After a 3 week hiatus, the FDIC decided to best to place two banks into the morgue:
Bank Name | City | State | CERT # | |||
|---|---|---|---|---|---|---|
| Western National Bank | Phoenix | AZ | 57917 | |||
| Premier Community Bank of the Emerald Coast | Crestview | FL | 58343 |
end.
Friday saw the stock market initially rally into triple digit gains by the Dow but as the day wore on, selling commenced and finally the Dow ended in negative territory. Gold started strong but fell during the early comex hours but gained strength as the day wore on, finishing the session at $1595.60 up $21.20. Silver also had a good day finishing the comex session at $29.62
In the access market here are the final closing prices for these two metals;
Gold; $1599.20
Silver: $29.74
Let us head over to the comex and see how trading fared with respect to open interests, delivery notices and finally inventory movements.
The total gold comex open interest fell by 5144 contracts to 430,854. We had very minor spec liquidation. The fun begins with the front delivery month of December. Here the OI fell from 2327 contracts to 981 contracts for a loss of 1346 contracts. We had a huge 1823 delivery notices on Thursday so we gained more gold ounces standing for delivery and lost nothing to cash settlements. The next big delivery month is February and here the OI fell from 261,629 contracts to 257,634 as it was here that had the major contraction in open interest. The estimated volume on Friday was very tame at 139,217. The confirmed volume on Thursday was much higher at 199,508 due to the raid and mega high frequency trading.
The total silver comex OI rose by 884 contracts despite the raid on Thursday. As I pointed out to you on numerous occasions it is becoming more difficult for the bankers to get the silver leaves to fall from the silver tree. They just are not biting. The next delivery month is March and here the OI rose from 57,037 to 58,059
as our longs remain resolute in their conviction and refuse to play along with the bankers. The estimated volume was extremely low at 30,084 as the bankers refused to supply the needed paper having been exhausted during the week with heavy activity and nothing to show for their "hard" work. The confirmed volume on Thursday was a little better on Thursday at 47,798.
Inventory Movements and Delivery Notices for Gold: Dec. 17 2011:
Gold | Ounces |
Withdrawals from Dealers Inventory in oz | nil |
Withdrawals from Customer Inventory in oz | 10,969 (Manfra,HSBC,JPM,Scotia) |
Deposits to the Dealer Inventory in oz | nil |
Deposits to the Customer Inventory, in oz | 64,300 (JPM) |
No of oz served (contracts) today | 632 (63,200) |
No of oz to be served (notices) | 349 (34,900 oz) |
Total monthly oz gold served (contracts) so far this month | 21,172 (2,117,200) |
Total accumulative withdrawal of gold from the Dealers inventory this month | nil |
Total accumulative withdrawal of gold from the Customer inventory this month | 54,304 |
Now for the fun part. Despite this being a record delivery month we still do not see any gold
enter as a deposit to the dealer and also no gold was withdrawn from the dealer.
We had another of our perfectly round 64,300 oz of paper gold which is exactly 2.00000 tonnes of gold enter as deposit to the customer and the vault: you guessed correctly our banking nemesis: JPMorgan.
Whenever you see a perfectly round deposit you know something is fishy. It seems that Brinks no longer wishes to be part of this as they have handed the scheme to other vaults.
We had the following customer withdrawal:
1. HSBC: 95 oz
2. JPM: 101 oz
3. Manfra: 482 oz
4. Scotia: 10,018 oz
total customer withdrawal: 10,969 oz.
We had two adjustments:
First with HSBC: A total of 30,982 oz was taken from the dealer HSBC back to the customer at HSBC
in a repayment of prior liability. It could also be a seller no longer wished to sell his gold and placed it back into the eligible or not for sale category.
Second: We had 401 oz at Scotia where the customer leased gold to the dealer at Scotia. It could be that a customer wished to sell his gold and moved the gold to the registered or for sale category.
The total registered gold inventory rests tonight at 3.011 million oz or 93.65 tonnes of gold.
The CME notified us that we had another stellar delivery day. Friday saw 632 delivery notices served for 63200 oz of gold. The total number of gold notices filed so far this month total 21,172 for 2,117,200 oz
To obtain what is left to be served upon, I take the OI standing for December (981) and subtract out Friday's deliveries (632) which leaves us with 349 or 34900 oz left to be served upon.
Thus the total number of gold oz standing in this delivery month is as follows: (and a record)_
2,117,200 oz (served) + 34,900 oz (to be served upon) = 2,152,100 oz or 66.93 tonnes of gold.
If we add in the November gold standing 1.77 tonnes (November is a non delivery month) we have 68.7 tonnes of gold standing. This represents 68.70 divided by 93.65 tonnes or 73.3% of all registered or dealer gold (for sale).
And no gold enters the dealer. If the data is fabricated why point out huge delivery notices?
And now for silver
First the chart: December 15th
Silver Ounces Withdrawals from Dealers Inventory nil Withdrawals fromCustomer Inventory 36,444(Scotia,) Deposits to theDealer Inventory 592,718 (Brinks) Deposits to the Customer Inventory 273,302 (Brinks,Delaware,Scotia) No of oz served (contracts) 9 (45,000) No of oz to be served (notices) 241 (1,205,000,) Total monthly oz silver served (contracts) 822 (4,110,000) Total accumulative withdrawal of silver from the Dealersinventory this month 86,937 Total accumulative withdrawal of silver from the Customer inventory this month 2,201,504
First the chart: December 15th
| Silver | Ounces |
| Withdrawals from Dealers Inventory | nil |
| Withdrawals fromCustomer Inventory | 36,444(Scotia,) |
| Deposits to theDealer Inventory | 592,718 (Brinks) |
| Deposits to the Customer Inventory | 273,302 (Brinks,Delaware,Scotia) |
| No of oz served (contracts) | 9 (45,000) |
| No of oz to be served (notices) | 241 (1,205,000,) |
| Total monthly oz silver served (contracts) | 822 (4,110,000) |
| Total accumulative withdrawal of silver from the Dealersinventory this month | 86,937 |
| Total accumulative withdrawal of silver from the Customer inventory this month | 2,201,504 |
Again a lot of activity inside the comex silver vaults. We again got a noticeable dealer silver deposit
of 592,718 and the dealer was Brinks. The dealer did not have a silver withdrawal.
The customer had the following silver deposit:
1. Into Brinks, 4203 oz
2. Into Delaware: 985 oz
3. Into Scotia: 268,114 oz
total deposit by the customer; 273,302. oz
We had the following customer withdrawal: 36,444 oz.
We had 3 adjustments:
1. 10,321 oz of silver removed from the dealer Brinks and back to the customer at Brinks
2. 59,382 oz of silver removed from the dealer Delaware and back to the customer at Delaware.
3. 10,250 oz of silver taken from the customer and placed to the dealer. This is usually a lease arrangement.
The total registered silver has now reached 34.08 million oz
The total of all silver is now 111.97 million oz.
Yet very little delivery notices and many cash settlements.
It seems that most of the silver in the registered category is paper silver.
The CME notified us that we had 9 delivery notices filed for 45,000 oz. The total number of notices filed so far this month total 822 for 4,110,000 oz. To obtain what is left to be served upon, I take the OI standing for December at 250 and subtract out Friday deliveries at (9) which leaves us with 241 notices or 1,205,000 oz.
Thus the total number of silver oz standing in this delivery month is as follows:
4,110,000 (oz served) + 1,205,000 (to be served) = 5,315,000
we lost 13 contracts or 65,000 oz to cash settlements.
end
Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:Sprott and Central Fund of Canada.
The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.
Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.
Dec 17.2011:
total Gold in Trust
Tonnes:1,279.98
Ounces:41,152,483.53
Value US$:65,582,708,535.84
Dec 15.2011:
TOTAL GOLD IN TRUST
Tonnes:1,279.98
Ounces:41,152,483.53
Value US$:64,760,375,623.95
we neither gained nor lost any gold at the GLD on Friday.
Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:
Sprott and Central Fund of Canada.
The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.
Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.
Dec 17.2011:
total Gold in Trust
Tonnes:1,279.98
Ounces:41,152,483.53
Value US$:65,582,708,535.84
Dec 15.2011:
TOTAL GOLD IN TRUST
Tonnes:1,279.98
Ounces:41,152,483.53
Value US$:64,760,375,623.95
we neither gained nor lost any gold at the GLD on Friday.
Sprott and Central Fund of Canada.
The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.
Dec 17.2011:
total Gold in Trust
Tonnes:1,279.98
Ounces:41,152,483.53
Value US$:65,582,708,535.84
Dec 15.2011:
TOTAL GOLD IN TRUST
Tonnes:1,279.98
Ounces:41,152,483.53
Value US$:64,760,375,623.95
we neither gained nor lost any gold at the GLD on Friday.
And now for silver Dec 17.2011:
Ounces of Silver in Trust 313,257,776.900 Tonnes of Silver in Trust 
9,743.41
Dec 15.2011:
Ounces of Silver in Trust 313,257,776.900 Tonnes of Silver in Trust 9,743.41
The silver inventory at the SLV remained the same.
end
And now for silver Dec 17.2011:
Ounces of Silver in Trust 313,257,776.900 Tonnes of Silver in Trust 9,743.41
Dec 15.2011:
Ounces of Silver in Trust 313,257,776.900 Tonnes of Silver in Trust 9,743.41
The silver inventory at the SLV remained the same.
end
And now for silver Dec 17.2011:
| Ounces of Silver in Trust | 313,257,776.900 |
| Tonnes of Silver in Trust | 9,743.41 |
Dec 15.2011:
| Ounces of Silver in Trust | 313,257,776.900 |
| Tonnes of Silver in Trust | 9,743.41 |
The silver inventory at the SLV remained the same.
end
And now for our premiums to NAV for the funds I follow:
1. Central Fund of Canada: traded to a positive 2.8 percent to NAV in usa funds and a positive 2.6 % to NAV for Cdn funds. ( Dec 17.2011).2. Sprott silver fund (PSLV): Premium to NAV rose to 17.31% to NAV Dec 17/2011
3. Sprott gold fund (PHYS): premium to NAV fell to a 3.92% positive to NAV Dec 17.2011).
The crooks still refuse to do battle with Eric Sprott who is on the prowl tonight looking for cheap silver.Please note that the premium in the Sprott fund has now returned to previous normal high levels.The world awaits anxiously for Eric to acquire his metal.
