Eurozone Recession in Overdrive

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Editor’s Comment:

France, Italy, Spain All at record lows in GDP

Mish Shedlock nails it in the article below. We are reminded again that where the banks get control of political policy, every avenue will be explored before Governments do the right thing — or the country explodes into chaos and a new Government is born. For those who have studied French history, these reports sound earily like the conditions that preceded the French Revolution and the bloodbath that followed. Rioting is commonplace. And the rioters are not just expressing outrage; they have lost faith in the their government, their currency and their prospects. Japanese seminars abound on how to store money and move to other countries. Malasia looks good to them. 

And here in the United States, the steam keeps building under the lid while the banks, realtors and other groups try to convince us that the recession, and the mortgage crisis that brought it on, is over and will NOW recover. Despite years of such “prosperity is just around the corners’ spinning, and some people still believe it when they hear it, we know from history, including our own, that revolution of one sort or another, doesn’t take a majority of citizens to get involved. In fact, every major revolution in every major country occurred with a small band of “fringe” people leading the way until their sucesses attracted the mainstream people who thought they could ride the storm and survive the aftermath.

Over the next 60 days, long-term unemployment benefits are over in this country. GDP is in for another hit. That was money going into the hands of people who were spending it the moment they received it. The full multiplier effect has been keeping our economy floating and now THAT is going away. 

Home prices are now at their lowest level since 2002 and all responsible analysts tell us that housing prices are going down another 15% and I think they are right. The economies of the world are crashing because the people have no money to spend. Even the employed are underemployed and can’t make enouogh money to pay for housing and other major purchases except on a much lower scale. 

We are in a depression, not a recession and the fact that this Depression is not yet as bad as the Great Depression should not lull us into a false sense that this is just a cycle that will run its course. It isn’t. This is the end of modern commerce unless we do something about it. And the ONLY thing left to do is to provide a mechanism where the middle class is suddenly redeployed with cash in their hands to buy things and cause commerce to renew. Don’t look to China or India either which are experiencing sharp decines in GDP. 

There is only one piece of currency that will restore the middle class . Iceland proved it as have other countries. FORCE BANKS TO REDUCE HOUSEHOLD DEBT. Between the mortgage chicanery and credit cards, government borrowing on terms they didn’t understand, and most banks that were “in the game” without knowing the rules, the money is gone. It isn’t the bank that has been robbed, nor government spending that is ripping the economies of the world apart. It is the banks themselves that siphoned off all our currency and our liquidity, and won’t put it back. They have lost their franchise through greed. It is time to nationalize the banks and then let them operate privately as utilities regulated as though they provide the lifeblood of the world.   

The “anti-regulators” are mere apologists for the new aristoracy that has pulled off a coup d’etat and pulled the wool over the eyes of the media and the public.

Eurozone Retail Sales Crash: Record Declines in France and Italy, Overall Revenues Drop at Near Record Pace

by Mike “Mish” Shedlock

Retail sales in France, Italy, and the eurozone as a whole hit the skids according to Markit. Retail sales in Germany were positive, but barely.

Steepest Decline in French History

Further sharp fall in French retail sales during May

 Key points:

  • Month-on-month decline in sales matches April’s survey-record
  • Steepest year-on-year decline in series history
  • Purchase price inflation eases to near-stagnation

Sales fell on an annual basis at the steepest pace recorded since the inception of the survey in January 2004. Margins continued to be squeezed amid an intense competitive environment, despite purchase price inflation easing to near-stagnation.

The headline Retail PMI® registered 41.4 in May, matching April’s survey-record low. French retailers indicated that actual sales came in well below previously set targets during May. The degree of undershoot was the greatest since February 2010.

Record Declines in Italy

Record year-on-year decrease in Italian retail sales in May

 Key points:

  • High street spending down sharply, albeit at weaker monthly rate
  • Job shedding steepest in series history
  • Discounting and cost inflation reduce profitability

Summary:

The Italian retail sector remained in contraction during May, with sales again falling sharply in spite of widespread discounting. Cost pressures meanwhile grew from April’s recent low on the back of rising transport costs, thereby adding more pressure to margins. Consequently, firms shed staff at a marked and accelerated rate that was the steepest since data were first compiled in January 2004.

High street spending across Italy contracted sharply on the month during May, albeit at a slightly slower rate than that registered during April. This was signalled by the seasonally adjusted Italian Retail PMI® posting at 35.8, up from 32.8. Sales fell for the fifteenth month straight, and panellists continued to highlight low consumer confidence and falling disposable incomes as the main factors behind the decline.

