Monday, April 15, 2013

Which Nations Are Next? The Credit Market Answers / By Tyler Durden / 04/14/2013 19:24
The debate about the usefulness of sovereign credit default swaps (SCDS) intensified with the outbreak of sovereign debt stress in the euro area. SCDS can be used to protect investors against losses on sovereign debt arising from so-called credit events such as default or debt restructuring.
Although CDS that reference sovereign credits are only a small part of the sovereign debt market ($3 trillion notional SCDS outstanding at end-June 2012, compared with $50 trillion of total government debt outstanding at end-2011), their importance has been growing rapidly. With the growing influence of SCDS, questions have arisen about whether speculative use of SCDS contracts could be destabilizing - and this caused regulators to ban non-hedge-related protection buying.

The prohibition is based on the view that, in extreme market conditions, such short selling could push sovereign bond prices into a downward spiral, which would lead to disorderly markets and systemic risks, and hence sharply raise the issuance costs of the underlying sovereigns. The IMF’s empirical results do not support many of the negative perceptions about SCDS. In particular, spreads of both SCDS and sovereign bonds reflect economic fundamentals, and other relevant market factors, in a similar fashion. Relative to bond spreads, SCDS spreads tend to reveal new information more rapidly during periods of stress, admittedly with overshoots one way or the other. Given the current apparent ‘stability’ in many nations’ bond market spreads, the chart below suggests an alternative way of judging what the credit market thinks – the volume of protection bid – and in this case some interesting names emerge.

Do Sovereign CDS Lead or Lag – the answer is both…
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American housing market: Key indicators of the 2013 real estate market / By Dr. Housing Bubble / April 13th, 2013
The US housing market is massive.  You would expect this from a nation of 315,000,000+ people spanning over 50 states.  So it is important to understand the various dynamics occurring over many states.  In regards to single family home buyers, in most of the United States home prices are very reasonable.  This is hard for some in the coastal regions to digest or even comprehend.  When you look at certain markets in high priced areas, many people have a hard time penciling out the financial details.  Yet with such a large number of investors purchasing with cash, a new market has been created.  But if we are to take the US market and make a wide-eyed observation, we will find some good, bad, and ugly aspects of the current housing market.  Whereas in 2008 through 2010, the market was dominated by the bad, ugly, and grotesque.  What can we say about the current US housing market?
The Good
One good aspect of the market is overall, affordability is back in line to historical trends:
housing affordable
Price-to-rent ratios are back in line in many parts of the country.  In fact, this is the big push from the all cash buyers in places like Arizona, Nevada, and Florida.  The one thing I would be cautious about is in places like Arizona, you have over 50 percent of buyers coming from the investment bunch and when you look at rental prices, they are weak and vacancies are very common.  But with such a high number of investors buying, you basically have investors selling to other investors thinking they will produce higher yields.  However, for non-investors in most US markets prices are now affordable thanks to the big drop in prices but also the Fed’s tantalizingly low interest rates.  Sure, the Fed’s balance sheet is well over $3 trillion but that is an issue for another day.

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GOLD: Tragedy, Panic & The Greatest Short Squeeze In History

from KingWorldNews:
Today Egon von Greyerz told King World News that within months, as more fires start to burn in the financial system, the world will see a massive and stunning coordinated global rescue package and one of the greatest short squeezes in history. Greyerz also said all of the major countries will participate. Below is what Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this tremendous interview.

Greyerz: “Eric, this is a time when investors should really be concerned, and not because of the current correction in the gold price. What we are facing is an unprecedented situation with most sovereign states being bankrupt, and the banking system also being bankrupt.

But at the same time stock markets are at a high, and so many investors are happy. They are being led into having a false sense of security because they don’t understand that it’s the printed money that’s creating another asset bubble in the stock market.”
Egon von Greyerz continues @

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FEI Company supplies scientific instruments for nanoscale applications and solutions for industry and science. Its products include transmission electron microscopes and scanning electron microscopes (SEMs); DualBeam systems, which include a SEM and focused ion beam system (FIB) on a single platform; stand-alone FIBs; and optical microscopes. The company offers products used in laboratories to enhance new product development and increase yields by enabling 3D wafer metrology, defect analysis, root cause failure analysis, and circuit edit for modifying device functionality in the semiconductor integrated circuit manufacturing and related industries, such as manufacturers of data storage equipment and other technologies. It also provides solutions for materials science market that enable scientific discovery and advancement for researchers and help manufacturers develop, analyze, and produce advanced products; and its products are used in mining for automated mineralogy, as well as in root cause failure analysis and quality control applications across a range of industries.
To review FEI's stock, please take a look at the 1-year chart of FEIC (FEI Company) below with my added notations:
1-year chart of FEIC (FEI Company) FEIF had stalled around $50 for about (5) months towards the end of last year. In January, the stock broke higher and rallied to where it currently sits. For the last (3) months the stock has been hitting resistance at $65 (red). A break through that resistance would be a new 52-week high for the stock and should mean higher prices moving forward.
The Tale of the Tape: FEIC has a 52-week high resistance at $65. A long trade could be entered on a break through that level with a stop placed under it.

