Tuesday, July 31, 2012

Europe's Second Scariest Chart

The unemployment rate across the 17-nation euro-zone reached its highest level on record (22 years) at 11.2% and becomes Europe's second scariest chart. The silver medal in scary factor is quite an accomplishment with parabolic TARGET2 exposures and plunging core short-term yields but the gold medal holder remains the extreme levels of youth unemployment that remain in the periphery. It would appear that Europe, in its haste to follow the lead of the US in cost-cutting and blood-letting amid a significant depression recession that clearly CEOs do not believe wil be short-lived, is seeing "Companies generally are under serious pressure to keep their labor forces as tight as possible to contain their costs in the face of the current limited demand, strong competition and worrying and uncertain growth outlook,” and as Reuters points out from IHS's Howard Archer, "there looks to be a very real danger that the euro-zone unemployment rate could reach 12 percent in 2013."


Saturday, July 28, 2012

2nd Quarter GDP - Weaker In All The Wrong Places

The first estimate of the 2nd Quarter GDP was released at a 1.5% annualized growth rate which was just a smidgen better than the 1.4% general consensus. There has been a rising chorus of calls as of late that the economy is already in a recession.  For all intents and purposes that may well be the case but the GDP numbers do not currently reveal that.   What we are fairly confident of is that with the weakness that we have seen in the recent swath of economic reports is that the 2nd quarter GDP will likely be weaker than reported in the first estimate. It is this environment, combined with the continued Euro Zone crisis and weaker stock markets, as the recent rumor induced bump fades, that will give the Federal Reserve the latitude to launch a third round of bond buying later this year.  While the impact of such a program is likely to be muted - it will likely push off an outright recession into next year.


Wednesday, July 25, 2012

Barclays' Disgraced COO Gets £8.75 Million Golden Parachute

The guy who openly admitted he was getting notification from the BOE to manipulate Libor, and was advising his traders appropriately, Barclays' COO Jerry del Missier, and who quit the same day as his boss Bob Diamond, has finally had his pay package revealed. The payoff to get him out and shut him up? £8,750,000.


Stephen Roach: "QE3 Is Not Going To Work"

QE is nothing but crack to a ridiculously addicted market. With 70% of the US economy in a balance sheet recession, the Fed knows this (which he notes is now run by WSJ's Jon Hilsenrath since what he prints must be adhered to by Ben for fear of market disappointment) and is "dangling QE in front of the markets like raw meat - but it has not worked and it will not work!" But critically, he believes, the euphoric response of markets will be tempered since they have become "used to the fact that all of this unconventional monetary easing by the central bank is just not what it is supposed to be."


Germany in recession: Private Sector Fastest Falls Since June 2009

Key Points

  • Flash Germany Composite Output Index(1) at 47.3 (48.1 in June), 37-month low. 
  • Flash Germany Services Activity Index(2) at 49.7 (49.9 in June), 10-month low. 
  • Flash Germany Manufacturing PMI(3) at 43.3 (45.0 in June), 37-month low. 
  • Flash Germany Manufacturing Output Index(4) at 42.8 (44.8 in June), 37-month low.

British Double Dip Accelerates Following "Terrible" GDP Data

The Office for National Statistics said Britain's gross domestic product fell 0.7 percent in the second quarter, the sharpest fall since early 2009 and a bigger drop than any of the economists surveyed in a Reuters poll last week had expected. The figures confirmed that Britain is mired in its second recession since the financial crisis, with the economy shrinking for a third consecutive quarter.


British GDP figures to confirm worst double-dip recession in 50 years

Britain's longest double-dip recession for more than 50 years will be confirmed in official figures out on Wednesday.  Gross domestic product (GDP) – a broad measure for the total economy – is forecast to have shrunk by around 0.2% between April and June in its third straight quarter of contraction.  That would mark the longest double-dip recession since quarterly records began in 1955 and is believed to be the worst since the second world war.


Anyone who follows shadow stats will know this has been going on much longer.  Not a huge fan of GDP obsession, but it shows that old stream media are slowly catching up to what the web has known for about 5 years...

The Economics of Silver

Buy the dip!

Tuesday, July 24, 2012

Scotland Debates Independence and Launching New Currency

However, the key issue for Scotland is whether or not they will be confident enough to launch their own currency. Currently there is much talk about Scotland either continuing to use the British sterling or even perhaps moving into the Eurozone. Both these aspirations are desperately misguided and both will lead Scotland into the exact situation that Greece, Spain, Portugal, Italy and Ireland face today. Because the Scottish currency will, in both these scenarios, be issued by a foreign central bank they will not have discretion over their own fiscal policy. Thus, without issuing their own currency — which, of course, will have drawbacks of its own (the Scotch pound would probably devalue vis-a-vis the British sterling upon issuance) — we can be fairly sure that Scotland’s dream of independence would soon become a nightmare.


