Replies to post #307982 on $Stock*Shop*Charts*News*Option$

[Stock Lobster]

Look at the downturn on that chart, yikes! Yes, from the way AIG was behaving today, I could definitely see a nice 10% downtick, but it is a volatile little bugger, so calls should do well along the way on bounces, but as always with AIG, take gains fast!

I've been watching calls go from 100% green to 20% red within an hour or two...wash rinse repeat

[Stock Lobster]

BL: Bond Vigilantes Say EU Needs Better Plan to Control Greece Budget Deficit

By Matthew Brown and Anchalee Worrachate

Feb. 18 (Bloomberg) -- European Union leaders are failing to persuade bond investors that Greece can fix its budget.

The yield on Greece two-year notes have remained above 5 percent, the highest in the euro zone, even after officials urged the nation this week to reduce its deficit. The premium investors demand to hold the notes instead of benchmark German securities has held above 4 percentage points, the most since the Mediterranean nation joined the euro and more than 10 times its 35 basis point average the past decade.

After driving yields to the highest in 10 years, bond investors are keeping up the pressure on the EU to support Greece. Concern that the nation’s inability to narrow a deficit that is more than four times the EU limit will be replicated in countries such as Portugal and Spain prompted Societe Generale SA’s top-ranked strategist Albert Edwards to predict Feb. 12 that the euro region was poised to break up.

“The market has replaced the EU as the chief enforcer of fiscal discipline, and the movement in spreads is testament to that,” said Charles Diebel, senior interest-rate strategist at Nomura International Plc in London. “What the bond markets have done to Greece could be the salvation of Europe.”

The euro weakened 0.3 percent to $1.3567, bringing its three-month decline to 9 percent.

No Specific Measures

Investors who push up debt yields in an effort to alter government policy are known as vigilantes, a term coined in 1984 by economist Edward Yardeni, president of Yardeni Investments Inc. in New York. They were credited with forcing Bill Clinton to cut the U.S. deficit after he came into office in 1993, helping drive 10-year Treasury yields down to about 4 percent by November 1998 from above 8 percent in 1994.

“Fiscal rules are only as good as the political will to enforce them, and there hasn’t been much of that, especially during the good times,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam.

Greek two-year yields rose the most in almost three weeks on Feb. 16, when euro-region finance ministers stopped short of announcing specific measures to help the country. EU Economic and Monetary Affairs Commissioner Olli Rehn said after their meeting in Brussels that the bloc has “ways and means” to safeguard stability in the euro area.

Greece said last year that the deficit would be 12.7 percent of gross domestic product, compared with the EU ceiling of 3 percent. Prime Minister George Papandreou’s Dec. 14 pledge to take “radical” action failed to stop Moody’s Investors Service and Standard & Poor’s from cutting the country’s credit ratings.

Shrugging of Papandreou

Yields rose even after Papandreou announced a plan on Jan. 14 to cut the deficit by 10 billion euros ($13.7 billion), forcing further concessions two weeks later when he promised to boost the retirement age and freeze public sector pay. That reversed a pledge he made in last year’s election.

While the vigilantes are punishing fiscal transgressors in Europe today, they were largely silent for much of the past decade as governments flouted the EU’s rules. The spread between Greek and German 10-year yields averaged 19 basis points in 2004 even as the Mediterranean nation’s budget deficit was 7.5 percent of GDP, the biggest in the region.

“The experience of the past 10 years shows that markets can be ignoring these issues totally until they suddenly wake up and turn violently against fiscal offenders,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “Market discipline is important and necessary, but sudden shifts in sentiment in the bond market can be equally devastating.”

Limits Exceeded

Euro-region nations have exceeded the 3 percent limit on their budget deficits 44 times since the currency was introduced in 1999. Greece has been the biggest offender, as its deficit rose above the ceiling in eight of the nine years since it joined the euro in 2001. Italy broke the rule six times. Portugal, France and Germany flouted it five times.

All 16 countries that use the euro will post budget deficits above 3 percent for 2009. Ireland will have a 12.5 percent shortfall, and Spain will have an 11.2 percent gap, according to European Commission estimates.

Greek “yields seem fair to me,” said Bob Treue, founder of New Jersey-based Barnegat Fund, ranked among the top three hedge-fund performers in fixed income last year with a 132.7 percent return, according to Bloomberg calculations. “We don’t have a position in Greece, long or short.”

Rules ‘Appropriate’

Current rules and instruments are “appropriate,” EU Economic and Monetary Affairs spokesman Amadeu Altafaj said in response to questions from Bloomberg News. “The issue at stake is not the rules and the instruments but the non-compliance to these rules.”

If the EU fails to convince markets that it can solve Greece’s difficulties, investors may turn their attention to its neighbors, according to Mark Schofield, head of interest-rate strategy at Citigroup Inc.

“Spain, Portugal, Italy and Ireland might not be a problem now, but if the market starts pushing their spreads wider, and put them in the situation where they are forced to fund their deficits at much more onerous levels, then you will see a lot more pressure for a pan-European solution to the problem,” he said.

Yields on the debt of other peripheral euro-region countries also rose in recent months as investors bet the budget crisis wasn’t limited to Greece. Portuguese two-year yields touched 2.72 percent on Feb. 4, 1.65 percentage points above Germany’s level and an almost 13-year high.

