G-Pap Demands Referendum To Rescue Plan, Seems Set To Throw In The Towel
by Zero Hedge - October 31st, 2011 2:08 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
It appears the Greek leader has had it, and is officially throwing in the towel, leaving his citizens to tell Europe to shove their perpetual bank rescue plan, via Bloomberg:
- PAPANDREOU SAYS NEW GREEK PLAN MUST BE PUT TO REFERENDUM
- PAPANDREOU SAYS GREEKS CALLED ON TO CHOOSE ON COUNTRY’S COURSE
- PAPANDREOU SAYS CALLS FOR VOTE OF CONFIDENCE ON POLICIES
- PAPANDREOU SAYS GREEK DECISION WILL BIND ALL POLITICAL PARTIES
- PAPANDREOU SAYS REJECT ELECTIONS AT THIS TIME
Naturally, with scenes like this one from last week, don’t expect a glowing Greek endorsement of abdicating national sovereignty to the European superstate. In fact, expect the opposite. And with that, preparations for a Greek exit from the Euro and Eurozone begin in earnest. Needless to say, Deutschland is not too happy.
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DiggComstock Announces Sale of Multi-Family Project for $19.75M
by Insider Scoop - October 31st, 2011 2:04 pm
Courtesy of Benzinga.
Comstock Homebuilding Companies, Inc. (Nasdaq: CHCI) announced that on October 31, 2011, Comstock Cascades II L.C., an entity in which the Company has a controlling interest, entered into a definitive agreement with CAPREIT, Inc. and/or its affiliates whereby Comstock agreed to sell CAPREIT its Potomac Square Apartment project for approximately $19.75 million.
ISDA Says 50% Greek Bond Haircut “Appears” Voluntary
by Zero Hedge - October 31st, 2011 1:53 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Well, they are right: 50% and the gun next to your head does not go off, hence “voluntary” or push for fair treatment in bankruptcy, get exiled from the ponzi in perpetuity, and hope for a 0% recovery at best. Next steps: the upcoming 90% haircut, which make no mistake is coming once the 50% one is deemed insufficient, just like the 21% before it, will also be voluntary? Thank you ISDA for confirming whose interests you have truly at heart, and for forcing everyone to take a quick peek at the members on your “determinations committee.”
From ISDA (highlights ours):
NEWS RELEASE
For Immediate Release
ISDA Statement on CDS Credit Event Process
NEW YORK, Monday, October 31, 2011 – The International Swaps and Derivatives Association, Inc. (ISDA) today issued the following statement in order to ensure an accurate understanding of how credit events are determined for credit default swaps contracts. Today’s statement is intended to underscore key points articulated in the Greek Sovereign Debt Q&A, updated on October 31, which discussed this issue with regards to the Eurozone proposal for Greek debt. Some media accounts of the information contained in the Q&A inaccurately described the credit event process.
The determination of whether a credit event occurs under CDS documentation is made by the relevant ISDA Determinations Committee (DC), which consists of 10 sell-side and five buy-side firms. ISDA serves as secretary to, but does not sit on, the DC. A supermajority of votes (12 of 15 DC members) is required to find that a credit event has occurred without the decision being subject to external legal review. A weaker majority decision would be subject to external legal review that might overturn such a determination.
The DC’s review of a potential credit event comes after a proposal has been announced and its final terms are publicly available and only if a market participant requests the DC to take up the matter. Neither of these has yet occurred with regards to the Greek sovereign debt situation. No debt issued by the Hellenic Republic has been modified to date, nor have the formal terms for any such modification under the Eurozone proposal yet been released. No market participant has yet made such a request to the DC.
When the DC does review…
Dear Christina: Reflections on Economic Fools and the Policies they Espouse
by ilene - October 31st, 2011 1:41 pm
Courtesy of Mish
The New York Times headline reads Dear Ben: It’s Time for Your Volcker Moment.