German Sales Show Slight Growth

German retail sales return to growth in May

 Key points:

  • Retail PMI points to marginal month-on-month rise in sales
  • Like-for-like sales higher than one year earlier
  • Wholesale price inflation eases markedly

The seasonally adjusted Germany Retail PMI rose from 47.4 in April to 50.7 in May, to indicate a marginal increase in sales on a month-on-month basis. That said, the rate of expansion was lower than those seen throughout the first quarter of 2012. Companies that reported a rise in sales since April generally noted that more favourable weather conditions had resulted in higher customer footfall.

Survey respondents indicated that actual sales fell short of initial targets for the second month running in May.

Sharp Drop in Overall Sales, Revenues Decline at Near Record Pace

Eurozone retail sales continue to fall sharply in May

 Key points: 

  • Retail PMI improves to 43.3, but still signals steep monthly drop in sales
  • Near-record annual fall in sales
  • Wholesale price inflation slows sharply

Summary of May findings:

The Eurozone retail sector remained firmly in contraction in May, according to PMI® data from Markit. Sales fell sharply on a month-on-month basis, and revenues compared with a year ago were down at a near-record rate. There were signs of easing pressure on retailer’s purchasing costs, however, as the rate of purchase price inflation slowed sharply to a 19-month low.

This should bury the notion the eurozone recession will be short and shallow.


Unemployment Continues Downward Drag on Housing — And it was Housing that Caused the recession

How Unemployment Is Dragging Down The Housing Market

The Huffington Post Lila Shapiro  First Posted: 03/25/11 02:35 PM Updated: 03/25/11 02:35 PM


Housing Unemployment

Although the United States population has grown by 120 million people in the past fifty-odd years, today’s new homes are selling at just half the pace they were in 1963.

Home sales are being dragged down by the weakness of the labor market and the number of Americans who have grown too discouraged to look for work, economists say. In previous recoveries, the housing market has sometimes buoyed the economy, creating new jobs and driving economic growth. This time, however, the housing market is now lagging behind.

Over at Mish’s Global Economic Trend Analysis, a new chart helps bring employment into the housing story by comparing the ratio of annual new home sales to the size of the civilian labor force. See the chart below.

The point is simple: while the working age population is steadily rising, the size of the labor force is actually shrinking. And those Americans who have grown so discouraged that they have given up looking for work — around 4.9 million as of last month — are unlikely to be in the market for a house.

With construction for new homes all but coming to a halt in February, Americans are on track to buy fewer new homes than in any year since the government began keeping data almost a half-century ago.

Mish lays out the problems, as he sees it:

• Those not in the labor force are not looking
• Those unemployed are not looking
• Those afraid of losing their job are not looking
• Those in a house and underwater are not looking
• Those just out of school and deep in school debt are not looking
• Those facing retirement may be looking to sell or downsize
• Mortgage standards are much tighter for those who are looking

Economists, however, are hard pressed to tie down the exact relationship between a slumping housing market and a weak labor market.

“It’s very hard to zero-in in that way,” said Bank of America-Merrill Lynch economist Michelle Meyer. “But one of the major components for why housing demand has remained very soft is because the labor market is very weak. And until we see that really changing, housing sales will continue to be soft.”

The more significant problem, for Meyer, is how these two factors taken together — housing and unemployment — indicate an economy still in trouble.

“When you think about new home sales, and housing specifically, that obviously ties to what share of Americans are participating in the labor force,” Meyer said. “But you can’t really say that because the labor force shrunk by X amount there is this many fewer homes needed. To me, it’s more of a signal that the fact that the labor force is weak. And that at this point in the recovery, people are still leaving the labor force — that signals to me that the fundamentals are soft.”

Federal Reserve Chairman Ben Bernanke has said that it will likely take five years for the unemployment rate to return to pre-recession levels, while a recent report from the Federal Reserve Bank of San Francisco concluded that the unemployment rate, now hovering around 9 percent, may never return to pre-recession levels.

Here is the chart from Mish’s Global Economic Trend Analysis, comparing annualized new home sales to the civilian labor force ratio, year over year. (Click image for more detail). More graphs over at Mish’s can be found here.

