Feb 27

$15 for a loaf of bread … coming to a store near you.


Everything Not Nailed Down Being Bought (ZeroHedge, Feb. 27, 2012):

When in doubt – buy. When in doubt what – everything. As the chart below shows starting with the open of the US market, literally everything has been bought: stocks, bonds, crude, gold, and ‘logically’, the VIX. It took the market virtually no time to remember that when trillions in liquidity are being injected into the market courtesy of central planners, a downtick is verboten. Next up: waiting for WTI $110. Should take a few minutes at most.

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Dec 21

Chart Of European Emergency Liquidity Back At Record Levels, And Why Bank Of America Is Long French CDS (ZeroHedge, Dec, 21, 2011):

Yesterday we charted the combined ECB balance sheet which showed that it had hit an all time record of €2.5 trillion, exclusing today’s operation (to the stunned surprise of all those who scream that the ECB should be printing more, more, more). Today, we focus exclusively on the various forms of unsecured liquidity measures, such as today’s 3 Year LTRO, because as the following chart from Bank of America shows, European emergency liquidity provisioning post today’s liquidity bailout brings the total to €873 billion and is just shy of its all time record of €896 billion, a number which we expect will be taken out as soon as the next liquidity provisioning operation. In other words, European liquidity in euro terms, has virtually never been worse. And as today’s additional drawdown of Fed swap lines indicates, the USD liquidity crunch is getting worse not better (confirmed by the rapid deterioration in basis swap levels). Perhaps the fact that not only is nothing fixed, but things are about as bad as they have ever been explains why Europe closed blood red across the board, and also why Bank of America continues to push for an outright crash in all risk (and some were doubting our earlier analysis that BAC is outright yearning for a market crash): To wit from Bank of America’s Ralf Preusser: “The tender results do not however change either our longer term  cautious outlook on growth, or the periphery. We remain long 5y CDS protection on France, at 210bp (target 300bp, stop loss 175bp).” So let’s see: BAC is shorting the EURUSD, which implies they are pushing for a market drop, and now they want French CDS to soar? Who was it that said the megabanks do not want a crash?

And here is what near record liquidity needs look like: Continue reading »

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Dec 10

Flashback ( on ECB’s Mario Draghi):

ECB’s Mario Draghi: We Need Fiscal Union (= EUSSR), Not Bank Intervention

Former Goldman Sachs Managing Director Mario Draghi Appointed European Central Bank President!

Mario Draghi (Wikipedia):

Draghi was then vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee (2002–2005). A controversy existed on his duties while employed at Goldman Sachs. Pascal Canfin (MEP) asserted Draghi was involved in swaps for European governments, namely Greece, trying to disguise their countries’ economic status.


 

French banks downgraded by Moody’s (Telegraph, Dec. 9, 2011):

Moody’s has downgraded BNP Paribas, Societe Generale, and Credit Agricole warning their creditworthiness is being damaged by the fragile operating environment for European banks.

The agency cut its ratings on the long-term debt of BNP and Credit Agicole by one notch to Aa3, concluding reviews that began in June and were continued in September. Societe Generale’s long-term debt was cut by one notch to A1.

The downgrades were driven by the increasing difficulties the banks were having in raising funding and the worsening economic outlook, Moody’s said.

The news comes a day after the European Banking Authority (EBA), warned the region’s banks must find €114.7bn of extra capital in order to withstand the euro zone debt crisis and restore investor confidence.

Moody’s said its ratings did take into account the fact that all three French banks were likely to benefit from state support if the crisis deepened.

“Liquidity and funding conditions have deteriorated significantly,” said Moody’s, adding that the banks have historically relied on wholesale funding markets.

“The probability that the will face further funding pressures has risen in line with the worsening European debt crisis.”

Eurozone banking system on the edge of collapse (Telegraph, Dec. 9, 2011):

Senior analysts and traders warned of impending bank failures as a summit intended to solve the European crisis failed to deliver a solution that eased concerns over bank funding.

