Financial News

[NorthSideSox72]

By making what is going to happen anyway...happen.

 

Edit: the correct quote...from a fairly knowledgeable Vulcan, is..."Since it is logical to conclude you will kill us in any event, I choose not to cooperate."

How can you not see that this deal means a Greek recovery over a period of years from this recession, versus a departure and collapse will mean a recovery in decades, if ever? How can you not see how not taking the deal is making things worse?

 

And all the while, even if taking the deal and not taking it are the same (as you seem to believe), taking the deal does a lot less damage to the rest of the euro zone and the world.

 

[Balta1701]

How can you not see that this deal means a Greek recovery over a period of years from this recession, versus a departure and collapse will mean a recovery in decades, if ever? How can you not see how not taking the deal is making things worse?

How on Earth does taking this deal mean a greek recovery over a period of years?

 

If you read the actual numbers on the plan, Greece's GDP in 2020 would still be 5% lower in 2020 than it was in 2008 if everything goes correctly...but the plan makes the exact same mistake as the last 5 plans or however many bailouts there have been...it assumes that the bailout plan won't do more damage. Every single previous plan has been wildly optimistic for exactly that reason, this is no different.

 

Aside from you guys getting frustrated with me, you have given zero reason for me to believe that this plan is somehow a path to growth. Even the wildly optimistic estimates going into the numbers for this bailout still show incredibly weak growth for Greece, and like I said, those estimates are political estimates...being written so that there's no motivation for the banks to take a larger haircut.

 

Greece will not "Recover" over a period of years if they take this deal. Greece will fall into a deeper unemployment hole, a deeper recession, and next June we'll have this exact same discussion over bailout 19.0: electric boogaloo.

[NorthSideSox72]

How on Earth does taking this deal mean a greek recovery over a period of years?

 

If you read the actual numbers on the plan, Greece's GDP in 2020 would still be 5% lower in 2020 than it was in 2008 if everything goes correctly...but the plan makes the exact same mistake as the last 5 plans or however many bailouts there have been...it assumes that the bailout plan won't do more damage. Every single previous plan has been wildly optimistic for exactly that reason, this is no different.

 

Aside from you guys getting frustrated with me, you have given zero reason for me to believe that this plan is somehow a path to growth. Even the wildly optimistic estimates going into the numbers for this bailout still show incredibly weak growth for Greece, and like I said, those estimates are political estimates...being written so that there's no motivation for the banks to take a larger haircut.

 

Greece will not "Recover" over a period of years if they take this deal. Greece will fall into a deeper unemployment hole, a deeper recession, and next June we'll have this exact same discussion over bailout 19.0: electric boogaloo.

You keep ignoring the main point here. The point is not that the offered plan is something that will make Greece some huge economic engine - they will struggle for quite a while under the best of circumstances. The point is that if they leave the EZ, they will collapse... and then recovery is much, much LONGER than WITH the plan.

 

[Balta1701]

You keep ignoring the main point here. The point is not that the offered plan is something that will make Greece some huge economic engine - they will struggle for quite a while under the best of circumstances. The point is that if they leave the EZ, they will collapse... and then recovery is much, much LONGER than WITH the plan.

If there's no recovery in sight with the plan, and no recovery in sight without the plan, then there is zero reason to believe this claim. If I were to say you guys were ignoring a point...you're ignoring what is actually happening to Greece right now.

 

I'm not pretending that defaulting will make them an economic engine either...but I'm not pretending that there's a path for growth in the plan.

 

They take the plan, their economy will shrink more, and they will be right back here again, probably with worse riots. Just like one could have predicted last time there was a bailout agreement. And the time before that. And the time before that.

[Balta1701]

Are the Greeks crazy?

 

No, they're just at the end of their tether. Europe is asking them to adopt more austerity than they're willing to bear.

 

OK, but they're spending too much money. Surely they know they have to cut back?

 

Sure, but the deals on offer are pretty unattractive. Europe wants to forgive half of Greece's debt and put them on a brutal austerity plan. The problem is that this is unrealistic. Greece would be broke even if all its debt were forgiven, and if their economy tanks they'll be even broker.

 

But that's the prospect they're being offered: a little bit of debt forgiveness and a lot of austerity.

 

Well, them's the breaks.

