IMF in need for one trillion dollars/The Private Greek Bond fiasco/Goldman Sachs earnings abysmal/

Good evening Ladies and Gentlemen:

Gold closed up $4.30 to 1659.00.  Silver however was the star of the day rising by 41 cents to close at 30.52.  The bankers tried to suppress the metals in the wee hours of the morning but failed somewhat as the metals rallied.  After the London fix they tried again as they knocked gold down by 6 dollars.  That failed miserably as demand is too great for physical gold and that caused the paper boys to cover quickly.

Let us head over to the comex and assess trading, open interest on the front delivery months, inventory movements, and the amount of physical metals standing for delivery.

The total gold comex OI rose by a huge 7,554 contracts as investors try to secure metal any which way they can.  The bankers were the obvious suppliers of the non backed paper.  The front options expiry month of January saw the OI fall from 71 to 31 for a loss of 40 contracts.  We only had 13 delivery notices so we lost 27 notices to cash settlements.  The paper fiat must have been too good to pass up, courtesy of Blythe Masters of JPMorgan.  The front delivery month of February is less than two weeks away as we are witnessing rollovers to April.  The February OI rests tonight at 164,237.  The estimated volume at the gold comex today was 166,309 which is below normal for the rollover period.  The confirmed volume yesterday came in at 216,485.

The total silver comex OI rose by only 825 contracts as the bankers are loathe to supply the non backed paper. The front options expiry month of January saw its OI mysteriously rise by 4 contracts (from 77 to 81) despite 23 delivery notices.  Generally this means that someone was in great need of physical silver and we lost nothing to cash settlements.  The next big delivery month is March and here the OI rose from 53,786 to 54,449 which is normal as we are still quite far from first day notice in silver.  The estimated volume at the silver comex came in at a lowish 40,754.  The confirmed volume yesterday was also tame at 44,357.

Inventory Movements and Delivery Notices for Gold: Jan 18 2012:

Gold	Ounces
Withdrawals from Dealers Inventory in oz	nil
Withdrawals from Customer Inventory in oz	1599 (HSBC,)
Deposits to the Dealer Inventory in oz	nil
Deposits to the Customer Inventory, in oz	26,784 (Scotia)
No of oz served (contracts) today	7 (700)
No of oz to be served (notices)	24 (2400)
Total monthly oz gold served (contracts) so far this month	1081  (108,100)
Total accumulative withdrawal of gold from the Dealers inventory this month	4297
Total accumulative withdrawal of gold from the Customer inventory this month	190,365

Again  gold enters the dealer and no gold is withdrawn.
The only deposit was as follows:

1. Into Scotia  26,784 oz

The only customer withdrawal:

1.  1599 oz from HSBC.

We did have a dandy of an adjustment whereby 38,290 oz leaves the dealer and enters the customer as a prior liability was paid by the dealer.

The new registered or dealer gold is now at 2.461 million oz or 76.54 tonnes of gold.

The CME notified us that we received 7 delivery notices today for 700 oz of gold.  The total number of delivery notices filed so far this month total 1081 for 108,100 oz. To obtain what is left to be served upon, we take the OI standing for January (31) and subtract out today's deliveries (7) which leaves us with 24 notices or 2400 oz of gold.

Thus the total number of gold oz standing in this non delivery month is as follows:

108,100 oz (served)  +  2400 (oz to be served)  =  110,500 oz  or 3.43 tonnes of gold.

If we were to add the delivery month of December to the two non delivery months of January and November, the total tonnage of delivery notices is as follows; 74.11 tonnes against a dealer inventory of
76.54 tonnes or 96.82% of available dealer gold.

And now for silver 

 the chart: January 18 2012:

Month of January now commences:

Silver	Ounces
Withdrawals from Dealers Inventory	nil
Withdrawals fromCustomer Inventory	464,284( HSBC,Delaware, Scotia)
Deposits to theDealer Inventory	nil
Deposits to the Customer Inventory	nil
No of oz served (contracts)	12 (60,000)
No of oz to be served (notices)	69  (345,000)
Total monthly oz silver served (contracts)	801  (4,005,000)
Total accumulative withdrawal of silver from the Dealersinventory this month	268,115
Total accumulative withdrawal of silver from the Customer inventory this month	3,027,027

We had no silver enter as a deposit to both dealer and customer.

We only had the following customer withdrawal":


1. Out of Delaware, 5969 oz
2. Out of HSBC , 5017 oz
3. Out of Scotia:  453,298 oz.

total customer withdrawal  464,284 oz.
we had one adjustment whereby a customer leased some silver to the dealer to the tune of 20,378 oz
The total registered or dealer silver rests tonight at 36.723 million oz
The total of all silver lowers to 125.174 million oz.



 The CME reported that we received 12 delivery notices for 60,000 oz.  The total number of delivery notices filed so far this month total 801 for 4,005,000 oz. To obtain what is left to be served, I take the OI standing for January (81) and subtract out today's deliveries (12) which leaves us with 69 notices or 345,000 oz.

Thus the total number of silver oz standing for delivery is as follows:

4,005,000 oz (served)  +  345,000 oz to be served =  4,350,000 oz.

notice that the non delivery month of January is approaching the number of oz that stood in the big delivery month of December.

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.

Jan 18. 2012:

Total Gold in Trust

Tonnes:1,255.67

Ounces:40,371,056.92

Value US$:66,474,936,984.83

Jan  17.2018

TOTAL GOLD IN TRUST

Tonnes:1,255.67

Ounces:40,371,056.92

Value US$:66,839,003,007.06

we neither gained nor lost any gold inventory at the GLD

And now for silver Jan 18 2012: 

Ounces of Silver in Trust	305,970,641.100
Tonnes of Silver in Trust	9,516.75

Jan 17: 2011:

Ounces of Silver in Trust

305,970,641.100

we neither gained nor lost any silver today in the SLV.

end.

And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive 4.9 percent to NAV in usa funds and a positive 4.6% to NAV for Cdn funds. ( Jan 18 2012.).

2. Sprott silver fund (PSLV): Premium to NAV fell  to  9.14.% to NAV  Jan 18 2012:
3. Sprott gold fund (PHYS): premium to NAV fell  to a 4.92% positive to NAV Jan 18. 2012). 

end.

In physical news, I was asked to comment on the following news story out of Hecla mining.

To me it makes no sense to bottle up supply of metal.  They are already in short supply to feed the USA mints so it seems this is nothing but bureaucrats getting in the way. Approximately 3.5 million oz of silver is taken out of the grid or approximately 8.75% of all USA silver production is being removed by those doorknobs.

