Faber’s Bold Prediction: Both The US And Europe Will Default On Their Debt
by ilene - February 10th, 2010 7:37 pm
Faber’s Bold Prediction: Both The US And Europe Will Default On Their Debt
Courtesy of Tyler Durden
Picking up where he left off in his prior Bloomberg interview earlier this week, the author of the "Gloom, Boom and Doom Report" continues his bashing of the governments of all developed and overleveraged nations, which he claims will sooner or later default on their obligations. This could be the most scathing critique of the fiat-money system to date, which is the primary cause for the facility with which governments have accumulated untenable debt loads.
"In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due, and these unfunded liabilities are so huge that eventually these governments will all have to print money before they default."
Sure enough, CNBC, and especially Dennis Kneale, was not too happy with his assessment.
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The Latest From Germany: “Greece Must Solve Own Budget Problem”
by ilene - February 9th, 2010 1:15 pm
The Latest From Germany: "Greece Must Solve Own Budget Problem"
Courtesy of Tyler Durden
Crazy pill time. More disinformation as we get it. Is Germany merely probing to see the market reaction to leaks? If the Bund collapses can they just call the whole thing off?
From Market News:
The spokesman for Germany’s coalition government has denied that Berlin is close to unveiling a plan for financial aid to fiscally-troubled Greece.The spokesman, Ulrich Wilhelm, rejected earlier reports that a Greece package was nearly a done deal, calling them "incorrect."
Earlier this evening the Financial Times Deutschland as well as some financial wire services reported that the German government is preparing a rescue package for Greece, citing sources close to the ruling coalition.The FTD report said the rescue package could include bilateral aid as well as internationally agreed action at the European Union level. It also said that Finance Minister Wolfgang Schaeuble would inform the leadership of his party about details of the plan on Wednesday.
The paper cited its sources as saying that a European solution is sought but aid from Germany alone is not excluded.The deputy parliamentary leader of the Christian Democratic Union/Christian Social Union group, Michael Meister, confirmed to the FTD that a rescue package is being worked on in Berlin, but insisted there would be strings attached.
"If Greece obtains help, then only under strict conditions and only if the Greek government drastically reforms the state," he remarked.
Wilhelm, the government spokesman, didn’t say one way or the other whether a plan was being worked on - just that no decision on it was close at hand.
However, Handelsblatt reported Wilhelm as saying that a solution to the Greek problem "now depends on the government in Athens itself solving its budget problems sustainably."
What a day for Greek CDS traders.
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Weekly Chartology
by Chart School - February 6th, 2010 11:56 am
Courtesy of Tyler Durden at Zero Hedge
Recapping the week that just ended, in a few easy bullets (with the requisite spin) and charts, from Goldman Sachs.
Performance
S&P 500 fell -1.9% this week. The Financials sector was the worst performing sector, falling - 3.5%. Consumer Discretionary was the best performing sector, falling just 80 bps. We expect S&P 500 to rise to 1300 by mid-year (+22.3%), before ending 2010 at 1250 (+17.6%).
S&P 500 earnings
Our top-down EPS forecast of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 39% increase in 2010 to $79, and a 20% increase in 2011 to $95.
Valuation
Top-down, the S&P 500 trades at an NTM P/E of 14.0X (13.1X on pre-provision EPS). Bottom-up, it trades at NTM P/E of 13.6X and LTM P/B of 2.2X.
Sector views and performance
Our recommended sector weightings have generated -26 bp of alpha YTD. We have lost the most ground in our overweight Info Tech position (-12 bp). We have generated the most positive alpha in our underweight positions in Telecom Services and Utilities (+5 bp).
Full presentation
(What's this?)
(THE PRAGMATIC CAPITALIST, 3/3/10)
(All Allan, 1/22/10)
(THE PRAGMATIC CAPITALIST, 2/5/10)
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The Sovereign Debt Bomb Goes Off
by ilene - February 4th, 2010 12:49 pm
The Sovereign Debt Bomb Goes Off
Courtesy of Joshua M Brown, The Reformed Broker
We’ve been talking about this stuff for awhile now here on TRB, but no one was on top of the sovereign debt minefield like the Zero Hedge gang. In case you missed ignored it, they’ve basically been handing you what the market is awakening to now on a platter.
Bad news from Harrisburg, PA to Southern Europe to Los Angeles today. And those jobs numbers certainly didn’t help. We should be at roughly 0% employment by 2016 at this rate.
