Posts Tagged ‘insolvency’

The Tidal Forces Ripping Europe Apart

Tidal forces are pulling the European Union apart. On one end, European governments have taken on debt and liabilities—both public and private—which they cannot possibly meet, rendering many of the smaller European states insolvent. On the other end, Europe is unwilling to carry out sovereign default and restructuring of debt of any one of its member nations. So as Europe gets closer and closer to the Global Depression, we are seeing as these two opposing forces—insurmountable debt vs. unwillingness to default and restructure—pull the continent apart as surely and relentlessly as tidal forces. — Gonzalo Lira

The Tidal Forces Ripping Europe Apart

Courtesy of Gonzalo Lira

In July of 1994, a comet named Shoemaker-Levy 9 crashed into Jupiter—it was quite a sight. 

According to astronomers, Shoemaker-Levy was a comet that was captured by Jupiter’s gravity twenty or thirty years before it was discovered. As the comet circled Jupiter, at one point it passed the Roche limit—the line around a large mass where its gravity will rip apart a smaller mass by way of tidal forces. 

Comet Shoemaker-Levy,
after Jupiter’s tidal forces
ripped it apart. 

By the time Shoemaker-Levy crashed into Jupiter, tidal forces had had their way with the comet. As the picture shows, it was no longer a single comet—it was a string of small lumps of rock and ice

Tidal forces are pulling the European Union apart. 

On one end, European governments have taken on debt and liabilities—both public and private—which they cannot possibly meet. These debts and liabilities are near-term enough that there is only one way to characterize many of the smaller European states: They are insolvent. 

On the other end, Europe is unwilling to carry out sovereign default of any one of its member nations. Indeed, there is a sense that—constant drumbeat of the Germans aside—Brussels is unwilling to evencontemplate the very notion of sovereign default and debt restructuring. Brussels and the European Central Bank believes in bailouts, not default, because they believe that the entire European project rests on the non-default status of all the EU members. They believe that all EU debt is backed by the entire EU, no matter how irresponsible the EU country that issued the EU debt. 

As we watch Europe get closer and closer to the Global Depression,…
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See, The Gun Is Loaded!

See, The Gun Is Loaded!

Courtesy of Karl Denninger of The Market Ticker 

No, no, not the ECB’s.

The "currency speculators" – cough - BANKS that were shorting the hell out of the Euro.

Let’s see if I can figure out what’s happened here.

  1. Banks shorted the Euro, (correctly) surmising that Greece, Portugal, Spain and others can’t possibly cover their debts.
     
  2. The ECB freaks out as the Euro heads toward PAR and calls "emergency meetings" (forgetting, I might add, that the Euro traded under PAR not that long ago.)
     
  3. The ECB and Eurozone decides to "defend" the Euro with €1t in "defensive measures", including buying bonds of bankrupt sovereigns (gee, that’s nice – monetization by another name.)  Since the ECB and EuroZone cognescenti is of course connected to the large banks in Europe (including France, where Sarkozy is located) these banks know to back off on Friday (notice the nice little uptick?) to lock in their bonuses from these insanely-profitable trades against their own currency.
     
  4. The very same banks, including the ones in Sarkozy’s back yard, see the very nice spike and short the Euro even harder, (correctly) surmising that they have successfully stuck the gun up the nose of the ECB!
An armful of gambling chips

Rinse and repeat until you have all the money.

Naw, it wouldn’t be that simple, would it?  Why of course it would.

See, lending someone money when they’re bankrupt can’t possibly make them not-bankrupt.  It can only make them more-bankrupt.  As a consequence the ECB’s action is self-destructive and doomed to fail, and as a consequence there is no reason for these banks to back off at all!  Indeed, quite to the contrary – they have (correctly) deduced that they can make billion in bonuses by shorting their own currency to destruction, forcing ever-larger "interventions" by the ECB!

If you’ve ever seen a meth addict goose himself with his drug of choice to the point where his teeth literally fall out, you know how this story ends. 

The only winning play is to refuse to play at all, and force the bankrupt to recognize their insolvency and reorganize their debts.  That’s it.  Attempting to paper over insolvency never works, and the market has now deduced this, as I expected – although I didn’t think it would happen quite this quickly.