I welcome everyone's comments on the following story.  

The War Against Us

David Bond

 |

January 16, 2012 - 9:27am

The Wallace Street Journal

Wallace, Idaho – Just when was it that the United Snakes of America declared war on the Coeur d'Alene Mining District, and why?

We were ruminating, fulminating on these weighty questions last week. Pretty clearly, the opening salvo was fired in the final decade of the 19^th Century, when Federal troops were dispatched under a declaration of martial law to lock up 600 miners here who were striking for decent wages.

Then of course during World War II there was the undeclared conscription of lead and zinc miners here who were prevented from taking better paying jobs in the shipyards of Puget Sound to keep wresting rocks from our earth that could be smelted into bullets and cartridges to kill Germans and Japanese.

For that trouble, we were rewarded, in 1984, by being declared a federal Superfund site by the U.S. Environmental Protection Agency and we have been struggling under the EPA's yoke ever since – as have some 70 mining companies who produced bullet-makings for the government in the 1940s, most of them mom-and-pop operations. Or was it in 1991, when agents of the Federal Bureau of Investigation swooped down upon us, shutting down our card games and seizing our slot machines, in their assault on our laissez-faire way of life?

Was it just last year, when the US EPA sweated a $200 million settlement out of Hecla Mining Co. for alleged “environmental damages” for having the temerity to mine silver, lead and zinc in the Silver Valley? (That amount, ironically, is about what Hecla intends to spend extending the life of the Lucky Friday by some 30 years.)

Or was it just last week, when the federal Mine Safety and Health Administration shuttered the Lucky Friday mine for up to a year on an utterly vacuous claim that is main vertical access way, the Silver Shaft, had miraculously become unsafe – overnight? This is the same MSHA that inspects the shaft every three months, most recently a month ago. What changed in 30 days to render the Silver Shaft unserviceable? According to MSHA, 30 years' accumulation of crud leaking from sand lines that have built up along the mile-deep, 18-foot cylindrical shaft's concrete liner.

This is federal government arrogance at its height. It is brazen and it reeks of ass-covering. It is also ineptitude at its height, to the detriment of some 200 Hecla Mining Co. employees and a like number of Cementation Corp. contract workers who were at work sinking the new No. 4 Shaft internal winze. As of late last week, Hecla miners were barred by MSHA even from maintaining the critical pumps to keep water out of the lower workings of the Lucky Friday, where most of the machinery is. The 4 Shaft is collared on the 4,900-foot level and most of the current ore hauling was being done on the 5,900-level to the Silver Shaft.

Miners tell this reporter that scaling-off accumulations of sand-line leaks has been an ongoing maintenance procedure since the Silver Shaft – unique to a district where wood-lined, rectangular (and infinitely more maintenance-intensive) shafts are the norm – was commissioned in 1983. Hecla, treading lightly, says it doesn't consider the MSHA closure order politically motivated. We beg to differ. It is all about politics. In the wake of the April, 2011 death of drift-miner Pete Merek on the 5900-level, MSHA directed Hecla to re-route that heading into uncharted territory. Following MSHA's orders led to a pair of rock-bursts in November and December last year, the latter of which injured seven men.

Our friendly local miners figure that MSHA's order to close the Silver Shaft is directly connected to its mandated screw-ups on the 5900 – essentially to distract attention from the injuries the agency's order caused. Some early scuttlebutt that MSHA had been pestering Hecla to clean up the Silver Shaft likely is rumour-mongering by the federal agency. But MSHA doesn't pester: it writes citations, issues orders and demands fines; it doesn't give advice.

Years ago MSHA was staffed by inspectors who'd spent years underground breaking rock for a living. They knew the art of the possible and the practical, and could with considerable moral authority cite a company that was bending the rules to the detriment of safety. The new breed of cat is different: college boys with little or no experience in the reality of hard-rock mining. The hard-rock miners they are ostensibly there to protect hold their ineptitude and their rule-book rigidity in contempt.

So, 3.5 million ounces of silver production from the Lucky Friday will be held off the books of America's export balance sheet this year. Our silver consumption will continue at or above its current rate, so we'll have to import more silver, and print more paper dollars to pay for it – which just drives up the price of milk and gasoline for all of us and the 400-plus miners now on the bricks.

No doubt some Goldman-Sachs-style short-seller made off like a bandit when the MSHA order caused Hecla's stock to crater from $6 to nearly $4 in a day's trading last week. Given the cozy cronyism between Wall Street and the United Snakes Government these days, might we wonder if more than just politics were involved?

This wasn't a war that the hardy people of northern Idaho started, back in the 1890s, or the 1980s, the 1990s, or just last week. We'd rather be known as the culture that brought decent working conditions, women's suffrage, and other enlightenments to the nation's conscience. But it is a fight we need to finish, and finish decisively.

David Bond
Wallace, Idaho USA
Editor, www.silverminers.com

Co-founder, silversummit.com

Author, The Silver Pennies

Read More

SilverSeek.com

The farce continues.  Now the IMF is stating that this lending bank has a two year funding gap of 1 trillion dollars.  With all countries broke, where are they going to get the dollars to feed nations in urgent trouble:

(courtesy zero hedge)

IMF Says 2 Year "Funding Gap" Hits $1 Trillion

Submitted by Tyler Durden on 01/18/2012 07:35 -0500

• Brazil
 
• China
 
• Funding Gap
 
• India
 
• International Monetary Fund
 
• Japan
• None

First we learn the LTRO may be €1 trillion, then €10 trillion, now the IMF tells us it has misplaced $1 trillion. The world may be going totally broke but at least it does in style - in perfectly round 12 digit numbers.

• IMF SAID TO SEE POTENTIAL 2-YEAR FINANCING GAP AT $1 TRILLION
• IMF SAID TO SEEK RAISING LENDING RESOURCES BY $500 BLN

In other words, even after it "miraculously" procures this money, the IMF will still be half a trill short. But, with everyone broke, just who will "fund" the IMF shortfall? Hm, could the fact that stocks are rising indicate that the ultimate buyer will be none other than the global central banking cartel. In other news, with every passing day we learn just how correct our thesis has been for the past 3 years: the it is not a liquidity crisis, it is all about solvency. Or rather insolvency. Global insolvency.

More on this farce from Peter Tchir.

This is starting to be more and more like a bad Austin Powers movie.

Why should this group of unelected, many appointed based more on their political connections than their qualifications deserve so much money?

