Stricter bank test leaves 80 billion euro hole: analyst

by Reuters

(Reuters) - Europe's banks would be 80 billion euros ($113 billion) short of capital under a tough test of their health, more than 30 times the amount demanded in an official test, according to a leading analyst.

Eight small banks on Friday failed a test of how 90 European lenders would withstand a two-year recession and were told to raise 2.5 billion euros.

Twenty top banks would fail a more severe test based on the data they supplied in the official test, with lenders in Britain, France and Germany all falling short, said Kian Abouhossein, an analyst at JPMorgan, in a note on Saturday.

The official tests were criticized for not applying a haircut on sovereign bond holdings in the banking book and having too low a pass mark.

"EBA stress test II is yet again an opportunity missed for EU member states encouraging banks to raise equity as Basel 3 ratios remain low," Abouhossein said.

Europe's banks would need 41 billion euros to keep their core capital ratio above 7 percent, rather than the 5 percent pass mark used in the official test, according to Reuters calculations.

JPMorgan said the shortcomings meant the results were of limited value, although the test provided far greater data and transparency than has been available in the past, allowing analysts to run an "acid test" for 27 banks using stricter criteria including haircuts on sovereign banking book exposures and a 7 percent pass mark.

The banks tested would show an 80 billion euro capital deficit, including 25 billion euros for UK banks, 20 billion euros for French banks, 14 billion for German banks, 9 billion for Italian banks, 4 billion in Spain, 4 billion euros for Portuguese banks and 4.5 billion in Austria, Abouhossein said.

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Tremonti: "We are on the Titanic ..."

vignetta di Makkox

Ricordate quando Pinocchio Tvemonti invitava a spendere (i nostri soldi, non i suoi) in quanto la crisi era solo psicologica, bisognava far girare l’economia? Era il 2009, mica mille anni fa. E quando, sempre lui, il superministro che tutto il mondo ci invidia (ma sarà vero?) sosteneva che “la crisi è superata, grazie a noi, la sinistra mente”. Anche in questo caso sembra passato tantissimo tempo, ma era solo l’anno scorso. È facile dare addosso a chi non si lascia andare a facili ottimisti e resta ancorato alla realtà, facendo la parte del gufo triste, della cassandra portasfiga capace solo di preconizzare avvenimenti drammatici, luttuosi. Eppure tutti i nodi vengono al pettine, e le bugie hanno le gambe corte. Infatti lo stesso Tvemonti, ora invoca l’aiuto dell’opposizione. “Siamo sul Titanic”, dice. “Il debito ci divora”, sostiene. Ma cosa ha fatto il governo in tutti questi anni per lo sviluppo? Ben poco, a sentire l’autorevole Financial Times, secondo il quale “In un mondo ideale Silvio Berlusconi si sarebbe già dimesso”. Ma non per il bunga bunga e le barzellette idiote, bensì per la sua cronica mancanza di credibilità, “per convincere i mercati che l’Italia è affidabile”. E per farlo non basta un pacchetto di misure di austerità, servirebbero provvedimenti in grado di far crescere il nostro Paese. Che magari siano anche in sintonia con quanto democraticamente espresso dagli elettori il 12 e il 13 giugno. Quando cioè hanno detto basta alle privatizzazioni all’italiana che finora hanno portato solo svantaggi ai contribuenti (e invece la manovra dà mandato a una dismissione in tempi più rapidi del patrimonio dello Stato). Come fa a girare l’economia se tutto quello che il “genio della finanza creativa” sa inventarsi è la mancata rivalutazione di pensioni normalissime, che spesso sono utilizzate come vero e proprio ammortizzatore sociale, dato che servono a pagare gli studi ai figli, o per aiutarli a sopravvivere, data la precarietà dei loro lavori malpagati? O l’ennesimo aumento delle accise sulla benzina, che colpisce tutti i cittadini e che sicuramente non contribuisce a far girare l’economia, dato che come si sa con il carburante aumentano anche tutti i beni, dato che il trasporto più caro viene fatto ricadere sull’acquirente?

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The principle of Pareto ...

by Contact Me

Evening markets: debate over US heat pulls grains from highs

by Agrimoney.com

How hot is the Midwest going to be in a week's time?

Investors already appear to have written off next week as a poor one for US crops, notably pollinating corn, bringing uncomfortable heat to the Midwest.

"The limited rains next week will cause crop ratings on corn and soybeans to slide 1-2%," US Commodities said.

"Soil moisture shortages should expand to 40-45% of the Corn Belt."

However, the big question is what happens the week after. Further heat for a crop deprived of soil moisture would be a far bigger threat.

Hot... but for how long

And that concern waned later on Friday.

WxRisk.com said said that weather model data was "pretty clear that the overall hot pattern will come to an end around July 24 to 25."

The weather service added: "All the data shows the heat dome over the eastern us simply breaks down and the cold front which is situated over the upper Plains and the western Corn Belt will get a chance to push into the central Plains and all the Midwest."

Not that everyone was quite so convinced.

"The GFS model continues to indicate more heat and less regression of the [heat] ridge," Darrell Holaday at broker Country Futures said.

Liquidation ahead?

But the doubts were enough to bring corn back well back from intraday highs. Indeed, selling into the rally was the safe option.

"I fear a major flush-out of weak length next week if weather does not agree with every and I mean every bull," Matthew Pierce at PitGuru said.

So December corn closed at $6.85 a bushel in Chicago, a price which, while 1.0% up on the day was still well below the intraday peak of $6.96 a bushel.

The old crop September contract closed at $7.01 ¼ a bushel, below a peak of $7.11 a bushel for the day.

