Markets are tanking early in the Asian trading session.

This follows a big sell-off in the U.S. on Thursday.

After the U.S. close, Moody’s downgraded 16 Spanish banks.  To make things worse, the world continues feel uneasy about a possible Greek exit from the Eurozone.

See Also – GET READY: This Is What Happens If Greece Exits The Euro >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

“Due to its extreme properties, it has become crucial in many areas of industry,” writes the folks from Visual Capitalist.  “Substituting another material for tungsten in many of its applications would result in increased cost or a loss in product performance.”

From our friends at Visual Capitalist:

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

ATHENS, Greece (AP) — Greece swore in 300 legislators for just one day before it dissolves Parliament and calls new elections, among them 21 lawmakers from Golden Dawn — arguably the most far-right party to be involved in a European national legislature since Nazi-era Germany.

Formerly a shadowy fringe group, Golden Dawn vehemently rejects the neo-Nazi label, insisting it is a nationalist patriotic party, but its meteoric rise from a largely marginalized outfit a few years ago to one that won nearly 7 percent in recent elections has alarmed many in Greece and in Europe.

In the traditional Parliamentary swearing-in ceremony Thursday, Golden Dawn legislators refused to stand as two Muslim deputies took their oaths on the Quran instead of the Bible.

“Beginning today Golden Dawn is officially in Parliament to speak the language of truth and to express all Greeks,” said Ilias Kassidiaris, who was elected into Parliament and is also the party spokesman.

But the party, like all others, will be tested once more at the ballot box next month. The May 6 election left no party with enough votes to form a government after Greeks furious over the handling of the country’s financial crisis deserted the two formerly dominant parties, the socialists and conservatives. They turned instead to smaller groups to the right and left of the political spectrum, including those on the extremes.

Coalition talks collapsed after nine days, leaving no other option but a repeat election. A caretaker government has been appointed, to be led by a senior judge, and the newly sworn-in Parliament is to be dissolved Friday so an election can officially be called, expected for June 17.

Golden Dawn gained from both a protest vote from people angered by increasing hardship ensuing from austerity measures imposed in return for billions of euros in international rescue loans, and from a backlash against an illegal immigration problem that has spiraled out of control.

“People say they are trouble, they might hit people and do other things, but there are some people that were helped by Golden Dawn,” said Athens resident Mattheos, who would not give his surname. “They are not right about everything, about land mines on the border, but they are right about one thing – immigration.”

Golden Dawn campaigned on an anti-immigration platform, promising to expel all illegal immigrants and clean up crime-ridden neighborhoods, while also delivering care packages of food and clothing to needy Greeks. It also advocated planting land mines along Greece’s border with Turkey to stop any more illegal immigrants entering the country.

While rejecting the neo-Nazi label, some of its members have openly admired some of Hitler’s policies, saying he worked to better the lot of his people. Party leader Nikolaos Michaloliakos caused a backlash in Greece earlier in the week when he claimed Nazi concentration camps did not use ovens and gas chambers to kill prisoners during the Holocaust.

Its members have also been blamed for violent racist attacks in the center of Athens and elsewhere.

“We are now in a world in which we should not be afraid. We will face the problem face to face. We will deal with it with democratic means, with dialogue,” said Mike Matsas, head of the Jewish Youth of Athens. “I think people and society, with their sanity, will understand sooner or later what they (Golden Dawn) are and will take appropriate measures.”

In the run-up to the last election, there was a backlash against the party in Greece and abroad. Since their strong showing at the polls, politicians and civil rights groups have criticized them as an extremist party with no place in Parliament.

“The Golden Dawn party is a dark stain on European politics. For the first time in over six decades a seemingly long hidden Nazi ideology returned to power,” said Moshe Kantor, president of the European Jewish Congress. “The Golden Dawn party is not a far-right wing party, it represents a neo-Nazi vision and ideology that many believed was isolated. Their political rise should have sent shock-waves through Europe and we expect politicians to openly reject this new-old danger.”

The party has been sidelined by Greece’s politicians.

Michaloliakos, who came to prominence a few years ago when he gave a fascist salute during his first appearance as a newly-elected member of the Athens City Council, was not invited to power-sharing talks in the aftermath of the May 6 vote.

None of the other parties sought out Golden Dawn’s support, and Greek President Karolos Papoulias, who brokered the last efforts at breaking the political deadlock, didn’t invite Michaloliakos to negotiations over a potential technocrat government. Michaloliakos then stayed away from the final meeting called to decide on a caretaker government, where constitutionally all parties with parliamentary representation must be invited.

“We haven’t seen that brand of a far-right party entering a national parliament but I wouldn’t divorce it from a broader trend,” said Matthew Goodwin, an associate fellow at Chatham House, explaining that extremist right-wing groups have been on the rise since the 1980s, long before the current financial crisis, and don’t just try to win seats in legislatures but have active cells, defense leagues and other grassroots activities.

