STOCK MARKET WATCH, Monday, December 19, 2011.

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[font size=3]STOCK MARKET WATCH, Monday, December 19, 2011[/font]

SMW for Dec 16 2011
AT THE CLOSING BELL ON December 16, 2011
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Dow Jones 11,866.39 -2.42 (-0.02%)
S&P 500 1,219.66 +3.91 (0.32%)
Nasdaq 2,555.33 +14.32 (0.56%)
10 Year 1.85% -0.05 (-2.63%)
30 Year 2.85% -0.05 (-1.72%)
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[font size=2]Market Conditions During Trading Hours[/font]
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[font size=2]Euro, Yen, Loonie, Silver and Gold[center]

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[font color=black][font size=2]Handy Links - Market Data and News:[/font][/font]
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Economic Calendar
Marketwatch Data
Bloomberg Economic News
Yahoo Finance
Google Finance
Bank Tracker
Credit Union Tracker
Daily Job Cuts
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[font color=black][font size=2]Handy Links - Economic Blogs:[/font][/font]
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The Big Picture
Financial Sense
Calculated Risk
Naked Capitalism
Credit Writedowns
Brad DeLong
Bonddad
Atrios
goldmansachs666
The Stand-Up Economist
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[font color=black][font size=2]Handy Links - Government Issues:[/font][/font]
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LegitGov
Open Government
Earmark Database
USA spending.gov
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[font color=black][font size=2]Handy Links - Videos:[/font][/font]
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Charlie Rose talks with Roubini
Charlie Rose talks with Krugman
William Black: This Economic Disaster
Bill Moyers with Kevin Drum and David Corn
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Financial Sector Officials Convicted since 1/20/09 = [/font][font color=red]12[/font]


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[font size=3][font color=red]This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.[/font][/font]

[Hugin]

1. Reports this week.

Date ET Release For Actual Briefing.com Forecast Briefing.com Consensus Prior Revised From
Dec 19 10:00 NAHB Housing Market Index Dec 19 19 20
Dec 20 08:30 Housing Starts Nov 600K 627K 628K
Dec 20 08:30 Building Permits Nov 625K 633K 653K
Dec 21 07:00 MBA Mortgage Index 12/17 NA NA 4.1%
Dec 21 10:00 Existing Home Sales Nov 5.20M 5.03M 4.97M

[Ghost Dog]

2. Why The European Debt Crisis Might Actually Be Over...

Joe Weisenthal | Dec. 18, 2011, 6:47 AM | 10,163 | 114

Last week we wrote a lot about what's rapidly becoming the hottest question in Europe: Did the ECB pull off a backdoor bailout of the various governments by making it super-cheap for banks to borrow money, with which they can then turn around and buy sovereign debt at juicy yields?

Some people think a corner has turned. Economist Tyler Cowen wrote a post on this headlined: It is finally being recognized that the eurozone made a major policy breakthrough.

Felix Salmon on the other hand is not convinced, pointing out that bankers themselves say they have no plans to buy more European sovereign debt. And actually, most analysts on Wall Street who have commented don't buy it either.

But something shifted in the market over the past several days, as evidenced by the sharp plunge in yields on short-term sovereign debt.

Here's the Spanish 2-year bond, via Bloomberg:




Read more: http://www.businessinsider.com/why-the-european-debt-crisis-might-be-over-2011-12#ixzz1gvdtz7rU

See also: http://marginalrevolution.com/marginalrevolution/2011/12/it-is-finally-being-recognized-that-the-eurozone-made-a-major-policy-breakthrough.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A

[Hugin]

3. Thanks again for the xpost in LBN, Ghost Dog.

Last edited Mon Dec 19, 2011, 07:46 AM - Edit history (2)

[Ghost Dog]

6. The Eurozone’s policy breakthrough?

Today’s money quote, obviously, is this, from Fitch:

"a ‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach."

Fitch’s view reflects the clear consensus of Anglo-American commentators. But Anglo-American commentators aren’t always right. Ezra Klein writes that the German policy establishment “remain[s] serenely confident that they will save [the Eurozone].” Note that Klein attributes this to no one in particular. He characterizes it as a view drawn from “members of Angela Merkel’s government, members of the opposition Social Democrats, industrialists, and bankers.” In other words, Klein heard this in private conversations, not market-moving public statements. Jean-Claude Junker’s famous when-it-becomes-serious-you-have-to-lie rule doesn’t apply. These are smart people who know everything we know, and they think they’ve got the situation covered.

Tyler Cowen has been emphasizing the possibility that the ECB will quietly fund sovereigns via the banking system. The ECB would lend to banks at very low rates, accepting sovereign debt as collateral. Banks would earn the spread between the yield on sovereign debt (which is currently distressed and very yieldy) and the sliver of interest demanded by the ECB. As a matter of mechanics, this plan could work. It’s the same as direct ECB lending to sovereigns, except ECB gets added security (in theory) by interposing banks as guarantors, and pays a fee for the privilege.

The Anglo-American punditosphere is unimpressed...

... A lot of commentators have derided Europe’s “policy breakthrough” as just a restatement of the old stability and growth pact with some institutional changes at the margin. Talk of automatic consequences and qualified majorities may just be blah blah blah. But if European states become dependent on bank finance, they become dependent on ECB finance. The ECB would have the power to manufacture fiscal crises for a misbehaving state at will, and with marvelous deniability. Laundered through banks and then through capital markets, ECB actions would be attributed to nameless bond vigilantes rather than unelected technocrats. ECB haircuts would very quickly be self-justifying, and disentangling cause from effect would be nearly impossible as officials might privately telegraph changes before anything is put in writing. Control would be hidden as a market outcome, a fact of nature...

/... http://www.interfluidity.com/v2/2617.html

The first comment mirrors my first thought: Isn't this just like the USA's QE?

Correct me if I’m way off, but this sounds like a variation of QE in America. Instead of outright exchange of treasuries for dollars, this is just the exchange of almost interest free loans (cash) for sovereign debt. Best case scenario is this inflationary tactic balances out the deflationary austerity/deleveraging and we all live happily ever after. Worst case scenario we get the worst of both worlds: outrageous asset prices and high unemployment. Here’s hoping we muddle through, Japan style...

Also,

... Laundered through banks and then through capital markets, ECB actions would be attributed to nameless bond vigilantes...

Sounds very much like the ECB reading from the Fed/Treasury/PPT (+ UK equivalents) playbook.

[Demeter]

26. I'm much more interested in saving people than institutions

and it's a very lonely and dangerous position to take.

[Ghost Dog]

7. Would you rather invest in Italy, or in Facebook? (points of view)

Last edited Mon Dec 19, 2011, 08:26 AM - Edit history (1)

... There’s an argument that it doesn’t really matter whether the banks buy Italian and Spanish debt or not: the main thing that matters is that the ECB is printing money, which is entering the system via the banking system, and which will ultimately find its way into sovereign coffers one way or another, especially since there’s precious little demand for commercial bank loans these days. But I don’t buy it: there’s a virtually infinite number of potential investment opportunities around the world, and there’s no good reason to believe that the ECB’s cash is going to wind up funding Italy’s deficit rather than, say, getting invested in Facebook stock...

/... from "Why ECB lending won’t solve the euro crisis" - http://blogs.reuters.com/felix-salmon/2011/12/17/why-ecb-lending-wont-solve-the-euro-crisis/


So now it doesn't matter how much liquidity is printed, a semi-independent Europe MUST DIE anyway? In the longer run, of naturally, this applies to all of us, under Austrian rules...

[Demeter]

39. As long as nations borrow from banks, instead of generating their own means of exchange

to wit: money; there will be no victory, no stability, and no peace.

[Ghost Dog]

11. I nearly didn't make it this morning due to a local power cut...

... the likes of which will likely become more frequent during this forthcoming, er, period.

[xchrom]

12. what are they doing? nt

[Ghost Dog]

47. As much as possible on as little as possible, I guess.

A previous local Mayor made tourism-related property deals (pocketing his 'commisions', most people would say) which turned out to be contrary to overriding planning law. So now the local council has to pay damages and costs to the promoters, with money it doesn't have.

[xchrom]

48. well damn. so does that involve the local electric company

or what ever the equivalent of pg&e or duke energy is where you are?

underground cables, hook ups, etc?

[Ghost Dog]

50. At the local council it's hookups, maintenance etc.

But at the next level up, the island council isn't well off (nor corruption-free) either, and the regional government (which, with the national government, subsidises the energy providers) has deficits to reduce...

The whole island depends on one diesel-fuelled power station (plus wind and solar in its infancy). So we're vulnerable to, for example, diesel supply interruptions if suppliers aren't paid or if war breaks out, whatever... Apart from the famous local goats and some organic fruit and veg growers, most everything else is imported in today's economy (especially tourists' cash).

And, without electric power, few can desalinate and pump water.

So the island is vulnerable, where it could be entirely self-sufficient given the constant solar, wind, wave and geothermal sources available.

[xchrom]

51. i know you're not in the u.s. -- but i don't know exactly where you are

i'd almost guess iceland from that description -- where are you?

and other than that corruption biz -- is it nice to live there?