Back to a discount

And with corn, the market leader, giving up ground, there was little hope for other grains, especially after Russia scooped another full house, of 180,000 tonnes, after the latest Egyptian wheat tender, highlighting that US and European supplies are out of the money.

Egypt bought its Russian wheat for $245.59-247.25 a tonne, more than $30 below the cheapest offers for French and US alternatives.

"That continues to be negative to the wheat market," Mr Holaday said.

"The low price of Russian wheat remains the worry factor for European and other markets," the UK grain arm of a major European commodities house said.

With harvest ahead, "at some stage in the next month or two there will be more wheat about in the major producing countries than home [EU] demand can absorb, and then markets will have to fall in order to compete with Russian supplies".

While Paris wheat managed a positive finish, up 1.1% at E200.00 a tonne, Chicago wheat certainly turned downward on Friday, closing down 1.7% at $6.94 ¾ a bushel for September delivery. Indeed, regaining its, unusual, discount to corn.

Floor near?

Soybeans stuck to the low volatility path, gaining some support from the US weather fears to end up 0.3% at $13.85 ¾ a bushel for August delivery, and up 0.2% at $13.87 a bushel for the best-traded November contract.

And, in New York, cotton retained its trading pattern too – meaning another trouncing on concerns that demand has been destroyed by the run up in prices to record highs earlier this year.

Jurgens Bauer at PitGuru said that, for the December contract, "I suspect a floor somewhere between 90 cents and a 100 cents a pound, but see no urgent reason to be in a rush to buy."

Nor did many other investors, with the lot falling the maximum daily limit, of 5.0 cents, to finish at 99.46 cents a pound, dropping below 100 cents a pound for the first time in six months.

The new crop December lot dropped the same limit to 101.35 cents a pound.

Cocoa sweetens

Not all soft commodities were so negative, with cocoa for September adding 0.4% to $3,168 a tonne in New York, following data showing firmer demand.

The North American cocoa grind rose 6.2%, to 125,000 tonnes in the second quarter, the National Confectioners Association said overnight.

That followed data on Thursday showing the European cocoa grind rose 8.3%, to 356,000 tonnes in the same period.

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Key Earnings Reports Next Week

by Bespoke Investment Group

This week was basically the pre-season to earnings season, as just 32 US companies reported their quarterly numbers. Next week the "regular season" will begin, as more than 300 companies are expected to report. Below is a table highlighting 36 companies reporting next week that investors will be watching very closely. In the table, we provide each stock's year-to-date change, its Q2 EPS estimate, its earnings "beat rate," and its average absolute 1-day change following prior reports going back to 2001. The earnings "beat rate" is the percentage of time the company has beaten earnings estimates using data from our Interactive Earnings Report Database.

The key companies set to report next week that have the highest "beat rates" are Goldman Sachs (GS), Apple (AAPL), Intuitive Surgical (ISRG), United Tech (UTX), and ITT Educational (ESI). These companies have all beaten earnings estimates more than 90% of the time over the last ten years. In terms of earnings report volatility, ISRG tops the list with an average one-day change of +/-13.92% on its report days. SanDisk (SNDK), Baidu (BIDU), Skyworks (SWKS), and Chipotle (CMG) are four other companies that typically see big moves in response to their earnings reports. 

On Monday, IBM's report will be the most watched after the close of trading. Goldman, Bank of America, and Wells Fargo are three big banks set to report Tuesday before the open. Apple, Chipotle, ISRG and Yahoo! will be closely watched after the close on Tuesday. Intel (INTC) will get the most attention on Wednesday after the close. Morgan Stanley (MS), AT&T (T), Baidu (BIDU), and Microsoft (MSFT) are on deck for next Thursday, and Ford (F), Caterpillar (CAT), General Electric (GE), and McDonald's (MCD) will round out the week on Friday.

Get ready for a busy week.

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The Fed is FREAKING Out

by Graham Summers

Indeed, it just posted the single biggest money pump since Lehman Brothers… on the week of June 27 2011. If you’re looking for a reason that stocks have been ramped so much higher in the last two weeks. This is it.

Indeed, for the week ended June 27, the Fed flooded the financial system with $76 BILLION in liquidity. Bill King of the King Report puts that number into perspective noting that it’s BIGGEST increase since September 22, 2008 right after Lehman Brothers collapsed.

That’s right, the Fed just juiced the system as much as it did when Lehman Brothers went under. While a shockingly large single money pump, the Fed’s generally been flooding the system with liquidity at a pace equal to that of 2008 since the beginning of the year.

In 2008, the Fed put roughly $1 trillion in liquidity into the system to try and hold things up. So far in 2011, it’s put in nearly $700 billion. You think that the recession ended and systemic risk has gone away? Explain this one.

In simple terms, it’s clear that beneath his attempted calm, Ben Bernanke is in fact scared stiff. Why else would he be printing money night and day? If the financial system was indeed stable and secure, why is he pumping money at the same pace as 2008?

This all ties in with what I’ve been saying for months now… that 2008 was in fact the warm up and that the REAL Crisis is fast approaching. And when it hits, the Fed will be POWERLESS to stop it. Because this time it will be entire countries, NOT just Wall Street banks that collapse. So what’s coming will be the equivalent of 2008 all over again, along with food shortages, civil unrest, outbreaks in crime, bank holidays, and the like. It will, in short, be like what’s going on in the Middle East today (though NATO won’t be bombing us).

Which is why if you haven’t already taken steps to prepare yourself and your portfolio for the coming disaster, you need to do so NOW.

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