Posts Tagged ‘PIIGS’

Economists Surprised Again as German Factory Orders Unexpectedly Fall

Economists Surprised Again as German Factory Orders Unexpectedly Fall

Pig whispering in another pigs ear, close-up

Courtesy of Mish

Economists are surprised by the strangest things.

The UK has announced austerity measures, Greece, Spain, Portugal (3 little PIIGS) are in forced austerity programs, and Germany is paying more attention to deficit reduction than growth (rightfully so), yet somehow economists expect factory orders in Germany to keep improving.

Please consider the Bloomberg report German Factory Orders Unexpectedly Fell in May

German factory orders unexpectedly fell for the first time in five months in May as demand for goods made in Europe’s largest economy waned across the 16- nation euro region.

Orders, adjusted for seasonal swings and inflation, declined 0.5 percent from April, when they rose a revised 3.2 percent, the Economy Ministry in Berlin said today. Economists had forecast a 0.3 percent gain for May, according to the median of 30 estimates in a Bloomberg News survey. From a year earlier, orders increased 24.8 percent.

Europe’s sovereign debt crisis has pushed the euro down 17 percent against the dollar since late November, making exports to countries outside the currency bloc more competitive just as the global recovery gathered pace. With governments cutting spending to convince investors that budget deficits are under control, growth in the euro area, Germany’s biggest export market, may slow.

“You have to see today’s decline in orders in the context of strong increases in the previous months,” said Klaus Schruefer, an economist at SEB Bank AG in Frankfurt. “It doesn’t throw the German economy off its recovery track.”

Recovery Off The Rails

While it is true that any month can be an outlier, the European macro picture is anemic in light of austerity programs virtually everywhere you look.

Moreover, the Asia picture is anemic, the US macro picture is anemic, and indeed the entire global macro picture is anemic. Yet economists, an ever optimistic lot, still have faith in a recovery 100% based on unsustainable government spending even though governments in general are cutting government spending in an attempt to reduce budget deficits.

For now, the US is an exception to global budget tightening. However, it should be perfectly clear that Congress is taking a harder stance towards more stimulus efforts as a measure to extend unemployment benefits has died in the US senate.

Talk of continued recovery is nonsense. The best anyone can possibly hope for…
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Counterparty Risk Increasing

Counterparty Risk Increasing

Courtesy of Rom Badilla, CFA – Bondsquawk.com

Due to the European debt crisis, counterparty risk is increasing as banks are reluctant to lend to each other, which is remiscient of the bank freeze at the beginning of the fiancial crisis of 2008. The LIBOR-OIS spread which is a gauge of banks willingness to lend, widened 2 basis points today to a spread of 26. Despite the unveiling of the near one trillion dollar Stabilization Fund last week, it continues to drift higher.  The spread has now increased 20 basis points from the most recent low achieved on March 15.

As mentioned last week here at Bondsquawk, the spread inched higher from 13 basis points in late July 2007 to 19 basis points the following week. As market conditions deteriorated, the widening accelerated. By late August, the spread widened to 73 basis points and the route was on. During the height of the financial crisis which is marked by the fall of Lehman Brothers, the spread reached a high of 364 basis points by October of 2008. While it remains to be seen if this will turn into another credit crunch as we have warned several days ago and as Bank of America’s Jeff Rosenberg had suggested earlier today, today’s action is certainly a growing concern and deserves further monitoring. 


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What If Doug Casey Is Right?

What If Doug Casey Is Right?

By Jeff Clark Editor Casey’s Gold & Resource Report

Pig whispering in another pigs ear, close-up

Gold is once again above $1,200 and making new highs. And yet, Doug Casey thinks we’re just getting started, estimating gold could touch $5,000 before this is all over. A titillating thought, to be sure, but… how likely is that?

Gold’s latest rise stems from mounting fear that the Greek bailout will be followed by other euro-area countries queued for a me-too handout. In other words, gold is serving its historical role as a safe haven, a store of value, and an alternate form of money when governments recklessly plunge themselves heavily into debt and abuse their currency.

But Jeff, $5,000 gold is a long way up,” the skeptics observe. “If you step back and look at the big picture, isn’t the gold price bubbly here?”

