The Only Surprising Thing About The Collapse Of Europe


I’m not surprised that the halo effect of political changes in Italy and Greece had a very short half-life. Why would it? Nothing has changed.

I’m not surprised that the contagion has worked its way to France. After all, the ECB intervention policy insures that France becomes a target. “If you can't sell Italy, sell France”, is the market’s response.

But I’m absolutely blown out by the pace of things. France’s bonds are being devalued on a daily basis. Italy has been functionally shut out of the new issue market. Market liquidity has dried up. What were once routine transactions are now difficult to price. E100mm bond transactions for France and Italy were normal; today E25mm is a market amount.

What is becoming scarily clear is that there is no more announcements coming that are going to make a difference. All the news is out on expanding the EFSF. The only thing that could reverse this tide is an agreement to “federalize” the debts of Europe. This would leave Germany (massively) on the hook. There is zero chance of this happening.

The central question that the market will ask and answer in the next few weeks is whether France can withstand the onslaught. The ECB will not intervene in the French market. Will debt capital continue to move out of France? Two charts. One says France is probably okay. The other says we are headed for a hard landing.

These numbers (CIA) are a year old but they tell the story. Italy had $2.1T of public sector debt (119% of GDP) while France had only $1.8T of debt (82% of GDP). Looking at this it’s understandable why Italy is in trouble. But it does not explain why France should have a problem. This chart is the reason that there could be an issue:


On this basis France has double the debt of Italy. I call this the Money Center Bank Syndrome. The banks have debt outside their borders (they have assets too). This debt is getting sucked into the French government bond market as world investors trim exposure to the country (“If you can’t reduce exposure to the banks, sell government bonds”).

Italy and France have an average debt maturity of ~7 years. There is a total of $3T. The market value of this stock of debt has fallen by about $200b since October 1st. This is not a loss that will be recorded on anyone’s books (except the likes of MFG) but it does cause a strain on funding as the repo value has fallen.

Remember that all night conference by the EU deciders on October 26th? Central to that meeting was the commitment that the EU banks would undergo a recapitalization of E106b ($150b) by June 30 2012. The EU banks have had their assets impaired by at least that amount in just the past two months.

 



That all night meeting was just a joke! Anyone who trusts these people are making a mistake.

The Merkozy’s of Europe will be making “calming” statements over the next few days. We are dangerously close to a death spiral, and they know it. But they have nothing on their shelf but words. I don’t think this will prove to be enough.

This post originally appeared on My Take On Financial Events.

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Here's Rick Perry's Audacious Plan To Completely Reinvent The U.S. Government


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2012 presidential hopeful Rick Perry will try to reclaim some of the magic of his early campaign days today with a dramatic call to completely overhaul all three branches of the federal government.

Perry's proposal, based largely on ideas from his 2010 treatise Fed Up!, is pretty radical — it would completely change the legislative and judiciary branches, and even involves changing the U.S. Constitution.

Here are the highlights:

  • Cut Congressional pay in half and make Congress a part-time job. If they don't pass a balanced budget by 2020, Perry would cut Congressional pay in half again 
  • Bring spending down to 18% GDP
  • Criminalize "insider trading" by members of Congress
  • Pass legislation requiring a two-thirds Congressional majority to pass any tax increases
  • End life-time appointments of federal judges
  • Pass a Constitutional amendment setting 18-year terms for Supreme Court justices
  • Issue a moratorium on pending federal regulations
  • Eliminate the Department of Commerce, Department of Education, and Department of Energy 
  • Overhaul the Department of Homeland Security and privatize airport security 
  • Downsize the Environmental Protection Agency "so it no longer torments job creators or gives an official stamp to phony science."
  • Privatize Fannie Mae and Freddie Mac
  • And of course, end federal funding of Planned Parenthood

Overall, this is a lot of federal government for one guy to hate. The proposal is a gutsy move that looks a lot like a Hail Mary pass by the struggling Perry campaign, which is looking for a second wind going into the homestretch before the 2012 primaries.

Perry's will announce the plan in Iowa this morning with a fiery anti-Washington speech that literally brands the Texas Governor as "The Washington Outsider." The speech is heavy on the limited-government message and religious rhetoric, an indication that Perry is trying to win back Iowa's Tea Partiers and conservative Christians before the state's January 3 caucuses. Perry is polling at just 7% in Iowa, according to the most recent numbers.

DON'T MISS: 11 Radical Arguments From Rick Perry's Manifesto

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10 Things You Need To Know This Morning (AAPL, YHOO, AMZN, GOOG)

DEVELOPING: POLICE ARE CLEARING OUT OCCUPY WALL STREET


Occupy Wall StreetORIGINAL POST: According to NYT, police have begun clearing out protesters from Occupy Wall Street.