[Demeter]

58. Azores or Canaries, I think

Islands of Spanish territory. Maybe the Azores are Portugues? Junior high was a long time ago, and I haven't traveled in 30 years...thanks to the ex.

[xchrom]

75. fabulous -- i would love to visit the azores.nt

[Ghost Dog]

85. Canary Island (when we stop singing, get out of the pit!)

http://en.wikipedia.org/wiki/Fuerteventura

[Ghost Dog]

5. Eurozone to pursue crisis action, Draghi inscrutable

BRUSSELS | Mon Dec 19, 2011 10:47am GMT (Reuters) - European finance ministers will pursue plans on Monday to enhance the IMF's arsenal and press on with a drive for tighter fiscal rules in an attempt to assuage doubts they can overcome their sovereign debt crisis.

They will discuss at the Monday teleconference the draft text of a new euro zone "fiscal compact" so that it can be finalised by the end of January, EU officials said.

/... http://uk.reuters.com/article/2011/12/19/uk-eurozone-idUKTRE7BH0IN20111219

[Roland99]

31. or maybe not: IMF Loans Likely To Fall Short Of €200 Expected As UK Pulls Rescue Funding

http://www.zerohedge.com/news/imf-loans-likely-fall-short-%E2%82%AC200-expected-uk-pulls-funding

As noted over the weekend, the UK, having vetoed the December 9 summit, has made it clear it would also likely back out of its IMF mandated contribution to save the Eurozone. In other words, the €30.9 billion that was supposed to come from the UK to rescue French and Italian banks, is now probably gone, a move which threatens to topple the latest Plan Z euro bailout in which broke countries pool money to bailout the same broke countries. Sure enough, Dow Jones confirms it:

EU loans to IMF likely to fall short of expected EUR 200bln according to sources
Eurozone may move on IMF loans without immediate UK support according to a EU source

And while below we present the latest breakdown of IMF contribution by member countries, courtesy of Reuters, how long before populist pressure in various Eurozone (and especially non-Eurozone) countries threatens to topple governments unless each and every "joint and several" contributor country pulls a UK? Because if the UK is allowed to save taxpayer funds, why not everyone else?

[Roland99]

34. or maybe so! Fed May Inject Over $1 Trillion To Bail Out Europe

http://www.zerohedge.com/news/fed-may-inject-over-1-trillion-bail-out-europe

As first reported here, two weeks ago European banks saw the amount of USD-loans from the Fed, via the ECB's revised swap line, surge to over $50 billion - a total first hit in the aftermath of the Bear Stearns failure prompting us to ask "When is Lehman coming?" However, according to little noted prepared remarks by Anthony Sanders in his Friday testimony to the Congress Oversight Committee, "What the Euro Crisis Means for Taxpayers and the U.S. Economy, Pt. 1", we may have been optimistic, because the end result will be not when is Lehman coming, but when are the next two Lehmans coming, as according to Sanders, the relaunch of the Fed's swaps program may "get to the $1 trillion level, or perhaps even higher." As a reference, FX swap line usage peaked at $583 billion in the Lehman aftermath (see chart). Needless to say, this estimate is rather ironic because as Bloomberg's Bradely Keoun reports, "Fed Chairman Ben S. Bernanke yesterday told a closed-door gathering of Republican senators that the Fed won’t provide more aid to European banks beyond the swap lines and the discount window -- another Fed program that provides emergency funds to U.S. banks, including U.S. branches of foreign banks." Well, between a trillion plus in FX swap lines, and a surge in discount window usage which only Zero Hedge has noted so far, there really is nothing else that the Fed can possibly do, as these actions along amount to a QE equivalent liquidity injection, only denominated in US Dollars. Aside of course to shower Europe with dollars from the ChairsatanCopter. Then again, before this is all over, we are certain that paradollardop will be part of the vernacular.

[Demeter]

59. Those SOBs!

[Demeter]

38. All that's happened is the Big Money went on Xmas break

they got their short-term goals...a Goldman in every capital.

[Demeter]

90. See post below for the Ghost of Christmas Yet to Come

David Malone

[Ghost Dog]

4. Asian Stocks Drop On EU Concerns, Kim's Death

CANBERA (dpa-AFX) - Asian stocks fell on Monday as the sudden death of the mercurial leader of nuclear-armed North Korea, Kim Jong Il, added to ongoing uncertainties in the Eurozone...

... Japan's Nikkei index fell 1.3 percent to a three-week low, mirroring weak regional stocks after Fitch Ratings put France on a negative outlook and Kim Jong-il, North Korea's longtime leader, died of heart failure, sparking fears of regional instability. The broader Topix index lost a percent, with financials, shipping companies and securities firms pacing the declines...

... China's Shanghai Composite index eased 0.3 percent after data from the National Bureau of Statistics showed house prices in most of China's major cities declined for a second consecutive month in November amid government's efforts to cool property market. Hong Kong's Hang Seng index fell 1.2 percent.

Australian shares fell sharply... South Korea's Kospi average fell as much as 5 percent at one point before recouping some of its loss and ending down 3.4 percent at a three-week low, as the death of North Korean dictator Kim Jong Il raised fears of increased political instability in the region. The South Korean won tumbled to a two-year low against the green back on fears that tension on the Korean peninsula may escalate.

/... http://www.finanznachrichten.de/nachrichten-2011-12/22245083-asian-stocks-drop-on-eu-concerns-kim-s-death-020.htm

[DemReadingDU]

8. Kim died early Saturday morning from fatigue? heart attack? something else???

It's taking 2 days for us to hear of this news? Is there anyone else wondering if we have the real story?

edit:
now the story is that he died of a heart attack brought from fatigue.

[Po_d Mainiac]

19. Timely reporting compared to the U$A

Only took 2 days for the story to get out.

Banks die here, and we don't get the memo till 2 months after the bailout.

[rfranklin]

20. Was he swimming the Yalu River?

Not as strong a leader as Mao, apparently.

[Ghost Dog]

9. European Stocks Erase Early Losses

VIENNA (dpa-AFX) - European stocks are posting modest gains on Monday, erasing early losses, as optimism prevailed ahead of a European finance ministers' teleconference later in the day.

The ministers are seeking to finalize a €150bn contribution to the International Monetary Fund and are expected to take a call on the new fiscal compact for the euro area, proposed at the EU summit on December 9. The Dow futures are rising 48 points, helping boost investor sentiment.

The Euro Stoxx 50 index of euro zone blue chippers is up 0.7 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, is moving up 0.4 percent.

Around Europe, the German DAX is gaining 0.7 percent, France's CAC 40 is rising half a percent, the U.K.'s FTSE 100 is adding 0.1 percent and Switzerland's SMI is up half a percent.

/... http://www.finanznachrichten.de/nachrichten-2011-12/22246048-european-stocks-erase-early-losses-020.htm

[Ghost Dog]

10. Britain to accept ICB bank reforms in full

(Reuters) - Britain will accept proposals to shake up the country's banks on Monday, forcing lenders to form barriers between their retail operations and riskier investment arms to protect ordinary customers better in any future crisis.

Business secretary Vince Cable told the BBC legislation introducing reforms proposed by the government-sponsored Independent Commission on Banking would be completed within the current parliament, namely by mid-2015.

Finance minister George Osborne will issue his formal response on Monday to proposals laid out in September by the ICB, headed by John Vickers.

He may not go as far as Vickers wanted on forcing banks to hold debt that could absorb losses if they hit trouble, however.

The proposal on "bail-in" debt has been attacked by HSBC and Standard Chartered, who have threatened to quit their London headquarters for Asia.

/... http://uk.reuters.com/article/2011/12/19/uk-britain-banks-icb-idUKTRE7BI01B20111219

[xchrom]

13. morning

[Demeter]

25. Morning

Last night's concert went very well, and it is over. Today and tomorrow are two more days of hell, and then I might get somewhat of a break. Hah!

[xchrom]

27. I'm so glad it went well!

I do hope you get a break during this busy time.

[Demeter]

36. The thing is

I don't want to do this anymore. I don't want to have my daily life disrupted all the time by other people's manufactured or self-inflicted crises. The convent is starting to look mighty attractive again...never a good sign.

And losing Ozy, and now PBD, and Fuddnick....the world's gone out of equilibrium.

I don't know if Firefox fixed something, but at least I can load a website again. Everything looks different and the automatic stuff isn't anymore....

[xchrom]

40. ok -- you know something i don't -- where did fuddnik go?

i've always thought the convent looked good.

[Tansy_Gold]

43. See WEE

Post #48.

[xchrom]

49. well that makes me very unhappy -- i adore fuddnik.

and he's certainly right about dem mayors etc -- it happened.
we all watched it.

[DemReadingDU]

46. Firefox isn't displaying the toon for me

A few weeks ago, Firefox wouldn't let me see the toon, and I had to see it using IE. Then Firefox started working again. Now today, it prevents me from seeing the toon again.

Occasionally this also happens in The Automatic Earth. Some days I just don't know what I am missing, which could be good or bad.

[Hugin]

52. I was using IE when I posted it and I can see it with Safari.

Postable cartoons are getting hard to find.

I may have to start drawing again!

