Financial topics

[Higgenbotham]

We shall see soon Higg about our thoughts ago, to be clear we wished to be wrong.
A few pyrrhic victory's it will not matter anyway.
The consort, firing a Parthian shot, escaped into the mist.


http://www.zerohedge.com/news/two-third ... t-hit-mute

Correct, it probably matters not in the long view. So if I'm short and collect, the country is in trouble and that's the important thing to realize and react to at this point. It will be time to get out of the mainstream and produce something at a local level that people will need to survive. A trip to say S&P 950, then my plan is to go to a 50/50 stance safe cash vs inflation hedges because there is no telling how crazy (disorderly is the word we've been using) it will get. I think January 12 may have been it for the stock market but things can always get a little crazier as we know.

Our margin forecast is notably different from consensus. We expect LTM margins to be unchanged since 2Q at 8.9% (ex-Financials and Utilities) while consensus expects margins of 9.0%. The outlook for S&P margins explains the majority of our below-consensus earnings forecast. In 2012 we expect margins to fall slightly to 8.7% and S&P 500 earnings of $100 while consensus expects record 9.3% margins and $107 EPS.

Sounds about right for now. But things should cliff dive pretty rapidly.

[OLD1953]

I see the current world situation as a game or contest really, a series of hot potato juggling that is attempting to get rid of the underlying economic issues by passing the most damaging items back and forth from country to country. The US got the real estate crunch, passed the banking and production issue to Europe, which passed housing to China but hasn't managed to yet get rid of the EURO. The one(s) who wind up holding the potatoes when the whistle blows lose it's game over, and everything has to start again. In a sense it doesn't matter who has the potatoes, because the game restarts for everyone, victors and losers alike.

Deflation now on everyone's radar.

http://abcnews.go.com/Business/forget-i ... xN9bqXzs6w

[Higgenbotham]

Standard & Poor's downgrades EU bailout fund EFSF

The credit ratings agency Standard & Poor's has downgraded the EU bailout fund to AA+ from AAA.

http://www.bbc.co.uk/news/business-16586807

This out about 90 minutes ago.

Interesting, Zero Hedge broke this story 34 minutes before any of the news agencies.

http://news.search.yahoo.com/search;_yl ... art=1&b=21

If this news doesn't top the stock market, then I'm out of time specific guesses. Before this news broke, Asia was down across the board overnight and Europe was up.

http://finance.yahoo.com/intlindices?e=europe

[Trevor]

and now I'm hearing talk that Japan may end up being downgraded as well. I'm just waiting for Fitch and Moody's to launch their wave of downgrades in a month or two.

[Higgenbotham]

Greek creditors bridle at demands, default fears grow
By Lefteris Papadimas and Steve Slater

ATHENS/LONDON | Mon Jan 16, 2012 6:56pm GMT

ATHENS/LONDON (Reuters) - Greece's private sector creditors warned on Monday that the Athens government must urgently break a deadlock in debt swap talks triggered by "unreasonable" demands from international lenders if is to avoid a disorderly default.

Barely a month after an injection of bailout funds helped to avert bankruptcy, Greece is back at the centre of the euro zone crisis as fears of a default and a subsequent euro zone exit overshadow a mass credit downgrade of euro zone countries.

Cash-strapped Athens needs a deal with the private sector within days to avoid going bankrupt when 14.5 billion euros of bond redemptions fall due in late March.

But talks with its creditor banks broke down on Friday over the interest rate on new bonds Greece will offer and a plan to enforce investor losses. Negotiations were suspended until Wednesday, and Athens sent senior officials to Washington to consult with the International Monetary Fund.

With a growing number of experts -- including a senior Standard & Poor's official -- warning a Greek default was on the cards, the country's creditors expressed alarm.

http://uk.reuters.com/article/2012/01/1 ... IN20120116

Remember guys, the VIX indicator is down, so this is definitely not a problem (sarcasm).

[Trevor]

Yeah, I read that article. Greece will probably receive its next bailout so they can continue to kick the can down the road, all the while crossing their fingers and praying that this will somehow be resolved.

A default in the cards; I don't know why an expert is necessary to say it. Investors can already see it in the cards; why else are the interest rates offered so astonishingly high?

