Tuesday, March 30, 2010

The Bailout Bus Keeps Rolling......

Looking into the PMI Investor Presentation & MGIC Investor Presentation and their "sky high" ( not just a few billions.... ) in exposure it should be clear that this is also another "hidden" bailout for the banks......The knowledge that the "Bailout Bus" keeps on rolling might explain Cramer´s Bull Case For Banks.... Even if he wasn´t honest enough to mention the "moral hazard trade" in his 10 reason to rush into the banking sector.....;-)

Ein Blick in die PMI Investor Präsentation & MGIC Investor Präsentation die einen "astronomisch" hohen Betrag ( rede nicht nur von einigen Mrd... ) an versicherten Schadensfällen ausweisen genügt um zu erkennen das hier neben den PMI Aktionären und Anleihebesitzern vor allem die Banken begünstigt werden die seinerzeit die Versicherung gezeichnet haben......Genau diese Bailoutgarantie erklärt auch Cramer´s Bull Case For Banks... Schade nur das er nicht so ehrlich gewesen ist den "Moral Hazard Trade" unter den 10 Kaufaurgumenten in Sachen Banken aufgeführt hat.... ;-)

H/T Matson

Insuring Against an End to Moral Hazard WSJ
The bailout bus keeps rolling. Last week's programs to forgive mortgage principal were good news for mortgage insurers. But PMI Group's share-price surge had an extra lift from Freddie Mac.

The mortgage giant gave a new PMI subsidiary the green light to write insurance for loans that Freddie guarantees. PMI needed the blessing—and got a similar one from Fannie Mae—because its main subsidiary may be banned in some states from writing policies if it breaches regulatory capital rules.

If that happened, PMI's future would be in even greater doubt. The company lost nearly $1.6 billion over the past two years and warned that "as a result of continued losses, we will need to raise significant additional capital and/or achieve significant statutory regulatory relief."

What is curious is that Freddie's and Fannie's support potentially puts taxpayer dollars at risk, while helping PMI shareholders—the company's stock jumped more than 40% last week. The moves also come as debate continues over how much skin in the game homeowners should have.

Help for PMI, and for Mortgage Guaranty Insurance Corp. last month, is also notable because Freddie has suggested that firms like this mightn't be able to meet future claims.

Freddie in its annual filing said "some of our mortgage insurers lack sufficient ability to fully meet all of their expected lifetime claims-paying obligations to us as they emerge." PMI has the lowest credit rating of Freddie's rated mortgage-insurance counterparties.

With the government, through Fannie and Freddie, willing to play such games to keep small fry like PMI and MGIC alive, it shows quite how far away Uncle Sam is from a real solution on "too big to fail."

See also As GSE Delinquencies Hit All Time Highs, What About The Monolines? ZH

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Payback Time : State Debt Woes Grow Too Big to Camouflage

Fits perfectly to this post.....

Passt hervorragend zu diesem Posting.....

State Debt Woes Grow Too Big to Camouflage NYT

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

Joshua Rauh, an economist at Northwestern University, and Robert Novy-Marx of the University of Chicago, recently recalculated the value of the 50 states’ pension obligations the way the bond markets value debt. They put the number at $5.17 trillion.

After the $1.94 trillion set aside in state pension funds was subtracted, there was a gap of $3.23 trillion — more than three times the amount the states owe their bondholders.

I highly recommend to read the entire NYT link..... Some pretty sobering details how desperate some states are already acting to mask the shortfalls.....

Empfehle wärmstens den kompletten NYT Link zu lesen..... Einige ziemlich verzweifelte Versuche um die aktuellen Lücken möglichst "kreativ" zu stopfen......

Summary via Mish

  • New Hampshire took $110 million from a medical malpractice insurance pool to "balance its budget". The State Supreme Court said put it back.
  • Colorado tried to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002.
  • Hawaii went to a four-day school week.
  • Connecticut tried to issue its own accounting rules.
  • California is making companies pay 70 percent of their 2010 taxes by June 15.
  • New Jersey and other states make their budgets look balanced by pushing debts into the future. While Greece used a type of foreign-exchange trade to hide debt, the derivatives popular with states and cities have been interest-rate swaps, contracts to hedge against changing rates.

Fitch Downgrades Illinois and Warns of Further Actions as Budget Gap Widens Jesse

Illinois is financially the fifth largest US state with a 2008 GDP of approximately $633 Billion.

To put this in perspective, the 2008 GDP for the nation of Greece was approximately $357 Billion.

The usual political reflex is already underway.... Blame the speculators......

Der übliche politische Reflex ist einmal mehr bereits aktiviert.....Stoppt die Spekulanten....

