Rebel Traders – Analysis Without The Hype

Think the situation with Greece is resolved? Not according to a new poll conducted in Germany. Fifty-three percent of Germans say that Greece should be thrown out of the European Union, and 67% say that Germany should not provide monetary assistance to Greece.

Vocal opposition to aid for Greece from members of Chancellor Angela Merkel’s coalition also grew at the weekend with several senior politicians expressing skepticism, especially as Germany’s own recovery is fragile.

The Emnid poll for Bild am Sonntag newspaper showed 53 percent of Germans asked said the European Union should, if necessary, expel Greece from the euro zone.

Athens has struggled to convince investors it is tackling its debt crisis and markets are nervous about a default.

EU leaders discussed the issue last week and offered words of support but failed to outline concrete steps, further unsettling markets. Euro zone finance ministers are expected to discuss Greece again on Monday and Tuesday.[…]

[…] Merkel’s coalition partners, the pro-business Free Democrats (FDP) are even more resistant to helping Greece.

"Solving this problem cannot be about aid for Greece," FDP budget expert Otto Fricke told Welt am Sonntag. "If anything, it’s about keeping any damage away from German tax payers."

Germany suffered its sharpest post-war recession last year and the upturn in Europe’s biggest economy stalled in the fourth quarter, data showed on Friday.[…] Reuters

Regardless of what happens to Greece, there is that nasty little problem with Portugal, Spain, Ireland, and Iceland which will at some point will be next with their hands out looking for a bailout. Where does it stop?

National debt limit to be raised to $14.3 trillion. Today the Senate proposed allowing the federal government to borrow an additional $1.9 trillion to keep the lights on in Washington. The $1.9 trillion increase would be a new record.

The unpopular legislation is needed to allow the federal government to issue bonds to fund programs and prevent a first-time default on obligations. It promises to be a challenging debate for Democrats, who, as the party in power, hold the responsibility for passing the legislation. […]

[…] The measure came to the floor under rules requiring 60 votes to pass. That’s an unprecedented step that could mean that every Democrat, no matter how politically endangered, may have to vote for it next week before Brown takes office and Democrats lose their 60-vote majority.[…]

[…] A White House policy statement said the increase "is critically important to make sure that financing of federal government operations can continue without interruption and that the creditworthiness of the United States is not called into question." […] (AP)

The White House statement says it is critically important to safeguard the creditworthiness of the United States. What idiot in Washington came up with that press statement? If the United States wants to safeguard the creditworthiness they need to be reducing the debt, not increase it.

Everyday that passes I am even more amazed at just how stupid Washington thinks the American people are.

Breaking -

S&P LOWERS GREEK SOVEREIGN RATINGS ONE NOTCH TO BBB+ FROM A-;  OUTLOOK IS NEGATIVE

The downgrade reflects S&P’s opinion that the measures the Greek authorities have recently announced to reduce the high fiscal deficit are unlikely, on their own, to lead to a sustainable reduction in the public debt burden. Moreover, S&P believes that the government’s efforts to reform the public finances face domestic obstacles that would likely require sustained efforts over a number of years to overcome.

S&P expects double-digit general government deficits as a percentage of GDP this year and next to raise Greece’s government debt burden sharply, to 126% of GDP in 2010 and around 138% of GDP in 2012. In S&P’s view, the increasing debt-service burden narrows the scope for debt stabilization, particularly against the background of what it expect will be a significantly weaker near-term economic growth environment.

The CreditWatch placement reflects S&P’s view that the ratings could be further lowered if the government is unable to gain sufficient political support to implement a credible medium-term fiscal consolidation program. [...]

[...] If political considerations and social pressures hamper progress in establishing a framework for containing the debt burden, we could lower the ratings further. On the other hand, if over the next three to four months Greece successfully implements a plan that includes deficit-reducing measures or other economic reforms that could lead to a sustained improvement in the debt trajectory, the ratings could be affirmed.

As the United States continues to spend money it does not have it requires that the federal debt ceiling to be raised once again. But raising the federal debt limits is something that never goes over well with the public. With elections in 2010 what does Congress do if they don’t want to raise the debt ceiling at a time when they will be running for re-election? They do it now and do it in a big way so they don’t have to do it during the elections.

Shhhhhh, come here (whispering) – they hope you will forget all about this when they ask for your votes next year.

In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.

“We’ve incurred this debt. We have to pay our bills,” House Majority Leader Steny Hoyer told POLITICO Wednesday. And the Maryland Democrat confirmed that the anticipated increase could be as high as $1.8 trillion — nearly twice what had been assumed in last spring’s budget resolution for the 2010 fiscal year.

The leadership is betting that it’s better for the party to take its lumps now rather than risk further votes over the coming year. But the enormity of the number could create its own dynamic, much as another debt ceiling fight in 1985 gave rise to the Gramm-Rudman deficit reduction act mandating across-the-board spending cuts nearly 25 years ago.[...]

[...]Last spring, the Democratic-backed budget proposed to raise this to about $13 trillion, but given the current pace of borrowing, no one now expects that will be sufficient to get through 2010.[...] Source: Politico

A debt ceiling of nearly $14 Trillion bucks. And what did President Obama say yesterday? “We will spend our way out of this recession”. Fiscal responsibility? Not in Washington anymore, and people wonder why it is that the risk of the United States losing the prized AAA sovereign rating is hanging over the nation.

The amount of money being placed on the ‘wheel of nation defaults‘ has risen quite remarkably over the past year. Some investors are using the derivatives market to place bets that the United States, Japan, and/or the United Kingdom will default on their bonds at some future date.