Friday night saw the release of the COT report. First the gold COT:
Gold COT Report - Futures Large Speculators Commercial Total Long Short Spreading Long Short Long Short 184,468 33,965 29,626 152,357 338,574 366,451 402,165 Change from Prior Reporting Period -8,284 924 5,868 9,914 -5,369 7,498 1,423 Traders 156 71 72 50 50 239 166
Small Speculators
Long Short Open Interest
61,248 25,534 427,699
-2,755 3,320 4,743
non reportable positions Change from the previous reporting period
COT Gold Report - Positions as of Tuesday, December 13, 2011
Please note that this report is from Dec 6 through to Dec 13.2011. We had 2 days of raids in these figures.
Those speculators that have been long in gold succumbed to the attack and pitched 8284 contracts of their longs.Those speculators that have been short in gold surprisingly added 924 contracts to their short side.
Our commercials:
Those commercials that have been long in gold (and are close to the physical scene) liked what they saw and they added another 9914 contracts to their long side.
Those commercials that have been perennially short in gold covered only 5369 contracts of their shorts despite two days of the raid.
Our small specs:
Those small specs that have been long in gold pitched 2755 contracts from their long side as they thought a raid was coming and they guessed correctly.
Those small specs that have been short in gold, continued to add to the shorts to the tune of 3320 contracts and generally are happy campers this week. It is rare to have the small specs guess correctly.
Conclusion: certainly more bullish that last week and yet we had a huge raid. This is probably why we did not have many open interest fall in number as all long holders remained resolute.
And now for the silver COT:
Silver COT Report - Futures Large Speculators Commercial Total Long Short Spreading Long Short Long Short 25,572 11,905 17,176 35,629 55,934 78,377 85,015 2,361 1,324 1,112 136 -2,078 3,609 358 Traders 61 35 39 35 41 118 99
Small Speculators
Long Short Open Interest
19,934 13,296 98,311
-982 2,269 2,627
non reportable positions Change from the previous reporting period
COT Silver Report - Positions as of Tuesday, December 13, 2011
Those large specs that have been long in silver continued to add to their positions to the tune of 2361 contracts.
Those large specs that have been short in silver continued to pound the table and add to their shorts to the tune of 1,324 contracts.
Our commercials;
Those commercials that have been long in silver and close to the physical scene added a tiny 36 contracts to their longs.Those commercials that have been short in silver from the beginning of time covered 2,078 contracts from their short side.
Our small specs:
Those small specs that have been long in silver covered a tiny 982 contracts from their long side fearing a raid .Those small specs that have been short in silver added another 2,269 contracts to their short side.
The small specs got it right this week.
Conclusion: slightly more bullish and yet their raided. I guess this is the reason that the OI remained as the longs are quite resilient.
end/
Let us now see some of the major stories that will certainly have an impact of the price of gold/silver.In simplistic terms, we have 3 major problems facing the globe:
1. An insolvency problem created by too much paper debt of which each sovereign nation cannot repay.2. A physical problem in gold where central banks have loaned out their gold and cannot retrieve it without paying exorbitant prices for it. A default will no doubt occur as they will fail to deliver upon individuals or other sovereigns wishing to purchase this ancient metal of kings as a guard against a decline in paper assets.3. We have a silver problem, as banks have loaned out massive amounts of this metal. We will also have a default by the banks as investors seek this metal as a guard against the decline in value of paper assets.
The initial problem started with a USA housing crisis 2007. This morphed into a banking crisis in 2008.The USA exported this "virus" to Europe as the European banks bought oodles of this junk.By the close of 2008 we had two major centres, the USA and Europe engulfed in a banking mess.The USA central bank, the Fed, started to print money buying much of the debt (QE I, II, III..etc). Europe because of its structure cannot print to infinity as Germany stands against it.Thus by 2009-2010, the banking problem morphed into a sovereign European problem as the economy slowed down over there and tax revenues fell off a cliff. Their debt problem now became more pronounced as sovereign interest rates rose because of perceived risk of not repaying that debt.In 2011, the sovereign debt problem re-morphed back into a banking crisis as many of European banks gorged on sovereign debt making all of them insolvent.
We basically have 3 types of paper debt problems:
1. the actual sovereign debt of the nation that simply cannot be repaid.2. credit default swaps written by banks which are simply bets on whether the entity can survive financially.This derivative bet is in the trillion of dollars category.3. We also have a shadow bank industry where the banks take excess collateral and leverage this many times over to create profits. Now individuals are removing their assets which is causing a major contraction in the shadow banking sector. This is the de-leveraging we are witnessing today.
The key event that will likely trigger a default on the paper side of things will be the default on the sovereign debt of Italy. The Italian banks which have gorged themselves with massive amounts of Italian debt will default on their debt sending problems for its citizenry.The three major French banks, BNP Paribas, Societe Generale, and Credit Agricole have on their balance sheet massive amounts of Italian debt, coupled with other PIIGS nations. A default by these banks will trigger the end game.
Sovereign nations can do two things once this happens:
1. Do nothing and let a massive depression engulf each and every nation2. Print massive amounts of paper money buying the debt and causing a massive hyperinflation.
It is like picking your poison, the same result will happen.We believe that the probable scenario will be the second one where nations massively print.The hope is that the powers to be will be smart enough to revalue gold and say: let's start all over again.
The stories I give you relate to the above.
Yesterday, Fitch decides to revise the French outlook to negative which is one step before a downgrade.Notice how Fitch describes the situation: ""Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis."
(courtesy zero hedge)
Fitch Revises French Outlook To Negative
Submitted by Tyler Durden on 12/16/2011 13:03 -0500
We spoke to soon: it appears suicide is painless after all, as Fitch just changed the French outlook to negative.The punchline: "The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon." As for the line that will finally shut up France in its diplomatic spat with the UK: "Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis." And now, the market shifts its attention to non-French rating agencies, who will downgrade France in a "slightly" shorter timeframe... more like 2 hours according to some rumors.FITCH AFFIRMS FRANCE AT 'AAA'; OUTLOOK REVISED TO NEGATIVE
Fitch Ratings-London/Paris-16 December 2011: Fitch Ratings has today affirmed France's Long-term foreign and local currency Issuer Default Ratings (IDRs) as well as its senior debt at 'AAA'. Fitch has also simultaneously affirmed France's Country Ceiling at 'AAA' and the Short-term foreign currency rating at 'F1+'. The rating Outlook on the Long-term rating is revised to Negative from Stable.
The affirmation of France's 'AAA' status is underpinned by its wealthy and diversified economy, effective political, civil and social institutions and its financing flexibility reflecting its status as a large benchmark euro area sovereign issuer. In addition, the French government has adopted several measures to strengthen the creditability of its fiscal consolidation effort.
Nonetheless, government debt to GDP is currently projected by Fitch under its baseline scenario to peak in 2014 at around 92%, higher than any other 'AAA'-rated sovereign with the exception of the UK and US and significantly higher than other 'AAA'-rated Euro Area peers.
France's sovereign credit profile benefits from a broad and stable tax base - the volatility of the revenue to GDP ratio is half the 'AAA' median - and the interest service burden is moderate and broadly comparable with other 'AAA's.Under Fitch's baseline scenario that does not incorporate the realisation of substantial fiscal liabilities arising from the Eurozone crisis or other adverse shocks, even such an elevated level of government indebtedness is consistent with France retaining its 'AAA' status assuming that government debt is firmly placed on a downward path from 2013-14. The Negative Outlook on the French rating reflects Fitch's view that the likelihood of the realisation of contingent liabilities, although still not our base-case assumption, has materially increased, as has the risk of a much worse than expected economic and consequently fiscal outturn.
Similar to other highly rated peers, France faces medium and long-term challenges to improve the functioning of the labour market and enhance international competitiveness. Fitch recognises that the authorities have adopted measures to address these weaknesses, though a more radical structural reform agenda would underpin greater confidence in the underlying potential growth rate of the French economy. However, corporate and especially household indebtedness is moderate compared to some 'AAA' peers, notably the UK and US, while foreign indebtedness remains modest, albeit rising.
The Negative Outlook is prompted by the heightened risk of contingent liabilities to the French state arising from the worsening economic and financial situation across the Eurozone, as reflected in the Rating Watch Negative placed on the sovereign ratings of several Euro Area Member States (EAMS) on 16 December 2011. As Fitch commented in its report on 23 November, 'French Public Finances', the fiscal space to absorb further adverse shocks without undermining its 'AAA' status has largely been exhausted.
The intensification of the Eurozone crisis since July constitutes a significant negative shock to the region and to France's economy and the stability of its financial sector. Since May, when Fitch last affirmed France's 'AAA' status, its forecast for economic growth in 2012 has been cut from 2.1% to 0.7% with around one-in-four chance of outright contraction. Despite the additional fiscal measures announced in August and November equivalent to around 1% of GDP, further measures are likely to be required in order to cut the deficit to 3% of GDP by 2013 and stabilise government debt below 90% of GDP in light of the worsening economic and financial outlook.
In Fitch's opinion, the commitments made by leaders at the EU Summit on 9-10 December and by the ECB were not sufficient to put in place a fully credible financial firewall to prevent a self-fulfilling liquidity and even solvency crisis for some non-AAA euro area sovereigns. In the absence of a 'comprehensive solution', the Eurozone crisis will persist and likely be punctuated by episodes of severe financial market volatility.
Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis. It has a larger structural budget deficit and higher government debt burden relative to Euro Area 'AAA' peers. Moreover, relative to non-Euro Area 'AAA' peers, notably the US ('AAA'/Negative Outlook) and the UK ('AAA'/Stable Outlook), the risk from contingent liabilities from an intensification of the Eurozone crisis is greater in light of its commitments to the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), as well as indirectly from French banks that are less strong than previously assessed as reflected in recent negative rating actions by Fitch.
The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. The triggers that would likely prompt a rating downgrade are as follows:
- Increased likelihood that contingent liabilities from an intensification of the Eurozone crisis will be crystallised onto the French state balance sheet.
- Material slippage from the fiscal targets that the government has set itself, notably the aim of stabilising the government debt to GDP ratio from 2013 and placing it on a firm downward path towards levels that would increase the 'fiscal space' necessary to absorb adverse shocks.
- Weaker than expected economic performance that prompts a re-assessment of France's medium to long-term growth potential.
Conversely, economic and fiscal performance in line with Fitch's baseline expectations, as set out in the Special Report, French Public Finances (23 November 2011), along with the resolution of the Eurozone crisis would likely result in the stabilisation of the rating Outlook.
In the absence of a material adverse shock, most likely associated with dramatic worsening of the Eurozone crisis, Fitch would not expect to resolve the Negative Outlook until 2013.
