The share price closed 12.81 percent lower in Milan at 2.286 euros.
The capital increase announcement last week dragged the stock down 14 percent on Wednesday, 17 percent on Thursday and 11 percent on Friday.
In order to attract investors, the bank was forced to price new shares at the heavily discounted level of 1.943 euros -- a move that spooked investors already nervous about the state of eurozone banks in the current environment.
Asked about Italian banks, Prime Minister Mario Monti on Sunday said lenders were "not at risk". He said UniCredit's capital increase was necessary even though it would mean "inconveniences" such as a fall in its share price.
UniCredit chief executive Federico Ghizzoni last week said the share issue was "an important test for the whole of the European banking market."
Several major UniCredit shareholders, including German insurance giant Allianz and Italian banking foundations, have already undertaken to buy around 24 percent of the shares in the capital increase, which ends on January 27.
A source close to the negotiations told AFP last month that the Libyan central bank, which already holds a 4.99-percent stake in UniCredit, would also take part using funds from Moamer Kadhafi's regime that are to be unblocked.
European authorities are forcing the region's banks to quickly raise their core capital to 9.0 percent by June in order for them to be able to better withstand shocks from the eurozone debt crisis.
Following the the 2008-09 global financial crisis, regulators agreed to strengthen banks' core capital reserves from 2.0 percent to 7.0 percent under Basel III rules, but the banks were given nearly a decade to comply.
The largest banks, whose failure could undermine the whole financial system, were told to increase their reserves to the equivalent of 9.0 percent of their asset base, the quicker the better.
UniCredit said on November 14 that it planned to raise its core capital from 8.74 percent to 9.0 percent in 2012 and then to 10 percent by 2015.

end.

Here is a visual for the 8 halts in UNIcredit today:

(zero hedge)

Italian Banks Plunge On Capital Raise Concerns

Tyler Durden's picture





While headlines are reeling with the almost-50% drop (and 8 halts today alone!) in UniCredit's stock price since the start of the year (as it tried and 'succeeded' to raise capital from clearly risk-averse investors), the rest of the Italian banking sector is now 'crashing'. With bank stocks down 12-20% year to dateacross the board, the clear fear is that the cost of raising real equity capital (not finding some short-term funding crisis solution) remains extremely high and as we tweeted last week,if the EUR7.5bn capital raise caused a 40% sell-off in UniCredit, how is the market going to cope with the EUR115bn more that is needed? Good Luck.




Then we had Italian 10 yr bond finish trading at a yield of 7.16%

(courtesy zero hedge)

Italian Bonds Surge To Early November Wides

Tyler Durden's picture





10Y Italian bonds (BTPs) ended the day at their second-widest closing spread to Bunds ever (at 533bps). Only November 9th saw a wider closing print and of course we saw margin hikes at LCH CC&G. 10Y yields are at 7.16%, their highest since just after Thanksgiving but we do note that 2Y yields have stabilized at around 5.00% yields (having peaked near 8% during thin Thanksgiving trading). It seems apparent that perhaps traders front-running LTRO's impact have compressed the 2s10s term structure but much clearer to us is Mr. Market's obvious desire for more money-printing now as BTPs are pushed to unsustainable levels once again - and the banking-to-sovereign vicious circle transmission of insolvency cranks up.
BTPs underperformed today as most European sovereigns were leaking wider into the close...

leaving BTPs almost as bad as they have ever been in 10Y spreads (upper pane) and yields (middle pane).
All of this in the context of a consistently increasing SMP by the ECB in the last three weeks...
Charts: Bloomberg



end


The closing 10 yr Italian bond.  It seems the only nation to record a rise in yield is the Italians:

Snapshot

SUMMARYONE-YEAR CHART INTERACTIVE CHART
Value7.16One-Year Chart for Italy Govt Bonds 10 Year Gross Yield (GBTPGR10:IND)
Change0.030 (0.419%)
Open7.17
High7.18
Low7.06


end.

 Spanish 10 yr bond: (lowers by 15 basis points)

Snapshot

SUMMARYONE-YEAR CHART INTERACTIVE CHART
Value5.56One-Year Chart for SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE (GSPG10YR:IND)
Change-0.146 (-2.559%)
Open5.71
High5.72
Low5.54


end.

