The Collapsing Greek Income Statement, Or Why Greece Is Doomed

The Collapsing Greek Income Statement

zerohedge.com

With everyone focused exclusively on the Greek balance sheet, where apparently the market has now realized that you don't cure unmanageable debt with yet more debt (something the Troica will figure out just as soon as the eurozone breaks apart), a far more important statement is the country's P&L, or income statement. After all, if a country can not grow into its balance sheet with excess cash at the end of the day, all bailouts are completely irrelevant....

Egan-Jones', a rating agency that has proven infinitely better at predicting the future than Moody's or S&P, summary of what to expect:

End of the line - although Greece is likely to receive additional funds, those funds might be senior to existing debt and both creditors and Greece's patience is waning. The rise in interest rates is likely to place an unbearable burden on the issuer and the austerity measures will further pressure GDP. The Hellenic Statistical Authority cited an accelerated contraction in domestic demand and a fall in consumer expenditures with the decline.

We expect that Greece will be forced to restructure its debt within the next 2 to 18 months; it cannot sustain significant additional budget cuts, the tepid economy, restricted capital raising, and 20+% interest rates. Greece's stated debt is EUR329B, GDP is EUR230B, and the federal budget deficit is EUR3.8B before interest expense and EUR16.4B after interest expense. The country has failed to meet its initial deficit target of 8.1% of GDP for 2010 as agreed to under the joint IMF-EU bailout terms in May 2010.Meanwhile, Greek debt (currently the highest in the EU at 127%) is projected to reach 160% of GDP in 2011. Austria withheld funds due to Greece after claiming the country has failed to meet its spoken commitments for the EU bailout package

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is Spain decoupling from its fellow PIIGS?

Spain drifts away

FT Alphaville

Posted by Neil Hume on Apr 06 10:00.

Spot the odd one out:

"...even under a stressed scenario [budget overshoot, higher than expected bank recapitalization costs and the potential direct costs to Spain if other fiscally challenged euro area countries restructure their debt] Spain’s debt levels (86.7 per cent of GDP) are considerably lower than Greece (156 per cent), Ireland (120 per cent) and Portugal (heading for 100 per cent).
That reflects the fact that Spain went into the great recession with lower levels of government debt than other countries (36 per cent at the end of 2007) and, says Jenkins, that the Spanish cajas are not that big relative to size of the overall economy." - Evolution Securities

It’s Spain of course, which has decoupled from other members of the periphery over the past three months with its bond yields not only tightening against bunds but also falling outright (from a high of 5.45 per cent to just over 5 per cent today.
The question, of course, is whether this can be justified.
Enter Gary Jenkins of Evolution Securities who has taken a closer look at whether this decoupling can be explained underlying factors.

We look at Spain’s projected fiscal path and then introduce some ‘stressed’ scenario events such a budget overshoot, higher than expected bank recapitalization costs and the potential direct costs to Spain if other fiscally challenged euro area countries restructure their debt. We then see how this changes Spain’s fiscal position and if the deficit/debt levels still remain ‘sustainable’ which would largely justify the decoupling from other peripherals that has taken place lately.

That’s the methodology and now the results.

As you can see even under a stressed scenario Spain’s debt levels (86.7 per cent of GDP) are considerably lower than Greece (156 per cent), Ireland (120 per cent) and Portugal (heading for 100 per cent).
That reflects the fact that Spain went into the great recession with lower levels of government debt than other countries (36 per cent at the end of 2007) and, says Jenkins, that the Spanish cajas are not that big relative to size of the overall economy.

It seems to us that the affordability of Spain’s debt is largely down to internal rather than external factors. Default by other peripherals will not have a significant direct effect on Spain, although there may be indirect effects, especially from a potential Portuguese default given Spain’s close ties with its Iberian neighbour. The factors that will have significant effect on the sustainability of Spain’s debt are the final cost of bailing out the savings banks, which in itself seems manageable and even in combination with a weaker economy and/or fiscal slippage would probably leave the debt at sustainable levels. Having successfully moved away from the other peripherals it is important that the fiscal discipline and economic growth expectations are met to ensure that Spain can avoid any contagion impact, if as we expect, we witness multisovereign restructuring in 2013 and beyond.