According to tweets, there are several cops in riot gear

Details remain scarce.

This follows similar action in Denver, Oakland, and Portland in recent days.

We're heading down there now to get more information.

UPDATE 2:53 AM: We've now been down to Occupy Wall Street, and can confirm a massive operation to clear out Zuccotti Park.

Police are in riot gear, and have sealed off several blocks all around the park. They are also ripping down tarps and arresting protesters who won't leave.

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A Damning Look At What Austerity Is Doing To Unemployment In The UK


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Those who think that austerity is the only way to deal with national debts and deficits should take a close look at the employment picture in austerity Britain.

Preliminary data for October show a 900 percent increase in government funded apprenticeships being taken up by people over 60. The apprentice scheme was set up to give youth a chance to get on the job ladder.

The youth unemployment rate is expected to crack 1 million when figures are released on Wednesday. But the fact that almost 4,000 over-60's have taken up these jobs tells you that the jobs crisis cuts across all age ranges and people are getting desperate.

Adding to the bleak picture: a survey of 1000 employers by the Chartered Institute of Personnel and Development was published in Britain today and it makes for pretty difficult reading for those who thought that the private sector would step in and pick up the slack as government workers lose their jobs in the austerity drive.

The key point in the CIPD report, "The figures point to a slow, painful contraction in the jobs market. Many firms appear to be locked in 'wait and see' mode,"

Waiting and seeing is a painful attitude with unemployment at a 17 year high and expected to rise.

At least part of Britain's employment woes are due to the contraction going on in its biggest trading partner: the euro zone. Today Chancellor Angela Merkel told a conference of her Christian Democratic Union that Europe is in "perhaps the toughest hour since World War II."

She continued, "The challenge of our generation is to finish what we started in Europe, and that is to bring about, step by step, a political union."

Hint to the Chancellor's speech writers ... promise political union will mean job creation. That is all anyone is concerned with in Europe these days.

This post originally appeared at The Christian Science Monitor.

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BofA's Top Equity Strategist Unveils Her S&P 500 Target For 2012


Savita Subramanian

In a note to clients today, Savita Subramanian, Bank of America's Head of U.S. Equity Strategy, outlined the firm's 2012 outlook for the S&P 500.

We forecast the S&P 500 will end 2012 near the highs of its two year trading range, with a year-end target of 1350. Continued macro uncertainty combined with healthy but slowing earnings growth lead us to prefer investments with higher quality, secular growth, and sustainable and growing yield.

Subramanian has been BofA's top equity strategist for just two months.  Her predecessor was David Bianco.

Here are the key points from equity strategy team's thesis:

  • Good micro, bad macro: we expect healthy earnings growth but a backdrop of continued uncertainty and heightened risk aversion
  • 2012 year-end target = 1350
  • Multifaceted approach to target model based on fundamentals, sentiment & technicals
  • 2012 economic outlook: European recession but slow global and US growth
  • We assume an elevated equity risk premium of 650bp, which is 50%+ higher vs. history
  • EPS Outlook: $98.25 for 2011 (15% y/y) and $104.50 for 2012 (6% y/y)
  • S&P 500 European exposure = 18% of profits (highest for Tech)
  • S&P 500 govt. exposure 8-10% of revenues (highest for Health Care & Defense)

 

Don't Miss: A Brilliant Overview Of Where The Markets And The Economy Are Right Now

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Letting Go: The Right Way to Fire Someone

Freddie Krueger, step aside. Dracula? Please. Many business owners and leaders have to face something that?s much scarier than any Halloween horror story: firing someone. In fact, according to an article in The Wall Street Journal, discharging a team member is one of the top three causes of stress for business leaders.

Letting someone go is not easy or comfortable, and it should never be your first option when dealing with an employee that?s not up to par. You want your team members to soar. If there is a problem, give them every opportunity to fix it.

As Dave teaches in EntreLeadership Master Series and in his new book, EntreLeadership, ?you owe your team members lots of clear, even blunt, communication about what is required to change their behavior.? Their course corrections begin with a verbal reprimand that should:

  • Be short. It?s not War and Peace. Get to the facts and get the reprimand over with.
  • Be uncomfortable for everyone. Neither you nor the team member should enjoy this process.
  • Attack the problem. Ken Blanchard, author of The One Minute Manager recommends the ?Reprimand Sandwich,? and it?s great advice. Begin with praise, then talk about the problem, then top it off with some more praise.
  • Be private. Want to lose a team member?s loyalty forever? Reprimand them in front of someone else.
  • Be gentle. Kind and clear are the key words here. Anything else and you?ve lost the teachable moment.