Santelli: "Ditch The Duct Tape; The Problem Is Insolvency"

Kashkari's intelligence, he rhetorically asks "Do you really think [the Fed] is the solution?" - and rightly so. "It's all band-aids," he exclaims, adding that "the problem is insolvency." Speaking out loud what many are thinking, Rick blasts the hypocrisy of the Kashkaris of the world who opine on solutions (and band-aids) while missing the critical underlying problem - that no one is accountable. Between Reagan, 'unreal' spending cuts, compromised 'bad' resolutions, and the continuing ostrich economics in the US mainstream, Santelli tells it like it is - as hard as it is for the CNBC anchors to hear.

[Watch the video below...]


Spain is Not Uganda - 2 Year At 6.66%, 10 Year At 7.6%

 Spain is not Uganda: this morning Spain is increasingly looking like the 10th circle of bondholder vigilante hell with its 10 Year trading at 7.59% after hitting a record 7.607% moment prior. The short end has blown out even wider and the 2 Year very appropriately at 6.66% and rising. Italy has also joined the party blowing out to just why of 6.5% and Italy's banks about to be halted across the board despite the short-selling ban. Next up: selling anything forbidden. Finally, the scramble for safety into Swiss 2 year notes accelerates as these touch a mindboggling -0.44%


Poverty Highest Since 1965

The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 percent in 2010, climbing as high as 15.7 percent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest level since 1965.


Monday, July 23, 2012

LIBOR Fraud May Be the Mother of All Bank Scandals

In fact, this may be the mother of all scandals—the one that finally leads to criminal charges and the insolvency of major banks. The fraud is breathtakingly easy to understand once past a small amount of jargon. Indeed, the simplicity of the fraud is the greatest threat to the perpetrators because here at last is a fraud that is easy for juries to understand and for prosecutors to prove.


But this time it's different and here's why: The sheer volume of contracts based on LIBOR defies the imagination. Estimates vary, but $500 trillion seems reasonable. Even if the banks lied by as little as one-tenth of 1 percent, that percentage applied to $500 trillion multiplied by the six years of the fraud comes to $3 trillion stolen from customers. Cutting that amount in half to allow for the fact that some customers benefited from the fraud while others lost still gives implied damages of $1.5 trillion, greater than the combined capital of all of the too-big-too-fail banks in the United States. Taken to the full extent of the law, these damages are enough to render a large segment of the global banking system insolvent. These damages will be pursued not by regulators, but in private lawsuits by class action lawyers.


Headed For The Ceiling (Spanish Bond Yields)

Spain's stock market has lost a stunning 12% in two trading days.  By most measures that's a crash.  Nobody's talking about the magnitude of this, but they should be -- Spanish 10yr bonds pipped at 7.5%, which is more than Spain can pay.


Denninger, as usual, spot on.  Not sure I agree with the conclusion that the Euro will collapse.  Debts that cant be paid, wont be paid.  As ever.

Tony Blair: hanging bankers won't help

Public anger over the financial crisis is wrong and must not lead Britain to “hang bankers at the end of the street,” Tony Blair says today.


A superior kind of Fed stimulus

Both the crisis and the apparent boom before it were caused by the change in private debt. Rising aggregate private debt adds to demand, and falling debt subtracts from it. This point is vehemently denied on conventional theoretical grounds by economists like Paul Krugman, but it is obvious in the empirical data. The crisis itself began in 2008, precisely when the growth of private debt plunged from its peak of almost 30 per cent of GDP per annum. down to its depth of minus 20 per cent in 2010. The recovery, such as it was, began when the rate of decline of debt slowed. Across recession, boom and bust between 1990 and 2012, the correlation between the annual change in private debt and the unemployment rate was -0.92.


Super-rich 'hiding' at least $21tn

A global super-rich elite had at least $21 trillion (£13tn) hidden in secret tax havens by the end of 2010, according to a major study.

The figure is equivalent to the size of the US and Japanese economies combined.
The Price of Offshore Revisited was written by James Henry, a former chief economist at the consultancy McKinsey, for the Tax Justice Network.


Fed Proposal Allows Banks To Seize Your Money

The New York Fed has introduced a framework to give banks the right to suspend account withdrawals at will to defend against financial panic.

Ten Italian Cities On Verge Of Financial Collapse

Sicily is followed by Calabria, Campania, Lazio, Abruzzo, Tuscany, Lombardy, Umbria, Liguria, Veneto and so on. At least the governors of those respective provinces now have an advance warning what the endgame is." Sure enough, now that this particular floodgate has also been opened, it is only fitting that in the aftermath of this weekend's main news that a total of 6 Spanish regions will demand bailouts, that Italy follow suit with its own blacklist, and as La Stampa has reported, there are now ten major Italian cities at risk of an imminent financial collapse, yet another factor pushing Italian yields well on their way to the country's own 7% rubicon, now at 6.34%.


Going to the Tape

Going to the tape

Zynga (znga) is a buy at $5.09 
  size 1000

Bitcoin is a a buy at $8.68 
  size 1000