bad exposure to Italy and Spain is (to give you an idea, the German bank I referred to earlier, again by its own admission, has total PIIGS exposure equal to 60% of its equity).
Folks, the European banking system is literally on the edge of the abyss. This won’t be Lehman 2.0. This is going to be something far, far worse. Some of these countries are already sporting unemployment of 20%. What happens when their largest banks go under?
Also, remember that the EU is:
1)   The single largest economy in the world ($16.28 trillion)
2)   China’s largest trade partner
3)   Accounts for 21% of US exports
4)   Accounts for $121 billion worth of exports for South America
The global impact of an EU banking Crisis will be tremendous. And it’s clear the EU is already heading into a recession without a banking crisis hitting. What do you think will be the impact when Europe as a whole experiences its own “2008” only on a sovereign level?
The answer is: we are literally on the eve of a Crisis that will make 2008 look like a picnic.
On that note, if you have not already taken steps to prepare for the next round of the Crisis now is the time to do so while the system is still holding together.
Graham Summers

This  SocGen article puts everything correctly in its place.  Greece will default as Germany does not want Greece in the Euro zone.
(courtesy zero hedge)

SocGen Sums It Up: “The Time For Patching It Up Is Over”

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While next to impossible, now may be a good time to ignore the constant barrage of meaningless noise and flashing red headlines, which not only are contradictory but prove that Europe is literally making it all up as it goes along. Today is a great case in point of a tangential detour which does nothingto change the reality that Germany no longer wants Greece in the Eurozone (remember, oh, yesterday), and that the ECB is merely playing possum with PSI creditors who will block the deal with even greater vigor than before (anyone recall the FT storyabout the PSI deal being on the verge of collapse not due to the ECB but due to private creditors?) as the ECB’s even bigger subordination will simply make the amount of hold outs even greater. So while algos take the required 12-48 hours to figure out what just happened today, here is SocGen’s Suki Mann stepping back from the endless daily din, and summarizing what is really happening in Europe.
Form SocGen
The time for patching it up is over; Greece looks as if it can no longer stop the seams from falling apart. Restructuring (an economy) in a low (negative) growth environment simply does not work. The prescribed medicine (austerity) has failed; debt forgiveness (PSI) can’t be agreed; and we are heading for debt default. The iterative process which defines the political response on these occasions has been unsuccessful, but the time for reflection will come later. It’s been a tumultuous two years. The immediate investment case now focuses  on contagion and its containment. Now we ask whether we’re really better placed to handle a default – whatever form it takes? Orderly/disorderly, much of the corporate credit universe should come through relatively unscathed, but risk asset pricing will be impacted nonetheless. Technicals of sidelined cash and an opening New Year frenzy have got us here, boosted by ECB manipulation of peripheral risk (sovereign and bank) through the LTRO. However, nearing the end game of the Greek situation now sees us with a different reality. Spreads are moving wider, the periphery is suffering the most, while turnover and secondary market liquidity have fallen off a cliff as evidenced through widening bid-offer spreads. It’s not quite the November phenomenon, because then we had massive selling of French risk in particular, so as long as investors stay with it, the widening should be contained. As ever, we’ll be fighting against the market’s mantra over the past two years, which has been to shoot first and ask questions later.
And nowhere is this mantra more visible than in today’s… actually make that everyday’s EURUSD, and thus ES (thank you 100% recoupling between Euro and US risk) chart.

Now we see new developments on the private swap in the PSI withthe ECB;s 50 billion euros of Greek bonds to be swapped for 50 billion of new bonds and handed over to the EFSF.  It just does not make much sense.Greece still has the same debt as these bonds do not receive a haircut.I guess it will be easier if the ECB has no Greek bonds if they are going to do a forced conversion on bond holders through a retroactivated CAC:

(zero hedge)

ECB To Fund Eurozone Central Banks As PSI Sweetener

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A number of headlines from Bloomberg, via Die Welt, that the ECB will undergo a bond swap on their greek government bonds and the ‘profit’ will flow to governments.

