Monday, July 18, 2011

Gundlach Has 10% In Cash, Hussman Sees Topping Process, Taylor Sees EURCHF At Parity, Rosenberg...

Wall Street (Source: Jpellgen on Flickr)
Links for 7/18/2011

Gundlach Leads Bond Funds Boosting Cash (Bloomberg)

"“We are looking for a more severe down move in prices, for a better level to buy,” said Jeffrey Gundlach"

“Gundlach, the chief executive officer of Los Angeles-based DoubleLine Capital Inc., said in a telephone interview that he has 10 percent of the fund’s assets in cash, about five times what it usually holds. He views a move in the 10-year Treasury yield above 3.5 percent as a buying opportunity."

David Rosenberg (Gluskin Sheff) Explains "Why We Should Be Worried" (Zero Hedge)

Rosenberg on CNBC: We Are One Small Shock Away From a New Recession (Pragmatic Capitalism)

Swiss Franc Is Most Expensive Currency as Taylor Sees Euro Parity (BusinessWeek)

“The Swiss franc looks like it will go to par with the euro,” said John Taylor, founder of FX Concepts LLC in New York, the world’s largest currency hedge fund." (hat tip ZH)

Watching GLD/SPY Ratio, Down 16% From March 2009 S&P Low - 7/18/2011

GLD/SPY (see below)
I'm watching the GLD/SPY ratio at the moment, or Gold/S&P 500 in ETF form. With the ratio at 1.18 (as of 7/15/2011), GLD/SPY is close to testing 2010 resistance at 1.20. As you already know, Gold and the S&P 500 have rallied hard over the past two and a half years on the reflation trade and "breadth thrust" after the financial bailouts. But it is interesting to note that GLD/SPY is down 16.42% from the March 2009 bottom on the S&P (see chart #2).

The first chart (as seen above) shows more than two years of sideways action after the ratio put in a blow off top at 1.41 in early 2009. I'm wondering if GLD outperforms SPY going forward, even if they both go down in tandem. It depends if the ratio can take out 2010 resistance in the sideways channel and stay on the uptrend line from 2007. If GLD underperforms SPY in the near term and breaks down, there is still a major uptrend line to test when using the 2000 and 2007 lows. If GLD/SPY gets above 1.20, it could be ready to test the 1.41 high (imo).

When looking at the last two recessions, GLD outperformed SPY during the 2000-2003 and 2007-2009 periods. Not only are the Euro and US Dollar looking ugly at the moment due to fiscal crises, some economists and analysts are predicting a new recession in 2012. Treasury yields and Eurozone solvency are probably the wild cards for gold and currencies in my opinion. What do you think. GLD by itself is in a strong ascending channel using the uptrend from 2008. GLD looks strong at the moment, but it also looked strong in the second half of 2007 before it peaked at 100 and lost 30% in 2008. When that happened, the GLD/SPY ratio chopped around between 0.64 and 0.85. See charts below of GLD/SPY, GLD:SPY performance and GLD.

Thursday, July 14, 2011

S&P: U.S. Ratings Placed On CreditWatch Negative, 50% Chance of Downgrade In 90 Days (10Y, 30Y UST Charts)

30Y T-bond Price (see larger view below)
Standard and Poor's put United States of America's 'AAA/A-1+' Ratings on negative watch today. This comes after Moody's put US's Aaa Government bond rating on review for possible downgrade yesterday. Will 10 year Treasury notes and 30 year bonds make new highs? LOL. See charts after the jump.

"United States of America 'AAA/A-1+' Ratings Placed On CreditWatch Negative On Rising Risk Of Policy Stalemate Overview

Overview

• Standard & Poor's has placed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the United States of America on CreditWatch with negative implications.

• Standard & Poor's uses CreditWatch to indicate a substantial likelihood of it taking a rating action within the next 90 days, or in response to events presenting significant uncertainty to the creditworthiness of an issuer. Today's CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days. We have also placed our short-term rating on the U.S. on CreditWatch negative, reflecting our view that the current situation presents such significant uncertainty to the U.S.' creditworthiness.

Bernanke: If U.S. Defaults On Its Debt We'll See A Major Crisis (Video, 7/13/2011)

Ben Bernanke, Chairman of the Federal Reserve, presented the Fed's "Semiannual Monetary Policy Report" to the House Financial Services Committee yesterday, which included their economic outlook and position on monetary policy (see below). When asked during Q&A what would happen if the debt ceiling wasn't raised on August 2 and the US defaulted on its debt, Bernanke said:

"Clearly if we went so far as to default on our debt it would be a major crisis because the Treasury security is viewed as the safest and most liquid security in the world. It is the foundation for much of our financial system and the notion that it would become suddenly unreliable and illiquid would throw shockwaves through the entire global financial system" (At 57:18 in the CSPAN video below)

In his testimony, Bernanke said if there is another threat of deflation, the Fed could provide additional stimulus. Read his full testimony and watch the Q&A session after the jump.

"However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate.

On the one hand, the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support. Even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further."

Wednesday, July 13, 2011

Moody's Places US Aaa Government Bond Rating on Review for Possible Downgrade

Total Federal Government Public Debt (St. Louis Fed)
Uh oh... From Moody's today:

"New York, July 13, 2011 -- Moody's Investors Service has placed the Aaa bond rating of the government of the United States on review for possible downgrade given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations. On June 2, Moody's had announced that a rating review would be likely in mid July unless there was meaningful progress in negotiations to raise the debt limit.

In conjunction with this action, Moody's has placed on review for possible downgrade the Aaa ratings of financial institutions directly linked to the US government: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks. We have also placed on review for possible downgrade securities either guaranteed by, backed by collateral securities issued by, or otherwise directly linked to the US government or the affected financial institutions.


RATIONALE FOR REVIEW

Daily Technical Analysis Report By MIG Bank (July 13, 2011)

Today's technical analysis report has been supplied by MIG Bank, the first forex broker in Switzerland to become a Swiss bank. Click here to read the full report on their website.

The report embedded below includes EUR/USD, USDX, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, GBP/JPY, EUR/JPY, EUR/GBP, EUR/CHF, Gold and Silver.