One way to test Doug’s thinking is to look at other simmering trouble spots that would similarly impact gold should they boil over. So, let us indeed review the big-screen events I believe could send gold a lot higher. See if you agree.  

ONE: The PIIGS are not done squealing.

Greece’s Gordian Knot of public debt has not been solved. In fact, Moody’s is considering downgrading Greece’s debt to junk status, stating that the announced €750 billion aid package will be “inadequate to stabilize the problems…
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European Market Update

European Market Update – May 14, 2010

Courtesy of Rom Badilla, CFA – Bondsquawk.com

The Euro continues its freefall and peripheral bonds weaken as the situation across the Atlantic appears to be deteriorating.

Spanish newspaper, El Pais reported that France threatened to leave the union unless Germany backed the $1 trillion bailout in last Sunday’s meeting according to a Bloomberg report. The newspaper did not reveal its sources and naturally country officials denied the report.

Though, when asked today about disagreements with EU partners, German Chancellor Angela Merkel said that “some arguments are worth it,” without elaborating.

The Euro is down another 1.2 percent to 1.2390 and will end today below Monday’s close of 1.2787, which was after the bailout announcement that was intended to restore confidence back into the markets. This marks the lowest level last seen since October 2008, shortly after the collapse of Lehman Brothers. 

EUR Historical Chart

Bond yields of the peripheral countries edged higher despite ECB’s intervention of buying bonds in the secondary market this week. Greece’s 2-Year finished higher by 40 basis points to 7.20 percent. The 5-Year spiked 70 basis points to 8.22 percent while the yield on Greece’s 10-Year finished at 7.71 percent, an increase of 35 basis points. 

Greece Yield Curve Change 

The yield on Spain’s 2-Year increased 13 basis points to 1.93 percent while Portugal saw its yields rise by 17 basis points to 2.41 percent on similar maturities. Ireland’s 2-Year finished at a yield of 1.96 percent, an increase of 17 basis points. The yield on Italian 2-Year bonds rose 12 basis points to 1.57 percent.

European equities are tumbling.  London’s FTSE and Germany’s DAX are both down 3.1 percent while Paris’ CAC is lower by4.6 percent. Spain’s IBEX is getting hit the hardest and is down 6.6 percent.

On the economic data release front, Spain released its inflation report today.  While the headline number was positive at 1.5 percent, the core inflation reading declined by 0.1 percent in April. This decline, which is the first time for the core reading, comes after a March increase of 0.2 percent.

Spain Core Inflation Historical Chart

Spain joins the other PIIGS, namely Portugal and Ireland, where core pries are falling compared to the previous year. 


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Hugh Hendry: The Greek “Bailout” Is Really A Bailout Of French Banks

Hugh Hendry: The Greek "Bailout" Is Really A Bailout Of French Banks

Hugh HendryCourtesy of Tyler Durden

Yesterday we pointed out that France was a global top three derisker in sovereign CDS as traders have shifted their worries from the periphery to the core. We have long discussed that the reason for this is that France, not Germany, has the greatest exposure to Greece and the PIIGS. Below is an RT clip in which Hugh Hendry confirms just this: according to the Ecclectica head man, a mark to realistic market of Greek debt would wipe out E35 billion in French bank capital, "and it is questionable whether the French banking system would take such a hit." Hendry’s solution, as has been the case from the solution, is for Greece to leave the euro, and points out that due to FX inflexibility, there will be no tourists in Greece this year as everything becomes painfully expensive, not in Drachmas but in Euros.

We would add that the burning parliament is probably not that much of a tourist draw either. In typical fashion, Hugh dismembers Angela Merkel’s hypocrisy: "When the truth becomes unpalatable, what is the truth. Angela Merkel, when we say she is being generous, there is nothing generous about spending taxpayers’ money in another country, that is not generosity, that is merely trying to salvage a bankrupt set of political ideology. So to blame the messenger when it’s the truth that hurts, I find that inexcusable." Just as Hugh’s huge bet against the euro has proven to be a terrific success, we are confident that he will be correct about the end of the EMU quite soon as well. And as the moderator adds "Shame on you, Europe, for needing the IMF to bail you out. Europe is like an African nation." Amen.