But it puts Greece into a death spiral. They can't pay their debts, so they cut back, which hurts their economy, which makes them even broker, so they cut back some more, rinse and repeat. There's virtually no hope that they'll recover anytime in the near future. It's just endless pain. What they need is total debt forgiveness and lots of aid going forward.

 

That doesn't sound like a very attractive option for the rest of Europe.

 

No, it's not.

 

So maybe they should just let Greece default and wash their hands of them.

 

Here's the thing, though: Greek debt is largely held by German banks that made the loans. [see update below.] If Greece has been irresponsible, so were the German banks that happily loaned out the money. So if Greece defaults, the banks go kablooey. But they're too big to fail, which means the German government would be forced to bail them out. And guess where the bailout money comes from? Tax dollars.

 

This means that German taxpayers have a bleak choice. They can shovel lots of money to Greece to keep them from defaulting, or they can refuse, and then shovel lots of money into German banks to keep them from collapsing. Either way, German taxpayers are going to foot the bill. They just haven't quite accepted this in their gut yet, and it's hard to blame them. They're pretty badly screwed no matter what.

Hmmm. Given that choice, they might decide they'd rather give their money to German banks than to Greek civil servants. What happens then?

 

Greece defaults. And that almost certainly means that Greece exits the euro.

 

Why?

 

It's the growth thing again. If Greece defaults, nobody will loan them any money. That means huge cutbacks, which means the economy will tank, which means even more cutbacks, etc. The traditional way out of this spiral is a massive devaluation of your currency. But Greece doesn't have a currency. It has the euro.

 

So if they want their economy to grow again, they have to (a) default, (b) exit the euro and re-adopt the drachma, and © devalue the drachma. This will cause massive amounts of pain, but it will also make Greek exports super cheap, which will eventually revive their economy.

 

So why not just let that happen?

 

It's just too catastrophic to consider. German banks, of course, would collapse and have to be bailed out. Ditto for banks in other countries that have lots of exposure to Greek debt. But that's not the worst of it. If Greece exits the euro, it will become terrifyingly obvious that other weak countries might exit too. Portugal, Spain, and Italy are the obvious candidates. Investors, spooked at the thought of their money being stuck in a country that might exit the euro and devalue all its bank deposits, would start huge runs on banks in those countries. The ECB would have to intervene and provide liquidity without limit. It would be a disaster.

 

So exiting the euro can't be allowed?

 

Right.

 

But if there's no exit, there's no devaluation, and Greece is pretty much screwed forever.

Right.

 

So who wins?

 

It depends on who blinks. Exiting the euro would be no picnic for Greece. But they could decide it's better than endless indenture, and threaten exit in order to get a better deal from the Germans. Then the Germans have to decide whether to call their bluff.

 

Wow.

 

Exactly. Wow. Everyone knows that somebody's going to lose a huge pile of money over this. What's really happening right now is a very high-stakes negotiation to figure out just how the losses are going to be parceled out. Stay tuned.

Different way of writing it.

 

The other point to remember here is that Greece has the rest of Europe over a barrel too.

[Jenksismyhero]

Question -

 

What's the US exposure for this? I'm sure we have our hands tied with the EU, so a drop of a country or two would hurt investors and banks here....but how much? Wouldn't the dollar have a really solid period of growth so that long-term it would be a benefit for the US? Or is that totally wrong?

[Balta1701]

Question -

 

What's the US exposure for this? I'm sure we have our hands tied with the EU, so a drop of a country or two would hurt investors and banks here....but how much? Wouldn't the dollar have a really solid period of growth so that long-term it would be a benefit for the US? Or is that totally wrong?

I think the real answer is "We don't know."

 

There's good reason to believe that even in Europe, the governments don't know who all has exposure to Greek debt. The U.S. almost certainly has very little direct exposure to Greek debt, but if it was just an issue of Greece then the Germans could pay them off and be done with it...the U.S's exposure to italian banks, spanish banks, etc., is probably larger...but the French and German exposure to those banks is again much larger since they made them all the bad loans.

 

So the question we're really getting to is...what is the U.S.'s exposure to the French and German banking industries? In that one...the U.S. probably has significant exposure somewhere in there. The MF collapse, for example, was in no small part based on Corzine's company betting that Europe would get its act together and bail out some of these Italian and Spanish banks.

