As has been whispered, it seems Portugal, following in Greece's footsteps, is in need of another bailout ($30 billion) according to Reuters. We have also seen the Portuguese yields explode as bond investors realize that Portuguese bonds are protected under stronger UK law, unlike Greece where 90% of the bonds have weak protection under local law. Over the weekend I also mentioned that the very fact that the German CDU is considering laws that will make it illegal to sell bonds because of a change in a country's credit rating, alone would be enough to send bond holders fleeing for the exit.
As has been suspected, an article ran in the Guardian in which Merkel cast doubt on saving Greece from financial meltdown... Perhaps the next tranche is not coming, the debt restructuring is surely going nowhere.
Furthermore out of Germany, the issue that could divide the bond market in to senior and subordinated bonds in which Private bond holders take a loss and the ECB, the largest Greek bond holder does not, which could only be achieved through retroactive Collective Action Clauses with an exception for the ECB, was brought up again by Merkel, this time in Bloomberg:
"German Chancellor Angela Merkel’s government will oppose any attempt to make the European Central Bank accept a writedown on its Greek bond holdings, senior coalition lawmaker Michael Meister said."
And with that one paragraph, the bond market could be destroyed as equal protection laws for creditors that have stood in place for well over 50 years would be scrapped. Furthermore, the precedent it would set would mean the more bonds the ECB holds of any one particular country, the greater the eventual loss could be for private bondholders in future restructuring as the ECB's portion would be unaffected, meaning whatever cuts needed to be made, would be deeper cut in to the private bond holders pockets. This is the second time the CDU has said something about this and just like the first time, I will say again, even saying it will have dramatic effects on bond holder confidence at the exact time when they need bond buyers the most. Christine LaGarde of the IMF clearly and vocally disagrees with Germany and sees the dangers of creating a two tiered bond market.
In other news, AAPL blew away consensus yesterday when they reported after hours. AAPL has long been known to down play consensus for an easy beat, however last quarter they did miss. As you know I have a recent put so it was not a fun earnings call, however as you also know 3C was right on RIMM even though we were wrong on the earnings call and that made a 30+% profit, so I'll give it a little time and see how AAPL trades. Earnings are really not about what you did, they are about perceptions regarding what you will do moving forward and sometimes blowout earnings like this cause investors to think, 'It won't get better then this". There were a couple of articles run last night showing some potentially disturbing trends for AAPL, some centered on market share loss in Asia due to counterfeit phones, some due to concerns Foxconn will be looking for higher wages considering AAPL's cash position. I don't care to run them, just to keep an eye on developments.
I'll have the first market updates as soon as I see something interesting developing.
In the UK GDP shrank by .2% and is the first quarter of negative growth in a year, down from the .6% rise during the last 3 months. Of course this is fueling fears of a double dip recession. As a reminder, two consecutive quarters of negative growth equal a recession.
No comments:
Post a Comment