Monday, September 12, 2011
BNP Paribas (BNP) SA, Societe Generale SA and Credit Agricole SA (ACA), France’s largest banks by market value, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings, two people with knowledge of the matter said.
Moody’s placed the three banks’ ratings on review in June to examine “the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” the rating company said at the time. Cuts are likely as the review period concludes, said the people, who declined to be identified because the matter is confidential.
Group of Seven finance chiefs vowed on Sept. 9 to support banks and buoy slowing economic growth as Europe’s debt crisis roiled financial markets and threatened a global recession. Renewed fears that European policy makers are failing to prevent a Greek default and contain their debt woes prompted investors to sell stocks and push the euro to a six-month low against the dollar. European bank and sovereign credit risk reached all-time highs as 10-year Treasury and German bund yields fell to record lows on demand for a haven.
“We will take all necessary actions to ensure the resilience of banking systems and financial markets,” G-7 finance ministers and central bankers said in a statement released during talks in Marseille, France.
Credit Agricole spokeswoman Anne-Sophie Gentil declined to comment late yesterday, as did BNP Paribas spokesman Antoine Sire. Societe Generale spokeswoman Laetitia Maurel said she couldn’t immediately comment. Voicemail messages left on the mobile and office lines of Moody’s chief European spokesman Daniel Piels yesterday, outside of working hours, weren’t immediately answered.
Societe Generale has dropped 55 percent in Paris trading since June 15, while Credit Agricole tumbled 45 percent and BNP Paribas has declined 42 percent. The Bloomberg Europe Banks and Financial Services Index of 46 companies has fallen 30 percent in the period.
The reviews of Credit Agricole and BNP Paribas are unlikely to lead to downgrades of more than one level, Moody’s said when it put the banks under review. Societe Generale’s debt and deposit ratings may be cut as much as two grades because of the “uplift it receives from systemic support, which is currently higher than average for the French banking system,” the rating company said at the time.
Credit Agricole’s main risk arises from its Greek subsidiary Emporiki Bank of Greece SA, Moody’s said in June. Societe Generale, France’s second-largest bank by market value, faces risks from its stake in General Bank of Greece. Credit Agricole is France’s third-largest bank. BNP Paribas doesn’t have a local unit in Greece and is instead at risk from direct holdings of Greek government debt, Moody’s said.
With the run-up during July and August gold has set itself up far above its long term indicators. Although it might turn downward from the other time periods perspective it does not look like gold will turn bearish from a long term perspective for some time yet.
Trend: Gold has been moving upwards in a well defined channel since its low of 2008. Only in August has it broken from the channel, on the up side. This looks more like a blow-off move rather than a new more aggressive bull move. Unless the world is going to hell in a hand basket we will probably not see any new highs for some time, or if new highs do appear they are expected to be short lived. Any reaction from here is expected to be more of an intermediate term reaction rather than a long term reversal of trend, but let the indicators determine that event if it should come.
Gold remains well above its positive sloping moving average line and is expected to remain so for some time yet.
Strength: The July/August bull move had very good momentum behind it to the point of giving us the highest long term momentum readings since mid-2006. Unfortunately, the September try for new highs was on very much reduced strength and the price reacted. The long term momentum indicator remains in its positive zone but just slightly below my trigger line. The trigger is also sloping downward suggesting the strength of the price move continues to diminish.
Volume: The volume indicator turned to the up side in early 2008 and has basically been in an up trend since. It’s trigger line has remained in a positive slope throughout although the indicator crossed below the trigger on a few occasions. It remains above its positive trigger line at this time and did make a new high on Tuesday.
As of the Friday close the long term rating remains BULLISH.
The short term chart in the next section shows the second and third FAN trend lines from an accelerating FAN trend. As mentioned previously, the breaking of that third FAN trend line was the end of the trend (blow-off stage). The action of gold has remained within the confines of the second and third FAN trend lines as expected. Also expected is an eventual move below that second FAN trend line towards lower levels. That should come very soon. In the mean time the intermediate term rating remains positive per the indicators.