Then Fitch decided to downgrade many of European sovereign nation debt:
(courtesy zero hedge)
And The Euro Downgrade Hits Just Keep On Coming, This Time Fitch
Submitted by Tyler Durden on 12/16/2011 12:48 -0500
Never a dull Friday when dealing with continents that have a terminal solvency, pardon, liquidity crisis.- FITCH PLACES BELGIUM, SPAIN, ITALY, IRELAND, SLOVENIA AND CYPRUS ON RATING WATCH NEGATIVE
Shockingly, French-owned Fitch has nothing to say about... France.Full statement:FITCH PLACES BELGIUM, SPAIN, SLOVENIA, ITALY, IRELAND AND CYPRUS ON RATING WATCH NEGATIVE
Fitch Ratings-London-16 December 2011: Fitch Ratings-London-16 December 2011:
Fitch Ratings has placed the ratings of all investment grade rated eurozone sovereigns and their debt with Negative Outlook onto Rating Watch Negative (RWN). The euro area country ceiling of 'AAA' is unaffected. The rating actions are as follows:
- Belgium 'AA+'/'RWN from 'AA+'/Negative Outlook ('F1+' Unaffected)
- Spain 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Slovenia 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Italy 'A+'/'F1'/RWN from 'A+'/'F1'/Negative Outlook
- Ireland 'BBB+'/'F2'/RWN from 'BBB+'/'F2'/Negative Outlook
- Cyprus 'BBB'/'F3'/RWN from 'BBB'/'F3'/Negative Outlook
The RWN indicates that the above ratings are under active review and are subject to a heightened probability of downgrade in the near-term. Fitch expects to complete the review by the end of January 2012. If the review concludes that a downgrade is warranted, it is likely be limited to one or two notches.
Following the EU Summit on 9-10 December, Fitch has concluded that a 'comprehensive solution' to the eurozone crisis is technically and politically beyond reach. Despite positive commitments by EU leaders at the Summit, notably the decision to accelerate the creation of the European Stability Mechanism (ESM) and to place less emphasis on private sector involvement (PSI), the concerns held by Fitch prior to the Summit remain pressing and have not been materially eased by the Summit outcome (also see, 'Summit Does Little To Ease Pressure on eurozone Sovereign Debt,' 12 December). Of particular concern is the absence of a credible financial backstop. In Fitch's opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States (EAMS).
Fitch recognises that the policy authorities in all of the countries with sovereign ratings subject to review have embarked upon significant fiscal consolidation and structural reform and these efforts will be taken into account in the review. However, the systemic nature of the eurozone crisis is having a profoundly adverse effect on economic and financial stability across the region and for some EAMS poses near-term risks that are beginning to dominate the sovereign-specific risk fundamentals. Today's announcement is focused on those sovereigns that are potentially vulnerable to the worsening external economic and financial environment as indicated by previous negative rating actions and rating Outlooks.
The RWN is prompted by the following risk factors:
- In the absence of greater clarity on the ultimate structure of a fundamentally reformed Economic and Monetary Union and the recognition by political leaders of the potential for an EAMS to leave the eurozone, Fitch will review its assessment of the balance of risks associated with eurozone membership, especially for sovereigns potentially subject to funding stresses.
- While acknowledging the extraordinary measures the ECB has adopted to provide liquidity to the European banking sector, its continued reluctance to countenance a similar degree of support to its sovereign shareholders undermines the efforts by EAMS to put in place a credible financial 'firewall' against contagion and self-fulfilling liquidity and even solvency crises.
- The intensification of the eurozone crisis since July constitutes a significant negative shock to the region's economy and the stability of its financial sector with potentially adverse consequences for sovereign credit profiles across the region, most immediately for those placed on RWN today.
- In the absence of a 'comprehensive solution', the crisis will persist and likely be punctuated by episodes of severe financial market volatility that is a particular source of risk to the sovereign governments of those countries with levels of public debt, contingent liabilities and fiscal and financial sector financing needs that are high relative to rating peers.
In light of these heightened risks, Fitch will re-consider the assumptions and analysis that underpin its current sovereign ratings of Belgium, Slovenia, Spain, Italy, Ireland and Cyprus to ensure that the above risk factors are appropriately reflected in its sovereign ratings in accordance with its sovereign rating methodology.
The focus on investment grade rated sovereign governments with Negative Outlooks reflects previous research and analysis that indicates specific weaknesses that render them especially vulnerable to the intensification of the eurozone crisis.
However, the outcome of the review will also incorporate Fitch's current assessment of the strength of their underlying economic and credit fundamentals as reflected in their current sovereign ratings as well as recent policy measures adopted at the national level.
end.
Late last night it was Moody's who turned the screws on Belgium by knocking its credit rating two notches due to continuing problems with its financing of Dexia and also the fact that it has no government:
(COURTESY ZERO HEDGE)
Moody's Takes S&P's Place - Downgrades Belgium By Two Notches To Aa3
Submitted by Tyler Durden on 12/16/2011 16:47 -0500
It appears Moodys is not having server issues.- BELGIUM'S CREDIT RATINGS CUT 2 LEVELS TO Aa3 BY MOODY'S
full note:Moody's downgrades Belgium's credit ratings to Aa3, negative outlookShort-term ratings affirmed at Prime-1; concludes review initiated 07 OctoberFrankfurt am Main, December 16, 2011 -- Moody's Investors Service has today downgraded Belgium's local- and foreign-currency government bond ratings by two notches to Aa3 from Aa1 with a negative outlook, while affirming its short-term ratings at Prime-1. Today's rating action concludes Moody's review for downgrade of Belgium's sovereign debt ratings, which was initiated on 07 October 2011.The main drivers that prompted the downgrade are:(1) Heightened risks posed by the sustained deterioration in funding conditions for euro area countries with relatively high levels of public debt, like Belgium; and the potential adverse impact these risks may have on the Belgian government's fiscal consolidation and debt-reduction efforts.(2) Increasing medium-term risks to economic growth for the small and very open Belgian economy due to the need for ongoing deleveraging and fiscal restriction in the euro area. This is likely to add to the challenges of placing the country's public debt on a downward trajectory.(3) New risks and uncertainties for the Belgian government's balance sheet stemming from the banking sector, particularly in connection with the contingent liabilities emanating from the run-off process of Dexia Credit Local (DCL).RATIONALE FOR DOWNGRADEThe first driver underlying Moody's decision to downgrade Belgium's debt rating is the fragile sentiment surrounding sovereign risk in the euro area. The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future. It translates into heightened potential for funding stress for euro area countries with high public debt burdens and refinancing needs like Belgium. Sustained increases in funding costs could also significantly complicate the reduction of general government deficit ratios to stabilise and reverse Belgium's high public debt in relation to nominal GDP -- currently close to 100%. Moreover, the probability of further more serious confidence shocks on the euro area bond markets -- up to and including sudden stops in funding - have risen recently, albeit from a very low base.The second driver of Moody's rating decision is the significant increase in the medium-term risks to economic growth, over and above any normal cyclical adjustment, in the small and very open Belgian economy. This is in part driven by the deleveraging underway across the euro area financial, corporate, household and government sectors, and is negatively affecting Belgium's export demand. Furthermore, uncertainties about the euro area debt crisis (management) are continuing to negatively impact the funding conditions for banks with potentially negative consequences for domestic economic activity. The further weakening economic growth outlook also complicates the government's ability to achieve its medium-term fiscal consolidation plans and may necessitate additional fiscal measures beyond the roughly 11 to 16 EUR billion yearly planned for the coming three years. This could further weigh on economic growth. Belgium's recent experience of political bargaining indicates that consensus on additional measures can be difficult to achieve.The third driver of today's rating action is the emergence of new risks which create greater uncertainty around the implications of banking sector contingent liabilities for the government's balance sheet. There is a significant risk that the dismantling of the Dexia group, and especially the run-off process of Dexia Credit Local (DCL), will result in increases in government debt metrics, although Moody's notes that the precise extent of any increase remains highly uncertain. Following the nationalisation of Dexia Bank Belgium (DBB) at a cost of EUR4 billion in October this year, the Belgian government's exposure to the group remains considerable through explicit debt guarantees and loan exposures to DCL through the now nationalised DBB. Combined, Moody's estimates these current exposures as representing close to 10% of the country's GDP.Furthermore, in conjunction with the French and Luxembourg governments, the Belgian government has agreed to guarantee a large share of the new funding issued by DCL for a period of 10 years. An agreement to that effect was announced in October, but the three governments have since re-opened discussions on the support package and are moving towards the implementation of a temporary guarantee scheme of six months with the maximum term of drawings and ceiling recalibrated to the liquidity needs of the period before putting the definitive guarantee in place. While Moody's says that the precise outcome of these discussions is difficult to predict at this stage, the original agreement and the funding needs of DCL suggest that the Belgian government's total exposures to the group will likely rise and, in Moody's views, could reach between 15% and 20% of GDP.Overall, Belgium's Aa3 rating weighs the mentioned risks against important strengths, such as the country's net international creditor status and the relatively healthy balance sheets of the corporate and household sectors. Moody's also recognises that the recent talks among the country's eight political parties have finally succeeded in resolving the longstanding political impasse. With the formation of a new government, the country may be in a better position to adopt more sustainable fiscal policies and to undertake structural reforms.Nevertheless, an immediate and major challenge facing the new government is the impact of weaker growth on the country's fiscal consolidation efforts and the resulting need for additional measures to meet the medium-term deficit and debt reduction targets.RATING OUTLOOKThe rating outlook is negative due to ongoing risks and uncertainties for public finances and economic growth in the context of the euro area debt crisis.WHAT COULD MOVE THE RATING UP/DOWNEconomic and fiscal policies paving the way for a substantial and sustainable trend of declining general government deficits with increasing primary surpluses that lead to a significant reversal in the public debt trajectory would be credit positive. Conversely, further intensification/crystallization of the risks constituting the three main rating drivers of today's rating action would be credit negative.
end
There is a great summary of the 29 largest banks that will fail.
special thanks to Jim Sinclair and Business Insider:
Jim Sinclair’s CommentaryYou really believe that QE to infinity is not coming?These Are The 29 Massive Banks That Could Take Down The Global Economy
end.
And this summary of USA data by John Williams:
Jim Sinclair’s CommentaryJohn Williams’ www.ShadowStats.com speaks the truth.- Consumer Financial Distress Hampered Retail Sales and Production
- Nonsensical Hype Over Regularly Mis-Adjusted Jobless Claims
- High Oil Prices Still Inflating Broad Economy
- November’s Annual Inflation: 3.4% (CPI-U), 3.8% (CPI-W), 11.0% (SGS)
- Gold Remains the Ultimate Hedge
Ambrose Evans Pritchard weighs in on the fight between France and Englandwhere England refused to go along with the EU accord on Dec 9:
(courtesy Ambrose Evans Pritchard)
In defence of the French
And now for our premiums to NAV for the funds I follow:
1. Central Fund of Canada: traded to a positive 2.8 percent to NAV in usa funds and a positive 2.6 % to NAV for Cdn funds. ( Dec 17.2011).2. Sprott silver fund (PSLV): Premium to NAV rose to 17.31% to NAV Dec 17/2011
3. Sprott gold fund (PHYS): premium to NAV fell to a 3.92% positive to NAV Dec 17.2011).
The crooks still refuse to do battle with Eric Sprott who is on the prowl tonight looking for cheap silver.Please note that the premium in the Sprott fund has now returned to previous normal high levels.The world awaits anxiously for Eric to acquire his metal.