Discovery, Forensic Analysis and Motion Practice: The Prospectus

USE THIS AS A GUIDE FOR DISCOVERY, FORENSIC ANALYSIS AND MOTION PRACTICE TO COMPEL DISCLOSURE

see for this example SHARPS%20CDO%20II_16.08.07_9347

Comments in Red: THIS IS A PARTIAL ANNOTATION OF THE PROSPECTUS. IF YOU WANT A FULL ANNOTATION OF THIS PROSPECTUS OR ANY OTHER YOU NEED AN EXPERT IN SECURITIZATION TO DO IT. THERE ARE THREE OBVIOUS JURISDICTIONS RECITED HERE: CAYMAN ISLANDS, UNITED STATES (DELAWARE), AND IRELAND WITH MANY OTHER JURISDICTIONS RECITED AS WELL FOR PURPOSES OF THE OFFERING, ALL INDICATING THAT THE INVESTORS (CREDITORS) ARE SPREAD OUT ACROSS THE WORLD.

Note that the issuance of the bonds/notes are “non-recourse” which further corroborates the fact that the issuer (SPV/REMIC) is NOT the debtor, it is the homeowners who were funded out of the pool of money solicited from the investors, part of which was used to fund mortgages and a large part of which was kept by the investment bankers as “profit.”There is no language indicative that anyone other than the investors own the notes from homeowner/borrowers/debtors. Thus the investors are the creditors and the homeowners are the debtors. Without the investors there would have been no loan. Without the borrowers, there would would have been no investment. Hence, a SINGLE TRANSACTION.

If you read carefully you will see that there is Deutsch Bank as “initial purchaser” so that the notes (bonds) can be sold to pension funds, sovereign wealth funds etc. at a profit. This profit is the second tier of yield spread premium that no TILA audit I have ever seen has caught.

The amount of the “LEVEL 2” yield spread premium I compute on average to be approximately 30%-35% of the total loan amount that was funded FOR THE SUBJECT LOAN on average, depending upon the method of computation used.Thus a $300,000 loan would on average spawn two yield spread premiums, “level 1” being perhaps 2% or $6,000 and “level 2” being 33% or $100,000, neither of which were disclosed to the borrower, a violation of TILA.

The amount of the yield spread premium is a complex number based upon detailed information about the what actually took place in the sale of all the bonds and what actually took place in the sale of all the loan products to homeowners and what actually took place in the alleged transfer or assignment of “loans” into a master pool and what actually took place in the alleged transfer or assignment of “loans” into specific SPV pools and the alleged transfer or assignment of “loans” into specific tranches or classes within the SPV operating structure.

Here is the beginning of the prospectus with some of the annotations that are applicable:

Sharps CDO II Ltd., (obviously a name that doesn’t show up at the closing with the homeowner when they sign the promissory note, mortgage (or Deed of Trust and other documents. You want to ask for the name and contact information for the entity that issued the prospectus which is not necessarily the same company that issued the securities to the investors) an exempted company (you might ask for the identification of any companies that are declared as “exempted company” and their contact information to the extent that they issued any document or security relating to the subject loan) incorporated with limited liability you probably want to find out what liabilities are limited) under the laws of the Cayman Islands (ask for the identity of any foreign jurisdiction in which enabling documents were created, or under which jurisdiction is claimed or referred in the enabling documentation) (the “Issuer”) (Note that this is the “issuer” you don’t see don’t find about unless you ask for it), and Sharps CDO II Corp., (it would be wise to check with Delaware and get as much information about the names and addresses of the incorporators) a Delaware corporation (the “Co-Issuer” and together with the Issuer, the “Co-Issuers”), pursuant to an indenture (don’t confuse the prospectus with the indenture. The indenture is the actual terms of the bond issued just like the “terms of Note” specify the terms of the promissory note executed by the borrower/homeowner at closing) (the “Indenture”), among the Co-Issuers and The Bank of New York, as trustee (Note that BONY is identified “as trustee” but the usual language of “under the terms of that certain trust dated….etc” are absent. This is because there usually is NO TRUST AGREEMENT designated as such and NOT TRUST. In fact, as stated here it is merely an agreement between the co-issuers and BONY, which it means that far from being a trust it is more like the operating agreement of an LLC) (the “Trustee”), will issue up to U.S.$600,000,000 Class A-1 Senior Secured Floating Rate Notes Due 2046 (the “Class A-1 Notes”), U.S.$100,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2046 (the “Class A-2 Notes”), U.S.$60,000,000 Class A-3 Senior Secured Floating Rate
Notes Due 2046 (the “Class A-3 Notes” and, together with the Class A-1 Notes and the Class A-2 Notes, the “Class A Notes”), U.S.$82,000,000 Class B Senior Secured Floating Rate Notes Due 2046 (the “Class B Notes”), U.S.$52,000,000 Class C Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class C Notes”), U.S.$34,000,000 Class D-1 Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class D-1 Notes”) and U.S.$27,000,000 Class D-2 Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class D-2 Notes” and, together with the Class D-1 Notes, the “Class D Notes”). The Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are collectively referred to as the “Senior Notes.” The Class A-2 Notes, the Class A-3 Notes, the Class
B Notes, the Class C Notes and the Class D Notes and the Subordinated Notes (as defined below) are collectively referred to as the “Offered Notes.” Concurrently with the issuance of the Senior Notes, the Issuer will issue U.S.$27,000,000 Class D-2 Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class D-2 Notes” and, together with the Class D-1 Notes, the “Class D Notes pursuant to the Indenture and U.S.$45,000,000 Subordinated Notes due 2046 (the “Subordinated Notes”) pursuant to the Memorandum and Articles of Association of the Issuer (the “Issuer Charter”) and in accordance with a Deed of Covenant (“Deed of Covenant”) and a Fiscal Agency Agreement (the “Fiscal Agency Agreement”), among the Issuer, The Bank of New York, as Fiscal Agent (in such capacity, the “Fiscal Agent”) and the Trustee, as Note Registrar (in such capacity, the “Note Registrar”). The Senior Notes and the Subordinated Notes are collectively referred to as the “Notes.” Deutsche Bank Aktiengesellschaft (“Deutsche Bank”), New York Branch (“Deutsche Bank AG, New York Branch” and, in such capacity, the “TRS Counterparty”) will enter into a total return swap transaction (the “Total Return Swap”) with the Issuer pursuant to which it will be obligated to purchase (or cause to be purchased) the Class A-1 Notes issued from time to time by the Issuer under the circumstances described herein and therein. (cover continued on next page)