The CDS inquisition, California edition FT Alphaville

It was only a matter of time. California — following in the footsteps of Ireland and Iceland, Greece, Spain, and politicians of all stripes and nationalities — has called for an examination of credit default swaps sold against its bonds.

California Treasurer Bill Lockyer has sent a letter to six big banks that underwrite the state’s municipal bond sales, asking what the banks’ role may be in also selling credit default swaps on Californian debt
The Muni Market is so far not worried ( surpirse, surprise ) that this house of cards will face any difficulties at least in the near term.........

Wenn man sich den Muni Chart so ansieht hat dieser ( welch Überraschung ) die beste aller Welten eingepreist....


Investing in municipal bonds is a paradox for investors right now. On one hand, they are attractive because of their tax-free status since taxes are expected to rise. On the other hand, with the economy as bad as it is, municipalities could come under duress and be at risk of default.

Based on the performance of the National Muni Bond ETF (MUB) in recent months, it looks like investors are weighing the tax advantage more heavily against default risk. As shown below, MUB is up 14.4% from its lows last year, and it is trading near its all-time highs since the ETF was released in 2007.


The chart above is even more "impressive" when you add the following story to the mix.....

Der Chart ist noch "eindrucksvoller" wenn man die nachfolgende Geschichte miteinbezieht.....

Bond insurer blow-up fallout, Las Vegas Monorail edition FT Alphaville

March 29 (Bloomberg) — Holders of bonds sold by the Las Vegas Monorail Co. likely won’t get their next payment due July 1 because the insurer, Ambac Financial Group Inc., won’t cover them.

The monorail, linking the city’s casinos, seeks to reorganize under Chapter 11 bankruptcy and has minimal funds to cover its next scheduled debt disbursement of $9.6 million in July, Wells Fargo, the trustee for the bonds, said in a March 26 announcement. While Ambac guarantees payments of $1.2 billion for the monorail, its obligation has been transferred by Wisconsin insurance regulators to a segregated account that temporarily can’t honor claims, according to the filing.

The Las Vegas Monorail example highlights what really matters about the dire state of the bond insurance industry – municipalities, and muni bondholders, are going to get hurt.

The halt marks the first time that a regulator has raised the possibility that Ambac, which insures $256 billion of municipal bonds, may be unable to pay current municipal bond insurance policy claims to preserve reserves for future obligations

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Foreigners Holding 75 % of Greece’s Current Debt Stock

One of the main reasons why the "Smoke & Mirrors" ( excellent link via Yves Smith / NC ) Greece "Rescue" & a hidden bailout ( see the ECB U-TURN My Big Fat Greek Collateral Conversion ) has been orchestrated..... It´s still the number one goal to bail out banks & insurers ( see PIIGS Claims On European Banks: $1.5 Trillion; France Most On Hook In PIIGS Implosion & Ireland Stunned To Uncover "Truly Shocking" Information By Its Banks ).....Nobody is too small too fail....Sarcastically one can argue that in hindsight it seems the Lehman "incident" was one of the best things that could have happened to the industry......

Denke das wir hier einen der Hauptgründe für den "Smoke & Mirrors" ( fantastische Zusammenfassung via Naked Capitalism ) Rettungsversuch bzw die indirekten ( siehe die 180 Grad Drehung der EZB My Big Fat Greek Collateral Conversion ) Bailoutbemühungen sehen.... Es geht wie leider immer noch darum Banken und Versicherungen vor möglichen Schäden zu "beschützen" ( siehe PIIGS Claims On European Banks: $1.5 Trillion; France Most On Hook In PIIGS Implosion & Ireland Stunned To Uncover "Truly Shocking" Information By Its Banks )...... Keiner ist unwichtig genug um zu fallen...."Spitz" formuliert könnte man fast meinen das im Nachhinein Lehman für die Branche der bestmöglich anzunehmende Unfall gewesen ist......

The kindness of (bond market) strangers FT Alphaville

With foreigners already holding three quarters of Greece’s current debt stock, convincing them to buy even more becomes increasingly difficult. Here’s what Deutsche’s Gillian Edgeworth says:

"Euroland insists that the Greek sovereign continues to access the market if possible. The sovereign issuer will hope that foreigners remain keen buyers of bonds, though foreigners already hold 75% of the total debt stock.

In the absence of further foreign buying, local institutions will only likely be able to absorb government issuance if domestic banks continue to draw off [European Central Bank] liquidity facilities in size."