Trend: That second FAN trend line could also be considered as an intermediate term up trend line with gold remaining above the line. Gold is also above its positive sloping intermediate term moving average line.
Strength: The intermediate term momentum indicator moved into its overbought zone three weeks ago and quickly reversed back below the zone. It has remained below and looking weaker. Although the indicator remains in its positive zone it also remains below its negative trigger line.
Volume: The volume indicator had breached its intermediate term trigger line earlier in the week but ended the week back above the trigger. The trigger itself is still sloping upwards although not aggressively so.
All in all as of the Friday close the intermediate term rating remains BULLISH. This bull is confirmed by the short term moving average line remaining above the intermediate term line.
While the long and intermediate term action remains pretty static as far as ultimate ratings are concerned the short term seems to be in play both on the up side and the down side. Today, it seems to be more on the up side.
Trend: Gold remains within the confines of the second and third FAN trend lines. It is also bouncing above and below its short term moving average line. At the Friday close it ended above the line and the line slope remains pointing upwards.
Strength: The short term momentum indicator remains above its neutral line where it has been since early July. However, it is slightly below a still downward sloping trigger line. The move this past week by gold into new intra-day highs was met be an ever weakening momentum so we might call that a negative divergence warning.
Volume: The daily volume remains weak and the up price days seem to be on lower than normal volume action. At the Friday close the daily volume was below its short term average volume.
On the short term, at the Friday close, the rating remains BULLISH. This is still confirmed by the very short term moving average line moving above the short term line.
As for the immediate direction of least resistance, the flip of the coin suggests a lateral trend remaining within the FAN trend lines for a little bit longer.
The long term silver P&F chart remains bullish but the reversal level is now being moved higher. A move to the $37 level would mark a reversal on this P&F chart. Such a reversal would project a move to the $28 level, but let’s not get ahead of ourselves.
The P&F chart may say one thing but let’s see what the indicators are telling us as to the present position of silver.
Trend: Silver price remains above its positive sloping long term moving average line.
Strength: Since the plunge in early May the long term momentum indicator has been moving sideways with very little change in strength. It has remained at a strength level of 55% give or take 2% since the initial plunge. There is no immediate sign of that changing any time soon. The momentum remains in its positive zone oscillating above and below its trigger line. At the Friday close it ended the day just below the trigger line and the line is sloping downward.
Volume: The volume indicator is moving very slowly higher and remains above its positive sloping trigger line.
At the Friday close the long term rating for silver remains BULLISH.
Trend: From the intermediate term standpoint silver has been trapped in a shallow up trending channel since its late June lows. It is presently in the lower half of the channel but still above its lower up trend line. Silver closed on Friday above its positive sloping intermediate term moving average line.
Strength: Although the intermediate term momentum has been moving in a lateral direction similar to the long term momentum it has been somewhat more volatile as far as its upper and lower limits are concerned. In any way it has remained in its positive zone since early July but has, at the Friday close, dropped below its now negative sloping trigger line.
Volume: The volume indicator is starting to lose luster as far as the intermediate term is concerned. It is sitting just above its trigger line although the trigger remains positive.
For the intermediate term the silver rating at the Friday close remains BULLISH. This is confirmed by the short term moving average remaining above the intermediate term average.
On the short term things are not quite as peachy.
Trend: Silver is sitting right on top of its short term moving average line although the line itself is still very, very slightly positive in slope.
Momentum: The short term momentum indicator is still in its positive zone but may not stay there much longer. It has dropped below its trigger line and the trigger is heading downwards.
Volume: The daily volume action is relatively very low suggesting a decided lack of interest by the speculators who move prices. This may be a precursor to more downside action to attract the buyers.
On the short term the silver rating at the Friday close must be classified as NEUTRAL but heading lower. The very short term moving average line is still above the short term line suggesting that the bear has not yet been confirmed (which I guess is what the neutral rating also says).