Friday night saw the release of the COT report. First the gold COT:
Gold COT Report - Futures Large Speculators Commercial Total Long Short Spreading Long Short Long Short 184,468 33,965 29,626 152,357 338,574 366,451 402,165 Change from Prior Reporting Period -8,284 924 5,868 9,914 -5,369 7,498 1,423 Traders 156 71 72 50 50 239 166
Small Speculators
Long Short Open Interest
61,248 25,534 427,699
-2,755 3,320 4,743
non reportable positions Change from the previous reporting period
COT Gold Report - Positions as of Tuesday, December 13, 2011
Please note that this report is from Dec 6 through to Dec 13.2011. We had 2 days of raids in these figures.
Those speculators that have been long in gold succumbed to the attack and pitched 8284 contracts of their longs.Those speculators that have been short in gold surprisingly added 924 contracts to their short side.
Our commercials:
Those commercials that have been long in gold (and are close to the physical scene) liked what they saw and they added another 9914 contracts to their long side.
Those commercials that have been perennially short in gold covered only 5369 contracts of their shorts despite two days of the raid.
Our small specs:
Those small specs that have been long in gold pitched 2755 contracts from their long side as they thought a raid was coming and they guessed correctly.
Those small specs that have been short in gold, continued to add to the shorts to the tune of 3320 contracts and generally are happy campers this week. It is rare to have the small specs guess correctly.
Conclusion: certainly more bullish that last week and yet we had a huge raid. This is probably why we did not have many open interest fall in number as all long holders remained resolute.
And now for the silver COT:
Silver COT Report - Futures Large Speculators Commercial Total Long Short Spreading Long Short Long Short 25,572 11,905 17,176 35,629 55,934 78,377 85,015 2,361 1,324 1,112 136 -2,078 3,609 358 Traders 61 35 39 35 41 118 99
Small Speculators
Long Short Open Interest
19,934 13,296 98,311
-982 2,269 2,627
non reportable positions Change from the previous reporting period
COT Silver Report - Positions as of Tuesday, December 13, 2011
Those large specs that have been long in silver continued to add to their positions to the tune of 2361 contracts.
Those large specs that have been short in silver continued to pound the table and add to their shorts to the tune of 1,324 contracts.
Our commercials;
Those commercials that have been long in silver and close to the physical scene added a tiny 36 contracts to their longs.Those commercials that have been short in silver from the beginning of time covered 2,078 contracts from their short side.
Our small specs:
Those small specs that have been long in silver covered a tiny 982 contracts from their long side fearing a raid .Those small specs that have been short in silver added another 2,269 contracts to their short side.
The small specs got it right this week.
Conclusion: slightly more bullish and yet their raided. I guess this is the reason that the OI remained as the longs are quite resilient.
end/
Let us now see some of the major stories that will certainly have an impact of the price of gold/silver.In simplistic terms, we have 3 major problems facing the globe:
1. An insolvency problem created by too much paper debt of which each sovereign nation cannot repay.2. A physical problem in gold where central banks have loaned out their gold and cannot retrieve it without paying exorbitant prices for it. A default will no doubt occur as they will fail to deliver upon individuals or other sovereigns wishing to purchase this ancient metal of kings as a guard against a decline in paper assets.3. We have a silver problem, as banks have loaned out massive amounts of this metal. We will also have a default by the banks as investors seek this metal as a guard against the decline in value of paper assets.
The initial problem started with a USA housing crisis 2007. This morphed into a banking crisis in 2008.The USA exported this "virus" to Europe as the European banks bought oodles of this junk.By the close of 2008 we had two major centres, the USA and Europe engulfed in a banking mess.The USA central bank, the Fed, started to print money buying much of the debt (QE I, II, III..etc). Europe because of its structure cannot print to infinity as Germany stands against it.Thus by 2009-2010, the banking problem morphed into a sovereign European problem as the economy slowed down over there and tax revenues fell off a cliff. Their debt problem now became more pronounced as sovereign interest rates rose because of perceived risk of not repaying that debt.In 2011, the sovereign debt problem re-morphed back into a banking crisis as many of European banks gorged on sovereign debt making all of them insolvent.
We basically have 3 types of paper debt problems:
1. the actual sovereign debt of the nation that simply cannot be repaid.2. credit default swaps written by banks which are simply bets on whether the entity can survive financially.This derivative bet is in the trillion of dollars category.3. We also have a shadow bank industry where the banks take excess collateral and leverage this many times over to create profits. Now individuals are removing their assets which is causing a major contraction in the shadow banking sector. This is the de-leveraging we are witnessing today.
The key event that will likely trigger a default on the paper side of things will be the default on the sovereign debt of Italy. The Italian banks which have gorged themselves with massive amounts of Italian debt will default on their debt sending problems for its citizenry.The three major French banks, BNP Paribas, Societe Generale, and Credit Agricole have on their balance sheet massive amounts of Italian debt, coupled with other PIIGS nations. A default by these banks will trigger the end game.
Sovereign nations can do two things once this happens:
1. Do nothing and let a massive depression engulf each and every nation2. Print massive amounts of paper money buying the debt and causing a massive hyperinflation.
It is like picking your poison, the same result will happen.We believe that the probable scenario will be the second one where nations massively print.The hope is that the powers to be will be smart enough to revalue gold and say: let's start all over again.
The stories I give you relate to the above.
Yesterday, Fitch decides to revise the French outlook to negative which is one step before a downgrade.Notice how Fitch describes the situation: ""Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis."
(courtesy zero hedge)
Fitch Revises French Outlook To Negative
Submitted by Tyler Durden on 12/16/2011 13:03 -0500
We spoke to soon: it appears suicide is painless after all, as Fitch just changed the French outlook to negative.The punchline: "The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon." As for the line that will finally shut up France in its diplomatic spat with the UK: "Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis." And now, the market shifts its attention to non-French rating agencies, who will downgrade France in a "slightly" shorter timeframe... more like 2 hours according to some rumors.FITCH AFFIRMS FRANCE AT 'AAA'; OUTLOOK REVISED TO NEGATIVE
Fitch Ratings-London/Paris-16 December 2011: Fitch Ratings has today affirmed France's Long-term foreign and local currency Issuer Default Ratings (IDRs) as well as its senior debt at 'AAA'. Fitch has also simultaneously affirmed France's Country Ceiling at 'AAA' and the Short-term foreign currency rating at 'F1+'. The rating Outlook on the Long-term rating is revised to Negative from Stable.
The affirmation of France's 'AAA' status is underpinned by its wealthy and diversified economy, effective political, civil and social institutions and its financing flexibility reflecting its status as a large benchmark euro area sovereign issuer. In addition, the French government has adopted several measures to strengthen the creditability of its fiscal consolidation effort.
Nonetheless, government debt to GDP is currently projected by Fitch under its baseline scenario to peak in 2014 at around 92%, higher than any other 'AAA'-rated sovereign with the exception of the UK and US and significantly higher than other 'AAA'-rated Euro Area peers.
France's sovereign credit profile benefits from a broad and stable tax base - the volatility of the revenue to GDP ratio is half the 'AAA' median - and the interest service burden is moderate and broadly comparable with other 'AAA's.Under Fitch's baseline scenario that does not incorporate the realisation of substantial fiscal liabilities arising from the Eurozone crisis or other adverse shocks, even such an elevated level of government indebtedness is consistent with France retaining its 'AAA' status assuming that government debt is firmly placed on a downward path from 2013-14. The Negative Outlook on the French rating reflects Fitch's view that the likelihood of the realisation of contingent liabilities, although still not our base-case assumption, has materially increased, as has the risk of a much worse than expected economic and consequently fiscal outturn.
Similar to other highly rated peers, France faces medium and long-term challenges to improve the functioning of the labour market and enhance international competitiveness. Fitch recognises that the authorities have adopted measures to address these weaknesses, though a more radical structural reform agenda would underpin greater confidence in the underlying potential growth rate of the French economy. However, corporate and especially household indebtedness is moderate compared to some 'AAA' peers, notably the UK and US, while foreign indebtedness remains modest, albeit rising.
The Negative Outlook is prompted by the heightened risk of contingent liabilities to the French state arising from the worsening economic and financial situation across the Eurozone, as reflected in the Rating Watch Negative placed on the sovereign ratings of several Euro Area Member States (EAMS) on 16 December 2011. As Fitch commented in its report on 23 November, 'French Public Finances', the fiscal space to absorb further adverse shocks without undermining its 'AAA' status has largely been exhausted.
The intensification of the Eurozone crisis since July constitutes a significant negative shock to the region and to France's economy and the stability of its financial sector. Since May, when Fitch last affirmed France's 'AAA' status, its forecast for economic growth in 2012 has been cut from 2.1% to 0.7% with around one-in-four chance of outright contraction. Despite the additional fiscal measures announced in August and November equivalent to around 1% of GDP, further measures are likely to be required in order to cut the deficit to 3% of GDP by 2013 and stabilise government debt below 90% of GDP in light of the worsening economic and financial outlook.
In Fitch's opinion, the commitments made by leaders at the EU Summit on 9-10 December and by the ECB were not sufficient to put in place a fully credible financial firewall to prevent a self-fulfilling liquidity and even solvency crisis for some non-AAA euro area sovereigns. In the absence of a 'comprehensive solution', the Eurozone crisis will persist and likely be punctuated by episodes of severe financial market volatility.
Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis. It has a larger structural budget deficit and higher government debt burden relative to Euro Area 'AAA' peers. Moreover, relative to non-Euro Area 'AAA' peers, notably the US ('AAA'/Negative Outlook) and the UK ('AAA'/Stable Outlook), the risk from contingent liabilities from an intensification of the Eurozone crisis is greater in light of its commitments to the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), as well as indirectly from French banks that are less strong than previously assessed as reflected in recent negative rating actions by Fitch.
The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. The triggers that would likely prompt a rating downgrade are as follows:
- Increased likelihood that contingent liabilities from an intensification of the Eurozone crisis will be crystallised onto the French state balance sheet.