The Dow is down around 200 as we speak, flirting with the psychologically meaningful 10,000 level.
Here’s what you need to read…
Chanos on the China Farce (Zero Hedge)
Data Dump Worsens Market Mood (WSJ MarketBeat)
Dollar Rallies Back To July Levels As The Euro Crushed (Zero Hedge)
Everyone’s Freaking Out About Sovereign Debt (Clusterstock)
Getting ugly out there, wear a helmet.
*****
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Senator Bob Corker Needs to Be Updated on His Bank Failure History
by ilene - February 2nd, 2010 7:08 pm
Senator Bob Corker Needs to Be Updated on His Bank Failure History
Courtesy of Reggie Middleton
Senator Corker challenged Mr. Volcker’s stance in today’s congressional hearings on the Volcker Rule by saying that no financial holding company that had a commercial bank failed while performing proprietary trading. It appears as if Mr. Corker may have received his information from the banking lobby, and did not do his own homework.
Let’s reference the largest commercial bank/thrift failure of all:
From Allbusiness.com:
Washington Mutual Hires John Drastal as Managing Director of Trading for WaMu Capital Corp.
Publication: Business Wire
Date: Monday, November 18 2002
You are viewing page 1Business Editors
SEATTLE–(BUSINESS WIRE)–Nov. 18, 2002
WaMu Capital Corp., a fixed-income institutional broker-dealer and subsidiary of Washington Mutual, Inc. (NYSE:WM), has hired John Drastal as the managing director of trading.
Drastal will oversee all fixed income trading and risk management within the firm, and will act as primary contact within the dealer community.\"John will play a key role as WaMu Capital Corp. continues to build out its mortgage and securitization platform,\" said Tim Maimone, president, WaMu Capital Corp. \"Over the next year we expect to strategically grow our sales and trading operations. We also plan to open a New York sales office to complement our current offices in Seattle and Los Angeles.\"
Drastal brings a wealth of Wall Street experience to the broker-dealer. Prior to joining WaMu Capital Corp., Drastal spent five years as managing director and principal for Donaldson, Lufkin and Jenrette, where he was responsible for all aspects of the mortgage and asset-backed security trading business, including position and risk management, personnel, distribution, research, finance, operations and new business development.In his 14 years of experience in fixed-income trading and management, Drastal has also held senior positions at Goldman Sachs and Company, Lehman Brothers Inc. and Drexel, Burnham and Lambert. Drastal holds a master\’s degree in industrial administration (MBA) from Carnegie Melon University and earned a bachelor\’s degree in computer science from the University of Delaware.
About Washington Mutual
With a history dating back to 1889, Washington Mutual is a national financial services company that provides a diversified line of products and services to consumers and small- to mid-sized businesses. At September 30, 2002, Washington Mutual and its subsidiaries had assets of $261.10 billion. Washington Mutual currently operates more than 2,500 consumer banking, mortgage lending, commercial banking, consumer finance and financial services offices throughout the nation.
It is truly unfortunate that such…
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Exercises In Supreme Hypocrisy: Bill Gross Edition
by Zero Hedge - January 7th, 2010 8:57 am
Exercises In Supreme Hypocrisy: Bill Gross Edition
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Courtesy of Zero Hedge’s Tyler Durden
In a pathological example of nearly clinical hypocrisy, PIMCO’s Bill Gross yesterday dedicated 4 meandering essay pages full of polemical ramblings to the characterization of America’s sad political and financial hybrid reality. Yet the billionaire’s saddest message is precisely the self-deluded aggrandizement that Gross decries yet willfully takes advantage of every single day. Because after bemoaning the fate of America’s broken political system, and ridiculing the Federal Reserve’s kleptocratic-friendly ways, it is precisely people like the PIMCO chairman that are most guilty of taking advantage of every single loophole presented to them, even as they criticize just this activity. This, beyond all the petty trivialities that Gross discusses, is precisely what is most wrong with America - at this point everyone, and especially Mr. Gross, knows too well that the wealth transfer from the middle class to the elite 1% of society will not end until such time as America itself defaults. Yet having the very people that benefit the most from this, write non-apologetic letters in which they criticize the very system that lets them walk home every day with an extra zero in their bank account simply due to their special connections within this very broken system, is beyond reproach.
Gross writes:
Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people… What amazes me most of all is that politicians can be bought so cheaply.
