Global insights audio-slides-07-18-11

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  • EBA - the European Banking Authority preparing the 2nd round of EU stress tests announced Friday after the markets closed.
  • Before talk about the EU Banking Stress Tests we need to put them into a bigger context. I want to talk about what I see to be the stealth implosion of the Yen Carry Trade that no one is talking about publically. WE SAID ON GLOBAL INSIGHTS IN MARCH THAT EXACTLY THIS WOULD HAPPEN!79.085 this AMThe G5 have failed to stop the Yen from rising which is forcing leveraged carry unwind.Breaking critical support is a technical risk trigger.
  • Before talk about the EU Banking Stress Tests we need to put them into a bigger context. I want to talk about what I see to be the stealth implosion of the Yen Carry Trade that no one is talking about publically. WE SAID ON GLOBAL INSIGHTS IN MARCH THAT EXACTLY THIS WOULD HAPPEN!79.085 this AMThe G5 have failed to stop the Yen from rising which is forcing leveraged carry unwind.Breaking critical support is a technical risk trigger.
  • After months of speculation, guesswork, front-running, last-ditch efforts to raise cash, gnashing of teeth around the exclusion of various types of capital, poltical fits (Helaba, although potentially with some justification), and a fair degree of protectiveness-cum-thinly-veiled-animosity towards the European Banking Authority (EBA) by some of the national regulatory bodies, the results of the EU-wide stress tests are out.Generally analysts derided the latest round of industry stress tests as inadequate. Analysts and investors said the criteria used by the EBA were overly optimistic and failed to capture the severity of the current sovereign debt crisis sweeping across the eurozone. The EBA has already faced criticism for being too soft, particularly because it did not make any allowance for a sovereign debt default – as is now widely expected in Greece. While Greek bonds are trading at about half their face value in the market, the EBA only required banks to assume a 15pc loss on their holdings. “If the European Union could monetize the value of the credibility it has destroyed it would be the richest organization on earth”The accusations follow last year’s widely-derided tests by the Committee of European Banking Supervisors. Seven banks failed the last set, but all the Irish banks passed. A few months later, Ireland had to nationalize its banking industry as its lenders faced insolvency. The EBA revealed it allowed a large degree of discretion for recapitalisation plans. Although the test was applied to 2010 results, any capital raised between January and April this year was admissible, bolstering balance sheets by £50bn.
  • IMF Warning on Europe's BanksEuropean Banks remain insufficiently funded,Stress Tests assume insufficient loss of value on government bonds,Capitalization of banks in Europe remains relatively lowEuropean B anks are lagging behind in securing funding for 2011,G20 progress on strengthening and repairing the financial sector has been too slow.
  • The ECB has the unenviable task of trying to bridge the North-South gap with a single interest policy.  The European Central Bank has raised interest rates a quarter point to 1.5pc to curb inflation and signaled more to come, despite faltering growth in southern Europe and acute stress in peripheral bond markets. Interest rates were raised to 1.5pc by the European Central Bank  Germany's industrial machine is powering ahead on exports to China, Russia, and the Mid-East.  SPANISH REAL ESTATE Spain seems trapped in near-depression, with unemployment at 21pc.  The ECB's monetary tightening has asymmetric effects, with greater impact on heavily-indebted and rate-sensitive economies in Spain and Ireland than on core Europe.  Over 90pc of Spanish mortgages are priced off the floating 1-year Euribor rate, which has risen 66 basis points to 2.19pc this year. Only 20pc of German loans are on floating rates.  Rate rises are ratcheting up the pressure as each month a fresh cohort of Spanish households sees a sharp upward adjustment in their mortgage payments. There is a hangover of 680,000 unsold properties on the market, according to government figures.  "There is no sign of recovery. House sales are falling again at double-digit rates and if this spills over into 2012, the pressure on the Spanish banking system could become unbearable,"Raj Badiani from IHS Global InsightWhen Spanish mortgage debtors cannot make their payments, Spanish law denies them two ways out that are common elsewhere: they cannot simply hand the keys back to the bank and walk away, and they cannot discharge their debt in bankruptcy. They remain personally liable for the full amount of the loan after foreclosure, and when penalty and interest charges and tens of thousands of dollars in court fees are counted, they can end up on the street facing a mountain of debt. 
  • CREDIT AGENCIES Moody's warned it may downgrade US credit rating S&P placed US debt on downgrade review S&P AlsoWarned That There Is A 50% Chance Of U.S. Credit Rating Downgrade In The Next 90 Days Obama was reported to have stormed out of the meetings saying “Eric, don't call my bluff. 'I'm going to the American people with this” – He called an immediate press conference for Friday AM - > ?Reading between the lines from Moody’s statement regarding the ratings review suggests that a downgrade can be avoided by accomplishing two things, both near-term goals: 1) raising the debt ceiling and 2) resolving the process going forward to make the raising of the debt ceiling easier, eliminating the possibility of another showdown in the future that could threaten a technical default. Senator Mitch McConnell’s proposal from earlier in the week, which would allow the President the authority to raise the debt ceiling without Congressional approval, seems like it would ideally suit these concerns. From the point of view of reducing the long-term budget deficit, the proposal is certainly suboptimal as it is dismal for it would do nothing but raise the debt ceiling. In that sense it embraces failure US BANKS: While, most of the moves were attributed to Debt Ceiling negotiations and EU banking contagion events, ongoing concerns about: Litigation risk and Regulatory changes the banks face helped formulate the tapestry of investor concern for this sector as well.S&P Threatens Broad Downgrade of Finance Companies S&P warns it may downgrade Fannie, Freddie AP
  • N- BANK OF AMERICA - Potential Problem warning => Friday 07-15-11BofA Again Faces Capital Conundrum –BofA recently announced an $8.5 billion mortgage settlement, a $5.5 billion boost to reserves and that it could face an estimated $5 billion in additional mortgage charges. BofA also faces a hit—some analysts say up to $7 billion—from an expected settlement between banks and the 50 state attorneys general over mortgage-servicing practices.
  • Global insights audio-slides-07-18-11

    1. 1. This chart is from the discussion recordedJuly 18th, 2011<br />EU BANKING STRESS TESTS<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    2. 2. This chart is from the discussion recordedJuly 18th, 2011<br />WATCH THE YEN CARRY TRADE – Liquidity Trap<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    3. 3. This chart is from the discussion recordedJuly 18th, 2011<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    4. 4. This chart is from the discussion recordedJuly 18th, 2011<br />EU BANKING STRESS TESTS - Results<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    5. 5. This chart is from the discussion recordedJuly 18th, 2011<br />POST STRESS TESTS – This AM<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    6. 6. This chart is from the discussion recordedJuly 18th, 2011<br />EU BANKING STRESS TESTS<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    7. 7. This chart is from the discussion recordedJuly 18th, 2011<br />EU BANKING STRESS TESTS<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    8. 8. This chart is from the discussion recordedJuly 18th, 2011<br />EU BANKING STRESS TESTS<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    9. 9. This chart is from the discussion recordedJuly 18th, 2011<br />EU BANKING STRESS TESTS<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    10. 10. This chart is from the discussion recordedJuly 18th, 2011<br />EU BANKING STRESS TESTS<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />
    11. 11. This chart is from the discussion recordedJuly 18th, 2011<br />Guess who the wolf is??<br />Listen to the original recording for this slide at either www.TraderView.com/GlobalInsights or www.GordonTLong.com/GlobalInsights<br />

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