Merv’s Precious Metals Indices Table
Well, that’s it for this week. Comments are always welcome and should be addressed to firstname.lastname@example.org.By Merv Burak, CMT
Every since the housing collapse triggered the recession that began in 2008, millions of Americans have been battered and beaten down, struggling to find jobs and stay afloat during this dire crisis in their lives. They watch as this government that should be attacking these problems has become totally dysfunctional, collapsing under the weight of a broken and corrupted political system.
But with all this pain and suffering, personal setbacks and the prospect of more and more of the same, the people of America remain in a form of semi-paralysis, full of fear and apprehension, but not protesting; seemingly unable to vent their mounting anger.
Those in the field of psychology would tell us that this is not a good condition. Keeping things inside, allowing problems to fester without relief, can be extremely harmful, both physically and mentally. People under such stress and tension in their lives often come to the point where life has lost its meaning and that's when unexpected things can easily happen. What are the people of America to do, where can they go, who can they turn to in their greatest time of need? Can they continue to wait and hope that this president or this Congress will respond to their needs?
Two major factors have the potential to trigger a societal eruption in America; jobs and food, both necessities of life. We all know about the never-ending jobs problem but there is another rapidly escalating problem involving food. Right now there are about 45 million Americans living below the poverty line and about the same number dependent on food stamps. The combination of a lack of jobs and the inability to pay the increasing prices for food are forcing more and more people into poverty and on food stamps.
And there is yet another factor that could bring on a storm of protests and rioting. Suppose the GOP maintains control of the U.S. House of Representatives, wins the presidency, and then begins to dismantle entitlements such as Social Security and Medicare? Or suppose that President Obama wins a second term and joins the Republicans in making significant changes to these entitlements, as he previously indicated "were on the table?" Then I believe there will be a societal explosion in America, the likes of which we cannot imagine.
Is there anyone who thinks that this kind of civil disobedience and protests can't happen in America, that this nation is somehow immune from them, that the people under such immense stress have infinite patience and can continue to remain in a state of frustration and desperation endlessly? We need only look at what's happening in other parts of the world and we may find our answers to these questions.
The Middle East protests came out of nowhere after social unrest erupted in violent protests in Tunisia that spread into Egypt, Bahrain, Syria, Yemen and surrounding nations. These were followed by a series of violent protests in London that have taken place over the past year; protests of dissatisfaction over increases in student tuition and government austerity measures. Violent, continuing protests in our very close ally, Britain, are an ominous sign that they can also happen here in America.
While most of these massive protests have occurred in Arab nations, it is simply astounding and hard to believe that very large protests are also currently happening in Israel. In Israel of all places, where an aggressive militaristic government rules; could that actually be true? Yes it is quite true as demonstrations have broken out in numerous areas of Israel that are part of a growing opposition to a lack of social justice, as well as dissatisfaction with the nation's standard of living.
This article from Haaretz.com reports the following: "Over 450,000 protesters attended rallies across the country last night calling for social justice in what was the largest demonstration in Israeli history." Yes, this is happening in a nation that has for decades had a population that has remained passive, submissive and silent but the people are now venting their long suppressed anger.
In speaking of storms it reminds me of the recent devastation brought down upon the Eastern coast of the U.S. by Hurricane Irene. We are fortunate to have, in this country, excellent weather forecasters and hurricane tracking systems that quite accurately indicate the speed, direction and force of these massive storms. They are, in effect, warning systems for federal and state government agencies and the public of impending danger.
With this information and these explicit warnings our government, municipalities and individuals can take precautionary measures to escape the storm or, at least, to limit the damage. Hurricane Irene resulted in extensive damage but only to one region of this nation, and this damage can be repaired. The storm of which I speak will have the power to shake the foundations of this society.
Warnings are being given to this government, the president, the Congress, and the media that this storm of enormous force is heading directly for America. It is a force that is being driven by the dire circumstances in which many millions of Americans find themselves; a storm that is looming on the horizon, growing in intensity, ready to wreak havoc upon this nation.
But as this storm heads toward America, do our leaders in Washington see it coming? Have they heard the warning of potential disaster? Will they heed the warnings and take appropriate measures to protect America and its people from society calamity? Without a doubt, they see it coming but it is becoming more and more evident that they have no intentions of making the necessary changes that would alleviate the pain and anguish that so many Americans are experiencing.