I expected the article to be about inflation. It starts out as such, praising Volcker for his commitment to lower inflation. A third of the way through came an innocuous looking sentence "Mr. Bernanke needs to steal a page from the Volcker playbook."
From there it went straight downhill.
Here are a few snips …
To forcefully tackle the unemployment problem, he needs to set a new policy framework — in this case, to begin targeting the path of nominal gross domestic product.
More specifically, normal output growth for our economy is about 2 1/2 percent a year, and the Fed believes that 2 percent inflation is appropriate. So a reasonable target for nominal G.D.P. growth is around 4 1/2 percent.
It would work like this: The Fed would start from some normal year — like 2007 — and say that nominal G.D.P. should have grown at 4 1/2 percent annually since then, and should keep growing at that pace. Because of the recession and the unusually low inflation in 2009 and 2010, nominal G.D.P. today is about 10 percent below that path. Adopting nominal G.D.P. targeting commits the Fed to eliminating this gap.
Who is this Monetarist Fool?
At that point I stopped reading and asked "who is this monetarist fool?" I went to the bottom of the article to find out it was none other than Christina D. Romer, an economics professor at the University of California, and former chairwoman of President Obama’s Council of Economic Advisers.
Dear Christina …
In case you have not noticed, interest rates are zero percent. The Fed cannot lower them any further. The Fed can of course print, but in case you did not notice again, the Fed already tried that and all it did was increase the price of food, gasoline, gold, and the stock market.
Moreover, and in case you did not notice, here is a chart of excess reserves sitting at the Fed.
You see Christina, there is 1.6 trillion dollars parked at the Fed already. Printing money in and of itself does nothing if it just sits there.
Moreover, and in case you did not notice, Japan over a 20 year period tried both quantitative easing and Keynesian stimulus (fiscal spending), and that did not stop Japan’s deflation.…
Here Come The “Unintended Consequences”: Stock Futures Liquidity Dries Up Post MF Bankruptcy
by Zero Hedge - October 31st, 2011 1:34 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Just like with Lehman, when it took 3 days for the full consequences of the bankruptcy to manifest themselves in the form of a complete freeze of money markets, so too now we are starting to see the same phenomenon following the blow up of one of the world’s largest exchanges. The first observation comes courtesy of Dow Jones which informs us that the MF Bankruptcy has “devastated stock futures liquidity.” Specifically, “MF Global’s departure from the clearing scene has “devastated liquidity” in stock index futures, a long-time CME floor broker said. He estimated about a third of the pit population is missing. On a normal day, six or seven filling brokers stand on the top rail. That’s down to three. In the rate futures markets, another veteran broker sees “marginal” impact because MF’s business in Eurodollar and Treasurys is not as large as Newedge USA and Goldman Sachs. “Whatever the effect, it will be extremely short- term in nature because accounts will find new clearing firms and executing brokers quickly,” the rate futures broker said.” One can only hope the futures broker is right. In the meantime, the CME’s margin drop in Dow related margins from last week probably could not have come at a better time.
h/t London Dude Trader
Financial Suicide: Head of EFSF says Bailout Fund Could One Day Issue Bonds in Yuan
by ilene - October 31st, 2011 1:32 pm
Courtesy of Mish
Klaus Regling, head of the European Financial Stability Facility has proposed European Bailout Fund Could ‘One Day’ Issue Bonds in Yuan
The euro area’s bailout fund could at some point issue bonds denominated in the Chinese currency, Chief Executive Officer Klaus Regling said in Beijing today.
“We are authorized to use any currency we want if it seems efficient so we may one day issue in U.S. dollars or renminbi,” said Regling, head of the European Financial Stability Facility, using another name for the yuan. “It depends whether the Chinese authorities would approve of that. I could imagine that over the years that might happen, maybe not immediately but maybe one day,” he said.
