Posts Tagged ‘Jean-Claude Trichet’

European Banks Still on the Brink

European Banks Still on the Brink

european banksCourtesy of MIKE WHITNEY writing at CourterPunch 

The EU banking system is in big trouble. That’s why European Central Bank (ECB) head Jean-Claude Trichet continues to purchase government bonds and provide "unlimited funds" for underwater banks. It’s an effort to prevent a financial system meltdown that could wipe out bondholders and plunge the economy back into recession.

"We have the best track record on price stability over 11 1/2 years in Europe and among the legacy currencies,” Trichet recently boasted. “What we have done and what we do with the same purpose is to help restore an appropriate functioning of the monetary-policy transmission mechanism.”

Nonsense. EU banks and other financial institutions are presently holding more than 2 trillion euros of public and private debt from Greece, Spain and Portugal. All three countries are in deep distress and face sharp downgrades on their sovereign debt. The potential losses put large parts of the EU banking system at risk. Trichet knows this, which is why he continues to support the teetering system with "unlimited funds". It has nothing to do with restoring the "functioning of the monetary-policy transmission mechanism". That’s deliberately misleading. It is a straightforward bailout of the banks.

Imagine that you are deeply in debt, but the bank offers to lend you as much money as you need to keep you from bankruptcy. To help maintain appearances, the bank agrees to accept the worthless junk you’ve collected in your attic in exchange for multi-million dollar loans. Does the bank’s participation in this charade mean that you are not really broke after all? Does it increase the value of the garbage collateral you’ve exchanged for cash?

The ECB is providing billions of euros per week to maintain the illusion that the market is wrong about the true value of the bonds. But the market is not wrong, the ECB is wrong. The value of Greek bonds (for example) has dropped precipitously. They are worth less, which means the banks need to take a haircut and write down the losses. More liquidity merely hides the problem.

This is from Reuters:

"Despite the open-arms approach, outstanding ECB lending has fallen more than a third since the start of July to 592 billion euros…. Liquidity remains abundant though. Over 120 billion euros was deposited back at the ECB overnight, the latest figures show."

So, overnight…
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Another Bank Bailout

Another Bank Bailout

Courtesy of MIKE WHITNEY writing at CounterPunch

Jean-Claude Trichet, President of the European Central Bank (ECB) addresses the media during his monthly news conference at the ECB headquarters in Frankfurt June 10, 2010. The ECB kept interest rates at 1.0 percent as expected on Thursday and predicted an uneven, moderate economic recovery.   REUTERS/Ralph Orlowski (GERMANY - Tags: BUSINESS HEADSHOT)

On Thursday, European Central Bank head Jean-Claude Trichet announced that he would continue the ECB’s low interest rates (1 per cent) and easy lending policies for the foreseeable future. Wall Street rallied on the news, sending shares rocketing up 273 points on the day. Trichet also said that he would continue his controversial bond-purchasing program which has drawn fire from wary German leaders who fear the onset of inflation. The bank chief dodged questions on the program suggesting that he will operate secretively like the Fed, buying up downgraded assets and concealing their original owner. By appointing himself the de facto Fiscal Czar of the European Union, Trichet has stopped the fall of the euro, scattered the short-sellers, and zapped the markets upward.  Not bad for a day’s work.

Up until yesterday, credit conditions in the EU had been steadily deteriorating. Hoarding by banks had intensified while the rates that banks charge each other for short-term loans was on the rise. Lenders were afraid that the $2.4 trillion in loans to countries in the south (Greece, Italy, Spain, Portugal) and East Europe would not be repaid and that that would push more banks into default.  Euribor (the rate at which euro interbank term deposits within the euro zone are offered by one prime bank to another ) had been creeping upwards while overnight deposits at the ECB were setting new records every day.  Jittery banks have parked over $390 billion at the ECB’s  deposit facility since the crisis began. Banks would rather get low interest on their deposits then lend in the money markets where they might not be repaid at all. 

From Bloomberg News:

“Jean-Claude Trichet said the European Central Bank will extend its offerings of unlimited cash and keep buying government bonds for now as it tries to ease tensions in money markets and fight the European debt crisis.