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100 Years Old And Still Killing Us: America Was Much Better Off Before The Income Tax

100 Years Old And Still Killing Us / By Michael Snyder 

Did you know that the greatest period of economic growth in American history was during a time when there was absolutely no federal income tax?  Between the end of the Civil War and 1913, there was an explosion of economic activity in the United States unlike anything ever seen before or since.  Unfortunately, a federal income tax was instituted in 1913, and this year it turned 100 years old.  But there was no fanfare, was there?  There was no celebration because the federal income tax is universally hated.  Sadly, most Americans just assume that there is no other option to an income tax.  Most Americans just assume that it has always been with us and that it will always be with us.  This year, the American people will shell out approximately $4.22 trillion in state and federal income taxes.  That amount is equivalent to approximately 29.4 percent of all income that Americans will bring in this year, and that does not even take into account the dozens of other taxes that Americans pay each year.  At this point, the U.S. tax code is about 13 miles long, and those that are honest and pay their taxes every year are being absolutely shredded by this system.  But wouldn’t the federal government go broke if we didn’t have a federal income tax?  No, actually the truth is that the federal government did just fine before there was an income tax.  In fact, the U.S. national debt has gotten more than 5000 times larger since the federal income tax and the Federal Reserve were created by Congress back in 1913.  As I have written about previously, the Federal Reserve system was actually designed to trap the United States in a debt spiral from which it could never possibly escape, and the federal income tax was needed to greatly expand the size of the federal government and to soak the American people of the funds necessary to service that debt.  But it doesn’t have to be this way.  America was once much better off before the income tax and the Federal Reserve were created, and we could easily go to such a system again.
What we desperately need to do is to teach the American people a little history lesson.  The truth is that the greatest period of economic growth in U.S. history was between the Civil War and 1913 when there was no federal income tax at all.  The following is from Wikipedia
The Gilded Age saw the greatest period of economic growth in American history. After the short-lived panic of 1873, the economy recovered with the advent of hard money policies and industrialization. From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita, despite the panic of 1873.  The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled.
Sadly, most Americans cannot even conceive of an economy like that.  Most Americans cannot even imagine having a nation without a massively bloated federal government and without an unelected central bank centrally planning our financial system.
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Former Portuguese Prime Minister Says “Portugal Cannot Pay Its Debts”, Calls for “Argentine-Style Default” / By Mike “Mish” Shedlock / 

It’s rare to hear any bit of common sense from political leaders, but today I have a sterling example. M├írio Soares, Prime Minister of Portugal from 1976-1978 and 1983-1985, and the 17th President of Portugal from 1986 to 1996 speaks the truth.
Soares says “Portugal Cannot Pay Its Debts“. He calls for an “Argentine-Style Default”, and states “The desire to please chancellor Merkel is ruining the country.”
 ”Portugal can not pay what you owe and however much they impoverish people, however much they steal the money to people who have it, not be able to pay what you owe. And when you cannot, the only solution is not pay. ” The president of Portugal, Mario Soares socialist argues that it is impossible for Portugal to return all of its foreign debt. So has asked to make a Argentine-style default to avoid economic collapse.
“Look at Argentina, was in crisis when he said we do not pay. ‘And something happened?” Asks Soares. “No, nothing happened,” he says in an interview with Antena 1, which airs tonight and that includes the Business Journal.
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US Weekly Economic Calendar

time (et) report period Actual CONSENSUS
MONDAY, April 15
8:30 a.m. Empire State index April   7.8  9.2
10 a.m. NAHB home builders index April   46 44
TUESDAY, April 16
8:30 a.m. Consumer price index March   0.0% 0.7%
8:30 a.m. Core CPI March   0.2% 0.2%
8:30 a.m. Housing starts March   935,000 917,000
9:15 a.m. Industrial production March   0.2% 0.8%
2 pm Beige Book        
8:30 a.m. Weekly jobless claims 4/13
346,000 346,000
10 a.m. Philly Fed April   4.5 2
10 a.m. Leading indicators March   0.2% 0.8%
FRIDAY, April 19
  None scheduled  
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