 

How things would cascade through...there's a good chance that any of these popping would be like Lehman popping for us, except this one wouldn't directly happne here.

[Balta1701]

Greek cabinet voted unanimously to support having a referendum.

[Jenksismyhero]

I think the real answer is "We don't know."

 

There's good reason to believe that even in Europe, the governments don't know who all has exposure to Greek debt. The U.S. almost certainly has very little direct exposure to Greek debt, but if it was just an issue of Greece then the Germans could pay them off and be done with it...the U.S's exposure to italian banks, spanish banks, etc., is probably larger...but the French and German exposure to those banks is again much larger since they made them all the bad loans.

 

So the question we're really getting to is...what is the U.S.'s exposure to the French and German banking industries? In that one...the U.S. probably has significant exposure somewhere in there. The MF collapse, for example, was in no small part based on Corzine's company betting that Europe would get its act together and bail out some of these Italian and Spanish banks.

 

How things would cascade through...there's a good chance that any of these popping would be like Lehman popping for us, except this one wouldn't directly happne here.

 

I guess i'm just wondering if the EU fails, then Europe's major markets are screwed for years to come. And while we might also get screwed and dip back into a recession, ultimately it would be short lived since we'd have the world's strongest and safest economy to invest and do business in, getting us to a position of dominance we were at in the 50's.

Edited November 2, 2011 by Jenksismybitch

[southsider2k5]

Question -

 

What's the US exposure for this? I'm sure we have our hands tied with the EU, so a drop of a country or two would hurt investors and banks here....but how much? Wouldn't the dollar have a really solid period of growth so that long-term it would be a benefit for the US? Or is that totally wrong?

 

It depends on how many dominoes fall. If it is Greece, we are fine. If it is Greece and Portugal, not as good. The further down the line is goes, the bigger trouble we get into. If it gets to France and/or Germany, we are in very big trouble.

[southsider2k5]

I guess i'm just wondering if the EU fails, then Europe's major markets are screwed for years to come. And while we might also get screwed and dip back into a recession, ultimately it would be short lived since we'd have the world's strongest and safest economy to invest and do business in, getting us to a position of dominance we were at in the 50's.

 

If the EU fails we aren't talking about a recession. We are talking about major, major problems.

[southsider2k5]

MF is now trading OTC, it has been as low as 3 cents. Currently at 22 cents

[Balta1701]

MF is now trading OTC, it has been as low as 3 cents. Currently at 22 cents

The night before MF Global Holdings Ltd. (MF) posted its biggest quarterly loss, triggering a 48 percent stock plunge, Chairman and Chief Executive Officer Jon Corzine appeared at a steak dinner at New York’s Helmsley Park Lane Hotel for a speech to a group of bankers and traders.

 

“There was no sense at all that there was impending doom,” Kenneth Polcari, a managing director of ICAP Corporates, said of Corzine’s Oct. 24 address to the National Organization of Investment Professionals. “He gave a spectacular speech” about his decades at Goldman Sachs Group Inc. (GS), life as a U.S. senator and New Jersey governor and his return to the private sector. “He’s had a full life, up until now.”

 

Corzine, 64, excused himself before the main course was served, saying he had to prepare for an earnings call the next day, said David Shields, vice chairman of New York-based brokerage Wellington Shields & Co. and a former chairman of the organization. The group seeks to foster “a favorable regulatory environment,” according to its website.

 

Timothy Mahoney, CEO of New York-based Bids Trading LP, said Corzine’s speech was “delightful.”

Link

[southsider2k5]

Link

 

I read somewhere else where someone saw him speak and said he looked like he had seen a ghost. I guess it is all in retrospect.

[caulfield12]

Question -

 

What's the US exposure for this? I'm sure we have our hands tied with the EU, so a drop of a country or two would hurt investors and banks here....but how much? Wouldn't the dollar have a really solid period of growth so that long-term it would be a benefit for the US? Or is that totally wrong?

 

 

Look at it this way, we had the huge advantage after WW II because Europe and Japan had to be completely rebuilt, and China was instituting a repressive, inward-looking regime.

 

Specifically, only 35% of China's GDP growth is domestic consumer spending...and that's shrunk from 45% a decade earlier.