And so, they have decided to do nothing, to let nature take its course and just ride out this storm, hoping it will veer away from America. How wrong they are, how shallow and shortsighted they are. They have it in their power to work together to solve these problems, to think about the plight of Americans rather than concentrate on their own selfish interests but they will not deviate from their own corrupted agendas.
This storm is out there somewhere on the horizon, ever increasing in intensity. When those millions of Americans give up all hope of action by this government and decide that they can no longer remain passive, submissive and silent, this storm will descend upon America; and when it wreaks enormous damage on this nation and this society, this government will wish it had heeded the numerous dire warnings that it was given.
It's that time again when the IMF has just telegraphed something very big and very bad is about to happen. But let's back up, and paraphrase our post from March: "Back in April 2010, before Waddell and Reed sold a few shares of ES, effectively destroying the market on news that Europe was insolvent, we made the following observation: "The IMF has just announced that it is expanding its New Arrangement to Borrow (NAB) multilateral facility from its existing $50 billion by a whopping $500 billion (SDR333.5 billion), to $550 billion." Little did we know that our conclusion "something big must be coming" would prove spot on just a month later after Greece, then Ireland, then Portgual, and soon Spain, Italy, Belgium, and pretty much all other European countries would topple like dominoes tethered together by a flawed monetary regime. Well, based on news from Dow Jones we can now safely predict the following: "something bigger must be coming." The specific reason for this prediction was the following: "the International Monetary Fund is expected to soon activate a special funding pool that will boost the fund's ability to prevent or resolve economic crises." Sure enough something bigger came, and then some: Greece received its second bailout package about 4 months later, only to see the entire Eurozone hang by a thread following the political fallout that has since ensued. Well, it is time to shift from the comparative to the superlative: "something biggest must be coming."
According to Dow Jones the "International Monetary Fund will likely re-activate a $580 billion resource pool in coming weeks to ensure it has funds to help cover Europe's worsening sovereign-debt crisis, according to several people close to the matter." Why is this a big flashing red light? "According to the IMF, the pool of supplementary resources are only to be activated when "needed to forestall or cope with a threat to the international monetary system." So it is settled: just like on the previous two occasions, the biggest load of feces yet is about to hit the fan. The only real question is: how many trillions will the real global backstopper, China, be forced to match this massive expansion of the former world rescuer with... Also, what comes after "biggest"?
From Dow Jones:
The IMF activated the so-called New Arrangements to Borrow in April of this year for a six-month period. The IMF's board, which met informally on the issue late Friday afternoon, would have to approve re-activation of the resource pool if the fund wants to tap it beyond September.
"A large majority of the board members are in favor of re-activating the NAB," as a precautionary measure, one of the people said. The board is scheduled to formally approve activation next Friday, the person said.
David Lipton, first deputy managing director at the IMF, said recently in a private meeting that keeping the NAB available may be necessary in coming months given Europe's debt meltdown, people familiar with the matter said. The crisis is entering a dangerous new phase as the risk of Greece defaulting rises and Italy and Spain's sovereign debt has come under attack.
Lipton didn't specify whether the facility needed to be tapped for a specific country, the people said. The IMF declined to comment.
According to the IMF, the pool of supplementary resources are only to be activated when "needed to forestall or cope with a threat to the international monetary system." The pool can only be activated by the board after IMF managing director makes a special request.
And while America is guaranteed to foot the bill once again (with China below the US in terms of priority payments despite its much higher cost basis and implicit investment into Europe), it will do so only on a provisional basis - none of the biggest IMF contributors have enacted the formal quota increase. Which means that the US will be stuck in legal limbo when Europe pulls a Greece, collects American cash, and then finds it has no collateral to pay back with.
So far, the IMF has already allocated nearly $7 billion from the NAB. In total, the NAB can provide up to about $580 billion in supplemental resources to the IMF, but only around $331 billion is currently available for use. Based on how much cash the fund can commit to within the next year--around $394 billion--without the special kitty, the IMF would only have around $60 billion on hand.