"All in" by the ECB drew not a "ok, ok your pot!"…
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Chart of the Day: State Budget Gaps 2010

Chart of the Day: State Budget Gaps 2010

Courtesy of Edward Harrison at Credit Writedowns

This is not just about California. Come Summer 2010, the most severe gaps will be closed via budget cuts or tax increases unless the Federal Government can pull a rabbit out of the hat.

statebudgetgaps2010

Source

Policies for Increasing Economic Growth and Employment in 2010 and 2011 – CBO

See also Illinois enters a state of insolvency

 


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How the Servant Became a Predator: Finance’s Five Fatal Flaws

Here’s an excellent, must-read article by William K. Black.  Special thanks to New Deal 2.0. - Ilene

How the Servant Became a Predator: Finance’s Five Fatal Flaws

By Bill Black, Courtesy of New Deal 2.0

money-shark-150 - preditor stateRoosevelt Institute Braintruster William K. Black explains how the finance economy preys on the real economy instead of serving it. He shows how both have become dysfunctional and warns that we must not neglect the real economy — the source of our jobs, our incomes, and the creator of goods and services — as we focus on financial reform.

What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector’s current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.

1. The financial sector harms the real economy.

Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a “middleman”. Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector’s parasitism.

Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator State, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:

• Corporate stock repurchases…
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The Real Reason the Giant, Insolvent Banks Aren’t Being Broken Up

The Real Reason the Giant, Insolvent Banks Aren’t Being Broken Up

good banks, insolvent banksCourtesy of Washington’s Blog

Why isn’t the government breaking up the giant, insolvent banks?

We Need Them To Help the Economy Recover?

Do we need the Too Big to Fails to help the economy recover?

No.

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:

Others, like Nobel prize-winning economist Paul Krugman, think that the giant insolvent banks may need to be temporarily nationalized.

In addition, many top economists and financial experts, including Bank of Israel Governor Stanley Fischer – who was Ben Bernanke’s thesis adviser at MIT – say that – at the very least – the size of the financial giants should be limited.

break upEven the Bank of International Settlements – the "Central Banks’ Central Bank" – has slammed too big…
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A Stimulating Train Wreck

stimulating train wreckOne of my favorite outfits is Sprott Asset Management, located in Toronto Canada, because their analyses tend to be quite data-rich and "reality-based" as well.

In this excellent, short-and-sweet report, the case is made that a 3.5% boost to GDP from government stimulus spending alone will hit in the third quarter of 2009.

This means that whatever reading is turned in, you should mentally subtract 3.5% from it, because "growth" resulting from government deficit spending is not real growth at all, it is merely consumption borrowed from the future.

Are you stimulated yet? We hope you are, because we’ve just witnessed the largest economic stimulus in the history of the world. Never before have so many government dollars been thrown at the economy to prevent a depression. When added together, the combined financial, monetary and fiscal stimuli in the US are more than the cost of the two World Wars and “The New Deal” combined.

Stimulus spending worldwide has taken the form of a combination of tax cuts, transfer payments (free money) and infrastructure investments on roads, schools, railroads etc. In the US, the financial and stimulus contributions have been especially impressive in scale.

According to CNN’s bailout tracker, the various US government departments have committed to stimuli worth $11 trillion dollars and have issued cheques totaling $2.8 trillion dollars thus far in 2009.

Neil Barofsky, the Special Investigator General for the TARP program, has estimated that the total cost to the US taxpayer could be as high as $23 trillion.

The vast majority of this stimulus has been directed at the financial sector – a complete waste of money in our opinion, supporting a segment of the economy that never deserved to be bailed out.

Nonetheless, the US taxpayer has spent massive sums, committed to promises worth even more and may ultimately owe debt in the double-digit trillions when all is said and done. Nice of them to spend so generously, wouldn’t you say?

Although the stimulus has been fantastic for the stock market, it has generated very little benefit for “Main Street”. To make matters worse, the effects of the stimulus packages have already started to wear off.

To explain why, we must mention the American Recovery and Reinvestment


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Phil's Favorites

One Million Market Beaters

Wow. These numbers may be shockingly disturbing to anyone who thinks they will beat the market by just picking the best stocks.