This is absolute delusion. The ECB claims EUR50bn nominal value of GGBs – so likely took a EUR20-30bn loss on this given the prices they bought at under the SMP and the current market price. We explained last week (must-read) the delusional nature of these profits (that will disappear immediatley the new bonds break) and assume this is yet another attempt to make market participants believe they wil help with PSI. However, there is more to this in our humble opinion. Since the ECB says they will distribute profits (which we know are illusory) to governments – it is nothing but a covert attempt to funnel money (think printing) to local government central banks – and the illusory profits here are simply giving away free money. Perhaps the loud screaming over the pain associated with even an ‘orderly’ Greek default is enough that the ECB needs to placate them with some new freshly printed money? For now, the PSI remains in limbo for the hold-out blocking-stake reasons we have discussed at length – if the ECB were to step into the market and buy/swap with hold-outs all of their UK-law bonds at Par (for huge gains to the hedgies) then perhaps we get a deal done – but this would be astounding and leave the rest of the European sovereign debt market disabled as investors pushed for the same deal and vigilantes drove Portugal and then Spain to this point…
No surprise we see this –
Finally, and as before, we issue a formal question to Mr. Draghi to point out just where on the chart below does the ECB book profits on Greek bonds?


Peter Tchir is right up on the Greek bailout.  Here is his assessment of the crazy swap proposed by the  ECB.  He has posted two commentaries on the issue with the second one the more important one on the swaps:

(courtesy Peter Tchir)

Reports Are Either Wrong Or This Is A Bad Deal For Greece

If the ECB switches 50 billion of old bonds for 50 billion of new bonds, what does Greece get?  No notional reduction. Possibly a reduction in interest payments but that depends on the coupons on the bonds the ECB owns. The new bonds allegedly have some covenants and possibly other projections for the bond holders. That is a negative for Greece – they can default on these old bonds and the ECB can’t do much about it.
Maybe the reporter is wrong, but this is a good deal for the ECB, marginal for Greece, but does make it easier to jam holdouts. They can default on old bonds or retroactively CAC old bonds and the ECB won’t be affected.
Will Greece agree to this?
If the ECB is counting the difference between purchase price and par as profits – then it is printing money. Maybe that is enough to get the market higher – a clear sign that ECB is printing.
It is possible that all they are considering as “profit” is interest they have been paid and it is possible that the ECB will exchange their bonds based on purchase price, giving Greece some notional reduction.
This announcement is either marginally good or marginally bad depending on the details. It is not great or a game changer – except maybe the money printing angle.

The following is perhaps the big story of the day as Moody’s cuts the ratings of the huge Italian insurers Generali, and Allianz to negative.Both of these insurance groups did an AIG by underwriting a huge whack of credit default swaps on Greece. There is no way that they could cover the payments if Greece defaults.  If these guys defaults, it will be another Lehman event with these two entities:
(courtesy zero hedge)

A&G’s AIG Moment Approaching: Moody’s Downgrades Generali, Cuts Megainsurer Allianz Outlook To Negative

