Tag: news

Is it any wonder Mario Draghi didn’t lift a quantitative-easing finger this week? Despite record unemployment, record (and disastrous youth unemployment), record suicide rates, record non-performing loans, and an inextricably-linked banking system facing $3 trillion in exposure to emerging markets… Spanish bond yields have collapsed to their lowest since 2006 (and Italian close behind). With an entirely broken transmission mechanism of monetary policy, it seems the “market” for European bonds knows no bounds as spreads on the riskiest sovereigns drop to pre-crisis levels and 10Y Spain yields are now lower than 30Y US Treasuries.

Europe must be fixed?

 

Spanish 10Y yields are now back below US 30Y yields for the first time in 4 years…

 

With the European banks holding the bulk of this crap and facing what many HOPE is a real stress test; we can only imagine the contagion should fears ever re-ignite – though we always have the magical OMT.

 

It seems much of this exuberance is the hope that a European think-tank expressed that March will see the ECB announce QE… as usual, any minute now.

 

Chart: Bloomberg

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Fundamentals, schmundamentals. Here is an easy lesson on how to navigate the current market.

Figure 1 is a weekly chart of the SP500. The trend channel (in green) is drawn from the 2009 lows. The failed breakout is noted. Pretty simple stuff!

TACTICALBETA IS 100% FREE ALL OF THE TIME.  TIMELY, NO NONSENSE, CONCISE….GO NOW!!

Figure 1. SP500/ weekly

Failed breakouts often result in much lower prices as undisciplined investors, whom were late to the party to begin with, buy the breakout and dump their positions on the slightest of discomfort. Thus the markets had a mini spasm. But why did the market bounce when it did? Once again, it is very elementary as our weekly chart of the SP500 shows. The orange trend line is drawn from the 2013 bottom.

Figure 2. SP500/ weekly

But there are several problems going forward at least from a technical perspective. It was only 3 short weeks ago that everyone was all in. Not a lot of people. I mean everyone as the bullish sentiment numbers were pushing very, very extreme. Those folks most likely are underwater and are probably thinking to themselves, “Geez, the market has rebounded some this week; I better sell as I don’t want to go through the trauma of seeing my account dip more than 2%.” In my opinion, sellers lurk at higher prices, and this puts a cap on higher prices. The second problem is less anecdotal and is one I am well familiar from my own studies and data. A market that fails to turn bulls into bears at periodic intervals is not a strong market, and this has been a problem with this market for a long time. If dips remain shallow (and this has been a shallow dip), then bulls are not converted to bears. Short covering to power the market higher doesn’t exist, and the price action loses momentum quickly without that short covering fuel. The venerable (love that word) market technician, Richard Russell, used to say and I paraphrase: that “bull markets are like bucking broncos; they will do their best to throw you off. As an investor, your job is to ride that bull as long as you can without getting thrown off.” These 5% dips or mini swoons that we are seeing really have not tested investors’ resolve. This kind of price action isn’t consistent with bull market action, but more consistent with a market top. The best thing that the bulls could hope for is a break of that 2013 trend line. This would bring the sellers in and ultimately set up the next leg higher provided the fundamental/ schmundamentals are supportive.

TACTICALBETA IS 100% FREE ALL OF THE TIME.  TIMELY, NO NONSENSE, CONCISE….GO NOW!!

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Three days ago it was S&P that opened the can of Puerto Rico junk worms. Moments ago it was Moody’s turn to downgrade the General Obligation rating of the Commonwealth from Baa3 to Ba2, aka junk status. We note this just in case someone is confused what the catalyst was that just sent stock to a new intraday high in the aftermath of today’s disappointing jobs number which until this moment barely managed to push the S&P higher by 1%.

 

Muni bonds, having shrugged off the initial downgrade, are starting to crack as the looming fear of forced (mandate-driven) sales rise rapidly… the 2017s tumbled over 4 points today!

