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POSTS: TUESDAY 07-06-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
IRAN
ISRAEL
KOREA
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SOVEREIGN DEBT & CREDIT CRISIS |
Trichet Calls on EU Governments to Reduce Budget Deficits to Boost Growth
BL
Chinese Premier Says Global Crisis More Serious Than Expected BI
GREECE
ITALY
SPAIN / PORTUGAL
Gloomy
economy dampens mood at Pamplona bull run
AP
Strong demand for Spanish bond auction FT
The Ticking Time Bomb That Are The Spanish Cajas ZH
FRANCE
GERMANY
UK
British economy 'could relapse into recession'
Independent
UNION SHOWDOWN
Civil servants face regional pay threat FT
Unions threaten to take industrial action
Cameron pushes unions FT
Civil servants vow to fight redundancy cuts FT
Big cuts to civil service pay-offs FT
JAPAN
CHINA
Int'l
monetary system needs yuan as 'third leg'
Xinhua
Yam
touts yuan use
Standard
Rogoff Says China Property Starting to ‘Collapse’ BL
Land minister: housing prices to fall in Q4 China Daily
Fitch warns of hidden information risks in Chinese banks Finance Asia
China eyes shake-up of bank holdings FT
Plan to remove restrictions on investing in the US
DUBAI WORLD
USA
SOME INTERESTING CHARTS FROM DAVID ROSENBERG @ GLUSKIN SCHEFF
Europe's bank stress test may backfire
Wolfgang Münchau
Bank
Balance Sheets Could Torpedo Recovery
Spiegel
Europe debt concerns ease but bank fears remain FT
Some investors have started buying sovereign bonds again
European Banks' Hidden Losses May Threaten EU Stress Test Plan
BL
ECB Buys Another €4 Billion In Sovereign Debt; Is Another Failed
Fixed Term Deposit Operation Coming Up- ZH
Don't Be Complacent in Bonds WSJ
Think Treasury Yields Are Too Low- Get Ready For Bond Bulls To
Laugh Even Harder At Us BI
Thanks to the barrage of rather horrible employment data
we've been hit with recently, Deutsche Bank is pushing back
their forecast for a Federal Reserve interest rate hike from
November 2010 to all the way out as far as potentially March
2011 (Q1 2011)
Deutsche Bank's
Joseph LaVorgna:
A Grinding Labor Market Recovery: The June
employment report confirmed our view that the labor recovery
is progressing, but the pace continues to be stubbornly
anemic. Monetary policymakers’ concerns of another “jobless
recovery” will hardly be diminished by the latest results.
While there is one more jobs report ahead of the August 10
FOMC meeting, there is little reason to believe the extended
period language will change anytime soon. As we highlight in
the following section, we are pushing our forecast for the
first Fed rate hike into next year.
Lower than expected core inflation, an uneven labor
recovery and concerns about sovereign risks have given us
cause to change our forecast for monetary policy tightening
from November 2010 to Q1 2011. For the Fed to commence
removing extreme policy accommodation, sovereign risks need to
abate and more importantly, the labor market needs to show
more robust gains in private payrolls. If the labor market
does not improve significantly in the near term, then monetary
policy will be on hold much longer than we currently envision
[Emphasis added] and downside risks to our forecast
would rise commensurately.
Which means that U.S. 10-year government bonds could rally
even further despite yields already being extremely low,
historically, at about 2.98%.
Bullish Yields Through to a Policy Shift:
We remain bullish on bonds. Any setbacks will be short-lived
and shallow and should be used as buying opportunities,
and 10s could trade to around 21⁄2 percent.
[Emphasis added]
A 2.5% yield would imply a rather strong Treasury rally
ahead (Note that bond yields fall as bond prices rise). We're
not touching the bonds, happier to be wrong here than to end
up feeling plain silly lending to the government for 10-years
at just 2.98%.
(Via Deutsche Bank, Quarterly Update: Labor Market is
Key to Outlook, Joseph LaVorgna, 2 July 2021)
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STATE
& LOCAL GOVERNMENT/b> |
Investors fear rising risk of US regional defaults FT
Difficulties in curbing pension and budget deficits
US states face hard budget choices FT
High CDS Prices Show Continued Stress In Eastern Europe BI
Right now, CDS on Eastern European sovereigns is tightening
after what was a difficult June for the market. The spike seen
in
early June has since leveled off since, but prices on
Hungarian, Romanian, Latvian, and Bulgarian sovereign debt
insurance remain high.
From CMA Datavision:
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HUNGARY
Failing US banks drive bond yields to record low
FT
DODD FRANK ACT
U.S.
Financial Regulatory Overhaul: What a Mess
BMO
RATING AGENCIES
Office Vacancies Keep Climbing WSJ
| Vacant office space continued to accumulate in the second
quarter, the latest indication that businesses aren't planning
significant hiring in the near future.
Office buildings across the U.S. lost 1.8 million square feet
of occupied space in the quarter, pushing the national office
vacancy rate to 17.4%, the highest level since 1993, according to
New York-based research firm
Reis Inc.
While the drop in occupied space was much smaller than in
previous quarters, analysts said companies' continued reduction of
office space meant they still lacked confidence in economic
recovery.