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For a while now we have said that the very weakest link in Europe is not the banks, not the ECB, not triggered CDS, and not even the shadow banking system (well, infinitely rehypothecated Greek bonds within a daisychain of broker-dealers, which ultimately ends up at the ECB at a negligible repo discount, that could well be the weakest link – we will have more to say about this over the weekend) but two very specific insurers: Italy’s mega insurer Assecurazioni Generali, which at last check had more Greek bonds as a % of TSF than anyone else, and Europe’s biggest insurer and Pimco parent, Allianz, which is filled to the gills with pretty much everything (for more on Generali, or as we like to call it by its CDS ticker ASSGEN read herehere, here, and here). Well, Moody’s just gave them, and the entire European space, the evil eye, and soon the layering of margin calls upon margin calls, especially if and when Greece defaults and a third of ASSGEN’s balance sheet is found to be insolvent, will make anyone who still is long CDS those two names rich. Assuming of course the Fed steps in and bails out the counterparty the CDS was purchased from.
Here is the only chart one needs to know why ASSGEN will likely not be writing life insurance on itself (source):
ASSGEN’s exposure to other PIIGS is far more hair-raising:
Generali’s main risk exposure to sovereign debt outside of Italy include Greece, Portugal, Ireland and Spain. The sovereign bonds are valued at market (accounted as Available For Sale). In aggregate, Generali has €12bn of gross exposure to troubled sovereign debt (excl Italy) and €2.1bn of net exposure (post tax and policyholder participation) accounting for c.14% of TNAV. We have assumed in our analysis that Generali would be able to share the impact of any potential impairments on its sovereign and financial (eg bank) exposures with policyholders given the decline in the minimum guarantees we have seen over the past few years (avg guarantee 2.3% in 2010). In practice the actual allocation will depend on the location of the bonds, the local country profit sharing rules and the level of buffer capital available in those entities (such as the free RfB buffer in Germany).
The Greek exposure is €3.0bn on a gross basis (per year end 2010) and €500m after policyholder participation and tax (based on amortized cost). This accounts for 20% and 3% of 2011e tangible book value on a gross and net basis respectively. We estimate Greek bonds will be valued at an estimated c50% of par based on a 6 year duration at end of 2011 Q2 with an estimated €160m unrealized loss included in shareholders’ equity after policyholder participation and tax. Should the debt rollover discussions be judged a credit event by either the rating agencies or auditors, we estimate that a €160m impairment would be realized through the P&L – assuming the haircut is in line with the market value of the bond. The overall impact on shareholders’ equity would be neutral (as it is already included).
Only if there is an additional haircut on the sovereign exposure that shareholders’ equity would be affected by additional impairments. In solvency terms, Generali includes unrealized gains and losses in its Solvency I and Solvency II calculations and the impairment of Greek debt should already be largely incorporated in our Q2  shareholders’ equity assumptions. Aggregating the main sovereign credit risk exposures outside Italy we estimate this factors in an unrealized loss of €3.2bn gross and €343m net unrealized losses in shareholders’ equity per end of 2011Q2 (see table below). The gap between the gross and net is material but is equivalent to 74bp of traditional life technical reserves. Substantially higher gross losses than those described below might belong more to shareholders than policyholders.
Overall, a write down in line with current marks on the Greek sovereign debt exposure will not have any incremental impact on the solvency ratio of the group as the debt is already included at market value. However, further swings in the value of sovereign debt, Spanish and Italian in particular will continue to affect TNAV and solvency until the situation stabilizes.
And here is ASSGEN’s Tangible Common Equity ratio: 1.25x.Oops


In this commentary, Deutsche Bank describes how Italy has entered its 4th recession in the last 10 years and the total miss in GDP by the government has been around 20% growth.   How on earth can the world think that they can grow themselves out of their latest mess?:

(courtesy zero hedge/Deutsche bank)

