Greek 10 Year Hits 952 Bps, +100 On The Day, 5 Years At 13.6%, German Professors Announce Imminent Greek Bail Out LawsuitSubmitted by Tyler Durden on 05/07/2010 - 06:14
At this point there is no need to refresh the Greek curve in graphic form: the country is finished in its current format. Bailout, no bailout, the market has spoken. Even as the German Bundestag (lower House of Parliament, the Bundesrat will vote later) approves a bailout, which unfortunately is too little too late at this point, Market News reports that several German professors "will file a lawsuit at the German Constitutional Court today against the German aid for Greece." This will put a procedural stumbling block in the rescue machine, as Greece is in desperate need to getting funding this weekend: some estimate that the entire country has far less than 1 billion available as "petty cash" not to mention it has to fund billions in maturities. The end game at this point is all to clear, even German FinMin Schaeuble said that "s a consequence of the current crisis, rules for an orderly insolvency of a Eurozone member state should be established, Schaeuble urged, reiterating previous comments." Yeah, those orderly procedures are oh so easy to implement. Just look at how easy it is for that political corpse Dodd and his worthless bill: As the Dude says it best: "That's a great plan, Walter. That's f#*$&' ingenious, if I understand it correctly. that's a swiss f#($*& watch." Alas, the troubles in Europe have devolved to the comedic content of a Coen brothers movie.
"Guys this is probably the craziest I have seen it down here ever." Here it is, memorialized for the generations and away from the now openly ridiculous disinformation propaganda of the mainstream media, just what a full market meltdown panic sounds like: straight from the epicenter, the S&P 500 pits. Luckily open ouctry still exists, if at least for shock value. Click here for a first hand account of the most shocking 15 minutes in recent market history. Fat finger my ass.
Japan takes a bold step toward moving away from second to last place in the currency devaluation game. Bloomberg reports:
The Bank of Japan said it will pump 2 trillion yen ($21.8 billion) into the financial system after the Greek debt crisis caused instability in financial markets in the U.S. and Europe.
The emergency measure represents the bank’s first same-day repurchase operations since December. The balance of current- account deposits held by financial institutions at the central bank will likely increase to 16.9 trillion yen, up 800 billion yen from yesterday, the central bank said.
Of course, right now Ben Bernanke an d the US dollar are dead last in the fiat bonfire. But not for long.
Luckily, the only real winner out of the Keynesian death rattle will be gold. Which is the LBMA is doing all it can to manipulate the price lower right this instant. All the better - entry points will be fewer and harder to come by as the time to the final Keynesian unwind draws nearer with each passing day.
There is the danger of walking out of today's session with a sense of relief for equity traders, because that insane move was "just" a fat finger or at least it is the word in the media and on the street. There are three things to keep in mind: 1/ the market was down 3% already when the alleged input error happened 2/ we are still in the middle of a major unresolved currency crisis threatening all of Europe and that led to deadly riots already 3/ the financial industry does not need any bad press right now and detractors just got some more ammo to push tough regulation. - Nic Lenoir, ICAP
The Senate is officially bribed, paid for and in the pocket of the big banks. Too disgusted to even comment on this. This country deserves all that the "big banks" have in store for it.
Spreads exploded wider today across all markets as contagion from Europe smashed risk appetite everywhere as broad-based macro/index selling/hedging was clearly in play. So many record-breaking moves and breathless dealers that we are a little stunned still by today's action but to be clear, credit was leading equity down out of the gate, did not crash and bounce anything like stocks late afternoon, but closed at 10-month wides in IG and six month wides in HY.
A year ago, before anyone aside from a hundred or so people had ever heard the words High Frequency Trading, Flash orders, Predatory algorithms, Sigma X, Sonar, Market topology, Liquidity providers, Supplementary Liquidity Providers, and many variations on these, Zero Hedge embarked upon a path to warn and hopefully prevent a full-blown market meltdown. On April 10, 2009, in a piece titled "The Incredibly Shrinking Market Liquidity, Or The Black Swan Of Black Swans" we cautioned "what happens in a world where the very core of the capital markets
system is gradually deleveraging to a point where maintaining a liquid
and orderly market becomes impossible: large swings on low volume,
massive bid-offer spreads, huge trading costs, inability to clear and
numerous failed trades. When the quant deleveraging finally catches up
with the market, the consequences will likely be unprecedented, with
dramatic dislocations leading the market both higher and lower on
record volatility." Today, after over a year of seemingly ceaseless heckling and jeering by numerous self-proclaimed experts and industry lobbyists, we are vindicated. We enjoy being heckled - we got a lot of it when we started discussing Goldman Sachs in early 2009. Look where that ended. Today, we have reached an apex in our quest to prevent the HFT "Black Monday" juggernaut, as absent the last minute intervention of still unknown powers, the market, for all intents and purposes, broke. Liquidity disappeared. What happened today was no fat finger, it was no panic selling by one major account: it was simply the impact of everyone in the HFT community going from port to starboard on the boat, at precisely the same time. And in doing so, these very actors, who in over a year have been complaining they are unfairly targeted because all they do is "provide liquidity", did anything but what they claim is their sworn duty. In fact, as Dennis Dick shows (see below) they were aggressive takers of liquidity at the peak of the meltdown, exacerbating the Dow drop as it slid 1000 points intraday. It is time for the SEC to do its job and not only ban flash trading as it said it would almost a year ago, but get rid of all the predatory aspects of high frequency trading, which are pretty much all of them. In 20 minutes the market showed that it is as broken as it was at the nadir of the market crash. Through its inactivity to investigate the market structure, the SEC has made things a million times worse, as HFT-trading seminars for idiots are now rampant. HFT killed over 12 months of hard fought propaganda by the likes of CNBC which has valiantly tried to restore faith in our broken capital markets. They have now failed in that task too. After today investors will have little if any faith left in the US stocks, assuming they had any to begin with. We need to purge the equity market structure of all liquidity-taking parasitic players. We must start today with High Frequency Trading.