The European Central Bank admitted it had held meetings about providing emergency funding to the region’s struggling banks, however City figures said a “collateral crunch” was looming.

“If anyone thinks things are getting better then they simply don’t understand how severe the problems are. I think a major bank could fail within weeks,” said one London-based executive at a major global bank.

Many banks, including some French, Italian and Spanish lenders, have already run out of many of the acceptable forms of collateral such as US Treasuries and other liquid securities used to finance short-term loans and have been forced to resort to lending out their gold reserves to maintain access to dollar funding.

“The system is creaking. There is a large amount of stress,” said Anthony Peters, a strategist at Swissinvest, pointing to soaring interbank lending rates.

Continue reading »

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Sep 23

Gold Liquidations Open Thread (ZeroHedge, Sep. 23, 2011):

Update: Yep – it was a leak of a margin hike as just confirmed. Which may very well mean nobody actually had to liquidate, just the herd thundered, as it always does, in the wrong direction. Expect gold to actually rise on this news.

Everyone knew they were coming… Just not when. Now that the gold liquidation frenzy has struck we still don’t know much if anything: who was it, why, and where did the money go? Some rumors have it as a bank in Central, Eastern Europe unwinding massive PM positions, which if true is paradoxically bullish for gold and silver as reported previously, as it means the already tight liquidity situation in Europe is about to come to a head, possibly as soon as this weekend. Others speculate it was a plain vanilla satisfaction of collateral requirements by a big funds who may or may not be liquidating and who have sizable gold positions. Or, the simplest explanation, was it simply an expectation (and leak) of a gold margin hike?

Case Closed: CME Hikes Gold, Silver, Copper Margins (ZeroHedge, Sep. 23, 2011):

And there you have it: CME just hiked gold margins by 21%, silver by 16% and copper by 18%. Mystery solved.

Gold Margin Hike 9.23

Gold/Silver Plunge-fest (ZeroHedge, Sep. 23, 2011):

Gold down over $100, and Silver down over 15% – someone is liquidating. Rumors vary from very prominent hedge funds to Central European (as in geographically) central banks. Bottom line is, it is a self-fulfilling prophecy at this point and will continue until every last seller is out, and until the margin calls end.

UPDATE: Silver <$30 -17%

Charts: Bloomberg

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Jun 17

European liquidity just went into Defcon 1. Presenting the FRAOIS spread. Oops.

And now moving to a US near you…


An explanation from a trading desk:

So the fact that Greece itself was stretched further on the rack was not the be all and end all of the new credit crisis and catalyst of the latest Libor jitters.

In reality, analysts immediately warned that the ramifications of any action on the ‘threat’ of French Bank downgrades was this time a significant event in the financing market.

When other EuroZone Banks had been downgraded or threatened with downgrades, the markets were to some extent immune because any shortfalls in Euro funding were continually topped up via swapped Dollars.

However, this ‘$-Funding’ has been dominated by the Big French Banks and now we see the reality of such a polarized or skewed funding profile for Europe.

Not only are these French Banks significant players in the short-term $ markets, but many investors have large exposures to these entities either via CP?CD/ABCP or the Repo Markets.

**Based on the current market info on their money-market activities, we are told that the 3main French Banks collectively account for as much as 50% of all Eurozone CP/CD exposure as at recent month-end (31st May)…and, furthermore, they account for almost 15% of $ Repo Markets as per the end of Q1 2010 (31st March).!!!**

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Mar 01

Warren Buffett bought 130 million ounces of silver between 1997 and 1998.

If the elitists agree that the time for the US dollar is up (and that time will come soon), he and his elite friends will sell their dollars, buying up all silver and gold, running up the manipulated gold and silver markets.

Silver and gold will skyrocket, the dollar will crash and then he will buy up everything in America for a few cents on the dollar, especially land.

Mission accomplished!



Warren Buffet, Arnold Schwarzenegger, Jacob Rothschild

NEW YORK (TheStreet) – Improving market conditions have been a major benefit for Warren Buffett, who has famously remained bullish throughout this long, arduous global economic recovery.

