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Archive for October, 2010|Monthly archive page

Investors Beware: Crucial Week Coming Up

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, National Economic Politics, Views, commentaries and opinions on 30.10.10 at 23:19

The coming week will be a kind of make-or-break for the global financial markets. Not only do we have a Congressional election in the US, we’ve also got the FOMC‘s decision on further quantitative easing coming up. In addition, the European sovereign debt problem has taken a turn for the worst, with the difference in CDS spreads hitting a record high on Friday.

“The next few days will have a crucial importance on both politics and economics.”

Gavan Nolan


The revival of political risks in Greece, Portugal and Ireland, and the growing potential of an Anglo Irish Bank debt exchange, caused the sovereign CDS spreads to widen further. The basis between the Markit iTraxx SovX Western Europe Index and Markit iTraxx Europe Index reached 53bp on Friday – the widest on record.

However, according to Markit.com, the SovX is trading with a considerable skew; “i.e. the theoretical level of the index is trading tighter than the index itself,” credit analyst Gavan Nolan writes in Markit’s weekly credit wrap.

And when comparing the theoretical levels of the two indices the difference is 36bp.

“A high level but nothing exceptional and well below the 47bp reached on May 6,” Gavan Nolan points out.

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Formerly Known As “Political Risk”

Politicians have been derided many times for their often shaky knowledge of economics.

Ronald Reagan’s supply-side policies were dismissed as “voodoo economics” by none other than George Bush in the 1980 presidential race.

And when Bill Clinton ran against George W. Bush in 1992, one of his most famous slogans was; “It’s the economy, stupid!

Probably one of the best indications of how deep the knowledge of economic and financial issues  are (in general) amongst our political leaders, sadly.

More recently, the newly appointed UK shadow Chancellor of the Exchequer Alan Johnson has faced opprobrium for his supposed ignorance, even half-joking that his first action would be to “pick up a primer of economics for beginners”.

But whatever their levels of competence – and many of them are more than competent – the actions and utterances of
politicians have a direct influence on the economy and asset valuations.

“Events in the euro zone’s periphery over the past few days have made this evident. Political instability in two of the most troubled countries in the currency club has caused a mini-revival of the volatility seen earlier this year,” Gavan Nolan writes in this weeks market wrap.

Greece’s spreads widened sharply this week, reversing some of the strong rally seen over the last two months.

The Prime Minister George Papandreou warned that “we have not yet escaped the danger. I am sounding the alarm”.

As if this wasn’t enough to deter investors, Papandreou threatened to call a general election if his party fail to win decisively in the upcoming local elections.

Then the finance minister George Papaconstantinou weighed in, revealing that the country has “serious tax compliance issues”.

“Those familiar with Greece will regard this as a truism, but if the sovereign is to get its fiscal house in order then it needs to fix this issue quickly,” Nolan points out.

The country’s budget deficit is expected to be upgraded by Eurostat to over 15%, and the sovereign’s spreads are still indicating that a debt restructuring might be the most likely – and least painful – way forward.

“On the other side of the periphery, Portugal – hardly a paragon of fiscal prudence – has its own political problems.” Nolan comments.

Budget talks between the minority Socialist government and the main opposition party, the Social Democrats (PSD), broke down on Wednesday. The latter party is insisting that spending cuts should make a larger contribution to the austerity package.

It is likely that a compromise will be reached before the final vote on the budget next month.

“Nonetheless, the uncertainty created by the deadlock caused spreads to widen and they are set to remain volatile until an agreement is reached,” Nolan notes.

“Political friction in the euro zone will no doubt be relevant to risky asset valuations next week,” the analyst writes.

The Risks of the Week

But any fresh developments are likely to be overshadowed by events across the Atlantic, as Tuesday brings the US mid-term elections.

The polls are predicting that the Democrats will lose control of the House and maybe the Senate.

“As investors digest the implications of possible political gridlock they will be hit by the FOMC decision the following day,” Gavan Nolan adds.