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RRESIDENTIAL REAL ESTATE - PHASE II |
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EXPIRATION FINANCIAL CRISIS PROGRAM/b>
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PENSION & ENTITLEMENTS CRISIS
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GOVERNMENT BACKSTOP INSURANCE |
BP plc And The Administration Replace First Amendment With $40,000 Fine
And Class D Felony ZH
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE/b>
Goldman- Our Clients Are Now 'Uniformly Bearish' And Scared Of Deflation
BI
FLASH CRASH - HFT - DARK POOLS
INNOVATION
VIDEO TO WATCH
INTERESTING ARTICLES - GENERAL
Chavez
Crackdown on Brokerage `Thieves' Leaves Traders Jobless
BL
Why
the Greater Depression Still Lies Ahead
Delta
Steve
Keen’s Scary Minsky Model
Yves Smith
Is America Really Free, If A Privately-Owned Central Bank Controls Our
Currency And Runs Our Economy- BI
QUOTE OF THE WEEK
Rick Santelli Uncut (And GE Turbofan Commercial Free)
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Having rapidly become the only person worth listening to on
CNBC, Rick Santelli's insights on the economy are now far more
valuable than any other guest's on the Jeff Immelt propaganda
station. Which is why we were very happy to find that
Eric King's latest interview was with none other than Mr.
Santelli. The topics discussed are numerous, varied and and very
critical to our economy, covering such concepts as deflation,
deficit spending, bailouts, government spending multipliers, Fed
transparency, spending cuts, austerity, the folly of Keynesianism,
strategic defaults, direct bidders and treasury auctions, and
lastly, tea party dynamics, making this a must hear interview for
anyone still on either side of the economic fence, and who enjoys
listening to Rick for longer than the 45 second segments the CNBC
producers will allow.
- Deflation: "deflation is the most
disingenuous argument especially in the current conditions.
[When the bubble process ends prices have to come down to
reality] the process really is deleveraging, but what happens
when prices go down you get the economists call it deflation.
Deflation is always the biggest bogeyman in a central banker's
closet. It also allows them to use the only tool in their
toolbox, which is to spend money, and usually money they
haven't collected yet, so it's usually a deficit form of
spending. Think about what economists are trying to do: we go
up too high in leverage, prices are too high, we try to
correct that process, it's called deflation, and they try to
put money in to prop it up at an artificial price-deleveraging
is the word we should stick to"
- Deficit spending: "the only thing that
works is across the board tax cuts because it fuels the type
of small business that does the bulk of the hiring"
- Bailouts: "the only regulation that will
ever work is failure. If you don't allow failure what you end
up with is regulators trying to serve when it's time to take
punch bowls away. Regulators never go against the grain. Back
in 03-04 many in the fixed income markets saw it coming but
nobody wants to pull that punch bowl away. Businesses should
fail, that's the way the system was designed"
- The Multiplier of Government spending:
"Larry Summers on many occasions has said that the multiplier
of government spending is greater than 1. If that was true,
we'd never have another recession ever again, and I would be
advocating to spend a trillion dollars every hour. It would be
like a perpetual motion machine and all physicists know those
are impossible. Every dollar the government spends comes from
somebody's pocket"
- Fed Transparency: "It seems to me we are
making some progress on the financial audit. I absolutely
agree that on all of the issues that take taxpayers' money and
end up being distributed or put on the balance sheet and in
any way used by the Fed, there should be an audit that should
be fully transparent. I am worried about the financial
accounting"
- On Spending Cuts: "Listeners, this is
going to be the most important thing I am going to say: we
need to maintain the focus on spending, the politicians in my
lifetime always spend. If we end up spending way more than we
can take in, in essence the deficit panel becomes a tax panel.
We must stop spending before we talk about VAT taxes or taxing
Americans more, we need to get spending under control. The
retings of congress are the lowest they have been in
history."
- On Austerity: "Nobody wants that. But
there is a silver lining - the UK have conditions in their
economy worse than the US, but they came up with an austerity
plan, and we see that their currency has been rewarded. The
GBP has risen about 10% in a very short period of time."
- On Keynesianism: "The Keynesians are both
right and wrong. I don't think Keynes advocated the kind of
helicopter-Ben spending that many say he promoted. He
promoted the kind of stimulus that created jobs, that's more
the medicine for a cyclical downturn, we have a structural
issue because of the bubble credit scenario."
- On the ECB's Debt Monetization: "I think
that the ECB has a huge issue and they are behind the ball.
They don't have a constitution in the eurozone, they have
cultural and monetary cultural issues to deal with. I think
that buying securities or monetizing or QE is always a bad
idea. Once there is a subsidy in the marketplace, it becomes
the normal pricing mechanism. For the Fed or the ECB to unload
these securities, becomes a destabilizing force and in the
long run does more harm than good."
- On Strategic Defaults: "I have feelings
on this that go both ways. I think morally I would have an
issue doing that, but people who did the mortgage, or the
second mortgage, or took a HELOC to pay for cars, pay for the
vacations, I think it is reprehensible that we end up
reshuffling wealth to pay some of that off. But I think the
dynamic is from the government side - I think contracts
between banks and homeowners - if it's unsecured, it's
unsecured, I don't have an issue with that."
- On Direct Bidders being a proxy for the Fed (a
much debated topic on Zero Hedge) and
Treasury Auctions in general: "That's the best
question anyone has asked me in a long time. I think there is
a recycling quid pro quo going on: the Fed is making banking
obsolete because a lot of the programs that they have is to
take the cheap end of the curve and invest it in Treasuries.
Well the Treasury needs as many buyers as it can get. I think
the financial institutions are recycling easy money that
should be going into John Q Public's pocket, to those that
deserve credit, all this money is ending up in the forms of
purchases of 10, 7, and 5-Year Notes, and I don't like that
way that's working. That's why I think that raising rates
would be a good thing. Why? Because it would take some of the
easy ways the banks recycle the Fed's cheap money and put it
back in the hands of the public and actually make banking a
relationship between banks and Americans that need it whether
it is for funding a mortgage or funding a small business."
- And on Tea Party dynamics: "I think
November 2 is going to be a watershed of Americans letting
Washington know they're the boss."
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ZHHstrong> - Zero Hedge, BI - Business Insider,
WSJ - Wall Street Journal, BL -
Bloomberg, FT - Financial Times |