Lucky, then, that the ECB decided to revise its acceptance rules for the collateral pledged by Greek banks on Friday

Too bad for the "architects" that so far the spreads havn´t narrowed in a meaningful way.....;-)

Leicht problematisch für die Bailoutakrobaten lediglich das sich zumindest momentan die Spreads nicht wesentlich "eingeengt" haben...... ;-)

Greek debt – spreading like it’s 1999 FT Alphaville
It looks like Hellenic Republic bond spreads over German bunds are back at 1999 levels — when Greece first attempted to join the eurozone but failed because it didn’t meet the required economic criteria

No wonder Gold has been hitting a series of new ATH in € terms ...

Da verwundert es wenig das Gold seit Wochen eine Serie von neues Allzeithoch auf € Basis markiert.....

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Saturday, March 27, 2010

Weekend Humor & Update Blogroll

Time for an extra dose of humor & an update.....Cannot believe that i missed Keen so far..... On top of the well known Dilbert i highly recommend to bookmark Alex ....The Greece Episode explains why........

Höchte Zeit für ne extra Portion Humor & ein Update....Kaum zu verzeihen das ich Keen bisher nicht dauerhaft verlinkt habe..... Neben dem inzwischen bekannten Dilbert empfehle ich sich Alex als festen Tagesordnungspunkt vorzunehmen..... Die Griechenland Episode erklärt warum.....


Steve Keen´s Debtwatch & Financial Times Money Supply & King World News

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Tuesday, March 23, 2010

Another "Reassuring" Sovereign Debt Chart........

Almost as "impressive" as this chart...... Taken from Dylan Grice Discusses When To Take Profits On Gold: Hint - Not For A Long While via ZH UPDATE: Speaking of Portugal and sovereign risk: a downgrade

Fast so "eindrucksvoll" wie dieser Chart...... Mehr zum Chart gibt es in Dylan Grice Discusses When To Take Profits On Gold: Hint - Not For A Long While via ZH UPDATE: Speaking of Portugal and sovereign risk: a downgrade

A reduction of this magnitude without a depression and social "tensions" is highly unlikely ...... Especially when the numbers are based on "realistic" forecasts that even would make "Wall Street Finest" proud.....

Eine Reduzierung in dieser Größenordnung ist ohne eine gefühlte Depression sowie starken sozialen "Spannungen" nicht vorstellbar..... Besonders vertrauenerweckend ist zudem das die Prognosen auf gewohnt konservativen Annahmen basieren die selbst Wall Street Finest blaß aussehen lassen..... ;-)

via NYT

This explains why GOLD Is Not A $ Story........ Wouldn´t also surprise me if charts like this won´t be seen as "unusual" any more down the road......

Damit erklärt sich auch leicht warum GOLD keinesfalls lediglich eine $ Story ist........ Zudem befürchte ich insgeheim das selbst zur Zeit noch aussergewöhnliche Charts wie dieser nicht länger die absolute Ausnahme bleiben......

The following story fits perfectly.......

Die nachfolgende Meldung passt da hervorragend ins Gesamtbild......

Obama Pays More Than Buffett as U.S. Risks AAA Rating

March 22 (Bloomberg) — The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama. Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg.

Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
Reassuring........ At least the worldwide banking system is now "well capitalised" and not in danger of needing another bailout....... ;-)

Sehr vertrauenserweckend.... Immerhin sind ja inzwischen die Banken weltweit "well capitalised" und dürften die Sanierung der Staashauhalte auf Jahre hinaus nicht weiter belasten..... ;-)

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Wednesday, March 10, 2010

Cramer´s Bull Case For Banks..... I Can Smell A Top... ;-)

Oh boy..... After the ( even by his standarts.... ) famous "Housing & Bank Stock Shortage" call from January 2008 ( NO KIDDING > see "Ten Trillion $ Worth Of Good Calls" ) was a little bit "premature" he is predicting a bank stock shortage version 2.0.... Would at least be honest if he mentioned the "ultimate moral hazard trade" & the "Enron-esque characteristics" when it comes to accounting as the two main reasons behind the motives to own banks.. ;-)

Die Euphorie ist zurück........ Nachdem derselbe Typ Januar 2008 leicht "verfrüht" bereits einmal eine "Housing & Bank Stock Shortage" ( siehe "Ten Trillion $ Worth Of Good Calls") proklamiert hat ist es höchtse Zeit für eine Version 2.0.....Wäre zumindest ehrlich gewesen wenn er in seinen 10 Gründen die unbedingt dafür sprechen sofort massiv Bankaktien zu kaufen den "ultimativen Moral Hazard Trade" sowie die kreative Bilanzierung die stark "Enron-esque characteristics" aufweist als die Topgründe aufführen würde.... ;-)

Just for the record here are the two main ETF´s tracking the financial sector.....