Now, as we head further into the year, the Omaha native is sitting on a mountain of cash, leading many analysts, commentators, and fans to speculate what the world’s third richest man plans to do with it. According to a Sept. 30, 2010 filing, Berkshire Hathaway(BRK.A) has $34.46 billion in cash.

While it is possible, the chance that Buffett would be satisfied simply standing by and watching his money pile continue grow in size is slim. In the past, he has clearly expressed his negative feelings towards the idea of holding cash as a long term investment.

In an interview on the Charlie Rose Show, Buffett insisted that although Berkshire Hathaway always has enough cash around, he sees cash as always being a bad long-term investment. He went on to say that he is typically unhappy when he finds that there is excess cash available.

Likening cash to oxygen, the legendary investor said it is important to know that it is around but unnecessary to have it in excess. Rather than have hoards of excessive cash on hand, he would rather own a strong business.

A more likely scenario is that Buffett’s massive cash reserves will be used to fund another big ticket purchase. Although the investor has tweaked the positions within his legendary investment portfolio on a number of occasions, he has not made a major purchase since Berkshire Hathaway announced that it was acquiring the remaining shares of Burlington Northern Santa Fe Railroad at the close of 2009.

Finding a suitable purchase is not easy endeavor for the investor, however. The Burlington Northern purchase highlights the challenges Buffett faces when seeking out opportunities.

Whereas Buffett could once generate strong returns by picking up small, undervalued companies, the pool of attractive investment opportunities has shrunk significantly as his firm has grown. Today, in order for a company to significantly impact Berkshire’s performance, it must be large. The small, fast-moving companies that pocketed the investor staggering returns in the past would barely make a dent in Berkshire.

There is a strong chance that Buffett would like to use his massive pile of cash to fund a new purchase. However, finding an attractive destination to sink his funds will be a difficult task going forward.

The financial newswires are buzzing this week in response to a recent Buffett-related article in Barron’s which forecasted that a dividend may be in the future for Berkshire Hathaway shareholders. Citing the company’s massive surplus of funds and the challenge of finding attractive acquisition targets, the author notes that a dividend could be one logical way the company could utilize its cash on hand.

Although Berkshire Hathaway has not traditionally paid out a dividend, Buffett is no stranger to distributions. On the contrary, the investor’s investment portfolio is loaded with notable income-paying positions such as Proctor & Gamble, Johnson & Johnson and Coca-Cola. Additionally, the investors’ personal investment portfolio boasts exposure to a number of yield-bearing firms which have provided him with a comfortable payout in recent years.

While attractive, many have been quick to point out issues such as the tax challenges Berkshire Hathaway and Buffett would face if they chose to offer a dividend.

These are only a few of Buffett’s available options and ultimately, it remains unclear how he will eventually choose to spend Berkshire Hathaway’s cash. However, given the massive size of his available funds, whichever route he chooses to take down the road will be exciting to watch.

Don Dion, The Street | Jan. 28, 2011, 11:39 AM

Source: The Business Insider

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Nov 07

True, but Schaeuble is also an elite puppet, who supported the bankster bailouts and he is the greatest public supporter of the German ‘Big Brother STASI Police State’, now called ‘Schaeuble 2.0’:


That is easily the Quote Of The Day, and it’s from German Finance Minister Wolfgang Schaeuble regarding Ben Bernanke’s quantitative easing.

He added: “(The problem) is not a shortage of liquidity. It’s not that the the Americans haven’t pumped enough liquidity into the market and now to say let’s pump more into the market is not going to solve their problems.”

Joe Weisenthal | Nov. 5, 2010, 7:30 AM

Source: Business Insider

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Jan 05

Must-read! Don’t miss to take a close look at the members of the the Group of Thirty!


