Tuesday, September 11, 2012
9/11/12 Inside Job
I read an interesting comment a couple of days ago (the source eludes me right now) re tomorrow's court decision: Why would Draghi go out on a limb with last week's bond-buying announcement without knowing ahead of time whether the court plans to issue an injunction?
There's always an 'inside man/woman.'
My take is simple> the court gives the green light to the bail-out fund.
Subscribe to:
Post Comments (Atom)
It is possible… although unlikely… that the Court could rule the entire law unconstitutional, citing the concern that
ReplyDeletethe ESM encroaches and trumps Germany’s sovereignty and doesn’t include enough oversight or accountability.
The rating agency, Fitch, released a report mid-week last week suggesting that the Court will not rule against the ESM entirely. The report said that
A consensus appears to have developed that
the court will not rule against the
ESM….However, a negative verdict by the
court would be likely to create significant
market volatility, in light of concerns about
the capacity of the bailout funds that may be
needed to support larger deficit countries.
Rather, we suspect that the Court shall find against portions of the ESM in its commentary but will approve the ESM with conditions, including perhaps a cap on Germany’s contributions, a requirement to go back to
parliament for further approval or perhaps even
mandating that the ESM be put to a referendum to be voted upon by the whole German population.
The latter condition would be the most serious for the most recent polls indicate that Mr. and Mrs. Schmidt do support keeping the euro and deepening fiscal ties, but are openly opposed to the sorts of bailouts that have been necessary for Greece and soon shall be for the
other PIIGS. Oh, and it is possible that the Court may simply kick the ball down the field and delay making a full decision until a later date!
per gartman
The markets (aka the people who trade stocks) want to rally. So we're about to rally.
ReplyDelete"the court gives the green light to the bail-out fund."
ReplyDeleteCould be Draghi believes the court will refuse so by making this commitment he's attempting to force the issue?
Today, Germany commented the US has too much debt ion their view.
So what was decided concerning extending Greece's austerity pardon, are we back discussing Greece leaving to EU? I still guess this would be good for the euro currency.
X+3B is hearing Israel attacks Iraq by the end of Oct.
ReplyDeleteInteresting - to sum up the article below, Israel needs to act like they are about to attack at any moment. Israel is giving the appearance of being held back by the US, unless Israel sees an immediate threat. There is no guarantee Israel could successfully destroy the nuclear site if Israel does attach. Iran only needs to develop a weapon, not produce one. That gives Iran more political clout. The US would prefer not to see any bombs being tossed around.
Deletehttp://www.stratfor.com/weekly/war-and-bluff-iran-israel-and-united-states
Nice and concise.
DeleteIraq has nothing, else Israel would already have taken steps.
DeleteI doubt we'll ever know how close they came, my feeling is it's more likely Iran hoists a white flag.
ReplyDeleteSubmitted by Vadym Graifer (3511 comments) on Wed, 09/12/2012 - 00:33 #113195
DE) Preview: German Constitutional Court Preview: Ruling expected Wed Sept 12th on or around 8:00 GMT (4:00 ET)
- On Sept 12th, the German Constitutional court will issue its initial verdict regarding the constitutionality of the ESM and Fiscal compact. The debate focuses around the fact that the euro zone finance ministers would have full control over disbursements of the ESM to struggling countries regardless of the effect of the distributions on German budgets, undermining the sovereign rights of the German legislature. The German court has taken an unusually long time to rule on the preliminary injunction, giving the ruling extra weight. Any further decisions are unlikely to deviate from the initial ruling.
- The fiscal compact is a treaty among EU members that will require national budgets to be in balance (as defined by a general budget deficit of <3% and structural deficit of <0.5-1.0%). The compact was signed by all members save the UK and the Czech Rep in March and will come into effect the month after it is ratified by the twelfth Eurozone member. Compliance will be placed on the European Court of Justice who will have the power to level fines to countries in breach of up to 0.1% of GDP.
- The European Stability Mechanism (ESM) is a permanent organization which will provide financial aid to distressed euro zone countries. The ESM will have paid-in capital provided by Eurozone members at a fixed %. In order for the ESM to come into effect it must be ratified by countries representing 90% of that capital. So far about 55% of the capital contributors have ratified the ESM (only German and Italy haven't ratified the treaty). Either German (27% contribution) or Italy (18%) could block the ESM if they fail to ratify it. If ratified the ESM will replace the temporary European Financial Stability Mechanism (EFSM) currently in effect.