The markets have been pricing in additional QE for some time now, and are expecting a confirmation on Wednesday.

The big question is how big – and how gradual – the liquidity injection will be.

“Prior to both events are the ISM and Markit Manufacturing PMIs on Monday (services on Wednesday) and then the week ends with non-farm payrolls on Friday,” markit.com informs.

“The next few days will have a crucial importance on both politics and economics,” Gavan Nolan concludes.

Related by The Swapper:

Credits: PIGs Gone Wild

Marc Faber Expects Market Sell Off On QE2 Announcement

Chart Of The Day: Europe’s Web Of Debt

The Fight Against Currency War

Fitch Place Most US Banks On Negative Rating Watch

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Rally To Restore Sanity: Watch It LIVE From Washington

In Health and Environment, Law & Regulations, National Economic Politics, Philosophy, Views, commentaries and opinions on 30.10.10 at 17:45

Jon Stewart‘s “Rally To Restore Sanity” is starting in Washington in under half an hour. It will be interesting to see how many people the famous comedian are able to gather in a “respectful disagreement” to discuss the issues that truly impact our lives (minus the political discord).

“We will send a message to our leaders! We are here! – but only until six…”

Jon Stewart


The Comedy Central have provided a link to the US capital where the rally is supposed to start in about 20 minutes. Click at the picture below, and follow this extraordinary event LIVE!

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(If that link doesn’t work, try this one.)

I anyone should find themself a bit puzzled over Mr. Colbert’s slogan “March To Keep Fear Alive,” here’s a little musical hint for you…

(Thanks to the very talented people at versusplus.com).

Related by The Swapper:

Jon Stewart’s Crusade To Restore Sanity

Jon Stewart Takes On Obama’s Chief Economic Advisor

Daily Show: Jon Stewart Finds Humor In The Foreclosure Crisis

Jon Stewart vs Jim Cramer

Please, Give This Man An Award!

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Credits: PIGs Gone Wild

In Financial Markets, High Frequency Trading, International Econnomic Politics, Quantitative Finance, Views, commentaries and opinions on 29.10.10 at 03:46

On Wednesday Greece was the major troublemaker in the credit markets, a role that investors appeared to believe the country had left behind. Greek CDS spreads were relatively stable Thursday, but its fellow peripherals, Portugal and Ireland, compensated with further volatility.

“However, investors were happy to overlook sovereign debt problems and focus on earnings and economic releases.”

Gavan Nolan


Portugal’s spreads started widening Wednesday after budget talks between the minority Socialist government and the opposition Social Democrats broke down. The passing of the budget, which is proposing relatively severe austerity measures, is essential for the country in reducing its deficit. Thursday the Irish CDS spread made another jump.

“A nervy sovereign debt market wasn’t enough to stop risky assets recovering some of the ground lost yesterday. Another day of strong corporate earnings and an upward surprise on US weekly jobless claims figures provided ballast to a market still uneasy from revised QE expectations,” credit analyst Gavan Nolan at Markit Credit Research writes in his daily update.

Wednesday Greece was disturbing the peace in the market, a role that investors appeared to believe the country had left behind.

Greece’s spreads widened by over 70bp today, the largest move since the turmoil of June. The credit deterioration was prompted by the Eurostat revising Greece’s 2009 budget deficit to above 15%.

This is over five times the initial estimate of 3%.

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“I always believed that pigs go the slaughterhouse”.
(Walter Annenberg)

The Greek CDS spreads were relatively stable Thursday, but its fellow peripherals Portugal and Ireland compensated with further volatility.

Portugal’s spreads started widening yesterday after budget talks between the minority Socialist government and the opposition Social Democrats broke down.

The passing of the budget, which is proposing relatively severe austerity measures, is essential for the country in reducing its deficit.

“It seems improbable that the two parties aren’t aware of the delicate fiscal situation and it is likely that a compromise will be reached over the mix of tax and spend. But until then the sovereign will be vulnerable to spread volatility,” Nolan writes.

Ireland, a country that has embraced austerity with little opposition from the general public, also widened Thursday.