When Henry Paulson publishes his long-awaited memoirs, the one section that will be of most interest to readers, will be the former Goldmanite and Secretary of the Treasury’s recollection of what, in his opinion, was the most unpredictable and dire consequence of letting Lehman fail (letting his former employer become the number one undisputed Fixed Income trading entity in the world was quite predictable… plus we doubt it will be a major topic of discussion in Hank’s book). We would venture to guess that the Reserve money market fund breaking the buck will be at the very top of the list, as the ensuing “run on the electronic bank” was precisely the 21st century equivalent of what happened to banks in physical form, during the early days of the Geat Depression. Had the lack of confidence in the system persisted for a few more hours, the entire financial world would have likely collapsed, as was so vividly recalled by Rep. Paul Kanjorski, once a barrage of electronic cash withdrawal requests depleted this primary spoke of the entire shadow economy. Ironically, money market funds are supposed to be the stalwart of safety and security among the plethora of global investment alternatives: one need only to look at their returns to see what the presumed composition of their investments is. A case in point, Fidelity’s $137 billion Cash Reserves fund has a return of 0.61% YTD, truly nothing to write home about, and a return that would have been easily beaten putting one’s money in Treasury Bonds. This is not surprising, as the primary purpose of money markets is to provide virtually instantaneous access to a portfolio of practically risk-free investment alternatives: a typical investor in a money market seeks minute investment risk, no volatility, and instantaneous liquidity, or redeemability. These are the three pillars upon which the entire $3.3 trillion money market industry is based.

Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option tosuspend redemptions to allow for the orderly liquidation of fund assets. You read that right: this does not refer to the charter of procyclical, leveraged, risk-ridden, transsexual (allegedly) portfolio manager-infested hedge funds like SAC, Citadel, Glenview or even Bridgewater (which in light of ADIA’s latest batch of problems, may well be wishing this was in fact the case), but the heart of heretofore assumed safest and most liquid of investment options: Money Market funds, which account for nearly 40% of all investment company assets. The next time there is a market crash, and you try to withdraw what you thought was “absolutely” safe money, a back office person will get back to you saying, Sorry – your money is now frozen. Bank runs have become illegal. This is precisely the regulation now proposed by the administration. In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous “extraordinary circumstances” arise. The second the game of constant offer-lifting ends, and money markets are exposed for the ponzi investment proxies they are, courtesy of their massive holdings of Treasury Bills, Reverse Repos, Commercial Paper, Agency Paper, CD, finance company MTNs and, of course, other money markets, and you decide to take your money out, well – sorry, you are out of luck. It’s the law.

A brief primer on money markets

A very succinct explanation of what money markets are was provided by none other than SEC’s Luis Aguilar on June 24, 2009, when he was presenting the case for making even the possibility of money market runs a thing of the past. To wit:

Money market funds were founded nearly 40 years ago. And, as is well known, one of the hallmarks of money market funds is their ability to maintain a stable net asset value – typically at a dollar per share.

In the time they have been around, money market funds have grown enormously – from $180 billion in 1983 (when Rule 2a-7 was first adopted), to $1.4 trillion at the end of 1998, to approximately $3.8 trillion at the end of 2008, just ten years later. The Release in front of us sets forth a number of informative statistics but a few that are of particular interest are the following: today, money market funds account for approximately 39% of all investment company assets; about 80% of all U.S. companies use money market funds in managing their cash balances; and about 20% of the cash balances of all U.S. households are held in money market funds. Clearly, money market funds have become part of the fabric by which families, and companies manage their financial affairs. Continue reading »

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Jan 03


Added: 30. December 2009

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Nov 02

Citigroup Is In Serious Trouble


citigroup

Nov. 2 (Bloomberg) — Citigroup Inc. and JPMorgan Chase & Co. are hoarding cash as if another crisis were on the way.

Citigroup has almost doubled its cash to $244.2 billion in the year since Lehman Brothers Holdings Inc. filed for bankruptcy, the biggest such stockpile of any U.S. bank. The lender, which last year came so close to a funding shortfall it had to get a $45 billion government infusion, is under pressure from the Treasury Department and regulators to keep more money on hand for emergencies, even as markets improve.

