Tuesday 30 October 2012

Europe v Germany.



Baltic Dry Index. 1048  -01

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

The gambling known as business looks with austere disfavor upon the business known as gambling.

Ambrose Bierce

The big story today is the Great Nor’easter storm hitting the east coast of the USA, but with it well covered in mainstream media, we will leave it to MSM to update us across the rest of the day. In the long run as we saw with Hurricane Katrina, storms have little lasting effect on an economy as large as the USA’s, but that is little comfort to those directly affected by property losses in the short run. Having been well publicised in advance, death and injury should be minimised, and following the debacle that followed Katrina, rescue and recovery efforts should be far more competent and efficient.

The big European story today is the Eyurozone, led by France starting to gang up on paymaster Germany. While our thoughts and sympathies remain with America, today we take stock of a crumbling Europe. Stay long precious metals. The euro doesn’t look to have long left in its present form.

Experience is the name everyone gives to their mistakes.

Oscar Wilde

Debt crisis: Greece must have debt relief, leaders to tell Angela Merkel

A delegation of leaders are to warn Angela Merkel that Germany must agree to Greek debt relief or risk plunging the eurozone into a fresh and more dangerous phase of the crisis.

Francois Hollande will travel to Berlin with leaders for crisis talks on Tuesday after Germany said a Greek sovereign debt restructuring was “out of the question”.

On Monday, the French president met with Jim Yong Kim, head of the World Bank, and IMF chief Christine Lagarde, as well as leaders of the World Trade Organisation and the OECD, to discuss solutions for Greece, including a debt buy-back. The group will talk about the ideas with Ms Merkel on Tuesday.

European markets dropped ahead of the pivotal talks amid worsening bank problems gripped both Greece and Spain. Greek banks plunged almost 16pc after the finance ministry in Athens said that Brussels’ bail-out fund would not recapitalise the banks. The collapsed dragged the Athens exchange down 6.3pc.

In Spain banks were told that a swingeing discount of as much as 63.1pc would be applied to property assets transferred into FROB, the national “bad bank”. The Bank of Spain said toxic property loans would be transferred from the banks at an average discount of 45.6pc with foreclosed loans taking a 63.1pc cut. 
The scheme, which is expected to start at the end of November, said it would have capacity to absorb €90bn of assets and would first take on €45bn assets from the nationalised banks.

Mario Monti, Italy’s prime minister, said he would work with Spain’s Mariano Rajoy to achieve stability.
Eurozone leaders fear that another crisis in Greece could destablise the Madrid’s fragile efforts to clean up its banks and shore up its finances.

Jean Claude Juncker, head of the eurogroup of finance ministers, said that leaders would speak three times over the next two weeks to establish a rescue plan for Greece.
More

Updated October 29, 2012, 6:00 p.m. ET

Crisis Takes Toll on French Hospital

Lyon Facility Is Unloading a Castle to Ease Funding Crunch Sparked by Banking Industry's Downturn

LYON, France—The public hospital center in this southeastern French city is selling a century-old castle and its expansive grounds to help ease a funding squeeze, in a sign of how the euro zone's sovereign-debt crisis is also afflicting the bloc's healthier members.

Hospices Civils de Lyon hopes to raise €4 million ($5.2 million) from the sale, which would also save on the hefty maintenance and heating bills associated with the aging château.

While France has been spared the depth of hardship seen in countries requiring bailouts, such as Greece, or those teetering on the edge, such as Spain, the crisis has had a deep impact on the French banking industry, traditionally a key source of financing for institutions such as public hospitals and municipalities.

The hospital's problems intensified in late 2011 when Franco-Belgian lender Dexia SA, DEXB.BT -5.26% which used to supply around 40% of the financing for French hospitals, received a bailout from the French and Belgian governments. The bank stopped lending.

French hospitals also have been hit by attempts to prevent another crisis: European governments have introduced new solvency rules designed to stop banks from overstretching themselves, which banks say make it hard to provide hospitals and municipalities with long-term loans.

