The yield on 10-year Greek bonds rose to 7.15 percent yesterday, the highest level since October 1999 and up from 4.99 percent on Nov. 30. The yield is more than 3.9 percentage points higher than benchmark German bunds, the biggest gain since October 1998.

The nation’s government bonds are the world’s worst performers in January, losing 4.19 percent in local currency terms and extending their decline over the past three months to 10 percent, Bloomberg/EFFAS indexes show. Credit-default swaps tied to Greece trade at about the same levels as Dubai when it got a $10 billion bailout from Abu Dhabi in December.

The cost of insuring the country’s debt against losses rose to a record yesterday, with credit-default swaps jumping 40 basis points, or 0.4 percentage point, to 414, CMA DataVision prices show.

The swaps have risen from 121.8 basis points in October, and compare with 433.4 basis points for Dubai in the weeks before it received cash from Abu Dhabi on Dec. 14 !!!

“I am not sure that a Greek default is inevitable, but the clock is ticking with regard to difficult policy choices,” said Marc Seidner , a portfolio manager at Pacific Investment Management Co. in Newport Beach.

“Any financial aid from other European nations would be conditional upon the government introducing new measures to clean up its public finances”, Le Monde said. Help would consist of bilateral loans from European governments in the absence of a mechanism for a euro-region bailout, the newspaper said.

Portugal and Spain, watch out !!!

We would like to present today  This Time is different from  Carmen M.Reinhart and Keneth S.Rogoff . They have catalogued over 250 financial crises in 66 countries over 800 years and then analyzed them for differences and similarities.

The book gives evidence that we have a lot of pain to experience because of the bad choices we have made. This is the entire developed world, and the emerging world will suffer, too, as we go through it. It is not a matter of pain or no pain. There is no way to avoid it. It is simply a matter of when and over how long a period.

In fact, Reinhart and Rogoff’s research suggests that the longer we try to put off the pain, the worse the total pain will be. We have simply overleveraged ourselves, and the deleveraging process is not fun, whether on a personal or a country basis.

And they say :

“But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever, particularly if leverage continues to grow unchecked.”

“This time may seem different, but all too often a deeper look shows it is not. Encouragingly, history does point to warning signs that policy makers can look at to assess risk – if only they do not become too drunk with their credit bubble – fueled success and say, as their predecessors have for centuries, “This time is different.”

Well, well, we have never believed that this time was different , and for sure, we advocate that this time it will take a lot of time, effort and courage  to navigate  through these turbulent times…

On January 1 , 2010 ,Spain took over the six-month rotating presidency of the EU. Spain’s biggest ambition for its turn is the launch of a “2020 strategy” for Europe. This is a ten-year plan for boosting competitiveness and growth to help pay for Europe’s generous welfare systems. It follows another ten-year plan, the old “Lisbon strategy”, which failed in its aim of making the EU “the world’s most competitive and dynamic knowledge-based economy” by 2010.

But EU members reaction has been unenthusiastic. Spanish unemployment is heading close to 20% (double the average among euro-zone countries), following the popping of a huge housing bubble,  worsened by a two-tier labour market in which a hard core of permanent workers is almost impossible to sack, passing the pain onto those on temporary contracts, all too often meaning the young and immigrants.

So please give us a break !!! Let´s start by applying to ourselves what we want for the rest of EUROPE.

IT IS DELEVERAGING STUPID !!!

The reason this recession is different is that it is a deleveraging recession ( depression kind ?). We borrowed too much (all over the developed world) and now are having to repair our balance sheets as the assets we bought have fallen in value (housing, bonds, securities, etc.). A new study by the McKinsey Global Institute found that periods of overleveraging are often followed by 6-7 years of slow growth as the deleveraging process plays out. No quick fixes.

The process of deleveraging from what is still a near-record debt overhang is going to take a long period of time and exact a toll on economic activity along the way.

As David Rosenberg says “ALL debt as shown in the chart above is going back to $60,000 in real terms, and if it’s going there, and we get a withdrawal of stimulus at any time, then the credit contraction is going to gain some serious momentum.  This is a big reason to be defensive and yield- oriented in the portfolio”.