[Demeter]

60. Do you have the source website?

If not, I can find it (listed under December 31st, 2010 SMW--Ozy's last post.)

[Hugin]

65. No.

Didn't see it listed.

[Demeter]

92. These are the sites Ozy left us for cartoons

http://news.yahoo.com/comics/

http://www.creators.com/editorialcartoons/cat-seeall.html

http://www.politicalcartoons.com/

http://www.washingtonpost.com/opinions/toles

http://danzigercartoons.com/index.php?paged=2

There is of course, some duplication/overlap....

[Demeter]

93. This one is cute

[Demeter]

94. And for domestic consumption...

[TalkingDog]

106. Are you running adblock or adban? Sometimes the addons are the problem.

I'm running the lastest version with AdBlock and AdBan.... which makes surfing the web AWESOME! But I do have to remember that certain things won't show up unless I allow them.

[DemReadingDU]

108. yes, both adblock plus and flashblock

Most times I can view cartoons here and the pictures at The Automatic Earth. It is only occasionally that the toons and pictures are blocked. It they were always blocked, it would make sense that the addons were the cause. But it must be due to something else?

[TalkingDog]

109. Did you try rightclick, view/refresh image? Sometimes they just don't load. Other than that....

Could be that you have p.o.ed your computer. I would offer some small sacrifice and see if that helps.

[DemReadingDU]

110. I just copy the link and browse it in IE, and the image appears

It's really a rare thing, so not a big deal. Just one of those oddities.

[Po_d Mainiac]

55. Fudds profile still states 'active" n/t

[Demeter]

95. It was his choice, this time

[xchrom]

14. Goldman Sachs Winning CEOs as Global No. 1

http://www.bloomberg.com/news/2011-12-19/goldman-sachs-winning-ceos-as-global-no-1-with-m-a-equity-deals.html

Goldman Sachs Group Inc. (GS) is poised to win the top spot among advisers on both global takeovers and equity offerings for the first time in five years, a sign the bank hasn’t lost the trust of corporate executives.

The global mergers-and-acquisitions team, led since May by Gene T. Sykes, 53, in Los Angeles and London-based Yoel Zaoui, 50, climbed to No. 1 on deals announced this year after trailing Morgan Stanley in 2010 and 2009, according to data compiled by Bloomberg. The bank, the fifth-largest by assets in the U.S., also dominated equity, equity-linked and rights offerings, overseen by London-based Matthew Westerman, 46, the data show.

Lloyd C. Blankfein, 57, a former head of fixed-income trading who became chairman and chief executive officer in 2006, has sought to repair the firm’s reputation after the Securities and Exchange Commission and a Senate subcommittee accused the company of misleading buyers of mortgage-linked investments. Protesters, angry at Wall Street paying billions of dollars in bonuses after governments bailed out the financial system, also targeted Goldman Sachs in protests as recently as last week.

“As much as maybe the public looks down upon them, they’ve been able to overcome it in boardrooms,” said Ralph Cole, senior vice president of research at Portland, Oregon-based Ferguson Wellman Inc., which manages $2.7 billion and doesn’t own Goldman Sachs stock. “Their reputation has taken such a hard hit, it’s surprising to me that people would still choose them over others.”

[Demeter]

24. Is It Trust, or Blackmail?

I vote for blackmail.

[Tansy_Gold]

44. When has it ever been anything else? n/t

[Demeter]

61. The starting point of Goldman Takeover is not clear

but Robert Rubin springs to mind....

[xchrom]

15. europe: German Economic Growth to Drop Before Rebounding in 2013 , Bundesbank Says

http://www.bloomberg.com/news/2011-12-19/german-economic-growth-to-drop-before-rebounding-in-2013-bundesbank-says.html

The Bundesbank said German economic growth will rebound in 2013 after slumping next year as the euro region’s sovereign debt crisis gradually abates.

Growth will slow to 0.6 percent in 2012 from 3 percent this year before recovering to 1.8 percent in 2013, the Frankfurt- based Bundesbank said in its monthly report today. Germany’s central bank said its base scenario is that the debt crisis doesn’t worsen and that the uncertainty among investors and consumers “gradually lessens.”

“The German economy could in the course of next year return to a solid growth path, supported by an expansive monetary policy and a more strongly-growing world economy,” the Bundesbank said. “This forecast assumes that there is no further significant worsening in the sovereign debt crisis.”

Bundesbank President Jens Weidmann has said he opposes the European Central Bank stepping up its bond purchases to battle the debt crisis, and it’s up to governments to find a lasting solution. Plans for a “fiscal compact” announced by European Union leaders earlier this month may help to reduce the “unusually high” level of uncertainty about the economic outlook, the Bundesbank said.

[xchrom]

16. Euro in Crisis 8% Stronger Than Average Since 1999 as Losses Seen for 2012

http://www.bloomberg.com/news/2011-12-19/euro-in-crisis-8-stronger-than-average-since-1999-as-losses-seen-for-2012.html

The euro, after falling to its weakest level against the dollar since January, is poised to depreciate further as traders lose confidence in the ability of European leaders to contain the region’s debt crisis.

Measures in the derivatives market ranging from future volatility implied by option prices to the cost of insuring against a drop in the euro to the record number of bearish bets by hedge funds and other speculators, show traders expect the blueprint unveiled by European leaders this month for a closer fiscal accord will fail to stem the declines.

While the euro at $1.3024 remains about 8 percent above the average since it began trading in 1999, bears say that provides more scope for depreciation as bond yields in Italy and Spain approach levels that prompted bailouts of Greece, Ireland and Portugal. Companies from Spain’s Grupo Gowex to Germany’s GEA Group AG are preparing for some countries to leave the euro and bank failures.

“The euro trading where it is now reflects a global lack of confidence in those dealing with the sovereign debt crisis,” Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said in a telephone interview on Dec. 14. “It is also a signal of more bad news to come in the euro zone. I am not certain what future euro negatives lie ahead, but I am certain there will be more.”

[xchrom]

17. Turkey Summoning of French Executives Before Armenian Vote Threatens Trade

http://www.bloomberg.com/news/2011-12-18/turkey-summoning-of-french-executives-before-armenian-vote-threatens-trade.html

Turkey is warning France of economic pain if its parliament approves a bill this week that would make it a crime to deny that Ottoman Turks committed genocide against Armenians in Anatolia a century ago.

Turkish Foreign Minister Ahmet Davutoglu summoned more than 20 local executives last week from companies including Credit Agricole SA and Groupama SA to lobby them against the French bill, according to two people at the Dec. 15 meeting who spoke on condition of anonymity because of the sensitivity of the matter. France will incur “hard-to-fix damages,” Turkish Prime Minister Recep Tayyip Erdogan said on Dec. 17. He is calling on French President Nicolas Sarkozy to block the measure.

Turkey has warned of retaliation in the past, though this time the threat may be more serious. French carmakers control a fifth of Turkey’s market and their banks have assets in the country exceeding $20 billion. The Turkish economy expanded 8.2 percent in the third quarter, a pace only exceeded by China among the Group of 20 major economies.

“Today, Turkey has the ability to follow through on its rhetoric because it believes that it has a stronger hand than it did in the past,” Soli Ozel, professor of international relations and political science at Istanbul’s Bilgi University, said in a telephone interview. “Turkey will not bow down on this matter.”

[xchrom]

18. Spanish house prices decline for 14th consecutive quarter

http://www.elpais.com/articulo/english/Spanish/house/prices/decline/for/14th/consecutive/quarter/elpepueng/20111215elpeng_9/Ten

Spanish house prices fell an annual 7.4 percent in the period July-September, marking the 14th quarter of uninterrupted declines as the market remained weighed down by a glut of unsold new homes and high unemployment.

The National Statistics Institute said Thursday that prices decreased 2.8 percent in the third quarter from the previous three months. The average price of existing homes dropped an annual 9.6 percent, while new homes fell 5.0 percent.

Housing has lost about a quarter of its value since a decade-long boom turned to bust around the start of 2008. A study by Fitch Ratings estimates that the value of repossessed homes held by banks are on average 43 percent below the valuations assigned to them in mortgages.

[Tansy_Gold]

22. Hmm, maybe I should start house-hunting again. . . . n/t

[xchrom]

28. if i had the money -- i would SO get a place in spain. nt

[Ghost Dog]

45. You need to choose _where_ in Spain.

It's a large territory (by European standards), with very diverse regions and distinctive cities, and varying degrees of 'expat' ghettoisation.

[Tansy_Gold]

56. Well, it's been more than 40 years since I was there, but

I adored Torremolinos, Benalmadena, the hills and mountains just inland. Two years ago, property prices were out of sight, and anyway I have all this CRAP that I can't seem to let go of. . . .

I did find one little place I kind of liked, but it was like 300K euros and that's just so way far outta my budget!

But I can dream. . . . . .

[Ghost Dog]

86. Well, where €300,000 were sought 2 years ago it may be going for €150,000 now...

(but maybe not in the more exclusive places) and still falling.

[Tansy_Gold]

99. Even so, it's still out of the question because I have the dogs

And all this. . . . . . stuff.

Seriously, though, I adored Spain, would go back if I could in a heartbeat. First I have to get rid of all the . . . . . . stuff.