Pardon The Interruption, “Debt Crisis To Resume Shortly” Says Deutsche Bank

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While many will point to the drop in front-end Italian bond yields as proof positive that all is well in the still-peripheral nation, we note that today saw 10Y Italian bond (BTP) spreads crack back above 400bps for the first time in 3 weeks and nervously remind readers of the stock market reaction in Eastman Kodak a week or two before its death. Of course, Italy is perhaps not quite as imminently terminal as EK was (thanks to the ECB reacharound) but the excitement about BTP’s ‘optical’ improvement will be starting to fade as banks are underperforming dramatically, we have exposed the sad reality of the LTRO, and now even the short-dated BTP yields are now over 40bps off their tights from last week. Why? Deutsche Bank’s Jim Reid may have the answer that Italy has now been in recession four times in the last decade and while hope is high that the new austere budget will take the nation to debt sustainability, he notes that thecumulative forecast miss since 2003 on GDP estimates is approaching an incredible 20%. As Reid notes, “When debt sustainability arguments are finely balanced and very dependent on future growth the question we’d ask is how confident can we be that economists’ forecasts are correct that Italy will pull itself out of the perpetual weak and disappointing growth cycle seen over the last decade or so.” As we (ZH) have been vociferously noting, LTRO did nothing but solve a very short-term liquidity crisis in bank funding, and the reality of insolvent sovereign and now more encumbered-bank balance sheets is starting the vicious circles up again. Deutsche’s base case remains that peripheral growth will disappoint and the sovereign crisis will re-emerge shortly – we tend to agree.
From top to bottom, we see 10Y BTP spreads wider by 65bps in the last week, 10Y yields higher by 47bps and 2Y yields higher by 44bps.
Deutsche Bank ‘Early Morning Reid’
In terms of yesterday’s European data it was a day of emphasizing the gap between the core and peripheral in terms of growth. Germany’s Q4 GDP fell a less than expected -0.2% vs -0.3% consensus, and France grew by 0.2% vs -0.2% expected. However Italy (-0.7%) was
slightly weaker than expected (-0.6%). Indeed the negative print in Italy confirms the 4th recession since 2001. Indeed in today’s EMR we show these 4 recessions in Italy graphically in the first chart and add an additional couple of graphs that we think need to be seriously taken into account when thinking of the country’s economic future and that of the entire periphery.
We’ve previously shown that Italian nominal GDP has still failed to recover from its 2007/08 peak and with austerity now starting we wonder whether economists are being too optimistic about the chances of the country returning to growth beyond the first half of this year. Over the last decade market consensus has generally been overly optimistic on the state of the Italian economy (as with many others in the developed world to be fair).
In the second graph we have plotted the consensus forecast for long-run real growth several years out for each year from 2003 onwards alongside the actual outcome. The graph clearly shows that actual GDP has consistently undershot these forecasts. The third graph then shows a crude cumulative forecast miss from each of these years. The cumulative real GDP miss from 2003 to the present day is approaching 20% and is close to 10% since 2008.
When debt sustainability arguments are finely balanced and very dependent on future growth the question we’d ask is how confident can we be that economists’ forecasts are correct that Italy will pull itself out of the perpetual weak and disappointing growth cycle seen over the last decade or so. Those of a more optimistic persuasion will point to the hope of success in the long overdue reforms now in place. However will the effects of austerity offset this?
Only time will tell but our base case is that growth in theperiphery will continue to disappoint the consensus for many quarters and years to come and that the sovereign crisis will continue after what might be a benign first few months or even first half of the year.


Portugal is in the cross-hairs as it tries to avoid the financial contagion:

(Financial times)

Portugal hoping to avoid Greek contagion: The FT discussed some of the latest developments surrounding Portugal. It cited an interview with Economy Minister Álvaro Santos Pereira, who said that Portugal remains focused on returning to the long-term debt market in 2013 and is not considering a renegotiation of its €78B bailout package. He also expressed confidence that the troika (which is conducting its third quarterly assessment of the plan) would respond positively to what Portugal has been able to achieve. He went on to highlight some of the new reform measures, including a competition law, a new industrial licensing law and a “sweeping reform” of bankruptcy legislation.

If the following news becomes part of the mainstream media, then the USA will have nobody playing the comex precious metals or any futures commodity.  Customer funds are no longer safe. This is a must read:

(courtesy zero hedge)