Austrian 10 year bond yield: (lowers by 15 basis points)

Snapshot

SUMMARYONE-YEAR CHART INTERACTIVE CHART
Value3.29One-Year Chart for Austria Govt Bonds 10 Year (GAGB10YR:IND)
Change-0.151 (-4.399%)
Open3.45
High3.46
Low3.27


It seems that the Greeks are taking the bailout money and buying military equipment.
(courtesy zero hedge)




Greece Spends Bailout Cash On European Military Purchases

Tyler Durden's picture





As Greek standards of living nose-dive, loans to households and businesses shrink still further, and Troika-imposed PSI discussions continue, there is one segment of the country's infrastructure that is holding up well. In a story on Zeit Online, the details of the multi-billion Euro new arms contracts are exposed as the European reach-around would be complete with IMF (US) and Europe-provided Greek bailout cash doing a full-circle into American Apache helicopters, French frigates, and German U-Boats. As the unnamed source in the article notes: "If Greece gets paid in March the next tranche of funding (€ 80 billion is expected), there is a real opportunity to conclude new arms contracts." With the country's doctors only treating emergencies, bus drivers on strike, and a dire lack of school textbooks and the country teetering on the brink of Drachmatization, perhaps our previous concerns over military coups was not so far-fetched as after the Portuguese (another obviously stressed nation), the Greeks are the largest buyers of German war weapons.  It seems debt crisis talks perhaps had more quid pro quo than many expected as Euro Fighter commitments were also discussed and Greek foreign minister Droutsas points out:"Whether we like it or not, Greece is obliged to have a strong military".

From Zeit Online: Fine Weapons For Athens (Via Google Translate)
Frigates, tanks and submarines: A Greek military passes any savings package. And Germany benefited.

The Gift of the Greek Ministry of Defense has the man in the head: up to 60 fighter aircraft fighter for maybe € 3.9 billion euros. French frigates for about four billion, patrol boats worth 400 million euros, as much is the necessary modernization of the existing Greek fleet. Then it still lacks of ammunition for the Leopard tank , also would have two American Apache helicopters will be replaced. Oh, and one would like to buy German U-boats, total price: two billion euros.

What the man who goes in and out of Greece's Defence Ministry, in an Athens cafe is because of the sounds absurd. A State which is on the verge of bankruptcy and is supported by billions of the European Union wants to buy tons of weapons?The man in the café is often seen in photos next to the generals of the Army or Defense, he phoned often with these people, so he knows his way around. He knows how sensitive the issue, and would therefore - like most other party - are not named in the newspaper. He even holds for arms purchases currently not communicable. But could soon change that, he says: "If Greece get paid in March the next tranche of funding of € 80 billion is expected, there is a real opportunity to conclude new arms contracts."

If only one billion staying left, so the man could be, for example, the first Euro Fighter frigates or a binding order.

Really incredible: This spring, decides whether Greece survives in the euro area or the drachma back . On the morning of the internals in the café are freely divulged, physicians treat in Athens hospitals only in emergencies, bus drivers on strike, are still missing textbooks in schools and thousands demonstrate against state officials announced their dismissal. Greece's government announced a new savings program that barely spared a Greek.

Unless he works for the military or the armaments industry . On these two areas is in fact still almost passed without any austerity.

...

Under Greece's EU partners, there are few who speak out publicly in favor, stop the project immediately and Greek armor for a long time. One is Daniel Cohn-Bendit, leader of the Greens in the European Parliament: "From the outside, access to EU countries in practically all the rights of Greece.Nurses will cut the wages and everything should be privatized. Only in the defense budget, it means a sudden, it was a sovereign right of the state. It's surreal. "

Cohn-Bendit believes that behind the hesitation of Europe to entrenched economic interests. Main beneficiary of the Greek armament policy in Europe is just saving champions Germany. According to thejust-released report, Arms Export in 2010 after the Portuguese, the Greeks - a state on the verge of bankruptcy - the largest buyers of German war weapons. Spanish and Greek newspapers spread the rumor at all, Angela Merkel and French President Nicolas Sarkozy would have remembered former Prime Minister of Greece George Papandreou nor the end of October at the edge of a summit meeting to finding solutions to existing or new arms orders complete. InPapandreou's environment is not confirmed, the federal government decided denied "messages, Chancellor Merkel and President Sarkozy had recently urged Greece to new arms deals, baseless," said a spokesman via e-mail.