[Tansy_Gold]

21. Forecast, schmorecast

If they're so certain it will rebound, why can't they prevent the drop? I mean, they must know what the factors are. . . .


They're full of shit -- and they know it.

[xchrom]

54. Britain's Mounting Distrust of Germany

http://www.spiegel.de/international/europe/0,1518,804616,00.html

British Prime Minister David Cameron had only been in office for seven weeks when he and German Chancellor Angela Merkel decided to watch a football match together to get to know each other better.

It was on June 27, 2010, and it was the World Cup quarter final in South Africa. It was also a match between two classic rivals: Germany and England. Thomas Müller scored a goal in the 67th minute, bringing the score to 3:1 -- to the consternation of British fans and the delight of the Germans.

In Toronto, where the two leaders were attending the G-20 summit, a beaming Merkel leaned over to Cameron and said, with typical German anti-triumphalism but a lack of linguistic finesse: "I really am terribly sorry."

When the Germans scored another goal three minutes later, Merkel said she was "sorry" again. As Cameron later said, half-jokingly, the shared experience was "a form of punishment I wouldn't wish on anyone." Nevertheless, he added, Mrs. Merkel "is one of the politest people I have ever met."

[Demeter]

23. Pretty Grim Cartoon, Hugin

Congrats on your promotion. Call if you need help.

[Hugin]

53. It's a holiday thing.

Maybe, I shouldn't have watched "It's a Family Guy Christmas" while posting.

I'm always looking for suggestions.

[TalkingDog]

107. I laugh uproariously during that special, esp. when the commercials come on. Incongruity amuses

n/t

[Demeter]

29. Don’t Tax the Rich. Tax Inequality Itself.

http://www.nytimes.com/2011/12/19/opinion/dont-tax-the-rich-tax-inequality-itself.html

THE progressive reformer and eminent jurist Louis D. Brandeis once said, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” Brandeis lived at a time when enormous disparities between the rich and the poor led to violent labor unrest and ultimately to a reform movement.

Over the last three decades, income inequality has again soared to the sort of levels that alarmed Brandeis. In 1980, the wealthiest 1 percent of Americans made 9.1 percent of our nation’s pre-tax income; by 2006 that share had risen to 18.8 percent — slightly higher than when Brandeis joined the Supreme Court in 1916. Congress might have countered this increased concentration but, instead, tax changes have exacerbated the trend: in after-tax dollars, our wealthiest 1 percent over this same period went from receiving 7.7 percent to 16.3 percent of our nation’s income. What we call the Brandeis Ratio — the ratio of the average income of the nation’s richest 1 percent to the median household income — has skyrocketed since Ronald Reagan took office. In 1980 the average 1-percenter made 12.5 times the median income, but in 2006 (the latest year for which data is available) the average income of our richest 1 percent was a whopping 36 times greater than that of the median household.

Brandeis understood that at some point the concentration of economic power could undermine the democratic requisite of dispersed political power. This concern looms large in today’s America, where billionaires are allowed to spend unlimited amounts of money on their own campaigns or expressly advocating the election of others. We believe that we have reached the Brandeis tipping point. It would be bad for our democracy if 1-percenters started making 40 or 50 times as much as the median American.

Enough is enough. Congress should reform our tax law to put the brakes on further inequality. Specifically, we propose an automatic extra tax on the income of the top 1 percent of earners — a tax that would limit the after-tax incomes of this club to 36 times the median household income....

********************************************************************


Ian Ayres, a professor of law at Yale, is the author of “Carrots and Sticks: Unlock the Power of Incentives to Get Things Done.” Aaron S. Edlin, a professor of law and of economics at the University of California, Berkeley, is co-editor of “The Economists’ Voice: Top Economists Take On Today’s Problems.”

CALL ME A SOCIALIST IF YOU MUST, BUT I THINK 36 TIMES IS STILL TOO MUCH. I'M NOT INSISTING ON EQUALITY, BUT SOMETHING A TAD MORE MODEST....THE DAY OF THE BILLIONAIRE AND TRILLLIONAIRE IS
OVER!

EVEN 20 TIMES IS TOO MUCH, IMO.

[Demeter]

30. AS WALLY SAYS

[xchrom]

32. PRECIOUS-Gold eases as Fitch downgrade warning hurts euro

http://uk.reuters.com/article/2011/12/19/markets-precious-idUKL3E7NJ3MW20111219

LONDON, Dec 19 (Reuters) - Gold prices eased on Monday, extending hefty losses the previous week, as a warning from Fitch Ratings that it may downgrade France and six other euro zone countries hurt the euro and fuelled a dash to the dollar.

Spot gold was down 0.2 percent at $1,595.55 an ounce at 1251 GMT.

The precious metal posted its biggest one-week loss since late September last week, falling to a near 12-week low as concerns over the euro zone debt crisis intensified, boosting the dollar at the expense of other assets.

Investors' shift to the U.S. currency, often seen as a haven from risk, is weighing on dollar-priced gold, which becomes more expensive for holders of other currencies.

[Demeter]

33. Asia isn't happy this morning

Europe is marginal, but US futures are up.

[Demeter]

62. Flash in the pan

Didn't even last through lunch.

[xchrom]

35. Why we flee those crowded aisles

http://lifeinc.today.msnbc.msn.com/_news/2011/12/16/9500475-why-we-flee-those-crowded-aisles

Retailers might want to rethink the seasonal strategy of cramming stores so full that customers can barely squeeze down the aisles.

Researchers have discovered that consumers hate rubbing elbows with other shoppers so much that they’ll cut short shopping missions –- or sometimes just stomp out of the store -– when they’re accidentally bumped.

And, as it turns out, it’s not just women who don’t like to be bumped by strangers while browsing, according to a study published in the Journal of Consumer Research. Men don’t like any stranger -– male or female -– to brush up against them.

“Men do not like being bumped into by women they don’t know,” says Brett A.S. Martin, a professor of marketing at the School of Advertising, Marketing and Public Relations at the Queensland University of Technology Business School in Brisbane, Australia. “But if it is a man they don’t know, they’ll leave the store fast.”

[Demeter]

37. Not to mention that you can't see, reach or do anything, nor get the cart down the aisle

This deserves a NSS Award.

Going out after some dragons....hope I don't catch any. See you all later, if there's any luck left.

[xchrom]

41. Old Dogs, New Tricks: Why More Seniors Are Starting Companies

http://www.theatlantic.com/business/archive/2011/12/old-dogs-new-tricks-why-more-seniors-are-starting-companies/250021/

Marion Jackson's airy, light-filled studio is filled with Brazilian art and sculpture. It sits on the third floor of a five-story, 100,000-square-foot industrial building in downtown Detroit that opened in 1927 to house the service department for Pontiac. The Corvette was later designed there. But that was before the U.S. auto industry declined, and the neighborhood became a wasteland of abandoned buildings.

Not anymore. Today, 250 start-up companies inhabit the renovated building, which is the centerpiece of a business incubator called TechTown. Jackson's venture, Con/Vida--in Spanish, "with life"--sells indigenous art from Latin America and curates exhibitions for galleries and museums. Jackson, 70, retired as an art-history professor at Detroit's Wayne State University last year and applied her knowledge of northeastern Brazil to the pursuit of a second career as Con/Vida's codirector.

This new chapter in Jackson's work life, much like the building the studio inhabits, amounts to a kind of adaptive reuse--of skills instead of space. In this, she has company. TechTown is run by Randal Charlton, a 71-year-old former jazz impresario and serial entrepreneur, whose human-tissue company was the resurrected building's first tenant. TechTown, an independent nonprofit, was launched a decade ago by Wayne State--which recently hired 77-year-old Allan Gilmour, a former Ford Motor chief financial officer, as its president.

By the prevailing definitions, all three of them are in old age--often portrayed as a wasteland of its own. We're set to become "a planet that's a whole lot more crowded--with old people," Phillip Longman, a senior research fellow on health policy at the New America Foundation, lamented in the September/October issue of Foreign Policy. He and other scholars who predict the "hyper-aging" of the developed world--when walkers will outnumber strollers--worry about too few working-age adults having to support too many children and retirees.

[Demeter]

63. But is she making any money?

or at least covering the costs?

[xchrom]

42. south asia: India begins crucial week for anti-corruption bill

http://www.bbc.co.uk/news/world-asia-india-16240083

A key week has begun for India's controversial anti-corruption bill, with the cabinet expected to approve it and then table it, reports say.

The Lokpal bill envisages setting up an independent ombudsman who would have the power to investigate and prosecute politicians and civil servants.

Final decisions still need to be made on who comes within the bill's ambit.

Key activist Anna Hazare has threatened to launch protests and go on a hunger strike if the bill is not passed.

[xchrom]

57. India facing trade 'disaster

http://www.atimes.com/atimes/South_Asia/ML20Df02.html

GENEVA - As the Eighth Ministerial meeting of the World Trade Organization (WTO) kicked off in Geneva last week, a group of non-government organizations exposed the devastating potential of a free trade agreement currently being negotiated between the European Union and India. If passed, they say the deal would make a mockery of all WTO rules and regulations.