This was a cute and slightly prestigious entity when it helped channel the charity of big rich nations into small developing countries.  Whatever their mandate was, this is now getting ridiculous.  On the other hand, I will admit that at least they attempt to due their job with diligence as opposed to the IIF which has to be the entity with the least credibility (usefulness) that has somehow found itself thrust in the middle of developing plans.

The list of countries the IMF wants money from is almost comical.  Japan is right up there.  Of any country listed that may at some point need their own bailout, Japan is front and center.  The bears are lining up to take a poke at JGB's.  Most have been burned from time to time over the past 20 years shorting JGB's, but the stars do seem to be aligning for a shot.

Yesterday we rallied on news that China remains weak enough to need stimulus, yet here they are on the list of countries expected to make the IMF savior of the world (technically, they can't save the world until they create their own central bank, but how far off can that be?). 

Brazil, Russia, and India all see to have enough of their own issues that stepping up their IMF contributions seems unlikely.

I assume the oil-exporting nations we are asking are the ones that we aren't going to embargo in 6 months (or just as soon as we don't need to buy their oil)?  Or maybe it is the countries where the rulers (not really leaders) buy private jets with hot tubs, yet many of their people have a standard of living that most Europeans would consider appalling.

On the other hand, the market is either too long, too mature, or just realizes the likelihood of this happening (nil) that it couldn't even bother to jack up stock futures much.  Kind of dull when a good old fashioned trillion dollar rumor can't cause much of a spike. 

If 2011 was the year of "broken" markets, then 2012 is shaping up to be the year of "apathetic" markets.

end

Now its the World Bank that is sounding the alarm bells with the European crisis.  This story is courtesy of Ambrose Evans Pritchard of the UKTelegraph:
(courtesy Ambrose Evans Pritchard/UKTelegraph)

World Bank Fears Europe's Crisis Could Set Off Deeper Global Slump Than Lehman Collapse

The World Bank has slashed its global growth forecast and told developing nations to prepare for the worst, warning that Europe’s debt crisis could trigger an even deeper slump than the post-Lehman collapse three years ago.

The bank said there is a risk that turmoil in Europe could interact with the delayed effects of monetary tightening in Asia and Latin America, reinforcing each other in a 'downward overshooting of activity'.

By Ambrose Evans-Pritchard

3:49PM GMT 18 Jan 2012

"The global economy has entered a dangerous phase. The financial system of the largest economic bloc in the world is threatened by a fiscal and financial crisis that has so far eluded policy-makers’ efforts to contain it," said the bank in its Global Economic Perspectives.

"The possibility of further escalation of the crisis in Europe cannot be ruled out. Should this happen, the ensuing global downturn is likely to be deeper and longer-lasting than the recession of 2008/2009 because countries do not have the fiscal and monetary space to stimulate the global economy. Activity is unlikely to bounce back as quickly."

"An escalation of the crisis would spare no one," said Andrew Burns, the key author. "Developing countries should hope for the best and plan for the worst. If these downside risks materialised there is not much developing countries can do to prevent it. But they can prepare for it."

The report said rich countries had used up their fiscal and monetary shock absorbers after the Lehman crisis. While some poorer states still have the means to cushion the blow, many have already pushed fiscal deficits and credit growth to the limits of safety.

"Developing countries would have much less fiscal space than in 2008 with which to react to a global slowdown. As a result, if financial conditions deteriorate, many of these countries could be forced to cut spending pro-cyclically, thereby exacerbating the cycle."

The bank said there is a risk that turmoil in Europe could interact with the delayed effects of monetary tightening in Asia and Latin America, reinforcing each other in a "downward overshooting of activity".

The bank cut its global forecast from 3.4pc to 2.5pc for 2012, warning that the eurozone has already fallen into recession and is likely to contract by 0.3pc this year. "The possibility of much worse outcomes are real," it said. If Europe’s financial system to seizes up, this could lop a further 4pc off global GDP.

"While contained for the moment, the risk of a much broader freezing up of capital markets and a global crisis similar in magnitude to the Lehman crisis remains. The willingness of markets to finance the deficits and maturing debt of high-income countries cannot be assured. Should more countries find themselves denied such financing, a much wider financial crisis that could engulf private banks and other financial institutions on both sides of the Atlantic cannot be ruled out. The world could be thrown into recession as large or even larger than that of 2008-09."

The consequences would be dire for 30-odd countries with external finance needs above 10pc of GDP. The bank advised these states to "prefinance" their needs while the credit markets are still open, reducing the risk of a sudden crunch. Commodity exporters should brace for a fall in oil and metal prices of almost a quarter.

Emerging markets have already seen a rise in average bond spreads of 117 basis points since last July. Global trade volumes contracted at an 8pc annual rate in the three months to October. Capital flows to developing countries fell to $170bn in the second half of 2011 from $309bn a year earlier.

In a veiled attack on Europe’s austerity policies the bank said "it is not yet clear whether there is an end in sight to the vicious circle whereby budget cuts to restore debt sustainability reduce growth and revenues to the detriment of debt sustainability".

The bank’s "downside scenario" involves a credit freeze in two "larger Euro Area economies". Such an event would cause a further contraction of Euroland’s GDP by 6pc over the next two years. The bank stopped short of modelling what would happen if the eurozone breaks up altogether.

end.






Again we see record ECB deposits as banks refuse to lend to one another:


(courtesy Reuters)







Bank deposits at ECB hit another record high: Reuters noted that commercial banks deposited over half a trillion euros at the ECB for a second straight day. It said that ECB data on Wednesday showed that deposits hit an all-time high of €528B, up from €502B the previous day.

The story on Greece has two conflicting reports.  Credit Suisse has decided just to ignore all news.  As far as I am concerned, circle the 20th of March and that is when the Greek nation goes bust:
(courtesy zero hedge)

The Latest Greek Creditor Negotiations Update: Coercive, Yet Not, At The Same Time

Submitted by Tyler Durden on 01/18/2012 00:03 -0500

• Creditors
 
• default
 
• European Central Bank
 
• European Union
 
• Greece
• International Monetary Fund

Late night media is abuzz with two reports, one from the NYT and one from The Telegraph, which unfortunately confirm Credit Suisse's decision to ignore the Greek situation entirely due to openly contradictory news.

• From The Telegraph: Greece prepares to give way to banks to secure debt deal
• From The NYT: Greek Premier Says Creditors May Be Forced to Take Losses

Which, of course, is the oldest trick in the book - when in doubt, leak opposing news, in this case whether or note the Greek default will be coercive or not, in hopes the good news trumps the bad, and nobody notices.