 

 

Full release:

Moody’s downgrades Puerto Rico GO and related bonds to Ba2, notched bonds to Ba3 and COFINA bonds to Baa1, Baa2; outlook negative

 Approximately $55B of rated debt affected

New York, February 07, 2014 — Moody’s Investors Service has downgraded the general obligation (GO) rating of the Commonwealth of Puerto Rico to Ba2 from Baa3. Ratings that are capped by or linked to the commonwealth’s GO rating were also downgraded two notches, with the exception of the Puerto Rico Aqueduct and Sewer Authority (PRASA) Revenue Bonds, which were downgraded to Ba2 from Ba1. At the same time, Moody’s downgraded the Puerto Rico Sales Tax Financing Corporation’s (COFINA’s) senior-lien bonds to Baa1 from A2 and its junior-lien bonds to Baa2 from A3. The outlooks for ratings on the GO and the related bonds, as well as the COFINA bonds, are negative. For the ratings affected by this action, all of which were placed on review on December 11, 2013, see the list at the end of this report.

SUMMARY RATING RATIONALE

The problems that confront the commonwealth are many years in the making, and include years of deficit financing, pension underfunding, and budgetary imbalance, along with seven years of economic recession. These factors have now put the commonwealth in a position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained. In the face of these problems, the administration has taken strong and aggressive actions to control spending, reform the retirement systems, reduce debt issuance, and promote economic development. Despite these accomplishments, however, in our view the commonwealth’s credit profile is no longer consistent with investment grade characteristics.

While some economic indicators point to a preliminary stabilization, we do not see evidence of economic growth sufficient to reverse the commonwealth’s negative financial trends. Without an economic revival, the commonwealth will face difficult decisions in coming years, as its debt and pension costs rise. The negative outlook signals the remaining challenges facing the commonwealth.

The commonwealth’s general obligation bonds and all the notched and related ratings were downgraded by two notches, with the exception of the Puerto Rico Aqueduct and Sewer Authority (PRASA) Revenue Bonds, which were downgraded one notch, to Ba2. This brings them to the same rating as the commonwealth general obligation rating, which reflects recent rate increases enacted by the legislature that will improve net revenues and are expected to reduce the authority’s reliance on commonwealth support.

CREDIT STRENGTHS

• Politically and economically linked to the US, with benefit of the nation’s strong financial, legal, and regulatory systems
• Large economy, with gross product exceeding that of 15 US states and population exceeding that of 22 US states
• Broad legal powers to raise revenues, adjust spending programs, and borrow to maintain fiscal solvency
• Major actions taken to stabilize commonwealth finances, including significant reform to main pension system, and tax increases to reduce budget deficit

CREDIT CHALLENGES

• Ongoing economic weakness due to long-term decline in dominant manufacturing sector, decreased competitiveness as a result of expired federal tax benefits, and high energy costs
• Dependence on capital markets financing to fund operating expenses and debt service during period of increased risk of reduced market access
• Very large unfunded pension liabilities relative to revenues, even after major reforms to two main plans that helped reduce cash-flow pressure
• Very high government debt, equal to more than 50% of gross domestic product
• Multi-year trend of large general fund operating deficits relative to revenues, financed by deficit borrowing

ACTION AFFECTS MULTIPLE CREDITS

The downgrade and negative outlook affect general obligation bonds of the commonwealth and of related entities listed below.

DOWNGRADED TO Ba2 FROM Baa3

• General obligation bonds
• Public Building Authority Bonds
• Pension funding bonds
• Puerto Rico Infrastructure Finance Authority (PRIFA) Special Tax Revenue Bonds
• Convention Center District Authority Hotel Occupancy Tax Revenue Bonds
• Government Development Bank (GDB) Senior Notes
• Municipal Finance Authority (MFA) Bonds
• Puerto Rico Highway and Transportation Authority (PRHTA) Transportation Revenue Bonds
• Puerto Rico Aqueduct and Sewer Authority (PRASA) Commonwealth Guaranteed Bonds