...

Clearly this is apparently also become a state visit in Greece: German Government members expressed their export needs, and the Greeks reiterated their demand for imports. It has every known, "that Greece had invested too much in its military," so Linnenkamp. Yet the Greeks piled on over the years, enormous obligations.

...

But in the spring of 2010 reminded Foreign Minister Guido Westerwelle (FDP), the Greek government to the order of € Fighter, just weeks before the Greek bankruptcy. "Westerwelle called for a commitment to the Euro Fighter," says someone who has experienced the talks closely. The Foreign Minister also assured again in the Greek daily newspaper Kathimerini: "We do not urge the Greek government to buy. If (they) but, at any time whatsoever, a decision to purchase fighter aircraft meets the Euro Fighter countries want to be represented here by Germany, will be considered in the decision. . This is within the European Union, but completely normal, "A few weeks later Westerwelle called in the stock market newspaper more discipline from the South:" We expect before, there are discussions about aid that Greece executes fully their own homework to consolidate policy. "

How does that work? Not at all, is the defense expert Linnenkamp: "It was totally irresponsible to speak in the midst of severe economic crisis, the issue of Greece's Euro Fighter at all."

...

Dimitris Droutsas is one of the few Greeks who speak openly about these figures. By June 2011, he was of Greek foreign minister. "We have not spent so much money on defense, because we made it fun," he says. The Greek foreign borders must be secured against the waves of migration from North Africa and Asia, almost daily there are conflicts with Turkey. "As Foreign Minister I was always in the afternoon a message from the Defense Department with the list of Turkish violations of our airspace." Greece also been watching with concern the increasing activity of the Turkish navy in the Aegean Sea and have seen a good 35 years on the "Turkish invasion" Cyprus . Since then, the Greeks lived in a state of fear. That with Turkey give an arms race, although both countries are in NATO, Droutsas deems legitimate: "Whether we like it or not, Greece is obliged to have a strong military" point.

...

Resistance in its own population as Droutsas Greeks need not fear. The Greek military security sector promises to the people - and jobs. In a country without its own significant industry that is worth much. German defense companies have recognized this early and with Greek companies closely intertwined. Someone who mitverhandelte long, says: "In Greece, the arms deal as a give and take anywhere. What do I get in return when I buy a tank with you? Always it was also about compensation. Any politician who signed a treaty with the Germans hoped that a corresponding portion flows back. "

end.

Then this from Greece:

(courtesy Der Spiegel)

Doubts grow over Greek restructuring: Der Spiegel said that the outlook for Greece is looking increasingly bleak, noting that government reforms are behind target, while PSI negotiations have stalled. It added that a disorderly default could be just weeks away. As reported by other media outlets, the article pointed out that the IMF wants to revise the benchmark figures for the restructuring program approved in October. It also cited an internal document that showed that the troika sees three possibilities: either Greece must implement tougher austerity measures; or private creditors must accept a larger haircut; or the country's creditors must provide Greece with additional funds.


and this from London's Financial times:

Bondholders poised to accept higher losses: The FT said that holders of Greek bonds are set to accept higher losses. Sources involved with the debt swap discussions told the paper that bondholders were likely to suffer a haircut of 50-60%, more than the 50% originally agreed in October as part of the second Greek bailout package (recall that the haircut under the first bailout package was 21%). The article pointed out that while the IMF and Greece have pushed for the tougher terms, bondholders and factions within the ECB have proposed watering down the PSI or even scrapping it completely. The FT, which highlighted investor concerns that holders of Italian and Portuguese debt could potentially also face restructurings, went on to discuss the uncertainty surrounding the fate of the ECB's estimated €45B of Greek sovereign holdings.




Today the Chairman of the Switzerland's national bank quit amid a scandal over his wife's purchases of USA dollars.  Now the Swiss peg with the dollar is in jeopardy:

(courtesy zero hedge)

SocGen On Hildebrand Departure Next Steps: "Will SNB Have To Make A Move?"