A recent impact assessment on the right to food of the EU-India FTA, researched and compiled by leading advocacy groups including the Delhi-based Third World Network (TWN), the Indian non-governmental organization (NGO) Anthra and Germany charities Misereor, Glopolis and the Heinrich Boll Foundation, concluded that the proposed deal would violate the right to food of a vast segment of the Indian population, particularly those who


rely on the poultry and dairy sectors.

Additionally, the zero-tariffs clause of the free trade agreement (FTA) could lacerate the retail sector by stripping small retailers of any protection against corporate giants.

Having sat on the table since 2007, the agreement could be sealed as early as next year, an outcome that many experts see as "disastrous" for the local economy.

[Demeter]

64. I thought the WTO was just about dead

be sorry if I was mistaken....

[xchrom]

72. the Queen of Snark strikes again!

well done.

[Demeter]

66. RBS told to shrink investment bank

The chancellor has called on Royal Bank of Scotland to shrink its investment banking business significantly as a way to “clear up mistakes of the past” and assuage public anger towards the banks

Read more >>
http://link.ft.com/r/NA70KK/B5SLAM/B49CK/DWY3K5/30WU1G/YT/t?a1=2011&a2=12&a3=19

CAN YOU IMAGINE THE HEADS ROLLING, AND THE LAMENTATION, SHOULD ANYONE IN DC MAKE SUCH A POLICY?

[Demeter]

67. ECB warns of further contagion risks

The eurozone faces a serious risk of its debt crisis engulfing further member states as a result of political uncertainty, credit rating downgrades or worries about the region’s banks, the European Central Bank has warned.

Read more >>
http://link.ft.com/r/TWK799/DWRHV0/GYN7Q/U1BZL3/62DTHM/6C/t?a1=2011&a2=12&a3=19

[Demeter]

68. Ultra-cheap money is having the opposite to the desired effect

Gresham’s law needs a corollary. Not only does “bad money drive out good,” but “cheap” money may as well. Ultra low, zero-bounded central bank policy rates might in fact de-lever instead of re-lever the financial system, creating contraction instead of expansion in the real economy, writes Bill Gross.

Just as Newtonian physics breaks down and Einsteinian concepts prevail at the speed of light, so too might easy money policies fail to stimulate at the zero bound.

Read more >>
http://link.ft.com/r/H60H77/KQLCUK/PNGIU/PFU0NY/VLV9DB/28/t?a1=2011&a2=12&a3=19

SOMEBODY EXPLAIN TO THIS IDIOT THAT "CHEAP" MONEY IS BAD MONEY, BY DEFINITION, BECAUSE IT CHEAPENS EVERYONE'S MONEY?

[Demeter]

69. Draghi warns on eurozone break-up

Mario Draghi has warned of the costs of a eurozone break-up, breaching a taboo for a president of the European Central Bank, even as he sought to play down market expectations about the ECB’s role in combating the sovereign debt crisis.

His willingness to discuss a scenario for Europe’s 13-year-old monetary union that his predecessor, Jean-Claude Trichet, simply described as “absurd,” highlights the high stakes in the eurozone debt crisis, which has rattled global financial markets.

Read more >>
http://link.ft.com/r/BLH300/KQL6L5/GYN7Q/TUHA10/TU0XI9/CM/t?a1=2011&a2=12&a3=18

Draghi Tells Financial Times Bond Buying Unlikely as ECB Abides by Mandate

http://www.bloomberg.com/news/2011-12-18/draghi-tells-financial-times-bond-buying-unlikely-as-ecb-abides-by-mandate.html

European Central Bank President Mario Draghi damped expectations that the bank will step up bond purchases to tame the sovereign debt crisis, saying it can’t overstep its mandate.

“People have to accept that we have to, and always will, act in accordance with our mandate and within our legal foundations,” Draghi told the Financial Times in an interview, confirmed by the Frankfurt-based ECB. “The important thing is to restore the trust of the people -- citizens as well as investors -- in our continent. We won’t achieve that by destroying the credibility of the ECB.”

The ECB is resisting pressure to increase its bond buying, saying governments need to find a lasting solution to the debt crisis. The central bank has instead focused on helping the banking industry and will this week offer financial institutions in the 17-nation euro area unlimited three-year loans. Draghi said it’s up to banks to decide what to do with the money.

“One of the things that they may do is to buy sovereign bonds,” he said. “But it is just one. And it is obviously not at all an equivalent to the ECB stepping up bond buying. One aspiration is to have them financing the real economy, especially small- and medium-sized enterprises.”

[Demeter]

70. Damned with faint plans

http://www.economist.com/node/21541859

Euro-zone government bonds have not been made safe—and the euro project remains in peril...THERE were hopes, however faint, that Europe’s leaders might, in the space of a few days, manage to persuade investors that euro-area government bonds were safe assets, not toxic waste, thus putting paid to fears that the currency zone would disintegrate. The verdict, a week after meetings of the European Central Bank (ECB) and European Union leaders on December 7th-9th, is that they failed.

The new measures that emerged from these meetings fell short of what is required to save the euro, though they may be enough to support the zone’s stricken banks and sovereigns for a while. The bond markets’ initial response is not encouraging. Yields on the ten-year bonds of Italy and Spain, the big euro-zone countries that investors are most wary of, have risen again after falling in the run-up to the summit (see chart).



The euro has also dropped to its lowest level (below $1.30) against the dollar since January. The likeliest trigger for the next stage in a deepening crisis is a blanket downgrade of euro-zone government bonds, which would strip France and even Germany of their prized AAA credit rating...

[Demeter]

71. Banks resist European pressure to buy government debt

http://www.ifre.com/banks-resist-european-pressure-to-buy-government-debt/1620695.article

Banks are unlikely to come to the aid of debt-ridden eurozone countries, with many planning to ignore political pressure to use cheap money from the European Central Bank to fund purchases of sovereign bonds.

With eurozone governments needing to sell almost €80bn of fresh debt in January alone and bond yields rising by the day, the stand-off between policymakers and banks could turn Europe’s slow-burning debt crisis into a full-scale conflagration in the New Year.

Burned by Greek losses, and under the scrutiny of shareholders, banks have slashed their exposure to weaker European sovereigns over recent months. Senior bankers say they will cut further, despite pressure to use newly available, longer-term ECB loans to buy government debt as part of an officially-sanctioned carry trade.

“When investors are constantly asking what you have on your books and the board is asking you to reduce your exposure, it doesn’t really matter about the economics of the trade,” said the treasurer of one of Europe’s biggest banks. “Am I going to buy Italian bonds? No.”

WELL, YES, THERE IS THAT...

[Demeter]

73. Credit agencies pile pressure on EU leaders

http://www.guardian.co.uk/business/2011/dec/16/credit-rating-cut-eurozone-countries-threat

Moody's downgrades Belgium by two notches and warns that indebted countries will find it increasingly hard to fund debts...European leaders are under renewed pressure to boost the firepower of the EU's multibillion-euro bailout package after Belgium's credit rating was cut.

Moody's downgraded Belgium by two notches to Aa3, its fourth highest rating. It warned that indebted eurozone countries such as Belgium will find it increasingly hard to fund their debts or achieve economic growth in the face of Europe's austerity drive.

"The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future," warned Moody's.

[Ghost Dog]

88. That chart's out of date (Dec 14). Latest rates are half that (see post #2)

Today's stories:

Spain Is Said to Pressure Banks to Borrow Funds in ECB Three-Year Auction

The Bank of Spain is urging lenders in the country to borrow all the funds they need when the European Central Bank auctions three-year money tomorrow, said two people familiar with a meeting held last week.

Central bank regulators met with treasurers on Dec. 15 to encourage them to use the facility, telling them that the more banks use the facility, the less chance there is of stigma for taking the funds, said the people, who declined to be identified because the meeting was private.

The ECB said on Dec. 8 it planned to offer unlimited funding against collateral for as long as three years to free up the flow of money in the financial system. Banco Bilbao Vizcaya Argentaria SA (BBVA) Chairman Francisco Gonzalez called for the ECB to set up three-year lending operations so that banks can buy public debt in a Nov. 28 column in Financial Times Deutschland.

“You can’t die twice and there is a strong incentive for banks to go for this,” Inigo Lecubarri, who helps manage about $300 million at Abaco Financials Fund in London, said in a phone interview. “There are institutions that don’t have access to the market and are desperate for funds.”

/... http://www.bloomberg.com/news/2011-12-19/spain-is-said-to-pressure-banks-to-borrow-funds-in-ecb-three-year-auction.html

... and see next post...

[Ghost Dog]

91. Spain's new prime minister pledges €16bn spending cuts

Spain's new prime minister, Mariano Rajoy, pledged public spending cuts of at least €16.5bn (£13.8bn) today and said he would force the country's banks to own up to the full scale of losses on bad property loans...

... Speaking to the parliament before he is formally voted in on Tuesday, Rajoy said that Spainhad no option but to embrace austerity and meet deficit targets set by the EU. In recent weeks the country's borrowing costs have soared dangerously close to a level that would force the country to seek an international bailout.

"The panorama could not be more sombre," he said. "We cannot be vague when setting out priorities."