Opinion polls in recent days have shown a distinct fall in support for Golden Dawn, although it might still gain above the 3 percent threshold needed to enter parliament.

“The party of Golden Dawn is small and will probably decline in its electoral influence,” said political science professor Dimitri A. Sotiropoulos. “If it has an influence, this will not be in terms of affecting parliamentary politics of our country. It will be an influence on matters of foreign policy.”

Greece’s 16-member caretaker Cabinet, led by Council of State head Panagiotis Pikrammenos, a 67-year-old judge, was also sworn in Thursday to lead the country to next month’s election.

Giorgos Zanias, a senior Finance Ministry official and top negotiator in the nation’s huge debt write down deal concluded earlier this year, has been appointed caretaker finance minister. Veteran diplomat Petros Molyviatis was named foreign minister, a post he also held in 2004-06.

The temporary government will not be able to take any internationally binding decisions, and its sole aim is to lead the country into the new elections.

____

Karel Janicek in Prague, Vanessa Gera in Warsaw and Annita Mordechai in Athens contributed.

Please follow International on Twitter and Facebook.

Join the conversation about this story »

Peter Schiff, the head of EuroPacific Capital weighed in on recent economic data in an interview with KingWorldNews.

Schiff, a vocal gold bug and dollar bear, is profoundly skeptical of the recovery. 

From the interview:

“Well, we keep getting more weak economic data, which is validating my perspective that we never really had a recovery at all.  We simply juiced the economy up on stimulus, and as the stimulus high wears off, the hangover sets in.”

“We’re seeing that today with weak jobless numbers.  We also have the weakness of the Philadelphia Fed Study.  So the market is just rolling over as it’s coming to grips with the fact that the fantasy investors believed in is just that, fantasy.  It’s not reality.

Schiff goes on to claim gold is oversold, QE is “heroin” for the economy, and the dollar will collapse.

Read the full interview at KWN.

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

Everyone’s got an opinion about what Facebook is worth.

But one of the most respected opinions comes from Aswath Damodaran, the legendary NYU finance professor who literally wrote the book on investment valuation.

So, what does he think?

Basically, Damodaran doesn’t expected too many fireworks.

Here’s an excerpt from his blog:

I don’t think that there has ever been an IPO where investment bankers have had more information (from private share market prices to institutional investor feedback) to work with, when pricing the stock, than this one. I would be very surprised, if the stock were overpriced; the bankers and the company have too much too lose. I would be equally surprised if the stock were dramatically under priced; a pop of 50% or even 25% would reflect very badly on the bankers’ pricing skills. In short, this is shaping up to be a Goldilocks IPO, at least in the initial hours: a pop of about 10-15% (just right for both the bankers and the company). The question is how long the pop will last. This company is too big and too public to stage manage in the weeks after the IPO. If the pop fades quickly, perhaps even by the end of trading tomorrow, I think it is a very bad sign for the momentum game in all social media stocks.

Damodaran made headlines ago when he dumped Apple after holding the stock for 15 years.  Apple’s share price is down 13 percent since he announced his sale.

Read more at Damodaran’s Musing on Markets blog.

SEE ALSO: Damodaran Explains How To Invest In Corrupt Companies >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

After some disappointing data out of China, talks of a Chinese hard landing are back full force.

But there’s one economic indicator that Chinese hard/soft/bumpy landing watchers should be looking at according to Societe General analyst Wei Yao.

Wei says import data, which is subject to less statistical adjustments and can be easily cross-checked with its trading partners, is a crucial indicator because China’s “import demand centers on investments”. And remember Chinese imports grew just 0.3 percent last month.

Wei says the weak import data trend has been around since the start of the year and shows that the deceleration is happening in real terms as well. :

“There is also an argument that China’s import deceleration was largely driven by export weakness. Looking at the type of imports, we noticed that imports of raw materials and other ordinary goods each contributed to the slowdown (at least) as much as imports for processing trade did. The deceleration in real import growth has a substantial domestic component.

China’s waning demand for non-commodity ordinary imports is particularly bad news for capital goods exporters like Korea and Taiwan. Their exports both surprised on the low side in April, with demand from China either flat or contracting. However, there is a big amount of trade due to supply chain integration, and so it is still hard to tell how much of the negative news was exactly because of China’s domestic demand.

As for raw materials, situations differed widely from one commodity to another in yoy growth rates (see table below). Copper import growth looked amazingly resilient on the books, but it was mostly because of the low import volume in H1 2011 when Chinese companies shied away from high copper prices. In addition, China’s copper imports are increasingly used as collateral for corporate financing and tend to pick up during monetary policy tightening. Even so, in level terms, copper imports were flat at best between Q4 2012 and April 2012. Therefore, we think steel and iron ore better reflect the strength of China’s investment demand, which is evidently weak at the moment.”