Tyler Durden's picture





As many have been suspecting all along, the political game involving the ouster of now former SNB president Philipp Hildebrand has been nothing more than a game of "pin the tail on the scapegoat" for bad monetary policy by the SNB, read the EURCHF 1.20 peg. In other words, it is quite likely that alongside the burgeoning SNB balance sheet, the bank had also accumulated quite a few losses, which the Swiss public will not be too happy with, and a change at the top was required. So what happens next: will the SNB relent and allow the peg to expire as the scramble for a (now much more diluted) CHF resumes ahead of the European D-Day in March, or will the peg be forced to be pushed even higher, at the expense of even greater balance sheet losses? Here is what SocGen thinks will be the next steps.
EUR/CHF: will the SNB have to make a move?

The EUR/CHF has been weakening steadily over the past month and is now back at the low end of the 1.2125-1.2475 range, which is within the level since mid-September and the last limit before the 1.2000 floor implemented by the SNB on 6 September.

Upside pressure on the CHF has underpinned the stressful climate in the eurozone, despite the control system set up by the SNB and reduced global risk aversion mainly attributable to better US figures. The markets are waiting for the implementation of the measures agreed on at the end  of last year (Merkel-Sarkozy meeting today); the situation in Greece is still a big concern (EUR15bn reimbursement on 20 March and discussions under way with the Troika); the budget outlook remains fragile overall (impact expected from the potential recession); and sovereign spreads  remain stretched (notably for Italy at 520bp).

The initial reaction following Hildebrand resignation today was almost limited above 1.2125 even if the global tone for the CHF remains solid. A drop through the 1.2125 zone would open the door to the 1.2000 level. This threat would then force the SNB to react via market intervention. The Central Bank said today it will defend the 1.20 level with “utmost determination”.

At the end of the day, the likelihood of raising this floor is expected to grow as deflationary pressure increasingly threatens the Swiss economy. Global CPI has reached -0.7% yoy and core CPI is collapsing towards a historical level of -1.1% yoy (whereas the situation is stabilising in the  eurozone). At the same time, manufacturing production is down for the first time since June 2009 (-4.3% yoy). In the highly uncertain economic environment with specific deflationary risks for Switzerland, and given the current evolution of spot rates, authorities are very likely to have to  contend with raising the floor to over 1.20 in the short term.

end.

In Belgium today, we had the caretaker government announce freezing of spending as they need austere measures to rein in their mess:

(courtesy Bloomberg)

Belgium freezes €1.3B of spending following EU warning: Bloomberg noted that Belgium froze €1.3B in spending after the EU warned that a weaker-than-expected economy would push the deficit above the new government's targets. However, Budget Minister Olivier Chastel told L’Echo newspaper that the freeze was just an administrative move to give it time to conduct the budget review. He also said that the government will get down the deficit down to 2.8% of GDP in 2012 as planned. The article pointed out that while EU Economic and Monetary Commissioner Olli Rehn said last week that immediate cuts of as much as €2B would be a "first-best solution", he also said that he would let Belgium buy some time with a spending freeze until a scheduled budget review in February. The EU gave Belgium until 9-Jun to respond to its recent warning, and will issue an opinion on 11-Jan.


(Belgium 10 yr bond yield)





Snapshot

SUMMARYONE-YEAR CHART INTERACTIVE CHART
Value4.57One-Year Chart for BELGIUM GOVT BONDS 10 YR NOTE BELGIUM BB (GBGB10YR:IND)
Change(%)
Open4.64
High4.66
Low4.55








In Iran, they just found an American guilty of being a spy.  The war drums continue to beat louder and louder:


Iran Sentences Alleged CIA Spy To Death

Tyler Durden's picture





Just when we thought we may go through one full day without some escalation out of the greater Iran region, here comes the WSJ to inform us that Iran has decided to shove the MAD ball right back into America's court with news that Iran has sentenced alleged CIA spy, 28 year old Amir Hekmati, to death. "Amir Mirzaei Hekmati, born in Arizona to Iranian parents and raised in Michigan, was accused of Moharebe--or being the enemy of God-- the highest crime in Islamic law that carries the death penalty in countries where Sharia law is practiced. The prosecutor's indictment against Hekmati, read in court, said he was guilty of waging a war against God, spying on the Islamic Republic of Iran for the CIA and working for an enemy government, according to Iranian media reports." Needless to say, "the case, the first recent death penalty for an American in Iran, will likely increase tensions between the U.S. and Iran. The State Department has called for Iran to release Hekmati and give the Swiss embassy--the protectorate of U.S. interest in Iran--access to him." It appears Iran has decided not to proceed with those particular instructions.
More from the WSJ:
Fars News Agency, a semi-official service affiliated with the Revolutionary Guards Corps, quoted Hekmati in court as saying, "I was fooled by the CIA to come to Iran and infiltrate the intelligence agencies and become a source for the CIA. But I personally didn't intend to harm Iran, I love Iran and wanted to live here and not return to the U.S."

It is not clear if the quotes attributed to Hekmati are accurate or if he made the comments under duress in a forced confession. The court hearing was behind closed doors.

Hekmati is a former U.S. Marine who served from 2001-2005 and subsequently worked as a contract translator for the U.S. Army in Afghanistan. At the time of his visit to Iran in August, he was working for a contractor company in Qatar, according to statements by his family.

The CIA has not commented on his case but his family has said that his visit to Iran in August 2011 was for personal reasons and denied that he received training or worked for the CIA.

"Amir has never had any affiliation with the CIA, and these allegations are untrue," said the family in a statement in December after his initial court hearing.
Judging by Brent's response today, especially with some ratherdire predictions hitting the tape over the weekend, few believe this latest push will amount to much and is merely more posturing. Which it will be, until it isn't.
h/t London Dude Trader

end.

On this side of the pond at 12:50 Atlanta Fed President Lockhart reiterated his calls for more QEIII:

12:48 Atlanta Fed President Dennis Lockhart says Fed cannot rule out additional easing
* In his remarks to the Rotary Club of Atlanta, Lockhart(voting member in 2012) notes that "slow progress toward full employment justifies continuing consideration of whether more can and should be done. So for me as a policymaker, now is not a time to lock into a rigid position."
* As recently as 29-Nov, Lockhart was on record as supporting the current course of monetary policy.
* * * * *




Then we received the following news where Bill Daley as Obama's chief of staff quit today.  It looks like Obama is not going to a JPMorgan, or Goldman Sachs alumni for replacement.  He is picking Jacob Lew of Citibank:

(zero hedge)

Bill Daley Barely Lasts One Year Under Obama - President To Discuss Live At 3 PM

Tyler Durden's picture





Remember when the hiring of former Wall Street insider and JP Morgan career man, Bill Daley, by the Obama administration as its latest Chief of Staff was big news last January? Well so much for that. The LA Times reports that the detente between Obama and Wall Street has reached new levels, with Daley's resignation expected to be announced at 3 pm by the president and is to be replaced by Citi's Jacob Lew, who in turn was the guy who oversaw the bank unit that "shorted the housing market." Well, at least Obama now knows to keep away from the JPM crew, whose Jamie Dimon is not all that happy with the president, if he wishes to avoid looking like not only the Wall Street's patsy, but also the guy who fails at sloppy seconds.
From the LA Times:
William Daley is stepping down as White House chief of staff and budget director Jack Lew is taking over the President Obama’s team as it heads into a tough election year, senior administration officials say.

Daley gave his letter of resignation to the president in a private meeting in the Oval Office last week, recounting the administration's successes of his one year on the job and saying it was time for him to return to his hometown of Chicago.

Obama plans to announce the change in leadership in a public event Monday afternoon. The official shift will take place at the end of the month, giving Lew time to complete the administration’s budget proposal while Daley leads the team through the crafting of the State of the Union address due in two weeks.

The choice of Lew puts a veteran staffer of the White House, Capitol Hill and State Department in a critical position at a difficult time for the president. Obama hopes he can work through tough budget and economic issues with Congress this year despite fierce opposition from Republicans in the GOP-led House. Having a strong team captain who can deal with lawmakers, staffers and business leaders is considered crucial to their strategy.

