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Canadian Banks Had To Be Bailed Out Too

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ZeroHedge reported previously of Canadian Banks getting a bailout because they were in big trouble after 2008 and rounded on by the Canadian Media. It seems that David McDonald, Senior Economist of Canadian Center Of Policy Alternatives has backed ZeroHedge’s view and has written a report on the $114 billion that the top 5 banks received.

“…we have not had to put any taxpayers’ money into our financial system in Canada, nor do I anticipate that we’ll be obliged to do so.”

—Jim Flaherty, Minister of Finance

“Without wanting to appear arrogant or vain, which would be quite un-Canadian… while our system is not perfect, it has worked during this difficult time, I don’t want the government to be in the banking business in Canada.”

—Jim Flaherty, Minister of Finance

“It is true, we have the only banks in the western world that are not looking at bailouts or anything like that…and we haven’t got any TARP money.”

—Stephen Harper, Prime Minister

Don’t you just love when politicians get caught out bullshitting 😉
The Big Banks Big Secret – Canada open.pdf

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US Public Finances Worse Than Greece

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Reported in ZeroHedge is a great chart showing the US debt including all its commitments and the amazing thing is its more indebted than Greece. Opps!! Check out the full article from ZeroHedge including a further breakdown of the debt.

A rather curious phenomenon that has been observed in the popular press lately is that on those rare occasions when total global public debt is demonstrated correctly on a country by country basis, i.e., including contingent liabilities, as well as various trans-national, public-sector backed guarantees (such as EFSF backstops), and most importantly the Net Present Value of pensions and healthcare, or the cost of the welfare state expressed in current dollars, there is one country that is  systematically excluded. That would be the United States. Today we set the record straight by adding the US to the list where it rightfully belongs, and also answer the rhetorical question of why the US just so happens to be consistently omitted from such column-chart based, hair-raising classifications.

Source: ZeroHedge

Hedge Funds Line Up Against Spain

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Its a cruel world in finance. After working their way through Greece and Spain, hedge funds are now eyeing up whats on offer in Spain.

(Reuters) – Hedge funds have spotted money-making opportunities in Spain, betting that market fears over the southern European country’s deepening debt crisis have made some assets too cheap relative to other securities.

Managers have been exploiting what they see as the mispricing of credit default swaps, government and corporate bonds and stocks, after months of growing market concern that Spain might need an international bailout, using relative value trades – betting on one security versus another.

The moves echo the earlier stages of the euro zone crisis, when hedge funds – renowned as being among the nimblest of investors – bought CDS – designed to pay out in the event of default – on Greece and other weaker euro zone countries.

When the trade became more popular they quickly took profits and moved onto countries such as France and Belgium.

Spanish stocks are already suffereing.

Spain’s stocks .IBEX have tumbled 17.1 percent this year while the 10-year government bond yield has risen from less than 4.7 percent at the start of February to more than 6 percent earlier this week as investors fretted over its debt-laden banks and consumers and its shrinking economy.

A number of hedge funds bought Spanish CDS at the start of the month, say industry insiders, helping drive up the price to more than 500 basis points earlier this week from below 350 basis points in February.

..

Some funds who have long-term bets on Spanish banks recovering and who are unwilling to sell at current prices have gone short a basket of Spanish stocks as a hedge, specially weighted to counter further sharp falls in bank stocks.

“If banks are a long-term position for you you’ve maybe put on a market hedge, but because banks have higher beta you’ve overhedged,” the prime broker said.

Its not just Spain who should be worried. France has not escaped attention either.

“We all agree that Spain is facing many difficulties, but so are other neighbouring countries. I find it more interesting to buy France or Portugal CDS at current levels,” he said.

“France is interesting, as, if Mr (Francois) Hollande is elected President, he will certainly request an audit of public accounts, which will certainly not look nice.”

Source : Reuters

 

Greek Government Provides Emergency Cash For Electricity Supplier

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Greece is on the verge of the electricity network collapsing, but the government is to provide €250 million in emergency funding to keep the lights on. You could argue that it was the fault of government policies that caused the situation in the first place. The power utility PPC was used as a property tax collector but ultimately many desperate people choose not to pay and have their electricity cut off instead. Greece also has to pay over the odds to secure fuel for generating power as a result of mistrust of suppliers of Greece paying its bills.

Greece will provide 250 million euros  in emergency funds to its ailing electricity providers to prevent a California-style energy crisis, government officials said on Friday.

..

The temporary aid will shore up the accounts of main power utility PPC, allowing it to maintain operations and reimburse other suppliers of electricity and natural gas on whom the smooth functioning of the country’s energy system depends.

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Greece’s energy market has fallen into disarray due to a combination of stagnant power demand, rising fuel costs and a government decision to use PPC as a tax collection vehicle.
 