So we can't realistically look for Chinese consumption to come close to covering the losses from a European collapse. Not to mention massive spikes here in inflation, health care costs and a property bubble. Plus the RMB and USD are pegged together.

 

Europe, dead for a decade and in a Japanese period of dormancy/stagflation.

 

Japan, still recovering 20 years later and dealing with Fukushima fallout, literally and figuratively.

 

That leaves Brazil, India, HK/Taiwan, Singapore, Malaysia, Indonesia, Vietnam, South Korea and Australia as the healthiest economies standing.

 

 

 

 

http://www.census.gov/foreign-trade/statis.../top1108yr.html

 

 

 

Of course, you still have Canada and Mexico, NAFTA, etc. But those alone won't re-balance this mess because Germany, the UK, Belgium, France and the Netherlands are 5 of our top 13 trade partners.

 

It would also help if we, like, actually started reinvesting in R&D, innovation, education in SOME area other than Silicon Valley. We actually have to produce something of high quality that the rest of the world would wants to consume besides the latest Apple product (which are basically made here in Shenzhen/Guangdong Province anyway).

 

 

Edited November 2, 2011 by caulfield12

[caulfield12]

http://business.blogs.cnn.com/2011/11/02/i...zone/?hpt=hp_c1

 

Italy's debt bonds at 6.4% and rising, 7% is the magic number for panic

 

 

http://globalpublicsquare.blogs.cnn.com/20...bold/?hpt=hp_t2

 

The current Greek political situation going into Cannes/G-20 and no-confidence vote Friday.

Edited November 2, 2011 by caulfield12

[NorthSideSox72]

MF Global is a poster child for exactly what I have been telling people outside the financial sector for years now:

 

1. There are some serious sleezballs in the trading and investment world, who will take all the chances they can to make a buck, and stomp anyone in their way.

 

2. Those sleezballs are but a small % of "the financial sector", which includes everyone from them to bank tellers.

 

MF Global (formerly Man Financial, formerly EDF Man) was a successful brokerage, retail and institutional, right up until this. And the 90% of the employees in the firm who work in those areas just got screwed in the worst way. The 10% who work in prop, probably 10% of them or less finagled this mess, and brought down the ship. People who work in finance are not evil, but there are evil people who work in finance.

 

---

 

Seperate but related, MF Global's demise is related primarily to two major factors. One was the absurd 40-1 leverage they were using in making naked directional bets in their prop business - much of that debt being unsecured, amazingly. Two was the pillaging of customer funds to cover the proprietary trading unit.

 

These two types of incidents could be, if not prevented, certainly made a lot less likely two occur, by taking just three steps:

 

1. Implement the Volcker Rule aka Glass-Steagel.

 

2. Require daily public reporting of debt ratios, margin collateral condition, tagged asset ratios and excess margin capital availability and state.

 

3. Significant increase, and then centralization, of regulatory oversight at the federal level.

 

And you want to know the best part? ObamaCo could do all three things, RIGHT NOW, without any further action from Congress.

 

When I harp on regulatory uncertainty in certain sectors, this is what I am getting at. Not that they are necessarily overregulated - they are in some areas but UNDERregulated in others - but that no one knows where the hammer is going to fall. So f***ing drop it already and lets move on.

 

Barack, we are waiting. Show some leadership.

 

[caulfield12]

MF Global is a poster child for exactly what I have been telling people outside the financial sector for years now:

 

1. There are some serious sleezballs in the trading and investment world, who will take all the chances they can to make a buck, and stomp anyone in their way.

 

2. Those sleezballs are but a small % of "the financial sector", which includes everyone from them to bank tellers.

 

MF Global (formerly Man Financial, formerly EDF Man) was a successful brokerage, retail and institutional, right up until this. And the 90% of the employees in the firm who work in those areas just got screwed in the worst way. The 10% who work in prop, probably 10% of them or less finagled this mess, and brought down the ship. People who work in finance are not evil, but there are evil people who work in finance.

 

---

 

Seperate but related, MF Global's demise is related primarily to two major factors. One was the absurd 40-1 leverage they were using in making naked directional bets in their prop business - much of that debt being unsecured, amazingly. Two was the pillaging of customer funds to cover the proprietary trading unit.

