10 Year European Government Bonds 2010-2011 + Bloomberg Previews the Eurozone Summit

As the Eurozone summit begins - The yields on 10year Government bonds for the 'PIIGS' nations continue to widen against the benchmark German 10 year bund.  Worryingly for the Eurozone on the day of the summit, most of the 10year bonds have widened to record levels. This further emphases the urgency investors have put upon the need for a rapid solution to the deepening crisis.

Source: http://www.fxstreet.com/

"Inside Track" with Erik Schatzker on Bloomberg TV

TARP by the Numbers - Courtesy of the US Treasury

Source: http://lolfed.com/2008/09/24/its-a-tarp-troubled-asset-recovery-program-o-rly/

TARP: By the Numbers http://www.sigtarp.gov/

By: Steve Adamske 3/11/2011

You may have seen a lot of news stories recently about Treasury’s efforts to wind down TARP and exit its investments in private companies. And most of those stories include a sea of numbers about the program: How much it’s expected to cost. How much money has gone out the door. How much has been repaid. And many others.

If you don’t follow TARP on a day-to-day basis, it might be hard to keep all of them in perspective. That’s why we put together the following chart that boils down some of the key facts about TARP, by the numbers.

 

TARP: BY THE NUMBERS

 

70 Percent:                 Percentage of TARP disbursements ($411 billion) taxpayers have recovered ($287 billion) to date, including repayments, dividends, warrant sales, and other income.

 

$48 Billion:                 Estimated lifetime cost of TARP (President’s FY2012 Budget), assuming all housing funds are spent

 

$28 Billion:                 Estimated cost when also including AIG common stock held outside of

TARP (President’s FY2012 Budget)

 

8.5 Million:                 Additional jobs that would have been lost without the federal

government’s response to the financial crisis, including TARP and the American Reinvestment and Recovery Act – according to a study by economists Marc Zandi and Alan Blinder (How the Great Recession Was Brought to an End, July 2010)      

 

88,600:                        Number of jobs the auto industry has added since GM and Chrysler emerged from bankruptcy – the strongest job growth in that industry in more than a decade.

 

$13.5 Billion:              Taxpayer proceeds from the November 2010 GM IPO, which cut Treasury’s common stock stake in that company nearly in half

 

$28.72:                        Break-even price for Treasury on its AIG common stock stake

 

$245 Billion:               Amount that TARP has invested in banks           

 

$243 Billion:               Repayments and other income from banks to date

 

$20 Billion:                 Estimated lifetime profit expected on TARP investments in banks

 

$12.3 Billion:              Cumulative profit to date on Treasury’s TARP investment in Citigroup

 

607,607:                      Number of homeowners that have received permanent mortgage modifications through TARP’s Home Affordable Modification Program (HAMP)

                                                            

27,957:                        New permanent HAMP modifications in January 2011

 

$475 Billion:               Maximum authorized TARP disbursements, which was reduced from $700 billion under the Dodd-Frank Wall Street Reform and Consumer Protection Act

 

Steve Adamske is Deputy Assistant Secretary of the Treasury for Public Affairs.

Posted in:  TARP

Japanese Earthquake - Economic and Financial Impact

Source: 

http://blogs.ft.com/rachmanblog/2011/03/japan-earthquake/

"The Pulse" with Maryam Nemazee on Bloomberg TV

According to renowned economist Nouriel Roubini, this earthquake could not have come at a worse time for the Japanese economy. (see last minute of the video above)

Already Japanese debt to GDP is by far the highest in the developed world. Indications are that the aftermath recovery could send this level even higher, potential to 210% according to FXSteet.com

The chart below shows already how Japanese companies have been affected by this earthquake and the resulting Tsunami

Production and businesses disrupted
Company	Status
Sony	Production halted at six plants
Toyota Motors	Three group factories halted
Canon	No impact reported
Nippon Telegraph & Telephone	Restricted calls to some areas including Tokyo
Nissan Motors	Halted production at four plants, two injuries
Honda Motors	Halted two plants, one employee killed, about 30 injured
Panasonic	Assessing damage, several workers with minor injuries
Fuji Heavy Industries	Five plants halted
Sapporo	Damage at Sendai and Chiba plants
East Japan Railway	Halted train services in Tokyo area
NTT DoCoMo	Mobile-phone service disruptions

 Source: http://www.bbc.co.uk/news/business-12709755

Insurers have also been hit hard today in European stock market trading. This adds to Insurers woes after a year when total payout from natural disasters have totalled $36bn.

The widening of CDS spreads in major European re-insurers the major concerns surrounding the potential size of their exposure to the Japanese earthquake and tsunami.