Well, Gross should know all about special interests and bribery. A casual check indicates that the PIMCO boss himself donated $6,900 to future present Barack Obama in 2008, and another $4,000 to the Democratic Senatorial Campaign committee. What was the IRR on that investment Mr. Gross? Just how many special Treasury JVs is PIMCO part of these days, and how much taxpayer money ends up in the Newport Beach bond manager daily, to simply trade side-by-side with the Federal Reserve and front-ru(i)n the broader investing public? Was Obama the cheapest politician you could buy?
We were so appalled with the result of this query that we decided against checking further back in time to see just what the price of bribery for prior presidents was. However, we did check how much of a "special interest" PIMCO itself is - to our (lack of) surprise, Mr. Gross, your company has spent at least $431,101 to…
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Goldman’s Ten Questions For 2010
by ilene - December 31st, 2009 3:59 pm
Goldman’s Ten Questions For 2010
Courtesy of Tyler Durden
One of the great paradoxes of life is that the smarter one is, the better one realizes just how little one knows. The same thing is true with forecasts: one can hypothesize and conjecture, but if one is unlucky, one is screwed: no matter how thought out, error-proof or logical the narrative - it is the unpredictable events that ultimately shape events, not the "priced in" obvious factors. The Heisenberg Uncertainty Principle applies in a perverse fashion not only to the wave-particle duality in the quantum realm, but to the very underpinning of economics: by predicting the future we implicitly change it. The futility of forecasts is well known to all those, who with the exception of a several few, whose very existence is an economy of scale "strange attractor" (think Warren Buffett and Goldman Sachs), have tried to repeat a winning performance, be it based on fundamentals, technicals, or kangaroo entrails. It is also sufficiently useless to the point where we will spare you a Zero Hedge set of observations of what to expect: if you have been reading this blog, you know what we believe is relevant as we enter 2010. How it will all pan out, however, is a totally different story. It is therefore not too ironic, and somewhat fitting, that Goldman Sachs’ chief economists do not leave 2009 with a dogmatic set of forecasts, which, just like every other year would have the success rate of a coin toss, but with 10 key questions addressed exactly one year into the future. Here are Goldman’s 10 Questions for December 31, 2010.
*****
Our forecast for 2010 features sluggish GDP growth, employment gains that are too slow to prevent a further modest increase in the unemployment rate, low (and probably falling) core inflation, and a Federal Reserve that “exits” from some unconventional monetary policies but keeps the funds rate at its current near-zero level. For the last US Economics Analyst of the year, we try to answer what we think are the 10 most important questions for 2010.
1. Have house prices bottomed?
Probably not yet, but we are quite uncertain. Although US homes are no longer significantly overvalued, we believe that much of the increase in prices over the past six months has been due to three temporary factors: a) the homebuyer tax credit, which has been extended into 2010 but is likely…
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2009 Recapitulating Thoughts On HFT From Themis Trading’s Joe Saluzzi
by Zero Hedge - December 30th, 2009 3:39 pm
2009 Recapitulating Thoughts On HFT From Themis Trading’s Joe Saluzzi
Courtesy of Tyler Durden
Zero Hedge has been a little quiet on the topic of HFT lately, not because we have come to peace with the threat that HFT presents to equity markets (we have not), and if HFT lobbyists are successful, CDS is next, or because we have realized that no matter what, Mary Schapiro will never, ever do the right thing and take a preemptive action instead of always doing damage control after the fact, until such time as the broader population finally realizes just how worthless the organization of the ex-Finra multi-millionairess is and forces its closure (please Judge Rakoff, do anything you can to accelerate this), but because we have been fascinated by the parallel farce that is the financial reform legislation which is nothing but yet another massive form of bailout for the big banks. We recommend our readers read David Reilly’s terrific overview of HR 4173: poor David is likely one of the 2 people in the entire world who read the entire 1,279 pages of mostly useless drivel. Some of its key points highlighted by Reilly are the following:
– For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery.
– Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.
– Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.
More Bailouts
– The bill also allows the government, in a crisis, to back financial firms’ debts. Bondholders can sleep easy — there are more bailouts to come.
