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    The Pensford Letter - 11.26.12

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    Pensford Financial
    The Fiscal Cliff Markets have rallied based solely on the positive tone from both Republicans and Democrats. The longer this drags on, the greater the potential magnitude of the rate drop, says JP Conklin. European authorities will transfer 35 billion euros to Spain's state bank rescue fund.

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    The Pensford Letter - 11.26.12

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    The Fiscal Cliff Markets have rallied based solely on the positive tone from both Republicans and Democrats. The longer this drags on, the greater the potential magnitude of the rate drop, says JP Conklin. European authorities will transfer 35 billion euros to Spain's state bank rescue fund.

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    The Fiscal Cliff Markets have rallied based solely on the positive tone from both Republicans and Democrats. The longer this drags on, the greater the potential magnitude of the rate drop, says JP Conklin. European authorities will transfer 35 billion euros to Spain's state bank rescue fund.

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    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    331 views3 pages

    The Pensford Letter - 11.26.12

    Uploaded by

    Pensford Financial
    The Fiscal Cliff Markets have rallied based solely on the positive tone from both Republicans and Democrats. The longer this drags on, the greater the potential magnitude of the rate drop, says JP Conklin. European authorities will transfer 35 billion euros to Spain's state bank rescue fund.

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    JP Conklin 704-887-9880 office [email protected] www.pensfordfinancial.

    com Leveling the Playing Field November 26, 2012 _______________________________________________________________________ I hope everyone had an enjoyable Thanksgiving, time to get back to work! Very quiet week last week, so lets touch on the big topics this week. I am typing this before hopping on the plane to head to LA so as to avoid a repeat of the now infamous seatkicking newsletter. Fiscal Cliff Markets have rallied based solely on the positive tone from both Republicans and Democrats. We feel an agreement will ultimately be reached, but we very well may see posturing right up until the 11th hour. As Reuters reported, "U.S. lawmakers have made little progress in the last 10 days toward a compromise to avoid the harsh tax increases and government spending cuts scheduled for Jan. 1, a senior Democratic senator said on Sunday." Heres what could happen: Republicans try to kick the can down the road to buy themselves political time until Obamas butt kicking isnt so fresh. Democrats counter by threatening to allow the nation to (temporarily) go over the cliff. Markets will become increasingly jittery the longer an agreement is not reached. Sooooonce markets realize that no real progress has been made, interest rates are likely to move lower until an agreement is forthcoming. Assuming this doesnt take place until the last second, we could see the 10T move below 1.50% heading towards year end. And the longer this drags on and reminds everyone of last years debacle, the greater the potential magnitude of the rate drop. What is our ridiculously confident yet entirely baseless rate call? Rates move lower as we approach year end and then move higher after the crisis is ultimately averted.

    Europe El Pais reported on Sunday that European authorities will transfer 35 billion euros to Spain's state bank rescue fund on December 15 in exchange for massive layoffs at Spain's four nationalized banks, including state-rescued Bankia. Two weeks after these funds are dropped into the bailout coffers, they will be distributed to the actual banks themselves, just in time for year-end closing of balance sheets. El Pais reported that the largest of the four banks, the cleverly named Bankia, will layoff up

    to 6,000 employees (nearly 1/3rd). No word on what el Banko, la Banka, los Bankos, or los Bankitos will require in layoffs. Now we have concrete evidence of why Prime Minister Rajoy has been so reluctant to formally request aid this sort of conditionality is difficult to sell to voters. Greece From the Couldnt Have Said It Better Myself file, Barclays writes, "even if the debt buyback enables the IMF and EU leaders to come to an agreement, leading to a Greek resolution in the near term, in the medium-to-long-term Greek debt is not sustainable on realistic macroeconomic assumptions without notable outright haircuts on official EU loans to Greece. Therefore, a successful debt buyback might resolve the Greek debt sustainability issue on paper in the troika report but it will most likely not resolve it in investors minds."

    LIBOR Outlook This could tick higher in the coming weeks as we approach year end. This usually reverses course in January.

    Fixed Rate Outlook In the near term, we think Treasury yields are likely to push lower on fiscal cliff concerns, European concerns, and ongoing QE buybacks.

    This Week Pretty busy week ahead as we get the last of the data that preceded Hurricane Sandys impact. Keep an eye on Tuesdays Durable Goods this was incredibly strong last month and economists are looking to see how much of that was front running orders into year end. Fridays personal income and spending report will not reflect Sandys impact, Thursdays ICSC chain store sales for November will factor this in and therefore garner unusual attention for a relatively minor report. Bad Trade of the Year Candidate: Silas Redd. Transferred from PSU to USC and ended up with a worse record AND spent a year under Lane Kiffin instead of Tom OBrien.

    Economic Calendar
    Economic Data Day Monday Time 8:30AM 10:30AM Tuesday 8:30AM 8:30AM 9:00AM 10:00AM Wednesday 7:00AM 10:00AM 2:00PM Thursday 8:30AM 8:30AM 8:30AM 8:30AM 11:00AM Friday 8:30AM 8:30AM 9:45AM Speeches and Events Day Tuesday Time 3:00AM 6:30AM Wednesday Thursday 2:00PM 6:00AM Fed's Fisher speaks Fed's Lockhart speaks on Financial Stability Fed releases Beige Book Economic Survey Fed's Fisher speaks Frankfurt, Germany Report Place Berlin, Germany Berlin, Germany Report Chicago Fed Nat Activity Dallas Fed Manufacturing Index Durable Orders Durable Orders ex Transportation Case-Shiller 20-city Index Consumer Confidence MBA Mortgage Applications New Home Sales (MoM) Fed releases Beige Book Economic Survey Initial Jobless Claims Continuing Claims GDP (QoQ) Personal Consumption Kansas City Fed Manufacturing Activity Personal Income Personal Spending Chicago Purchasing Manager 0.2% 0.1% 51.1 415k 3340k 2.8% 410k 3337k 2.0% 2.0% -4 0.4% 0.8% 49.9 -1.7% -0.3% -0.5% 3.0% 73.1 Forecast Previous 0.00 1.8 9.9% 2.0% 2.0% 72.2 -2.2% 5.7%

    Treasury Auctions Day Tuesday Wednesday Thursday Time 1:00PM 1:00PM 1:00PM 2-year Treasury 5-year Treasury 7-year Treasury Report Size $35B $35B $29B

    Generally, this material is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Your receipt of this material does not create a client relationship with us and we are not acting as fiduciary or advisory capacity to you by providing the information herein. All market prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. This material may contain information that is privileged, confidential, legally privileged, and/or exempt from disclosure under applicable law. Though the information herein may discuss certain legal and tax aspects of financial instruments, Pensford Financial Group, LLC does not provide legal or tax advice. The contents herein are the copyright material of Pensford Financial Group, LLC and shall not be copied, reproduced, or redistributed without the express written permission of Pensford Financial Group, LLC.

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