European leaders are seeking financial support from China, holder of the world’s largest foreign-exchange reserves, for an enlarged rescue fund aimed at containing the region’s sovereign- debt crisis. Vice Finance Minister Zhu Guangyao said yesterday his government wants more details about the “technicalities” before making any decision on investment.
Regling said yesterday that China, which has been a “good” and “loyal” purchaser of EFSF bonds so far, hasn’t set any conditions for buying more of the securities.
Financial Suicide
Issuing bonds in another currency risks financial suicide. Currency movements add to the already massive potential risk of huge fluctuations because of leverage.
Argentina blew up when it could no longer hold a peg in US dollars. While not a peg, imagine the losses on long-term bonds on a leveraged fund were the Yuan to rise by 33% vs. the Euro.
Many homeowners in Eastern European countries have housing loans in Euros or Swiss Francs and have paid a severe price as the value of their currency has dropped vs the Euro and even more so vs the Swiss Franc.
Perhaps the yuan would sink vs. the Euro, but anyone entertaining the risk is severely lacking in financial competence.
Moreover, that Regling would even suggest such a foolish thing says the EU not only expects this crisis will linger for a long time, and it does not believe it has buyers for the debt it issues.
MF Global: One of the Biggest Bankruptcies Ever
by Insider Scoop - October 31st, 2011 1:31 pm
Courtesy of Benzinga.
My motto is, if you’re going to fail, you may as well fail spectacularly.
It appears that former New Jersey Senator and Governor Jon Corzine lives by the same motto. Corzine, who for now is the CEO of MF Global (NYSE: MF), has to be living out a Halloween nightmare today, as his company filed for bankruptcy.
As Benzinga reported earlier this morning, MF Global filed for bankruptcy protection after seeing its stock price drop 70 percent since August. This disaster was brought on because the firm was heavily invested in the European sovereign debt market, which got absolutely rocked this year. Reports indicate that the company had invested nearly $6 billion in the market, which qualifies Corzine for one giant "oopsie".
At the time of the filing, MF Global was worth somewhere in the neighborhood of $40 billion dollars. Shockingly enough, this staggering sum barely qualifies as one of the top ten bankruptcies of all time. Here’s the rundown on the twenty biggest bankruptcies of all time, according to bankruptcydata.com
- Lehman Brothers Holdings went bankrupt on 09/15/08, with assets of $691 billion
- Washington Mutual went bankrupt on 09/26/08, with assets of $327 billion
- WorldCom went bankrupt on 07/21/02, with assets of $103 billion
- General Motors Corporation went bankrupt on 06/01/09, with assets of $91 billion
- CIT Group went bankrupt on 11/01/09, with assets of $80 billion
- Enron Corp went bankrupt on 12/02/01, with assets of $65 billion
- Conseco went bankrupt on 12/17/02, with assets of $61 billion
- Global MF went bankrupt on 10/31/11, with assets of appx $40 billion
- Chrysler LLC went bankrupt on 04/30/09, with assets of $39 billion
- Thornburg Mortgage went bankrupt on 05/01/09, with assets of $36 billion
- Pacific Gas and Electric Company went bankrupt on 04/06/01, with assets of $36 billion
- Texaco went bankrupt on 04/12/87, with assets of 34 $billion
- Financial Corp. of America went bankrupt on 09/09/88, with assets of $33 billion
- Refco went bankrupt on 10/17/05, with assets of $33 billion
- IndyMac Bancorp went bankrupt on 07/31/08, with assets of $32 billion
- Global Crossing went bankrupt on 01/28/02, with assets of $30 billion
- Bank of New England went bankrupt on 01/07/91, with assets of $29 billion
- General Growth Properties went bankrupt on 04/16/09, with assets of $29 billion
- Lyondell Chemical Company went bankrupt on 01/06/09, with assets of
…
BOB JANJUAH: The Euro Bailout Is A Con, China Will Give Nothing, And The S&P Is Going To Plunge
by ilene - October 31st, 2011 1:30 pm
Courtesy of Joe Weisenthal of The Business Insider
Surprise surprise!
