Free Republic

Yes, I know Athens is burning as some of the more violent demonstrators threw some Molotov cocktails and the media was given some photo ops so the situation can be understood by those too involved with life’s challenges to read. If that sounds acerbic it is because I have been writing about the Greek debt crisis since December of 2009 when the Chinese investment funds reneged on a promise to purchase $25 Billion of Greek bonds and the debt crisis was in full swing. Again, Athens may be the present battleground but the political and financial games are being played...

Sound bites from the left. Sound bites to the right; here I am, stuck in the middle with you (STEALERS WHEEL). The House Budget Committee was in full political regalia as posturing for the home folks and November’s election was in full force. Most of the questions are redundant or ridiculous and in some cases, both. An exception was Committee Chairman Paul Ryan, who asked Mr.Bernanke if the FED‘s policies had corrupted the BOND markets that they stopped sending a credible signal. It has been a consistent theme of NOTES that the BOND market is broken as an indicator of...

[T]he real question that we face for all the markets is WHEN will the Sovereign Debt Crisis go into meltdown? We are in the 13th year from the Major Directional Change of 1999 that marked the birth of the Euro, low in gold and crude oil, and the bubble in shares that peaked in many countries in 2000. Just as the United States has been obsessed with the Great Depression as government always is ready to stimulate and many see this as pending hyperinflation with the end of the world, Germany suffers from the opposite delusion. There, the fear is...

S&P Sounds Alarm On US, G20 Downgrades Antonia van de Velde, CNBC January 31, 2012 Concerns over the size of United States debt reared their head once again as ratings agency Standard & Poor’s warned that health care costs for a number of highly-rated Group of 20 countries, including the U.S., could hurt growth prospects and harm their sovereign creditworthiness from the middle of this decade. S&P downgraded the United States credit rating for the first time ever in August of last year. "Governments' fiscal burdens will increase significantly over the coming decade, with the highest deterioration in public finances...

The Hot New Worry In The Eurozone... Joe Weisenthal January 29, 2012 Greece is still furiously working out a haircut deal with its creditors, but the hot new worry in Europe is unquestionably Portugal, land of the surging bond yields. In a note that identifies: "TOP CLIENT QUESTIONS", SocGen's Global Head Of Economics Michala Marcussen writes Will Portugal follow Greece? Portuguese bond yields have increased on the back of downgrades and fears that Portugal will follow in the footsteps of Greece. Under the current EU/IMF program, Portugal is due to return to market funding in 2013. For this to become...

FITCH GOES ON RAMPAGE: CUTS SPAIN, ITALY, BELGIUM, CYPRUS, AND SLOVENIA Simone Foxman January 27,2012 Fitch just cut the long-term issuer ratings of 5 EU countries: Belgium: AA+ to AA Spain: AA- to A Italy: A+ to A- Cyprus: BBB to BBB- Slovenia: AA- to A It affirmed Ireland's BBB+ rating with a negative outlook. Borrowing costs have been sinking for these countries lately–particularly for Italy and Spain—after the European Central Bank announced liquidity support measures in early December that have lessened mounting worries about the health of the banking system. While Fitch says that it supports EU leaders actions...

Geithner: I won't serve second termBy Peter Schroeder - 01/25/12 04:27 PM ET Treasury Secretary Timothy Geithner does not anticipate serving a second term under President Obama. Geithner said in an interview with Bloomberg Television that he is "pretty confident" the president would not ask him to stay on if he is reelected. "I'm confident he'll be president. But I'm also confident he's going to have the privilege of having another secretary of the Treasury," he said, adding that he planned to do "something else." Geithner mulled leaving the administration this summer once a deal to raise the federal debt...

It's time for public agencies to come clean about their debt.On Wednesday morning, we editorially criticized the Moraga Orinda Fire District for plans to borrow $2 million for a new administration building that was twice the size it needed when there was adequate office space available for lease in Orinda City Hall. That night, the fire district board, in a stunning reversal, canceled the deal.It was the right decision, although some board members said they made it only because of bad publicity. Director Frank Sperling said individuals and organizations "have created a perceived reality through purposeful misinformation."Actually, it's the district...

U.S. Savings Bonds Go PaperlessJanuary 4, 2012 10:30 PM PITTSBURGH (KDKA) — U.S. savings bonds enclosed in birthday cards have been an American tradition for more than 70 years. But from now on, purchasers will have to be computer savvy. As of January 1, the U.S. Treasury declared that all bonds must be purchased online through the website www.treasurydirect.gov. The buyer can download a “gift certificate” indicating the amount of the bond, and for what occasion.

