Posts Tagged ‘GIIPS’

Notes From Underground: Let’s Assume We Have A Can Opener…

April 15, 2012

As regular readers of NOTES are well aware, I have been very critical of market participants like George Soros and their sanguine views of the European DEBT CRISIS. Many analysts like Jim Cramer have spent the last years waving the debt problem away. First, it was Greece was too small to have an impact on Europe. Ireland was too small and besides was ring-fenced by a bad bank structure. Portugal was smaller than Greece, thus nothing to be concerned about. Italy and Spain were possible problems but many were listening to the flirtations of the Chinese, who, time after time, made solicitations about purchasing European Debt. (By the way, we still haven’t seen the Chinese Sovereign Wealth Fund enter the fray.) If all else failed, European financial leaders were too exposed to the EURO to allow the European Monetary Structure to collapse. Germany would not allow the work of Helmut Kohl and others to be just another failed attempt at a unified Europe.

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Notes From Underground: A Visit to February 5 (Sometimes A Reminder Is Necessary To Clear The Stain Of Bad Execution)

March 15, 2012

The world is carrying on in its design of vast pools of liquidity in a “sea of tranquility” … for the moment. Are Europe’s problems solved as the FRENCH ROOSTER Nicholas Sarkozy has crowed? Absolutely not. The travails of debt plagued economies will begin for the nations living on the IBERIAN PENINSULA. As I have argued for a long time in this BLOG, Spain is a far worse problem then Italy but Italian BONDS suffered as they were the only FUTURES HEDGE AVAILABLE FOR THE PROBLEMS OF THE GIIPS.

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Notes From Underground: IN”LTRO” FERTILIZATION

February 27, 2012

Okay, the German Lower House of Parliament approved the funding for the Greece bailout, though Chancellor Merkel had to reach “across the aisle” to secure the necessary majority as some members of her coalition abstained or voted no. This is certainly no major surprise. Now the focus will return to Wednesday’s LONG TERM REFINANCING OPERATION (LTRO) and see how large the uptake will be from European banks and how much the ECB may try to cram into the system. The Geithner/Schauble squabble over IMF funding may give DRAGHI the edge he needs to push a larger LIQUIDITY ADD THAN THE 470 BILLION EUROS reported last Friday in a BLOOMBERG article.

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Notes From Underground: OPA! Time to Drink Some Ouzo and Reflect on the Greek Situation

February 13, 2012

Europe was/is/will be the catalyst for the markets, from equities and commodities to, of course, currencies. Whether the problems are violent strikes in Athens or insolvent banks in France and Spain, the issues that PLAGUE EUROPE ARE EXISTENTIAL IN NATURE. Can the problems of sovereign default and the deflationary impact rippling from a massive deleveraging be contained by a massive douse of LTRO or QE3 in the U.S.? For now the markets are CONTENT to allow the flood of liquidity be the potion for increased portfolio risk.

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Note From Underground: Mr. Bernanke Meets the House Budgeteers

February 2, 2012

Sound bites from the left. Sound bites to the right; here I am, stuck in the middle with you (STEALERS WHEEL). The House Budget Committee was in full political regalia as posturing  for the home folks and November’s election was in full force. Most of the questions are redundant or ridiculous and in some cases, both. An exception was Committee Chairman Paul Ryan, who asked Mr.Bernanke if the FED‘s policies had corrupted the BOND markets that they stopped sending a credible signal. It has been a consistent theme of NOTES that the BOND market is broken as an indicator of inflation expectations because the FED‘s large scale asset program has created an artificial support to LONG-TERM BOND PRICES.

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Notes From Underground: When Irish Eyes Are Smiling, It Must Mean the World’s Focus Is Elsewhere

January 30, 2012

Greece is balking at surrendering its sovereignty as the Merkel-led European elite is shouting for more austerity from the “profligates” in an effort to insure the large continental banks against the ravages of default. As one reader e-mailed today, IT IS AS IF THE GERMANS ARE PLACING THE ENTIRE NATION OF GREECE INTO DEBTORS PRISON. Life was much easier when a country could send in its gunboats to collect its loans.

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Notes From Underground: S&P, The Insider’s Trading Edge

January 16, 2012

It is startling to think that the S&P downgrades could have any sort of effect on the markets. The sovereign debt markets have been telling those who are attentive that not all countries in the European Union are equal. Several of the GIIPS have had interest rate yields far above those of the German benchmark for almost two years. Even the French 10-year note has widened to 150 BASIS POINTS over the German 10-year BUND during the last six months. DO WE REALLY NEED S&P OR OTHER RATING AGENCIES TO CERTIFY WHAT THE MARKETS HAVE BEEN SAYING?

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Notes From Underground: Bernanke, Housing Fails to Provide Economic Foundation

January 11, 2012

In a BLOOMBERG article published today, “Bernanke Doubling Down on Housing Bet Asks Government to Help,” it appears that the Obama administration and the FED are in sync that something needs to be done to lift the moribund residential real estate market. This is certainly not a new development but it shows how the FED is at a loss to explain how the ultra-low interest rate policy for the last three years has FAILED to stem the decline in housing prices and ultimately foreclosures. The FED and others don’t want to admit that this IS A BALANCE SHEET RECESSION.

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Notes From Underground: The Fed Steps Into the Light???

January 3, 2012

The release of the FOMC minutes today revealed that the FED plans to be more transparent as it will “publish forecasts of its own interest rates for years into the future.” Previous FED forecasts have proved to be very poor at predicting the path of the economy over the near term or yet for any longer period of time. On first read, this attempt at transparency ought to be labeled the VOLUME ENHANCEMENT FOR THE CME EURODOLLAR CURVE. FED prognostications will move the 3-5 year part of the curve all over the place and be very productive at increasing futures and options volume.

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