An increasing number of consumers stopped paying their electricity bills after the government started collecting a 1.7 billion euro property tax through them last year, in a desperate effort to meet its budget targets under an EU/IMF bailout.
 
Non-payments blew a hole into the accounts of PPC, which is Greece’s biggest power producer and its sole electricity retailer. PPC, which posted a record loss in the fourth quarter, is also the biggest client for upstart producers generating about 23 percent of Greece’s electricity.
Source: Athennews

Alternatives For Ireland After NO Vote In Referendum

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Prof. Terrence McDonough ( School of Business and Economics,  NUI Galway) made a presentation to the Joint Committee on European Affairs on the Intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union regarding Ireland’s many options if there was a NO vote on Fiscal Treaty Referendum.

There is a strong chance Ireland will need a 2nd bailout. As many suspect (and hasn’t been denied by Irish government), the Treaty was changed at Irish Government’s request so that Ireland would not be able to access the ESM for funding if it voted NO. This measure was brought in so the Irish Government could force the electorate to pass the referendum (they knew full well one was required). Below are options that Ireland has to deal with the eventuality of needed funds. In fact Constantin Gurdgiev said a NO vote is Ireland’s trump card.

In fact, Ireland will have a number of options in this event.  First, Ireland is small but scary. A disorderly Irish default would threaten the stability of the European banking system.  A European Central Bank intervention to restabilize the system would be considerably more expensive than a second bailout of a comparatively small country. It is highly unlikely that Europe would ignore its self-interest in order to spite the Irish electorate.  Funds would be  found outside of the ESM.

Secondly, Ireland also has the option of borrowing from the IMF rather than the European institutions.

A third possibility is to set about closing the budget deficit.  Irish tax take as a  percentage of GDP is well below the EU average.  Taxes on wealth and high incomes are  considerably underexploited.

A fourth possibility is the restructuring of debt.  The Anglo-Irish promissory note  payments alone constitute 3 billion in any given year.

A fifth under-discussed possibility is the issuance of innovative debt instruments.  It would be possible to make Irish bonds acceptable in payment of taxes in the event of any  default.  This should eliminate the risk premium which makes it difficult for Ireland to re- enter the markets at this time.

Any one of these options alone has the potential to substantially address the budget gap in the event of a second bailout and a failure to access ESM funding.  A judicious  combination of these strategies would easily finance the resulting gap with little disruption.

The sky will not fall in the event of no vote.

If a no vote will not lead to disaster, are there positive reasons to vote yes?

Many pro-treaty arguments are primarily intended to be calming and reassuring in  nature, telling the electorate that a yes vote is the safe and conservative course.  In fact such a  pact is historically unprecedented and a dangerous experiment.

 

Paul Sommerville who was on the Vincent Browne show said that there is no chance Ireland would be left without funding.

“There is absolutely no chance that the ESM will not fund us no matter what way we vote, zero chance…”.

Goto 29mins 15 secs into interview at http://www.tv3.ie/3player/show/41/47930/1/Tonight-with-Vincent-Browne

An Ireland NO Vote To Fiscal Treaty Is a Trump Card – Constantin Gurdgiev

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The campaign for Ireland’s referendum on the Fiscal treaty is to be started next week, but influential economist Constantin Gurdgiev has said that a NO vote would be a trump card for Ireland to play.

Gurdgiev had further to say on the referendum last month

In short, the Pact our Government so eagerly subscribed to is at the very best a continuation of the status quo. At its worst, Ireland and other member states of the Euro are now participants to a fiscal suicide pact, having previously signed up to a monetary straightjacket as well.

Machines Account For 84% of Stock Trades

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Most people’s confidence in the stock market has taken a hit over the last few years and more and more trades are dominated by high frequency trading (HFT). Morgan Stanley recently reported that now machines account for over 84% of the market. This accounts for the flash crashes but what would happen if the plug was pulled overnight when 84% of trades are computer programes.

Morgan Stanley has just shown (via the Financial Times) that the percentage of high frequency trading in the stock market has skyrocketed to 84%:

Trading by “real” investors is taking up the smallest share of US stock market volumes [since Morgan Stanley  started keeping track 10 years ago.]

The findings highlight how US trading activity is increasingly being fuelled by fast turnover of shares by independent firms and the market-making desks of brokerages, many using high-frequency trading engines. [actually all of the market-making desks are using it.]

***

The proportion of US trading activity represented by buy and sell orders from mutual funds, hedge funds, pensions and brokerages, referred to as “real money” or institutional investors, accounted for just 16 per cent of total market volume in the form of buying, and 13 per cent via selling in the final quarter of last year, according to analysis by Morgan Stanley’s Quantitative and Derivative Strategies group.

It’s not just the U.S. High frequency trading dominates in the U.K. as well.

 

Source: Ritholtz

http://en.wikipedia.org/wiki/High-frequency_trading

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