A heavy Treasury auction schedule with a big settlement on Thursday was enough to contribute to keeping stock prices (SPX) in check this week, but not to knock down Treasuries. Demand for US Government paper is so great it simply engulfs even heavier than expected levels of new supply. The massive capital flight out of Europe is now confined to the only game in town, the US Treasury market, the last great Ponzi game still operating. This won’t end well, but it won’t end until it ends, and the technical signals suggest that it won’t happen in the short run....

As the news came out on Friday morning, the headline reported that the unemployment rate dropped to 8.6% from 9%–at first glance, the rate looked like 98.6 on the economic thermometer. The analysts are still arguing over the meaning of this data, but for traders and investors the real outcome is meaningless. It may lead to foreign investors purchasing U.S. equities as America is seen to be a relatively stronger economy, especially when compared with the EUROPEAN CREDIT-STRESSED environment. The headline number is fraught with all types of data pollution as the bean counters strive to figure out how many...

Following today's unprecedented POMO failure due to "system difficulties" (one would hope the Fed's POMO machine does not start and stop every time someone pulls the plug from the socket), Brian Sack's team (not to be confused with the PWG team of Eric Mindich) had to reschedule the literally failed auction. As it turns out, the first opportunity to sell $8-$8.75 billion in 2013 bonds is on December 2. And unlike the December 21 "reverse" POMO which is due to take place at 1:15pm, the rescheduled bond sale will instead occur at its usual time of 10:15-11:00am. Ironically, this is...

Following the failure of the supercommittee, the U.S. government’s AAA credit rating was placed on a “negative outlook” Monday by Fitch Ratings, indicating a more than 50 percent chance the country gets slapped with another downgrade in the next two years. “By postponing the difficult decisions on tax and spending until after forthcoming congressional and presidential elections, the scale and pace of required deficit reduction will consequently be greater,” Fitch said in a statement. “Conversely, failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in...

In one of the best Marx Brothers scenes is from A Night at the Opera, where Groucho and Chico are ripping up a contract and they finally come to the SANITY CLAUSE, in which Chico proclaims there is no SANITY CLAUSE. In tomorrow’s Financial Times, there is a story about France pushing for a Christmas gift from the ECB. The gift that the French are hoping for is a backstop for the European banks that are under severe stress because of the huge amount of EURO sovereign bonds on the banks’ balance sheets. In order for the ECB to act,...

Moody's has cut Hungary's government bond rating to "junk", citing high debt levels, weak growth prospects and uncertainty about its ability to meet fiscal goals, in what the government called part of "financial attacks" against the country. The rating agency cut the country's rating by one notch to Ba1, below investment-grade, with a negative outlook hours after rival Standard & Poor's held fire on a flagged downgrade on news of Budapest's planned talks on getting international aid. Hungary returned to the International Monetary Fund and the European Union last week after the forint currency fell to record lows against the...

The Game Is About DoneKarl Denninger November 23, 2011 It's pretty-much over at this point.... This morning Germany had a failed Bund auction. That's not particularly noteworthy; it happens from time to time. But what's noteworthy is what happened to bond yields everywhere through Europe in response: They blew out. The Greek and Italian "problem" is no longer about Greece and Italy. It has been creeping into Spain and more-recently France, but this morning jumped into Germany and everywhere else "all at once." Capital has said "no more" to the lies in Europe. While this does not mean an instant...

The market is rife with rumors about the previous agreement to bail out the bank and insurance firm DEXIA is coming apart as the Belgians are balking at the cost. Something that needs to be considered is that the French are probably putting pressure on the deal to force the Germans to agree an EBC-sponsored bailout so as to get a major infusion of capital. Dexia is already a problem for Europe so by getting the Belgians to pull the plug on the deal the French can force the Germans to immediately step up and agree to a large role...

When the recession squeezed Miami's budget in recent years, officials reached into funds raised for road repairs and other projects to plug the shortfall. Now, the city is paying a price. The moves triggered lawsuits and a federal investigation, in a brouhaha that holds ramifications for how municipalities nationwide maneuver around unprecedented money problems. Cash Flow View Interactive ..Cities and states across the country are using money designated for specific purposes—such as fixing roads or sewers—in order to fill financial holes elsewhere, according to public officials and records. The moves are exposing municipalities to controversy, as federal regulators and local...

