This came today from Larry Levin regarding Spain.
Do you remember when there was a European banking crisis? It was a “whole” several weeks ago (not years) so that makes it quite difficult to remember. Hmm, what was it that almost “brought the global banking system to its knees?” Was it Greece? I can’t seem to recall; after all, March 2012 was a long time ago – don’t you agree?
That’s right! It was Greece. It was insolvent, then it was saved, then it was insolvent again, then it was saved, then it was insolvent again…then the banking mafia literally rewrote the rules of the game (bond sales) and screwed bond holders out of ~80% of their money and issued newer bonds to replace the old insolvent ones. Oh, and the new bonds are already nearly worthless.
During that time, if you recall, I constantly reminded everyone that this so-called “ring fencing” and/or “savior” plan wouldn’t last (again, the new bonds are in a huge loss position) and that there was worse news out there: Portugal, Spain, Ireland, and possibly Italy.
Well, the on-again off-again insolvency game is perking up in Spain and this is one country that is said to be too big for the ECB to save.
For over three years now the sole source of “stimulus” for European and US economies, and thus the stock market rally, has been from money printing and central planning of the respective central banks. The market was scared today when it looked like the spigot of “free” money may be shutting off. Spain held a bond auction and the best word to describe it is “caca.” I guess in Europe they were saying “STOP! Don’t touch that (auction), it’s caca.”
The auction was so bad it caused Spain’s 10-YR bond yield to spike 4.46% today. This is turn spooked equity investors as they wondered “Why aren’t the central planners buying up this garbage? Don’t they know they have to buy this worthless paper to keep me happy so we’ll stay long equities?”
Bloomberg had the I placed at the top.
Also from Bloomberg today “Spanish Yields Reach 12-Week High on Auction
Spain sold 2.6 billion euros ($3.4 billion) of bonds, near the minimum planned, and borrowing costs rose as the impact of European Central Bank’s emergency lending waned. Bonds and the euro declined.
…Spain’s financing costs had been held down by the ECB’s 1 trillion euros of three-year loans to banks, known as the LTRO, some of which have been recycled into high-yielding government debt. Yields had declined as much as 95 basis points after ECB President Mario Draghi announced the policy on Dec. 8 and Spanish banks’ holdings of government debt jumped to 220 billion euros in January from 178 billion euros in November.
“It’s back to reality now, the auction shows the LTRO effect has been exhausted and now demand for Spanish paper is becoming much more price sensitive,” Peter Chatwell, a London-based fixed-income strategist at Credit Agricole Investment Bank, said in a telephone interview. – Keith Jenkins, Bloomberg.
By the way, Italian bonds spiked today too (+4.13%) and it is an even bigger financial mess than Spain.
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I also saw this chart the other day on Europe.
The economy is getting worse.
We just got a big slew of PMI numbers, and a few things are clear in Europe.
The periphery is hurting badly. What countries like Spain, Italy, and Greece so desperately need is growth, and they're not getting any of it. This not only is bad from a societal standpoint (as the jobs picture gets worse and worse) but it makes sovereign debt dynamics worse, as the GDP part of debt-to-GDP shrinks.
Core is not doing so hot either. The French number showed a particularly steep drop. Germany has dropped below 50 as well.
Surprisingly, the only real "bright spot" was Ireland, which saw a big pickup in New Orders and exports. Somehow it continues to avoid the curse of the rest of the PIIGS.
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On the lighter side...
FOR SALE BY OWNER.
Complete set of Encyclopaedia Britannica, 45 volumes.
Excellent condition, £200 or best offer. No longer needed, got married, wife knows everything.
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Did Santorum really almost call Obama the N word?
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As part of its annual Best and Worst Supermarkets guide, Consumer Reports sent a secret shopper out on a mission:
To figure out, once and for all, which discount shopping method really makes the biggest difference at the cash register.
Five shopping styles were put to the test–impulse purchases, using brand loyalty cards/coupons, buying store brand-only, and shopping in bulk. When all was said and scanned, the store-brand and bulk buyers blew the competition away.
"By choosing store brands, Marks cut his bill by almost 60 percent, paying about $66 instead of $164," according to the report. "He saved almost as much by shopping at a warehouse club. And he cut his impulsive-shopper bill by 43 percent by using coupons and a store savings card."
