Central Perk: 25 mar. 2012

duminică, 25 martie 2012

Mish's Global Economic Trend Analysis

CDS Quotes On New Greek Bonds On Hold; Last CDS and 1-Year Bond Quote on March 9
Property Tax Revolution in North Dakota, Minnesota, Michigan; It's Our Home Not Theirs!
Hero or Goat?
Trichet Warns of "Behavioral Contagion" and Nontraditional Steps That He Personally Started

CDS Quotes On New Greek Bonds On Hold; Last CDS and 1-Year Bond Quote on March 9

Posted: 25 Mar 2012 07:31 PM PDT

New Greek bonds are priced at roughly 22 cents on the dollar. Simply put, the market expects yet another credit event. Yet try buying CDS protection on the new Greek bonds. You can't.

The Financial Times reports Greek yields up as CDS trading put on hold

Yields on new Greek bonds have jumped sharply in the past week amid worries over a shutdown of the market in insurance-like products used to hedge the risk of holding Athens' debt.

Banks have stopped offering prices on Greek sovereign credit default swaps because a payout on new instruments could be forced immediately due to technical problems with the documentation used to settle contracts.

Yields, which have an inverse relationship with prices, have leapt more than 3 percentage points to 16.93 per cent on the new 2042 Greek bond – which is issued under a debt exchange with private sector bondholders and used to set the final payout on CDS contracts – since March 12, its first day of trading.

The market's concern centres on a so-called 60-day look-back clause in standard CDS contracts, which could be used to activate a payout on new contracts in the wake of a "credit event" that was declared on March 9, when Greece secured private sector participation for its debt restructuring.

Bankers fear the rising yields on Greek debt, and uncertainty surrounding the CDS trigger process, could hit sentiment in other eurozone bond markets, where borrowing costs for indebted governments have fallen from recent peaks.

"This is yet another problem that will deter investors and banks from buying Greek bonds," said a senior CDS trader at one European bank. "If you can't use CDS to hedge the risk of buying Greek bonds, then you may decide not to buy Greek bonds."

Greek CDS prices were last quoted on March 9, when a buyer of protection would have had to pay $7.8m up front to insure $10m of debt against default.

Markit, the data provider, said it needed at least three global banks to give it prices for Greek CDS before it could continue to quote them.

Did you catch that? The last quote was $7.8m up front to insure $10m of debt against default. We are talking about a near certain default on the new bonds.

I just did a check on Bloomberg. The last quote on a 1-year Greek bond shows the yield is 1,143%. The date of the quote is March 9th, the last date CDS was quoted.

But hey, Greece is saved. Doesn't everyone know?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Property Tax Revolution in North Dakota, Minnesota, Michigan; It's Our Home Not Theirs!

Posted: 25 Mar 2012 10:29 AM PDT

The granddaddy of property tax revolts is now underway in North Dakota.

The North Dakota group, Empower the Taxpayer writes "On June 12, 2012, the voters of North Dakota will have the opportunity to make North Dakota truly 'Legendary', as the first to pass a state constitutional amendment that will abolish the property tax, prioritize spending by the legislature, and finally give local governments something they never had: true local control over spending."

Public unions and proponents of big government are now involved in a major wave of fearmongering because North Dakota counties get about 60 percent of their revenue from property tax.

If the amendment passes, school districts will simply have to get funding from another source, or cut budgets.

Support Grows For Abolishing Property Taxes

Minnesota Public Radio discussed the setup in North Dakota in an article last November called Support grows for abolishing property tax in ND

Many Minnesota residents expect a bigger bill when their property tax statements arrive this month. But across the border, North Dakota residents are considering a proposal to make the state the first in the nation to abolish property taxes.

Supporters gathered more than 28,000 signatures to put that question on the ballot next June.

Backers of the measure say there's plenty of revenue to go around without property taxes. But local government officials say eliminating property tax would create chaos.

In the north central North Dakota small town of Carrington, population 2065, Mayor Don Frye wonders if businesses will build in his city if the snow isn't plowed, or the sewers don't work.

Those are just scare tactics, says Charles Tuttle. He's one of the organizers behind a measure to abolish property taxes.

Eliminating property taxes would put more than $800 million back in the pockets of property owners, stimulate the economy and create thousands of jobs, Tuttle said, referencing the study [Eliminating Property Taxes in North Dakota] from a Massachusetts free-market think tank.

Michigan Ponders Property Tax Repeal

Inquiring minds note that Michigan Ponders Property Tax Repeal

County governments across Michigan are keeping a close eye on Lansing as lawmakers zero in on the possible repeal of the personal property tax.

Personal property tax in Michigan is paid by businesses on property not permanently affixed to land, such as furniture, tools and computers. Michigan counties' reliance on personal property tax has increased in recent years as revenue from other sources has plummeted. The state is one of 43 that implement some form of a personal property tax.

Michigan Gov. Rick Snyder's (R) tax reform plan calls for eliminating personal property taxes. To ease the impact, alternatives have been rumored — including the state's taking over court costs. These costs represent one of the largest expenditures for counties in Michigan. Snyder favors a "revenue-neutral" elimination of the tax, but hasn't announced any proposal to replace the tax with another funding source.