It is a condition to the issuance of the Notes on the Closing Date that the Class A-1 Notes be rated “Aaa” by Moody’s Investors Service, Inc. (“Moody’s”) and “AAA” by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s,” and together with Moody’s, the “Rating Agencies”), that the Class A-2 Notes be rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s, that the Class A-3 Notes be rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s, that the Class B Notes be rated at least “Aa2” by Moody’s and at least “AA” by Standard & Poor’s, that the Class C Notes be rated at least “A2” by Moody’s and at least “A” by Standard & Poor’s, that the Class D-1 Notes be rated “Baa1” by Moody’s and “BBB+” by Standard & Poor’s, that the Class D-2 Notes be rated “Baa3” by Moody’s and “BBB-” by Standard & Poor’s.
This Offering Circular constitutes the Prospectus (the “Prospectus”) for the purposes of Directive 2003/71/EC (the “Prospectus Directive”). Application has been made to the Irish Financial Services Regulatory Authority (the “Financial Regulator”) (you could ask for the identification and contact information of any financial regulator referred to in the offering circular, prospectus or other documents relating to the securitization of the subject loan), as competent authority under the Prospectus Directive for the Prospectus to be approved. Approval by the Financial Regulator relates only to the Senior Notes that are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of the Directive 93/22/EEC or which are to be offered to the public in any Member State of the European Economic Area. Any foreign language text that is included within this document is for convenience purposes only and does not form part of the Prospectus.
Application has been made to the Irish Stock Exchange for the Senior Notes to be admitted to the Official List and to trading on its regulated market.
APPROVAL OF THE FINANCIAL REGULATOR RELATES ONLY TO THE SENIOR NOTES WHICH ARE TO BE ADMITTED TO TRADING ON THE REGULATED MARKET OF THE IRISH STOCK EXCHANGE OR OTHER REGULATED MARKETS FOR THE PURPOSES OF DIRECTIVE 93/22/EEC OR WHICH ARE TO BE OFFERED TO THE PUBLIC IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA.
SEE “RISK FACTORS” IN THIS OFFERING CIRCULAR FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE NOTES. THE SENIOR NOTES ARE NON-RECOURSE OBLIGATIONS OF THE CO-ISSUER AND THE NOTES ARE LIMITED
RECOURSE OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM THE COLLATERAL DESCRIBED HEREIN.
THE NOTES DO NOT REPRESENT AN INTEREST IN OR OBLIGATIONS OF, AND ARE NOT INSURED OR GUARANTEED BY, THE TRUSTEE, DEUTSCHE BANK SECURITIES INC., DEUTSCHE BANK OR ANY OF THEIR RESPECTIVE AFFILIATES. Note that you have more than one trustee without any specific description of where one trustee ends and the other begins. It is classic obfuscation and musical chairs. NOTE ALSO THAT TRUSTEE DISCLAIMS ANY INTEREST IN THE BONDS BEING ISSUED [REFERRED TO AS “NOTES” JUST TO MAKE THINGS MORE CONFUSING].

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