 


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Slow Motion PIGS Wreck; Dollar Soars as Contagion Spreads to Portugal; Greece “will default at some point”; What’s Next?

Slow Motion PIGS Wreck; Dollar Soars as Contagion Spreads to Portugal; Greece "will default at some point"; What’s Next?

Courtesy of Mish 

Royal Melbourne Show 2009 Continues

The US dollar soared today in the midst of a crisis in the Eurozone no longer contained to Greece. Please consider Portugal’s Debt Rating Lowered by Fitch on Finances

Portugal’s credit grade was cut by Fitch Ratings for the first time, underscoring growing concern that Europe’s weakest economies will struggle to meet their debt commitments as finances deteriorate.

The rating was lowered one step to AA- with a “negative” outlook, Fitch said in a statement today, adding that further economic or fiscal underperformance this year or in 2011 may lead to another downgrade. The euro extended its decline, dropping against all but one of the 16 most-traded currencies. Portuguese stocks and bonds fell.

“A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal’s creditworthiness,” Douglas Renwick, associate director at Fitch, wrote in the statement from London. “Although Portugal has not been disproportionately affected by the global downturn, prospects for economic recovery are weaker than 15 European Union peers, which will put pressure on its public finances over the medium term.”

The governments of Greece, Ireland, Italy and Spain are seeking to narrow budget deficits that have swollen as their economies have been battered by the recession. Portugal’s deficit is 9.3 percent of gross domestic product, more than triple the European Union’s 3 percent limit. Failure by the EU to agree on a mechanism to help countries shore up their finances has hurt the euro, putting it on course for its worst quarter against the dollar since 2008.

The Portuguese and Greek economies may face a “slow death” as they dedicate a higher proportion of wealth to paying off debt and investors drive up government borrowing costs, Moody’s said on Jan. 13. While the two countries can still avoid such a scenario, their window of opportunity “will not be open indefinitely,” Moody’s said.

Slow Motion PIGS Wreck

PIIGS stands for Portugal, Ireland, Italy, Greece, and Spain. I dropped an "I" to focus on the "Club-Med" countries.

Bloomberg reports Euro Drops as Portugal Downgrade Underlines Concern on Greece 

“Fitch opened up another front against the euro,” said Alan Ruskin, head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut, who predicted the


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Worry Over the US$ and PIIGS

Worry Over the US$ and PIIGS

Courtesy of Mish

Inquiring minds are listening to an interview with Marc Faber on Tech Ticker: The Next Thing You Need To Worry About Is The PIIGS

After every financial crisis there’s a sovereign debt crisis, Marc Faber says. Countries that borrowed too much during the boom times start struggling to pay their competitors back, and eventually some of them default.

The countries most likely to blow up this time around are the "PIIGS": Portugal, Ireland, Italy, Greece, and Spain. One ore more of them, Faber says, will likely default in the next couple of years. And, that could result in the death of the Euro currency.

Longer-term, Faber says, Japan and the US are in line for the same fate.

Question Of Timeframe

Marc Faber says "The US crisis won’t hit us this year or next year. But within 5-10 years, the United States will be forced to quietly default on its debt, most likely by printing money and destroying the value of the currency."

I like that timeframe. People expecting the US$ to implode right here right now are simply too early in my estimation. As for five years from now, I will reassess later. There are too many things happening right here right now to worry about 5-10 years from now.

Certainly the PIIGS are near the top of today’s list of worries. Moreover, we can easily have a crisis in places eyes are not focused such as Mexico. Is anyone even looking at Mexico or what a housing crash might mean to Canada or Australia?

Let’s not forget that Japan’s rapidly aging demographics suggests that Japan crisis will hit before the US. Japan’s debt is approaching 200% of GDP, Japan is mired in deflation, and its aging workforce now needs to draw down on savings, in retirement. The belief that "Japan is a nation of savers and the US is a nation of spenders" is about to be shattered. Secular spending trends in both countries have peaked, in opposite directions.

Finally, the love affair with China is way overdone. The amount of fiscal stimulus and monetary printing is off the charts. China is a bubble waiting to burst. I am in the camp, and have been for years, that if China floated the RMB it might crash, not soar.

