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Originally posted by ColorGuard
Euro is falling... How long until it collaspe? Just a guess if you can.edit on 30-12-2011 by ColorGuard because: add stuff
What should investors watch in 2012? As the new year dawns, there are plenty of short-term issues on the horizon, ranging from the eurozone to fiscal gridlock in the US to upheavals in the Middle East.
But amid that list there is also another, often ignored, question to ponder: could 2012 produce a repeat of the “flash crash”, the bizarre episode that hit the U.S. equity markets back on May 6 2010?
Think about it for a moment. A full 18 months have passed since the strange episode that caused the Dow Jones to tumble 650 points in half an hour, wiping $850 billion off share prices, before rebounding. Since then, the issue has faded from view amid the eurozone drama.
But to this day, nobody has fully explained what really happened on May 6. Nor is there any evidence that the fundamental problems that caused the flash crash have been resolved. That leaves some scientists fearing that not only is a repeat of that flash crash possible, but it is probable — and next time round, it could be even more damaging.
To understand this, take a look at a fascinating transatlantic research paper published by the Bank for International Settlements. One of the paper’s co-authors is Dave Cliff, formerly a financial trader who now runs the UK government’s Large-Scale Complex Information Technology Systems project, an endeavour that analyses the risks of IT systems in sectors including healthcare, nuclear energy and finance. The other, Linda Northrop, runs a similar project at Carnegie Mellon University, which was initiated a decade ago by the US military.
In recent years, these two teams have used engineering and science skills to analyse what they call socio-technical risks, or the dangers that occur whenever complex technological systems proliferate, creating “systems of systems” that nobody understands. In early 2010, well before May 6, they released a brilliantly prescient report that predicted that a systems failure loomed.
Since then, they have continued their research, with sobering conclusions. Most notably, these researchers believe that the flash crash was not an isolated event; on the contrary, it was entirely predictable given how IT systems have proliferated to create a system of systems that is now interacting in unpredictable ways that regulators and investors cannot comprehend, far less control.
“The true nightmare scenario would have been if the crash’s 600-point down-spike, the trillion-dollar write-off, had occurred immediately before [US] market close,” they note. “The only reason that this sequence of events was not triggered was down to mere lucky timing. . . the world’s financial system dodged a bullet.”
Flash Crash Threatens to Return With a Vengeance
Mr Sarkozy told the nation that the worst economic crisis since the Second World War would continue to hurt households in 2012.
"I know that the lives of many of you, already tested by two difficult years, have been put to the test once more. You are ending the year more worried about yourselves and your children.
"The only way to preserve our sovereignty, to control our destiny, is to choose... the route of structural reforms rather than that of impulsive actions which only add to confusion and chaos without restoring confidence."
In his New Year address, President Giorgio Napolitano called on Italians to make sacrifices to prevent the "financial collapse of Italy".
"Sacrifices are necessary to ensure the future of young people, it's our objective and a commitment we cannot avoid.
"No-one, no social group, can today avoid the commitment to contribute to the clean up of public finances in order to prevent the financial collapse of Italy."
Prime Minister Lucas Papademos on Saturday warned Greeks of another difficult year ahead as it battles to avert economic collapse and an exit from the single European currency.
"A very difficult year, marked by necessary but painful measures, is ending... a very difficult year is around the corner," Papademos said in his New Year's message.
"We must pursue our efforts with determination... so that the crisis does not lead to a disorderly and catastrophic collapse. So that we can keep the euro," he said.
Thousands of retail jobs are in danger in 2012 with industry analysts warning of "carnage" on Britain's High Streets.
1,600 job losses have been announced at Barratts and Priceless shoes where administrators have decided to close the retailer's concessions that operate within other stores.
A buyer is being sought for Barratts' remaining 170 High Street outlets.
Administrators are on standby at the lingerie chain, La Senza, and the gift retailer, Past Times, as they seek new finance or buyers to save their combined 3,600 staff.
A further 2,000 jobs are under threat at the outdoor retailer Blacks Leisure unless a buyer can be found for its 300 Blacks and Millets stores.
"We enter 2012 with a very difficult outlook for the eurozone [and] with an increasing possibility of countries actually leaving the eurozone.
"Nobody should underestimate what a big deal that would be, because it would be very difficult to manage the contagion risk, even if it was only Greece. The disruption from that would really be quite significant.
"That will have ramifications all over the world . . . because the simple maths is that the eurozone is a very large part of the global economy and if it is going slower, then economic trade will be slower around the world. Also just from a confidence perspective."
"I think the probability of countries leaving the eurozone has increased because we have had several successive plans announced to solve the problem of the eurozone which simply haven't convinced the market – and ultimately, the current structure and shape and scope of the eurozone only works if the market believes it's worth supporting," he said.
"We are in a path-dependent problem, where the solutions available at any one time are not necessarily available at the next step and so I think the solutions base has narrowed because we have missed opportunities."