The world just keeps coming unwound with amazing speed. Unfortunately, because this is a Sovereign Debt Crisis that strikes at the very heart of HOW government has functioned since World War II, this is like an individual who is in severe pain but is diagnosing himself. Government has been following the philosophies of Karl Marx and John Maynard Keynes who jointly advocated that government was capable of altering the Business Cycle and thereby cut the ties of boom and bust that marked history unfolding as a vicious repetitive cycle. There were to be no more recessions or depressions. Government was...

Italy's cost of borrowing has touched a new record, a day after Prime Minister Silvio Berlusconi said he would resign once budget reforms are passed. The yield on Italian 10-year government bonds reached 7%, the highest since the euro was founded in 1999. The debt was pushed up as a clearing house asked for a larger deposit to trade Italian bonds - to cover the increased risk of non-payment. Investors fear that Italy could become the next victim of the debt crisis.

Prime Minister George Papandreou faced calls from within his own party to step down on Tuesday after he threw the nation's eurozone membership into jeopardy by calling a referendum on a bailout package agreed only last week. A leading Pasok MP quit while two others said Greece needed a government of national unity followed by snap elections, which the opposition also demanded. The leaders of France and Germany scrambled to limit the damage to the wider eurozone, and European politicians expressed incredulity at an announcement that caught everyone by surprise - including Finance Minister Evangelos Venizelos. "It's difficult to see...

Today's epic risk rally has been punctuated by something probably not all that surprising: a very weak $29 billion 7 Year auction, which has since dragged the entire bond curve even lower. The bond priced at a high yield of 1.791%, a notable 3 bps tail to the When Issued which was trading at 1.76 at 1 pm. But the internals are again where the action is: the Bid To Cover of 2.59 was the lowest in the series since the 2.26 back in May 2009! Additionally it appears that foreigners, either China or Europe, had very little desire to...

Why It's Actually A Big Deal That Greek Bond Haircuts Talks Have Been Suspended Simone Foxman Oct. 26, 2011, 9:53 AM Talks on the losses private Greek bondholders will take are deadlocked and have been suspended. This news just hit the wires from Bloomberg. So far, U.S. markets don't seem to care. However, this could be a big deal, for two reasons: - Debt sustainability in Greece is virtually impossible without significant writedowns of sovereign debt. The numbers are just too big to allow for anything else. More private sector involvement (perhaps coupled with public sector involvement) is seen as...

Bill Gross Just Made A Huge Bet On Economic Doom, And Nobody Seems To Care Joe Weisenthal Oct. 14, 2011, 2:01 PM This week, bond god Bill Gross just made a super-long bet on the long end of the yield curve, coming right after a historic rally in fixed income. It was a gigantic shift from his stance earlier this year, when he bet against Treasuries -- a bet that famously worked out badly for him. The interesting thing about this is that his short bet got TONS of attention (including a big story in The Atlantic), whereas his new...

An International Monetary Fund official said Wednesday, the global lender could buy Spanish or Italian bonds alongside a euro zone bailout fund, but he later appeared to back away from his own suggestion. Antonio Borges, the IMF's European head, told a news conference the IMF could possibly "invest alongside the European Financial Stability Facility (EFSF) . We would certainly be ready to play that role." Earlier in the day, he said Europe needs between 100 billion and 200 billion euros ($134 billion to $266 billion) to recapitalize its banks to win back investor confidence. Later, however, Borges issued a statement...

Post stocks which didn't fall dramatically today.... if we were REALLY having a market crash, everything across the board would fall. Example... Auto Zone Inc. (AZO) -- only went down about $6 per share from $322...not much of a crash there...regular fluctuations. Must be hundreds of others just like it. The markets are nothing but pure manipulation.

Let us look a 8 reasons why the Great Depression is the best case scenario and also look at how difficult the Depression was for people who were far more prepared to deal with a harsh world. Back during the Depression most of America could feed themselves with farming, now we only know corporate frankenfood. Back then people only knew of real wealth, now we think the digits in our brokerage account in wealth. Back then people had a strong family on community support systems, now we live little lives of narcissism. Back then people had a strong spiritual strength,...

WASHINGTON (MarketWatch) — The Federal Reserve on Wednesday, acting in the face of a weak economic outlook, decided to start a program to twist the yield curve by swapping shorter-maturity government securities for longer-dated ones. In a statement, the Fed will buy $400 billion of Treasury securities in the 6-30 year range and sell an equal amount of maturities of 3 years or less. The Fed also announced a new plan to purchase agency mortgage-backed securities with proceeds of maturing securities.