MF Global: Where’s the Cash — Part II

rcwhalen's picture

This week in The Institutional Risk Analyst we published a comment on the ongoing financial genocide at MF Global, “MF Global: Where’s the Cash?”
The comment correctly identifies the location of the “missing” $1.6 billion as JP Morgan Chase and other bank custodians of MF Global.  The trouble is that even though we now know where the missing customer money has gone, namely JPMorgan, there is little chance that the defrauded customers of Jon Corzinewill ever recover a dime.
Here’s the link to a video by William Rochelle of Bloomberg News explaining how the safe harbor in Section 546(e) of the Bankruptcy Code likely will prevent MF Global customers from ever getting their $1.6 billion back — even when it’s located, as it has been evidently.
When Bill recorded the video, the bankruptcy trustee hadn’t yet raised the loss estimate from $1.2 billion.  In case you’re wondering why Bill is so knowledgeable about bankruptcy law, he was head of bankruptcy litigation at Fulbright & Jaworski in New York before he decided to take up journalism. 
What people need to understand is that like the case of WorldCom, the MF Global bankruptcy illustrates the way in which the large Wall Street banks have used their Washington lobbyists to encroach upon the rights of investors.  Even if it were proved that John Corzine and his colleagues committed criminal violations of the Uniform Securities Act and state law, there is little chance that the investors in MF Global will ever receive equity and justice.  Again, read the WorldCom case.  
The problem here is that the existing laws against pillaging customer accounts and other acts of fraud are in conflict with the bankruptcy statute designed to make the world safe for large banks and over-the-counter derivatives.  Specifically, the post 2005 bankruptcy laws prohibit trustees from clawing back the $1.6 billion in stolen customer funds.  Indeed, the Bankruptcy Court and trustee are precluded from pursuing the banks just as the trustee in the Madoff fraud has likewise been stymied.   
In addition to the clients of MF Global who were apparently defrauded, the big losers in this mess are the smaller independent broker dealers who have acted as custodian of client funds.  Once institutional customers understand that they have no rights in the event that management of a small broker-dealer absconds with client funds to pay bank margin calls and a broker-dealer fails, the ability of independent dealers to hold customer funds is going to evaporate. 
Purely as a matter of due diligence, no fiduciary will ever again be able to use a US-based broker dealer as a custodian.  To do so would be reckless and would expose the fiduciary to claims of negligence in the event a loss similar to MF Global occurred. 
Until the Congress rectifies the current bankruptcy laws and allows trustees to claw back payments made to secured lenders and other counterparties, there is no reason for any rational personal to allow a broker dealer to hold securities in custody.  All of this business will go to the big banks, who will be just as happy to see the smaller dealers thrown into the meat grinder.
Now why, you may be wondering, did the lobbyists from the big banks push Congress to expand the safe harbor for secured parties in the bankruptcy code?  As one former Bush II Treasury official told me last night: “The canard the banks used to get 546 amended was that overriding the trustee’s normal avoidance powers was said to be necessary to limit systemic risk and ensure access to credit.  God forbid the banks be required to do some due diligence.  As the bailouts showed, the systemic risk was in fact enhanced by the changes to the bankruptcy code and the illusion of superior claims to collateral, thus increasing leverage.”
The MF Global bankruptcy provides yet more evidence that the 2005 bankruptcy reform legislation passed by Congress is an abomination, but the cancer goes even deeper than the years of Bush II.  The big banks who earn the lion’s share of their profits in the quantum world of derivatives are literally looting the real economy and real investors, all with the full approval and complicity of the Fed.
Fred Feldkamp, learned securities counsel and expert on RMBS, put the problem in perspective:
“Greenspan proved his total ignorance of the current state of the law when he stupidly eliminated regulatory restraints on fraud saying there was no need for regulation because “fraud is self-regulating.”  The “Supremes” don’t “get it” as of now and Congress precluded just about every other means for controlling fraud between the last 2 years of Clinton and the 8 years of Bush II.  It took a decade (1929-1938) before the Supreme Court woke up to the Great Depression’s root cause (fraud of the 1910s to 1929).  Blaming Obama for this is understandable in one sense, but overly simplistic.”
It may be overly simplistic to blame President Obama for the financial mess, but don’t think that this president won’t throw Jon Corzine to the wolves to make political points.  “Jon Corzine is not well-liked in Washington,” one veteran republican operative told me over dinner tonight. “Don’t be surprised if we see a  high profile prosecution of Corzine by the US Attorney to prove Obama is distancing himself from the big banks.”

We have a new group wishing to sue the Federal Reserve  and end the rule of the banks on Wall Street.  They will need  trillion dollars in reserves to fight this behemoth:

(special thanks to Robert H for sending)

Why Sue the Federal Reserve?