Here are some extracts from either:

Sources close to the bondholders told The Daily Telegraph there was "enough movement" from officials representing Greece, the International Monetary Fund (IMF), European Central Bank (ECB) and the European Union (EU) to persuade Mr Dallara to meet with them.

Bondholders are resisting pressure to take losses of more than 50pc on their bonds. They are also pushing for higher coupons on fresh Greek paper.

The IIF, which has been representing private sector bondholders during the tortuous talks, said it was committed to "seeking an agreement on a voluntary debt exchange for Greece" and appealed to officials to "work in good faith toward this end with a sense of urgency".

And the other.

Taking direct aim at hedge funds and other private holders of Greece’s debt, Prime Minister Lucas Papademos says he will consider legislation forcing the creditors to take losses on their holdings if no agreement can be reached in critical negotiations scheduled to resume Wednesday.

Mr. Papademos said that if Greece did not receive 100 percent participation in a program in which bondholders would voluntarily write down $130 billion from Greece’s unwieldy $450 billion debt, the country would consider passing a law to require holdouts to take losses.

“It is something that has to be considered in the light of expectations about the degree of the participation to be achieved,” Mr. Papademos said. “It cannot be excluded. It is contingent on the percentage.”

At this point we would settle for both being true and this whole politically coordinated farce just ending so real investing can actually resume.

end.


Here is zero hedge telling us what to watch out for with respect to a deal in Greece.  If the short end bonds are falling you can bet the farm that there is no deal:
(courtesy zero hedge)

If Greek PSI Deal Was 'In The Bag', Greek Bonds Would Be Rallying, Not Dumping

Submitted by Tyler Durden on 01/18/2012 11:53 -0500

• Bond
 
• Greece
 
• International Monetary Fund

As headline after headline suggest that the PSI deal is getting closer and the market appears to be pricing in that headline-driven excitement, we cast a very skeptical eye over the performance of Greek bonds today. Short-dated GGBs, the August 2012 issue for instance, would be expected to rally if the deal was close (or even anticipated by the market) but instead, this 8-month bond traded to new record low price (and obviously therefore record high yields of 421%) today with quite a significant drop from EUR31.5 to EUR30 on the day. Further out, the 5Y GGB is the cheapest-to-deliver and is trading at EUR18.75/23.25 (quite a spread), down more today, and still well below an approximate EUR32 take-out. While there may have been some unwinds in the cash-CDS basis today, it seems to us that the greek bond market is absolutely not expecting a PSI deal and therefore risk-on rallies on the back of this (a debt reduction that will still leave Greek debt unsustainable) seem overdone at best (unless the IMF can cajole the US Congress to untighten its wallet some more - and even then, its not the solution Greece needs).

1Y GGB prices continue to drop - even as the 'deal' is supposedly in the bag...

As the price term structure shows GGBs trading well below any NPV-based take-out level and even very short-dated debt now trading down considerably.

Chart: Bloomberg

end.



Peter Tchir of TMarket Analysts believes that greenmail will be offered to the holders of the private (PSI) Greek bonds.
There are three types of holders of these Greek bonds:
1. those who purchased a good amount at 40 cents on the dollar.2. those who purchased the bonds with a credit default swap attached to it.3. those who purchased bonds at 25 cents on the dollar and short dated.
Peter describes that greenmail will be offered to all classes to prevent a CDS from exploding the bankers into smithereens
(courtesy Peter Tchir):

Greek PSI

Posted on January 18, 2012

The Greek PSI is once again (still) hitting the headlines.

Here is what I think the most likely scenario is (80% likelihood).

Some form of an agreement will be announced.  The IIF will announce that the “creditor committee has agreed in principle to a plan.”  That plan will need to be “formalized” and final agreement from the individual institutions on the committee and those that weren’t part of the committee will need to be obtained.  The headline will sound good, but will leave a month or so for details to come out.  In the meantime every European and EU leader (or employee) with a  press contact will say what a great deal it is.  That it confirms that Europe is on the path of progress and that they are doing what they committed to at their summits.

That will be the hype that will drive the market higher.  They will do it because they have to.  They cannot afford an uncontrolled default, so they will have to push forward as though they have fixed something.

The reality of the situation is that the big European banks on the IIF committee will have agreed to the plan.  They will confirm it.  Other European banks will also agree.  They will be told that they will not have such easy access to the ECB or other programs if they don’t agree.  In the end, European banks will get fully on board.  That is the easy part.  What about hedge funds?

I believe hedge funds have 3 trades in Greece right now.  The “how much lower can it go”, the “basis package”, and the “let’s play chicken” trades.

How much lower can it go?
These funds bought longer dated bonds, often at a price of 40% of par or lower.  If they deal they get is profitable they may agree.  Maybe some side deals will be created.  Maybe a bank (on behalf of the EU or ECB) will pay 50% or something for these bonds.  It won’t be an economic trade for the bank/EU/ECB, but they are all about taking default off the table.  Once upon a time “Greenmail” was a strategy, so why not now.  How much would it cost to give the funds enough of a profit that they sell or to cut some side deal where they get a bit extra?  Remember, these are the same people who are talking about a retroactive Collective Action clause, so don’t put anything past them.  That would clear up this source of bonds.

The basis package?
Funds that own bonds and CDS will be the most stubborn, so take them out of the package at 104 or something.  That is more than they could hope to make from it, and monetizes it today rather than at some point in the future.  A form of “greenmail” but if default scares you so much, do this.

The “Chicken” Trade?
Some funds bought very short dated bonds, March and May of this year, with the hope that the TROIKA would just pay them par whether or not a full PSI had been reached.  These are trickier because the amount of potential profit is very high if they are paid at par, but the consequences of “defaulting” might still scare the EU.

Carrot and Stick
So the “greenmail” would be the carrot for funds to participate or sell positions.  At same time, during the month while things are “finalized” how many visits would it take from regulatory authorities to scare even an unregulated entity into action.  The governments could clearly threaten to scrutinize holdouts and make life harder for them.  This is likely more to be a nuisance threat, or threat of some regulations that will never get passed, but at some point accepting the carrot and avoiding the stick might be enough to get the funds on board.

What will we learn?
We will learn that the ECB’s holdings, including Secondary Market Programme purchases are treated senior to other holdings, 50% NPV doesn’t mean 50% haircut, banks will be do what governments want, governments will have crossed a threshold in what they are willing to say and do to hedge funds.  None of those are good, and although they are in the back of most people’s minds, confirmation of them will not be good.