But aides say Obama had faith in Daley to lead that effort, and that he had not been discussing making any changes prior to last week. Daley’s letter took the president by surprise, said three officials familiar with the personnel discussions that followed. They requested anonymity to speak about the internal talks in advance of the public announcement.
The presidential address to explain how Daley has more pressing family obligations can be hear here live at 3pm, with the now customary 45 minute fashionably late delay.

end.

Lastly, the San Francisco Fed President, Williams also issued his plea for more QEIII.
This is nothing new,  Williams is also nicknamed "Helicopter John Williams", as he has been pounding the table continually for more printing!!:

(courtesy zero hedge)

Fed may need to buy more bonds: Williams

Mon Jan 9, 2012 12:40am EST



(Reuters) - The Federal Reserve Bank of San Francisco President John Williams expects that the central bank will need to buy more bonds if his forecast for subpar growth and low inflation comes to pass, the Wall Street Journal reported on Monday.
With import price pressures ebbing and wages still under pressure, Williams expects inflation to slow to 1.5 percent in 2012 and 2013 from nearly 4 percent earlier last year, he said in an interview with the newspaper.
He added that he expects subpar economic growth in 2012 at a 2.25 percent annual rate and 3 percent in 2013 and does not consider it enough to bring the unemployment rate much below 8 percent by the end of 2013.
"Unemployment is going to be sustained above a reasonable estimate of the natural rate of unemployment, which is closer to 6.5 percent than the 8.5 percent that we have now. That does make an argument that we should have more stimulus," he said.
St Louis Fed President James Bullard said on Saturday that recent data seems to suggest that the U.S. economic recovery is gaining strength, suggesting that the Fed may not need to buy bonds right now.
The diverse remarks show that the Fed is still divided over the need for more accommodation to ensure a soft recovery does not dissipate or wilt due to an outside shock such as an intensification of the European debt crisis.
Several Fed officials, including Boston Fed President Eric Rosengren, have urged another round of buying mortgage-backed securities to shore up the depressed housing market, . Williams, who is now a voting member of the Federal Open Market Committee which sets monetary policy, said he is not in favor of increasing interest rates "anytime soon."


end.

It is my contention that they are already engaging in QEIII.  The USA has tax revenues in the neighbourhood of 2.3 trillion dollars.  It has expenditures of around 3.7 trillion.  Thus a deficit of 1.4 trillion dollars on balance sheet.  If you add off balance sheet stuff like the wars we have close to 1.5 trillion dollars of deficit.
Japan is in a mess to fund their natural disaster; Europe is in a mess  (see above).  There is nobody capable of buying the bonds.  The USA hides the purchases through their swap arrangement whereby the dollars over in the Europe received through a swap buys the USA treasuries and thus hide QE.  It now seems that they wish to "come out of closet" and buy openly the bonds and increase the balance sheet of the Fed.

end

Greg Hunter talks about the phony jobs report released on Friday:

(courtesy Greg Hunter of USAWatchdog.com)


