Monday, May 3, 2010

Oil Slicks And Bailouts

You know, this market apparently does not give a flying flip about anything but higher prices. It has taken on the persona of a banker or a Wall Street executive, profit at any cost in any manner. You have to ask yourself what the heck is this market thinking? The permabulls will argue cyclical bull market and economic recovery while all the bears can manage is a shake of the head and to show the promise of global default. I believe global default will occur and the cards have been played, thus there is not turning back.

Looking at this post from Mish - Shock and Awe, EU's $146 Billion Bet to Avoid Contagion; Market Says "So What?" you have to shake your head if you are a realist. I completely agree with Mish when he says, "The entire global banking system is insolvent. Talk of well capitalized banks at a national level is a joke. The only pertinent question is "What order do various countries implode?"" Based on the stats in this post from Mish - ECB Comes to Greece’s Aid by Waiving Collateral Rules; ECB Plays With Fire; Europe's Web of Debt.

Given the numbers in that post I would be willing to bet that Spain is next in line and not far behind. What size of a friggin dose of hopium  do global financiers have to deliver this time to get the sheeple to continue to follow the shepherd to the trough of plenty? It is simply unimaginable that Greece can actually repay the additional debt they are about to incur (not to mention the fact they could not afford their debt load in the first place). It is also insane to think that Spain will be able to repay their outstanding debts, not to mention the amounts they will possibly incur in a bailout. This is total insanity (and the market rolls on like there are no issues whatsoever).

As Denninger puts it in Greek Dog Squeeze Now Accepted At ECB, "Congratulations Europe, you have now demonstrated that your central bank is and has been issuing dog turds disguised as Euro bank notes." Or as TD at Zero Hedge puts it in ECB Will Accept Junk-Rated Greekman Brothers Debt As Collateral In Suspenion To Rating Threshold Program "In the meantime, using simple math, we wonder: if Greece, which as so many have pointed out is only 2.7% of European GDP, ended up costing 110 billion euros, does that mean that a full blown bailout of Europe will be over $5 trillion? Surely this is a bargain compared to the $20+ trillion that the rescue of the US ended up costing. Looks like a slam dunk relative default pair trade to us."  I guess in today's relative value arguments, it's just another WTF?

Looking to the other side of the globe ZH reports China Hikes RRR, Faber Sees Chinese Crash In 9-12 Months. "Earlier Marc Faber said in a Bloomberg TV interview that "China’s economy will slow and possibly “crash” within a year as declines in stock and commodity prices signal the nation’s property bubble is set to burst. The market is telling you that something is not quite right. The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months." If you are like me, you trust nothing coming out of big red. The communist state is IMHO the most full of it of any nation on the planet. Hell, that government over there is capable of even the unimaginable and since they have our treasury and economy by the cajounes, I guess they get to keep on keeping on. The endless stockpiling of raw materials, the empty malls and housing developments, the pegged Yuan, the countless number of unemployed and the rest on meager wages and on and on, it will be a disaster I think. Where China sits in the impending toppling of the global dominoes is anyone's guess, but if Faber is right they are near the front of the line.

A little closer to home, Jesse's Cafe American has this excellent post you should read GDP Deflator at a Five Decades Low While Income Inequality Is at Record Highs "I obviously do not believe that communism is the inevitable outcome, not at all. But some form of statism, of the left or right, becomes more probable. Long periods of instability and distortion often result in violent corrections." This is a different take on some of the larger issues facing the nation. Sadly the result of all this fiscal irresponsibility and greed will be irrefutable in a year or so. "Change will come if the system remains as unsustainable as it is now. And what gives me a somewhat pessimistic view is that people never seem to learn the lessons of history."

Since we all know that none of these great recessions has ended without a war, let's follow up on the tensions between the Israel (US) and Iran. Googling the subject returns endless results and speculation. Speculation is all good, but when "the delegations of the United States, Britain, France, Germany and others walked out of the assembly chamber during the Iranian president's fiery speech." I guess you have to ask, who was left other than a handful of our middle east friends? 

Finally, don't belittle this oil spill issue. Yes, it will become a horrific environmental disaster, but will it possibly become an even larger financial disaster? If the mighty Mississippi river gets shut down, you bet it will. At that point not only will the coastline be effected, but the whole central part of America. At this time, this disaster could be the one that pushes  the USA past the breaking point. That area of the country can not afford to lose anymore jobs or to have the cost of goods increase one cent. If the river should get shut down, imagine the financial impact from one end to the other. The good news is that the same person that did such a great job after the Katrina disaster, Adm. Thad W. Allen, the commandant of the Coast Guard , is heading things up for the government. I feel a lot better now! Maybe when we visit the gulf coast in a few weeks we'll actually be able to go fishing and swimming (doubt it). I'll report more when I get there for sure.

Washington's Blog has some nice posts from angles you will not hear from the MSM on the spill here Gulf Oil Spill is Cheney's Fault as Much as Obama's and here Oil Spill: Here's the Inside Scoop. Planet Yelnick also has a nice group of links related to the oil spill here

Have a great evening. I'll be ready to moan about the markets actions in the am. In the meantime, if you're jonesin to see a chart, check out where the 30m chart ended the day here. Thanks for all the views and votes this month. I was awarded free chart time for being a top vote and view receiver. Thanks for your contribution.