...Never will a politician in any country ever question government’s fiscal management. Even in the Euro crisis, governments expect Germany to bail out all of Europe to ease the immediate pain, but again there is no discussion about revising the system. There is just a presumption that if they get through this shortfall, it will all go back to normal. These people actually believe they can continue to promise the Moon, never pay off... ...Even in the Euro crisis, there are people now blaming Britain for not joining the currency. Some now say to make the Euro work somehow it...

Bloomberg Link only: http://finance.yahoo.com/news/Obama-Moots-Limits-on-Tax-bloomberg-1619743580.html;_ylt=Ai.HNSRDY7Y6gspmkzcQkPS7YWsA;_ylu=X3oDMTE2ZTRmcnNvBHBvcwMxMARzZWMDdG9wU3RvcmllcwRzbGsDb2JhbWFtb290c2xp?x=0&sec=topStories&pos=7&asset=&ccode=

The headlines driving markets in recent minutes is a rumor about Italian officials talking about bond purchases with China. The media of course will hold China up as though they are some white knight riding in to save these failing European nations. But make no mistake – that is not even remotely close to the truth. On the one hand, China can “help” ease the strains in the Eurozone by buying bonds of various periphery nations. This helps kick the can in the debt game, but does NOTHING to solve it. We know this because we’ve already seen this movie...

Via email, Michael Pettis at China Financial Markets shared his outlook for China, Europe, and the world. The overall outlook is not pretty, and includes a breakup of the Eurozone, a major slowdown for China, and a smack-down of the much beloved BRICs. Pettis Writes ... August is supposed to be a slow month, but of course this August has been hectic, and a lot crueler than April ever was. The US downgrade set off a storm of market volatility, along with bizarre concern in the US about whether or not China will stop buying US debt and the economic...

Recession Is Not In View But Economy Is Ugly Steven Hansen August 21, 2011 Every day recently, readers have had to digest a growing number of pundits screaming “upcoming recession” giving a cacophony of reasons. Other than a horribly weak economy, there are no major signs indicating an outright contraction. As I have stated previously, a discussion of whether the USA is in a depression would be more pertinent. In a depression, there are no economic drivers for expansion – and the economy flops around (one step forward, on step back). One year ago, we were worried the economy was...

Gold and US Treasurys trading together illustrate the point that the BIG money has not begun to move and is still parking. Corporations are at record highs with over $2 trillion in cash holdings also parking in Treasurys fearful of investing with the future so uncertain. Those who try to predict the future with fundamentals get their head handed to them without exception because they become fixated largely on a couple of issues that are more often than not too domestic. Lacking worldly experience, they become just deer in headlights. A closing tomorrow on the Dow BELOW 10906 will warn...

Aug 11 (Reuters) - The U.S. Treasury sold $16 billion worth of 30-year long bonds at a poorly received auction on Thursday, with investors showing the weakest overall demand in 2-1/2 years and foreigners largely steering clear. [Snip] Investors submitted bids worth 2.08 times the amount on offer, the lowest since February 2009. A measure of foreign demand -- the indirect bidder category -- accounted for just 12 percent of the sale, the lowest since February 2008.

  Downgrade U.S. Credit? Why Now? David C. Stolinsky Aug. 11, 2011 On Friday, August 5, Standard & Poor’s, one of the three major credit-rating agencies, downgraded U.S. credit from AAA to AA+. The downgrade was announced after the markets closed, but the reaction was predictable. When markets opened on Monday, gold shot up, reflecting loss of confidence in the dollar and currencies in general, while most stocks fell. The government has been spending money in a way that makes drunken sailors look miserly, first under Bush, and even more under Obama. But what happened now that was any...

World leaders made emergency conference calls Sunday, seeking solutions to the US debt and eurozone crises ahead of a feared disastrous reopening of markets on Monday. In a possible bellwether, Israel's market fell seven percent. World leaders searched Sunday for answers to a global debt crisis, hoping to head off a massacre on markets spooked by an unprecedented US rating downgrade and Europe's swelling malaise. France and Germany called for full implementation of measures agreed at a eurozone summit in July to safeguard the single currency as markets braced for fresh turmoil this week. "President (Nicolas) Sarkozy and Chancellor (Angela)...

pre-market data.

WASHINGTON – The credit rating agency Standard & Poor's showed "terrible judgment" in lowering the U.S. government's credit rating, Treasury Secretary Timothy Geithner said Sunday. "They've handled themselves very poorly. And they've shown a stunning lack of knowledge about the basic U.S. fiscal budget math," Geithner said in his first public comments about the credit rating decision. Interviewed on CNBC, Geither said that U.S. Treasury securities were just as safe now as they were before S&P announced its downgrade. He predicted that China and investors would remain strong purchasers of U.S. government debt. Republicans have blamed President Barack Obama for...