EUR/USD (MIG Bank)
"EUR/USD

Breaks out of triangular consolidation.
  • EUR/USD has resumed its bearish activity and has broken out of the all important triangular consolidation pattern.
  • The move follows last Friday’s worse-than-expected NFP figures which paradoxically pushed the US dollar higher, as market sentiment refocused back onto risk aversion and a flight to traditional quality/safe haven assets.
  • Our short position favours sustained weakness to unlock an accelerated impulsive (wave 3) into 1.3670 (61.8% Fib-Jan 2011 uptrend). Only a sustained close above 1.4653 and most importantly 1.4711/30 will lead us to re-evaluate.
  • Inversely, the US dollar index has broken above 76.36 (23rd May high), to confirm a multi-month w-shaped base pattern for an extension into 7701 and 78.03 (50%/61.8% Fib-Jan 2011 Decline).
  • Further upside scope is also being supported by increased long positions on our COT liquidity, which has been positive for the last 6 weeks."

Moody's Downgrades Ireland to Junk (Ba1), Ruins FOMC Minutes Rally (Dow Chart, EUR/USD)

EUR/USD (FreeStockCharts.com)
Moody's downgraded Ireland's credit rating yesterday to Ba1 (junk) and completely ruined the 'FOMC Minutes' spike in the Dow. There are interesting forces affecting the markets right now. At 4:08a EST, EUR/USD is up 0.34% at 1.40520.

Yesterday (7/12/2011), EUR/USD pierced through the 200 day moving average, hit an intraday low of 1.3872 and almost touched the major uptrend line from 2010. Since then EUR/USD regained the 200DMA, but be prepared for any unexpected negative catalysts out of the Eurozone. In my opinion, the 200DMA and uptrend line are important support levels that need to hold to prevent a structural breakdown in EUR/USD. I'm wondering how the US Dollar and Treasuries start pricing in the August 2, 2011 debt ceiling deadline. My futures widget says E-mini Dow (YUM11) is up 57 at 12,470. Risk on? Below is more information on the downgrade from Moody's Investors Service.

FOMC Minutes vs. Ireland Downgrade 
Dow Industrials via StockCharts.com
"Frankfurt am Main, July 12, 2011 -- Moody's Investors Service has today downgraded Ireland's foreign- and local-currency government bond ratings by one notch to Ba1 from Baa3. The outlook on the ratings remains negative.

The key driver for today's rating action is the growing possibility that following the end of the current EU/IMF support programme at year-end 2013 Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support, in line with recent EU government proposals.

As stated in Moody's recent comment, entitled "Calls for Banks to Share Greek Burden Are Credit Negative for Sovereigns Unable to Access Market Funding" (published on 11 July as part of Moody's Weekly Credit Outlook), the prospect of any form of private sector participation in debt relief is negative for holders of distressed sovereign debt. This is a key factor in Moody's ongoing assessment of debt-burdened euro area sovereigns.

Some FOMC Members Considering QE3 If Economic Growth Too Slow (FOMC Minutes, Dow Chart)

Industrial Average Intraday 7/12/2011
When the June 21-22 FOMC Minutes were released yesterday, the market initially spiked when traders saw the possibility of QE3 ("additional monetary policy stimulus"). I quoted the portion below from page 8 of the released (see below). The market then crashed intraday when Moody's downgraded Ireland to junk (Ba1). More on that in my next post. Quantitative easing during the next bear market will be interesting to watch, when that day comes.

"However, many members saw the outlook for both employment and inflation as unusually uncertain. Against this backdrop, members agreed that it was appropriate to maintain the Committee's current policy stance and accumulate further information regarding the outlook for growth and inflation before deciding on the next policy step. On the one hand, a few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run. On the other hand, a few members viewed the increase in inflation risks as suggesting that economic conditions might well evolve in a way that would warrant the Committee taking steps to begin removing policy accommodation sooner than currently anticipated." (source: Federal Reserve)

Monday, July 11, 2011

John Hussman: The Federal Reserve is Leveraged 55.6 to 1 (July 7 Fed Balance Sheet)

In John Hussman's new weekly market comment titled "A Wile E. Coyote Market", he mentioned that the Federal Reserve's balance sheet is leveraged 55.6 to 1 ($2.87 trillion assets / $51.7 billion capital). Read his thoughts about the market as well. If interested, I embedded the Fed's July 7 statistical release after the jump.

Fed Balance Sheet (July 7) - See below
"Unlike 2010, there appears to be little latitude for a robust fiscal or monetary response to the weakening in leading economic measures. Not that we would view any of those responses - aside from facilitating debt restructuring - as promising in any event. Before contemplating a round of QE3, the hawks on the Fed are likely to ask what benefit QE2 provided to the real economy, aside from Fed sponsored speculation, market distortions, and commodity price inflation.

Moreover, as of Wednesday July 7, the Fed's consolidated balance sheet shows $2.87 trillion in assets, versus $51.7 billion in capital, for a leverage ratio that is now up to 55.6-to-1. This isn't getting any better, and is far beyond where Bear Stearns, Lehman, Fannie Mae or Freddie Mac were at just prior to their respective insolvencies. Of course, nobody is going to shut down the Fed just because it is approaching technical insolvency, but we ought to recognize that anytime interest rates rise, the interest being paid on Treasury debt is quietly being used to cover the Fed's capital losses."

Source: http://www.hussmanfunds.com/wmc/wmc110711.htm

Sunday, July 10, 2011

10Y Italian-German Bund Spread Spikes to 2.44, Spain-Bund Spread Testing High! (Chart, Link Fest)

10y Italian-German Bund Spread (Bloomberg)
Both the 10-year Italian-German bund spread and Italian 10-year government bond yield keep making new highs after breaking above resistance levels (read my previous post on 6/24/2011: 10 Year Italian-German Bund Yield Spread Makes New High; Watching Spain - Chart). The Italy-Germany 10Y Spread is at 2.44, up 31% in about a month (from 1.85), and the 10-year Italian government bond yield closed at 5.27, up 9.5% from 4.81. German bonds are considered a safe haven for investors.