Unlike Portugal, its recent credit deterioration has in large part been caused by its broken banking sector.

Ireland’s budget deficit has spiralled upwards to 32% of GDP as a consequence of its support for banks, particularly Anglo Irish Bank.

“Investors received another reminder of the state’s painful exposure with the news that a group of subordinated
bondholders are planning to block the proposed debt exchange,” Gavan Nolan points out.

The bondholders are unhappy about the terms of the exchange, which they view as unfair.

But the Irish government has already stated that the terms are non-negotiable and has intimated that it will turn to legislation if it faces opposition.

“Nonetheless, Ireland’s sovereign spreads widened significantly amid doubts about the validity of burden sharing,” Nolan notes.

In contrast to the day before, however, investors were happy to overlook sovereign debt problems and focus on earnings and economic releases.

The earnings season has so far proved to be a strong one, with companies that beat expectations easily outnumbering those that missed.

The trend continued today, with oil majors Royal Dutch Shell and Exxon Mobil gaining from higher oil prices. France Telecom, Potash Corp, Visa and Dow Chemical were among the other companies to beat consensus estimates.

In an otherwise quiet day for economic releases US initial jobless claims were always likely to stand out. The figures
dropped by 21,000 to 434,000, their lowest level in three months,

“The data surpassed expectations and helped markets rally in the afternoon. But the gains were modest, with investors no doubt wary of the news heavy days lying ahead,” Gavan Nolan at Markit concludes.

Another BP CDS Blowout Today?

In Financial Markets, High Frequency Trading, Law & Regulations, National Economic Politics, Natural science, Technology, Views, commentaries and opinions on 29.10.10 at 02:43

Reports stemming from the presidential commission investigating the Gulf of Mexico oil spill indicate that Halliburton and BP were aware of flaws in the cement used to seal the well’s bottom. Halliburton’s CDS spreads started to move  Thursday – what will happen on Friday?

“The distribution of the burden, unlike hardened cement, is still fluid.”

Otis Casey



Halliburton and BP may have been aware of flaws in the cement used to seal the well’s bottom, according to an official report.  CDS on Halliburton started out moderately wider on the headlines, but is currently about 38 bps wider than yesterday’s close. Anadarko and Transocean are essentially unchanged. But this can change quickly.

The market’s reaction on BP CDS will come in Friday’s London session

“Whether the report constitutes a ‘smoking gun’ or not remains to be seen, but it has that potential. Litigation risk is high even if the total amount is uncertain. The distribution of the burden, unlike hardened cement, is still fluid,” vice president Otis Casey at Markit writes in a comment.

(www.markit.com)

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Back in May, it was  the Transocean CDS that got the biggest kick.

(www.cma.com)

 

Verizon To Pay $78 Million For Overcharging Customers

In Financial Markets, International Econnomic Politics, Law & Regulations, National Economic Politics, Technology, Views, commentaries and opinions on 29.10.10 at 01:50

One of largest telecom companies in the world, wireless carrier Verizon, have agreed to pay $25 Million to the US government as a settlement after an investigation into the company’s billing practice by The Federal Communications Commission. In addition Verizone will pay back about $53 million to subscribing customers.  The payment is the largest settlement in the industry’s history.

“It will serve as a significant deterrent to others in the future.”

Julius Genachowski


The Federal Communications Commission says that it has reached a record $25 million settlement with Verizon Wireless over the company’s wrongly charging customers mysterious internet fees over the past several years.

The payment will go to the US Treasury.

It is the largest settlement in FCC‘s history, and marks the ending of FCC’s 10-month investigation into overcharges at Verizon Wireless, the agency says in a news release.

However, a FCC spokeswoman declined to comment on whether the settlement also ends the agency’s other billing inquiries, The Washington Post writes.

Verizon Wireless’s total costs associated with false fees have reached $77.8 million – one of the largest payouts for false business practices in the communications services industry.