Greg Hunter’s USAWatchdog.com




Last Friday, the Bureau of Labor Statistics (BLS) said 200,000 new jobs were created which dropped the unemployment rate to 8.5%. Break out the party hats and champagne, we’ve finally hit bottom and are heading back up! That’s the way the mainstream media (MSM) reported it, and in a campaign year, President Obama took a victory lap. Reuter’s reported Obama said, "We’re making progress. We’re moving in the right direction. And one of the reasons for this is the tax cut for working Americans that we put in place last year. . . .When Congress returns they should extend the middle class tax cut for all of this year, to make sure we keep this recovery going." (Click here to read the completer Reuter’s story.)
Economist John Williams of Shadowstats.com says the government reported more than 40,000 jobs that didn’t exist. In his latest report, Williams said, "The reported seasonally-adjusted 200,000 jobs surge in December 2011 payrolls included a false, seasonally-adjusted gain of roughly 42,000 in the "Couriers and Messengers" category." Williams went on to report, "While today’s happy labor data likely will fuel financial-media and political talk of an improving economy, the underlying reality remains bleak, with data later this month and next generally tending to confirm the ongoing bottom-bouncing of the U.S. economy in a severe downturn." (Click here to go to the Shadowstats.com home page.) If unemployment was calculated the way BLS did it in 1994 and earlier, it would be 22.4% according to Williams.
By the way, the "tax cut" amounts to $20 a week on average, and it cuts cash to fund things like Social Security. Of course, nobody is talking about how Social Security went "cash negative" in 2010. The Washington Post reports, "Now, Social Security is sucking money out of the Treasury. This year, it will add a projected $46 billion to the nation’s budget problems, according to projections by system trustees. Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion. If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits." (Click here to read the complete Post story from Oct. 2011.)
Cutting Social Security sounds more like desperation to me and not a real recovery. Bill Gross who heads up PIMCO (an investment fund with more than $1 trillion under management) recently gave a dire 2012 investment outlook. He starts off by saying, "It’s as if the Earth now has two moons instead of one and both are growing in size like a cancerous tumor that may threaten the financial tides, oceans and economic life as we have known it for the past half century. Welcome to 2012." Gross thinks the world could experience big inflation or big deflation in 2012. I think bankers would rather live with inflation than take the losses deflation will deliver. So, I think inflation for 2012 is a lock, and that could turn into hyperinflation, but who knows about the timing of the latter. Gross closes his outlook by saying, "The New Normal is "Sub," "Ab," "Para" and then some. The financial markets and global economies are at great risk." (Click here to read the complete Bill Gross investment outlook from PIMCO.) Please keep in mind, this is not some nut job living in a cave in Afghanistan, but a highly respected investor and money manager.
I think the best and most succinct 2012 prediction comes from renowned investor Jim Rogers. He says,". . . they’re going to make us all feel better for a while" because politicians will push money printing during a big election year. Rogers thinks what’s been going on is a "charade" and come the fall–look out! "This is all going to end in a terrible disaster for all of us . . . by the fall of 2012 I’d be very worried." (Click here to see the complete interview of Rogers on the European edition of CNBC.)
The economy is clearly not headed for a real recovery, no matter how many positive reports are conjured up by the government. The government and the MSM can mask the decline, but they can’t stop it.

-END-



Consumer credit skyrocketed in November as the holiday season began in earnest:

( courtesy Dow Jones newswires)



DJ US Consumer Credit Surges In November






Mon Jan 09 15:00:45 2012 EST
WASHINGTON (Dow Jones)--U.S. consumer borrowing rose by the most in a decade during November, surging 10% with Americans pulling out their credit cards as the holiday shopping season got rolling.
The level of consumer credit outstanding increased by $20.37 billion to $2.478 trillion, the Federal Reserve said Monday. Economists surveyed by Dow Jones Newswires had forecast an $8.0 billion increase.
In percentage terms, the increase was the biggest since October 2001 and a big driver of the gain was revolving credit, which includes credit-card debt. It increased by $5.60 billion to $798.27 billion.
Nonrevolving credit also surged, rising $14.78 billion to $1.679 trillion. The increase was fueled by federal government, a category that includes student loans and has been increasing a lot over the past year--a sign high joblessness in the U.S. has led many people to go back to school.
The consumer-credit report doesn't include numbers on home mortgages and other real-estate secured loans. But the Fed data are important for the clues to behavior by consumers, whose spending helps propel the economy.
The November jump in consumer credit followed a gain of $6.02 billion during October and was the 13th increase in 14 months.
Rising credit can be a sign people are more comfortable with the economy--or an indication they are forced to finance essential purchases, such as food and gasoline. The big gain in revolving credit during November suggests consumers used credit cards to buy gifts and other holiday purchases.
Consumer spending has been growing, but not very fast. While inflation isn't out of control, the lackluster economy that is restraining prices has also kept income gains small. Over the past year, the rate Americans save money has slid considerably, with the latest government figures showing it at 3.5% in November, compared to 5.1% in November 2010.
Unemployment in the U.S. remains high, housing prices keep falling, and the stock market has been volatile--leaving many consumers feeling vulnerable. An important read on how consumers felt during the thick of the holiday shopping season comes out Thursday, when the Commerce Department reports on December retail sales. Economists surveyed by Dow Jones Newswires are expecting another small gain of 0.2%.
Despite the headwinds, the economy continues to move forward. The Fed has forecast modest growth this year, ranging from 2.5% to 2.9%. According to the research firm Synovate, credit-card issuers sent 418 million solicitations to subprime borrowers in the first nine months of 2011, double the year-earlier volume of 207 million. 