On 6/19/2011, I tweeted that a breakout looked possible when looking at the chart and jokingly said the Italy-Bund Spread ETF was in play. There isn't an ETF available for the 10-year Italian-German Bund spread (there are now futures), but BUNT:ITLT, the 3x German Bund/3x Italian Bond ETN, increased 16% in about a month on very low volume (chart below). BUNL:ITLY is the ratio without leverage. I don't trade European Govvies, I am strictly looking at charts available on Bloomberg.com and StockCharts. The sovereign debt crises in Europe affects other markets, banks and currencies (EUR/USD, EUR/CHF etc.).  Here is the amount of Italian debt outstanding in Euros from the Bank of Italy. Total Debt/GDP as of 12/31/2010 was 119%. See trends at http://www.dt.tesoro.it (Dipartimento de Tesoro).

  • Outstanding Government Bonds as of 30/06/2011: € 1,582,700.50 million
  • 10y Italian Government Bond Yield (Bloomberg
  • Public Debt as of 31/12/2010: € 1,843,015 million

European government bonds and bund spreads (links) have been volatile because of rolling default and contagion risk. On July 2, Greece got a $17 billion lifeline from the ECB/EU/IMF that will last them a few months, and last week Portugal was downgraded to junk by Moody's and its bond yields, credit default swaps and bund spreads made new highs. The 10-year Irish-German Bund spread keeps making new highs and the 10-year Spanish-German Bund spread is testing the 6/24/2011 high at 2.84 (chart below). European markets are the most interesting to watch right now.

Friday, July 8, 2011

New Bill Will Allow 1,000 Investors Before Going Public (H.R.2167 - Private Company Flexibility and Growth Act)

SecondMarket Participant Growth (Q2 Update)
In SecondMarket's Q2 2011 Business Update, I read that Barry Silbert, CEO of SecondMarket, testified before congress in May about changing a law that requires private companies to go public after exceeding 500 shareholders. On June 14, 2011, the "Private Company Flexibility and Growth Act (H.R.2167)" was introduced "to amend the Securities Exchange Act of 1934 to change the threshold number of shareholders for required registration under that Act" to 1,000. Could this have a major effect on the public equity markets if passed? What happens to high frequency trading if liquidity gets pulled from the NYSE and Nasdaq?
"In May, I was invited to testify before the House of Representatives Committee on Oversight and Government Reform about the negative impact of the so-called 500 Shareholder Rule on US businesses. The rule compels private companies to become public reporting companies once they have more than 499 shareholders and $10 million in assets at the end of the calendar year. Participating in the hearing was an amazing experience and a tremendous opportunity to discuss the 500 Shareholder Rule with prominent members of both political parties. The reaction to my testimony was almost entirely positive and I walked away encouraged by the bipartisan support. 
A few weeks after the hearing, there was an exciting breakthrough: “The Private Company Growth and Flexibility Act” was introduced in the House by Rep. Schweikert (R-AZ) and Rep. Himes (D-CT). Specifically, this bipartisan bill would modernize the 500 Shareholder Rule by increasing the threshold from 500 to 1,000, while also exempting employees and accredited investors from the count. We’ve been promoting these changes for several months as the current rule restricts private companies’ ability to readily access capital, retain existing employees and hire new ones." [continue reading at SecondMarket.com]

Follow the bill at OpenCongress.org

BLS: U.S. Adds 18,000 Jobs In June, Unemployment Rate At 9.2% (Misses Consensus Estimates)

Unemployment Rate, Nonfarm Payroll Employment Trends (BLS.gov)
This morning the Bureau of Labor Statistics reported that jobs in June increased by 18,000, below the 105,000 consensus estimate. The unemployment rate increased to 9.2%, which was higher than the 9.0% median estimate and up from 9.1% in June. Jan Hatzius, Chief U.S. Economist at Goldman Sachs, predicted an increase of 125,000 jobs and Joe LaVorgna, Chief U.S. Economist at Deutsche Bank, predicted 175,000. The charts above show employment trends.

Government jobs declined by 39,000 in June (Federal employment declined by 14,000) while health care (ambulatory employment increased by 16,500), leisure and hospitality jobs saw gains. Below are excerpts from the BLS report, read it in full with tables after the jump.

The Employment Situation – JUNE 2011

"Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down."

"The number of unemployed persons (14.1 million) and the unemployment rate (9.2 percent) were essentially unchanged over the month. Since March, the number of unemployed persons has increased by 545,000, and the unemployment rate has risen by 0.4 percentage point. The labor force, at 153.4 million, changed little over the month. (See table A-1.)"

Thursday, July 7, 2011

Distressed Volatility Now Optimized For Smartphone Devices

Press Release: DistressedVolatility.com's mobile site is now optimized for smartphones, courtesy of Blogger's mobile template creator. The picture below shows what it looks like on the iPhone using Safari. The mobile template cuts off the sidebar widgets to make the blog load faster and converts Adsense gadgets (or in-line blog ads) to mobile Adsense ads automatically. Thanks Blogger...

Wednesday, July 6, 2011

Portuguese Bond Yields, CDS, Bund Spread Make New Highs On Junk Rating [UPDATE]

Portuguese 2Y Note Yield Spikes 21% to 15.66
via Bloomberg.com
Continued from my previous post a few hours ago: Moody's Downgrades Portugal to Ba2 (Junk); Yields, Spreads, CDS Not At New Highs (Yet). Well, it happened. Portuguese government bond yields, 5Y CDSs (credit default swaps) and the 10Y Portuguese - German bund spread made new highs this morning after Moody's downgraded Portugal to junk. EUR/USD is getting killed (1.43165 -0.98%).

Portuguese 2-year Yield = 15.64% (closed at 14.63% on 6/27)
Portuguese 5-year Yield = 15.02% (closed at 14.15% on 6/27)
Portuguese 10-year Yield = 12.43% (closed at 11.68% on 6/27)
Portuguese 5-year CDS = 916 bps (closed at 841 on 6/27)
10-year Portuguese-German Bund spread = 9.46% (closed at 8.79% on 6/27)

Bruce Berkowitz On St. Joe's Investigation, Says Buying Back Shares If Price Moves Lower

Bruce Berkowitz (Fairholme Fund)
Bruce Berkowitz, manager of the Fairholme Fund (FAIRX), spoke with Bloomberg's Eric Schatzker yesterday on St. Joe Co.'s SEC filing that named him and Fairholme in a formal investigation. View the SEC filing on my previous post. He said "there is not a lot new here, except for I was named and Fairholme was named in the discussion, strictly in regards to our 13D position.” Berkowitz said he wants to buy more shares if the price moves lower. His fund already owns 30% of the company. I embedded the Bloomberg video after the jump. Below are a few quotes from the interview.
"It was my decision as the Chairman of St. Joe to put that 8K out, because we have a buyback program in place. We have a desire for the shareholders to benefit. And if the stock is going to be pushed down for whatever reason, by whatever articles that have been out there for the past three years, I want the company to preserve its ability to buy back shares on the open market… To preserve that ability, the public must know everything and the shareholders must know everything." 
$JOE symmetrical triangle! - FreeStockCharts
"The main reason again is, is for whatever reason the price of St. Joe goes down, I want St. Joe to have the ability to buy back shares for the benefit of our shareholders."
By the way, JOE put options were active yesterday in pretty decent size. Someone might be protecting downside risk after this. Or is Berkowitz selling puts?