Verizon said earlier this month that it would refund about 15 million subscribers $52.8 million for those unwanted data charges. Verizon partly attributed the problem to a software glitch in phones.

“In these rough economic times, every $1.99 counts.”

Julius Genachowski

“People shouldn’t find mystery fees when they open their phone bills — and they certainly shouldn’t have to pay for services they didn’t want and didn’t use,” FCC Chairman Julius Genachowski says in a statement. Adding: “In these rough economic times, every $1.99 counts.”

Verizon Wireless says in a news release that its overcharges were “inadvertent.”

“We accept responsibility for those errors, and apologize to our customers who received accidental data charges on their bills,” Verizone says.

Genachowski also says that the large settlement is meant to send a signal to other communications services providers.

According to telecom analysts, it seems like the FCC is ramping up regulatory pressure on companies to protect consumers.

“It will serve as a significant deterrent to others in the future.”

Genachowski has indicated that he will look into regulatory fixes for the growing fines associated with breaking long-term service contracts.

Earlier this month, the FCC began an exploration into regulations that would require cellphone service providers to alert users when they are close to going over their monthly allotted voice, text and data limits.

In a survey, the agency said 30 million cellphone users said they experienced “bill shock,” with extra charges on their monthly bills for data overcharges and other fees.

“It will serve as a significant deterrent to others in the future,” the FCC chairman says.

G20 meeting in Washington

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On a personal account: I’m not quite sure who Genachowski is referring to when he says;  “every $1.99 counts.”

The customers? Or the US government?

And, by the way, the US government is not the only government in the world that is looking into “regulatory fixes” at the moment as national debt is mounting…

iRock: “Nobody Knows The Bubbles I’ve Seen”

In Financial Markets, Learning, Philosophy, Views, commentaries and opinions on 28.10.10 at 23:47

Here’s the latest release from Versus. (October 7).  As usual with high quality sound and brilliant lyrics – another masterpiece!

“Nobody knows the bubbles I’ve seen. Nobody knows but me – Got it, CNBC?”

Her is; “Nobody Knows The Bubbles I’ve Seen” – parody lyrics by Marcy Shaffer

More songs at iRock.

Jon Stewart’s Crusade To Restore Sanity

In Health and Environment, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Philosophy, Uncategorized, Views, commentaries and opinions on 28.10.10 at 21:50

Comedian Jon Stewart – who yesterday was announced as the most influential man of 2010 – is now crusading to restore sanity in the US. The so-called “Rally to Restore Sanity” is scheduled to take place on the National Mall in Washington DC on Saturday. Stewart is expecting more than 100.000 americans to participate at his rally.

“What does the journalists of the 21st century have to know about listening to the crowd? And how can he or she break through the information overload to reach the public?”

Paley Center for Media


Jon Stewart is seeking to reintroduce the concept of playing nice with his upcoming Rally to Restore Sanity.   Rather than the name-calling and anger that seems to increase with every political season, Stewart is asking everyone to take it down a notch with a meeting of opposing views coming together in “respectful disagreement”. Basically it’s the reintroduction of playground rules – always play nice, no name-calling, no yelling, and when it’s all done shake hands and go home on friendly terms.

The Rally, which will take place on October 30 in Washington DC, is calling for “the people who think shouting is annoying, counterproductive, and terrible for your throat; who feel that the loudest voices shouldn’t be the only ones that get heard; and who believe that the only time it’s appropriate to draw a Hitler mustache on someone is when that person is actually Hitler,” to come together and discuss the issues that truly impact our lives (minus the political discord).

“The only time it’s appropriate to draw a Hitler mustache on someone is when that person is actually Hitler.

Also a satellite rally also will take place in Los Angeles.

However,  the details on the event are limited, Associated Press and  Matt Friedman reports:

More influential Than Obama

On Wednesday, Mr. Stewart was announced as the most influential man of 2010.

The award is based on a poll conducted by AskMen.com with half a million readers voting, along with the staff of the magazine.

The host of Comedy Central’s “Daily Show” rise to the top of the list this year, amongst 49 other prominent men from politics, sports, entertainment, technology and philanthropy.

