Financial topics

[John]

Now the BBC is reporting that the full 600 billion euro package has
been approved.

I don't understand how these people can commit their nations'
governments to providing that much money.

John

[John]

I feel like a yoyo.

Now the BBC is pointing out that the aid package has been approved "in
principle." It will have to await an actual emergency before actual
money will be approved. This is the only thing I've heard that makes
sense and, if true, it means that it's just another meaningless
gesture.

Investors are buying in, so far. Dow Industrial futures are up almost
200 points, and the Nikkei is up 1%.

However, Chinese markets have been crashing in the last few weeks, and
that appears to be continuing, as Hong Kong is down 1% and Shanghai is
down 2%.

Look forward, ladies and gentlemen, to a VERY rocky week.

John

[OLD1953]

What happens if all the PIIGS line up and say "GIMME" next week? They haven't even concluded anything on Greece as yet, at least as far as I can tell.

This comes close to Keystone Cops manuvers. These non bailout things have been run though before. The real test comes when they actually say "we'll issue some funds".

With a new German govt, and the people demanding that Germany not pay out billions to outside entities, this doesn't seem like a very likely event. Seems more likely they'll decide "the crisis is not yet demanding enough to release the monies". Eternally.

The markets won't take very long to catch onto that.

Plus, there's a story going around that JP Morgan is being investigated for manipulating the silver market. That can't help.

[MarshAviator]

The people on ZeroHedge just never miss a thing.
This comment seems to summarize the GD forecast exactly, but without a Generational explanation.

Morgan Stanley's Stephen Roach spoke with Bloomberg's Tom Keene earlier, pointing out the most troubling statistic about recent market activity, which has to do with both the frequency and amplitude of catastrophes: "The crises are coming with greater frequency. Over the last 25 years we have had an average of one crisis every 3 years. The gap this time is 18 months. The scale is bigger. This is a much more serious problem in the eurozone than the Asian financial crisis." So intercrisis half-life continues to decline as the severity jumps exponentially. In other words, in nine months we will need a combined Fed-ECB-BOE-PBoC-BOJ effort for about $10 trillion just to calm the markets. 4.5 months after that, $100 trillion more... And so forth. Enjoy.

Again, they see it coming even if they don't know the root cause.
Sooner or later kicking the can down the road leaves a really big can....

Reminds me of John's piece one,two, infinity.

I want to see a $ 100 Trillion bailout.........

The $ 10 is so five minutes ago...

[JLak]

This was somewhat obvious. When faced with a tough decision, extreme measures will be taken to delay until larger forces make it. Eventually it will turn into a situation that parallels the prelude to the American Civil War. The EU states have roughly the same political cohesion as the US states of that era, and there is a central ideological battle between a system of production and innovation through free choice of the individual, and a system of forced labor controlled by the anointed few (my view of socialism). The question is whether there will be a war over it. Do EU nations care if the PIIGS default? Before bailing them out, it is not worth going to war over. After bailing them out, they will have no choice because their own debt will threaten their peaceful existence. Germany, UK and France are in no position to be lending to profligates. Best case scenario is a rerun of Chile in Greece.

[mannfm11]

The amazing thing about the market on Monday along with the huge gain was the fact that it opened on the up in the SPX and NYSE. That means the high was real early and no one was able to buy stock on Monday in a broad sense and make any money. Goldman moved the market before it opened and I am sure dumped plenty of stock on the poor sheeple.

Debt is debt and more debt is not what we need. The audit the Fed bill is being watered down to hide what kind of trash Bernanke is taking on this time. The Fed is likely insolvent, which means we are about to get another huge bill for the mortgages they bought. Debt requires more debt to keep going. Marsh hit it somewhat on the head as the deflation machine is swallowing all the inflation that is being put out there. The only real inflation is showing up in rigged markets, like propped home prices, gamed oil future prices and a stock market that can't be shorted because Goldman blows up the positions overnight. It came out Monday that Goldman didn't lose money on a single day this past quarter, something that is impossible unless they are gaming the markets, like front running trades. The 700 point dive on Thursday is one example, as the reason given is pure fiction. They knew some big position was being liquidated and just quit making the market. Then they pulled the asks out of the market to blow out those that had ridden out the right side of the trade. There is not much honesty in the markets around the world today. Once it sinks in to all involved, many will quit playing.