- Material slippage from the fiscal targets that the government has set itself, notably the aim of stabilising the government debt to GDP ratio from 2013 and placing it on a firm downward path towards levels that would increase the 'fiscal space' necessary to absorb adverse shocks.
- Weaker than expected economic performance that prompts a re-assessment of France's medium to long-term growth potential.
Conversely, economic and fiscal performance in line with Fitch's baseline expectations, as set out in the Special Report, French Public Finances (23 November 2011), along with the resolution of the Eurozone crisis would likely result in the stabilisation of the rating Outlook.
In the absence of a material adverse shock, most likely associated with dramatic worsening of the Eurozone crisis, Fitch would not expect to resolve the Negative Outlook until 2013.
Then Fitch decided to downgrade many of European sovereign nation debt:
(courtesy zero hedge)
And The Euro Downgrade Hits Just Keep On Coming, This Time Fitch
Submitted by Tyler Durden on 12/16/2011 12:48 -0500
Never a dull Friday when dealing with continents that have a terminal solvency, pardon, liquidity crisis.- FITCH PLACES BELGIUM, SPAIN, ITALY, IRELAND, SLOVENIA AND CYPRUS ON RATING WATCH NEGATIVE
Shockingly, French-owned Fitch has nothing to say about... France.Full statement:FITCH PLACES BELGIUM, SPAIN, SLOVENIA, ITALY, IRELAND AND CYPRUS ON RATING WATCH NEGATIVE
Fitch Ratings-London-16 December 2011: Fitch Ratings-London-16 December 2011:
Fitch Ratings has placed the ratings of all investment grade rated eurozone sovereigns and their debt with Negative Outlook onto Rating Watch Negative (RWN). The euro area country ceiling of 'AAA' is unaffected. The rating actions are as follows:
- Belgium 'AA+'/'RWN from 'AA+'/Negative Outlook ('F1+' Unaffected)
- Spain 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Slovenia 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Italy 'A+'/'F1'/RWN from 'A+'/'F1'/Negative Outlook
- Ireland 'BBB+'/'F2'/RWN from 'BBB+'/'F2'/Negative Outlook
- Cyprus 'BBB'/'F3'/RWN from 'BBB'/'F3'/Negative Outlook
The RWN indicates that the above ratings are under active review and are subject to a heightened probability of downgrade in the near-term. Fitch expects to complete the review by the end of January 2012. If the review concludes that a downgrade is warranted, it is likely be limited to one or two notches.
Following the EU Summit on 9-10 December, Fitch has concluded that a 'comprehensive solution' to the eurozone crisis is technically and politically beyond reach. Despite positive commitments by EU leaders at the Summit, notably the decision to accelerate the creation of the European Stability Mechanism (ESM) and to place less emphasis on private sector involvement (PSI), the concerns held by Fitch prior to the Summit remain pressing and have not been materially eased by the Summit outcome (also see, 'Summit Does Little To Ease Pressure on eurozone Sovereign Debt,' 12 December). Of particular concern is the absence of a credible financial backstop. In Fitch's opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States (EAMS).
Fitch recognises that the policy authorities in all of the countries with sovereign ratings subject to review have embarked upon significant fiscal consolidation and structural reform and these efforts will be taken into account in the review. However, the systemic nature of the eurozone crisis is having a profoundly adverse effect on economic and financial stability across the region and for some EAMS poses near-term risks that are beginning to dominate the sovereign-specific risk fundamentals. Today's announcement is focused on those sovereigns that are potentially vulnerable to the worsening external economic and financial environment as indicated by previous negative rating actions and rating Outlooks.
The RWN is prompted by the following risk factors:
- In the absence of greater clarity on the ultimate structure of a fundamentally reformed Economic and Monetary Union and the recognition by political leaders of the potential for an EAMS to leave the eurozone, Fitch will review its assessment of the balance of risks associated with eurozone membership, especially for sovereigns potentially subject to funding stresses.
- While acknowledging the extraordinary measures the ECB has adopted to provide liquidity to the European banking sector, its continued reluctance to countenance a similar degree of support to its sovereign shareholders undermines the efforts by EAMS to put in place a credible financial 'firewall' against contagion and self-fulfilling liquidity and even solvency crises.
- The intensification of the eurozone crisis since July constitutes a significant negative shock to the region's economy and the stability of its financial sector with potentially adverse consequences for sovereign credit profiles across the region, most immediately for those placed on RWN today.
- In the absence of a 'comprehensive solution', the crisis will persist and likely be punctuated by episodes of severe financial market volatility that is a particular source of risk to the sovereign governments of those countries with levels of public debt, contingent liabilities and fiscal and financial sector financing needs that are high relative to rating peers.
In light of these heightened risks, Fitch will re-consider the assumptions and analysis that underpin its current sovereign ratings of Belgium, Slovenia, Spain, Italy, Ireland and Cyprus to ensure that the above risk factors are appropriately reflected in its sovereign ratings in accordance with its sovereign rating methodology.
The focus on investment grade rated sovereign governments with Negative Outlooks reflects previous research and analysis that indicates specific weaknesses that render them especially vulnerable to the intensification of the eurozone crisis.
However, the outcome of the review will also incorporate Fitch's current assessment of the strength of their underlying economic and credit fundamentals as reflected in their current sovereign ratings as well as recent policy measures adopted at the national level.
end.
Late last night it was Moody's who turned the screws on Belgium by knocking its credit rating two notches due to continuing problems with its financing of Dexia and also the fact that it has no government:
(COURTESY ZERO HEDGE)
Moody's Takes S&P's Place - Downgrades Belgium By Two Notches To Aa3
Submitted by Tyler Durden on 12/16/2011 16:47 -0500
It appears Moodys is not having server issues.- BELGIUM'S CREDIT RATINGS CUT 2 LEVELS TO Aa3 BY MOODY'S
full note:Moody's downgrades Belgium's credit ratings to Aa3, negative outlookShort-term ratings affirmed at Prime-1; concludes review initiated 07 OctoberFrankfurt am Main, December 16, 2011 -- Moody's Investors Service has today downgraded Belgium's local- and foreign-currency government bond ratings by two notches to Aa3 from Aa1 with a negative outlook, while affirming its short-term ratings at Prime-1. Today's rating action concludes Moody's review for downgrade of Belgium's sovereign debt ratings, which was initiated on 07 October 2011.The main drivers that prompted the downgrade are:(1) Heightened risks posed by the sustained deterioration in funding conditions for euro area countries with relatively high levels of public debt, like Belgium; and the potential adverse impact these risks may have on the Belgian government's fiscal consolidation and debt-reduction efforts.(2) Increasing medium-term risks to economic growth for the small and very open Belgian economy due to the need for ongoing deleveraging and fiscal restriction in the euro area. This is likely to add to the challenges of placing the country's public debt on a downward trajectory.(3) New risks and uncertainties for the Belgian government's balance sheet stemming from the banking sector, particularly in connection with the contingent liabilities emanating from the run-off process of Dexia Credit Local (DCL).RATIONALE FOR DOWNGRADEThe first driver underlying Moody's decision to downgrade Belgium's debt rating is the fragile sentiment surrounding sovereign risk in the euro area. The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future. It translates into heightened potential for funding stress for euro area countries with high public debt burdens and refinancing needs like Belgium. Sustained increases in funding costs could also significantly complicate the reduction of general government deficit ratios to stabilise and reverse Belgium's high public debt in relation to nominal GDP -- currently close to 100%. Moreover, the probability of further more serious confidence shocks on the euro area bond markets -- up to and including sudden stops in funding - have risen recently, albeit from a very low base.The second driver of Moody's rating decision is the significant increase in the medium-term risks to economic growth, over and above any normal cyclical adjustment, in the small and very open Belgian economy. This is in part driven by the deleveraging underway across the euro area financial, corporate, household and government sectors, and is negatively affecting Belgium's export demand. Furthermore, uncertainties about the euro area debt crisis (management) are continuing to negatively impact the funding conditions for banks with potentially negative consequences for domestic economic activity. The further weakening economic growth outlook also complicates the government's ability to achieve its medium-term fiscal consolidation plans and may necessitate additional fiscal measures beyond the roughly 11 to 16 EUR billion yearly planned for the coming three years. This could further weigh on economic growth. Belgium's recent experience of political bargaining indicates that consensus on additional measures can be difficult to achieve.The third driver of today's rating action is the emergence of new risks which create greater uncertainty around the implications of banking sector contingent liabilities for the government's balance sheet. There is a significant risk that the dismantling of the Dexia group, and especially the run-off process of Dexia Credit Local (DCL), will result in increases in government debt metrics, although Moody's notes that the precise extent of any increase remains highly uncertain. Following the nationalisation of Dexia Bank Belgium (DBB) at a cost of EUR4 billion in October this year, the Belgian government's exposure to the group remains considerable through explicit debt guarantees and loan exposures to DCL through the now nationalised DBB. Combined, Moody's estimates these current exposures as representing close to 10% of the country's GDP.Furthermore, in conjunction with the French and Luxembourg governments, the Belgian government has agreed to guarantee a large share of the new funding issued by DCL for a period of 10 years. An agreement to that effect was announced in October, but the three governments have since re-opened discussions on the support package and are moving towards the implementation of a temporary guarantee scheme of six months with the maximum term of drawings and ceiling recalibrated to the liquidity needs of the period before putting the definitive guarantee in place. While Moody's says that the precise outcome of these discussions is difficult to predict at this stage, the original agreement and the funding needs of DCL suggest that the Belgian government's total exposures to the group will likely rise and, in Moody's views, could reach between 15% and 20% of GDP.Overall, Belgium's Aa3 rating weighs the mentioned risks against important strengths, such as the country's net international creditor status and the relatively healthy balance sheets of the corporate and household sectors. Moody's also recognises that the recent talks among the country's eight political parties have finally succeeded in resolving the longstanding political impasse. With the formation of a new government, the country may be in a better position to adopt more sustainable fiscal policies and to undertake structural reforms.Nevertheless, an immediate and major challenge facing the new government is the impact of weaker growth on the country's fiscal consolidation efforts and the resulting need for additional measures to meet the medium-term deficit and debt reduction targets.RATING OUTLOOKThe rating outlook is negative due to ongoing risks and uncertainties for public finances and economic growth in the context of the euro area debt crisis.WHAT COULD MOVE THE RATING UP/DOWNEconomic and fiscal policies paving the way for a substantial and sustainable trend of declining general government deficits with increasing primary surpluses that lead to a significant reversal in the public debt trajectory would be credit positive. Conversely, further intensification/crystallization of the risks constituting the three main rating drivers of today's rating action would be credit negative.
end
There is a great summary of the 29 largest banks that will fail.
special thanks to Jim Sinclair and Business Insider:
Jim Sinclair’s CommentaryYou really believe that QE to infinity is not coming?These Are The 29 Massive Banks That Could Take Down The Global Economy
end.