On the following placed on the most-influential-list are;  Microsoft’s Bill Gates, Facebook’s Mark Zuckerberg, Apple’s Steve Jobs and artist Kanye West, according to Reuters.

“The “Daily Show” is our youths’ most trusted source of information and its host the most trusted man in America,” AskMen.com says in a statement.

When it comes to the US President, Mr. Barack Obama only reach place number 21 on the list.

The President is said to be guest at the “Daily Show” tonight. Thursday.

Other notables included James Franco (No. 7), Jay-Z (No. 13), George Clooney (No. 18), designer-turned-director Tom Ford (No. 23), Eminem (No. 24), Ben Affleck (No. 25), Zach Galifianakis (No. 29), Old Spice guy Isaiah Mustafa (No. 30), Justin Timberlake (No. 33), Hugh Jackman (No. 36), Christopher Nolan (No. 40), Leonardo DiCaprio (No. 43), former JetBlue flight attendant Steven Slater (No. 48) and comedian Russell Brand (No. 49).

“These are the men history will remember as having defined 2010,” according to AskMen.

Good For Democracy?

Stewart’s fellow Comedy Central late-night host, Stephen Colbert, came in at number 11.

Stewart and Colbert was named as the “real winners” of last years presidential election in the US, after their intensive coverage of the candidate’s campaigns.

Several surveys confirm that the majority of young Americans gets their news and general information, mainly, from the “Daily Show”.

Gone are the days when the Brahmins of the news industry dictate what the audience should know.

This was the topic of a debate at ForaTV earlier this year.

“The loudest voices shouldn’t be the only ones that get heard.”

Ira Glass with the National Public Radio (NPR) argues that the program, while good satire, is a poor substitute for actual, in-depth news coverage.

Journalists Rachel Davis Mersey and Ted Anthony defends the “Daily Show”.

Rachel Davis Mersey is an assistant professor of journalism at the Northwestern University’s Medill School of Journalism. Ted Anthony is Assistant Managing Editor for The Associated Press.

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Related by The Swapper:

Jon Stewart Takes On Obama’s Chief Economic Advisor

Daily Show: Jon Stewart Finds Humor In The Foreclosure Crisis

Jon Stewart vs Jim Cramer

Please, Give This Man An Award!

Marc Faber Expects Market Sell Off On QE2 Announcement

In Financial Markets, High Frequency Trading, Law & Regulations, National Economic Politics, Quantitative Finance, Views, commentaries and opinions on 26.10.10 at 21:52

With vacuum tubes expecting QE next Wednesday to come anywhere between $500 billion a $10 trillion, it falls upon Marc Faber to naturally take the other side of the bet, who, in this interview with Margaret Brennan, tells the impeccably coiffed Bloomberg anchor that instead of inciting the mother of all flash dashes and hitting the BlackRock 12 month target of Dow 36,000, Mr. Faber instead anticipates that the FED decision “could disappoint investors and may prompt a correction in US stocks.”

In response to Margaret’s question if size does in fact matter, Faber responds that anything under a trillion will “disappoint.”

And with Goldman now throwing out bogeys as high as $2-4 trillion, it is almost inevitable that a sell the news type day will be virtual certainty on mid-term election day.

“The markets are stretched: weak dollar, strong PMs and strong equities – I think a correction is overdue. But I wouldn’t think that a bear market is around the corner.”

In fact the opposite: “Maybe we will have a crack up boom in stocks and commodities like between the end of 1999 and March 2000 when the markets went up very strongly,” Faber says.

Marc “Gloom-And-Doom” Faber is once again mostly bearish on bonds (and cash), due to his long-running expectation that inflation, whether modest or hyper, will make all fixed paper investments lose value very fast.

As for specific equity sectors Faber highlights agricultural commodities and “I continue to recommend the accumulation of precious metals, whereby I think they are overdue for some kind of a correction here and then we’ll get the next move probably next year and then thereafter.”

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