August 3, 2012

EUROPEAN CENTRAL BANK (ECB)

  • ECB President Mario Draghi has indicated that the focus of the ECB is to keep short term rates low by purchasing T-bills and short-term bonds.
  • Draghi also stated that the European Financial Stability Fund (EFSF) may be activated to buy longer-dated bonds.
  • The EFSF :
    • Is a corporation comprised of the 27 member states of the Euro zone.
    • Can only act after a support request is made and a Memorandum of Understanding is unanimously accepted by the Euro Group.
    • Countries receiving financial support (bail outs) are still responsible for their previous guarantees but not future guarantees. As countries drawdown for financial assistance the EFSF ‘pot’ is reduced by the drawdown and guarantee support.
    • To date Greece, Ireland, and Portugal have received support and no longer provide guarantees.
    • The EFSF peaked at $780 billion in the second quarter of 2012 and now the credit line stands at $448 billion.

LARRY JEDDELOH – MARKET INTELLIGENCE REPORT

  • The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain does.
  • US households are now actually receiving more money directly from the US government than they are paying to the government in taxes.
  • The Federal Reserve purchased approximately 61% of all government debt issued by the US Treasury Department during 2011.

TIDBITS

  • Knight Capital Group Inc, a computerized trading firm, had a major ‘bug’ in its new software costing the firm $445 million in 45 minutes. All trades were cancelled and only Knight sustained any loss. The company opened its books to potential buyers and is under pressure to strike a deal within days.
  • Limited Run, a NY start-up, is deleting its ad page on Facebook because its research found that only 20% of clicks were from users, the rest were from software ‘robots’.
  • US led sanctions against Iran are costing OPEC’s 3rd largest oil producer $133 million/day in lost sales.
  • According to CBRE Group Inc. San Francisco office building sales may exceed $5.3 billion, the most since the market peaked in 2007. The average price has risen to $465/sq. ft. and peaked in 2007 at $516/sq. ft.