Here's the breakdown:
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Some interesting Fed related gold headlines.
Isn’t it just crazy. You couldn’t make this stuff up.
The following was just last week.
Gold has gone back to the norm. Bernanke speaks, gold goes straight up.
Bernanke, speaking at the National Association for Business Economics, just made a very strong hint that the New QE is coming.
Here is the quote:
A wide range of indicators suggests that the job market has been improving, which is a welcome development indeed. Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force. To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.
If this hypothesis is wrong and structural factors are in fact explaining much of the increase in long-term unemployment, then the scope for countercyclical policies to address this problem will be more limited. Even if that proves to be the case, however, we should not conclude that nothing can be done. If structural factors are the predominant explanation for the increase in long-term unemployment, it will become even more important to take the steps needed to ensure that workers are able to obtain the skills needed to meet the demands of our rapidly changing economy.
And this
Tim Geithner (along with Bernanke) testified before the House Committee on Government Oversight and Reform last week. Congressman Trey Gowdy (R-SC) - in a display of forcing Geithner to answer a question directly - asked Geithner if he had only ONE more debt ceiling increase request ever that could possibly be made, how big would it be.
After trying to shuffle - very awkwardly - around answering the question, Geithner responded with, "It would be a lot - it would make you uncomfortable." Here's the exchange, which is spine-chilling:
Geithner: “That I’d have to get to you in writing, I can’t do it in my head though.”
Gowdy: “How about a round number?”
Geithner: “No idea….
Gowdy: “$20 trillion?”
Geithner: “I just can’t do it in my head.”
Gowdy: “$50 trillion?”
Geithner: “I don’t know..."
Gowdy: “A lot? Can we agree it would be a lot?”
Geithner: “It would be a lot. It would make you uncomfortable.”
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With any short-term gold correction comes talk that the "gold bull" is dead.
Are these folks right?
Our crystal ball here at Stansberry & Associates doesn't work any better than anyone else's… But we've been gold bulls for a decade… We got tens of thousands of our readers into gold early in the game. (I placed one-third of my net worth into gold back in 2003… and hold that stake to this day.) We've even published a book on gold… So we do have some comments that might be of use.
First, keep in mind that most of the people who are declaring that the gold bull market is dead said the same thing in 2006, 2008, and 2010. Most of these people don't even understand the "idea" of gold.
They don't understand why gold has been used as money for thousands of years. (Gold is consistent the world 'round… It is divisible, it is portable, it doesn't ruse or corrode, it has intrinsic value… And as our friend Doug Casey reminds us, gold is money that governments cannot debase.)
So… although we always like to hear both sides of a debate, we know most people – even highly respected investment pros – just don't know what they are talking about when it comes to gold. Talking with these people is as useful as talking to a goat (though more frustrating).
Gold isn't an investment the way most folks see it. A hundred shares of Coca-Cola is an investment. An income-producing rental property is an investment. Gold is "real money," and thus, is a crisis hedge. We buy gold and hope we never have to use it… just like we do with auto insurance. The sooner people learn that gold is not a conventional "investment," the better off they'll be. If you're late to the party in realizing this, you're not alone. The majority of brokers, financial advisors, and fund managers have no idea this is the case.
Second, keep in mind the "long view" of gold. Gold has increased in value for 11 consecutive years. No widely traded asset or index has done that for more than 100 years. It's the most extraordinarily consistent price run we've ever seen. Gold is just flat out "due" for a break. It deserves a break.
When I discuss potential short-term trades and write trading commentaries, I often say "Markets are like runners. They can't run flat out without taking a breather." This is a useful view because you learn to anticipate natural corrections. You're not surprised or confused by them at all (unlike most market participants).
This line of thinking is also useful when viewing gold's long-term uptrend. When you know that even the strongest market moves go through corrections, you're not surprised by them. You don't freak out and go on CNBC, pronouncing the gold bull market is dead.
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I'm finishing this one off with a couple of jokes. If you're easily offended you might want to stop right here.
Give a man a fish and he eats for a day.
Give a man a welfare check, a free cell phone with free monthly minutes,
food stamps, section 8 housing, a forty-ounce malt liquor, a crack pipe
and some Air Jordan's and he votes Democrat for a lifetime.
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