3065 December $15 puts traded with 398 open (hat tip @optionsizzle); 1529 September $16 puts traded with 187 open; 468 September $15 puts traded with 216 open; 1746 July $19 puts traded with 919 open; 689 July $18 puts traded with 246 open, and 327 July $17 puts traded with 31 open. I uploaded the July, September and December JOE Option chains on Flickr (via Google Finance). The chart above shows that JOE is trading in a multi-year symmetrical triangle and getting closer to judgment day. Click the chart for a larger view.

EUR/USD, EUR/CHF Chart Watch 7/6/2011 (Euro, Dollar, Swiss Franc)

Below are EUR/USD and EUR/CHF short and long term symmetrical triangles, descending channels and support levels to watch (charts courtesy of freestockcharts.com). In my opinion, 1.43 (or 1.42816 is the 11/2010 blow off top) is a very important support level to hold. If it busts through that level, EUR/USD could test the first and second symmetrical triangle support levels. If you look at the long term chart though, you will see that EUR/USD is still in a rising trend. Watch out for interventions by central banks like China. EUR/CHF is in a nasty downtrend and 1.18 is the recent low. See more charts after the jump (click for larger view).



Moody's Downgrades Portugal to Ba2 (Junk); Yields, Spreads, CDS Not At New Highs (Yet)

Portugal 5Y Note Yield (Bloomberg)
Moody's downgraded Portugal's credit rating to Ba2 (junk) and had a negative outlook. It seems like Portuguese government bond yields and credit default swaps were already pricing this in (*Update: never mind, now they are pricing in the downgrade. Rates made new highs this morning (2Y yield +29% at 16.74). The Moody's report was released after the 7/5 close. See updates here). According to quotes on Bloomberg.com today, the Portuguese 5Y CDS closed at 775 bps, down from 841 bps on 6/27; Portuguese 10Y Note Yield closed at 11.02%, down from 11.68% on 6/27; Portuguese 5Y Note Yield closed at 13.16%, down from 14.15% on 6/27; the 2Y Yield closed at 12.94%, down from 14.63% on 6/27; and the 10Y Portuguese-German Bund spread closed at 8.01, down from 8.79 on 6/27. I couldn't find the 5Y spread on Bloomberg.com. I'm assuming if there is near-term default risk, like Greece last week, these rates will move even higher. No? Greek 2Y notes yield 26%.

EUR/USD and EUR/CHF fell hard last night on perhaps the negative S&P announcement about banks rolling Greek debt, or speculating on more problems in the Eurozone. EUR/USD is currently trading at 1.44515, up from the low of 1.43972 last night. Maybe China stopped buying Euros, or the Dollar is getting a bid based on a second half recovery in the U.S. Also, with QE2 over, do Treasury yields and asset prices move higher or lower. And what happens with the debt ceiling? All of these reactions will affect Dollar.
Lagos, Portugal via Flickr

So what happens next. Do all of these countries get bailed out by the ECB, IMF and EU with steep austerity bills? Simon Johnson, who was chief economist at the IMF in 2007 and 2008, and currently a prof at MIT, thinks Italy is the next Domino to fall (Bloomberg View). This article I found at Daily FX warns about Spain and Italy and potential contagion risks ("yet the real danger to the euro is contagion risk to Spain and Italy, and the next steps could decide the euro’s fate over the medium term."). Here is today's Moody's announcement:

Moody's downgrades Portugal to Ba2 with a negative outlook from Baa1

London, 05 July 2011 -- Moody's Investors Service has today downgraded Portugal's long-term government bond ratings to Ba2 from Baa1 and assigned a negative outlook. Concurrently, Moody's has also downgraded the government's short-term debt rating to (P) Not-Prime from (P) Prime-2. Today's rating action concludes the review of Portugal's ratings initiated on 5 April 2011.

Tuesday, July 5, 2011

Daily Technical Report By MIG Bank (July 5, 2011) - EUR/USD, EUR/CHF, GBP/USD, USD/JPY, Gold, Silver...

From now on I will be embedding technical research reports courtesy of MIG Bank on my blog. View the embedded PDF file after the jump. This report includes EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, GBP/JPY, EUR/JPY, EUR/GBP, EUR/CHF, US Dollar Index, Gold and Silver. Enjoy!

Today's technical analysis report has been supplied by MIG Bank, the first forex broker in Switzerland to become a Swiss bank. Click here to read the full report on their website.
"EUR/USD

EUR/USD (Source: MIG Bank)
Reactionary bounce under pressure into resistance at 1.4550/67.
  • EUR/USD’s reactionary bounce is losing momentum as it comes under pressure into key resistance at 1.4550/67 (a confluence of both the multi-week triangle pattern ceiling and 76.4%/78.6% Fib-08th June price swing).
  • We watch for this area to cap recent bullish gains for a return back into the lower boundary of this critical triangle pattern. Key downside trigger levels remain at 1.4148 (38.2% Fib-Jan 2011 uptrend) and 1.4000 (psychological).
  • A sustained close below 1.4000/1.3970 (Psychological/May swing low), will accelerate this impulsive (wave 3) into 1.3903/1.3895 (50% Fib/200-day MA), thereafter shifting prior upside trend-followers back into 1.3670 (61.8% Fib-Jan 2011 uptrend). Only a sustained close above the ”Trichet high” at 1.4653 and most importantly 1.4711/30 will lead us to re-evaluate.
  • Inversely, the US dollar index still needs to extend its recovery above 76.36 (23rd May high), to confirm a multi-month w-shaped base pattern for an extension into 77.01 and 78.03 (50%/61.8% Fib-Jan 2011 Decline). Further upside scope is also being supported by increased long positions on our COT liquidity, which has been positive for the last 4 weeks."