Nur um die Daten festzuhalten nachfolgend die beiden relevanten Bank/Finanz EFT´s....

Financial Select Sector ETF) $ 15,47 & KBW Regional Banking (ETF) $ 25,47

Needless to say that both ( along with almost every asset class worldwide ) are trading at 52 week highs & had the longest winning streaks since 1995.....Especially Citigroup seems to be a "real bargain"... ;-)

Überflüssig zu erwähnen das die EFT´s ( wie fast alle anderen Anlageklassen weltweit ) auf Jahreshochs stehen & gerade die längste Gewinnserie seit 1995 hinter sich haben....Besonders Citigroup scheint ein "echtes Schnäppchen" zu sein... ;-)

John Hussman Rips Apart CNBC ZH

In reflecting on why the past 15 years have been so riddled by irresponsible speculation, it is impossible to ignore the rise over that same period of widely-viewed financial programming that is equally riddled with cartoonish content that encourages short-term thinking and speculation (buy-buy-buy! sell-sell-sell! boo-yah!)
"Anti Spin" from Chris Whalen via NC ( MUST READ!!!!)

In fact, the banking system is continuing to sink under bad loans and even worse securities losses. Telling the public that the banks are “fixed” is irresponsible. Unfortunately this false perception is widespread, including among major media such as CNBC and also with a number of my clients in the hedge fund world.
But at least Bubblevision is a very good tool to spot sentiment......

Immerhin muß man Bubblevision lassen das es kaum ein besseres Barometer gibt wenn es darum geht die Stimmungen "einzufangen".....

UPDATE: Unrelated....... Ohne Bezug.... ;-)

Citi: Bove Raises to “Buy”; Citicorp Is New Model for U.S. Banks
He figures Citi is worth about $8.50 in that outlook.
"Wall Street Finest & Lehman June 2008 ZH

Hoenig Says Big Banks Must Either Add $210 Billion In New Capital Or Reduce Total Assets By $3 Trillion; Bank Capital Raises Imminent ZH

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Monday, March 08, 2010

Maybe This Time It Is Different.........

So far every bet against the Japanese bond market was a disaster..... But the latest move from the GPIF ( $1.37 trln / 66.32percent of its assets in domestic bonds ! see Profile GPIF Government Pension Investment Fund, Japan ) is really looking "unconventional".....

Bisher ist jeder der gegen japanische Staatsanleihen (JGB) gewettet hat übelst auf den Bauch gefallen.... Da der letzte Schritt des 1.37 trln $ schweren und zu knapp 66% in JGB´s investierten GPIF ( mehr Details GPIF Government Pension Investment Fund, Japan ) allerdings doch recht "unkonventionell" daherkommt ist der Ausgang zwischen Bullen und Bären wohl ungewisser denn je.....

H/T Claire Morel / Reuters

‘Japan’s brewing fiasco’ SocGen’s Dylan Grice via FT Alphaville

The biggest JGB holder on the planet – the Government Pension Investment Fund (GPIF) – which has already admitted it’s no longer able to roll maturing bonds, has announced that it will open credit lines so it doesn’t have to sell them to fund its obligations…

To spell that out: we are going into a year in which the government has ¥213 trillion of bonds to roll over… and the biggest holder of JGBs is openly admitting he has no new inflows of money

Click here & here to get the entire report... Some pretty scary charts & the following stat............

Den kompletten Research Report gibt es hier & hier ... Einige extrem unschöne Charts sowie die nachfolgende Zahl..........

So who will fund the Japanese government´s deficit in the future? It is not likely to be the international capital markets, especially if its bonds are offering only a 1.5% yield.

But if international investors were to demand triple that, pricing JGBs in line with international bond market peers (all priced too generously in my opinion) the game would soon be up because Japan´s current debt service already amounts to 35% of pre-bond issuance revenues.

H/T Zero Hedge

For more on this topic make sure you visit the excellent slide show Japan - The Point Of No Return from Vitaliy N. Katsenelson via Barry

Wer mehr zu diesem Thema sehen möchte dem empfehle ich die erstklassige Ansammlung von Charts Japan - The Point Of No Return von Vitaliy N. Katsenelson via Barry

GOLD Is Not A $ Story........ ;-)

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Tuesday, March 02, 2010

GOLD Is Not A $ Story........

Nice addtition to an earlier posting.....

Nette Ergänzung zu einem früheren Posting.....


[Pedal to Metal]

Unrelated..... ;-) / Ohne jeden Bezug..... ;-)

8 reasons Wall Street loses another 20% in this decade Paul B. Farrell

.... the past decade. Wall Street lost trillions, lost 11% of your money. Adjusted for inflation, Wall Street lost 20% of your money.

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