“ ‘It’s appropriate to continue to do what we’ve decided’ on sovereign bonds, ECB President Trichet said at a press conference  in Frankfurt today. ‘We have a money market which is not functioning perfectly.’

Trichet’s ECB is buying debt and pumping unlimited funds into the banking system as part of a European Union strategy to stop the euro region from breaking apart. While Trichet refused to bow to some investors’ demands for more details


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The ECB Takes a Page From the Fed Playbook, Monetizes Anything That Isn’t Nailed Down

The ECB Takes a Page From the Fed Playbook, Monetizes Anything That Isn’t Nailed Down

Courtesy of Jr. Deputy Accountant 

Hell, they may get desperate and monetize whatever IS nailed down if things don’t look up and quick. Wonder if Trichet has Bernanke on speed dial for this one. At least the ECB is being completely clear about its intentions.

Bloomberg

Jean-Claude Trichet said the European Central Bank will extend its offerings of unlimited cash and keep buying government bonds as it tries to ease tensions in money markets and fight the European debt crisis.

“It’s appropriate to continue to do what we’ve decided” on purchases of sovereign and corporate bonds, Trichet, who heads the ECB, said at a press conference in Frankfurt today. Earlier, the central bank kept its benchmark interest rate at 1 percent. “We have a money market which is not functioning perfectly.”

The ECB is buying state debt and pumping unlimited funds into the banking system as part of a strategy by European policy makers to stop the euro region from breaking apart. While Trichet refused to bow to some investors’ demands for more details on the bond purchases, he said the ECB plans to offer further help to banks struggling to raise cash in money markets.

“The ECB is really in fire-fighting mode and is no longer thinking about exit,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam. “Interest rates will be lower for longer because of this euro-region sovereign debt crisis.”

Whatever it takes! 

 


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The Center Cannot Hold

The Center Cannot Hold

brown falcon Courtesy of John Mauldin, Thoughts from the Frontline 

The Risks from Fiscal Imbalances 
The Challenge for Central Banks 
Bang, Indeed! 
The Center Cannot Hold 
A Decent Employment Report 
Montreal and New York and Italy

Turning and turning in the widening gyre 
The falcon cannot hear the falconer; 
Things fall apart; the center cannot hold; 
Mere anarchy is loosed upon the world, 
The blood-dimmed tide is loosed, and everywhere 
The ceremony of innocence is drowned; 
The best lack all conviction, while the worst 
Are full of passionate intensity.

- William Butler Yeats

Last week we focused on the first half of a paper by the Bank of International Settlements, discussing what they characterized as the need for "Drastic measures … to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability." As I noted, you don’t often see the term drastic measures in a staid economic paper from the BIS. This week we will look at the conclusion of that paper, and then turn our discussion to the fallout from the problems they discuss, initially in Europe but coming soon to a country near you.

But first, what a week in the markets! I’m sure more than a few investors felt like they had a severe case of whiplash. We will discuss the volatility a little more below.

First, a very quick three-paragraph commercial. In the current market environment, there are managers who have not done well and then there are money managers who have done very well. My partners around the world would be happy to show you some of the managers they have on their platforms that we think are appropriate for the current environment. If you are an accredited investor (basically a net worth over $1.5 million) and would like to look at hedge-fund and other alternative-fund managers (such as commodity traders) I suggest you go to www.accreditedinvestor.ws and sign up; and someone from Altegris Investments in La Jolla will call you if you are a US citizen. Or you’ll get a call from Absolute Return Partners in London if you are in Europe (they also work with non-accredited investors). If you are in South Africa, then someone from Plexus Asset Management will ring.…
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How Much is Needed to Bail Out Greece? $159 Billion? $794 Billion? Estimates Vary Wildly as Greece Turns Viral; S&P Downgrades Spain

How Much is Needed to Bail Out Greece? $159 Billion? $794 Billion? Estimates Vary Wildly as Greece Turns Viral; S&P Downgrades Spain

Courtesy of Mish 

Pressure is on German Chancellor Angela Merkel to do something. European Central Bank President Jean-Claude Trichet is in Berlin along with the IMF to arm-twist Merkel. Meanwhile, German citizens want no part of a Greece bailout.