We have been informed by sources in the US Army Corps of Engineers, Federal Emergency Management Agency (FEMA), and Florida Department of Environmental Protection that the Obama White House and British Petroleum (BP), which pumped $71,000 into Barack Obama's 2008 presidential campaign -- more than John McCain or Hillary Clinton, are covering up the magnitude of the volcanic-level oil disaster in the Gulf of Mexico and working together to limit BP's liability for damage caused by what can be called a "mega-disaster." Obama and his senior White House staff, as well as Interior Secretary Ken Salazar, are working with BP's chief executive officer Tony Hayward on legislation that would raise the cap on liability for damage claims from those affected by the oil disaster from $75 million to $10 billion. However, WMR's federal and Gulf state sources are reporting the disaster has the real potential cost of at least $1 trillion. Critics of the deal being worked out between Obama and Hayward point out that $10 billion is a mere drop in the bucket for a trillion dollar disaster but also note that BP, if its assets were nationalized, could fetch almost a trillion dollars for compensation purposes. There is talk in some government circles, including FEMA, of the need to nationalize BP in order to compensate those who will ultimately be affected by the worst oil disaster in the history of the world.
In a historic development, we may be on the verge of the Senate passing amendments that will bite off the Wall Street hand that has fed the Senate, Congress and all politicians for decades. The Huffington Post reports that "Harry Reid will make sure that an amendment to break up megabanks and cap their size comes up for a vote, the Senate majority leader said. He added that he was leaning heavily toward voting for the amendment, cosponsored by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.). Reid will also support an amendment from Sen. Bernie Sanders (I-Vt.) that will authorize an audit of the Federal Reserve." In an ironic twist, the president may be the last party remaining to protecting Wall Street's interests, as democrats wholesale turn their back on their former masters. Should the critical Brown/Kaufman and Sanders amendments pass it will be game over not only for Goldman Sachs and the Federal Reserve, but to the entire financial oligarchic/kleptocratic status quo that has controlled this country for decades. The next inevitable logical progression is the passage of the McCain amendment which essentially returns Glass-Steagal. Should that happen, look for all fin stocks to trade at about 25% of their current levels.
What is uglier than a bunch of momentum chasing quants fleeing in "orderly" fashion from a burning theater: a bunch of prop carry traders doing the same, especially once they have been informed the margin calls are coming in. Now that the fate of the eurozone is sealed, save for 6-9 months of political rhetoric as those responsible for the single biggest monetary failure in recent decades finally realize the folly of their "all for one, and one for all" ways, the question of how Bernanke will export dollar weakness abroad, and thus boost the Export-led renaissance, becomes very glaring. We expect American politicians to learn nothing from the European debacle, and to double their efforts for a CNY revaluation as US exports now become even more expensive, which will achieve nothing, but merely antagonize China potentially to its breaking point, and throw the world in a trade vacuum. But at least China has the worker, the resources and the middle class to beself sustainable for much, much longer than the US possibly can. And don't forget all those Treasuries that China can and will sell in the open market. The endgame is approaching.
Was this it for the bear market rally? The new new normal, same as the old normal: Risk and Carry off, Gold on...Meanwhile, the panic over at the Eccles building can be felt all the way in Europe.
In the past two weeks, borrowings under the ECB's "discount window" equivalent, the Marginal Lending Facility, have jumped substantially. Where on April 25th just E2 million was outstanding, it has subsequently jumped all the way to 2.6 billion on May 3 (yes, for Americans these sums are paltry, but for European, and especially Greek banks, half a billion could mean the difference between life and death). And with the O/N-3M repo spread blowing out, the ECB could be once again becoming the lender of first and last resort. One of the rumors for the jump in borrowings has been that Greek Piraeus bank was on the verge in the last days of April after a full blown bank run, and only a last-minute MLF borrowing helped it stave off bankruptcy. The MLF dropped to E1.3 billion yesterday, although this could be merely a liquidity shift from one source to another. Keep a close eye on the ECB's daily MLF report to determine if there is a backdoor bailout occurring of one of the more troubled European banks. We will also provide details later on today, when the data becomes available, on whether the Fed has disclosed any FX swaps having taken place in the prior week.
Listening to ECB President Jean-Claude Trichet who said default is not an option for Greece while the single currency attacked the $1.27 figure at the moment when he called it a safe store of value I cut my observations of the ECB council meeting here. Mr. Market seems to have a differing opinion. BTW, interest rates are on hold despite the latest uptick in inflation to 1.4%.
I stumbled upon this ECB legal document that runs to the contrary and strangely has found no media attention.
While promoting the Euro as a safe store of value the ECB opts for tight limits on cash transactions in Greece, limiting the role of cash Euros as a medium of exchange, one of the fundamental functions of a currency.
Stating the objective to limit tax evasion the ECB recommends that all business transactions above €3,000 and all consumer expenses above €1,500 Euros shall be paid for in all other forms than cash. - Toni Straka, The Prudent Investor