Rajoy did not specify where the spending cuts would come from, but said much civil service recruitment would be frozen. He also proposed a drastic reduction in the number of state companies, quangos and other entities.

Rajoy admitted there was a worrying hole in the Spanish banking system with "latent and hidden losses" left by a burst housing bubble. The new government would oblige banks to reveal the full extent of toxic real estate assets, valuing land and properties they have received from bankrupt builders at realistic prices.

/... http://www.guardian.co.uk/world/2011/dec/19/spain-prime-minister-spending-cuts

[amandabeech]

103. My G-d! The Spanish banks may have to mark to market their loans and recovered collateral from the

housing sector.

If we did that, would any financial institutions aside from credit unions and some community banks be solvent?

Is this a start of a new trend?

[Ghost Dog]

104. As you see, the so-called 'vigilantes' are not demanding similar action in the USA

yet.

[amandabeech]

113. I wonder if the vigilantes will get this guy to recant.

Or if something like this was banging around in the meeting in which Cameron refused further involvement in the EU in order to save The City from regulation.

God forbid if the The City had to mark to market. They've got toxic assets stored in a moon-sized warehouse and they're making more every day.

[Demeter]

74. Van Rompuy sends EU leaders draft of fiscal union pact

http://www.europeanvoice.com/article/2011/december/van-rompuy-sends-eu-leaders-draft-of-new-fiscal-pact-/73005.aspx

Herman Van Rompuy, the president of the European Council, today sent national governments a draft of an inter-governmental treaty that will seek to boost economic discipline in the eurozone.

Crucially, it will enter into force once nine out of the 17 eurozone member states have ratified it, meaning it will still come into effect even if some countries vote against it in referenda or their parliament reject it.
Non-eurozone countries that sign up to the agreement will be subject to the new rules only when they adopt the euro. However, they can choose to apply the rules earlier if they wish.

The treaty, called “an international agreement on a reinforced economic union”, contains the tougher rules on economic discipline that national leaders agreed at their summit on 8-9 December. An inter-governmental treaty became necessary when the United Kingdom refused to back changes to the EU's treaties.

The rules include introducing a debt brake into national legislation and agreeing to semi-automatic sanctions for failing to respect debt and deficit limits....FULL DRAFT AVAILABLE AT LINK

[Demeter]

76. Markets on alert as European Union bosses face big decisions

http://www.telegraph.co.uk/finance/markets/8964691/Markets-on-alert-as-European-Union-bosses-face-big-decisions.html#disqus_thread

Traders are braced for a volatile day on Monday ahead of European talks on fresh austerity measures, eurozone bail-out mechanisms and a looming deadline to approve $200bn (£167bn) of bilateral loans to the International Monetary Fund (IMF)...Jean Claude Juncker, the head of the Eurogroup, said all 27 European Union finance ministers, including George Osborne, would talk together in the afternoon to approve or reject extending the funds to the IMF as agreed in Brussels by December 19. The loans would be used by the IMF to support struggling eurozone countries.

The finance ministers are also tasked with devising a voting system to govern the European Stability Mechanism (ESM) after the Brussels decision to replace unanimity sparked a revolt. The ministers are under pressure to have a deal ready for approval by EU leaders when they convene on Tuesday.

There are fears that a failure to reach an agreement on either the IMF loans or the ESM would rattle markets which already have to digest the mass credit rating downgrade warnings on eurozone sovereigns that were announced on Friday night.

Fitch placed six countries, including Spain and Italy, on “negative watch”, while Moody’s downgraded Belgium. Standard & Poor’s has said 15 eurozone states face a downgrade, including France and Germany.

[Demeter]

77. EU finance ministers to hold teleconference on Monday

http://www.reuters.com/article/2011/12/18/us-eu-ministers-teleconference-idUSTRE7BH0JD20111218

European Union finance ministers will hold a teleconference on bilateral loans to the International Monetary Fund and on the new fiscal compact for the euro zone on Monday at 1430 GMT, European Union officials said on Sunday.

"There will be a conference call of the Eurogroup Plus, that is the 27 EU countires, tomorrow afternoon," a spokeswoman for Eurogroup President Jean-Claude Juncker said.

Euro zone officials who asked not to be named said there would also be a discussion about the European Stability Mechanism - the 500 billion euro permanent euro zone bailout fund. Ministers would discuss a new, qualified-majority voting mechanism that is to replace unanimity for the ESM under a decision of euro zone leaders on December 9.

Euro zone leaders decided on Dec 9 to bring forward the launch of the ESM by one year to July 2012 to help boost the euro zone's defences. They also decided to abolish unanimity in ESM voting to prevent small countries blocking major decisions....NO KIDDING! WHO COULDN'T SEE THAT COMING?

[Demeter]

78. European Ministers Seek $261B in IMF Funds

http://www.bloomberg.com/news/2011-12-18/european-finance-ministers-to-discuss-crisis-tomorrow-as-confidence-wanes.html

European finance ministers sought to meet a self-imposed deadline for drawing additional aid to the debt crisis and to form new budget rules as investor confidence that a comprehensive solution is achievable wanes.

Euro-area finance ministers held a conference call beginning at 3:30 p.m. Brussels time to discuss 200 billion euros ($261 billion) in additional funding through the International Monetary Fund and the mechanics of a so-called fiscal compact that was negotiated at a Dec. 9 European Union summit, according to two people familiar with the planning.

“They’ll try to get as much done as they can before Christmas, but it’s doubtful they’ll put markets in a Christmas mood,” Carsten Brzeski, an economist at ING Group in Brussels, said in an interview. “There is still so much uncertainty.”

The accord to ratchet up budget rules failed to ease concern that the monetary union risks buckling under the weight of the two-year-old crisis. Fitch Ratings lowered France’s credit outlook and put other euro-area nations on review Dec. 16, saying an overall crisis solution may be “technically and politically beyond reach.” Belgium’s rating was cut two levels to Aa3 by Moody’s Investors Service on the same day...

[Demeter]

79. I Saw Gas for $2.85 this morning

Couldn't stop to fill up...have to do that tonight.

Wonder why? See next post!

[Demeter]

80. Commodity Investors Glum; Goldman Sees Rally

http://www.bloomberg.com/news/2011-12-19/investors-in-fetal-position-cut-bets-as-goldman-sees-rally-commodities.html

Speculators reduced bets on commodities to a 31-month low on mounting concern that global economic growth is slowing as Goldman Sachs Group Inc. (GS) and Barclays Capital reiterated predictions that prices will gain.

Money managers cut combined net-long positions across 18 U.S. futures and options by 9.6 percent to 532,521 contracts in the week ended Dec. 13, Commodity Futures Trading Commission data show. That’s the lowest since April 28, 2009. Wagers on gold dropped to an eight-week low and coffee holdings tumbled 60 percent, the most since August.

Funds are less bullish after Moody’s Investors Service said it is reviewing Europe’s ratings and the International Monetary Fund said the region’s fiscal crisis is “escalating.” Europe accounts for 19 percent of global copper demand and consumes about one in six barrels of the world’s oil. Manufacturing in China, the biggest buyer of everything from nickel to soybeans, may contract for a second month, a private survey showed.

“For most people, the fetal position is quickly becoming their portfolio position,” said John Stephenson, who helps manage $2.6 billion of assets at First Asset Investment Management Inc. in Toronto. “It could get a lot uglier.”

HOW MUCH UGLIER COULD IT GET, JOHN?

[Demeter]

81. Coffee Falls to One-Year Low as Inventories Gain; Sugar Rises; Cocoa Falls

http://www.bloomberg.com/news/2011-12-16/coffee-falls-in-new-york-before-usda-s-production-update-sugar-advances.html

Coffee fell to a one-year low as inventories monitored by ICE Futures U.S. climbed for the seventh straight week. Sugar advanced, and cocoa dropped. Stockpiles of coffee monitored by ICE have jumped 20 percent since Nov. 1 to 1.53 million bags. Arabica futures in New York have dropped 11 percent this year after surging 77 percent in 2010.

“Warehouse stockpiles are higher, and that may be keeping buyers at bay,” Sterling Smith, an analyst at Country Hedging in St. Paul, Minnesota, said in a telephone interview...

[Demeter]

82. KPMG defends role over MF Global

The administrator for the futures broker explains its handling of the return of funds as customers voice frustration over return of UK assets

Read more >>
http://link.ft.com/r/S4XZQQ/2OWQF9/WH2F8/VLG711/C4SBE2/28/t?a1=2011&a2=12&a3=19

[Demeter]

83. Chinese ‘hoops’ hold back foreign banks

Rules that thwart foreign participation in the financial sector and a meddling securities regulator have kept foreign banks on the sidelines

Read more >>
http://link.ft.com/r/S4XZQQ/2OWQF9/WH2F8/VLG711/U1CD6Q/28/t?a1=2011&a2=12&a3=19

CHINA WAS NOT BORN YESTERDAY...