The rating agencies will call it a DEFAULT, because it is.  ISDA won’t call it a Credit Event because it isn’t.  The EU leaders will call it a haircut or PSI, because they have an aversion to saying the word DEFAULT (and to the truth).  There will be some concern that calling it a DEFAULT by the rating agencies will trigger some actions.  It won’t.  The ECB will allow banks to overrule the declaration of the rating agencies.  They will say that Greece remains current on some bonds, that Greece will make payments on new bonds, so this DEFAULT situation is temporary and can be ignored for purposes of accounting, mark to market, collateral, etc..  It will avoid the chaos that would ensue, so they will go with the flow.

Then all talk will turn to Portugal.  Why should Portugal continue to pay on their existing debt, when Greece just cut a great deal?  And Ireland?  The reality that Greece will NOT be an isolated case, but will be the norm will hit, and we will see the market give back the gains and sink lower on the realization that the banks recognizing losses is just beginning.

Hard Default
Without the carrot and stick and coercion a hard default would be inevitable.  If they cannot bribe and blackmail and threaten their way into something they call PSI, then we will see Greece stop making payments, and then the markets will get very ugly in a hurry.  We saw how quickly an entity as small as MF Global impacted markets in unseen ways.  This will be much worse.  The fear of this happening is so strong that banks and governments will figure out a way to make it seem like they have a deal and then spend the next month ensuring it closes.

 end

Goldman Sachs earnings were abysmal.  What is totally frightening is the loss on the top line as the business environment is contracting to a high degree:

Goldman Misses Top Line, Beats EPS On Comp Cut, Pays Average Employee $367,057 In 2011

Submitted by Tyler Durden on 01/18/2012 08:08 -0500

• Jim O'Neill

Cutting down to the chase on Goldman's numbers, the top line was weak, with the company reporting $6.05 billion in total Q4 revenue on expectations of $6.39 billion. The primary reason was a decline in all segments Year over Year with Investment Banking tumbling 43% to $863 Million, Institutional Client Sales down 16% to $3.1 billion, Investment Management down 16% (great work Jim O'Neill) to $1.3 billion, and finally Goldman Prop, or as it is politically correctly now known, Investing and Lending, down 56% to just $872 million, although much better than the massive Q3 loss of $2.5 billion. All this was offset by compensation benefits of $2.2 billion, which resulted in a Q4 Compensation Margin of 36.5%, down from the 44.5% average previously in 2011. As a reminder, back in Q4 2009, Goldman hadnegative compensation expense of $519 million to make its EPS. The result was total comp of $12.2 billion in 2011, or 42.4% compensation payoff, compared to $15.4 billion in 2010. Yet since the company let the axe fly, cutting total staff from 35,700 at December 31, 2010 to 33,300 at year end 2011, or the lowest since Q1 2010, average trailing 12 monthcompensation per employee rose to $367,057.06, also known as "not much" for Mitt Romney.

Summarized this looks as follows:

Yet probably most important is that average VaR in Q4 rose from $102 to $135 sequentially, primarily on a spike in Interest Rate VaR. Is Goldman pulling a FRBNY LLC and going all in on even more rate contraction?

Full results here.

end


Wolf Richter of www.testosteronepit.com talks about the exit of not only Greece but the possibility of Germany and other Nordic countries leaving the euro even though it would be somewhat catastrophic to Germany. It does not leave a pretty picture:
(courtesy Wolf Richter)

Old Europe Doesn’t Have a future’ And ‘Is Not an Option for Germany.’

Submitted by testosteronepit on 01/17/2012 21:07 -0500

• Capital Markets
 
• default
 
• European Central Bank
 
• Eurozone
 
• Germany
• Greece
 
• Italy
 
• Reuters
 
• Unemployment

Wolf Richter   www.testosteronepit.com

“The fact that we profit massively from the euro doesn’t mean that we have to accept every political horse-trade to save the common currency,” Anton F. Börner, president of the German Association of Exporters (BGA), told the Handelsblatt—a swipe at Italian Prime Minister Mario Monti who’d demanded that Germany dig deeper into its pockets to reduce the debt burden of other countries, such as, well, Italy.

“The Italian government is on the wrong track if it thinks it can get out of this without difficult reforms to strengthen its competitiveness,” Börner said. Clear political messages would be necessary; and Italy would have to deliver. But if countries like Italy that are mired in crisis—the Krisenländer—refuse to implement those reforms, then the breakup of the Eurozone would be a solution.

His voice doesn’t go unnoticed: the BGA represents 120,000 exporters—the lifeblood of the economy. Germany fights for the euro because failure would have a “massive economic cost and incalculable political consequences,” Börner said. It would mean “renationalization and protectionism” and finally “balkanization and marginalization of Europe.”

He’d already stepped into the spotlight in November when he uttered the then still unspeakable: “We need a common market, not one currency.” And he'd suggested an alternative: a mini-eurozone, one without Italy. For that whole debacle, read....The Next Step Towards The End Of The Euro.

Each country must fight to retain the confidence of the financial markets or regain it through reforms, Börner said. But if “a country cannot keep its deficits and debt within the commonly agreed-upon limits, it must irrevocably accept a substantial reduction in sovereignty.” Germany is prepared to sink a lot of money into the Krisenländer to help them on their way to competitiveness, he said, but “the old Europe doesn’t have a future—and is therefore not an option for Germany.”

He isn’t the only one. Over the weekend, it was Wolfgang Reitzle, CEO of Linde AG, who’d elicited gasps when he told theSpiegel, “I don’t believe that the euro must be saved at any price.”

He feared that reform efforts would fade if the ECB takes pressure off the Krisenländer by buying their bonds. And he explained: “If it is not possible to discipline the Krisenländer, then Germany must exit.”

Yes, it would lead to an appreciation of the “Deutschmark, the euro-north, or whatever currency we’d have then.” It would be a shock to the economy. Exports would cave and unemployment would rise. But not for long. “Five years down the road, Germany would be even stronger in comparison to its Asian competitors.”

The German industrial elite now openly discuss exiting the Eurozone. The question no longer is whether or not to keep Greece in it—the capital markets had already “checked off” that topic long ago, Reitzle said—but what price Germany should pay to stay in it itself. Already, there is utter frustration with the ECB. Hans-Werner Sinn, president of Ifo, a large economic research institute, lamented that Germany was being marginalized at the ECB as neither its president nor its chief economist were Germans. “All the pretty words how the ECB would function after its model, the Bundesbank, and how Germany, as the largest country, would retain its special role turned out to be echo and smoke.”

But there is no agreement. Yet.

