As Greece girds for elections next month that could lead to its exit from the euro zone, economists are acknowledging an unsettling reality: No one knows what the bill will be. A wide range of potential price tags has been reported, anywhere from €150 billion to €1 trillion euros ($1.27 trillion). But none of these are comprehensive, nor are they meant to be—they don't, for instance, weigh the cost of an exit against the cost of avoiding one. By comparison, the 2008 Troubled Asset Relief Program, known as TARP, was a $700 billion program initiated in response to the U.S. financial crisis.
Saturday, May 19, 2012
Pricing the Cost of a Greek Euro Exit
As Greece girds for elections next month that could lead to its exit from the euro zone, economists are acknowledging an unsettling reality: No one knows what the bill will be. A wide range of potential price tags has been reported, anywhere from €150 billion to €1 trillion euros ($1.27 trillion). But none of these are comprehensive, nor are they meant to be—they don't, for instance, weigh the cost of an exit against the cost of avoiding one. By comparison, the 2008 Troubled Asset Relief Program, known as TARP, was a $700 billion program initiated in response to the U.S. financial crisis.
OJ Futures Tip Below $1 for First Time Since 2009
Orange-juice futures dropped below $1 a pound in intraday trading for the first time in 2½ years.
Futures for frozen concentrated orange juice have plummeted 40% this year due to weakening demand and increasing supplies since hitting an all-time high in January. Front-month orange juice for July delivery on the ICE Futures U.S. exchange in New York settled down 3.65 cents, or 3.5%, at $1.0220 a pound Friday, after brushing an intraday low of 97.10 cents a pound. Prices have fallen 17% this week.
Dollar Rally Stalls Against the Euro
The dollar weakened against the euro for the first time in six days, as concerns about Greece's economic and political crisis subsided, sparking renewed demand for the common currency. Expectations that leaders at this weekend's summits at Camp David and Chicago will pledge their support for the euro gave the common currency an additional boost against the dollar. Traders are looking to world leaders, meeting at two summits in the U.S. this weekend, to pledge support for the euro. Shown, the Coast Guard patrols Lake Michigan in Chicago, where NATO will meet. The move closed out a week in which the euro fell 2.1% against the dollar to a four-month low early Friday, before staging a turnaround, ending the week down 1.1%.
Fed funds rate indicating more QE
Quantitative Conundrum - Gold and silver soars and oil sinks in what can be best described as a quantitative easing conundrum. Many people were confused how gold might rally after briefly dipping in bear market territory after the dollar rallied for a record 14 days. The day after the Fed minutes showed that several Fed officials would be open to more economic stimulus if the economy turned worse, all of a sudden it seemed that indeed thinks look worse.
20 Years from Now: Gold at $12,000 & Silver at $1,000?
Should both gold and silver bulls & bears take a long winter sleep? Maybe. When we look at silver prices from 1985 to today (green line in the chart below) and compare the evolution to the one from 1967 to 1974 (black line in the chart below), we can see a very similar pattern. If price would continue to track this pattern, it could mean that silver has just entered a 20 years lasting winter sleep. In the meantime, it would trade between $20 and $50, before taking off again in 2032… From then on, it could gain over 2,000% to reach nearly $1,000. A similar pattern can be observed in the price of gold, although the time scale is slightly different. Gold would drop towards $1,000 in 2015, before taking off to about $12,000 by 2025.
Greek bond risk pays off for ‘vulture fund’
When Greece announced last Tuesday that it had made a 436 million euro bond payment to the holdout investors who rejected the country’s historic debt overhaul deal in March, the decision came as no surprise. After all, with the Athens government in disarray and investors wary of having anything to do with Greece, now would have been a particularly awkward time to make things worse by defaulting on a bond payment. The real news is where most of that money went. Almost 90 per cent will end up in the coffers of Dart Management, a secretive investment fund based in the Cayman Islands, according to people with direct knowledge of the transaction.
German Bond Yields Fall to Record After Spanish Bank Downgrades
German two-, five-, 10- and 30-year bond yields dropped to all-time lows after Moody’s Investors Service lowered the credit ratings of 16 Spanish banks, spurring demand for Europe’s safest government debt. Benchmark bunds headed for a fifth weekly advance as a report showed German producer-price inflation slowed in April. Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA) were among lenders cut by Moody’s, which cited economic weakness and Spain’s budget strains. Separately, Greece’s credit grade was lowered one level by Fitch Ratings. The cost of insuring Spanish government debt against default rose to a record high.
With Greece on the Brink, Is It Time to Sell?
It’s tempting. But we don’t think so. Potential doomsday scenarios like the one we are in the midst of now occur frequently – we just remember them as less scary after the fact. The news is full of confident predictions about how this crisis will play out. Anyone who thinks they know the outcome proves only that they really do not know.