EUR/USD, EUR/CHF Look Weak, Broke Near-Term Support (Charts, News)

EUR/CHF (Yellow) v. EUR/USD (White)  July 4-5 (click to view) 
Courtesy FreeStockCharts.com
The Euro is making major moves overnight. Happy belated Independence Day to my U.S. readers. EUR/USD (Euro/U.S. Dollar) broke the July 4 floor and actually just made a new low. EUR/CHF (Euro/Swiss Franc) broke through the floor as well and is testing immediate support as I write. During the past two weeks I charted out a major EUR/USD descending channel to watch, and it looks like it failed technically at the upper bound of the channel (resistance). Interesting news I found:

ECB Will Continue to Accept Greek Debt (Financial Times)
"The European Central Bank will continue to accept Greek debt as collateral for loans unless all the major credit rating agencies it uses declare it to be in default, said a senior finance official"... 
Greek fiscal survival vital for euro zone: FinMin (Reuters)

FOREX-Euro backs off 1-month high on dollar short squeeze (Reuters)
* Short squeeze in the dollar pulls euro off 1-mth highs
* Expected rate hike by ECB to keep euro dips shallow
S&P Selective-Default Risk for Greece 'Surmountable,' HSBC Says (SF Gate/Bloomberg)

Spain next candidate to request major aid package, say London bookies, Italy next (Merco Press)

Ratings agencies playing hardball on Greece: Nowotny (Reuters)

Moody's: $540 Billion In China Local Government Debt Unaccounted For Understates Bank Exposure

qianmen 3.3 (3rd time this road has been rebuilt in the last 2 years)
Road Construction in China via Tricia Wang (Flickr)
Moody's reported today that China's National Audit Office may have understated total local government debt by $540 billion, which could affect banks if these loans go sour. On June 27, China's NAO released a report that said $1.3 trillion of total local government debt outstanding ($1.7 trillion) was funded by banks, but China's Central Bank said there was $2.2 trillion in local government debt outstanding. Read more about about the NAO report at NYT. In addition to this hidden $540 billion, this is going on:

"In its report Monday, the national audit office said it had found many irregular activities. For instance, many local governments were using “unreal” or illegal collateral to secure the loans, the report said, and some of the money they borrowed was funneled into the stock and property markets. At other times, the auditor said, the local governments were “overestimating the value of the collateral” — which was often tied to land values." (NYT, 6/27/2011)"

If all else fails and there's a hard landing in China (as Soros says), the People's Bank of China will just print more renminbi right? Marc Faber thinks so. Here is today's announcement by Moody's Investors Service (7/4/2011):

Beijing, July 05, 2011 -- Moody's Investors Service says that the potential scale of the problem loans at Chinese banks may be closer to its stress case than its base case, according to an assessment that the rating agency conducted following the release of new data by China's National Audit Office (NAO).

Monday, July 4, 2011

St. Joe Co. 8K Filing Mentions Private Investigation By SEC (JOE)

Source: T2 Partners VIC Slides 
This shouldn't come as a surprise. In an 8K filing on January 10, 2011, St. Joe Co, a homebuilder in Florida, said the SEC was "conducting an informal inquiry" on their land impairment practices (read: SEC Conducts Inquiry Into St. Joe's Land Impairment Practices). A new 8K was filed on July 1, 2011 that said there was a private investigation on a variety of matters for the period beginning January 1, 2007. We'll see what happens with this.

Both David Einhorn (Greenlight Capital) and Whitney Tilson (T2 Partners), who are publicly short the company (unless this has changed), believe there should be large land impairment charges. They think $JOE is worth $7-$12/share based on the value of their timberland holdings. The stock is currently trading at $20.87 and hit a low of $18.31 in June.
"Item 8.01 Other Material Events. 
The Company previously disclosed in January 2011 that the Securities and Exchange Commission (the “SEC”) is conducting an informal inquiry into the Company’s policies and practices concerning impairment of investment in real estate assets. On June 24, 2011, the Company received notice from the SEC that it has issued a related order of private investigation. The order of private investigation covers a variety of matters for the period beginning January 1, 2007 including (a) the antifraud provisions of the Federal securities laws as applicable to the Company and its past and present officers, directors, employees, partners, subsidiaries, and/or affiliates, and/or other persons or entities, (b) compliance by past and present reporting persons or entities who were or are directly or indirectly the beneficial owner of more than 5% of the Company’s common stock (which includes Fairholme Funds, Inc., Fairholme Capital Management L.L.C. and the Company’s current Chairman Bruce R. Berkowitz) with their reporting obligations under Section 13(d) of the Exchange Act, (c) internal controls, (d) books and records, (e) communications with auditors and (f) financial reports. The order designates officers of the SEC to take the testimony of the Company and third parties with respect to any or all of these matters, and the Company is cooperating with the SEC."

S&P: Greek Debt Rollover Proposal Could Result In Selective Default (TEXT, 7/4/2011)

National Bank of Greece via Flickr (Duke of Waltham)
Source: http://www.standardandpoors.com/prot/ratings/articles/en/us/?assetID=1245311278832 (hat tip Guardian.co.uk)

"LONDON (Standard & Poor's) July 4, 2011--On June 13, Standard & Poor's Ratings Services lowered the long-term rating on the Hellenic Republic (Greece) to 'CCC' from 'B'. In part, the downgrade reflected our view of the rising risk that an enhanced official financing package addressing the Greek government's 2011-2014 financing needs could require private sector debt restructuring in a form that we would view as an effective default of its debt obligations under our ratings criteria. In recent weeks, a number of proposals relating to this topic have surfaced, and the particulars in some cases are evidently still in flux. This credit comment looks at the most prominent of the recent proposals, put forward by the Federation Bancaire Francaise (FBF) on June 24, 2011, in the context of our criteria for evaluating distressed debt exchanges and similar debt restructurings (see Related Research below). In brief, it is our view that each of the two financing options described in the FBF proposal would likely amount to a default under our criteria.