The special resource base, funded through bilateral loans from countries such as the U.S. and China, was designed as a temporary measure. It is expected to be largely replaced by an agreement late last year by the fund's board of directors to increase quotas, the share of contributions that each member must give to fund IMF lending.
The board of governors agreed in December to roughly double quotas from around $375 billion to around $750 billion. But out of the 187 member countries, only 17 have legally accepted the increase, including Japan, the U.K. and Korea. Most of the countries with the biggest quotas, such as the U.S., China and Germany, haven't yet gone through the legal process, such as parliamentary or congressional approval, need to hand over their promised dues.
There is little we can add here that was not said during one of the two prior massive IMF intervention attepts, both of which predicted a huge global shake up within months.
Which is why we will end this post with the same words we ended the previous iteration in the IMF global rescue series:
"US taxpayers: our condolences."
With stocks markets reeling and gold closing the week near the $1,800 level, today King World News interviewed Michael Pento, CEO of Pento Portfolio Strategies. When asked where he sees things headed, Pento stated, “Chicago Fed President Charles Evans said earlier this week that the central bank should increase its target rate for inflation above the current 2% level in an effort to get the economy back on track. Imagine that, the Fed actually believes what the economy really needs is more of the inflation that brought it to its knees in the first place.”
Michael Pento continues: Read More @ KingWorldNews.com
|Date||Time (ET)||Statistic||For||Actual||Briefing Forecast||Market Expects||Prior||Revised From|
|Sep 13||8:30 AM||Export Prices ex-ag.||Aug||-||NA||NA||0.5%||-|
|Sep 13||8:30 AM||Import Prices ex-oil||Aug||-||NA||NA||0.4%||-|
|Sep 13||2:00 PM||Treasury Budget||Aug||-||-$132.0B||-$132.0B||-$90.5B||-|
|Sep 14||7:00 AM||MBA Mortgage Index||09/10||-||NA||NA||-4.9%||-|
|Sep 14||7:00 AM||MBA Mortgage Purchase Index||09/10||-||NA||NA||-4.9%||-|
|Sep 14||8:30 AM||PPI||Aug||-||-0.1%||0.0%||0.2%||-|
|Sep 14||8:30 AM||Core PPI||Aug||-||0.2%||0.2%||0.4%||-|
|Sep 14||8:30 AM||Retail Sales||Aug||-||-0.5%||0.2%||0.5%||-|
|Sep 14||8:30 AM||Retail Sales ex-auto||Aug||-||-0.2%||0.3%||0.5%||-|
|Sep 14||10:00 AM||Business Inventories||Jul||-||0.4%||0.5%||0.3%||-|
|Sep 14||10:30 AM||Crude Inventories||09/10||-||NA||NA||-3.963M||-|
|Sep 15||8:30 AM||Initial Claims||09/10||-||410K||410K||414K||-|
|Sep 15||8:30 AM||Continuing Claims||09/03||-||3700K||3700K||3717K||-|
|Sep 15||8:30 AM||CPI||Aug||-||0.2%||0.2%||0.5%||-|
|Sep 15||8:30 AM||Core CPI||Aug||-||0.2%||0.2%||0.2%||-|
|Sep 15||8:30 AM||Empire Manufacturing||Sep||-||-5.0||-4.0||-7.7||-|
|Sep 15||8:30 AM||Current Account Balance||Q2||-||-$121.0B||-$121.5B||-$119.3||-|
|Sep 15||9:15 AM||Industrial Production||Aug||-||-0.2%||0.0%||0.9%||-|
|Sep 15||9:15 AM||Capacity Utilization||Aug||-||77.0%||77.4%||77.5%||-|
|Sep 15||10:00 AM||Philadelphia Fed||Sep||-||-15.0||-10.0||-30.7||-|
|Sep 16||9:00 AM||Net Long-Term TIC Flows||Jul||-||NA||NA||$3.7B||-|
|Sep 16||9:55 AM||Mich Sentiment||Sep||-||53.0||56.3||55.7||-|