May 30. All about Spain
–This morning Spain and Italy bond yields are surging, with new high in Spain/German bund spread. The ECB rebuffed Spain’s plan to recapitalize Bankia with sovereign bonds which could then be pledged to the ECB as collateral. (Perhaps I don’t have the details of the plan exactly right because I would think gold would surge as a result…not). Also, China declined to help with a big stimulus package (your move, Bernanke…). Spain has clearly edged Greece off stage. I do find it surprising that some people think there will be a “relief” or “clarity” rally if Greece leaves the euro, I would think it would be a very temporary counter-trend move at best. As Alexis Tsipras says, “the next day, the markets will ask, who’s next?”
–Trade was subdued in interest rates yesterday except for June/Sept rolls in treasuries, where open interest in TYM fell 701k vs +788k in Sept. Interestingly FVM fell 412k, but FVU was up only 357k (according to prelims)
–The law firm Dewey Leboeuf filed for bankruptcy in the biggest law firm collapse ever. I, like you, say “so what?” Apparently there were guaranteed bonus agreements that simply couldn’t be honored; high debt and excessive compensation sunk the firm. But are the partners going to have to sell their homes and make good to all creditors, including other attorneys due to poor management decisions? Not in a NY minute. But citizens are always expected to pay for the bad decisions of their elected leaders and financial overlords. Or leave. Or revolt.
–Regarding the former option: (CNSNews.com) – “New York State accounted for the biggest migration exodus of any state in the nation between 2000 and 2010, with 3.4 million residents leaving over that period, according to the Tax Foundation… Over that decade the state gained 2.1 million, so net migration amounted to 1.3 million, representing a loss of $45.6 billion in income.”
–And they are abandoning the financial markets as well, perhaps the flameout of Facebook (another new low) is a reflection of loss of public trust.