[aedens]

http://www.youtube.com/watch?v=A3oIiH7BLmg&NR=1

http://www.clevelandfed.org/research/da ... .nav=Local

trends

[John]

Greece Is Insolvent, Will Default on Its Debt, Fitch Says

> Jan. 17 (Bloomberg) -- Greece is insolvent and probably won’t be
> able to honor a bond payment in March as the country negotiates
> with creditors to cut its debt burden, Fitch Ratings Managing
> Director Edward Parker said.

> The euro area’s most indebted country is unlikely to be able to
> honor a March 20 bond payment of 14.5 billion euros ($18 billion),
> Parker said today in an interview in Stockholm. Efforts to arrange
> a private sector deal on how to handle Greece’s obligations would
> constitute a default, he said. ...

> “The so-called private sector involvement, for us, would count as
> a default, it clearly is a default in our book,” Parker said. “So
> it won’t be a surprise when the Greek default actually happens and
> we expect it one way or the other to be relatively soon.”

> http://www.businessweek.com/news/2012-0 ... -says.html

Fitch Ratings Service has been something of a "hero" to Sarkozy and
the Europeans because they have offices in Paris and, unlike those
nasty Anglo-Saxon ratings services, especially S&P, they've reaffirmed
France's AAA rating.

So now Fitch is targeting Greece. They won't be heroes much longer.

John

[John]

Baltic Dry Index Slumps To Lowest Since January 2009

> The apparently
> critical-when-its-going-up-but-ignore-it-when-it-is-falling index
> of the cost of dry bulk goods transportation has 'crashed' in the
> last few weeks to its lowest level since January 2009 (back below
> 1000 according to today's levels). Whether this is seasonal output
> differences or weather impacts, it seems clear that lower steel
> output in China and a decline in European imports is having its
> impact on global trade. The index has fallen for 19 days in a row,
> down almost 50%, its largest drop since the harrowing period of Q4
> 2008.

http://www.zerohedge.com/sites/default/ ... BDIY_0.png

The BDI could turn around, as it has before, but all the signs are
that the world is "slowing down," as it did at the end of 2008,
and a falling BDI would be another sign of that.

John

[burt]

I recommend you read the article from Stratfor: http://www.stratfor.com/analysis/european-crisis-2012
So where we are now:
-1- Euro is GOING to exist for the next 10 years,
-2- Europe is headed by a recession (you have to pay somewhere this kind of craziness),
-3- the political fight will continue for a while, but EU is NOT going to be erased, as long a people want it, and EVERYONE in Europe is asking for a "stronger" Europe, the is NO risk of any major social unrest, the only things that people are asking for is "kicking the can down the road" at WHATEVER price.
-4- Nothing to do with the article, but the Swiss Franc won't exist any more by 2015-2017, Euro will become the only money within Europe, maybe before disappearing, but his is another story
ECB can do a lot of crazy things within the next 10 years, and don't forget that Draghi was part of the bank that put Greece on the brink, he can do the same thing with Euro and this will "save" the Euro for 10 years, before a "splendid" crash. He doesn't care more that what did Greenspan with the dollar (which will survive AS LONG as US have a lot of "aircraft carrier" and "drones" and military stuff, enough to "crash" any "ennemy") this is part of definiti0n of a money.

I think that the price equity will go up and hit the wall of the reality in 10 years.

The way banks are managed here in Europe, means that at some point (but not in 2012, don't forget it is an electoral year for several major countries in the world) you have to "make" something with the "virtual" money owned by the banks.

Look back about definition of "money", you have really different kind of "moneys" today (and a "Central Bank money", fully disconnected from the Economy), the world (and so the timing going along with it) is VERY different from the one we had in 1929, so I do not believe that any major shock will happen in 2012, we'll see....

John, what kind of explanation could you give about this variation of the "time" (things on one hand go much faster, that is the technology factor, and on another hand things last much longer, see, for example the bull stock market starting from 1932 to 2007.

I’m no so certain, that the 4 generations cycle is enough for explaining that nothing is really changing, except that banks hold definitely the power, and people DON’T react (NO social unrest, just a few demontrations, but nothing which can go anywhere).

Higgi and John I’d be happy to read your comments.