And this summary of USA data by John Williams:
Jim Sinclair’s CommentaryJohn Williams’ www.ShadowStats.com speaks the truth.- Consumer Financial Distress Hampered Retail Sales and Production
- Nonsensical Hype Over Regularly Mis-Adjusted Jobless Claims
- High Oil Prices Still Inflating Broad Economy
- November’s Annual Inflation: 3.4% (CPI-U), 3.8% (CPI-W), 11.0% (SGS)
- Gold Remains the Ultimate Hedge
Ambrose Evans Pritchard weighs in on the fight between France and Englandwhere England refused to go along with the EU accord on Dec 9:
(courtesy Ambrose Evans Pritchard)
In defence of the French
And now for our premiums to NAV for the funds I follow:
1. Central Fund of Canada: traded to a positive 2.8 percent to NAV in usa funds and a positive 2.6 % to NAV for Cdn funds. ( Dec 17.2011).
2. Sprott silver fund (PSLV): Premium to NAV rose to 17.31% to NAV Dec 17/2011
3. Sprott gold fund (PHYS): premium to NAV fell to a 3.92% positive to NAV Dec 17.2011).
3. Sprott gold fund (PHYS): premium to NAV fell to a 3.92% positive to NAV Dec 17.2011).
The crooks still refuse to do battle with Eric Sprott who is on the prowl tonight looking for cheap silver.
Please note that the premium in the Sprott fund has now returned to previous normal high levels.
The world awaits anxiously for Eric to acquire his metal.
Friday night saw the release of the COT report. First the gold COT:
Gold COT Report - Futures | ||||||
Large Speculators | Commercial | Total | ||||
Long | Short | Spreading | Long | Short | Long | Short |
184,468 | 33,965 | 29,626 | 152,357 | 338,574 | 366,451 | 402,165 |
Change from Prior Reporting Period | ||||||
-8,284 | 924 | 5,868 | 9,914 | -5,369 | 7,498 | 1,423 |
Traders | ||||||
156 | 71 | 72 | 50 | 50 | 239 | 166 |
Small Speculators | ||||||
Long | Short | Open Interest | ||||
61,248 | 25,534 | 427,699 | ||||
-2,755 | 3,320 | 4,743 | ||||
non reportable positions | Change from the previous reporting period | |||||
COT Gold Report - Positions as of | Tuesday, December 13, 2011 | |||||
Please note that this report is from Dec 6 through to Dec 13.2011. We had 2 days of raids in these figures.
Those speculators that have been long in gold succumbed to the attack and pitched 8284 contracts of their longs.
Those speculators that have been short in gold surprisingly added 924 contracts to their short side.
Our commercials:
Those commercials that have been long in gold (and are close to the physical scene) liked what they saw and they added another 9914 contracts to their long side.
Those commercials that have been perennially short in gold covered only 5369 contracts of their shorts despite two days of the raid.
Our small specs:
Those small specs that have been long in gold pitched 2755 contracts from their long side as they thought a raid was coming and they guessed correctly.
Those small specs that have been short in gold, continued to add to the shorts to the tune of 3320 contracts and generally are happy campers this week. It is rare to have the small specs guess correctly.
Conclusion: certainly more bullish that last week and yet we had a huge raid. This is probably why we did not have many open interest fall in number as all long holders remained resolute.
And now for the silver COT:
Silver COT Report - Futures | ||||||
Large Speculators | Commercial | Total | ||||
Long | Short | Spreading | Long | Short | Long | Short |
25,572 | 11,905 | 17,176 | 35,629 | 55,934 | 78,377 | 85,015 |
2,361 | 1,324 | 1,112 | 136 | -2,078 | 3,609 | 358 |
Traders | ||||||
61 | 35 | 39 | 35 | 41 | 118 | 99 |
Small Speculators | ||||||
Long | Short | Open Interest | ||||
19,934 | 13,296 | 98,311 | ||||
-982 | 2,269 | 2,627 | ||||
non reportable positions | Change from the previous reporting period | |||||
COT Silver Report - Positions as of | Tuesday, December 13, 2011 | |||||
Those large specs that have been long in silver continued to add to their positions to the tune of 2361 contracts.
Those large specs that have been short in silver continued to pound the table and add to their shorts to the tune of 1,324 contracts.
Our commercials;
Those commercials that have been long in silver and close to the physical scene added a tiny 36 contracts to their longs.
Those commercials that have been short in silver from the beginning of time covered 2,078 contracts from their short side.
Our small specs:
Those small specs that have been long in silver covered a tiny 982 contracts from their long side fearing a raid .
Those small specs that have been short in silver added another 2,269 contracts to their short side.
The small specs got it right this week.
Conclusion: slightly more bullish and yet their raided. I guess this is the reason that the OI remained as the longs are quite resilient.
end/
Let us now see some of the major stories that will certainly have an impact of the price of gold/silver.
In simplistic terms, we have 3 major problems facing the globe:
1. An insolvency problem created by too much paper debt of which each sovereign nation cannot repay.
2. A physical problem in gold where central banks have loaned out their gold and cannot retrieve it without paying exorbitant prices for it. A default will no doubt occur as they will fail to deliver upon individuals or other sovereigns wishing to purchase this ancient metal of kings as a guard against a decline in paper assets.
3. We have a silver problem, as banks have loaned out massive amounts of this metal. We will also have a default by the banks as investors seek this metal as a guard against the decline in value of paper assets.
The initial problem started with a USA housing crisis 2007. This morphed into a banking crisis in 2008.
The USA exported this "virus" to Europe as the European banks bought oodles of this junk.
By the close of 2008 we had two major centres, the USA and Europe engulfed in a banking mess.
The USA central bank, the Fed, started to print money buying much of the debt (QE I, II, III..etc).
Europe because of its structure cannot print to infinity as Germany stands against it.
Thus by 2009-2010, the banking problem morphed into a sovereign European problem as the economy slowed down over there and tax revenues fell off a cliff. Their debt problem now became more pronounced as sovereign interest rates rose because of perceived risk of not repaying that debt.
In 2011, the sovereign debt problem re-morphed back into a banking crisis as many of European banks gorged on sovereign debt making all of them insolvent.
We basically have 3 types of paper debt problems:
1. the actual sovereign debt of the nation that simply cannot be repaid.
2. credit default swaps written by banks which are simply bets on whether the entity can survive financially.
This derivative bet is in the trillion of dollars category.
3. We also have a shadow bank industry where the banks take excess collateral and leverage this many times over to create profits. Now individuals are removing their assets which is causing a major contraction in the shadow banking sector. This is the de-leveraging we are witnessing today.
The key event that will likely trigger a default on the paper side of things will be the default on the sovereign debt of Italy. The Italian banks which have gorged themselves with massive amounts of Italian debt will default on their debt sending problems for its citizenry.
The three major French banks, BNP Paribas, Societe Generale, and Credit Agricole have on their balance sheet massive amounts of Italian debt, coupled with other PIIGS nations. A default by these banks will trigger the end game.
Sovereign nations can do two things once this happens:
1. Do nothing and let a massive depression engulf each and every nation
2. Print massive amounts of paper money buying the debt and causing a massive hyperinflation.
It is like picking your poison, the same result will happen.
We believe that the probable scenario will be the second one where nations massively print.
The hope is that the powers to be will be smart enough to revalue gold and say: let's start all over again.
The stories I give you relate to the above.
Yesterday, Fitch decides to revise the French outlook to negative which is one step before a downgrade.
Notice how Fitch describes the situation: ""Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis."
(courtesy zero hedge)
Fitch Revises French Outlook To Negative
We spoke to soon: it appears suicide is painless after all, as Fitch just changed the French outlook to negative.The punchline: "The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon." As for the line that will finally shut up France in its diplomatic spat with the UK: "Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis." And now, the market shifts its attention to non-French rating agencies, who will downgrade France in a "slightly" shorter timeframe... more like 2 hours according to some rumors.
FITCH AFFIRMS FRANCE AT 'AAA'; OUTLOOK REVISED TO NEGATIVE
Fitch Ratings-London/Paris-16 December 2011: Fitch Ratings has today affirmed France's Long-term foreign and local currency Issuer Default Ratings (IDRs) as well as its senior debt at 'AAA'. Fitch has also simultaneously affirmed France's Country Ceiling at 'AAA' and the Short-term foreign currency rating at 'F1+'. The rating Outlook on the Long-term rating is revised to Negative from Stable.
The affirmation of France's 'AAA' status is underpinned by its wealthy and diversified economy, effective political, civil and social institutions and its financing flexibility reflecting its status as a large benchmark euro area sovereign issuer. In addition, the French government has adopted several measures to strengthen the creditability of its fiscal consolidation effort.
Nonetheless, government debt to GDP is currently projected by Fitch under its baseline scenario to peak in 2014 at around 92%, higher than any other 'AAA'-rated sovereign with the exception of the UK and US and significantly higher than other 'AAA'-rated Euro Area peers.
France's sovereign credit profile benefits from a broad and stable tax base - the volatility of the revenue to GDP ratio is half the 'AAA' median - and the interest service burden is moderate and broadly comparable with other 'AAA's.
Fitch Ratings-London/Paris-16 December 2011: Fitch Ratings has today affirmed France's Long-term foreign and local currency Issuer Default Ratings (IDRs) as well as its senior debt at 'AAA'. Fitch has also simultaneously affirmed France's Country Ceiling at 'AAA' and the Short-term foreign currency rating at 'F1+'. The rating Outlook on the Long-term rating is revised to Negative from Stable.
The affirmation of France's 'AAA' status is underpinned by its wealthy and diversified economy, effective political, civil and social institutions and its financing flexibility reflecting its status as a large benchmark euro area sovereign issuer. In addition, the French government has adopted several measures to strengthen the creditability of its fiscal consolidation effort.
Nonetheless, government debt to GDP is currently projected by Fitch under its baseline scenario to peak in 2014 at around 92%, higher than any other 'AAA'-rated sovereign with the exception of the UK and US and significantly higher than other 'AAA'-rated Euro Area peers.
France's sovereign credit profile benefits from a broad and stable tax base - the volatility of the revenue to GDP ratio is half the 'AAA' median - and the interest service burden is moderate and broadly comparable with other 'AAA's.
Under Fitch's baseline scenario that does not incorporate the realisation of substantial fiscal liabilities arising from the Eurozone crisis or other adverse shocks, even such an elevated level of government indebtedness is consistent with France retaining its 'AAA' status assuming that government debt is firmly placed on a downward path from 2013-14. The Negative Outlook on the French rating reflects Fitch's view that the likelihood of the realisation of contingent liabilities, although still not our base-case assumption, has materially increased, as has the risk of a much worse than expected economic and consequently fiscal outturn.