“A return to the D-Mark would be catastrophic,” BMW CFO Friedrich Eichner told Reuters (Spiegel). “We should to do everything possible to avoid that it will get that far.”

Siemens CEO Peter Löscher was more sanguine. “The euro is extremely important for the European industry,” he said. Frank Appel, CEO of Deutsche Post DHL, said, “whatever it would cost to save the euro will be less than that what the euro has given and will continue to give Germany and Europe.” The spokesperson for Merck KGaA was more ambivalent: “It’s part of our job ... to be prepared for changes.”

Meanwhile, austerity is taking its toll on Greece. Suicides jumped by 22.5%. Unemployment rose to 18.2%. Pharmacies are having difficulties obtaining medications. More cuts are coming. If there is no agreement with bondholders, the bailout Troika will walk and Greece will default in March. But now, even the Troika is in disarray. Read....  Greece: Disagreement Everywhere.

end

Bruce Krasting has written a great piece on 3 areas:
1. the turmoil in Greece2. cement companies in Switzerland, France, Germany and China     and how cement companies in China are 25 x  the usage compared to the USA and Europe.      3.  the CBO has reminded the USA that it must pass spending laws as most of the spending has been passed  by continuing resolutions.
this is a very important read:
(courtesy zero hedge,Bruce Krasting)

Greece, China and the USA

Submitted by Bruce Krasting on 01/17/2012 21:08 -0500

• Australia
 
• Bureau of Labor Statistics
 
• China
 
• Congressional Budget Office
 
• default
 
• fixed
 
• France
 
• Germany
 
• Greece
 
• Gross Domestic Product
 
• Market Share

On Greece

I spoke with someone from Athens today. It's not a pretty picture.

Issues related to subsistence have replaced the fervor for demonstrations. This may not last according to this resident.

The closing of stores and shops is escalating. Apparently, 20% of all retail establishments are shuttered. Nearly every block has one reminder of the ongoing depression in the economy.

The Greek Diaspora is in full swing. People are leaving the country, old and young alike. They are going to Europe, where the prospects of jobs stink, but not as badly as in Greece.  They are also fleeing to America (family members in the US have been helping out), Australia (where some are welcome) and South America.

The talk is that the Greeks are becoming the new Palestinians. They leave their homes, as there is no future there, but all the time they wish they never left.

As the shops close and the people leave, the economy shrinks. My Greek friend is convinced that government revenues are collapsing as a result. Whatever estimates the Troika were looking at six-months ago are pure fantasy today. The country is imploding.

People are feeling hopeless, and the situation is getting worse. In this fellow’s opinion, there is not a chance in hell that Greece will avoid a default. Two years ago there was a general belief that Greece could manage through a crisis, and avoid defaulting and sustain the link to the Euro. That is no longer the case.

This friend understands that a transition from the Euro to the Drachma would cause huge additional pain. It would devalue the pensions of every citizen by at least 50%. He understands that a default would mean that Greece would be a debt pariah. In spite of this, he prefers that it would come sooner rather than later. He thinks this is the prevailing sentiment in the country. There is nothing desirable about this choice. It’s now just inevitable.

On Cement

The big Swiss cement company Holcim announced a charge to assets as a result of a write down of fixed assets. Here's the headline and a look at Holcim’s stock performance. Note that the stock got clipped for a 1/3 of it value about 8 months ago.

 .

The large cement producers from France and Germany also had their stocks whacked at about the same time.

Actually there is not much good news for the cement boys anywhere:

A question for readers: How big is China when it comes to cement? Keep in mind that the EU and the USA have GDPs of about $15T apiece. China is much smaller and has a GDP closer to $6T. Knowing that, what’s your guess on how China stacks up in the world of cement? I would have thought that China was as big as the US or EU. The economy is smaller, but they are building so much, my guess was about equal.

Wrong. wrong. wrong. I must admit, I was blown away by this:

China is 25 Xs larger than either the US or EU! When it comes to cement, forget the rest of the world and focus on what is happening in the country with a 54% market share.

China’s cement production has been on a tear for years. But it's slowing down. The production for 2011 will come in at 1.88mm metric tones, an increase of only 6% over 2010 (the slowest in 15 years). The Cement Association of China is forecasting that 2012 total production will be “about the same as 2011”. We shall see. I saw this article on cement pricing in Sichuan province. 

Since 2004 China' GDP has doubled. So has its cement production. That's not a coincidence. The forecast for unchanged production in 2012 is inconsistent with high growth in GDP. What does zero growth in cement production translate into Chinese economic growth? My guess is that 4% GDP would be a good result. That would be well below stall speed for China.

On Continuing Resolutions

The CBO sent a memo to the House and the Senate. It was reminder of all of the stopgap measures that are in place. The government is running on a series of continuing resolutions. How big a deal is this? Potentially, it’s a very big deal. The amount involved is $969B!

There are two lists. This first one looks at the spending for which the necessary enabling legislation has already expired:

This one is for those expenditures whose authorizations expire on or before September 30 of this year:

You might rightly ask, “What’s that big chunk of money being spent on?” The biggest chunk is the military (68%).  Even with partisan politics and an election year, the military will likely get its money without much of a fight. The CBO report spells out what the rest of the dough is being spent on. (It runs 100 pages.) Some snippets:

General Administration

Unauthorized FY 2012 Appropriations: 11,519,966,000

United States Marshals service

Unauthorized FY 2012 Appropriations: 11,806,793,000

National Institutes of Health

Unauthorized FY 2012 Appropriations: 30,689,990,000

Western Hemisphere Drug Elimination 

Unauthorized FY 2012 Appropriations: 1,061,000,000

Operations of the Peace Corps

Unauthorized FY 2012 Appropriations: 375,000,000

Migration and refugee assistance

Unauthorized FY 2012 Appropriations: 1,639,000,000

Department of State diplomatic and consular programs

Unauthorized FY 2012 Appropriations: 8,275,386,000

Section 8 tenant-based housing assistance

Unauthorized FY 2012 Appropriations: 18,914,369,000

Low-income home energy assistance

Unauthorized FY 2012 Appropriations: 3,478,246,000

Noxious Weed Control and Eradication  

Unauthorized FY 2012 Appropriations: Not Available

Brown Tree Snake Control and Eradication 

Unauthorized FY 2012 Appropriations: Not Available

Assistance to trafficking victims in the United States

Unauthorized FY 2012 Appropriations: 9,794,000

Administration on Aging programs

Unauthorized FY 2012 Appropriations: 1,473,703,000

Bureau of Labor Statistics

Unauthorized FY 2012 Appropriations: 610,224,000

National Endowment for the Arts

Unauthorized FY 2012 Appropriations: 292,510,000

Pandemic and All-Hazards Preparedness Act

Unauthorized FY 2012 Appropriations: 62,700,000

Project Bioshield

FY 2012 Appropriations: Not Available

Strategic Petroleum Reserve

FY 2012 Appropriations: 192,704,000

National Highway Traffic Safety Administration

FY 2012 Appropriations Authorized 24,693,000,000 

Federal Trade Commission operations: 