Index of US leading economic indicators unexpectedly falls
May 17 (Bloomberg) -- The index of U.S. leading indicators unexpectedly fell in April, indicating the pace of economic expansion may cool. The Conference Board’s gauge of the outlook for the next three to six months decreased 0.1 percent after a 0.3 percent gain in March, the New York-based group said today. Economists projected the gauge would rise by 0.1 percent, according to the median of 49 estimates in a Bloomberg News survey. American employers added jobs at the slowest pace in six months in April, restraining the consumer spending that accounts for 70 percent of the world’s largest economy. Higher claims for unemployment benefits, a decline in building permits and weaker consumer confidence contributed to the decline.
JPMorgan losses accelerate, top $3 billion
The New York Times is reporting that JP Morgan’s trading losses have increased by at least 50% in recent days, topping the $3-billion mark according to sources close to the matter. A $2-billion loss was initially reported last week and the losses have increased rapidly as hedge funds and other investors are taking advantage of JP Morgan’s distress, resulting in a faster deterioration in the bank’s underlying credit market positions according to the report. A spokeswoman for the bank declined to comment on the article, and CEO Jamie Dimon had said earlier that the total amount of the loss would be volatile based on daily market fluctuations.
US feedlots buy 15% fewer cattle as animal supplies shrink
May 18 (Bloomberg) -- Feedlots slashed purchases of young cattle by 15 percent in April as the number available for sale shrank, and improved pasture conditions allowed animals to stay on grazing areas.
Feedlots bought 1.521 million head of cattle last month, down from 1.785 million in April 2011, the U.S. Department of Agriculture said today in a report. Thirteen analysts surveyed by Bloomberg News projected a 12 percent drop, on average. The feedlot herd totaled 11.110 million as of May 1, down 0.6 percent from a year earlier. Analysts expected a 0.3 percent gain.
MF Global $1 billion vanished into brokerage, court is told
May 18 (Bloomberg) -- MF Global Holdings Ltd. still can’t trace where some of the money went when its brokerage collapsed, including $1 billion that “vanished” into the brokerage unit MF Global Inc., an attorney told a bankruptcy court. Brett Miller, a lawyer for MF Global Holdings’ Chapter 11 estate, told U.S. Bankruptcy Judge Martin Glenn in Manhattan today that court papers detailing the assets and debts of five of its six bankrupt units are likely to be filed today. Details on the sixth, MF Global USA, which filed for bankruptcy in March, will take about another week, he added. A report is due June 4 from Chapter 11 trustee Louis Freeh on the results of a probe into how the brokerage failed last October. Miller said key information is still unknown.
JP Morgan returns $168 million in MF collateral
The trustee for MF Global Inc. reported today that he has secured $168 million from JP Morgan as a result of ongoing discussions between JP Morgan and the trustee. Trustee spokesman Kent Jarrell said that the $168 million was unrelated to other claims that the trustee had announced on April 4, that it was “engaged in substantive discussions” with JP Morgan over. Jarrell added that the $168 million was not part of the $1.6 billion in non-recovered customer funds. According to a statement by the trustee, “The $168 million represents the proceeds of excess collateral that JP Morgan held at the commencement of MFGI's liquidation.”
Eurozone steps closer to the edge
It was a pivotal week for the Eurozone after Greece announced that it was heading back to the polls after the top three parities failed to form a coalition government. So now Greece is leaderless, there is a caretaker government in place but it won’t be able to enforce the austerity required to get the next tranche of bailout funds necessary for Greece to avoid running out of money in July. So as time runs out for Greece the European authorities have been clear: the upcoming election is a referendum on euro-membership. Either vote for pro bailout parties and stay in the currency bloc, or don’t and leave.
Corn traders betting against a corn bumper crop
Corn traders are the most bullish since March on mounting concern that hot and dry weather will curb U.S. yields at a time of accelerating demand from China, the second largest buyer of U.S. farm goods.
Currency Markets To Shrug Off Greek Deposit Withdrawals
LONDON (Dow Jones)--A flight of bank deposits out of peripheral euro-zone states may matter less for the currency markets than investors initially might think, foreign-exchange strategists at Barclays PLC said Friday. Deposit withdrawals can affect the currency markets in two ways through their conversion into other currencies such as the Swiss franc, and by intensifying the stress in the euro-zone banking system, analysts at Barclays wrote in a note to clients. But analysts Guillermo Felices and Raghav Subbarao at the bank cautioned against overstating the impact of deposit flight on the currency markets and warned that the pressure seen recently on the euro against the franc may be less than many think. For a start, Greek deposit withdrawals may end up in other, euro-denominated local assets or in euro-area sovereigns with healthier banking systems, resulting in no effect on the currency markets. Euro-denominated deposits held in Swiss accounts would also have no effect.
Currency Markets Pull Back From The Precipice
LONDON (Dow Jones)--Currency markets pulled back from the precipice in European hours Friday, having looked ready to go over the top in early trade as the euro and Australian dollar sank against safer bets like the yen and dollar. That came amid a global slump in shares after poor U.S. data added to the economic gloom and Moody's Investors Service downgraded 16 Spanish banks, piling the pressure on Spain after a day of bank-run denials and ratcheting up the euro-zone crisis still further in the wake of Greece's political deadlock. The euro hit a four-month low of $1.2642 against the dollar, taking its losses for the week to 4.5%, but then steadied. It was a similar story against the yen, after the single currency fell to its lowest level in more than 14 weeks and Japanese Finance Minister Jun Azumi hinted at possible market intervention to counter volatile trading conditions.