Continue reading »

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Jul 16

mark-mobius
Mark Mobius, executive chairman of Templeton Asset Management Ltd., poses for a portrait in Hong Kong, March 23, 2009. Photographer: Scott Eells/Bloomberg News

July 15 (Bloomberg) — A new financial crisis will develop from the failure to effectively regulate derivatives and the extra global liquidity from stimulus spending, Templeton Asset Management Ltd.’s Mark Mobius said.

“Political pressure from investment banks and all the people that make money in derivatives” will prevent adequate regulation, said Mobius, who oversees $25 billion as executive chairman of Templeton in Singapore. “Definitely we’re going to have another crisis coming down,” he said in a phone interview from Istanbul on July 13.

Derivatives contributed to almost $1.5 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg. Global share markets lost almost half their value last year, shedding $28.7 trillion as investors became risk averse amid a global recession.

Continue reading »

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Jun 11

Ben Bernanke is just another puppet of the elite behind the scenes.


Bernanke telling us not to worry about housing, mortgages, or car companies in the years before the recession, like denying a train wreck that is coming down the tracks.

Bernanke was chairman of President Bush’s Council of Economic Advisers, and now as chairman of the Federal Reserve, he’s the fourth most powerful person in the world according to Newsweek.

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Dec 01

The US are broke. The Dow Jones lost 7.7% today. This is going to get much worse.
_________________________________________________________________________


Arnold Schwarzenegger, governor of California, speaks during a news conference in Sacramento, California, on Nov. 6, 2008. Photographer: Ken James/Bloomberg News

Dec. 1 (Bloomberg) — California Governor Arnold Schwarzenegger, saying his state is going broke, declared a fiscal emergency and ordered the incoming class of lawmakers into a special session to fix a widening $11 billion deficit.

Schwarzenegger, a 61-year-old Republican, wants lawmakers to raise taxes and cut spending to narrow the gap that is projected to swell to $28 billion over the next 18 months. He invoked powers granted him in 2004 to declare a fiscal emergency, which gives the Legislature 45 days to plug the shortfall. If they fail to find a solution in that time, they are barred from doing any other legislative work until they do.

“Without immediate action, our state is heading for fiscal disaster,” Schwarzenegger told reporters today in Los Angeles. “I’ve had to make tough choices that I wish I didn’t have to make, and I know this is a terrible time to raise taxes, but it’s also a terrible time to make cuts to very important programs. But in an emergency like this, we have to take quick action to avoid even worse problems, even if they include decisions that we don’t like.”

Continue reading »

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Dec 01


Michael Lipsitz signs his credit card bill for the groceries he purchased at the WalMart in Crossville, Tennessee March 21, 2008. REUTERS/Brian Snyder

(Reuters) – The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

“In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent.”

Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.

Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults.

Continue reading »

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Nov 25

Related article: Fed Pledges Top $7.4 Trillion to Ease Frozen Credit


Treasury Secretary Henry M. Paulson Jr. spoke at a news conference at the Treasury Department on Tuesday in Washington.

The federal government unveiled $800 billion in new loans and debt purchases on Tuesday, hoping another infusion of cash can help unfreeze troubled credit markets and make borrowing easier for homebuyers, small businesses and students.

The Federal Reserve said that it would buy up to $600 billion in mortgage-backed assets from the government-sponsored mortgage finance giants Fannie Mae and Freddie Mac. The agency would also buy up to $100 billion in debt directly from the companies and up to $500 billion in mortgage-backed securities.

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Federal Reserve said in a statement.

Separately, the Fed and Treasury Department announced a $200 billion program to ease commercial lending on debts like student loans, car loans or business loans. The Fed would lend up to $200 billion to holders of asset-backed securities supported by car loans, credit card loans, student loans, and business loans guaranteed by the Small Business Administration.

Continue reading »

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Nov 22

The IMF’s chief economist is warning the global financial crisis is set to worsen and the situation will not improve until 2010, a report says.

Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.

“The worst is yet to come,” Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that “a lot of time is needed before the situation becomes normal.”

He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again.

