After renewed Eurozone jitters, some MENA conflicts still going on, Bin Laden Captures, we seldomly hear about the US Economy anymore. It still is the largest economy in the world. The debt ceiling has a few billion Usd left before (b)reached, even though Geithner has started some of his “emergency” measures.  Some perspectives on the Us budget in the below great chart by Elefint Designs. Take a close look on the microscopic dot, far left in the chart, that is the proposed cut for 2011. Click the chart for better view.

The soap opera continues in the PIIGS arena. Now Portugal is not happy with the ratings agencies, and are suing those. What happened to “if you can’t beat them, join them”?

“Portuguese authorities have opened a criminal inquiry into three international credit rating agencies following a complaint, the Attorney General’s office said Monday.

The inquiry is based on a complaint filed last month by four Portuguese academics, an official with the Attorney General’s office said on condition of anonymity, in keeping with departmental regulations.”(washingtonpost)

http://www.washingtonpost.com/business/portugal-opens-inquiry-into-international-rating-agencies-report-says/2011/05/09/AFNOSVZG_story.html

Meanwhile we are hearing;

*** New Greek Deal Possible Early As June Senior Greek Official

Sometimes taking the STOP is the only possibility of survival. Greece has a hard time understanding the fact, their economy is not feeling well after many years of mismanagement. They need to go through the bloodbath procedure, prolonging it, won’t cure the country. This is despite the fact a restructure would cause big losses.

“Greek bond yields and the cost of insuring the country’s debt against default rose to all-time highs amid speculation about a debt write-off or an extension of repayment timelines. Standard & Poor’s cut Greece’s long-term sovereign credit rating by two levels yesterday to B, five notches below investment grade. The rating may be lowered further, S&P said.

“Right now a restructuring shouldn’t and can’t happen,” Aris Xenofos, president of the Hellenic Fund & Asset Management Association representing 36 firms, said in an interview before the downgrade. “It would be devastating for the Greek economy, and detrimental for the rest of the European Union and the euro.” (Bloomberg)

http://www.bloomberg.com/news/2011-05-09/greek-fund-industry-head-warns-debt-restructuring-would-devastate-economy.html

So we go back to normal, ie, low volume, low volatility environment in equities. Yesterday was another low volume day again. It coincided with the reverse 1/10 stock split in Citigroup. We think that is evidence enough, prior to the invesrse split, HFT Algos churned stocks to get rebate, and all of a sudden it is not that lucrative churning Citi stocks. Algomania continues.

Regulators hiking margins again, this time it is  oil. Let’s see how the already hurt long hedge fund society copes with this one. They managed to kill the Silver longs, let’s see if it works as efficiently on oil prices? Full report below,

cme oil hike

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?