As announced in previous GEABs, in this issue our team presents its anticipations on the changes in the United States for the period 2012-2016. This country, the epicentre of the global systemic crisis and pillar of the international system since 1945, will go through a particularly tragic in its history during these five years. Already insolvent it will become ungovernable bringing about, for Americans and those who depend on the United States violent and destructive economic, financial, monetary, geopolitical and social shocks. If the United States today is already very different from the "super-power" of 2006, the year the first GEAB was published, announcing the global systemic crisis and the end of the all-powerful US, the changes we anticipate for the 2012-2016 period are even more important, and will radically transform the country's institutional system, its social fabric and its economic and financial weight.
First Morgan Stanley issued the first market forecast of 2012 before the market has even opened, and now it is Greece's turn to threaten fire and brimstone (aka to leave the Eurozone, but according to UBS and everyone else in the status quo the two are synonymous) within hours of the New Year, if the second bailout, which as far as we recall was arranged back in July 2011, is not secured. Quote the BBC: ""The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," spokesman Pantelis Kapsis told Skai TV."
Market talk of a French sovereign downgrade continues to do the rounds – Unconfirmed
German Unemployment Change (000's) (Dec) M/M -22K vs. Exp. -10K (Prev. -20K, Rev. to -23K)
EU says the commission and member states have submitted amendments for new EU treaty
In 2008, reckless credit default swaps nearly obliterated the global economy. Now comes the next crisis - rehypothecated assets.
It's a complicated, fancy term in the global banking complex. Yet it's one you need to know.
And if you understand it, you will get the scope of the risks we currently face - and it's way bigger than just Greece.
So follow with me on this one. I guarantee that you'll be outraged and amazed - and better educated. You'll also be in a better position to protect your assets at the end of this article, where I'll give you three important action steps to take. So follow along...
Wall Street is addicted to leverage and, when given the opportunity to self-police, has rarely, if ever, taken actions that would threaten profits.
Further, what I am about to share with you is one of main the reasons why Europe is in such deep trouble and why our banking system will get hammered if the European Union (EU) goes down.
And w hat makes this so disgusting - take a deep breath - is that it's our money that's at stake. Regulators like the Securities and Exchange Commission (SEC) and their overseas equivalents are not only letting big banks get away with what I am about to describe, but have made it an integral part of the present banking system.
Hypothecation is what it's called when a borrower pledges collateral as a means of securing a debt. The borrower retains ownership of the collateral but it is hypothetically under the control of the creditor who can seize possession of the collateral if the borrower defaults.
If you're a brokerage house, the process is similar. Have equities, the collateral gets posted and used accordingly. Bonds, same thing. The brokers will reuse them by rehypothicating them at their discretion while making sure a fraction of the actual underlying value remains in reserve as collateral.
Typically, banks and investment houses have rehypothecated customer assets to back their own trades, their own borrowing, and their own operations.
Just like your house, which can be seized if you don't pay up, assets on deposit with a broker may be sold by the broker (hypothecated) if investors fail to keep up with margin payments or if the securities drop in value and the investors in question fail to respond to requests to boost their collateral - all at the broker's discretion depending on their margin and clearing requirements.
Now here's where it starts to get sticky.
If a client has $10,000 in securities on deposit and a debt deficit of $2,000, the net equity is $8,000. This means the broker-dealer could rehypothecate up to $2,800 of client assets to finance its own activities - often without notice.
Not only is this legal, it's common practice specified in the fine print of most brokerage agreements.
If you've ever traded on margin, chances are you're in the game whether you want to be or not because any common stock, cash, or other securities - even gold and Chinese yuan - can be used as collateral that the broker can hypothecate or rehypothecate.
And that's where the real games begin.
If there is a hiccup anywhere in the chain, the effect is one of instant collateral collapse as everybody in the chain is forced to buy back, or recall, their assets. The effect is not unlike a colossal global "short" on world markets.
Imagine what happens if something goes wrong and everybody wants their $10 back, but find that there is only $1 in actual cash.
I believe this is what Federal Reserve Chairman Ben Bernanke and his counterparts at the ECB are so concerned with and why they are obsessed with liquidity. Everybody knows that too much debt caused this mess, but what they don't realize is that it's the use of rehypothecated assets that make collateralizing it nearly impossible barring massive injections and printing.
Following the 4th unhalt of UniCredit, its stock is now down 15% on the day as it scrambles to catch up to the fair value represented yesterday courtesy of the rights offering to be about 43% below the market price.
Italy PM Monti flies to Brussels unexpectedly
Baltic Dry index falls over 8%
Originally posted by Cyanhide
the dow jones closed last night with +21 and opened few minutes ago and is now -96
Thats pretty heavy if you ask me. Or is this normal behavior ?edit on 5-1-2012 by Cyanhide because: (no reason given)
Looks like Europe plans on pushing its fate literally to the wire. Yesterday we explained why for Greece March is D(eadline)-Day, and as Greece itself stated, absent bailout cash coming in, it is game over: for Greece, for the Eurozone, and for Europe as the serial chain of defaults and exits begins. Which is why we read with great surprise minutes ago that according to the European Commission, the entire Greek bailout package has been delayed by three months because of delays in payouts of the 2011 tranche!