 

These two types of incidents could be, if not prevented, certainly made a lot less likely two occur, by taking just three steps:

 

1. Implement the Volcker Rule aka Glass-Steagel.

 

2. Require daily public reporting of debt ratios, margin collateral condition, tagged asset ratios and excess margin capital availability and state.

 

3. Significant increase, and then centralization, of regulatory oversight at the federal level.

 

And you want to know the best part? ObamaCo could do all three things, RIGHT NOW, without any further action from Congress.

 

When I harp on regulatory uncertainty in certain sectors, this is what I am getting at. Not that they are necessarily overregulated - they are in some areas but UNDERregulated in others - but that no one knows where the hammer is going to fall. So f***ing drop it already and lets move on.

 

Barack, we are waiting. Show some leadership.

 

 

They're (the big financial institutions) all going to line up behind Romney anyway, so he has nothing to lose and more to gain by actually taking a position and sticking to it.

 

It would be a lot better than a couple of pontificating speeches, tepid support for Occupy Wall Street but then nothing substantive to come out of it.

 

What percentage of those making $200,000+ per year is he really going to alienate further and lose their votes, at this point?

[StrangeSox]

[southsider2k5]

MF Global is a poster child for exactly what I have been telling people outside the financial sector for years now:

 

1. There are some serious sleezballs in the trading and investment world, who will take all the chances they can to make a buck, and stomp anyone in their way.

 

2. Those sleezballs are but a small % of "the financial sector", which includes everyone from them to bank tellers.

 

MF Global (formerly Man Financial, formerly EDF Man) was a successful brokerage, retail and institutional, right up until this. And the 90% of the employees in the firm who work in those areas just got screwed in the worst way. The 10% who work in prop, probably 10% of them or less finagled this mess, and brought down the ship. People who work in finance are not evil, but there are evil people who work in finance.

 

---

 

Seperate but related, MF Global's demise is related primarily to two major factors. One was the absurd 40-1 leverage they were using in making naked directional bets in their prop business - much of that debt being unsecured, amazingly. Two was the pillaging of customer funds to cover the proprietary trading unit.

 

These two types of incidents could be, if not prevented, certainly made a lot less likely two occur, by taking just three steps:

 

1. Implement the Volcker Rule aka Glass-Steagel.

 

2. Require daily public reporting of debt ratios, margin collateral condition, tagged asset ratios and excess margin capital availability and state.

 

3. Significant increase, and then centralization, of regulatory oversight at the federal level.

 

And you want to know the best part? ObamaCo could do all three things, RIGHT NOW, without any further action from Congress.

 

When I harp on regulatory uncertainty in certain sectors, this is what I am getting at. Not that they are necessarily overregulated - they are in some areas but UNDERregulated in others - but that no one knows where the hammer is going to fall. So f***ing drop it already and lets move on.

 

Barack, we are waiting. Show some leadership.

 

#2 is something I have been harping on for years. Our regulatory system is akin to the Manhattan project. No one knows the big picture, because it is all so compartmentalized and decentralized. The biggest problem with centralization is that because of the regulatory required segregation of information, the vast majority of the employees will have no idea what is going on either. Centralizing regulation will at least allow regulators to go from department to department to try to build the big and complete picture. As it stands now, the auditors are the only ones who had a chance at catching this, and the odds of that are pretty slim. If you want to commit fraud, there really isn't much to stop you. Adding more laws really doesn't change that either.

[NorthSideSox72]

Fortunately for Greece, Europe and everyone else, Greece has decided not to have the referendum after all. And the opposition party agrees. So, looks like Greece will take the deal.

 

[bmags]

Fortunately for Greece, Europe and everyone else, Greece has decided not to have the referendum after all. And the opposition party agrees. So, looks like Greece will take the deal.

 

I can't tell if this was just incredibly shrewd by the Greece PM or just dumb luck. But I'm glad it worked out.

[Balta1701]

I can't tell if this was just incredibly shrewd by the Greece PM or just dumb luck. But I'm glad it worked out.

Yup. See you in what, 3-4 months when this deal stops working out?

[bmags]

So what? You'd prefer the shockwave here, eh? Well you can tell the unemployed here what a better deal it was for the Greeks.

[Balta1701]

So what? You'd prefer the shockwave here, eh? Well you can tell the unemployed here what a better deal it was for the Greeks.

There's a real good chance that they're going to wind up with the shockwave anyway.