end

Forbes' Francis Mckenna writes that the regulators are blocking the truth on the MFGlobal situation:


(courtesy Forbes/Francis McKenna)
The Neverending MF Global Story: Regulators Block The Truth
By Francis McKenna
January 9, 2012

Instead of looking out for MF Global investors – and customers who are still waiting for their money – it looks like regulators and the bankruptcy trustees are busy suppressing information. Instead of full transparency, regulators and the trustees are holding onto crucial details that might tell us all who was asleep at the wheel when the broker/dealer and futures commission merchant (FCM) headed over the cliff.

Bob English, an independent trader and contributing editor to the blog, 
Economic Policy Journal, published a post this morning that raises serious questions about the Securities and Exchange Commission’s program of regulation for broker/dealers and, in particular, the agency’s role in keeping the truth from the public about what went wrong at MF Global.

We’re also being kept from the truth about other broker/dealers who may be putting risky trades on their books or whose controls over segregation of customer assets may be weak or non-existent.


"It seems that sloppy scanning and filing standards combined with preferential treatment for certain large brokers has substantially reduced the value of this part of the SEC’s public filing system. Since this is often the sole repository for disclosures about private companies, including broker dealers that do not have public holding companies, investors are being deprived of timely and critical information.

Even for those broker dealers that do have public holding companies, such as MF Global Inc., the financial notes of the broker audits disclose different, and oftentimes, more substantial information. Since it is now apparent that Louis Freeh, the former FBI Director cum MF Global Holdings trustee, is running cover for MF’s largest creditors, not the least of which is JP Morgan Chase, it is all the more critical that the integrity of the SEC’s public filing system be scrutinized."
On November 4, 2011, days after the bankruptcy filing, I described in an American Banker column the information the regulators and investigators should be looking for:
"Since MF Global is a broker-dealer and a Futures Commission Merchant, PwC’s job went well beyond a standard audit. The auditor for a firm like this must annually review the procedures for safeguarding customer and firm assets in accordance with the Commodity Exchange Act. The annual audit must include a review of a firm’s practices and procedures for computing the amounts that, by law, have to be set aside in clients’ accounts each day. MF Global also had to send regulators an annual supplemental report from PwC. This report would describe any material inadequacies existing since the date of the previous audit and any corrective action taken or proposed.

I’m sure the CFTC wants to know if PwC ever documented any material inadequacies in MF Global’s controls over safeguarding customer assets. But wouldn’t they already know that? Regulators like the CME Group, the CFTC, the SEC, and FINRA received audited financial information annually, unaudited information semiannually and monthly reports that provided a capsule view of MF Global’s financial position. MF Global is required to perform calculations daily (by the CFTC) and weekly (by the SEC) to ensure that the proper amount of customer funds is set aside in the separate accounts.

PwC’s report to the SEC of internal control discrepancies for 2010, and there is one according to the filing index, is private. None of the auditor’s reports specific to the broker/dealer and FCM are available to the public on Edgar for 2011.
Is this just sloppy scanning? It’s no coincidence to me that auditor PricewaterhouseCoopers may also be playing a role in keeping uncomfortable or incriminating information from the public about its audit clients which include MF Global as well as Bank of America, JP Morgan, and Barclays.
-END-

I am going to leave you tonight with this lengthy piece from Ben Davies of Hinde Capital.
It is self explanatory.

(courtesy, Ben Davies/Hinde Capital/GATA)



Hinde Capital report on Europe: Should I stay or should I go?

 Section: 
2p ET Monday, January 9, 2012
Dear Friend of GATA and Gold:
A new study by Hinde Capital in London, whose CEO, Ben Davies, spoke at GATA's conference there in August, concludes that debt, austerity, sovereignty, and democracy pressures are likely to pull the euro zone apart. The Hinde report touches on central bank gold sales to deflect currency pressures and the possible mobilization of gold as formal backing for currency. The report is titled "Should I Stay or Should I Go?" and it's posted at the Hinde Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



I will see you tomorrow night
Harvey

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