Here are the possible decision scenarios:
- 1. The ESM and Fiscal compact are ruled constitutional as they exist (injunction is dismissed). Once the ESM and Fiscal pact are declared to be constitutional, Germany can ratify the treaty at any time making it very difficult to overturn the decision and declare the treaties unconstitutional in the future. -Market Impact: A decision without conditions would be unexpected and very positive for a unified Europe going forward. Many Germans (and other northern Europeans) have been outspoken against a unified Europe without conditions and this type of decision would do a lot to quell their voices. Risk on
- 2. The ESM and Fiscal compact are ruled constitutional with conditions or requiring additional information These may include:
- Restriction on ECB bond purchases
- Limiting the liability of the ESM with a cap of maximum capital paid-in or some type of halt to the program if other members are unable to pay their share
- Consultation of lawmakers or the Bundestag on ESM disbursements/issues
- Changing details of the fiscal compact
- Where the ESM treaty belongs in the Constitution
- A referendum on the ESM and Fiscal compact to be voted on by the German population - Market Impact: This decision is the most likely one, a lot of the impact will hinge on the severity and/or number of the conditions
- 3. The injunction is found to be valid. Germany will be banned from signing the treaties into effect until the German Court issues its final ruling early in 2013. This final verdict could also impose further conditions on the German government regarding other European countries. This scenario could also include the Court ordering a National referendum on the ESM and Fiscal compact as well. Germans are bitterly divided on this with about of them not wanting to supply financial assistance to other countries - Market Impact: This decision would be the most unexpected and would have the largest market impact. Massive risk off
**Note: Twenty German Legal Experts unanimously think that German Top Court will not block the ESM and fiscal pact in poll
Assuming MGIC continues with the $0.10 semi-annual dividend, MGIC now has the highest yield of all of the software companies listed under software in Yahoo - I see this as providing a good catalyst for upside in the stock. Plus, they've been growing revenues and profits consistently for several years now and are doing a lot of work to position themselves for the cloud. In fact, if it not for the fact they had a controlling shareholder, I suspect we would have seen them taken out by now.
ReplyDeleteI'm not sure if MGIC will act move like an American company an keep the same each time or a European one and vary it based on earnings - they've said dividends will be 50% of earnings, but either way, it is uniquely a high-yielding, growth-oriented software company in a good sector of the market. I would not be surprised to see a $10+ stock price in the next couple of years.
Wow...is that true $0.20 per year? That's a nice yield for a growth company.
DeleteIt's passed!
ReplyDeleteJVA is skyrocketing. REDF is skyrocketing. NBG is skyrocketing. All of the crap stocks are running hard. YRCW and DMND are next up.
ReplyDeleteMGIC - Hmmm.......
ReplyDeleteTBT closed @ 16.195 for a 3.5% gain.
ReplyDeleteFrom my comment about Israel, I meant Iran obviously.
ReplyDeleteOh dang, I thought the ME was going to hell in a handbasket!
DeleteThe new situation in Egypt bothers me more than Iran for some reason. Iran is economically in the pits w 25% unemployment, this is why I think they come around.
Hope your right about Iran.
DeleteREDF - Damn, missed it!
ReplyDeleteMight as well through HEK in that POS group.
ReplyDeleteMGIC - Was a tight pincher on the daily last month:
ReplyDeletehttp://stockcharts.com/h-sc/ui?s=MGIC&p=D&b=5&g=0&id=p13593089024
NSPH - Still coming to us
ReplyDeleteI've been trying to find a link to Monday's Conference.
DeleteIllini's all over this one, he hasn't said anything 'bout the conf. though. I just lowered my bid to $2.50
DeleteINTC - This thing seems oversold
ReplyDeleteThanks for pointing that out, CP! Picked it up @ 23.10...
DeleteI can see a case for $21.50, drawing lines on the weekly chart.
DeleteGMO - Last week General Moly announced completion of their Preliminary Final Environmental Impact Statement (PFEIS) for the Mt. Hope project.
ReplyDeleteBOIL - Green again, yee-ha! ;)
ReplyDeleteDMND is setting up for a monster move. 100%.
ReplyDeleteDidn't they have a PR that advised not to expect restatement till Jan?
DeleteI'm trying my best to keep track...
well they got an extension from Nasdaq on getting delisted.
DeleteYeah, I saw that extension PR as well.
DeleteWow, Geoff was certainly correct in predicting that once the German court approves ESM, there will be a small rally to clear the buy stop orders and then a sell-off to shake the newcomers off the train AND to hit some sell stop orders below. We got exactly that in SLV...
ReplyDeleteNice to see, however, AUMN positive on the day when SLV and GDXJ are negative -- a complete reversal of yesterday's situation. Why should such a good company trade in such an erratic fashion? Has it really all been left to black box algos?
ReplyDelete"Has it really all been left to black box algos?"
DeleteYes, all they have to do is bang the tape up and down using other people's money, to make them sell and/or buy.
I think they sucked in a lot of people on the way to taking silver to $50, notice how they smacked it back down too, there were no buyers in the wee hours of the night and so the task of dropping the price was a piece of cake.
IMAX - I saw an article headline yesterday that claimed box office receipts are down considerably.
ReplyDeleteDELL - Is this thing cheap enough yet, or should I just forget about it?
ReplyDeleteBOIL - Looks like I shoulda' put a few more crabs on BOIL.
ReplyDeleteCNH - Looks like a $50 target on this one to me, a stronger Brazilian Real would be the clinch factor.
ReplyDeleteSee you guys at the close. I need to go buy a new iPhone.
ReplyDeleteTITN - Would you say this gal's beat up enough to look attractive?
ReplyDeleteI think I'll wait a bit and see if it drops to a $12 handle.
DeleteIMAX - Looks like a hammer on this one.
ReplyDeletenew post
ReplyDelete