It all comes down to the growing debt that the richest nations are finding themselves buried in resulting from declining tax revenues and the massive spending in bailouts. And all of that is on top of a record deficit.

According to data from Deutsche Bank Research, the total gross public debt as a percentage of GDP is expected to rise to 97.5% by 2010 (was 61.7% in 2006). In Japan the figure is 199.8% in 2010 and will be 89.3% in the United Kingdom.

The gross national sovereign credit default swap (CDS) volume outstanding (bets that the nation will default) has risen nearly 150% in just the past year. For Japan it is a rise of 114% and the United Kingdom is witnessing a rise 102% in the amount of money being placed as a bet the nation will default.

Gary Jenkins, head of fixed income research at Evolution, said: “The biggest single risk hanging over the bond markets is the rapid rise in public debt in the industrialised world.

“If we get to a point where the market thinks the levels of debt are unsustainable, then we will see an almighty sell-off in the government bond markets, with yields soaring. Governments need to take action to cut deficits and debt.”

Fitch Solutions, the data arm of the Fitch Group, said that there is almost as much uncertainty in the CDS market about the outlook for the developed economies and their bond markets as there is for emerging economies.[...] Source: FT

Those investors, hedge funds, and probably even some large banks are not confident that these rich nations will be able to control the debt. If economic conditions were truly improving then we should be seeing a dramatic decline in sovereign default risks. Instead the market is viewing the chances of default as increasing.

Once again we see another disguised bailout. Remember that Obama said the bailouts were over, instead they just disguise them.

On Nov. 6, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 into law, extending unemployment benefits by 20 weeks and renewing the first-time homebuyer tax credit until next April.

But tucked inside the law was another prize: a tax break that lets big companies offset losses incurred in 2008 and 2009 against profits booked as far back as 2004. The tax cuts will generate corporate refunds or relief worth about $33 billion, according to an administration estimate.[...]

Among the biggest beneficiaries are home builders, analysts say. Once again, at the front of the government assistance line, stand some of the very companies that contributed mightily to the credit crisis by building and financing too many homes.

This is getting to be a habit: companies that participated on the upside and are now reaping rewards from the taxpayers on the downside. The banks that underwrote so many dubious loans, for example, received government aid to get them lending again. Unfortunately, that hasn’t been the result.[...]

[...] dropping helicopter money on the home builders — the folks who massively overbuilt in community after community — seems decidedly less urgent (unless you are one of these companies, of course). Given that the supply of housing far outstrips demand, it is unlikely that these companies will use these tax breaks to hire workers[...]

[...]Securing this tax break was a top priority for home builders, lobbying records show. The Center for Responsive Politics reports that through Oct. 26 of this year, home builders paid $6 million to their lobbyists. Last year, the industry spent $8.2 million lobbying.[...] WSJ

Companies that are thought to receive the biggest windfalls are Hovnanian Enterprises, Pulte Homes, Beazer Homes, D.R. Horton, and Standard Pacific.Companies who contributed the most to over building and even created creative financing to home owners will now get a gift windfall on our backs.

This is nothing more than bailouts in disguise. Is it any wonder that the Obama administration is now concerned about the nations debt ceiling?

The Obama administration is confident Congress will raise the country’s debt limit by year end to avert a showdown similar to the one that shuttered parts of the government in 1995, administration officials said.

The White House wants an increase of at least $1 trillion to $1.5 trillion, according to a person familiar with the deliberations between lawmakers and the administration. Record budget deficits are pushing the national debt closer to the $12.1 trillion statutory limit.

The administration’s request, higher than a proposed increase already passed in the House of Representatives, would get the government through the November 2010 midterm congressional elections without needing another increase. Earlier this month, Treasury officials acknowledged they’ll need more borrowing room by year-end to avoid market disruptions.[...] Bloomberg

This evening Fitch Ratings issued a statement that the AAA sovereign rating of the United Kingdom is the most at risk to lose that sovereign rating. Fitch also stated that Japan is being watch carefully and Fitch is concerned about Japan issuance of JGB which would prompt a rating review.

The United States rating will come under additional pressure if “US fiscal position does not stabilize”

RT note: You hear that Geithner and Bernanke? You just got a shot across the bow. Get the deficit under control or go down with the ship.

Reuters is reporting tonight the following:

TOKYO, Feb 10 (Reuters) – The euro fell over 1 percent against the yen and the dollar, weighed down by a report that Russia was to request negotiations with European and other foreign banks to postpone repayment of private sector debt.[...]

[...]Russia will request negotiations with European and other foreign banks to postpone repayment on up to $400 billion of its private sector debt, the Nikkei said.

From Bloomberg:

Nikkei newspaper report(s) that Russian banks and businesses may seek to reschedule $400 billion of foreign loans deepened concern financial turmoil in Europe is worsening.[...]

[...]“The Nikkei report of rescheduling debt is driving the euro lower because European financial institutions have a bigger exposure to Russia than their counterparts in other countries,” said Takashi Kudo, Tokyo-based director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp., Japan’s largest fixed-line phone company.[...]

[...]Kazakhstan’s banks may have their ratings cut as the devaluation of the nation’s currency makes it harder for them to repay foreign debt and “substantially increases” credit risk, Moody’s Investors Service said yesterday.

The widening spreads between the interest rates that different euro-area nations must pay bond investors are “worrying developments,” according to a “speaking note” prepared for Luxembourg Finance Minister Jean-Claude Juncker and obtained by Bloomberg News.[...]