The FBF proposal currently envisions French-regulated financial institutions agreeing to either of two options regarding their reinvestment of proceeds from Greek government debt maturing between July 2011 and June 2014. Based on recent public statements by European policy makers and bank executives, we believe the options FBF has put forward on the refinancing of Greece's maturing debt were made at the behest of Greece's eurozone official creditors. We broadly summarize these options below.

Sunday, July 3, 2011

Links: Greek Ratings, U.S. Debt Limit, Russian Bank Bailout, China's Landing

Debt Subject To Limit, Public Debt Outstanding (TreasuryDirect.gov)
Treasury: No Change to August 2 Estimate Regarding Exhaustion of U.S. Borrowing Authority (Treasury, 7/1/2011)
“The Treasury Department continues to project that the United States will exhaust its borrowing authority under the debt limit on August 2, 2011. Secretary Geithner urges Congress to avoid the catastrophic economic and market consequences of a default crisis by raising the statutory debt limit in a timely manner.”

Doubtful debt deal done soon (AP, 7/3/2011)
"WASHINGTON -- President Barack Obama and Congress likely will find it difficult, if not impossible, to reach a broad deal to raise the U.S. borrowing limit and slash spending by Aug. 2."

Tensions rise on Capitol Hill as America runs out of money (Guardian, 7/3/2011)
"Mark Zandi, chief economist at Moody's Analytics, said: "Our biggest problem now is the fragile nature of the recovery. Confidence is lacking. If anything goes off track, people freeze." He predicts that if the row continues on into July, financial markets – distracted in recent weeks by the shenanigans in Greece – will start to get more and more unsettled. "If we get to August, things will get a lot worse."

Statement By Eurogroup On 5th Tranche Of Greek Loan ($17 billion)

March 25 - Greece Independence Day
Embed Source: Aster-oid on Flickr
Greece will receive "a $17 billion installment by July 15" to get them through the next few months, according to VOA News. Here is the statement made by Eurozone finance ministers. By the way, the Dow Jones Greece Stock Index is close to testing January 2011 resistance. I will provide a chart update in a new post. Greek stocks rallied along with Greek Government bonds on the austerity news.

"2 July 2011

Statement by the Eurogroup

Ministers welcomed the progress made by the Greek authorities in implementing the policy understandings reached with the European Commission, in liaison with the ECB, and the IMF. In particular, Ministers noted with satisfaction the adoption of key laws on the fiscal strategy and privatisation by the Greek Parliament. Ministers therefore endorsed the Commission's Compliance Report and the signing of the updated Memorandum of Understanding.

The Greek authorities provided a strong commitment to adhere to the agreed fiscal adjustment path and to the growth-enhancing structural reform agenda, which are essential components of our strategy to restore fiscal sustainability and safeguard financial stability. Ministers call on all political parties in Greece to support the programme's main objectives and key policy measures in order to ensure a rigorous and swift implementation.

Saturday, July 2, 2011

Charlie Munger's Parody on Wantmore, Tweakmore, Totalscum, Countwrong and Oblivious in Boneheadia; BRK Buys Remaining Wesco Stake

Charlie Munger via Wikipedia
Berkshire Hathaway (BRK) decided to buy the remaining 20% stake in Wesco Financial (WSN), which is currently run by Charlie Munger, the Vice Chairman of Berkshire. Full article at Bloomberg:
"Wesco shareholders voted today at a meeting in Pasadena, California, to approve Berkshire Hathaway Inc. (BRK/A)’s offer to acquire the 20 percent of Wesco it doesn’t already own for about $545 million in cash and stock."

At the final shareholders meeting he dissed bankers, accountants, Alan Greenspan and Lehman's former CEO Dick Fuld. Full article at Bloomberg:
“The bubble in America was caused by some combination of megalomania, insanity and evil in, I would say, investment banking, mortgage banking,” Munger, 87, said today at a conference in Pasadena, California.

There was also a parody released which is a must read. Read it at My Investing Notebook:
"A PARODY DESCRIBING THE CONTRIBUTIONS OF WANTMORE, TWEAKMORE, TOTALSCUM, COUNTWRONG, AND OBLIVIOUS TO THE TRAGIC “GREAT RECESSION” IN BONEHEADIA AND THE THOUGHTS OF SOME PEOPLE RELATING TO THIS DISASTER" ... (LOL)

Thursday, June 30, 2011

Jim Rogers Says Federal Reserve Worries Him The Most, Be Prepared (Video)

Source: Bloomberg
Jim Rogers was interviewed by Rishaad Salamat today on Bloomberg TV in Singapore. He still owns the U.S. Dollar and Euro, is short Government bonds ("from June 10 to be precise") and believes Greece should default in an orderly way. Rogers is also worried about the global supply of agriculture; watch the Bloomberg video after the jump.

When asked what worries him the most at the moment, Rogers said the Federal Reserve in the United States.
"They don't have a clue about economics or currencies; they don't have a clue about much of anything, and they are dangerous people. They are not doing good things for the world. And they will probably stop QE2, they said it so many times they will, but when things start going wrong again in a few days, weeks or months, they are going to start printing money again and that's not good for the world. That's going to lead to more problems for all of us over the next decade. This is a serious problem facing us."

When asked how and when we plan to solve these problems, Rogers said the market could force us to face reality (David Stockman thinks the same thing).

Wednesday, June 29, 2011

Visualizations of Tweets Before and After Japanese Earthquake

Source: Twitter on Flickr
Check out these visualizations designed by @miguelrios. From Twitter's blog:
"On Twitter, we saw a 500% increase in Tweets from Japan as people reached out to friends, family and loved ones in the moments after the March 2011 earthquake. This video shows the volume of @replies traveling into and out of Japan in a one-hour period just before and then after the earthquake. Replies directed to users in Japan are shown in pink; messages directed at others from Japan are shown in yellow."

The second video "displays worldwide retweets of Tweets originating in Japan for one hour after the earthquake. Senders’ original Tweets are shown in red; Tweets retweeted by their followers in the hour after the event are displayed in green."

Live Video of Greeks Protesting Austerity Measures in Syntagma Square, RT Video Clips (6/29/2011)

Watch News247 stream live in Syntagma Square in Athens, Greece (hat tip Zero Hedge)

EUR/USD Rallies Ahead Of Greek Austerity Vote, Will ECB Raise Rates?