Continue reading »

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Nov 22

  • Market jumps on hopes of new treasury secretary
  • Boost fails to help US banking giant

Wall Street ended a volatile week with renewed confidence last night, after reports that Barack Obama has chosen Timothy Geithner, the head of the New York Federal Reserve, as his treasury secretary.

As speculation mounted over Geithner’s nomination, shares rebounded. The Dow Jones industrial average recorded a 494-point gain on the day as stocks surged by 6.5% to close above the psychologically important 8,000 level at 8046.42. It was still 5% down for the week, however, as worries persist about the global economic slowdown.

Geithner, 47, has always been a favourite to take the top job and his appointment is expected to be announced by the Obama camp in the next 24 hours.

Banking stocks still suffered, though, despite the market’s abrupt recovery.

Citigroup, once the world’s biggest banking group, saw another $5bn (£3.35bn)wiped off its value after an emergency board meeting failed to come up with any initiative to stem the unprecedented flight of investors. Shares fell to $3 after the bank’s chief executive, Vikram Pandit, ruled out selling its retail stockbroking arm, Smith Barney, in an attempt to stop the rout.

Shares in Citigroup have lost more than half their value this week since Pandit announced plans on Monday to sack 52,000 workers. Measures by the bank and its biggest investors to reverse the share price decline, from a level of $54 two years ago, have all failed.

However, a Citigroup source within Pandit’s inner circle, defended the bank last night, saying the sinking share price “has nothing to do with our viability”. The source added that it was of no consequence if the price fell to zero.
(Obviously an expert!…)

“This is all about market perception,” she said, claiming that the market was wrong. “We are the same as everybody else. Our stock price is declining but so is everybody else’s.”
(…and a great observer too!)

Continue reading »

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Nov 20


Pedestrians are reflected in the window of a Citibank branch in Hong Kong’s financial Central District November 18, 2008. REUTERS/Bobby Yip

(Reuters) – The U.S. financial system still needs at least $1 trillion to $1.2 trillion of tangible common equity to restore confidence and improve liquidity in the credit markets, Friedman Billings Ramsey analyst Paul Miller said.

Eight financial companies — Citigroup Inc, Morgan Stanley, Goldman Sachs Group Inc, Wells Fargo & Co, JPMorgan Chase & Co, American International Group Inc, Bank of America Corp and GE Financial — are in greatest need of capital, he said.

“Debt or TARP capital is not true capital. Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis,” he said in a note dated November 19.

Currently, the U.S. financial system has $37 trillion of debt outstanding, he noted.

Combined, these eight companies have roughly $12.2 trillion of assets and only $406 billion of tangible common capital, or just 3.4 percent, the analyst said in his note to clients.

Miller said these institutions need somewhere between $1 trillion and $1.2trillion of capital to put their balance sheets back on solid ground and begin to extend credit again, given their dependence on short-term funding and the illiquid nature of their asset bases.

Continue reading »

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Nov 05

Nov. 6 (Bloomberg) — Airbus SAS and Boeing Co. may end up with as many as 200 new planes without buyers next year because airlines are unable to obtain funds to pay for them amid a global credit squeeze, a consultant said.

“There’s a funding gap and we don’t really know where the money is coming from,” Eddy Pieniazek, a director of aviation adviser Ascend, said at a conference in Hong Kong yesterday. “If the money doesn’t arrive, you can quite easily see 200 new aircraft, or whitetails, parked in a desert.”

Airbus and Boeing, the world’s two-biggest airplane makers, will probably deliver about $65 billion of large commercial aircraft next year, according to a report by JPMorgan Securities Inc. Leasing companies and banks, which will account for about 60 percent of the aircraft financing market in 2008, are likely to “pull back substantially,” creating a funding gap as wide as $20 billion, the report said.

“Nobody is getting out of this alive,” said Bill Cumberlidge, director of aviation asset finance at Allco Finance Group, which on Nov. 4 handed over operations to outside managers after warning it may default on its debt. “The debt market is dead.”

“Zero Liquidity”

Continue reading »

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Oct 28

The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money.