[Demeter]

84. Stores braced for poor Christmas

The coming days will make or break retailers’ festive trading, which can account for up to half of non-food retailers’ annual profits

Read more >>
http://link.ft.com/r/S4XZQQ/2OWQF9/WH2F8/VLG711/4CXN4M/28/t?a1=2011&a2=12&a3=19

[Demeter]

87. Plan B – How to Loot Nations and Their Banks Legally By David Malone MUST READ!!

http://www.golemxiv.co.uk/2011/12/plan-b-how-to-loot-nations-and-their-banks-legally/

Does anyone think that if our governments fail to keep to their austerity targets and fail to keep bailing out the banking sector, that the banks will just shrug and say, “Well, thanks for trying” and accept their fate? Or do you think the banks might have a Plan B of their own?

First let’s be clear about Plan A. That plan is to enforce an era of long-term austerity cuts to public services, in part to cut public expenditure so as to free up money for spending on the banks, but perhaps more importantly to further atrophy public services so that private providers can take over. A privatization of services which will bring great profits and cash flow to the private sector and to the banks who finance them, and a further general victory for those who feel that private debts rather than public taxes should be what underpins our national life and social contract. Plan A therefore requires that governments convince their populace that private debts should be taken on to the public purse and that once taken on, the contracts signed by governments on behalf of the tax payers/citizens, are then sacrosanct and above any democratic change of mind. If governments can hold their peoples to this,then the banks are ‘saved’ with the added bonus that democracy and the ‘Rights’ it once guaranteed will all have been redefined as subordinate to finance and its contracts, and our citizenship will have become second to one’s contractual place in a web of private debts. Debts to the private lenders will become more important than taxes to the public exchequer. And as they do the State will wither away, leaving free-market believers and extreme libertarians exactly where they have always wanted to be – in charge – by dint of being rich. It is, in my view, a bleak future which I once described as A Toxic Debt Wasteland.

BUT it does all depend on governments being able to suppress discontent and to outlaw opposition in the sense of saying to people you may disagree but we have now declared these debts and their repayment to be outside democratic control and immune to any attempt to rescind or repudiate the agreed debt contracts. As the severity of the austerity cuts to social services (health, education, pensions etc) becomes painfully clearer to people and the ‘necessity’ for them is ‘regretfully’ extended year after year, it will become harder and harder to justify, let alone impose, such suffering. We will enter an era of vicious sectarian blame. We are already in it, but it will get much darker. The banks and those whose wealth and power is tied to them, would obviously prefer Plan A to succeed. It makes governments do all the dirty work and it would profit the banks far more in the long run. If you want to bleed a man – kill him and you get about 5 litres/quarts. But strap him to a gurney with a catheter in his arm and a drip feed in his nose, and he will bleed for you for as long as his system can stand it. That is Plan A. But what if it fails?

I cannot believe the banks, with everything at stake, have not thought it prudent to have a plan B. So here are my thoughts on what that plan could be. Let me say now, I do not think this plan was a long term conspiracy. I do not think the end game was in mind when the first elements were put in place. It has, I think, been constructed opportunistically. But the end result is no less dark and threatening....What I offer from here on is thinking out loud. I obviously have no proof at all that there is a plan B. All I can hope to do is show you the elements which I think could make a Plan B for the banks. Then my argument is that if the mechanism I describe could work, if I have not simply misunderstood something, then I think the banks will surely have thought of it before me. And so it either already exists or it will. I think there are scraps of information that suggest it does exist and the collapse of MF Global might even be the first example of Plan B in action. The MF Global case certainly contains all the clues. MF Global imploded when it could not get the short term funding it needed. There were two kinds of funding MF Global relied upon for its liquidity/cash flow: repo and hypothecation. For those not familiar, Repo is when a bank or brokerage ‘sells’ an asset for cash but with the agreement that it will re-purchase – hence ‘repo’ – the asset at an agreed date for an agreed price. It is not really a sale but a loan. Repo is the oxygen the financial world breathes. Repo is a $10 Trillion market...The other main source of the essential short term funding was Hypothecation. This is when a bank or brokerage pledges an asset to a ‘lender’ in return for cash but the asset remains in the possession of the borrower. What the ‘lender’ gets is hypothetical control of the asset. Although the asset never actually changes hands, the new ‘owner’s’ hypothetical control of the asset allows her to do what she wishes with the asset. Including re-hypothecating the asset to another bank or brokerage. If she does so then the hypothetical control passes to yet another ‘owner’. Even though physically it remain where it started.

Like repo – hypothecation and re-hypothecation are truely massive parts of modern debt-based banking. So the first thing the MF Global case tells us is that what happened is not due to some peripheral, parochial rogue trader-esque, isolated problem. What happened was as a result of a mechanism right at the very heart of the financial system. In the MF Global collapse what ZeroHedge, and following them, I and others wrote about, was the way in which not only did MF Global go bankrupt, but so also did some of their clients when they found the money they thought MF Global was holding for them, went unaccountably missing. Client’s money went missing because it was ‘mingled’ with the brokerage’s money when it should not have been. Brokers should keep them separate. But it seems in the ‘re-hypothecation’ of assets it was mingled. Former CEO of MF Global, Mr Corzine has sworn under oath he knew nothing about his co-mingling nor the irregularities with his company’s re-hypothecation. It has been rumoured the client’s money may now be, possibly, in the hands of JP Morgan. This hint of illegality has grabbed everyone’s attention. But I think it is actually the legal part of the story not the possibly illegal part which is by far the more important. In my opinion the key to the bank’s Plan B is in understanding why any money/assets were taken from MF Global after it had gone bankrupt and how exactly it went under in the first place. We all know MF Global had huge holdings of dicey European sovereign debt. But those debts have not become worthless so what caused MF to collapse? ...The answer to all these questions lie in a change to Bankruptcy laws that happened around the world between 2002 and 05. This might seem like a detour into nerd city but it is not. It is the key. When a company declares bankruptcy there is what the Americans call an ‘automatic stay’, which means all the assets left in a company at the moment it goes bankrupt are protected from the rush of creditor’s demands until appointed auditors can sort out who should get what. The automatic stay prevents a first come first served disorderly looting where those with the most muscle getting everything and everyone else getting nothing. As we are all painfully aware now, there is a legal pecking order to who gets paid before who, with Senior bond holders at the top. But, in America culminating in 2005 with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) the order was changed. And that change is the crucial event. At the time the law was being passed few were aware of this change and even fewer were aware of how important it would become. At the time the furore was all about changes to personal bankruptcy. The Credit Card industry (AKA Banks) had spent more than a decade and its rumoured as much as $100 million lobbying to make bankruptcy much harder and more punitive for ordinary debtors...

....MUCH MORE AT LINK...

....I am sorry this has been such a long piece but I wanted you to see exactly how I came to this because I hope you can show me how I am wrong. Please do so politely and I will go downstairs and celebrate my stupidity with a cup of tea, before apologizing to you all. I would very much like to be wrong...But if I am not wrong, then the banks have created a financial Armageddon looting machine. Their Plan B is a mechanism to loot not just the more vulnerable banks in weaker nations, but those nations themselves. And the looting will not take months not even days. It could happen in hours if not minutes. Our leaders would have only a few hours to decide who they would side with: the banks or us. The past four years give me no faith they would chose us.

************************************************************************

David Malone is author of the "The Debt Generation". David has a career spanning nearly twenty years producing and directing documentaries for both the BBC and Channel4. His series Testing God was shortlisted for the Royal Television Society best documentary series and was described by The Times as "moving and startling - as close to poetry as television gets." For the last three years David has focused considerable attention on the financial system. His BBC documentary High Anxieties- The Mathematics of Chaos, first broadcast in September 2008, was one of the first films to be made about the financial crisis accurately anticipating the problems that were to unfold in the economy. The Debt Generation was published in November 2010.

David Malone on the Keiser Report

&feature=player_embedded

[Demeter]

89. To tell you the truth, I'm sorry I asked. The Answer is devastating

but it does confirm that we are within months, if not days, of the end of all things as we know it, and the times that try men's souls are close at hand.

Too bad the psychopaths will not be on the front lines, where they belong. But they will be the first ones buried, I predict.

[Ghost Dog]

112. Here's the crux of it, I think:

What was this amendment? The amendment exempted repos (and hypothecated and re-hypothecated assets) and a whole range of derivatives from the automatic stay. It also allowed lower quality assets to qualify for the exemptions.

Which means,

"The special bankruptcy treatment given repos and derivatives means that repo lenders and parties to derivative contracts can keep the collateral if their trading partner becomes insolvent. This exempts them from the “automatic stay” rule in bankruptcy, which prohibits most creditors from trying to collect ahead of others."

Or as the official report from the US Financial Crisis Inquirey Commission said,

"under a 2005 amendment to the bankruptcy laws, derivatives counterparties were given the advantage over other creditors of being able to immediately terminate their contracts and seize collateral at the time of bankruptcy. (p. 48)"

So when a bank goes bankrupt, BEFORE even the most senior bond holders, the repo lenders and derivatives traders can remove, or keep all the assets pledged to them.

I'd say your conclusion is probably correct.