EUR/USD (FreeStockCharts.com) Click for larger view
The Greek austerity vote is at 2pm Athens time, so 7am in New York. A strategist at BNP Paribas told CNBC that if the vote passes EUR/USD could hit 1.45. Look where the upper-bound of the descending channel hits today. There is still a sovereign debt crisis in Europe, but countries keep getting bailed out by the IMF, ECB and EU, and supported by China (good job if you bought the Euro after this news).

EUR/USD just broke out of a near-term downtrend, above 50 day moving average resistance and regained the uptrend line from January. It is rallying hard right now inside the green circle or mini symmetrical triangle. The question is, does it stick? Will the vote be a buy the rumor-buy the news or buy the rumor-sell the news catalyst. I will continue to watch 1.4281 as an important support level (blow off top on 11/4/2010) should EUR/USD rollover again. As you can see from the chart, whenever EUR/USD broke through that support level it has always been a decent short opportunity. So will EUR/USD hit 1.45 or 1.428 first? For thoughts on the Eurozone by market gurus see yesterday's Eurozone/Greece link fest. In the comment section I provided updates. Get ready for riots.

Tuesday, June 28, 2011

Soros, Taylor, El-Erian, Grant, Ackermann On Eurozone Crisis; Gary Shilling, Marc Faber on China

Euro Banknotes (Wikimedia/ECB)
Watch the Greek austerity/budget cut vote tomorrow and see how EUR/USD reacts (read my previous post on EUR/USD technical levels to watch). Below are opinions of what to expect going forward with Greece (+ analysis on China, Japan and Italian banks).

Josef Ackermann (Deutsche Bank CEO) Greek woes may eclipse Lehman (Reuters, 6/27/2011)

Soros Says a Euro Exit Mechanism Is ‘Probably Inevitable’ Amid Debt Crisis (Bloomberg, 6/27/2011)

Financial Meltdown if Greece Defaults: S&P Equity Strategist (Yahoo Finance - Breakout Video, 6/27/2011)

EU has Plan B if Greece rejects austerity -sources (Reuters, 6/27/2011)

Norway Won’t Be Haven From Greek Default (Bloomberg, 6/28/2011)

U.S. Money Funds Risk Losses From Europe Crisis (Bloomberg, 6/27/2011)

Jim Grant (Interest Rate Observer): Money market mutual funds in the U.S are exposed to sovereign risks in Europe (Bloomberg Video, 6/20/2011)

Scenarios: Possible impact of a Greek ratings default (Reuters, 6/27/2011)

Greek debt restructure inevitable: PIMCO's El-Erian (Reuters, 6/26/2011)

EUR/USD at Crossroads Waiting on Greek Budget Cut Vote (Charts)

EUR/USD (see larger views below)
EUR/USD (Euro in U.S. Dollars) is trying to confirm a direction in the center of a descending channel. It rallied hard last night when Premier Wen said he would invest in the Euro-zone's sovereign debt. At Bloomberg (6/26/2011):
"Premier Wen Jiabao said China will keep investing in Europe’s sovereign bond market, providing a vote of confidence in the region roiled by the debt crisis."

And French banks are willing to rollover greek debt. At Bloomberg (6/27/2011):
"The euro maintained yesterday’s gain against the dollar on optimism Greece’s creditors will agree to roll over the nation’s debt to forestall the currency union’s first default."

However, the Euro started falling on fears that Greek austerity might not pass. At Bloomberg (6/28/2011)
"The euro fell against the dollar and yen, reversing earlier gains, before Greek lawmakers vote on budget cuts tomorrow needed to prevent the currency union’s first default."

Who knows what will happen tomorrow. Like I said in my previous post, in my opinion EUR/USD needs to stay above 11/4/2010 support (1.4281) to prove it can test the upper-bound of the descending channel. The 50 day moving average and the near-term downtrend line also need to be violated. If EUR/USD can't stay above 1.4281, it could test the major uptrend line and 200 day moving average inside the symmetrical triangle. Click on the charts below for a larger view. I'm going to construct a link-fest with various opinions on the Greek debt crisis and Euro (see it here).

Monday, June 27, 2011

FOMC Statement, Economic Projections, Bernanke's Press Conference (Video-Transcript) - 6/22/2011

Bernanke's Press Conference 6/23/2011
On 6/22/2011, the Federal Reserve released updated economic projections and said in the FOMC statement that the U.S. economic recovery was "continuing at a moderate pace, though more slowly than the Committee had expected" and "recent labor market indicators have been weaker than anticipated. The Fed completes its second round of quantitative easing ($600 billion in Treasury bond purchases) at the end of the month, but will continue to reinvest principal payments from agency debt and agency mortgage-backed securities in Treasury securities. I embedded Bernanke's press conference and transcript as well.

Overnight market update: E-mini S&P 1261.75 (-0.18%), EUR/USD 1.41196 (-0.06%), Gold/USD 1504.14 (-0.01%), August Crude Oil Future 90.69 (-0.52%), Nikkei 225 9619.57 (-0.61%), Hang Seng 22,025 (-0.66%).

FOMC Statement on June 22, 2011:
Fed Economic Projections (GDP, Unemployment, PCE Inflation) 6/2011
Information received since the Federal Open Market Committee met in April indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly than the Committee had expected. Also, recent labor market indicators have been weaker than anticipated. The slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions. However, longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated; however, the Committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline toward levels that the Committee judges to be consistent with its dual mandate. Inflation has moved up recently, but the Committee anticipates that inflation will subside to levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipate that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

Friday, June 24, 2011

10 Year Italian-German Bund Yield Spread Makes New High; Watching Spain (Chart)

Italy - Germany 10Y Spread (Bloomberg)
After Moody's put "Italy's Aa2 ratings on review for possible downgrade",  I charted out Italy's 10-year bond yield and randomly opened up a chart of the 10 Year Italian-German bond yield spread (ITAGER10:IND) on Sunday 6/17/2011, and it appeared to me that the spread wanted to test the high on 1/10/2011 (1.97) and potentially make a new four year high. I told my twitter followers to watch it on Sunday night. During the next four days the spread went from 1.88 to 2.07 and made a new high. The 5-year Italian-German bund (ITAGER5:IND) spread did not make a new high, but it did spike to test the high on 1/10/2011 (2.17). Thoughts?

