Daily Digest 6/11 - Syrian Opposition Elects New Leader, Borrowing To Stay Ahead In Europe, China Sells Abroad To Ease Slump

Please notice the graphs and yields for 10 year bonds in Italy (currently at 6.04%) and Spain (currently at 6.44%). The bailout  rally did not last and bond yields are turning higher.

Headlines:

1. Spanish Yields Surge As Bank Bailout Stokes Sovereign Debt Fears
2. Infosys Skirts Italy, Spain Software Deals on Euro Crisis
3. ECB Financing to Portuguese Banks Increased to Record in May
4. Puerto Rico Borrowing Costs Rise on Rating Concern: Muni Credit
5. Spain told it will be under "troika" supervision
6. Italy Enters Crisis Crosshairs as Spain Bailout Rally Fizzles
7. European airlines ‘are facing a record loss’
8. Ireland Pursues Debt Gain From Spain’s Banking Pain
9. Cyprus Minister: 'Urgent' Bailout Needed
10. S&P Says India May Be First in BRIC to Lose Investment Grade
11. Detroit unions concerned as contracts set to expire
12. Syria risks military strikes, warns Hague
13. Gold-Investment Demand in China to Advance 10%, ICBC Says
14. Greek Blackouts Risked as Power Companies’ Cash Runs Out: Energy
15. Irish Town revives original currency

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• EU floats worst-case plans for Greek euro exit: sources

"European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls "

Europe Brings Out The "Capital Controls" Bazooka

EJ does not give up too much to the public domain... thanks very much for bringing him on FS and providing the link to the interview.  Everything made good sense in the discussion... the only thing you two didn't touch on was the overarching derivatives bomb..  and the more I think about it, the more that is all that matters when it comes to end game discussion.  How can we talk rationally about things like longer term dollar depreciation, etc., when we have derivatives valued notionally at some 25X world GDP, where once even a small fraction start going money good as the dominos fall, the deflationary black hole vortex either takes all markets down with it, or incites the largest wave of printing ever seen?

http://www.zerohedge.com/news/isda-says-no-cds-trigger-subordination

I think we are beginning to see the writing on the wall.  Since the ISDA has to declare something a "credit event" to trigger a CDS, they might have a lot of difficulty finding a credit event among the proliferation of defaults and collapses, particularly if they are big ones.  Of course, all those entities who buy the CDSs to hedge their loans will have to eat their losses, but it may not trigger systemic failure.

http://www.bloomberg.com/news/2012-06-10/wall-street-shrugs-as-jpmorgan-trades-lop-off-27-billion.html

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon plans to testify before Congress this week about his firm’s $2 billion trading loss. His Wall Street colleagues don’t understand why.

“Occasional losses are inevitable,” said Blackstone Group LP (BX)’s Stephen A. Schwarzman, 65, CEO of the largest private- equity firm. “Publicly excoriating JPMorgan serves no purpose except to reduce people’s confidence in the financial system.”

Publically excoriating [insert criminal act here] serves no purpose except to reduce people's confidence in criminals.

Executives, lobbyists and analysts said in more than a dozen interviews that the public stir is an overreaction to a minor misstep.

“I kind of shrug,” said Bill Archer, 58, a former co- chairman of Goldman Sachs Group Inc. (GS)’s capital markets committee and now a partner at buyout firm Veronis Suhler Stevenson LLC in New York. “That’s just the way the world is.”

And what I find kinda interesting is that those who lost nothing and profited the most don't get it. But you can see their point of view. If it didn't impact them in a negative way, how could they possibly see that there was a negative impact? And even if all hell broke loose, they'd simply toddle off to one of their mansions. And why not? I would. So would you.

Of course, for those impacted have another view. Perhaps even made all the stronger by jealousy. Perhaps because they didn't prepare or position themselves better. Perhaps because they were too slow to react, perhaps they didn't understand or know how, perhaps they were given poor advice.

If you haven't already, I'd suggest you read Adam Fergusson's When Money Dies. It has many parallels and may give some indication of what could happen in the future whilst explaining why people can't (or won't) see what's happening now.

Banks brace for likely downgrade

California Pension Fund Down Almost 5% as End of the Year Looms

• Spain insists it will continue to tap private debt markets

"SPAIN REITERATED its determination to continue tapping private debt markets for day-to-day funds as financial markets delivered a cold response to Europe’s €100 billion support package for the country’s banks.

While the Spanish request for aid is predicated on access to markets for nonbank borrowing, the agreement did nothing to arrest the relentless upward pressure on the interest rates the country must pay. Amid uncertainty over the rerun of the Greek election next Sunday, Italian bond yields also rose yesterday.

If Spain is to avoid a full-blown bailout later this year, its borrowing costs are going to have to come down quickly. Some €82.5 billion in sovereign debt falls to be refinanced before 2013, alongside a further €15.7 billion for autonomous regional governments and a central government deficit of €52 billion."
 

Erik

That was an excellent interview.  Janszen was very impressive.  Of course it helps when the interviewer asks good questions, and then listens carefully to the responses.  Nice job.

Travlin