Wei says irrespective of the type of landing it is clear that China’s investment growth will be much slower at the end of the decade, which points to a significant shift in its import structure.

What to expect in coming months

China’s central bank cut its RRR rate and Wei thinks it is likely to continue managing the slowdown along with Chinese authorities.  Wei says she expects the government to take action in three area:

1. Push infrastructure investment
2. Soften the property tightening policy by possibly providing support for first time home-buyers.
3. Possible tariff cuts and a consumption stimulus package by the ministry of commerce.

After weak April trade data SocGen revised down its Q2 GDP growth from 7.8 percent, to 7.6 percent, and the full-year GDP growth down to 7.9 percent, from 8.1 percent. For now, she is watching to see if her call for a bumpy landing turns into a hard one.

Don’t Miss: 16 Western Mis-perceptions About China >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

Two market developments are worthy of note today (so far). Gold is up 2.5% (off a very cheap low) and USDYEN and EURYEN have made very significant 1.3% moves down.

Stuff like this scares me. It looks like acceleration in the flight to quality. The news backdrop is terrible and supports a panicky market outcome. My ability to look into the future has gone to zero.

For those that follow this blog for my read on FX, I cut out my short on the Euro and the long on USDYEN today. The outcome was (sort of) what I anticipated. I collected a few dimes on net. This was always a trading position, having lost my rudder on what might happen next, I’m just taking oars out of the water.

It’s been my experience that my “Worst Fears” on matters of global macro economic developments never come true. Some of my worst fears at the moment:

- A full-blown bank run in Europe. This is already happening. It is happening in cash by the billions at the bank teller windows and cash machines, it is happening by the hundreds of billion in electronic transfers. It can’t go on much longer.

There is a story/rumor going around that Euro denominated bills will soon be stamped with a single letter of country origin. This is what may happen in Greece. To stop the cash drain from the local banks, bills taken from a bank/ATM would have a red G on them. Any money transfers out of the country would similarly be flagged G (or temporarily blocked). Functionally a two tiered Euro will have been created.

If (when) this happens the bank run will explode in Spain, Portugal and Ireland. The precedent will have been set with Greece. The response by authorities will be more stamped money, this time with red S’s, P’s and I’s. Basically the whole ball of wax melts down.

In that scenario, what would the value of a EURUSD marked with a D for Germany or an F for France be? My answer is that it would be far higher than the 1.2700 it is at the moment.

My point is that it is not entirely clear what it means to be short the Euro against another currency, currently. I want to be short the Euro that will be marked with the dreaded S, P, or I (or maybe one with red IT?), but I don’t want to be short the one with a D.

Exchange controls of some form or another are not far away.  If there is a two tiered Euro being formed by events in Greece, then contracts, including FX contracts, will be settled with the Euros that are the strongest legs of the two tiered system. While there are long odds for this outcome, they are odds I do not want to play.

- If things keep up as they are in the financial markets, there will be another problem someplace that is not now on the radar. It could be in Eastern Europe, or even Russia. My bet is it comes from Asia, possibly China. There will be liquidity issues someplace.

This story by Izabella Kaminska talks about the potential for a problem (link).

- There are other things on my radar that could be trouble. One that could be a kick in the pants is a “failed” IPO for Facebook.

Nevertheless, I think this deal will be a huge success. It will be a monster IPO that raises record amounts of capital. More shares will be sold to the public than has been assumed. There is a big ‘Green Shoe” of additional shares that the underwriters have to offer if there is post issue market demand.

I expect that the stock will open at a big premium to the IPO price, and then rise some more. What I’m afraid of is the print at 3:30.

There is an aspect to this deal that is a bit troubling. Mark Zuckerberg has made it clear to the underwriters that he wants a good portion of the stock sold in the IPO to go retail investors who believe in Facebook. Those investors would not stand a chance of getting any stock in a normal IPO. Good for Marky.

But that is not how IPOs work. Deals get “hot” because retail investors want to own shares, and those investors typically have been excluded from getting shares at the IPO price. Retail is normally the force that gets an IPO a 10%+ pop at the opening.

But what if a fair chunk of the retail demand that is needed for the stock to catch a bid has already been filled?

This is a very big deal with some unusual features. It will be priced rich with lots of shares sold. If there is a pop tomorrow morning that results in the green shoe getting filled, and the flippers (like me) get out, it could lead to a disappointing day.

Who knows? We might have a $100b lead weight on our hands.

Note: The results for FB may get tainted by news from Europe or elsewhere. What’s the chance for bad news from Europe tomorrow? A Friday? High, is the answer.