Treasuries in Longest Winning Streak Since ’98 on Europe
Treasuries posted the longest streak of gains in more than 13 years, pushing 10-year yields close to a record low, as investors sought the safety of U.S. government securities while Europe’s debt crisis worsens. U.S. debt rallied as Greece failed to form a government after elections May 6 gave no political party control of the legislature and as Moody’s Investors Service cut the credit ratings of 16 Spanish banks, citing economic weakness and the government’s mounting budget strain. The U.S. auctioned $13 billion of 10-year inflation-protected notes at a record negative yield and will sell $99 billion in notes next week.
Coffee May Help Drinkers Live Longer, U.S. Study Suggests
Coffee, caffeinated or decaffeinated, may help extend the lives of people who drink it daily, a U.S. study found. Men who drank 2 to 3 cups a day had a 10 percent chance of outliving those who drank no coffee, while women had a 13 percent advantage, according to research published yesterday in the New England Journal of Medicine.
Oil, Hogs Fall; Gold, Natural Gas Rise: Commodities at Close
The Standard & Poor’s GSCI gauge of 24 commodities fell 0.2 percent to 629.5 at 4 p.m. New York time. The UBS Bloomberg CMCI index of 26 raw materials rose less than 0.1 percent to 1,496.79.
Investors flee to bonds again on Greece fears
U.S. bond funds gained $5.6 billion in new money while U.S. equity funds lost $2.79 billion in outflows in the week ended May 16, the Cambridge, Massachusetts-based fund-tracking firm said. In the previous week, U.S. bond funds saw another huge jump of net inflows--at $6.46 billion--while U.S. equity funds saw outflows of $4.78 billion. Late Friday, Group of Eight leaders prepared to meet to discuss Europe's debt crisis as global stocks capped their worst week in eight months.
Potential Middle Path for Further Fed Stimulus
Potential Middle Path for Further Fed Stimulus - Real Time Economics - WSJ
If Federal Reserve officials decide they need to provide additional stimulus to the economy, there is a strategy that would allow them to act without resorting to what markets called QE3.
QE3, or a third round of quantitative easing, refers to bond buying by the Fed that would expand what is now a $2.9 trillion central-bank balance sheet. Expectations the Fed would go down this road have waxed and waned over recent months in sync with the flow of economic data. In recent weeks, even those central bankers who had been open to the strategy have suggested it’s pretty unlikely given the outlook. Even so, Fed Chairman Ben Bernanke kept the options alive in his press conference following the late April Federal Open Market Committee.
If Federal Reserve officials decide they need to provide additional stimulus to the economy, there is a strategy that would allow them to act without resorting to what markets called QE3.
- Click for an interactive look at the effects of the Fed’s actions on markets.
EU Officials: Greek Exit Plans Discussed
FRANKFURT—Europe has begun to prepare for Greece's possible exit from the euro zone ahead of a crucial round of elections in the country next month, which are fast becoming a referendum on its membership in the common currency. Euro-zone officials have started emergency planning to contain the fallout from a Greek exit from the currency bloc, officials said Friday. That includes the preparation of emergency scenarios by staff at the European Commission, the European Central Bank and in national finance ministries, the officials said.
J.P. Morgan Struggles to Unwind Huge Bets
J.P. Morgan Struggles to Unwind Huge Bets - WSJ.com
![[0518chase]](http://si.wsj.net/public/resources/images/OB-TA253_0518ch_G_20120518210545.jpg)
J.P. Morgan Chase & Co. is struggling to extricate itself from disastrous wagers by traders such as the "London whale," in a sign that the size of its bets could bog down the bank's unwinding of the trades and deepen its losses by billions of dollars. The nation's largest bank has said publicly that its losses on the trades have surpassed $2 billion, and people familiar with the matter have said they could over time reach $5 billion.
J.P. Morgan Chase & Co. is struggling to extricate itself from disastrous wagers by traders such as the "London whale," in a sign that the size of its bets could bog down the bank's unwinding of the trades and deepen its losses by billions of dollars. The nation's largest bank has said publicly that its losses on the trades have surpassed $2 billion, and people familiar with the matter have said they could over time reach $5 billion.
Bond Investors In Flight To Safety
LONDON—Nervous investors piled into safe haven bonds Friday, pushing short-term German yields close to zero, as a raft of Spanish bank downgrades by Moody's Investors Service Inc. further jolted sentiment already weakened by fears of a Greek exit from the euro zone. In the latest sign of the intensifying of the sovereign debt crisis, the yield on the two-year German bond, known as the Schatz, sank to an all-time low of just 0.028%. Many analysts expect Schatz yields to turn negative, meaning investors may soon be paying the German government for the privilege of parking their cash.
Subscribe to:
Posts (Atom)