One of the greatest technicians of all time was a man named W. D. Gann (1878-1955). He had tremendous success predicting market moves much in advance. Legend has it that he occasionally sent notes to The Wall Street Journal, which accurately predicted tops and bottoms in grain markets months ahead of time. There are two Gann principles that I have always respected. They are that historical prices alone aren’t predictive unless paired with time; and that the “birth dates” of contracts are of major significance. The birth date is the first day a contract, stock, or grain begins trading. And...

Treasury Secretary Tim Geithner said Tuesday there is "no risk" the U.S. will lose its top credit rating amid a new analysis that revised its outlook on American debt to "negative." Geithner took to the airwaves of financial news networks to push back against a report Monday by Standard & Poor's that lowered its outlook on U.S. debt to "negative," reflecting political uncertainty over whether lawmakers will reach an agreement to address long-term debt.

...I cannot say this in any simpler terms. We are wiping out the future of our children. We have stolen their future, and now the clamors that we cannot default are being heard everywhere to justify the economic implosion on the horizon. How can we grow the economy by reducing spending and raising taxes? This is austerity that shrinks the economy destroying the opportunity for employment among the youth feeding a cycle of economic contraction. I am not advocating just borrowing and not raising taxes. I am saying the entire system is broke and it will implode. Cities are going...

As was predicted last week, China's rating agency Dagong, unlike its worthless western counterparts, has come through on its threat to downgrade the US in the event a subpar debt ceiling deal was hammered out. As Xinhua reports, 'Dagong Global Credit Rating Co. said Wednesday it has cut the credit rating of the United States from A+ to A with a negative outlook after the U.S. federal government announced that the country's debt limit would be increased." Confirming that not being branded a NRSRO is the only thing that allows a rater to still think straight (and not in terms...

Moody's Investors Service on Tuesday confirmed its triple-A rating of the United States, citing the decision to raise the debt limit, but kept the pressure on the government to move toward a long-term fiscal consolidation plan. The ratings agency affirmed the United States' triple-A rating after congressional lawmakers agreed to raise the country's debt ceiling , which will allow the Treasury to keep servicing U.S. debt obligations. It assigned a negative outlook on the rating, however, in a sign that a downgrade is still possible in the next 12 to 18 months. In a statement, Moody's said there would be...

...One other factor that could lift bond prices is that Treasury could be forced to stop selling new bonds, which would limit the supply available for investors. Limiting supply typically helps to lift prices. Thursday's auction of 7-year Treasuries came in with a yield of 2.25%, the lowest rate Treasury has had to pay for notes of that term since last November.

The "most-recent" proposals cut anywhere from nothing in actual spending (Democrat proposal) for 2012 to $90 billion (Republican.) And neither contains any actual cuts on a forward basis - the Republicans are at least honest about it and say they just "hold discretionary non-defense spending at 2011 levels." That's not a cut in spending.

President Obama has categorically ruled out a constitutional challenge to the US debt ceiling since I wrote yesterday’s blog. Spokesman Jay Carney said the White House cannot invoke the 14th Amendment, which stipulates that US federal debt “shall not be questioned”. “It’s not available. The Constitution makes clear that Congress has the authority, not the president, to borrow money and only Congress can increase the statutory debt ceiling. That is just a reality,” he said. That is questionable, but let us move on. Obama had previously been vague about this, saying White House lawyers were “not persuaded that is...

Valerie learns about modern slavery (One of those cute educational youtube animations)

Standard & Poor's has removed the immediate risk of a downgrade of California's debt rating, saying the state's plan to balance its budget was "largely realistic." S&P on Thursday raised its outlook for California’s rating to “stable” from “negative.” The rating, A-minus, still is the lowest of any of the 50 states. “The negative outlook had been linked to the possibility of a recurring cash deficiency that we now believe the enactment of the fiscal 2012 budget is likely to mitigate for the most part,” S&P said in a report. “Because the state has improved the structural alignment between its...

Europe's leaders have finally run out of time. If they fail to agree on some form of debt pooling and shared fiscal destiny at Thursday's emergency summit, they risk a full-fledged run on South Europe's bond markets and a disorderly collapse of monetary union. "We are heading towards fiscal union or break-up," said David Bloom, currency chief at HSBC. "Talk is no longer enough as the fire threatens to leap over the firebreak into Spain and Italy. "What the market is worried about is Germany's long-term committment to the euro project. If we see unreserved and absolute backing from the...