The spread measures Italy's credit risk against Germany which is considered the safest credit in the Eurozone. There is an ongoing sovereign debt crisis in Europe with the PIIGS (Portugal, Italy, Ireland, Greece and Spain), so these spreads are important to watch. Today the 10 Year Spanish-German Bund spread (SPAGER10:IND) closed 6 basis points away from the high made on 11/30/2010 (283). The 5 year spread is not on Bloomberg.com. I provide links to more spread quotes on Bloomberg.com in this post.

*This just in:

Moody's Warns On Ratings Of Italian Banks (WSJ)

China Formally Working With IMF To Avoid Eurozone Restructuring - Qu Xing, director of the China Institute of International Studies (Zero Hedge)

China Recognizes Risk Of Buying Euro-Zone Sovereign Debt -China Adviser (Wall Street Journal)

Thursday, June 23, 2011

BAC, ProLogis, NRG Energy Partner in Huge Rooftop Solar Generation Project (With DOE Loan)

I thought this was interesting:

Source: Flickr (Montgomery County, MD)
Landmark Rooftop Solar Project to Create Thousands of Jobs in 28 States

Bank of America Merrill Lynch, Prologis and NRG Energy Secure an Offer of a Conditional Loan Guarantee Commitment From Department of Energy NEW YORK, Jun 22, 2011 (BUSINESS WIRE) --

Rooftop solar generation takes a giant leap forward as a consortium of leading companies - Bank of America Merrill Lynch, Prologis and NRG Energy - announce an offer of a conditional commitment from the U.S. Department of Energy's Loan Programs Office to help finance the largest distributed rooftop solar generation project in the world. The loan guarantee supporting $1.4 billion of debt facilitates a total project size of about $2.6 billion, which is being financed entirely by the private sector over the next four years.

This distributed solar project will generate employment across 28 states and will create the equivalent of more than 10,000 full-year jobs. Once fully funded and completed, these installations are expected to provide approximately 733 megawatts (MW) of distributed solar energy, which is enough clean, renewable energy to power approximately 100,000 homes.


Tuesday, June 21, 2011

Bill Gross: College is a Waste (College Tuition Inflation, Student Debt and No Jobs)

In his most recent note, Bill Gross, manager of the largest bond fund in the world at PIMCO, said college is a waste and needs to restructured in order to create jobs again. Read the full note here.

"​A mind is a precious thing to waste, so why are millions of America’s students wasting theirs by going to college? All of us who have been there know an undergraduate education is primarily a four year vacation interrupted by periodic bouts of cramming or Google plagiarizing, but at least it used to serve a purpose. It weeded out underachievers and proved at a minimum that you could pass an SAT test. For those who made it to the good schools, it proved that your parents had enough money to either bribe administrators or hire SAT tutors to increase your score by 500 points. And a degree represented that the graduate could “party hearty” for long stretches of time and establish social networking skills that would prove invaluable later on at office cocktail parties or interactively via Facebook. College was great as long as the jobs were there.

So is college tuition (higher education) in a bubble? Here are facts Gross provided. The chart above compares college tuition, home prices and the CPI.

EUR/USD Chart Testing 50DMA Before Greek Confidence Vote

EUR/USD broke above resistance in the vertex and is still riding the uptrend line. It is now testing the 50 day moving average. Catalysts ahead include the Fed meeting and Greece confidence vote. Continue to watch that trend line and floor support (Nov 2010 high). If tested again and breached, I think it presents a decent short opportunity (in my opinion). A chart with EUR/USD updated is after jump, as well as a hyperlink to the layout with trend lines. You can also watch the EUR/USD quote live on the FreeStockCharts.com widget on the sidebar.



Obama Impersonator at Republican Leadership Conference (Reggie Brown)

While waiting on Greece's confidence vote, watch some political comedy that occurred over the weekend. Reggie Brown, a comedian and Obama impersonator, performed at the Republican Leadership Conference in New Orleans on Saturday and was eventually kicked off stage, haha. He started taking shots at Republicans and they cut off his mic during a joke on Michele Bachmann. From the Washington Post:
“Had I been in the room I would have pulled him sooner,” Charlie Davis, executive director of the RLC told The Fix. “We have zero tolerance for racially insensitive jokes. As soon as I realized what was going on, I rushed backstage and had him pulled."
He does a good impersonation. Watch the CSPAN video after the jump.

Sarah Hewin: Greek Banks More Exposed To Sovereign Debt Crisis (CNBCTV18)

Sarah Hewin (Source: Youtube)
If you want detailed information on the Greek sovereign debt crisis, Sarah Hewin, Head of Research at Standard Chartered Bank in Europe, explained everything on CNBCTV18 yesterday. Read the full transcript or watch the video after the jump. I also provided links to breaking news on the situation. Ahead of the confidence vote, the Greek 2-year government bond yields 28.098% (went from 28.81% to 28.09% this morning) and EUR/USD is trading higher at 1.43433. Good luck Greece!
Greece 2-year Gov Bond Yield (Bloomberg)
"The question is how voluntary a voluntary rollover can be is an interesting one. I think that there is a certain amount of behind the scenes coercion which is going on for large banks, particularly state owned banks in Europe to rollover debt as it falls due. Now, the main thing is that there should not be seen to be any coercion because if that’s the case then the ratings agencies have said that they will class Greek debt as in default, and if that’s the case then the European Central Bank has said that they will no longer accept Greek debt as collateral. So the definitions are quite important. 
The main difference really is that in a truly voluntary situation you frankly don’t know how much debt is going to be rolled over. So it’s a bit of a shot in the dark as to how much you can rely upon the private sector to refinance that debt as it falls due. The overall exposure to Greece, again an interesting question, we have got various parts of the global economy which has exposure to Greece but of course the main holders of Greek debt are the Greek banks themselves, the European banks hold probably 80% of foreign banking exposure to Greece and amongst those European banks its France and Germany that have the major holdings, has major holding in euro size. But if you look at what their holdings are as a share, as a percent of the banking sector assets is relatively small amount. The Greek banks are much more exposed on that measure."
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