Similar to other highly rated peers, France faces medium and long-term challenges to improve the functioning of the labour market and enhance international competitiveness. Fitch recognises that the authorities have adopted measures to address these weaknesses, though a more radical structural reform agenda would underpin greater confidence in the underlying potential growth rate of the French economy. However, corporate and especially household indebtedness is moderate compared to some 'AAA' peers, notably the UK and US, while foreign indebtedness remains modest, albeit rising.
The Negative Outlook is prompted by the heightened risk of contingent liabilities to the French state arising from the worsening economic and financial situation across the Eurozone, as reflected in the Rating Watch Negative placed on the sovereign ratings of several Euro Area Member States (EAMS) on 16 December 2011. As Fitch commented in its report on 23 November, 'French Public Finances', the fiscal space to absorb further adverse shocks without undermining its 'AAA' status has largely been exhausted.
The intensification of the Eurozone crisis since July constitutes a significant negative shock to the region and to France's economy and the stability of its financial sector. Since May, when Fitch last affirmed France's 'AAA' status, its forecast for economic growth in 2012 has been cut from 2.1% to 0.7% with around one-in-four chance of outright contraction. Despite the additional fiscal measures announced in August and November equivalent to around 1% of GDP, further measures are likely to be required in order to cut the deficit to 3% of GDP by 2013 and stabilise government debt below 90% of GDP in light of the worsening economic and financial outlook.
In Fitch's opinion, the commitments made by leaders at the EU Summit on 9-10 December and by the ECB were not sufficient to put in place a fully credible financial firewall to prevent a self-fulfilling liquidity and even solvency crisis for some non-AAA euro area sovereigns. In the absence of a 'comprehensive solution', the Eurozone crisis will persist and likely be punctuated by episodes of severe financial market volatility.
Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis. It has a larger structural budget deficit and higher government debt burden relative to Euro Area 'AAA' peers. Moreover, relative to non-Euro Area 'AAA' peers, notably the US ('AAA'/Negative Outlook) and the UK ('AAA'/Stable Outlook), the risk from contingent liabilities from an intensification of the Eurozone crisis is greater in light of its commitments to the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), as well as indirectly from French banks that are less strong than previously assessed as reflected in recent negative rating actions by Fitch.
The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. The triggers that would likely prompt a rating downgrade are as follows:
- Increased likelihood that contingent liabilities from an intensification of the Eurozone crisis will be crystallised onto the French state balance sheet.
- Material slippage from the fiscal targets that the government has set itself, notably the aim of stabilising the government debt to GDP ratio from 2013 and placing it on a firm downward path towards levels that would increase the 'fiscal space' necessary to absorb adverse shocks.
- Weaker than expected economic performance that prompts a re-assessment of France's medium to long-term growth potential.
Conversely, economic and fiscal performance in line with Fitch's baseline expectations, as set out in the Special Report, French Public Finances (23 November 2011), along with the resolution of the Eurozone crisis would likely result in the stabilisation of the rating Outlook.
In the absence of a material adverse shock, most likely associated with dramatic worsening of the Eurozone crisis, Fitch would not expect to resolve the Negative Outlook until 2013.
Similar to other highly rated peers, France faces medium and long-term challenges to improve the functioning of the labour market and enhance international competitiveness. Fitch recognises that the authorities have adopted measures to address these weaknesses, though a more radical structural reform agenda would underpin greater confidence in the underlying potential growth rate of the French economy. However, corporate and especially household indebtedness is moderate compared to some 'AAA' peers, notably the UK and US, while foreign indebtedness remains modest, albeit rising.
The Negative Outlook is prompted by the heightened risk of contingent liabilities to the French state arising from the worsening economic and financial situation across the Eurozone, as reflected in the Rating Watch Negative placed on the sovereign ratings of several Euro Area Member States (EAMS) on 16 December 2011. As Fitch commented in its report on 23 November, 'French Public Finances', the fiscal space to absorb further adverse shocks without undermining its 'AAA' status has largely been exhausted.
The intensification of the Eurozone crisis since July constitutes a significant negative shock to the region and to France's economy and the stability of its financial sector. Since May, when Fitch last affirmed France's 'AAA' status, its forecast for economic growth in 2012 has been cut from 2.1% to 0.7% with around one-in-four chance of outright contraction. Despite the additional fiscal measures announced in August and November equivalent to around 1% of GDP, further measures are likely to be required in order to cut the deficit to 3% of GDP by 2013 and stabilise government debt below 90% of GDP in light of the worsening economic and financial outlook.
In Fitch's opinion, the commitments made by leaders at the EU Summit on 9-10 December and by the ECB were not sufficient to put in place a fully credible financial firewall to prevent a self-fulfilling liquidity and even solvency crisis for some non-AAA euro area sovereigns. In the absence of a 'comprehensive solution', the Eurozone crisis will persist and likely be punctuated by episodes of severe financial market volatility.
Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis. It has a larger structural budget deficit and higher government debt burden relative to Euro Area 'AAA' peers. Moreover, relative to non-Euro Area 'AAA' peers, notably the US ('AAA'/Negative Outlook) and the UK ('AAA'/Stable Outlook), the risk from contingent liabilities from an intensification of the Eurozone crisis is greater in light of its commitments to the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), as well as indirectly from French banks that are less strong than previously assessed as reflected in recent negative rating actions by Fitch.
The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. The triggers that would likely prompt a rating downgrade are as follows:
- Increased likelihood that contingent liabilities from an intensification of the Eurozone crisis will be crystallised onto the French state balance sheet.
- Material slippage from the fiscal targets that the government has set itself, notably the aim of stabilising the government debt to GDP ratio from 2013 and placing it on a firm downward path towards levels that would increase the 'fiscal space' necessary to absorb adverse shocks.
- Weaker than expected economic performance that prompts a re-assessment of France's medium to long-term growth potential.
Conversely, economic and fiscal performance in line with Fitch's baseline expectations, as set out in the Special Report, French Public Finances (23 November 2011), along with the resolution of the Eurozone crisis would likely result in the stabilisation of the rating Outlook.
In the absence of a material adverse shock, most likely associated with dramatic worsening of the Eurozone crisis, Fitch would not expect to resolve the Negative Outlook until 2013.
Then Fitch decided to downgrade many of European sovereign nation debt:
(courtesy zero hedge)
And The Euro Downgrade Hits Just Keep On Coming, This Time Fitch
Never a dull Friday when dealing with continents that have a terminal solvency, pardon, liquidity crisis.
- FITCH PLACES BELGIUM, SPAIN, ITALY, IRELAND, SLOVENIA AND CYPRUS ON RATING WATCH NEGATIVE
Shockingly, French-owned Fitch has nothing to say about... France.
Full statement:
FITCH PLACES BELGIUM, SPAIN, SLOVENIA, ITALY, IRELAND AND CYPRUS ON RATING WATCH NEGATIVE
Fitch Ratings-London-16 December 2011: Fitch Ratings-London-16 December 2011:
Fitch Ratings has placed the ratings of all investment grade rated eurozone sovereigns and their debt with Negative Outlook onto Rating Watch Negative (RWN). The euro area country ceiling of 'AAA' is unaffected. The rating actions are as follows:
- Belgium 'AA+'/'RWN from 'AA+'/Negative Outlook ('F1+' Unaffected)
- Spain 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Slovenia 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Italy 'A+'/'F1'/RWN from 'A+'/'F1'/Negative Outlook
- Ireland 'BBB+'/'F2'/RWN from 'BBB+'/'F2'/Negative Outlook
- Cyprus 'BBB'/'F3'/RWN from 'BBB'/'F3'/Negative Outlook
The RWN indicates that the above ratings are under active review and are subject to a heightened probability of downgrade in the near-term. Fitch expects to complete the review by the end of January 2012. If the review concludes that a downgrade is warranted, it is likely be limited to one or two notches.
Following the EU Summit on 9-10 December, Fitch has concluded that a 'comprehensive solution' to the eurozone crisis is technically and politically beyond reach. Despite positive commitments by EU leaders at the Summit, notably the decision to accelerate the creation of the European Stability Mechanism (ESM) and to place less emphasis on private sector involvement (PSI), the concerns held by Fitch prior to the Summit remain pressing and have not been materially eased by the Summit outcome (also see, 'Summit Does Little To Ease Pressure on eurozone Sovereign Debt,' 12 December). Of particular concern is the absence of a credible financial backstop. In Fitch's opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States (EAMS).
Fitch recognises that the policy authorities in all of the countries with sovereign ratings subject to review have embarked upon significant fiscal consolidation and structural reform and these efforts will be taken into account in the review. However, the systemic nature of the eurozone crisis is having a profoundly adverse effect on economic and financial stability across the region and for some EAMS poses near-term risks that are beginning to dominate the sovereign-specific risk fundamentals. Today's announcement is focused on those sovereigns that are potentially vulnerable to the worsening external economic and financial environment as indicated by previous negative rating actions and rating Outlooks.
The RWN is prompted by the following risk factors:
- In the absence of greater clarity on the ultimate structure of a fundamentally reformed Economic and Monetary Union and the recognition by political leaders of the potential for an EAMS to leave the eurozone, Fitch will review its assessment of the balance of risks associated with eurozone membership, especially for sovereigns potentially subject to funding stresses.
- While acknowledging the extraordinary measures the ECB has adopted to provide liquidity to the European banking sector, its continued reluctance to countenance a similar degree of support to its sovereign shareholders undermines the efforts by EAMS to put in place a credible financial 'firewall' against contagion and self-fulfilling liquidity and even solvency crises.
- The intensification of the eurozone crisis since July constitutes a significant negative shock to the region's economy and the stability of its financial sector with potentially adverse consequences for sovereign credit profiles across the region, most immediately for those placed on RWN today.
- In the absence of a 'comprehensive solution', the crisis will persist and likely be punctuated by episodes of severe financial market volatility that is a particular source of risk to the sovereign governments of those countries with levels of public debt, contingent liabilities and fiscal and financial sector financing needs that are high relative to rating peers.
In light of these heightened risks, Fitch will re-consider the assumptions and analysis that underpin its current sovereign ratings of Belgium, Slovenia, Spain, Italy, Ireland and Cyprus to ensure that the above risk factors are appropriately reflected in its sovereign ratings in accordance with its sovereign rating methodology.
The focus on investment grade rated sovereign governments with Negative Outlooks reflects previous research and analysis that indicates specific weaknesses that render them especially vulnerable to the intensification of the eurozone crisis.