One Million Market Beaters

Courtesy of Michael Batnick, The Irrelevant Investor

  • Uncertainty remains, but Florida is in the cross hairs.
  • What to expect today after tornado outbreak.
  • Why we’re watching Gaston closely now.

These headlines were pulled from a few articles today at weather.com. You could seamlessly replace Florida, tornado, and Gast...



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Zero Hedge

How The Hillary 'Victory Fund' Uses State Democratic Committees To Launder Money To The DNC

Courtesy of ZeroHedge. View original post here.

Is the Hillary Victory Fund using state democratic committees to launder donations from wealthy individuals to the Democratic National Committee?  Evidence gathered by Bloomberg would certainly seem to suggest so.

So how does it work?  Campaign finance laws specifically restrict the amount of money any single person can give to individual candidates ($2,700), a party's various state committees ($10,000) as well as a pa...



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ValueWalk

IMF knew the euro had serious flaws, Sacrificed Greece

By Mauldin Economics. Originally published at ValueWalk.

BY JOHN MAULDIN

There’s a new chapter in the ongoing tale of IMF incompetence. Take a look at this UK Telegraph headline that recently caught my eye.

The love affair was no surprise. Nor was the fact that the IMF had taken part in the immolation of Greece. No, the surprise was that the IMF would publicly disclose the extent of incompetence and massive rule breaking that had taken place.

The Ambrose Evans-Pritchard byline told me this would be a good story. Here’s his lead:

The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleade...



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Chart School

S&P 500 Snapshot: A Modest Loss Follows the Jackson Hole Drama

Courtesy of Doug Short's Advisor Perspectives.

This morning's Second Estimate of Q2 GDP at 1.1% was a ho-hum event in advance of Fed Chair Yellen speech at Jackson Hole. And indeed the intraday range volatility of today's session was at the 70th percentile of the 165 market days of 2016 and the widest in 37 sessions. The S&P 500 opened higher, rallied with the opening of her speech, and then sold off sharply during with Vice Chairman Stanley Fischer's suggestion that a couple of rate hikes this year were possible. The index bounced back later in the afternoon to its -0.16% Friday close. The index is down 0.68% for the week.

The yield on the 10-year note closed at at 1.62%, up four basis points from the previous close.

Here is a snapshot of past five sessions in the S&P 500.

...

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Kimble Charting Solutions

Basic Materials attempting breakout says Joe Friday

Courtesy of Chris Kimble.

Basic Materials stocks can often times give a decent snap shot of how an economy is doing from a growth or lack of perspective. Below looks at Basic Materials ETF (IYM) over the past decade.

CLICK ON CHART TO ENLARGE

IYM remains inside of an upward sloping mult-year rising channel (1), since 2009. It hit the bottom of this channel earlier this year and has bounce off support. Currently IYM is testing f...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Europe’s Refugee Pact With Turkey May Collapse Over Visa Dispute (Bloomberg)

The foundations of Turkey’s agreement with the European Union to curb the flow of migrants into Greece are looking increasingly shaky.

Asian Stocks Drop as Investors Avoid Risk Before Yellen Speech (Bloomberg)

Asian stocks fell, led by shares in Japan, as investors showed a reluctance to take on risk before Federal Reserve Chair Janet Yellen’s speech later Friday.

...



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Biotech

Epizyme - A Waiting Game

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...



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OpTrader

Swing trading portfolio - week of August 22nd, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Digital Currencies

Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust

 

Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust 

By  at Bloomberg

Excerpt:

Stefan Thomas, who introduced millions of people to bitcoin, has had a change of heart.

Blockchain, the ledger software that makes the digital currency possible...



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Mapping The Market

Illusion of Choice

From Jean-Luc:

Looks like we are down to about 10 companies for our consumer goods:

http://www.visualcapitalist.com/illusion-of-choice-consumer-brands/

Just like banks, airlines and cable companies! 

The Illusion of Choice in Consumer Brands

Explore the full-size version of the above graphic in all its glory.

If today’s infographic looks familiar, that’s because it originates from a well-circulated report that Oxfam International puts together to show consolidation i...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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