No Federal Reserve
  • To End the “Rule of the Banks” over the People and Bring Accountability to Wall Street
  • To Restore Economic Prosperity and a Sustainable Monetary Policy
  • To Recover Trillions of Dollars Taken from “We the People”
  • To Reduce the Federal Deficit by Trillions of Dollars
  • To Obtain Economic Justice for All Americans
PatriotStorm was formed because we believe that the Federal Reserve System (the Fed”) is antiquated and dysfunctional and needs to be abolished. Our opinion is shared by many experts in this field. Since the passage of the Federal Reserve Act that created the Fed in 1913, many highly respected economists and experienced authors have written volumes about the many problems and abuses caused by the Fed. Two examples are listed below:

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson, 1802 3rd president of US

“The Federal Reserve System is a legal private monopoly of the money supply, operated for the benefit of a few, under the guise of protecting and promoting the public interest.” – Anthony Sutton, PhD Stanford Economics

Federal Reserve BuildingMany people do not know that the Federal Reserve is a private company – not a government agency. In fact, it is not related to the government in any way. It is a PRIVATELY-OWNED, FOR-PROFIT company that holds the monopoly on the US system of money, banking and credit, and its power and influence over both Washington and Wall Street is profound and unprecedented. We believe that under the Fed’s current policies the needs of “Main Street” and the common man have been for the most part sacrificed and ignored.
PatriotStorm disavows the actions of hysterics or conspiracy theorists. We deal only in facts. PatriotStorm is made up of a group of courageous men and women leading a movement of ordinary citizens and patriots like you, who are concerned with the direction of our nation, and believe that our Republic and the free enterprise system which made our country great, are under siege. We are committed to doing whatever we can to lawfully help restore economic growth and personal prosperity in order to lead our nation to exceptionalism and greatness once again. We believe that the Fed and its policies interfere with this vision.
At PatriotStorm, we are convinced that the Fed and its monetary system are broken beyond repair and must be replaced with a modern system based on a set of historically proven, sustainable and sound financial principles that: a) promote economic growth; b) restore jobs; c) decentralize power, and d) eliminate government indebtedness to a private central bank. All of us have watched Congress debate the issue of the Fed for years with no real progress. It now appears that it is up to us; “We the People” to solve this problem directly, as specifically enumerated in the 10th Amendment to the US Constitution.
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are preserved to the States respectively, or to the people.”
Our opinion is that the Fed is beyond redemption and must be abolished for the following reasons:
  1. Unconstitutionality: Many legal experts insist that the Federal Reserve Act is unlawful on its face under Article I Section 8 of the US Constitution; and that Congress acted beyond its authority when it chartered the Fed in 1913.
  2. Unfairness: The current system allows banks the ability to loan money they do not have, created in transactions where they put nothing at risk thus assigning all of the risks in the loan to be borne by the borrower. As many authors state – it is like “creating money from nothing.” This practice is unjust and unconscionable. It is simply un-American to get something for nothing.
  3. Lack of Transparency: The Fed fails to disclose its banking practices and the ultimate results of its monetary policies to borrowers prior to making its interest-bearing loans. In the opinion of our counsel their failure to disclose these fundamental aspects of borrowing are unlawful – termed “fraud in the inducement” and if the court agrees, these transactions are actionable (provide a cause to sue).
  4. Money in chainsPublic Endangerment: Numerous experts have shown that any monetary policy which calls for the payment of interest to a private bank based upon the government’s debt (defined as “Usury”) creates an economy that is mathematically unsustainable and which is inherently designed to fail. This fundamental flaw undermines our society, weakens our economy, threatens our national security and damages each and every Person in the nation. The evidence of this truth is everywhere today – where economies all over the world (Argentina, Greece, Iceland, etc) are collapsing and being forced into bankruptcy by the large international banks and their central banks that operate on the same Usury system principles. (We believe that the United States may not be far behind unless something is done immediately to stop it.)
  5. Unregulated Monopoly: The Fed has grown so powerful that it no longer allows any true oversight by Congress. For example, the Fed has never undergone a complete audit and now openly refuses to allow one. The Fed is no longer cooperating with Congress and is steadfastly refusing to answer important questions regarding our money and the material transactions it makes on a regular basis. We believe that no institution should be allowed to operate beyond oversight and above the law.
  6. Against Public Policy: Because the Fed makes enormous profits by putting the government (i.e., every one of us) into a state of perpetual re-borrowing and interminable debt, the Fed’s policies are unconscionable; and act against our best interests and violate the public trust of the American people.
  7. Breach of Fiduciary Duty: The Fed has failed to meet its stated goals in its charter which are to: to provide the nation with a safer, more flexible, and more stable monetary and financial system.” In fact, since 1913 the Fed’s policies have actually caused the exact opposite to occur:
    1. The dollar has lost 95% of its value,
    2. Our economy has experienced numerous recessions and a major depression,
    3. Our economy is now on the verge of total financial collapse,
    4. The federal government has accumulated massive debts which it is entirely unable to repay without continued re-borrowing (we are essentially bankrupt), and
    5. Americans are losing their personal property at unprecedented rates (record bankruptcies and foreclosures) and seeing a relentless erosion of their individual freedoms and liberty every day.