And finally, FT in the Lex Column “it may be economically and politically sensible for governments to spend money on making life more palatable at the height of the crisis.  But the longer countries go on before paying down their debt, the more painful and drawn-out the process is likely to be.  Unless, of course, government bond investors revolt and expedite the whole shebang.”

So, who said this game was over ? Let´s see what Bond Vigilantes have to say…

“Security researchers said they have discovered software capable of stealing information installed on computers in 103 countries from a network that targeted government agencies.The software infected more than 1,200 computers, almost 30% of which were considered high-value targets, according to a report published Sunday by Information Warfare Monitor, a Toronto-based organization”. Said WSJ.

“Google has said it will end the controversial censorship of its search service in China and risk being thrown out of the world’s most populous internet market, following what it claimed were Chinese-based attempts to hack into its systems and those of other international companies”. Said FT

The apparent attacks are the latest to suggest cyberespionage is on the rise. Last year, Kevin Chilton, commander of the U.S. Strategic Command, said “military computer networks are increasingly coming under attack from hackers trying to steal information, many of whom he said appeared to have ties to China”.

PHOTO: AP  CRASH 1929

Today the prices of many assets are being held up by unsustainable fiscal and monetary stimulus.Interest rates of 1% or less in America, Japan, Britain and the Euro zone, have persuaded investors to take their money out of cash and to buy risky assets.

For all the panic last year, asset values never quite reached the lows that marked other bear-market bottoms, and now the rally has made several markets look pricey again.

Low rates have persuaded investors to move money out of cash. Investors withdrew $468.5 billion from money-market funds in the course of 2009. The “carry trade”—borrowing in low-yielding currencies to invest in high-yielding ones—is back in full swing. The Australian dollar has been a popular beneficiary.

But our problems still there. We still have banks too big to fail, we have not put the credit default swaps on an exchange, we have not reinstated Glass-Steagall Act, we keep in power the same people who missed the problems the last time, ETC,ETC,ETC…

So let´s be careful with the coloured glasses that we use to see the World because that may change…

Since 2005 China’s interest in Africa has intensified. In November 2006, Beijing hosted a Sino-African summit at which it promised more than 40 of the continent’s leaders a new era of co-operation.

Beijing has offered more than long-necked symbolism. In 2006 alone, it signed trade deals with African countries worth $60bn. Investments, which often include a resources-for-infrastructure element, have poured in thick and fast. China’s stock of foreign direct investment has shot well past $120bn. In 2006, Angola temporarily overtook Saudi Arabia as China’s main supplier of oil, and Africa now accounts for nearly 30 per cent of China’s oil imports.

In 2007, Industrial and Commercial Bank of China, the biggest bank in the world by deposits, paid $5.6bn for a fifth of South Africa’s Standard Bank. Two years ago Beijing pledged $10bn of new low-cost loans to Africa. It also promised to eliminate tariffs on 60 per cent of exports and to forgive the debt of several countries. Trade between Africa and China has already risen spectacularly: in 2009 it jumped 45 per cent to $107bn, a tenfold increase over 2000.

Beijing’s engagement with Africa has caused much hand-wringing. China is no philanthropist, but its rise may still represent Africa’s best hope of escaping poverty. In the eight years to 2007, before the financial crisis, African countries were growing, on average, by more than 4 per cent a year, far higher than previously. That was thanks partly to better economic management, debt relief and increased capital flows (some from China), but also to the higher commodity prices driven by Chinese demand.

Much of the criticism of China’s influence rings hollow. As Chinese and Japanese officials point out, the west’s track record is less than exemplary. European contact with Africa can best be summed up as decades of naked rapaciousness followed by a spectacularly unsuccessful attempt to make amends. During the cold war western governments supported dictators across the continent, from President Mobutu Sese Seko to Idi Amin.

Finally, China is not alone in seeking opportunities on the continent. As well as the west, India, Brazil and Russia are also looking for business.