Ah, the cajas and all the real estate exposure. Here’s what Jenkins has to say about that:

In the name of prudence we will however use Moody’s worst case scenario where it sees a need for capital injections of up to €120bn, or nearly 8% of Spanish GDP when looking at the possible cost to Spain. This number highlights the difference between Ireland and Spain. Both countries have been affected by real estate and construction bubbles that brought at least parts of the banking sector down with them when they burst in 2007/2008. The cost of Ireland’s bank bailout has reached about 45% of GDP including the €24bn further recapitalisation needs announced last week (although at least in theory some of this may be raised from the private sector or subordinated debt holders rather than from government funds), Spanish cajas may be in a weak position, but relative to the size of the overall economy their losses and potential losses remain manageable.

read the whole story here:FT Alphaville » Spain drifts away

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Banks and investment firms have rebounded fastest since March 2009 lows

Chart of the day: Barclays and Lloyds soar since lows

Kit Chellel

18 Feb 2011

How financial firms in the FTSE100 have performed since the lowest point of the crisis

Two weeks from today is the second anniversary of one of the darkest moments of the financial crisis, when the FTSE 100 fell to a new low and Barclays shares were going for as little as 81p.

On that day, March 3, 2009, the 100 largest companies in the UK were worth less than they were when Tony Blair was elected in 1997.

The FTSE 100 has not hit such depths since, and an equities rally over the past few months has seen the index recover to somewhere near two-year highs.

Figures compiled by Financial News show that banks and investment firms have rebounded fastest, albeit from a lower level.

An investor who bought shares in the 10 financial firms (excluding insurers) currently in the FTSE 100 back in March 2009, would have seen a return of 149% in those two years, based on prices on Thursday morning.

This compares to an average of 73% across the FTSE 100 index.

An investor who backed Barclays would have done even better. The bank, which avoided a government bailout by tapping up Middle Eastern oil money, has risen a staggering 311% in the same period.

Lloyds is up 205% and private equity group 3i 182%.

The worst performer was investment group Alliance Trust whose shares rose 58.8%, which is below the FTSE average.

Second from bottom among the financial firms was Man Group which has been beset by problems since the crash. The listed hedge fund has seen half its assets under management pulled out by investors since the start of the crisis. Despite this, its shares have still gained 92 per cent between March 2008 and now.

The share gains achieved by banks are all the more impressive given that Barclays, HSBC, Lloyds and RBS all carried out multi-billion pound share issues to recapitalise following the crisis, diluting the value of stock.

The FTSE 100 index closed at 6087.38 yesterday, helped by strong performance from Lloyds TSB (up 2.9%) and RBS (up 3.8%). However the index remains some way below the pre-crisis peak of 6721.60 on September 31, 2007.

-- write to kit.chellel@dowjones.com

http://www.efinancialnews.com/story/2011-02-18/barclays-and-lloyd-best-performing-shares-since-crisis-trough?utm_source=twitterfeed&utm_medium=twitter

Your One-Stop Guide To Frontrunning Monday's Double POMO | zero hedge

Your One-Stop Guide To Frontrunning Monday's Double POMO

By Tyler Durden

Created 11/27/2010 - 13:04

On Monday, Brian Sack will go for an all-out onslaught of Netflix and Amazon shorts. For the first time ever the New York Fed will hold not one but two monetization procedures. Incidentally both will focus on the part of the curve that in the past two weeks has been performing best: the sides of the belly. The two operations, expected to be about $2 and $7 billion, will focus on bonds in the 10-17 Y and 2.5-4 Y sector. In keeping with the tradition of sharing with our readers the bonds that Sack will almost certainly end up monetizing, we present the 10 cheapest bonds that will likely end up being acquired on Monday. As the Fed is now the largest single holder of Treasurys [1](since the announcement of the SOMA reinvestment program on August 10, the NY Fed has purchased a total of $124bn Treasuries / TIPS: of the $105bn scheduled for the current month, the Fed has purchased $48bn per MS) expect to see increasingly more detailed analyses of the Fed's SOMA composition as cartoons about how to front run the Fed become increasingly more popular.
[2]
It is only fitting that on the near end, the bond most likely to be monetized is the just issued (November 8) PU8 [3] (3Y).
Below is a detailed summary of all QE2 OMOs via Morgan Stanley.
[4]
A detailed look at the long-side of Monday's second POMO:
[5]
The best cheat sheet available at the moment for future monetizations:

infographic: bailout mechanisms in Europe

As for those who still may be confused by how the various bailout mechanisms in Europe operate, we present to you this useful infographic by the Guardian.



http://the-masterblog.blogspot.com/2010/11/its-official-there-is-not-enough-money.html


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Fraudclosure Flow Chart

Fraudclosure Flow Chart

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Bankruptcies: Going for broke | The Economist

Bankruptcies: Going for broke | The Economist: "Bankruptcies rise in America
Aug 18th 2010

BANKRUPTCY filings rose 20% in the year to June 30th compared with the previous 12-month period, according to statistics released on August 17th by the Administrative Office of the US Courts. This takes quarterly filings to their highest point since tougher bankruptcy laws were introduced at the end of 2005. That change brought a spike of bankruptcies, as companies and individuals rushed to declare themselves broke under the more lenient old regime. The data suggest that an older trend is reasserting itself. This is could be more bad news for America—or it could just mean that creative destruction is alive and well."

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