After Friday’s chaos meeting regarding Greece, today’s S&P downgrade of the country, it is important to be up to date with the coming 2 crucial weeks, full of market moving events. Below schedule from Stratfor;

Courtesy, Stratfor

Self explanatory chart from Spiegel.

So, let’s all listen to the Elite again, on how to get us out of the mess, THEY created. Krugman delivers a great article on this subject below. For the full insight, of how it all went down, from subCrime, CDS, etc, watch “Inside Job”.

“The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious. And by trying to shift the blame to the general populace, elites are ducking some much-needed reflection on their own catastrophic mistakes.

The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.

So who was responsible for these budget busters? It wasn’t the man in the street.” (WSJ)

And the conclusion;

“But the larger answer, I’d argue, is that by making up stories about our current predicament that absolve the people who put us here there, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.” (WSJ)

http://www.nytimes.com/2011/05/09/opinion/09krugman.html?_r=2

Austerity hurts, but if you don’t wish to exit the Euro, you have to sell some assets. We believe that Greece needs to restructure it’s debt, and then try to rebuilt. More loans, selling assets etc is just Chinese water torture. Sometimes, one needs to take the Stop.

ATHENS — “The Greek government, under pressure from its foreign creditors to raise money by privatizing state enterprises, is facing fierce opposition to its proposed sell-offs from powerful labor unions and critics within the governing Socialist party itself.

No islands or beaches are up for sale, despite the persistent, usually snide suggestions from abroad that have riled many Greeks. Genop, the power workers’ union, has gone further, presenting its protest as a crusade for Greeks who saw their wages and pensions cut in the first wave of austerity measures last year.

“We will do everything to stop this privatization for one reason alone — because if we don’t, citizens will see their power bills triple,” said Nikos Fotopoulos, head of Genop.” (NYT)

http://www.nytimes.com/2011/05/10/business/global/10privatize.html?ref=business

Commodities up day today. After reports of huge losses at several hedge funds due to last week’s collapse in oil and silver, we see Silver up 6.5% and oil up 5.5%. Vvol is huge, short gamma guys are exploding, but we hope they didn’t sell out all at rock bottom. As we wrote before ( http://www.thetrader.se/2011/05/08/silver-why-are-forward-rates-negative-again/) we expect the Silver bounce to max 40 Usd.

But what is going on with JPY? Intervention time soon?

While the markets sold off heaviliy on rumours of a secret meeting last Friday and the Euro plunged hard, we heard only denial from EU leaders. WSJ reports of some rather interesting aspects of our elite leaders. Maybe the masses are too stupid to be told the truth 

“Is lying considered an appropriate mode of communication for euro-zone leaders?

We have to wonder after a strange episode on Friday evening. Here’s what happened:

Just before 6 p.m., German news magazine Spiegel Online distributed a report saying that euro-zone finance ministers were convening a secret, emergency meeting in Luxembourg that evening to discuss a Greek demand to quit the euro zone.” (WSJ)

http://blogs.wsj.com/brussels/2011/05/09/luxembourg-lies-on-secret-meeting/

More lies,

http://euobserver.com/9/32222

There goes the housing market….Homeowners in negative equity are making new highs. Anybody believing the housing rebound should reconsider. All the QE seems to have saved some billionare’s SPX exposure, but Average Joe is still stuck with negative equity. It’s these guys that are supposed to consume us out of the misery.

“More than 28 percent of U.S. homeowners owed more than their properties were worth in the first quarter as values fell the most since 2008, Zillow Inc. said today.

Homeowners with negative equity increased from 22 percent a year earlier as home prices slumped 8.2 percent over the past 12 months, the Seattle-based company said. About 27 percent of homes were “underwater” in the fourth quarter, according to Zillow, which runs a website with property-value estimates and real-estate listings.

Home prices fell 3 percent in the first quarter and will drop as much as 9 percent this year as foreclosures spread and unemployment remains high, Zillow Chief Economist Stan Humphries said. Prices won’t find a floor until 2012, he said.” (Zillow)

http://www.bloomberg.com/news/2011-05-09/u-s-underwater-homeowners-increase-to-28-percent-zillow-says.html

Moody’s Investors Service has today placed Greece’s B1 local and foreign currency government bond ratings on review for possible downgrade.

Moody’s decision to initiate this review was prompted by:

(1) revisions to fiscal metrics, most notably the significant upward revision of the 2010 general government deficit;

(2) increased uncertainty about the sustainability of Greek sovereign debt in the context of potential delays in the achievement of fiscal consolidation targets; and

(3) concerns about the probability and the implications of a delayed and weaker economic recovery.

Moody’s review will focus on the factors that will drive the country’s debt dynamics over the next few years.

Moody’s says that a multi-notch downgrade is possible if it concludes that there is large risk that Greece’s debt metrics are on an unsustainable path. In Moody’s view, such conditions would materially increase the risk of debt restructuring over the short to medium term. Under such conditions, euro area policymakers have stated that future loans from the Exchange Stability Mechanism would be extended only if private creditors were to bear some of the losses. If the path of Greek debt-to-GDP were to appear unsustainable, then Greece might itself have an incentive to seek a change in the terms of its debt obligations.

Greece’s country ceilings for bonds and bank deposits are unaffected by the review and remain at Aaa (in line with the euro area’s rating). At this point of time, however, due in large part to systemic risk within Greece, the highest rated domestic issuer or securitization is rated A3.

Full report below,

http://www.moodys.com/viewresearchdoc.aspx?lang=en&cy=global&docid=PR_218672

Thetrader has written many articles on the HFT Algomania. With the predator models now in the commodities space, we got to experience the first Flash Crash in commodities. We are patiently waiting for the Flash Crash in currencies to follow shortly. Must read article from Reuters,

“Stunningly large jolts from so-called stop-loss trading amazed market traders. The automated sell orders were generated as oil crashed through price points that traders had programed in advance into their supercomputers. In many cases, computer algorithms sold for technical reasons, as oil dropped through levels that, once breached, could trigger ever larger waves of selling yet to come.

The machine trading, based on subtly different but fundamentally similar, algorithmic models, eliminates the white-knuckles and potential human error involved in actively trading a volatile market, and increases anonymity. Instead of breeding hesitation, abrupt price drops can quickly prompt these machines to unload a bullish long position in oil, and build up a bearish short one instead.

Machine-led trading is one plausible thesis for another apparent market anomaly that occurred on Thursday. Exchange data shows that the total number of open positions in the oil market — a number that would typically fall in a selloff — instead rose. Normally, panicky funds selling oil en masse would cause total “open interest” numbers to shrink, as exiting investors closed out contracts. But some machines, following the market trend, may have gone further, by dumping long positions and quickly amassing sizable short positions instead.” (Reuters)

http://www.reuters.com/article/2011/05/09/us-financial-oil-rout-idUSTRE7480AI20110509