– The legislation does create a council of regulators to spot risks to the financial system and big financial firms. Unfortunately this group is made up of folks who missed the problems that…
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A Three-Month Flat Market? Yes…If You Exclude The Constant After Hours Manipulation
by ilene - December 23rd, 2009 2:26 pm
A Three-Month Flat Market? Yes…If You Exclude The Constant After Hours Manipulation
Courtesy of Tyler Durden at Zero Hedge
Anyone looking at their 401(k) portfolio performance since the end of August will undoubtedly be very happy (and extremely surprised), as the market has climbed steadily higher despite i) increasingly declining trading volume and ii) consistent and material withdrawals from domestic equity mutual funds. Furthermore, if anyone was merely looking at the trading action in regular hours, one would think there was absolutely no profit made since early September. The reason for that: all the upside since September 14th has come exclusively from after hours action. The chart below demonstrates the relative performance of regular hour trading in the SPY as well as that in the extended session. The notable observations: gaps, gaps, gaps. Every single day, minimal volume pushes the futures index higher. Good news, bad news, it don’t matter to the Goldman S&P and Russell 1000 futures desk: they just lift every micro offer, giving the impression that the market is unstoppable, often leapfrogging each other as the latest viagra’ed GDP or unemployment rumor is spread. Come morning, it is time for the HFT brigade to come in and scalp their trillions of pennies while leaving the market unchanged, then at 4pm handing it off again to leveraged futures manipulation and dark pools. In a nutshell, this is the secret of the past quarter’s phenomenal market performance.
A longer-term chart highlights the regime changes since the March lows, when for several months in a row, regular hours would carry the broader market higher, then would flatline, and let the futures trading desks take over. Rinse. Repeat. That way both the HFTs and dark pools end up happy.
The observant among you will immediately realize what this implies: not only is there no volume breadth to the recent move in the markets, but the actual push higher likely occurs on at most tens of thousands of futures contracts on a daily/weekly basis. The fact that literally several blocks of AH trades, used persistently, can move the market higher by 6% over the past 3 months, even as regular trading accounts for absolutely no part of this move, and that the SEC finds nothing troubling about this phenomenon, should be sufficiently telling about how "efficient" US markets have become.
The reason for this focus away from regular hours trading is simple: all After Hours does is provide…
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Census Bureau Reports Collapse In State Tax Revenue, Liquor Stores Only Bright Spot
by ilene - December 9th, 2009 4:05 pm
Census Bureau Reports Collapse In State Tax Revenue, Liquor Stores Only Bright Spot
Courtesy of Tyler Durden
Hopefully the administration by now has realized that unless it wants uprisings (either metaphoric or literal ones) it has to tackle the state situation. As today’s Census Bureau update points out, and corroborates our earlier findings on the witholding tax plunge, usually used to fill both State and Federal coffers, total state revenues dropped by 16% to $1.678 trillion, even as total expenses increased by 6.2% to $1.736 trillion.
Here are the highlights from the Census Bureau itself:
State governments took in nearly $1.7 trillion in total revenues in fiscal year 2008, a 15.8 percent decrease from 2007, according to new data on state government finances released by the U.S. Census Bureau. The largest share of those revenues came from taxes ($780.7 billion), which made up 46.5 percent. The decline was primarily because of a decrease in insurance trust revenue, which fell by $377.7 billion (72.7 percent).Insurance trust systems are comprised of public employee retirement systems, the unemployment compensation system, state government workers’ compensation programs and other state social insurance trusts.
Total state government expenditures increased 6.2 percent from fiscal year 2007, totaling slightly more than $1.7 trillion in 2008. Education ($546.8 billion), public welfare ($412.1 billion) and highways ($107.2 billion) represented the top three outlays, accounting for nearly two-thirds of all state government total expenditures.
The findings come from the 2008 Annual Survey of State Government Finances, which includes data on revenues, expenditures, debt, and cash and security holdings for each state, as well as a national level summary. The major source of these finance statistics is the governments’ own accounting systems, either directly from a government’s own records or through intermediate reporting systems.
Eleven states spent more than 25 percent of total expenditures on public welfare, with Tennessee (32.8 percent), Maine (30.5 percent) and Rhode Island (29.8 percent) spending the highest percentage of their total expenditures. (See table) (Excel).
Public welfare spending is used to support people based on need and includes such items as old-age assistance, temporary assistance for needy families, and commodities and services provided under welfare programs, including medical care or burial services.
Hawaii (11.5 percent), Alabama (10.1 percent) and South Carolina (9.9 percent) led in spending on public health and hospitals as a percentage of total expenditures.
In addition to state taxes, state lotteries were another way many state governments (including Washington, D.C.) raised revenue in 2008.…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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