Hospices Civils de Lyon, which carries debt of about €900 million, and around 20 other large French hospitals have tapped financial markets by selling bonds. But that route could also become more difficult. In July, Moody's Investors Service downgraded €270 million in bonds issued jointly by Lyon and other hospitals in 2009 to Baa1 from Aaa. A separate €167 million issuance in 2010, not including Lyon, was downgraded to A1 from Aaa. The two bond issues remain on review for further downgrade.
More
http://online.wsj.com/article/SB10001424052970203400604578073203530828418.html?mod=WSJUK_hpp_MIDDLETopNews

October 29, 2012, 6:05 p.m. ET

Sicilian Vote Shows Political Discontent in Italy

ROME—Sicily elected a governor from Italy's center-left parties for the first time in more than a decade on Monday, in a ballot that underscored rising voter disaffection with the country's political establishment and the growing popularity of a protest party led by a former comedian.

Sicily's political map, which is closely watched as a bellwether of the coming national elections in the spring, was redrawn by Monday's election results. Backing crumbled for center-right parties that once considered Sicily a bastion of support.

The vote came as rating firm Fitch on Monday downgraded Sicily one notch closer to junk territory, citing expectations of a prolonged period of budgetary deficits in the Italian region. Sicily is one of Italy's poorest regions, with an unemployment rate of nearly 20%, twice the national average.

Rosario Crocetta—an openly gay candidate backed by a coalition of leftist and Catholic parties—garnered 31% of the vote, beating Sebastiano Musumeci, the center-right candidate backed by former Prime Minister Silvio Berlusconi.

---- The biggest surprise, analysts said, was the number of Sicilians who decided to either stay away from the polls or cast their vote for the Five-Star Movement, a protest party led by euro-skeptic and former comedian Beppe Grillo. Only 47% of voters turned out this year, compared with the 67% that voted in 2008. The Five-Star Movement grabbed 15% of the vote for Sicily's regional assembly—more than any other party. Its candidate for governor, warehouse worker Giancarlo Cancelleri, received 18% of the vote.

"This is an extraordinary result that makes me think the movement could become the leading party in the national elections," said Alessandro Campi, a professor of politics at the University of Perugia.
More
http://online.wsj.com/article/SB10001424052970203880704578086791443200704.html?mod=WSJUK_hpp_MIDDLETopNews

We end for the day with two of Europe’s crooked banks.  Barclay’s loses its dubious case in England’s High Court. UBS losses force it out of Investment Gambling. For more on UBS and gambling scroll down to Crooks Corner.

In gambling the many must lose in order that the few may win.

George Bernard Shaw

Libor: Judge forces Barclays to reveal names of staff involved in rate rigging

Barclays will be forced to disclose the names of staff involved in Libor rigging, following a damning court judgment over claims it mis-sold interest rate swaps to a care home operator.

The bank was chastised on Monday at the High Court in London by Lord Justice Flaux, who claimed Barclays was intentionally trying to hide the true scale of the Libor scandal, which has already seen the lender fined £290m.

The criticisms came as Barclays faced a preliminary hearing, ahead of a trial, over allegations it mis-sold to a care home group complex interest rate derivatives that were in turn based on false Libor rates.

Issuing a damning judgment, Lord Justice Flaux said Barclays’ objections to the Libor-rigging claims brought against it by Guardian Care Homes were “wholly without merit” and accused the bank of “misleading” customers.

Allowing the case to continue to trial, the judge described the bank’s attempts to dismiss the Libor aspects of the care home operator’s claim as “shadow boxing” and said they were “doomed to fail”.

Guardian Care Homes’ lawsuit is seen as a test case for Libor-rigging claims and the court decision to allow the case to go to trial potentially opens the door to billions of pounds of legal actions against other banks involved in the rate-setting scandal.

Over a day-long hearing, Lord Justice Flaux repeatedly struck down Barclays’ objections and said the bank would be forced to disclose potentially embarrassing details, such as the identities of staff implicated in Libor manipulation.