By the


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Phil's Favorites

Investing podcasts with Patrick O'Shaughnessy

 

Business vs. Investing, w/ Jason Zweig and Morgan Housel – [Invest Like the Best, EP.50]

My guests this week are both veterans of the podcast, Jason Zweig and Morgan Housel. They are two of the best in the world at making the complicated simple, and in that spirit, I’ll keep this introduction short. Morgan shifted from public markets to the private markets a year ago when he joined the Collaborative Fund, so we begin with what he has learned about venture capital in his first year on the job. ~ Patrick O’Shaughnessy

Notes and references here. 

 

Buying Companies With Economic Moats, w/ Pat Dorsey – [Invest Like the Best, EP.51]

My ...



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ValueWalk

Lazada - The Amazon Of South East Asia?

By Guest Post. Originally published at ValueWalk.

You heard of Amazon.com of course, but what about Lazada? If you have not, you probably should have. Find out more below on the company and other e-commerce giants in Asia

Key Findings from the Map of E-Commerce made by iPrice Group

The potential of e-commerce in Southeast Asia (SEA) is irrefutable. With a population of more than 600 million people paired with predictions by giants such as Google and Temasek that the digital economy would become a US$25 billion industry by 2020, local and international players has emerged in the region to realise its full potential. Among the fastest growing countries in the SEA region is Malaysia. According to forecast, the Malaysian e-commerce is approximately worth USD$5.7...



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Biotech

Will CRISPR fears fade with familiarity?

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

 

Will CRISPR fears fade with familiarity?

Courtesy of Patricia StapletonWorcester Polytechnic Institute

With all these ‘test-tube babies’ grown up, how have our reactions to the technology evolved? AP Photo/Alastair Grant

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Zero Hedge

Jackson Hole Preview: Market Reactions, And Why UBS Says It's "Nothing To Skip Lunch Over"

Courtesy of ZeroHedge. View original post here.

Historically the annual Jackson Hole symposium has been a major market-moving event as it has traditionally been the venue where central banks make critical announcements such as Bernanke's preview and hints of QE2 and QE3 in 2012, as well as Draghi's suggestion of the ECB's QE in 2014. As shown in the chart below, market reactions following these events have been material.

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Cryptocurrency Hedge Fund Returns 2,129% YTD

Courtesy of ZeroHedge. View original post here.

We'll preface this post by saying we have never heard of the Alternative Money Fund - which "Specializes in Returning Freedom and Value" - and very well may never hear of it again, however it is notable for two things: i) it is a "hedge fund" invested entirely in cryptocurrencies and ii) it has allegedly generated a 2,129% return YTD, making it the best performer in hedgeco's ranking of asset managers YTD.

The "fund's" own description is similar to what one would find in any traditional asset manager, with one...



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5 Biggest Price Target Changes For Tuesday

Courtesy of Benzinga.

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OpTrader

Swing trading portfolio - week of August 21st, 2017

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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Chart School

Weekly Market Recap Aug 20, 2017

Courtesy of Blain.

The story of 2017 has been “lack of volatility”.  There is finally some volatility entering the market, which is nice for those out there who like to actually trade a bit rather than buy and hold.  In last week’s recaps we noted the NYSE McClellan Indicator had registered an extreme oversold reading so a “rubber band” type of snap back rally could happen.

Thursday it hit an extreme level over -80 which we don’t see very often which can lead to short term snap back rallies.  But until we get back to sustained levels over zero caution remains in order.

So that “snap back” rally happened Monday – credit given to “an ebb in pressure between North Korea and the U.S. but the real headline should have been “the market was overs...



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Members' Corner

Why we need to act on climate change now

 

Why we need to act on climate change now

Interview with Jan Dash PhD, by Ilene Carrie, Editor at Phil’s Stock World

Jan Dash PhD is a physicist, an expert at quantitative finance and risk management, and a consultant at Bloomberg LP. In his thought-provoking book, Quantitative Finance and Risk Management, A Physicist's Approach, Jan devotes a chapter to climate change and its long-term systemic risk. In this article, Ilene interviews Jan regarding his thoughts on climate change and the way it can affect our futu...



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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...



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NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

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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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