Source: http://www.businessinsider.com/cds-reinsurers-japan-earthquake-2011-3

  
For a detailed breakdown of the impact on the share prices of the re-insurers click the link below from the FT (11/03/2011)




http://www.ft.com/cms/s/0/0da4c73a-4bc9-11e0-9705-00144feab49a.html#axzz1GKj7aEqt

Source: http://www.thisislondon.co.uk/standard-business/article-23931215-insurers-fear-hit-from-japan-earthquake.do

"Strategy Session" with Becky Quick on CNBC

According to Sean Egan of Egan-Jones Rating Co. says this disaster will make it increasingly difficult for Japan to deal with its sky-rocketing public debt levels, which he says is actually as high as 240%.

The Wall Street Journal gives a preview of the week ahead in the Asian market for next week in the aftermath of the devastating earthquake.

The Crown for the Country Without a Government for the Longest Goes To......View Video to find out

Fareed Zakaria - GPS (Global Public Square) on CNN

If you think America’s politics are divided, take a look at Belgium.

The Northern European country has been without a government for 270 days and counting, as political instability and a separatist movement continue to divide the small nation.

So how have the Belgians been handling their political crisis which seems to have no end in sight?

Parties, booze and strippers – naturally.

Check out the video.

Significant Two Weeks for the Eurozone Begins Tomorrow

Angela Merkel the German Chancellor has laid down some key concessions Greece and Ireland must adopt in order for Germany to consider easing the bailout terms i.e. interest payments on loans lent to them.

Today it has emerged that two concessions Merkel favours are that Ireland must increase its corporate tax rate, which is the lowest in Eurozone (see chart below). Also Greece is not exempt, Merkel has said that it must begin to seriously consider selling state owned assets in order to begin raising its own capital. Report from France 24 indicated that the Greek government was seeking an advisor in order to pen a list of assets that the government should consider selling.

The pressure on Ireland to increase its corporate tax rate is all part of grander plan for a standardisation of corporation tax, retirement age and caps on government spending. This is part of the Franco-German Pact for Competitiveness . However due to Ireland's high dependence on corporation tax for government revenue, it is  unlikely to move on the issue.

Even these concession are no guarantee that the bailout terms will be loosened. Even closely allied Austria and the Netherlands, not to mention Merkel's fellow party member are against it. There is very little optimism surrounding this summit due to mounting divisions and political point scoring.

However this summit will take place on the backdrop of Moody's downgrade of Spain today (hopefully this will spur the EU into action).  This was on concerns that the government has not set aside enough money to bail out its financial sector. Furthermore the Spanish Central Bank released figures today, for how under-capitalised the Spanish financial sector is. The Bank of Spain said that its banks were under-capitalised to tune of 15bn euro's, but this was well inside of estimates of 20bn euro's. This has led analyst and investors to speculate about the validity of these figures.

Strategist are already sceptical about what the EU summit, set to begin tomorrow can achieve, saying that it is likely to tip Portugal over the edge this would leave them in situation where they would require a bailout. This would put further downward pressure on the Euro which has been rising steadily over the last couple of months against its major counterparts (see chart below).

If these 13 days result in little more than a minor agreement on a small expansion of the region's bailout fund and a few "pact for competitiveness" style reforms, bond markets will react negatively and the pressure on Europe will again be very real.

Read more: http://www.businessinsider.com/euro-area-summit-2011-3#ixzz1GF80nBNl

China / US Policy Head in Opposite Directions - As Oil Soars to $104

As the White House Chief of Staff Bill Daley has indicated MSNBCs Meet the Press that President Obama is considering tapping in the US Strategic Petroleum Reserves, China is taking a different path.

http://www.marketwatch.com/story/us-may-consider-tapping-oil-reserve-2011-03-06

The US currently has just over 750mm barrels of oil in its SPR http://www.spr.doe.gov/dir/dir.html. Given that the US consumes approximately 21mm daily then this supply would last only 34 days. However given the fact the US imports around 12mm per day then the SPR could last 54 days.

Contrast this to a recent report published in the FT, which shows that China is taking a very different path to secure its future oil requirements (as the diagram below indicates)

Upon completion of this program in 2020, China is expected to have 500mm barrels in reserve, which is the equivalent to three months supply. This would be the world seconds largest oil reserves.

Additionally the Philippines announced on Wednesday last week that it would require oil companies to hold 15 days of oil reserves, this in response to the escalating crisis in the MENA.

This present a grave threat to the US and its position within the global economy. The reason for this is because as the US SPR decline their ability to influence future OPEC meetings declines also, consequently Asia's ability to dictate terms to OPEC increases [potentially].

Wadah Khanfar - Al-Jazeera's Director-General on a "Historic Moment in the Arab World

Thoughts/Comments welcome