October 30, 2012

UBS to Reorganize Investment Bank

In response to a tougher regulatory and economic climate, UBS AG UBSN.VX +7.28% is launching a complete overhaul of its investment-banking arm, exiting almost entirely from fixed income and cutting thousands of jobs in London and the U.S.

Chief Executive Sergio Ermotti said the decision to take this step was made during the summer, when it became increasingly clear that the global economy was worsening, that regulators were getting stricter and tougher demands on capital were here to stay.

However, the foundations for the plan were laid a year ago, when Mr. Ermotti told investors that the Swiss bank wants to focus on servicing its wealth-management, corporate and retail clients and shrink its investment bank.

The Zurich-based bank said Tuesday it plans to cut about 10,000 jobs by 2015, or 15% of its headcount of 64,000. About a quarter of the jobs will be lost in Switzerland.

The rest will be spread around the globe. Since a majority of the layoffs will be made at the investment bank, New York and London will be affected heavily.

----- The changes will take three years to implement and will probably cost about 3.3 billion francs in total in restructuring charges over this period.

The bulk of the savings will come from the reduction in headcount.

"This is a people's business," Mr. Ermotti said. "If you cut costs, the big part is coming from headcount."
More
http://online.wsj.com/article/SB10001424052970203335504578087411872547912.html?mod=WSJUK_hpp_LEFTTopWhatNews

The best throw of the dice is to throw them away.

English Proverb

At the Comex silver depositories Friday final figures were: Registered 36.97 Moz, Eligible 104.85 Moz, Total 141.82 Moz.  

Crooks And Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over. 

Today, a little light comedy. UBS, Switzerland’s rogue bank that has trouble in America keeping within American laws, is having one of its former traders prosecuted in London for, of all things, rogue trading. To this old dinosaur commodities trader, UBS deserved what it got for not putting in place proper internal controls to stay on top of its gamblers, aka traders. UBS deserved to fail, but unfortunately was bailed out by the hapless Swiss taxpayer. Is our fiat money system great, or what?

If you must play, decide upon three things at the start:
the rules of the game, the stakes, and the quitting time.


Chinese Proverb

Investment banking is a gamble, Kweku Adoboli tells court

Kweku Adoboli, the UBS “rogue trader”, denied gambling away the bank’s money, claiming if his actions amounted to gambling then all investment banking was just a game of chance.

The 32-year-old investment banker claimed that he would get up at 3am to monitor the markets and to guide his trading.

“The purpose of doing all that investigation and analysis is to increase the chance, and reduce the number of things that are going to be surprises when you make decisions about where you think the market is going,” he said.

“If that is just a calculated gamble, then all investment banking is a calculated gamble.”

Instead of losing money by acting recklessly, Mr Adoboli put his $2.3bn (£1.4bn) loss down to a decision taken by his superiors in 2011.

At that time the bank decided to move from being bearish to bullish on the European banking sector.

“At that point I should have held on to my conviction of fear of the market,” Mr Adoboli told a jury in Southwark Crown Court. “At that very point I changed my position, that is why I don’t believe I was a rogue trader.”

Mr Adoboli claims his colleagues knew about his secret trading positions and an “umbrella” account he used to conceal profits made on those trades.

While Mr Adoboli’s initial unauthorised trading made a profit, he built up huge positions in 2011 and 2012 after trying to recoup previous losses. At one point he had built up a $12bn position.

However, Mr Adoboli claimed the use of his umbrella account did not result in any higher pay for him.

By setting aside profit in the account it seemed as if Mr Adoboli was making less cash for the bank than was the case, hence a lower bonus.

Mr Adoboli claimed he started the practice of putting aside money to offset future costs.

When I was young, people called me a gambler.
As the scale of my operations increased I became known as a speculator.
Now I am called a banker.
But I have been doing the same thing all the time. 


Sir Ernest Cassel (1852-1921)

The monthly Coppock Indicators finished September:
DJIA: +66 Up. NASDAQ: +88 DOWN. SP500: +85 Up. All three indicators had reversed from down to up, but now the NASDAQ has reversed again to down. While not unprecedented, it is a warning sign a that the July reversal from up to down is about to fail.

No comments:

Post a Comment