Posted by Paul Vignaon January 14, 2011 Bonds, Economy /
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Welcome to New Jersey. We’re not Greece!
We opined in this space back in March of last year that if you wanted to know what lessons the unfolding crisis at the time in Greece held for the United States, the place to look wasn’t the federal level, it was the state level. Greek stories, after all, I said, always have something to teach us.
That’s becoming more apparent. Be sure to get a gander at the story at the top of page one in today’s Wall Street Journal, New Hit to Strapped States. The market for municipal bonds is getting tighter for all manner of issuers, hospitals, improvement authorities, schools.
With myriad agencies having to refinance tens of billions in bonds this year, it’s creating another headache for the states, which have enough of them to begin with. This isn’t just a bad rabbit hole to go down. It’s a nuclear rabbit hole.
It’s been a bad week for muni bonds, with the highest profile misfortune, the one that really got this whole mess into the public eye, this week coming from my own Garden State. Given that New Jersey sprouts more “improvement authorities” than bad reality shows, this is no surprise.
Posted by Steven Russolilloon November 29, 2010 Economy, europe, Markets /
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Investors aren’t convinced a $113 billion bailout of Ireland will stop contagion in Europe. The Dow Jones Industrial Average, which earlier plunged as much as 163 points, was recently only down 36 points. Part of the move is technical trading, but ultimately its tough to explain today’s move. Here’s a piece of a snippet John put on the wire around 3:00 pm ET:
No easy indentifiable catalyst for the turnaround, though that’s not unusual for these late afternoon sprints toward the finish. The euro has recovered a little lost ground, but isn’t setting the place on fire with its move.
Nevertheless, concerns that the Irish bailout might not be enough to contain the euro-zone debt crisis appears to be the main theme on investors’ minds. And that mindset isn’t going away anytime soon.
Dow Jones’ Donna Kardos Yesalavich, Michael Casey and Joe Bel Bruno report on this issue and more on today’s Markets Hub:
Remember all the rave reviews and talk about transparency during the summer when European bank stress-test results were released? As Gluskin Sheff’s David Rosenberg reminds us today, the Irish banks (yes, the ones at the center of the bailout), “passed” those tests.
The euro and US stocks enjoyed a nifty little rally back in late July, in part on hype about the stress-test “results,” even though there was wide skepticism and derision over the testing process.
At least part of that charade is over. Back in July, Dow Jones reporter Vladimir Guevarra wrote that the Bank of Ireland and Allied Irish Banks “passed a European Union-wide stress test on the strength of their balance sheets,” according to the Irish Central Bank and financial regulator. Continue reading…
Posted by Paul Vignaon November 18, 2010 europe /
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It all looks so much brighter today, with the Irish question apparently drawing toward an answer, and China’s price controls may not be as “harsh” as expected. Those two things have sparked the risk trade anew.
Did GM pick a good day to go public or what?
It doesn’t take much to get the market to look past something like the Irish question. So far as Mr. Market is concerned, it’s already been settled. “It’s my expectation that that is what is definitely likely to happen,” Patrick Honohan, the head of Ireland’s central bank and also a member of the ECB governing council, said of the odds of a bailout, putting the price tag in the “tens of billions.” So let’s just wipe the dirt off our hands and move on, shall we? Maybe not quite so fast.
I don’t know if you know any Irish people. I do — half my family. There is nothing about Ireland and the Irish I don’t love, the island, the history, the music, the literature, the Guinness. But they also happen to among the most stubborn people on the planet. There’s a scene in “Patriot Games” that sums up Irish stubbornness.
It comes toward the end, during a boat chase, when the IRA soldier (or terrorist, depending upon your bent) Sean Miller is obsessively chasing Harrison Ford’s Jack Ryan, who killed Miller’s brother in foiling an assassination attempt. Miller’s boss is on the boat, pleading with him to let it go, to give up and go back to the real cause. So what does Miller do? Shoots his boss dead and keeps chasing Ryan.