Trichet in Berlin

Trichet in Berlin as Germans Balk at Greek Rescue

European Central Bank President Jean-Claude Trichet is on a diplomatic mission to Berlin as Germany’s reluctance to bail out Greece helps fan a fiscal crisis now burning around the euro region’s periphery.

Trichet and International Monetary Fund Managing Director Dominique Strauss-Kahn will brief German parliamentary leaders in Berlin around noon today about the $60 billion aid package for Greece, which has met with opposition in Europe’s biggest economy. The joint European Union-IMF package would require Germany to stump up the biggest individual loan to Greece.

“It’s a sales pitch in front of an audience that needs it,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “The lawmakers probably need it spelled out that this is not about financing luxury pensions in Greece. Not helping Greece will unfortunately have a direct impact on the euro-area economy and German jobs.”

“Why do we have to pay for Greece’s luxury pensions?” Germany’s biggest-selling tabloid newspaper, Bild Zeitung, asked on its front page yesterday. Almost 60 percent of Germans don’t want to help Greece, Die Welt newspaper reported, citing a survey of 1,009 people.

German Finance Minister Wolfgang Schaeuble asked Trichet and Strauss-Kahn to speak with lawmakers to “facilitate direct insight into the actions as they stand.”

Merkel Puts Demands On Greece

Merkel’s Cabinet Meets on Greece as Pressure for Action Grows

Chancellor Angela Merkel’s Cabinet met to debate help for Greece as Europe’s growing debt crisis tests her refusal to rush German approval of aid.

Merkel is insisting Greece commit to several years of deficit reduction as a cut in the nation’s debt rating to junk yesterday drove up borrowing costs from Italy to Portugal and Ireland and boosted indicators of corporate credit risk around the world.

Action “has to be done now, has to be done very fast,” Organization for Economic Cooperation and Development Secretary General Angel Gurria said in an interview today with Bloomberg television in Berlin before


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Phil's Favorites

Brexit deal flops, Theresa May survives -- so what happens now?

 

Brexit deal flops, Theresa May survives -- so what happens now?

Courtesy of Victoria Honeyman, University of Leeds

As the clock ticks down to March 29 2019, all of the political manoeuvring, negotiating, arguing and fighting is coming to a peak. In the two and a half years since the 2016 EU referendum, views on both sides have hardened and agreement still seems as far away as it was the day after the referendum.

With Theresa May’s withdrawal agreement disliked by all sides, and voted down by an unprecedented majority in the House of Commons, everyone is wondering what can and should be done next?

...



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Zero Hedge

Federal Workers Taking Odd Jobs To Make Ends Meet During Shutdown

Courtesy of Zero Hedge

Federal employees affected by the partial government shutdown are turning to various side jobs to make ends meet, according to the Associated Press

Some, such as immigration lawyer Cheryl Inzunza Blum of Tucson has been renting out a room on Airbnb for extra cash - capitalizing on the busy winter travel season in Arizona after she stopped receiving paychecks for her government contract work at a local immigration lawyer. She says she's working for free since she has clients who depend on her - some of whom are detained or have court hearings. 

Cheryl Inzunza Blum ...



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Kimble Charting Solutions

The "Average Stock" is Facing a Big Test Here!

Courtesy of Chris Kimble.

The Value Line Geometric Index tends to give investors a good idea of the health of the overall market. It is an equal-weighted index with a broad swath of stocks that gives investors an idea of how the “average stock” is performing.

The Value Line Geometric formed highs in the same area in 1998, 2007, and 2015 (see blue line). In the last two years, the index broke out above that line and held above it until the recent correction.

It is now testing the underside of that price area (now resistance). Bulls will get good news with a breakout ABOVE thi...



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Digital Currencies

Crypto-Bubble: Will Bitcoin Bottom In February Or Has It Already?

Courtesy of Michelle Jones via ValueWalk.com

The new year has been relatively good for the price of bitcoin after a spectacular collapse of the cryptocurrency bubble in 2018. It’s up notably since the middle of December and traded around the psychological level of $4,000... so is this a sign that the crypto market is about to recover?

Of course, it depends on who you ask, but one analyst discovered a pattern which might point to a bottom next month.

A year after the cryptocurrency bubble popped

CCN...



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ValueWalk

D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...



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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ...

http://www.insidercow.com/ more from Insider

Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 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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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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About Phil:

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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