Michigan is not the only state considering a possible repeal of the personal property tax. A constitutional amendment is being proposed by a citizen petition to abolish the North Dakota personal property tax. The measure will appear on the June 2012 election ballot. Illinois and Missouri are also looking into repealing their personal property taxes, but no legislation has been put forward.

Minnesota House Passes Legislation to Freeze then Phase Out Business Property Taxes

Please consider Minnesota House Passes Tax Relief and Job Creation Act

Saint Paul – (March 22, 2012) – The Minnesota House of Representatives today approved the Tax Relief and Job Creation Act by a vote of 72-62.

The Tax Relief and Job Creation Act freezes the statewide tax on business property for one year and phases out the statewide tax on business property over 12 years beginning in 2014. It also excludes 70 percent of the first $150,000 of value for all business property in 2013, benefitting small businesses throughout the state especially those in Greater Minnesota.

"Minnesota's business property tax rate ranks among the highest in the United States. Our property tax relief package helps create a stronger, competitive business climate by freezing the statewide business property tax rate for one year and phasing out this burdensome regressive tax to allow for more investment in products, services and employees," said Rep. Greg Davids (R-Preston), chief author of the bill.

That's a start but I have to ask, why should businesses own their homes free and clear without being subject to onerous taxation but not individual homeowners?

It's Our Home Not Theirs!

Please consider the following video Robert Hale Co-Author of Property Tax Revolution who says "It's Our Home Not Theirs!"

"The essence of freedom is property rights. It always has been. Yet, if you don't pay the government the tithe that they request, you lose your property."

Indeed!

You Never Own Your Own Home

Property taxes are an insidious form of taxation. They mean you never really own your home. Taxes even go up at the whim of local school boards and teachers unions who perpetually want more money, not for the kids, but for the school boards and teachers' unions.

Property taxes are particularly hard on senior citizens who can literally be taxed out of their own homes.

The public unions and local governments who have their hands in your pockets will be fighting hard with money and fearmongering ads. You can counter with donations to Empower the Taxpayer in North Dakota.

It's time to put an end to property taxes nationwide. The place to start is North Dakota.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Hero or Goat?

Posted: 25 Mar 2012 09:10 AM PDT

Here is an exclusive undoctored image of Ben Bernanke as actually taken by the Atlantic Magazine.

Via the wonders of Photoshop, Atlantic editors managed to transform the above actual image of Bernanke into the following nauseating cover.

Insiders at the Atlantic say the transformation from goat to hero was meant as an April Fools' Day joke as was Roger Lowenstein, article when he proclaimed "The visceral criticism of Bernanke is hard to fathom."

See Atlantic Magazine Cover Proclaims Ben Bernanke "THE HERO" for a discussion of the magazine cover and article.

Apologies offered to Roger Lowenstein for a joke well executed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Trichet Warns of "Behavioral Contagion" and Nontraditional Steps That He Personally Started

Posted: 25 Mar 2012 12:14 AM PDT

The hypocrisy of former ECB president Jean-Claude Trichet is in the spotlight today. Who put the spotlight on Trichet? Ironically, he did himself.

Please consider Trichet warns of "behavioral contagion"

Jean-Claude Trichet, the former president of the European Central Bank, said Saturday that he is worried that controversial quantitative easing and other nontraditional steps that global central banks have taken since the financial crisis could be here to stay.

The Fed has purchased $2.3 trillion of securities since it cut interest rates to zero in December 2008 in a bid to bring down long-term interest rates and boost economic growth.

These actions have led to criticism, especially during the early days of the Republican contest for the 2012 presidential nomination, that Fed Chairman Ben Bernanke was undermining the dollar and creating conditions for a sharp rise in inflation.

Speaking to a conference of influential central bankers from around the world and leading academic experts on monetary policy, Trichet said it could still turn out that the bond-buying, asset purchases and liquidity injections by global central banks might go away after the financial system gets back on its feet.

That is the optimistic scenario, he said.

But Trichet said there was a "less flattering conjecture" that the extraordinary actions will be part of a new "permanent regime."

Those factors may have created the permanent risk of "behavioral contagion" or a grave and immediate threat to the systemic functioning of the financial system, similar to the market meltdown in the wake of the collapse of Lehman Brothers.

"Nobody would have expected such a long time after Lehman Brothers, [central banks] would continue to have this level of expansion of our balance sheets," he said. "We are all still in crisis."

Who was it that started ECB bond buying? Why it was none other than Jean-Claude Trichet, acting against the advice of Axel Weber, German central bank president who resigned in protest rather than be part of the operation.

With the default of Greece, Trichet's bond-buying spree blew up in the ECB's face and so too will the ECB's buying of Portuguese and Spanish bonds.

Ultimately we are headed for a global currency crisis. Central banks headed by Greenspan, Bernanke, Trichet, and Draghi paved the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Seth's Blog : "I don't see it"

"I don't see it"

Venture capital, marketing and pop culture are largely about pattern matching. Something happens, something else happens and it's the beginning of a trend.

Some people (like Clive Davis and Fred Wilson, to pick two) see the trends before others, often without being able to verbalize them.

If you are around people who are able to understand these things before you are, it's worthwhile to call yourself on it, and see if you can get into some discussions about what they see that you don't. I get particularly restless if it's obvious that there's something going on but I can't see it. I can't move on until I see it too.

The more often you match patterns, the better you get.