Unauthorized FY 2012 Appropriations: 311,563,000

Centers for Disease Control programs regarding infertility and sexually transmitted diseases

Unauthorized FY 2012 Appropriations: 964,855,000

Corporation for Public Broadcasting

Unauthorized FY 2012 Appropriations: 445,000,000

Administrative expenses for Government National Mortgage Association guarantees of mortgage-backed securities

Unauthorized FY 2012 Appropriations: 19,500,000

Funds appropriated to the President for international assistance.

Unauthorized FY 2012 Appropriations: 16,462,253,000

Secretary of Health and Human Services refugee and entrant assistance programs

Unauthorized FY 2012 Appropriations: 769,789,000

Pacific Salmon Treaty 

Unauthorized FY 2012 Appropriations: 123,566,000

Nutria Eradication and Control Act

Unauthorized FY 2012 Appropriations: Not Available

Bureau of Land Management

Unauthorized FY 2012 Appropriations: 973,552,000

Paperwork Reduction Act of 1995

Unauthorized FY 2012 Appropriations: Not Available

Renewable energy research and development

Unauthorized FY 2012 Appropriations: 963,000,000

Appropriations for the Coast Guard

(1) Operation and maintenance 

Unauthorized FY 2012 Appropriations: 7,051,054,000

(2) Acquisition, construction, rebuilding, and improvement

Unauthorized FY 2012 Appropriations: 1,403,924,000

(3) Retired Pay 

Unauthorized FY 2012 Appropriations: 1,400,700,000

Specialty crop research initiative

FY 2012 Appropriations Authorized 100,000,000

Food animal residue avoidance database program

FY 2012 Appropriations Authorized 2,500,000

National Sheep Industry Improvement Center

FY 2012 Appropriations Authorized 10,000,000

Block grants for energy efficiency

FY 2012 Appropriations Authorized 2,000,000,000

Central Intelligence Agency Retirement and Disability Fund

FY 2012 Appropriations Authorized 514,000,000 

Have a look at the report. There are hundreds of line items for expenses. Something for everyone to hate. 

end

Now it looks like Portugal will default:




(courtesy David Oakley, Robin Wigglesworth  London's Financial times)

Portugal mired in default territory

By David Oakley and Robin Wigglesworth

Financial Times

Wednesday, January 18, 2012

Portugal is trading in default territory after investors offloaded the country’s bonds this week amid rising fears of contagion, hurting a government debt auction on Wednesday. Worries are mounting that the private sector and Greece will fail to agree a restructuring package for Athens’ debt.

Portuguese 10-year bond yields, which have an inverse relationship with prices, jumped to a new euro-era high of 14.40 per cent by in London on Wednesday. Before the S&P two-notch downgrade late on Friday, yields were trading at 12.45 per cent.

Portugal on Wednesday sold €1.25bn of 11-month bills, €754m of six-month notes and €496m of three-month notes, lower than the €2bn to €2.5bn targeted by the government debt agency ahead of the auction.

Portugal does not have a bond maturing until June, when €10bn is due for repayment. The country’s borrowing needs are also modest at €17.5bn. However, investors worry about its painfully slow growth, which could impact on its ability to service its debts.

Many investors were also forced to sell Portuguese bonds after Standard & Poor’s downgraded the country to junk on Friday. Other funds sold Portuguese debt after Lisbon was removed from Citigroup’s European Bond Index, which these investors track, because of its fall to junk status.

All three main credit rating agencies, S&P, Moody’s, and Fitch, rate Portugal as junk, below investment grade. In the eurozone, only Greece is also rated junk by all the agencies.

The markets are pricing in a 65 per cent chance that Portugal will default over the next five years, according to credit default swaps as these instruments, which protect investors from default, leapt to record highs this week.

Portuguese bond prices have slumped to levels considered by many investors to be in default territory. Bond prices for benchmark 10-year debt were trading at slightly over 50 per cent of par on Wednesday morning, recovering from levels below 50 per cent on Monday.

Elisabeth Afseth, fixed-income analyst at Investec Capital Markets, said: “The growing worry that Greece will default is now hitting Portugal because of contagion fears. If Greece defaults, then the worry is so will Portugal. We have seen how quickly this crisis can spread.”

Fitch, the rating agency, warned on Tuesday that Greece was likely to default in March when Athens is due to pay €14.5bn in bonds.

Edward Parker, managing director at Fitch, said on Wednesday that the rating agency was likely to downgrade all six eurozone nations it placed on review in December – Spain, Italy, Ireland, Cyprus, Belgium and Slovenia – by one or two notches.

Italian and Spanish borrowing costs edged up again on Wednesday morning, but remain significantly lower than the highs touched at the peak of the market turmoil late last year.

Greek debt swap negotiations with private bondholders will resume in Athens on Wednesday, the Institute of International Finance said on Tuesday after talks were suspended last week.

The IIF said its managing director and co-chairman of the private investor creditor steering committee for Greece, Charles Dallara, and Jean Lemierre, special adviser to the chairman, would resume discussions with the Greek government.

But many investors fear the talks will fail, increasing the chance that Greece will default on March 20 when the bond repayments are due.

Bruce Richards, chief executive of Marathon Asset Management, one of the 32-member private creditor group negotiating with Greece, told Bloomberg that Greece would not be able to make the March 20 payment, but expected that creditors would agree to a restructuring deal for cash and securities with a market value of about 32 cents per euro of government debt before the payment is due.

end

This next commentary is extremely important as the TIC report shows that China has reduced its holdings of USA treasuries for the past 7 weeks.  Its holdings are now down to 1.132 trillion dollars, its lowest level in a year.  The Russians are also getting into the act and they have lowered its USA reserves by over 50%  from 176 billion to 80 billion USA dollars.