DOWNGRADED TO Ba2 from Ba1

• Puerto Rico Aqueduct and Sewer Authority (PRASA) Revenue Bonds

DOWNGRADED TO Baa1 from A2

• Commonwealth of Puerto Rico Sales Tax Financing Corporation Senior Lien Bonds

DOWNGRADED TO Baa2 from A3

• Commonwealth of Puerto Rico Sales Tax Financing Corporation Junior Lien Bonds

DOWNGRADED TO Ba1 FROM Baa2

• Puerto Rico Highway and Transportation Authority (PRHTA) Highway Revenue Bonds

DOWNGRADED TO Ba3 FROM Ba1

• Puerto Rico Public Finance Corporation (PRPFC) Commonwealth Appropriation Bonds
• Puerto Rico Highway and Transportation Authority (PRHTA) Subordinate Transportation Revenue Bonds

OUTLOOK

The rating outlook is negative, based on our expectation of continued economic stagnation or decline. The outlook also incorporates continuing demands on liquidity, increased refinancing risk and constrained market access.

WHAT COULD MAKE THE RATING GO UP

• Strong rebound in economic growth leading to improved and sustained financial performance
• A trend of declining debt

WHAT COULD MAKE THE RATING GO DOWN

• Evidence of further constraints on market access or significant further weakening of GDB liquidity
• Indication that total fixed costs, including pension contributions and debt service on bonded debt, have become unaffordable
• Steep growth in structural budget gap and an increase in GAAP deficits, solved with non-recurring solutions
• Economic weakness resulting in declining revenues and continued out-migration
• Reacceleration of growth in government debt

via Zero Hedge http://ift.tt/1iCLHcE Tyler Durden

Three days ago it was S&P that opened the can of Puerto Rico junk worms. Moments ago it was Moody’s turn to downgrade the General Obligation rating of the Commonwealth from Baa3 to Ba2, aka junk status. We note this just in case someone is confused what the catalyst was that just sent stock to a new intraday high in the aftermath of today’s disappointing jobs number which until this moment barely managed to push the S&P higher by 1%.

 

Muni bonds, having shrugged off the initial downgrade, are starting to crack as the looming fear of forced (mandate-driven) sales rise rapidly… the 2017s tumbled over 4 points today!

 

 

Full release:

Moody’s downgrades Puerto Rico GO and related bonds to Ba2, notched bonds to Ba3 and COFINA bonds to Baa1, Baa2; outlook negative

 Approximately $55B of rated debt affected

New York, February 07, 2014 — Moody’s Investors Service has downgraded the general obligation (GO) rating of the Commonwealth of Puerto Rico to Ba2 from Baa3. Ratings that are capped by or linked to the commonwealth’s GO rating were also downgraded two notches, with the exception of the Puerto Rico Aqueduct and Sewer Authority (PRASA) Revenue Bonds, which were downgraded to Ba2 from Ba1. At the same time, Moody’s downgraded the Puerto Rico Sales Tax Financing Corporation’s (COFINA’s) senior-lien bonds to Baa1 from A2 and its junior-lien bonds to Baa2 from A3. The outlooks for ratings on the GO and the related bonds, as well as the COFINA bonds, are negative. For the ratings affected by this action, all of which were placed on review on December 11, 2013, see the list at the end of this report.

SUMMARY RATING RATIONALE

The problems that confront the commonwealth are many years in the making, and include years of deficit financing, pension underfunding, and budgetary imbalance, along with seven years of economic recession. These factors have now put the commonwealth in a position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained. In the face of these problems, the administration has taken strong and aggressive actions to control spending, reform the retirement systems, reduce debt issuance, and promote economic development. Despite these accomplishments, however, in our view the commonwealth’s credit profile is no longer consistent with investment grade characteristics.

While some economic indicators point to a preliminary stabilization, we do not see evidence of economic growth sufficient to reverse the commonwealth’s negative financial trends. Without an economic revival, the commonwealth will face difficult decisions in coming years, as its debt and pension costs rise. The negative outlook signals the remaining challenges facing the commonwealth.

The commonwealth’s general obligation bonds and all the notched and related ratings were downgraded by two notches, with the exception of the Puerto Rico Aqueduct and Sewer Authority (PRASA) Revenue Bonds, which were downgraded one notch, to Ba2. This brings them to the same rating as the commonwealth general obligation rating, which reflects recent rate increases enacted by the legislature that will improve net revenues and are expected to reduce the authority’s reliance on commonwealth support.