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

Greece’s Ominous Fiscal Situation — Next Two Months

Here is the best case, based on BAML estimates, which provides a good baseline for measuring more likely (and significantly worse) outcomes:

Given the developing political situation, however, the above scenario seems more unlikely with each passing hour. A more likely outcome, according to BAML, is that Greece might be able to collect half of these estimated revenues, putting them flush out of cash “sometime in June.”

If that happens, BAML thinks it likely that “Greek authorities may decide to meet payments only for salaries, pensions and debt servicing.” This will have a negative feedback effect on revenue collection and will probably lead to some serious torches and pitchforks in the streets of Athens.

The Likely ECB Response to a Greek Exit

Here is BAML’s take:

The ECB is exposed to Greece through two channels, repo operations of various maturities and emergency liquidity assistance (ELA). The respective amounts are €109bn and ca. €60bn. Should Greece default, we think it is highly likely that the ECB would terminate the repo operations. And, the ECB could veto the ELA, which would cause the Greek banks to run out of liquidity.

We have reported all week on the bank run on Greek deposits that is already under way. To state the obvious, the banking system’s exposure to its sovereign, combined with mounting deposit flight and the likelihood that the ECB cuts off liquidity, means the end of Greek banks as they are currently constituted.

Spillover Effects into the Eurozone Banking System

The greater eurozone banking system has been effectively shut out of funding markets for some time now, and the ECB’s LTRO policy responses have only worsened the situation as banks have pledged what’s left of the quality paper in Europe in exchange for ECB loans.

Ergo, BAML says “funding markets are likely to be completely shut, even for the strongest euro zone banks.“

The real risk, though, is deposits. They’ve evaporated already in Greece this week. Bankia in Spain has seen 1.3bn euro withdrawn already this week. SocGen this morning sees a 20-30% deposit outflow in Spain and Italy as a result of a Greek exit.

BAML on the deposit risks to the periphery:

In our view the main risk is to deposits as this accounts for some 50% of euro zone banks’ funded balance sheets. As can be seen in Table 2 below, to date the deposit outflows have been relatively limited with the exception of Greece with a 30% reduction since December 2009, and Ireland with a 12.4% drop. However, should Greece leave the euro, there is a risk that this could spread to other countries as depositors fear redenomination at unknown terms.

And here is the table on deposit outflows from the report:

Finally, BAML sees the shock to confidence in the real eurozone economy “at least as high as that of fallout from the Lehman Brothers collapse,” and further, they see at least a 4% GDP contraction in the eurozone resulting from the Greek exit scenario described in this piece. And all of this in against a far worse economic and fiscal backdrop than in 2008.

How to Play a Greek Exit in Various Asset Classes

The main idea from BAML here is that the short-term response to a Greek exit from the eurozone will be risk-off, with 10-year Bunds perhaps dropping below 1%, and heavy liquidation flows sending gold and other commodities down sharply along with equities and non-IG credit.

What follows depends on whether a) the ECB steps in strong (perhaps coordinated with other central banks) or b) the central bank response is not seen as adequate by investors.

In scenario a), BAML sees a “powerful short squeeze” in peripheral sovereign yields, financial stocks and credits, and the euro given the current extreme underweight positioning in these classes. Further, gold will have “scope to trade > 2000/oz.”

On the other hand, if the ECB’s response is seen as inadequate, expect a totally disastrous risk-off move as investors run for the hills toward conventional safe haven assets. BAML notes, for example, that “the euro zone banking sector is already back towards its credit crisis lows in Price-to-Book terms at about 0.4x,” but even these valuations are nothing compared to the 0.15x P/B Korean bank stocks traded down to in the wake of the 1997-98 Asian crisis or the 0.25x P/B of the Scandinavian banks in the early 1990s.

Bottom line: the ECB is going to have its work cut out for it in the weeks ahead, regardless of what unfolds.

For more on what would happen in a Grexit, see our guide here >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

Talk of bank runs in Europe reached a brand new pitch today, with headlines about deposit flight from the periphery all over the place.

Some of the talk might be overblown. After all, Greece has been bleeding deposits for years. And the Spanish bank Bankia — which was at one point down 20% — denied that there was anything unusual going on in that department.

But the thing about bank runs is that headlines can become reality.

Europe is now in a weird position where the next big scheduled “event” isn’t until June 17, when Greece has its revote to form its next election.

At the rate things are going, June 17 is a long way away. It’s hard to see the status quo continuing until then with markets melting at the rate they’re going.

Just sayin’.

Now for what happens if Greece leaves the euro, see here >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

It will hit the public markets tomorrow and the stock will likely pop. The question we have for you is how high will it pop?

Pick your closing price from the options below and drop a note in the comments about why.

Two things to think about before voting: Google’s market cap is currently $203 billion and Facebook is selling a lot of stock, so it should be able to fulfill a lot of demand.

Please follow SAI on Twitter and Facebook.

Join the conversation about this story »