Sometimes, unfortunately, some staffers simply need to hit the road, and you must have the courage to pull the trigger when it?s time for them to leave.

Like hiring, there are components to firing someone. They include:

  1. Taking your time.
    Discharging someone should never be an easy decision, and the decision should NEVER be made in anger. A team member should have already gone through the reprimand process and clearly understand what they are being fired for.

    However, there are two exceptions to this rule. If there is an integrity issue or they are caught stealing, then say goodbye that very day. That?s a fundamental moral breakdown that you?ll never be able to course-correct. If the team member is still in a probationary period and the behavior continues, the same holds true. They should be quickly let go.

  2. Following the Golden Rule
    No matter how bad a job the person did or what they have said, always remember you are messing with their life. They are losing their job and deserve to be treated with dignity, compassion and generosity.

    The easiest way to accomplish this is by following the Golden Rule: ?Do to others as you would have them do to you.? (Luke 6:31). Put yourself in their shoes, and then act the way you?d want to be treated if you were being fired.

Being in charge is tough, especially when it comes to letting a member of your team go. It?s a difficult decision. But if it?s done correctly with a lot of forethought, you?ll earn the admiration and respect of your team and be well on your way to becoming a great EntreLeader.

No leader should lead without these principles. It?s what your team members need to see in you, and what you want to see in them. Learn more about the EntreLeadership Live Events, and put Dave's 20 years of proven business principles to work for you.

In 20 years, Dave has grown his company to a national winning brand with more than 300 team members who have impacted millions of lives. His company has been named one of the ?Best Places to Work in Nashville? four years in a row. EntreLeadership is how he?s done it and how you can do it too. Get your copy of the new book now!

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Q&A: Do you think Barack Hussein Obama is racist?

Question by RLP: Do you think Barack Hussein Obama is racist? A former Justice Department attorney who quit his job to protest the Obama administration’s handling of the New Black Panther Party voter intimidation case is accusing Attorney General Eric Holder of dropping the charges for racially motivated reasons. Adams says the dismissal is a [...]

Source: http://www.legaldebthelponline.com/2011/11/13/qa-do-you-think-barack-hussein-obama-is-racist/

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George Clooney Considered Suicide On The Set Of 'Syriana'


George Clooney

Usually, George Clooney garners attention for the latest lady on his arm, but his latest headline-grabbing confession is a lot more serious.

In a cover story for Rolling Stone, Clooney reveals he was suicidal during the filming of "Syriana" in 2005.

Clooney was hurt in a stunt-gone-bad on the film's set -- his inured spine was so painful, he considered ending his own life.

As Huffington Post quotes,

"I was at a point where I thought, 'I can't exist like this. I can't actually live...I was lying in a hospital bed with an IV in my arm, unable to move, having these headaches where it feels like you're having a stroke, and for a short three-week period, I started to think, 'I may have to do something drastic about this.'"

The actor even went as far as to consider how he would do it: "You start to think in terms of, you don't want to leave a mess, so go in the garage, go in the car, start the engine."

Eventually, Clooney underwent surgery to treat the injury and went on to win an Academy Award for his role in the movie.

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The Jets Got Clobbered Last Night, And Now Everyone Is Panicking Again


Mark Sanchez

Okay, so maybe the Jets didn't get clobbered, but they got worked pretty good by the Patriots at home last night.

And now everyone is freaking out that the Jets won't make the playoffs.

Here's why that's premature:

They did exactly what they had to do on a brutal three-game stretch. The Jets just went 2-1 against San Diego, Buffalo, and New England. Yeah, last night's loss leaves them on the outside of the playoff race looking in. But getting two wins out of those three games was huge.

The schedule really opens up now. The Jets next four games are Denver, Buffalo, Washington, Kansas City. NY should go at least 3-1 in that stretch.

Buffalo stinks all of a sudden. The Bills have fallen off considerably since their hot start. Everyone thought two of the Patriots, Jets, and Bills would make the playoffs. Now it appears the Bills have lost their mojo, so that eliminates one contender.

The stats say they're better than we think. They topped Football Outsiders' complex but ultimately reliable DVOA rankings last week despite a 5-3 record. The stats like them because they are consistent, albeit not spectacular, in all three phases of the game.

Mark Sanchez made a few bone-headed plays last night, and the Jets o-line make the Patriots pass rush look better than it has all year.

But at 5-4 with a bunch of winnable games coming up, it's not time to panic yet.

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