That always summed up Irish stubbornness to me. If you’re Irish, or know the Irish, it’s actually kind of funny, in the way that “Angela’s Ashes” is kind of funny.
It’s like Bailout Nation on steroids. I don’t see how this can possibly be a good thing.
The Irish have been resisting an aid package for some time now, and the Irish, recall, stepped out to handle their own problems long, long before Greece and the PIIGS were even on anybody’s problem-child radar. They never passed the hat around to begin with, but now not only is a hat being shoved in their hands, it’s being filled with money at the same time.
This is, ostensibly, to “shore up” confidence in Ireland’s solvency; which is supremely ironic when you consider that the very act of accepting outside aid in order to pay off ones’ debts would seem to be the very definition of insolvent (“not able to meet debts.”)
But the Europeans aren’t very concerned about semantics and irony right now. They’re concerned, very concerned — again — about a general meltdown of the sovereign picture among several nations. This concern is coming back to light because nothing was actually done to address the issue last year, and not much seems to be getting done about it now.
Just when I thought I could not possibly get more outraged by anything I hear about government bailouts, I read this from the Times:
When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Societe Generale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.
Um, excuse me? Am I to understand that the U.S. government, which was about to hand over nearly $200 billion to AIG, forced it to agree not to sue any of the banks it owed money to, even if it should it later find out that any of them committed, oh, you know, fraud? Is that what my government brokered?
This is the kind of agreement that, say, a corporation might make one sign when they’re letting you go, but giving you a little severance package, know what I mean? Why in the world would the U.S. government, which was about to fork over an almost unheard of amount of taxpayer money, want to force to AIG to give up any legal chance to recoup any of that money? It would make sense if it was the banks forcing that issue, but for the government to…
A-ha! A-ha!
“Another way to read this requirement is that the Fed and Treasury were opposed to having fraud at the banks exposed, period,” Yves Smith writes at naked capitalism. “That is a very troubling stance for bank regulators to take.”
I’d like to think that ShoreBank, the “troubled” Chicago-area bank that’s been the recipient of an industry-led bailout, is holding some super toxic piece of off-balance-sheet subprime debt, like a mortgage on the gates of hell, and if it goes bad will unleash terrors that will makes derivatives trading look like a kindergaten class, like in some bad action movie.
Right? Call this one “The B Team.” Blankfein recruits a team of top bankers to save a troubled colleague, and save the universe. Dimon is the brawn. Pandit is the brains. They have to convince Ken Lewis to come out of retirement (“Those days are over for me”) to help them. For a little sex appeal, they go drag Erin Callen out of the Hamptons. A snappy theme song, a subplot involving Russian oligarchs, the thing writes itself.
Am I nuts? Then you explain to me why Wall Street’s going all Hands Across America to save this little bank that nobody outside of Chicago’s ever heard of. Apparently, too big to fail has to do with more than just mere size.
Boy, a trillion dollars doesn’t stretch like it used to.
On Thursday, Deutsche Bank’s CEO, Josef Ackermann, said publicly what nobody in Europe wants to hear, that Greece — even after its bailout — may not be able to pay off its debts. A second German banker, Ulrich Kater, chief economist of Germany’s Dekabank, has now seconded Ackermann’s fears. It’s one thing when Cassandras and contrarians say the things nobody wants to hear. But when the adults in the room start saying these things, that’s a bad sign.
Ackermann caught some grief for his candor. Germany’s economic minister, Rainer Bruederle, called the comments “strange, surprising and annoying.” But what’s so strange about them? The ECB’s chief economist, Juergen Stark, said all the $1 trillion bailout bought is time. And Jean-Claude Trichet himself said Europe’s economy is at its worst point since World War II, if not World War I.
Nobody’s going out on much of a limb here, by the way. Greece is past the point of no return. They can’t grow their way out of their debts, they can’t debase their currency, and in order to get public spending under control, they’re going to put in such draconian cuts and taxes that it’s going to send the country into a multi-year tailspin that can only be properly described as a depression (little “d,” the old fashioned kind that used to crop up regularly until the word became fraught with such terror nobody wanted to use it anymore.)