[John]

A lot of people share your skepticism, Barry. Here's what
EuroIntelligence is saying this morning:

11.05.2010

Euphoria ends as investors suspect another shameless EU confidence
trick

The euphoria is evaporating. Market commentators have taken a closer
second look at the package, and they start not to like it. In our view
the sentiment was best expressed by what Kevin Gaynor chief markets
economist of RBS who called the EU’s strategy “Bailouts rather than
integration”. They are not solving the problem, they are throwing
money at it. Another appropriate comment came from Marek Belke, the EU
head at the IMF, who compared the rescue package to a dose of morphine
with the purpose to stabilise the patient. The real hard stuff has yet
to happen.

Most European newspapers opened this morning with the story of
euphoric market reactions, but the hangover already started to set in
with the opening of markets in Asia. After the euro surged against
dollar and yen yesterday, this morning the euro already fell back by
0.3% against the yen. South European bond markets improved yesterday,
but as it turned out the only buyer was the European System of Central
Banks. Market confidence has not yet returned to the bond market.

The consensus comment praised the eurozone’s initiative as a
courageous, but warned that structural problems have not been dealt
with and could trigger more turmoil in years to come. ...

Unless the EU comes up with a plausible strategy – on reform of fiscal
policy, governance systems, and structural reforms – the announcement
will soon be reversed completely. (We think there is absolutely no
evidence the EU is going to deliver a package with the capacity to
impress investors. For the last ten years, the governance rules served
the sole purpose of satisfying national prejudices – see for examples
Merkel’s ludicrous proposals for a strong stability pact).

http://www.eurointelligence.com/index.p ... 45166fb74c

John

[JonLaw]

John says:

"Several people wrote to me over the weekend using the word "scared," after what happened last Thursday. In each case I wrote back to point out that they have a big advantage over other people because they read this web site and they know what's coming, and therefore they can use the time to prepare."

I get scared of bailouts. I was actually net short going into Thursday, assuming that the market was going to tank, at least in the short term. The drop was so furious, that I decided to close out my short position after earning 10% on the swing trade. I've learned to not get greedy at all on the short side. At least I locked in those profit before the random liquidity Euro bailout.

Mannfm11 says:

"The amazing thing about the market on Monday along with the huge gain was the fact that it opened on the up in the SPX and NYSE. That means the high was real early and no one was able to buy stock on Monday in a broad sense and make any money. Goldman moved the market before it opened and I am sure dumped plenty of stock on the poor sheeple...There is not much honesty in the markets around the world today. Once it sinks in to all involved, many will quit playing."

There isn't any honesty at all, which means that holding long for any significant period of time is going to end up being wrong. Now, if the Fed/Treasury can get the liquidity problem back under control again, they can reset the markets for another bubble-esqe rocket shot going into 2011, getting us a triple top on the S&P. That's the worst possible outcome for everybody, though. At that point, the markets will, once again, tank hard, and with interest rates already at 0%, there will be real trouble again.

[aedens]

http://www.zerohedge.com/article/sec-ad ... who-refuse

The truth has 3 levels if you like it or not.

And, as usual, the SEC will say "Well, we tried, but nobody really foresaw this."

[JonLaw]

John says:

"Now the BBC is reporting that the full 600 billion euro package has
been approved.

I don't understand how these people can commit their nations'
governments to providing that much money."

It's easy. When you are a politician, you don't really care about the math. You do what you think you need to do to preserve the functioning of the system.

They know that shoving coins into the fuse box works to keep everything operational. Printing money and issuing debt has worked in the past, and it's "working" now.

Eventually it will cause severe and chaotic events, but that's a problem for tomorrow, not for today.