However, the outcome of the review will also incorporate Fitch's current assessment of the strength of their underlying economic and credit fundamentals as reflected in their current sovereign ratings as well as recent policy measures adopted at the national level.
Fitch Ratings-London-16 December 2011: Fitch Ratings-London-16 December 2011:
Fitch Ratings has placed the ratings of all investment grade rated eurozone sovereigns and their debt with Negative Outlook onto Rating Watch Negative (RWN). The euro area country ceiling of 'AAA' is unaffected. The rating actions are as follows:
- Belgium 'AA+'/'RWN from 'AA+'/Negative Outlook ('F1+' Unaffected)
- Spain 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Slovenia 'AA-'/'F1+'/RWN from 'AA-'/'F1+'/Negative Outlook
- Italy 'A+'/'F1'/RWN from 'A+'/'F1'/Negative Outlook
- Ireland 'BBB+'/'F2'/RWN from 'BBB+'/'F2'/Negative Outlook
- Cyprus 'BBB'/'F3'/RWN from 'BBB'/'F3'/Negative Outlook
The RWN indicates that the above ratings are under active review and are subject to a heightened probability of downgrade in the near-term. Fitch expects to complete the review by the end of January 2012. If the review concludes that a downgrade is warranted, it is likely be limited to one or two notches.
Following the EU Summit on 9-10 December, Fitch has concluded that a 'comprehensive solution' to the eurozone crisis is technically and politically beyond reach. Despite positive commitments by EU leaders at the Summit, notably the decision to accelerate the creation of the European Stability Mechanism (ESM) and to place less emphasis on private sector involvement (PSI), the concerns held by Fitch prior to the Summit remain pressing and have not been materially eased by the Summit outcome (also see, 'Summit Does Little To Ease Pressure on eurozone Sovereign Debt,' 12 December). Of particular concern is the absence of a credible financial backstop. In Fitch's opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States (EAMS).
Fitch recognises that the policy authorities in all of the countries with sovereign ratings subject to review have embarked upon significant fiscal consolidation and structural reform and these efforts will be taken into account in the review. However, the systemic nature of the eurozone crisis is having a profoundly adverse effect on economic and financial stability across the region and for some EAMS poses near-term risks that are beginning to dominate the sovereign-specific risk fundamentals. Today's announcement is focused on those sovereigns that are potentially vulnerable to the worsening external economic and financial environment as indicated by previous negative rating actions and rating Outlooks.
The RWN is prompted by the following risk factors:
- In the absence of greater clarity on the ultimate structure of a fundamentally reformed Economic and Monetary Union and the recognition by political leaders of the potential for an EAMS to leave the eurozone, Fitch will review its assessment of the balance of risks associated with eurozone membership, especially for sovereigns potentially subject to funding stresses.
- While acknowledging the extraordinary measures the ECB has adopted to provide liquidity to the European banking sector, its continued reluctance to countenance a similar degree of support to its sovereign shareholders undermines the efforts by EAMS to put in place a credible financial 'firewall' against contagion and self-fulfilling liquidity and even solvency crises.
- The intensification of the eurozone crisis since July constitutes a significant negative shock to the region's economy and the stability of its financial sector with potentially adverse consequences for sovereign credit profiles across the region, most immediately for those placed on RWN today.
- In the absence of a 'comprehensive solution', the crisis will persist and likely be punctuated by episodes of severe financial market volatility that is a particular source of risk to the sovereign governments of those countries with levels of public debt, contingent liabilities and fiscal and financial sector financing needs that are high relative to rating peers.
In light of these heightened risks, Fitch will re-consider the assumptions and analysis that underpin its current sovereign ratings of Belgium, Slovenia, Spain, Italy, Ireland and Cyprus to ensure that the above risk factors are appropriately reflected in its sovereign ratings in accordance with its sovereign rating methodology.
The focus on investment grade rated sovereign governments with Negative Outlooks reflects previous research and analysis that indicates specific weaknesses that render them especially vulnerable to the intensification of the eurozone crisis.
However, the outcome of the review will also incorporate Fitch's current assessment of the strength of their underlying economic and credit fundamentals as reflected in their current sovereign ratings as well as recent policy measures adopted at the national level.
end.
Late last night it was Moody's who turned the screws on Belgium by knocking its credit rating two notches due to continuing problems with its financing of Dexia and also the fact that it has no government:
(COURTESY ZERO HEDGE)
Moody's Takes S&P's Place - Downgrades Belgium By Two Notches To Aa3
It appears Moodys is not having server issues.
- BELGIUM'S CREDIT RATINGS CUT 2 LEVELS TO Aa3 BY MOODY'S
full note:
Moody's downgrades Belgium's credit ratings to Aa3, negative outlook
Short-term ratings affirmed at Prime-1; concludes review initiated 07 October
Frankfurt am Main, December 16, 2011 -- Moody's Investors Service has today downgraded Belgium's local- and foreign-currency government bond ratings by two notches to Aa3 from Aa1 with a negative outlook, while affirming its short-term ratings at Prime-1. Today's rating action concludes Moody's review for downgrade of Belgium's sovereign debt ratings, which was initiated on 07 October 2011.
The main drivers that prompted the downgrade are:
(1) Heightened risks posed by the sustained deterioration in funding conditions for euro area countries with relatively high levels of public debt, like Belgium; and the potential adverse impact these risks may have on the Belgian government's fiscal consolidation and debt-reduction efforts.
(2) Increasing medium-term risks to economic growth for the small and very open Belgian economy due to the need for ongoing deleveraging and fiscal restriction in the euro area. This is likely to add to the challenges of placing the country's public debt on a downward trajectory.
(3) New risks and uncertainties for the Belgian government's balance sheet stemming from the banking sector, particularly in connection with the contingent liabilities emanating from the run-off process of Dexia Credit Local (DCL).
RATIONALE FOR DOWNGRADE
The first driver underlying Moody's decision to downgrade Belgium's debt rating is the fragile sentiment surrounding sovereign risk in the euro area. The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future. It translates into heightened potential for funding stress for euro area countries with high public debt burdens and refinancing needs like Belgium. Sustained increases in funding costs could also significantly complicate the reduction of general government deficit ratios to stabilise and reverse Belgium's high public debt in relation to nominal GDP -- currently close to 100%. Moreover, the probability of further more serious confidence shocks on the euro area bond markets -- up to and including sudden stops in funding - have risen recently, albeit from a very low base.
The second driver of Moody's rating decision is the significant increase in the medium-term risks to economic growth, over and above any normal cyclical adjustment, in the small and very open Belgian economy. This is in part driven by the deleveraging underway across the euro area financial, corporate, household and government sectors, and is negatively affecting Belgium's export demand. Furthermore, uncertainties about the euro area debt crisis (management) are continuing to negatively impact the funding conditions for banks with potentially negative consequences for domestic economic activity. The further weakening economic growth outlook also complicates the government's ability to achieve its medium-term fiscal consolidation plans and may necessitate additional fiscal measures beyond the roughly 11 to 16 EUR billion yearly planned for the coming three years. This could further weigh on economic growth. Belgium's recent experience of political bargaining indicates that consensus on additional measures can be difficult to achieve.
The third driver of today's rating action is the emergence of new risks which create greater uncertainty around the implications of banking sector contingent liabilities for the government's balance sheet. There is a significant risk that the dismantling of the Dexia group, and especially the run-off process of Dexia Credit Local (DCL), will result in increases in government debt metrics, although Moody's notes that the precise extent of any increase remains highly uncertain. Following the nationalisation of Dexia Bank Belgium (DBB) at a cost of EUR4 billion in October this year, the Belgian government's exposure to the group remains considerable through explicit debt guarantees and loan exposures to DCL through the now nationalised DBB. Combined, Moody's estimates these current exposures as representing close to 10% of the country's GDP.
Furthermore, in conjunction with the French and Luxembourg governments, the Belgian government has agreed to guarantee a large share of the new funding issued by DCL for a period of 10 years. An agreement to that effect was announced in October, but the three governments have since re-opened discussions on the support package and are moving towards the implementation of a temporary guarantee scheme of six months with the maximum term of drawings and ceiling recalibrated to the liquidity needs of the period before putting the definitive guarantee in place. While Moody's says that the precise outcome of these discussions is difficult to predict at this stage, the original agreement and the funding needs of DCL suggest that the Belgian government's total exposures to the group will likely rise and, in Moody's views, could reach between 15% and 20% of GDP.
Overall, Belgium's Aa3 rating weighs the mentioned risks against important strengths, such as the country's net international creditor status and the relatively healthy balance sheets of the corporate and household sectors. Moody's also recognises that the recent talks among the country's eight political parties have finally succeeded in resolving the longstanding political impasse. With the formation of a new government, the country may be in a better position to adopt more sustainable fiscal policies and to undertake structural reforms.
Nevertheless, an immediate and major challenge facing the new government is the impact of weaker growth on the country's fiscal consolidation efforts and the resulting need for additional measures to meet the medium-term deficit and debt reduction targets.
RATING OUTLOOK
The rating outlook is negative due to ongoing risks and uncertainties for public finances and economic growth in the context of the euro area debt crisis.
WHAT COULD MOVE THE RATING UP/DOWN
Economic and fiscal policies paving the way for a substantial and sustainable trend of declining general government deficits with increasing primary surpluses that lead to a significant reversal in the public debt trajectory would be credit positive. Conversely, further intensification/crystallization of the risks constituting the three main rating drivers of today's rating action would be credit negative.
end
There is a great summary of the 29 largest banks that will fail.
special thanks to Jim Sinclair and Business Insider:
Jim Sinclair’s Commentary
You really believe that QE to infinity is not coming?
These Are The 29 Massive Banks That Could Take Down The Global Economy
end.
And this summary of USA data by John Williams:
Jim Sinclair’s Commentary
John Williams’ www.ShadowStats.com speaks the truth.
- Consumer Financial Distress Hampered Retail Sales and Production
- Nonsensical Hype Over Regularly Mis-Adjusted Jobless Claims
- High Oil Prices Still Inflating Broad Economy
- November’s Annual Inflation: 3.4% (CPI-U), 3.8% (CPI-W), 11.0% (SGS)
- Gold Remains the Ultimate Hedge
- Nonsensical Hype Over Regularly Mis-Adjusted Jobless Claims
- High Oil Prices Still Inflating Broad Economy
- November’s Annual Inflation: 3.4% (CPI-U), 3.8% (CPI-W), 11.0% (SGS)
- Gold Remains the Ultimate Hedge
Ambrose Evans Pritchard weighs in on the fight between France and England
where England refused to go along with the EU accord on Dec 9:
(courtesy Ambrose Evans Pritchard)