[amandabeech]

114. That might explain the run on AIG. n/t

[Demeter]

96. Mortgage curbs mean fewer loans for the over-50s IN UK

http://www.telegraph.co.uk/finance/personalfinance/8964810/Mortgage-curbs-mean-fewer-loans-for-the-over-50s.html

[Demeter]

97. British Regulator Softens Mortgage Rules for Lenders’ Existing Customers

http://www.bloomberg.com/news/2011-12-19/british-regulator-softens-mortgage-rules-for-lenders-existing-customers.html

[Demeter]

98. Happy Birthday, and Congrats to Yves Smith!

nakedcapitalism.com is 6 years old! Check it out!

http://www.nakedcapitalism.com/

I know many of you are getting Christmas cards with inserts extolling company, or worse, family accomplishments. So I’ll keep it brief. After 8,582 posts, according to Google Analytics, we have close to 2 million page views and 300,000 unique visitors a month (the latter is clearly overstated, since someone accessing the site and home and at the office would be counted as two visitors). But most important, we have a discerning, engaged readership, and we hope our work has shed a bit of light on the dark corners of the financial services industry. As we wrote on our first birthday:

Although we take interest in the traffic, what is most important to us is that we are attracting a high caliber readership and getting the attention of people who have influence. Perhaps it’s naive, but we think our mission is to encourage people to think more critically; finance just happens to be a convenient place for us to operate. One of our favorite mottos is the Will Rogers saying, “It isn’t what you don’t know that will hurt you, it’s what you know that ain’t so.”

There are so many people who have contributed in so many ways to the success of this website that it is hard to know where to begin. Our guest bloggers. The individuals who send us links suggestions. The commentariat. People who have put us on to important stories. Fellow bloggers, some of whom correspond, others who chew over what we have said on their sites. The members of the community who supported us in our recent fundraiser. But ultimately it is the readers that make an initiative like this possible, and I am as always grateful for your interest and participation.

[Demeter]

100. FHFA Inspector General End Runs DoJ, Joins Forces With New York Attorney General Schneiderman

http://www.nakedcapitalism.com/2011/12/fhfa-inspector-general-end-runs-doj-joins-forces-with-new-york-attorney-general-schneiderman.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

...It’s a well deserved slap in the face of the Department of Justice.

I’m not certain of the precise scope of powers of the FHFA inspector general. But typically, federal inspector generals have limited scope of action. They can only subpoena documents and cannot subpoena witnesses. And, of course, they are not prosecutors and cannot launch cases. The theory of IGs is that if they uncover something unsavory, they’ll hand it off to the Department of Justice. But as a former IG has pointed out, the DoJ does not take case leads from the IGs unless they are fully fleshed out, and that is well nigh impossible to do in the absence of speaking to witnesses.

The Department of Justice has AWOL on the mortgage and banking beat, no doubt to avoid ruffling powerful possible Obama donors. Inspectors general are in theory independent, and on top of that, the FHFA is an independent agency and is not running the Administration playbook (I’ve been told by people involved in bank regulation that Geithner has tried pressuring FHFA acting chief DeMarco to no avail).

So what does the FHFA inspector general do, certain that Eric Holder will ignore any misdeeds he finds? Turn to another prosecutor who can bring cases that can bring cases that are national in scope...The mortgage industrial complex is starting to look a smidge vulnerable. That time is long overdue. I hope readers will cheer these tough minded state attorneys general on in the courageous work.

JUICY DETAILS AT LINK

[Demeter]

101. This slump won’t end until 2031 / The Long Depression: The Slump of 2008-2031 by Matthew Lynn

http://www.marketwatch.com/story/this-slump-wont-end-until-2031-2011-12-14?dist=countdown

In retrospect, it wasn’t hard to see that the markets were becoming dangerously unstable. Germany had just adopted a new monetary system, and Europe was being flooded with cheap German money. Greece had signed up to a monetary union with Italy and France but was struggling to hold it together. Financial markets had been deregulated. New technologies were transforming production and communications, allowing money to move across borders at lightening speed. And a massive new industrial power was flooding the world with cheap manufactured goods, blowing apart old industries.

When it all fell apart in an almighty crash, it was only to be expected.

A prophesy for London, New York or Berlin in 2012? Not exactly. It is a description of Vienna in 1873. In that year, in one of the great crashes of all time, the Austrian markets triggered collapses across Europe, swiftly followed by an equally spectacular collapse in New York. It was the start of what economic historians call the Long Depression, a prolonged period of volatility, unemployment and slumps that lasted an epic 23 years, only coming to an end in 1896.

I have been researching that episode for my new e-book ”The Long Depression: The Slump of 2008 to 2031.” The parallels with our own time are fascinating. German unification, and the adoption of the gold standard, had led to a boom in that country, and cheap German money had flooded Europe. Greece had just joined the Latin Currency Union, an ill-fated attempt to merge currencies across Europe. Banking had been deregulated, which was partly why so much German money was invested on the Vienna bourse. The telegraph created instant communications, allowing the European crash to spread to New York. The U.S. was industrializing, transforming the global economy as much as China has transformed the present era’s economy in the past decade...All those factors came together to create an almighty bubble, followed by an even worse crash. The slump that followed — although it is hard to measure these things precisely — lasted more than two decades. If the slump following the crash of 2008 is anything like that one, then this one is going to last until 2031...True, historical parallels are never precise. We won’t replay the Long Depression of 1873 to 1896 exactly, nor will this slump necessarily last as long. It is, however, a far more instructive episode than the Great Depression of the 1930s. And there are five key lessons we should learn from it....First, depressions can last a very long time, and when their origins are in a debt bubble they should be measured in decades not years. For a century or more, depressions have been relatively short, sharp episodes. They are like having a tooth pulled, rather than a chronic sickness — painful, but over quite quickly. But it doesn’t have to be that way. In the U.K., for example, this is already the longest recession since records began — in the sense that output is still below its 2008 peak. It is more enduring than the depression of the 1930s. That is true of many other countries, as well. If, as seems likely, Europe, and perhaps the U.S., slips back into recession in 2012, it will be clear to everyone we are witnessing something far longer than the conventional economic textbooks allow for...Second, this depression is structural. The Long Depression of the 19th century had its roots in financial speculation, technological change, and the arrival of a massive new player in the global economy. Our current depression likewise has its roots in three huge crises coming together at the same time. We have a debt bubble that had been building up over three decade and which burst spectacularly in 2008. The dollar is in long-term decline as a reserve currency, and as the anchor for the global monetary system, but there is still not much sign of what will replace it. And in the euro, the biggest single economic bloc has created the most dysfunctional monetary system in human history, threatening financial collapses on an unprecedented scale. Think of it as the world economy’s suffering a heart attack, then a stroke, then getting picked up by an ambulance that crashes on the way to the hospital — it is hardly surprising the patient isn’t in good shape...Three, it’s uneven. The Long Depression of the 19th century was a sustained period of lower growth compared with what came before and what came afterward. Germany, for example, grew 4.3% annually between 1850 and 1873 and then at 4.1% between 1896 and 1913. But in the Long Depression years, it only managed a growth rate of just over 2% a year. It was similar in other countries. The markets remained volatile, with repeated booms and busts, regularly collapsing back into recession. They did grow occasionally, just as Japan has sometimes grown in what is now its second decade of slump. But the growth is never sustained...Four, good things are still happening. It isn’t all doom and gloom. In the Long Depression, some countries were largely unscathed. New technologies and industries were being created. The telephone was invented, and the foundations of new industries based on the petrol engine and electricity were put into place. The people who got it right still made huge fortunes, and the workers in the right industries prospered. Overall, however, times were hard. And you had to position yourself carefully...Five, it won’t be fixed easily. The parallel with the 1930s is dangerous, because it has convinced bankers and policy makers that if you can just pump up demand, everything will be OK. It won’t.

Sure, demand is important — there is no point in letting it collapse. But this won’t be over until all three structural problems get fixed. Debt needs to be paid down to manageable levels, a new reserve currency needs to be created, and the euro needs to be put out of its misery. None of these are simple tasks, and none will be done quickly. The global economy will eventually get back to normal growth. But the truth is, it is going to be a long, hard haul — and a lot of work needs to be done it get back on track.

*******************************************************

Matthew Lynn is chief executive of Strategy Economics, a London-based consultancy. His latest book ‘The Long Depression: The Slump of 2008-2031’ is published by Endeavour Press.

[bread_and_roses]

111. My guess is that by 2031 climate disaster

will have destroyed much so of what we think of as normal ... but who knows, maybe the 1%ers will be trading away - speculating on the famines, maybe - the ghouls.

[Demeter]

102. How Business Schools Got to Be the Way They Are

http://www.economicprincipals.com/issues/2011.12.18/1321.html?

CAN SOMEONE READ AND EXCERPT/SUMMARIZE? I'VE HAD TOO MUCH BAD NEWS ALREADY.

ALSO, TIME TO REJOIN WHAT PASSES FOR REALITY AROUND HERE...WISH ME LUCK, OR AT LEAST, A GOOD DEATH.

[Roland99]

105. Stocks hit daily lows as Bank of America stock drops below $5/share

[font color=red]Dow 11,757 -110 -0.93%
Nasdaq 2,522 -33 -1.31%
S&P 500 1,204 -15 -1.25%
GlobalDow 1,731 -21 -1.23%
Gold 1,593 -5 -0.29%[/font]
Oil 93.68 +0.15 +0.16%