POSTS:   WEDNESDAY 07-14-10

GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN

IRAN

UAE official backs use of force against Iran  FT

Cost of attacking Iran underplayed  FT

Dubai’s heavy price for Iran sanctions  FT

Emirate becomes front against Tehran’s nuclear programme and legitimate Iranian businesses suffer

ISRAEL

KOREA 

Red: Gordon T Long

After three years, new fault lines threaten  Martin Wolf   FT

 

I think of it as the end of “the deal”. What was that deal? It was the post-second-world-war settlement: in the US, the deal centred on full employment and high individual consumption. In Europe, it centred on state-provided welfare. We can see two huge threats in front of us. 1- The first is the failure to recognise the strength of the deflationary pressures (see chart). The danger that premature fiscal and monetary tightening will end up tipping the world economy back into recession is not small, even if the largest emerging countries should be well able to protect themselves. 2- The second threat is failure to secure the medium-term structural shifts in fiscal positions, in management of the financial sector and in export-dependency that are needed if a sustained and healthy global recovery is to occur. The west is not the power it was; its debt-fuelled consumers are not the source of demand they were; the west’s financial system is not the source of credit it was; and the integration of economies is not the driving force it proved to be over the past three decades. Leaders of the world’s principal economies – both advanced and emerging – will need to reform co-operatively and deeply if the world economy is not to suffer further earthquakes in years ahead.

"The problem similar to 1930's is going to be a failed Public Policy Response due to:

misunderstanding, failed diagnoses and failed global coordination"

Gordon T Long

GREECE

Greek T-Bill Sale Oversubscribed, Yields Up Reuters

Greek central bank accused on short selling  FT

ITALY

SPAIN / PORTUGAL

Moody's cuts Portugal rating Reuters  Fitch Still Negative

Is Spain About To Be The Next Big Downgrade To Hit European Markets BI 

A Third Of Spanish Cities Are Facing A California Crisis  BI

FRANCE

GERMANY

Germans Show No Way to Abandon Euro, Spurring Business  BL

UK

Jobs woe set to last five years, say experts  FT

JAPAN

CHINA

China's frothy property market may have peaked BBC

USA

Banking editor Patrick Jenkins explains EU plan to stress test 91 European banks FT

AUDIO SLIDESHOW

Double-Dippers Get Wet Ignoring Yield Curve Baum

STATE & LOCAL GOVERNMENT

California May Cut Pay, Illinois Holds Bills to Bar Downgrades  BL

Texas To Rely On Bond Sales To Replenish Empty Unemployment Trust Fund  ZH

Broke US states are probing new lows with each passing day, as money continues to stubbornly refuse to grow on trees (unless you have discount window access of course). The latest funding fiasco comes from Texas, which Reuters reports is planning on selling $2 billion in debt just to refill its empty unemployment trust fund. We are confident that bondholders will be ecstatic to put their money into a extremely rapidly amortizing "asset" that will begin depleting from day one and will likely have no collateral recourse in under a year. But after all, it is other people's money, so we are confident this particular Citi/BofA led bond offering will close and price and sub Treasury rates. More from Reuters: Texas, like many states around the nation, has seen the recession drain its unemployment insurance fund, which pays benefits to jobless workers. Last year, Texas paid out $4 billion in jobless benefits, up from $1 billion in 2008, said Ann Hatchitt, a spokeswoman for the Texas Workforce Commission. Along with at least 33 other states, Texas has also borrowed from the federal government, which will start charging interest at the end of this year. By early May, U.S. states had borrowed a total of $38.9 billion from the federal government to pay unemployment benefits, according to a Government Accountability Office report. "We don't know yet if the bonds will be tax-exempt," Hatchitt said. The co-senior managers of the new debt, if it is approved, are Citigroup, which is working with BofA Merrill Lynch , Loop Capital Markets, and Estrada Hinojosa, she said. Ironically, the underwriters will likely end up holding a big chunk of the offering on their own books, demonstrating just how efficient of a financial system ponzies are: bankrupt entities using issued debt to buy the debt of another bankrupt entity, so it can give its unemployed llittle green pieces of paper, and prevent an uprising.

CENTRAL & EASTERN EUROPE

Federal Reserve Sees Slower Growth  WSJ

Fed officials, who are likely to reveal a cut in their assessment of the growth outlook, are divided on how aggressively the central bank should act if the economy slows further.

DODD FRANK ACT

RATING AGENCIES

ECB's Trichet Wants End of Rating Agencies Oligopoly   Reuters

OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE

FLASH CRASH - HFT - DARK POOLS

MARKET WARNINGS

The Volume, As Always, Speaks Volumes   ZH

At this point there is little one can add or say. Today the marching orders were for an S&P 1,100. And we will get it. One way or another.

Seller Heavy Market Bid-Ask Stack Means Lifting Offers Pushes Stocks Higher As Increasingly More Shares Sold  ZH

Welcome to reverse distribution. The Bid-Offer stack in the ES is telegraphing the intentions of market participants who can't wait to offload positions, yet are doing so in a way that is pushing the market higher: any bid-side interest is occurring via market trades lifting the ES price courtesy of a massive ask-side inventory which however is locked into limit positions and refuses to go VWAP or market. Yes - sellers outnumber buyers two to one, but unlike panicked shorts who are urgently covering exposed positions, are willing to wait to get their desired price. And with every lift, the NBBO ratchets up one notch higher, creating a feedback loop. The more ask side interest, the faster the market rips, even as the imbalanced market with much greater sell-side interest clears progressively higher! Nothing like selling causing rising prices in this latest installment of the bizarro market.

GOLD MANIPULATION

VIDEO TO WATCH