If the Russians and the Chinese are selling their reserves who on earth are buying USA treasuries?
Answer:  nobody.  The bonds are purchased by way of swaps with the ECB:

(courtesy, TIC report, zero hedge)

China Brings US Treasury Holdings To One Year Low, Russia Cuts Treasury Exposure By 50% In One Year

Submitted by Tyler Durden on 01/18/2012 09:22 -0500

• China

Today's TIC data confirmed what Zero Hedge readers have now known for quite some time: namely that foreigners are selling US paper. And while we have used contemporaneous Custody Account data from the Fed to present that in the past 7 weeksforeigners have sold a record amount of bonds, we now get confirmation via TIC that in November the selling continued, especially at the biggest non-Fed holder of US paper, China, which saw its holdings down to $1,132.6 billion, the lowest in the past year. Yet where the selling is just relentless is in Russia, which has quite demonstratively slashed its US Treasury holdings in half in the past year from $176 billion to under $80 billion. Putin is not happy, and is not afraid to show it.

China:

Russia:

end
Here is the Dow Jones official release of the TIC report:
(courtesy Dow Jones newswires)


DJ TIC: China Net Seller Of US Treasurys In Nov; Remains Top Holder
Wed Jan 18 09:03:31 2012 EST
WASHINGTON (Dow Jones)--China sold U.S. Treasurys in November, reducing its net holdings but remaining the largest foreign holder amid the growing sovereign debt crisis in Europe, the Treasury Department said Wednesday.
Overall, foreigners were net buyers of long-term U.S. financial assets in November according to the monthly Treasury International Capital report, known as the TIC.
China's net holdings fell $1.5 billion to $1.133 trillion, following net selling of more than $14.2 billion in October. Analysts caution the data may not reflect the full spectrum of China's activity in the market, however. For example, Treasury last year adjusted its estimation of China's holding based on use of proxies in other countries. Also, the net figure is a sum of short and long-term activities.
Japan, meanwhile, continued to be a heavy net buyer of Treasurys, accumulating Treasuries to record levels and threatening China's top holder position. Japan remained the second-largest holder of Treasurys, lifting its holdings to $1.039 trillion from $979.0 billion in October.
Among all foreign investors, net purchases of U.S. Treasury notes and bonds totaled $54.0 billion, compared with net buying of $15.3 billion in the previous month. Private foreign investors bought a net in $28.1 billion Treasury notes and bonds, after buying a net of $18.6 billion in October.
The closely watched figure of net long-term securities transactions showed total buying of $59.8 billion in long-term U.S. securities in November, after purchases of $8.3 billion the month before.
More broadly, net purchases of long-term U.S. securities, including transactions that don't occur on the open market, totaled $44.4 billion following net selling of $5.2 billion the month before.
The monthly Treasury report highlights cross-border acquisitions of securities with maturities of more than one year including nonmarket transactions such as stock swaps and principal repayment on asset-backed securities.
The report's most comprehensive category, "monthly net TIC flows," includes nonmarket flows, short-term securities and changes in banks' dollar holdings. This measure of net foreign capital inflow was $48.6 billion, compared with an outflow of $39.6 billion in October. Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the U.S. can finance its trade deficit.
U.S. data released last week showed the trade gap widened in November, on slumping euro area exports and rising oil prices, showing the first trade signs of the European debt crisis breaking on American shores. The trade deficit with China narrowed, however, as exports surged to new level and imports fell from the previous month's record high.
-END-
The following paper was the second major piece written by Ambrose Evans Pritchard today as he  was a very busy boy.Here he discusses that the Euro is pushing the important Italian nation into a severe depression.  Just take a look at M3 as it contracts to oblivion.The M3 contraction pattern is now engulfing Greece and Portugal as well as Italy:
(courtesy Ambrose Evans Pritchard)

The euro is pushing Italy into depression

By Ambrose Evans-Pritchard Economics Last updated: January 18th, 2012

Italy is being pushed into depression by monetary union

Here is the latest money supply chart from the Banca d'Italia. Just look at M3. Horrendous. See page 7 of this report.

This speaks for itself. There is no clearer indictment of the dysfunctional nature of monetary union. Italy is being pushed into depression. Criminal.

Obviously, Italy and Germany can no longer share the same monetary policy. Ergo, Germany should leave EMU, pronto.

The Banca said Italy's economy contracted by 0.5pc in the last quarter of 2011. It will shrink by a further 1.5pc this year, with no growth in 2013.

This is a direct result of the misguided pro-cyclical austerity polices imposed by Angela Merkel and the ECB – the infamous Trichet letter – without offsetting monetary and exchange stimulus.

This will of course play havoc with Italy's debt trajectory.

• For those wondering where I have been, I have been crossing South China from Canton to the foothills of the Himalayas in Yunnan with my family. Impressions:

A lot of luxury stores in shopping malls selling very little.
A lot of middle class housing estates looking half empty (cycled through a few).
A lot of surprisingly rich peasants.
Impossible to buy train tickets. China desperately needs a railway upgrade. Not high-speed, just plain vanilla railways.

Read Wild Swans at last. Everybody must read that book.

end
Oh! why not.  Let's downgrade the only nation that has both monetary and fiscal discipline:
(courtesy zero hedge)

Egan Jones Downgrades Germany From AA To AA-

Submitted by Tyler Durden on 01/18/2012 11:42 -0500

• default
 
• Egan-Jones
 
• Egan-Jones
 
• European Central Bank
 
• Germany
• Gross Domestic Product
 
• Sean Egan
 
• Unemployment

Sean Egan strikes again, this time downgrading Germany from AA to AA-.

Germany maintains its position as the European Union's top economy. However, Germany has been shouldering the burdens of other EU countries via its exposure to the EFSF and indirectly via the ECB's hefty exposure to the weaker banks and the weaker sovereign credits. The country's debt to GDP of 83% as of 2010 (expect near 86% for 2011) and a deficit to GDP of 4.6% is weak (and getting weaker) for a top-tier country. On the positive side, unemployment was only 6.8% but will probably increase as many EU countries implement austerity measures. Other positives were the positive (EUR133B) balance of trade and the positive (EUR193B) current account as of the end of 2010. Inflation has been fairly moderate at 2%, but we expect an increase as a result of the decline in the euro relative to the dollar.

German chancellor Angela Merkel continues to create tension with EU member states by pushing for ratification of changes to the Lisbon Treaty. The government insists that private investors bear more of the costs of further European bailouts. Note, the cost of the bailouts is likely to be absorbed via increased support for the EFSF, the ESM, the ECB and a rise in the number of euros. The fallout from a likely Greek default needs to be monitored.

via Egan-Jones


end


I guess it is time to say goodnight.


I will check in with you tomorrow, a little late 


and a little sore, but I will report  (going to the dentist)


bye for now


harvey