CREDIT STRENGTHS

• Politically and economically linked to the US, with benefit of the nation’s strong financial, legal, and regulatory systems
• Large economy, with gross product exceeding that of 15 US states and population exceeding that of 22 US states
• Broad legal powers to raise revenues, adjust spending programs, and borrow to maintain fiscal solvency
• Major actions taken to stabilize commonwealth finances, including significant reform to main pension system, and tax increases to reduce budget deficit

CREDIT CHALLENGES

• Ongoing economic weakness due to long-term decline in dominant manufacturing sector, decreased competitiveness as a result of expired federal tax benefits, and high energy costs
• Dependence on capital markets financing to fund operating expenses and debt service during period of increased risk of reduced market access
• Very large unfunded pension liabilities relative to revenues, even after major reforms to two main plans that helped reduce cash-flow pressure
• Very high government debt, equal to more than 50% of gross domestic product
• Multi-year trend of large general fund operating deficits relative to revenues, financed by deficit borrowing

ACTION AFFECTS MULTIPLE CREDITS

The downgrade and negative outlook affect general obligation bonds of the commonwealth and of related entities listed below.

DOWNGRADED TO Ba2 FROM Baa3

• General obligation bonds
• Public Building Authority Bonds
• Pension funding bonds
• Puerto Rico Infrastructure Finance Authority (PRIFA) Special Tax Revenue Bonds
• Convention Center District Authority Hotel Occupancy Tax Revenue Bonds
• Government Development Bank (GDB) Senior Notes
• Municipal Finance Authority (MFA) Bonds
• Puerto Rico Highway and Transportation Authority (PRHTA) Transportation Revenue Bonds
• Puerto Rico Aqueduct and Sewer Authority (PRASA) Commonwealth Guaranteed Bonds

DOWNGRADED TO Ba2 from Ba1

• Puerto Rico Aqueduct and Sewer Authority (PRASA) Revenue Bonds

DOWNGRADED TO Baa1 from A2

• Commonwealth of Puerto Rico Sales Tax Financing Corporation Senior Lien Bonds

DOWNGRADED TO Baa2 from A3

• Commonwealth of Puerto Rico Sales Tax Financing Corporation Junior Lien Bonds

DOWNGRADED TO Ba1 FROM Baa2

• Puerto Rico Highway and Transportation Authority (PRHTA) Highway Revenue Bonds

DOWNGRADED TO Ba3 FROM Ba1

• Puerto Rico Public Finance Corporation (PRPFC) Commonwealth Appropriation Bonds
• Puerto Rico Highway and Transportation Authority (PRHTA) Subordinate Transportation Revenue Bonds

OUTLOOK

The rating outlook is negative, based on our expectation of continued economic stagnation or decline. The outlook also incorporates continuing demands on liquidity, increased refinancing risk and constrained market access.

WHAT COULD MAKE THE RATING GO UP

• Strong rebound in economic growth leading to improved and sustained financial performance
• A trend of declining debt

WHAT COULD MAKE THE RATING GO DOWN

• Evidence of further constraints on market access or significant further weakening of GDB liquidity
• Indication that total fixed costs, including pension contributions and debt service on bonded debt, have become unaffordable
• Steep growth in structural budget gap and an increase in GAAP deficits, solved with non-recurring solutions
• Economic weakness resulting in declining revenues and continued out-migration
• Reacceleration of growth in government debt

via Zero Hedge http://ift.tt/1iCLHcE Tyler Durden

Trinkets and Ads trump global energy provision…

 

 

Google, which became the world’s largest online advertiser through its dominant search engine, has a market capitalization of $393.5 billion while oil company Exxon is valued at $392.6 billion, according to data compiled by Bloomberg. Apple has a market value of $465.5 billion. Software company Microsoft Corp. is No. 4 with $302.1 billion.

 

Chart: Bloomberg

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