No, Greece is going to go through all that, Europe (and the U.S. for that matter, don’t forget that,) is going to go through the expense, the great expense, of a bailout, and Greece isn’t going to be able to pay off its debt anyhow. They’ll call it something diplomatic, a restructuring or something, but bluntly it’s a default. Which isn’t the worst thing in the world. Greece has been around in one form or another for 3,500 years, probably more, there are cultures there that predate history. They were around yesterday, and they’ll be around tomorrow. But it’s going to a long, slow, painful rehabilitation.
- BofA, Citi, JPMorgan and Goldman Sachs all racked up perfect trading quarters in 1Q, but the Kid Dynamite blogger is less than impressed with the ensuing analysis. “See, the probability of winning when your cost of funds is near zero and you can invest at positive interest rates at assets which are already being supported by the Government is probably closer to 100% than 50%.”
- “It’s no wonder that Goldman Sachs–perhaps the largest market maker in the world–consecutively avoids trading losses quarter after quarter,” FT’s Alphaville blog says. “That’s because when you’re making markets with no obligation to do so, you are in complete control. You dictate the terms. It’s very hard to lose.”
- EU’s nearly $1T bailout package stabilized Europe’s stock and bond markets this week, but hasn’t done much for the sliding euro.
- The online advertising business is improving from its dismal
performance a year ago, but how much of an improvement is tough to quantify.
- Paul Volcker’s candidness is undermining Obama. “It’s one thing for people in the private sector to express negative views about the future on the Eurozone, quite another for someone of Volcker’s stature who is playing a policy role for the Administration to undermine an initiative deemed so important that the President has thrown its weight behind it,” Yves Smith says.
- The number of people considered long-term unemployed sits at its highest level on record even as the economy has experienced four-straight months of net payroll growth. “Think about what that means: The new jobs that have been created so far seem to be going disproportionately to people out of work for only a short period,” Catherine Rampell writes.
- NBC canceling Law and Order could mean 8,000 people will join the unemployed ranks.
- Bespoke compiles a list of companies whose stocks have performed well on their earnings release days, but then declined the most since then. Topping the list, First Solar (FSLR) which rose 18% after posting earnings April 28, but since has dropped 20%.
- Well, that experiment didn’t last long. Google plans to stop selling its Nexus One on the Web.
- The summer of LeBron officially starts now. Mayor Bloomberg says he’ll give LeBron a “big sales pitch” to come to NY, but President Obama hopes the King goes to Chicago. LeBron, you can guest post here at Market Talk anytime you’d like if you become a Knickerbocker.
Let’s face it, the Greeks invented drama, and they still know how to do it pretty well.
Having fun watching Greece devolve live on TV? The Greeks have been protesting for months, but this is the first time we’re seeing it over here. Of course, previously the journalists were on strike as well as everybody else. And the protests have turned into full-fledged riots, which no journalist, even a striking journalist, can resist.
The European Union is in the spiral, make no mistake. The only question is how far they allow themselves to get dragged down. Remember, this was supposed to be an austere, responsible monetary union. No deficits above 3%. No bailouts. The ECB wouldn’t ease off collateral rules. This was basically going to be a union with German-type rules.
That was, apparently, a pipe dream. Every day, the European Union moves further away from the kind of monetary policies it started with. Despite a very clear clause in the Maastricht Treaty, a member nation is getting bailed out, and with that Pandora’s Box opened, there are very real expectations that more bailouts will be forthcoming, no matter what Germany says. Once you go down that road, it’s very hard to turn back.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
President Reagan’s former budget director David Stockman says Edward Snowden performed a heroic act, the Patriot Act should be repealed, and this whole spying-on-U.S.-citizens thing is a symptom of an out-of-control military-industrial complex. Click here to watch him go on YahooFinance. The author of “The Great Deformation: The Corruption of Capitalism in A […]