Definition of justice

In short, the Fed’s policies are not in synch and are no longer operating in the best interests of the American people. It is therefore incapable of achieving its chartered purposes.
With that said, our nation now stands at a critically important crossroad. For reasons that remain unclear, the political will of our elected officials to remedy the situation is stymied. This has caused the people to lose faith in their government to protect them, and fear is spreading rapidly across the land. This must stop. NOW!
We believe that the process for getting our country back begins as the ballot box. Voting a new slate of elected officials into office who will address each of these critical issues through sweeping financial reform legislation is an essential means of restoring sound fiscal policy and confidence in our Republic. PatriotStorm supports the many amazing people and patriotic organizations who have dedicated themselves to this cause. Simultaneously, it is our considered opinion that one of the best ways that the American people can support a revitalized Congress is to seek civil redress against the Federal Reserve through the courts.
Therefore, PatriotStorm is preparing to unleash the largest armada of civil class action litigation in history. We will be focusing that attack directly on the Federal Reserve in virtually every municipal, county, state and federal court in the nation. This is a bold undertaking. It is a true David vs. Goliath effort to help regain our country. We are confident that we have right on our side, and will win this fight – with your participation and support.
Unlike many other popular grass roots organizations, PatriotStorm is not a political entity. We are seeking to restore economic freedom for everyone. When an economy collapses, it does not discriminate against age, gender, religion, ethnic background or anything else. It hurts everyone – the middle class most of all. We are taking our fight to the Fed, we hope that everyone will join us.
We do not represent Republican or Democratic ideals; but we do support those candidates who are willing to join us in this fight. Our goal is to restore America to greatness and reclaim prosperity for each of us through the litigation process. We believe that the best way to achieve this objective is to replace our current monetary system, and those who support it, with one that is time tested to be fair and will protect each American citizen. The Fed with its current Usury monetary system just does not meet this simple standard.
The bottom line is that the Federal Reserve’s failure to perform its responsibilities and meet its fiduciary duties has severely damaged every American in the process. We believe that it is high time for average Americans to band together and stand up to seek a complete redress of these grievances in court. This challenge is not trivial. It will involve the efforts of thousands of lawyers working tirelessly nationwide. PatriotStorm will work hand in hand with these patriotic law firms to provide them with: a) essential legal research; b) documents from discovery proceedings gathered from court filings nationwide; and c) legal briefs and court testimony from all of the other similar actions across the country. Fortunately, we have a roadmap to success. Our process will be modeled upon the successful tobacco litigation precedents established during the 1980’s and 90’s. Only we will have the added advantage of modern technology to keep abreast of the cases in real time and reduce the time and expense of prosecuting the litigation in each case.
Below are listed just some of the actions that we will seek to prove in courts of competent jurisdiction all across the country.
“Top 20” Potential Civil Causes of Action:
  1. Breach of Fiduciary Duty
  2. Breach of Contract
  3. Conducting a Ponzi Scheme
  4. Theft
  5. Tortuous Interference
  6. Unlawful seizure of Account holders funds
  7. Accounting malpractice
  8. Fraud in the Inducement
  9. Banking Fraud
  10. Consumer Protection Fraud
  1. Detrimental Reliance
  2. Gross Negligence
  3. Unjust Enrichment
  4. Failure to Perform
  5. Deceptive Business Practices
  6. Unconscionability
  7. Willful Infliction of Emotional Distress
  8. Against Public Policy
  9. Securities Fraud
  10. Other
But we cannot do this alone. We need your help to be successful. You can participate in two ways:
  1. Join the Litigation: You can join the litigation as a Co-Plaintiff and add your voice to millions of others who have been damaged by the Fed’s policies that support and encourage out-of-control government spending that leads to unpayable debt and deficits that endanger our society. If you are: a) over 18 years old; b) and are an American citizen or are legally residing in the US, and c) have ever been involved in a loan transaction with a bank, you are probably eligible to join the lawsuit. It’s FREE and requires that you simply sign up. A local law firm in our network will contact you as they prepare to begin the lawsuit in your area.
  2. Support the Litigation: PatriotStorm funds the litigation process, (attorneys fees, court costs, and out of pocket expenses) through the sale of its membership subscriptions and other items. Our supporters are called “Minutemen,” and they form the backbone of our fight against the Fed. Minutemen receive regular private updates regarding the status of the litigation. They get all of the behind the scenes information about the lawyers, the court filings, the motions, the court battles etc., and they receive this information before anyone else, and in more detail than anyone else.
Becoming a Minuteman gives each person or business the ability to finally do something and get directly involved in taking our county back. It is a tangible way to get real results and is a real investment in the future of our Republic and in our children’s future as well.