IMF's work in countries such as Turkey is only just beginning
IMF’s work in countries such as Turkey is only just beginning

The Fund is already close to committing a quarter of its $200bn (£130bn) reserve chest, with a loans to Iceland ($2bn), Ukraine ($16.5bn), and talks underway with Pakistan ($14.5bn), Hungary ($10bn), as well as Belarus and Serbia.

Neil Schering, emerging market strategist at Capital Economics, said the IMF’s work in the great arc of countries from the Baltic states to Turkey is only just beginning.

“When you tot up the countries across the region with external funding needs, you get to $500bn or $600bn very quickly, and that blows the IMF out of the water. The Fund may soon have to start calling on the West for additional funds,” he said.

Brad Setser, an expert on capital flows at the Council for Foreign Relations, said Russia, Mexico, Brazil and India have together spent $75bn of their reserves defending their currencies this month, and South Korea is grappling with a serious banking crisis.

“Right now the IMF is too small to meet the foreign currency liquidity needs of the larger emerging economies. We’re in a dangerous situation and there is the risk of extreme moves in the markets, as we have seen with the Brazilian real. I hope policy-makers understand how serious this is,” he said.

The IMF, led by Dominique Strauss-Kahn, has the power to raise money on the capital markets by issuing `AAA’ bonds under its own name. It has never resorted to this option, preferring to tap members states for deposits.

The nuclear option is to print money by issuing Special Drawing Rights, in effect acting as if it were the world’s central bank. This was done briefly after the fall of the Soviet Union but has never been used as systematic tool of policy to head off a global financial crisis.

“The IMF can in theory create liquidity like a central bank,” said an informed source. “There are a lot of ideas kicking around.”

Continue reading »

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Oct 10

Stock markets across the world are in a state of hysteria. The tidal wave of sell-offs, which began when Henry Paulson announced the Bush administration’s $700 billion bailout plan for the sinking banking system, has swelled into a global tsunami racing round the globe.

Shares fell sharply across Europe and Asia for the fifth straight day following a 679 drop on the Dow Jones.  Nearly $900 billion was wiped off the value of U.S. equities in just one trading day. The Chicago Board Options Exchange Volatility Index, the “fear index”, soared to a record 64.

Credit markets remain frozen. Libor, the London interbank offered rate, nudged up slightly on Thursday night, signaling even greater resistance to lending between the banks. Until there is relief in the credit markets, stocks will continue to slide. But trust has vanished. The 50 basis points rate cut that was coordinated with foreign central banks has had no effect. The market is being driven by fear and pessimism.

Continue reading »

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Oct 08

Gordon Brown and Alistair Darling set out a radical £500 billion package today to restore confidence in the UK banking sector and break the crippling logjam in credit markets.

The three-part package includes committing up to £50 billion of taxpayer funds for a partial nationalisation of stricken banks, met from increased public borrowing and with political strings attached that would include reining in executive pay.

In addition, the Bank of England will pump at least £200 billion into the money markets under its existing Special Liquidity Scheme. The Government is also making a further £250 billion available for banks over the next three years to guarantee medium-term debt to help restore confidence and get banks lending to each other again.

Continue reading »

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Sep 18


Nouriel Roubini

An economic analyst says by buying out investment giants, the USA had transformed into the USSRA (the United Socialist State Republic of America).

“This transformation of the USA into a country where there is socialism for the rich, the well connected and Wall Street (i.e. where profits are privatized and losses are socialized) continues today with the nationalization of AIG,” Nouriel Roubini said.

Continue reading »

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Sep 18

Medvedev calls for more measures

MOSCOW (AP) — Russia closed its stock exchanges for a second day Thursday as President Dmitry Medvedev pledged a 500 billion ruble ($20 billion) injection into financial markets to stem a dizzying plummet in share prices — and quash fears of a repeat of the country’s 1998 financial collapse.

Russian President Dmitry Medvedev reiterated that the government — which sits on the world’s third-largest foreign reserves — is in a strong position to handle the crisis, which threatens to undermine an eight-year economic success story and a resurgence in national pride.

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