To contact the reporters on this story: Matthew Brown in London at [e-mail]; Anchalee Worrachate in London at [e-mail]

Last Updated: February 17, 2010 21:49 EST

[Stock Lobster]

BL: Asian Stocks Drop, Yen Rises on Greece, Concern Fed May Withdraw Stimulus

By Patrick Chu and Masaki Kondo

Feb. 18 (Bloomberg) -- Asian stocks dropped and the yen strengthened on speculation the Federal Reserve is moving closer to pulling economic stimulus measures and concerns about the European Union’s financial rescue of Greece resurfaced.

The MSCI Asia Pacific Index lost 0.4 percent to 117.73 as of 2:25 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index declined 0.2 percent. The yen strengthened 0.6 percent to 123.42 versus the euro, set for the sharpest gain since Feb. 4 on a closing basis. The Japanese currency advanced to 90.93 to the dollar from 91.25 in New York yesterday.

Minutes of the Fed’s Jan. 26-27 meeting posted yesterday showed some policy makers pushed to start selling assets in the “near future” as a way to shrink the central bank’s balance sheet. The yen climbed against all 16 of its most-traded counterparts after a political ally of German Chancellor Angela Merkel said that “not a single euro” should go to Greece, rekindling sovereign credit concerns and demand for Japan’s currency as a refuge.

“People have a strong appetite for bargain hunting and can’t see bright prospects for higher share prices,” said Yoshihiro Ito, senior strategist at Okasan Asset Management Co., which oversees $8.2 billion. “Continued improvement in the global economy is supporting the market, though uncertainties won’t be easily cleared.”

The Asia stock benchmark’s drop today followed a 1.6 percent increase yesterday, which was the most since Nov. 30. Japan’s Topix index lost 0.1 percent and Singapore’s Straits Times Index dropped 0.4 percent.

Stocks Reversal

“After yesterday’s surge, profit taking will weigh on the market,” said Mitsushige Akino, who oversees about $450 million at Tokyo-based Ichiyoshi Investment Management Co.

The S&P 500 advanced 0.4 percent yesterday as better-than- estimated earnings, industrial production and housing data bolstered confidence in the economic recovery.

Qantas Airways Ltd., Australia’s biggest airline, plunged 8.1 percent to A$2.73. The company will scrap first-class cabins on most routes after a slump in demand for the most expensive seats led to a 72 percent drop in first-half profit. The company’s earnings missed analyst estimates.

Sims Metal Management Ltd., the world’s biggest recycler of scrap metal, sank 7.7 percent to A$19.79 after reporting a 39 percent decline in first-half sales.

Santos Ltd., Australia’s third-largest oil and gas producer, declined 1 percent to A$13.47. The company said 2009 net income tumbled 74 percent as the price it received for oil fell.

German Resistance

The leader of Chancellor Merkel’s Bavarian political allies said Germany must resist supporting Greece with taxpayer funds because granting aid would invite other nations to seek bailouts.

“We are the stable-currency party,” Horst Seehofer, who heads the Christian Social Union, one of three parties in Merkel’s coalition, told a rally in the southern city of Passau yesterday. “That’s why we’re helping Greece politically, but not a single euro must go there.”

The euro has fallen about 10 percent against the dollar from a one-year high of $1.5144 in November on concern sovereign debt problems will hamper the region’s recovery. The dollar advanced to $1.3570 per euro in Tokyo from $1.3607 in New York yesterday.

Futures on the CME Group exchange show a 47 percent chance the Fed will raise its target rate for overnight bank lending by at least a quarter-percentage point by its September meeting, up from 46 percent odds on Feb. 16.

South Korea’s won weakened 0.7 percent to 1,149.70 per dollar on signs European Union leaders are failing to persuade bond investors that Greece can fix its budget woes, boosting the attractiveness of the greenback. The yield on Greece two-year notes has remained above 5 percent, more than four percentage points higher than those of Germany. The Malaysian ringgit fell 0.4 percent to 3.3995 per dollar.

Oil Falls

Crude oil dropped for the first time in three days as the dollar climbed against the euro and an industry report showed an increase in distillate supplies in the U.S., the world’s biggest energy consumer.

Oil retreated from a four-week high, dropping 0.7 percent to $76.83 a barrel, after the American Petroleum Institute reported that supplies of distillate fuel, a category that includes heating oil and diesel, rose 1.28 million barrels last week.

“The global economy is still realistically weak,” said Peter McGuire, managing director at CWA Global Markets Pty in Sydney. “I don’t see a lot of issues in terms of supply constraints out there and demand is relatively weak.”

Gold for immediate delivery fell 0.4 percent to $1,102.15 an ounce after the International Monetary Fund said it would begin selling some of its reserves on the open market, raising concern that supply will increase.

Metals Drop

Copper on the London Metal Exchange slid 0.4 percent to $7,099.75 a metric ton and nickel declined 1.3 percent to $19,875 a ton.

The cost of protecting Australian and Japanese corporate bonds from default dropped to a two-week low, according to traders of credit-default swaps. The Markit iTraxx Australia index fell 2 basis points to 97.5 basis points in Hong Kong, the lowest since Feb. 4, according to Citigroup Inc. and CMA DataVision. The Markit iTraxx Japan index declined 1 basis point to 146, according to Morgan Stanley. That’s also the lowest since Feb. 4, CMA prices show.

To contact the reporters on this story: Patrick Chu in Tokyo at [e-mail] Kondo in Tokyo at [e-mail].

Last Updated: February 18, 2010 00:24 EST