Nomura’s uber-bear Bob Januah is uber-bearish on the European bailout deal, and he predicts the S&P could go as low as 700.
From his note:
We all have reams of commentary on the latest eurozone "deal? to digest. I want to keep my contribution to a minimum. In summary, this latest round of eurozone shock and awe is, in my view, nothing more than a confidence trick and has possibly even set-up an even worse final outcome. With respect to the Greek debt "write off?, the bank "recap?, and the structured credit technology being applied to ESFS, my takeaway is fudge, fiction and fantasy. The eurozone leadership know they can’t really put in any meaningful amount of new money to fix things, yet are lacking in courage when it comes to forcing proper debt write offs and debt relief, ditto forcing genuine bank recapitalisation and financial sector restructuring, and we have a humiliation and tragedy of epic proportions when we consider that the ESFS leverage "plan? seems to rely on convincing a largely poor country where GDP per head is close to USD5k to bailout out a bloc where GDP per head is larger by a factor of x6/x8.
I spend a fair bit of time in China. Chinese policymakers on the whole impress me with their ability to understand what the real issue are. If my experience and read of China is right, Mr Regling is going to come back to Europe with lots of kind and supportive words, but little or no real hard cash. China wants military technology, nuclear technology, access to European corporates (ownership!), and it wants Europe fully on its side vs. the US with respect to human rights, the currency/the trade surplus, and in terms of IMF, WTO, and UN "status?. It does not want to buy eurozone government bonds for the sake of it (bunds are the major exception) and I suspect the first question Mr Regling will need to address is something along the lines of: "If your bond/ESFS deal is so good, why aren’t the financial markets biting your hands off for a piece of the action?? After all, financial markets are pretty good at spotting give-away bargains when they present themselves! So in reality we are continuing with the policy of creeping fiscal…
Presenting The Bond That Blew Up MF Global
by Zero Hedge - October 31st, 2011 1:20 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Reaching for yield (and prospectively capital appreciation) while shortening duration had become the new ‘smart money’ trade as we saw HY credit curves steepen earlier in the year (only to become the pain-trade very quickly). The attraction of those incredible yields on short-dated sovereigns was an obvious place for momentum monkeys to chase and it seems that was the undoing of MF Global. The Dec 2012 Italian bonds (of which MF held 91% of its ITA exposure in), as highlighted in today’s Bloomberg Chart-of-the-day, appears to be the capital-sucking instrument of doom for the now-stricken MF.
As if we need to remind readers, there is a reason why yields are high – there is no free lunch – and while some have already leaped to the defense of the bet-on-black Corzine risk management process with comments such as ‘He was simply early and will be proved correct’ should remember that only the central banks have bottomless non-mark-to-market pockets to withstand the vol.
Perhaps the largest lesson, and one that Mr. Barroso, Van-Rompuy, Draghi et al. should bear in mind is just how quickly a levered (firm not instrument) position supporting risky sovereign debt can go against you – but then today’s EFSF issue demand perhaps makes that discussion moot.
Chart: Bloomberg
Business Activity Reports Are Mixed (DIA, SPY)
by ilene - October 31st, 2011 1:12 pm
Courtesy of John Nyaradi.
Business activity reports from Chicago and Texas are mixed this morning
The October Dallas Federal Reserve Texas Manufacturing Index recorded a substantial gain to +2.3 from last month’s -14.4, indicating improving business and manufacturing activity (AMEX:DIA) in the region. This was the first positive reading in six months with employment also reaching a six month high while new orders declined.
Farther north, the Chicago PMI declined to 58.4 from last month’s 60.4, indicating slower business activity for companies (AMEX:SPY) in the region but still remained above the critical 50 level which indicates the borderline between expansion and contraction.
Tomorrow brings the widely watched national ISM report.
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