What’s in it for you?

  1. These are tough times. Everyone knows someone who has lost their job, lost their home or been severely affected by the economy. Abolishing the Fed will allow the economy to get moving again, toward a true recovery that will be lasting and sustainable.
  2. Our litigation will be seeking the recovery of every dollar that has ever been paid in interest in any loan that has ever been made. For many people this check could be pretty substantial, especially if they have a home mortgage.
  3. Also, we will be demanding that every current loan be modified to a non-interest bearing note with all of the interest paid in to date to be applied to the principle amount. This would lower monthly payments dramatically allowing everyone the opportunity to get out of debt quicker and to have much more money (disposable income) to spend each month.
This is the first time in history that a legal undertaking of this size and scope has ever been attempted. Also, it is the first real opportunity for patriots everywhere to stand up together and put some teeth into their demands for:

No More Government Debt

No More Out of Control Spending

No More Growth in the Size of Government

Abolishing the Fed will send a clear message to our politicians to start representing the people rather than the special interests. It’s time to stand up and actually do something to take our county back.
“Now is the time for all good men to come to the aid of their country.” – Charles E. Weller


I really enjoyed this Charles Biderman of Trimtabs offering, as he is totally baffled as we are with Obama’s new budget.  He agrees that Obama will run out before the uSA election i.e. the debt ceiling of 16.4 trillion will be reached prior to the election in November.

(zero hedge/Charles Biderman of Trimtabs/)

Biderman Beyond Baffled by B.O.’s Budget

Tyler Durden's picture

In his best Lewis Black impression, TrimTabs CEO Charles Biderman succinctly destroys the ‘growth’ myth behind Obama’s budget plan as nothing but a handout and money-printing exercise in futility and drain-circling. Based on the $3.8tn budget plan, the TrimTabs truth-seeker notes that current government tax revenues are about $2.4tn, and growing at no more than $100bn each year, making the math surprisingly simple – we spend around $300bn per month and receive only $200bn with the missing $100bn to pay for the US government’s largesse (income shortfall) coming from – ‘printing money’. The spin is, of course, that revenues will somehow magically start to grow faster than spending and shrink the budget deficit. With take home pay at $6.3tn for everyone who pays taxes, up $300-400bn from the 2009 low, but still well below the $7.1tn rate from early 2008; Biderman’sconsternation at the self-hypnosis that a $200bn tax increase in an economy where take-home pay has been growing by only $100bn per year will somehow create anything other than slow-growth at best (or more likely contraction) is palpable. This slow- or no-growth will mean less tax revenue and more spending on safety-nets and thus the Sausalito-savant factually points out that most people do not realize that government spending is simply giving people money whether they do anything useful with it or not and still the governments of the US, Japan, and Europe want us to believe that our economies will grow faster if we keep taking more money from the workers and give that money to the government.

Today, we received the jobless claims and it shows increasing strength in the USA.  The problem of course is that we had another of those adjusted numbers coming from the BLS:Source

Categories: News mix

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