Archive - Sep 13, 2010

Earlier the ECB released its weekly USD tender operation details, i.e., the Fed swap line roll, and it appears that the same European bank that has been locked out of money markets for several weeks now continues to have dollar funding issues. The same bank that was the sole bidder for $60MM in dollar liquidity last week, and the week prior, has once again obtained dollar funding via the ECB at the fixed rate of 1.18%, which continues to be roughly 4 times richer than comparable USD Libor based rates. Why this bank is locked out of the interbank market? Why is nobody else curious about why a seemingly solvent Europe continues to need the Fed's swap lines? It doesn't matter: by 2019 the bank should be ok. After all it will have 30x leverage for at least 3 years to get its book in order. Perhaps they can also hire Dick Fuld as executive chairman and head consultant on how to generate the best IRR on ludicrous leverage levels.

As Zero Hedge has long expected, now that the summer vacations are over, and the credit card invoices come in the mail, the Greek unions "are back on the street" since unlike the US, they don't have the FHA doing all it can to reflate their bubble (although we probably should not give the Department of Bubble Creation any ideas). Bloomberg has an update on the festivities in the Greek streets, which are once again full with (soon to be) unemployed and disgruntled public workers, and tax avoiders. Since these clips are eerily reminiscent of what was seen on live TV around the days when some real price discovery was allowed in stocks on May 6, don't expect to see them broadcast on such media discount outlets as CNBC. Amusingly enough, we learn that Greek PM Papandreou is now betting it all on... solars.

• Must read: Trading Eludes Dodd-Frank as No Investors See Inside Black Box (Bloomberg)
• Japan Ozawa Might Carry Out FX Intervention Threat If Elected PM  (WSJ)
• Beijing Currency Saga Returns (FT)
• Caroline Baum: the things that got us into this mess are expected to get us out? (Bloomberg)
• After welcoming everyone to the "recovery", Geithner now urges action to actually make it happen (WSJ)
• China Has Done ‘Very Little’ on Exchange Rate: Geithner (WSJ)
• Bond Buyers Getting Burned by Going Long as Yields Climb (Bloomberg)
• At Goldman, Partners Are Made, and Unmade (NYT)
• Small-business Bill Could Be Democrats’ Last Hope on Jobs (Reuters)

A report out of Swiss paper NZZ am Sontag cites analysts who see top Swiss Banks UBS and Credit Suisse as needing to follow in DB's footsteps, and raise CHF 20 billion (a little under that in USD). With DB already well ahead of the pack with its capital raise announcement last week, expect rumors of the Swiss banks underwriting their own equity raises to prevent them from this morning's financial euphoria.

Weekly Bollinger Bands: Are at their tightest in a year. Furthermore the top band is moving wider as the market is dropping. These are signs that if you are a buyer of dips be careful. But also that no real downside momentum break out will come until we pierce the midline on a daily settlement.

No surprise the reaction across Wall Street is strong to quite strong on the latest regulatory farice out of Europe, especially since our initial read of a 20x leverage cap was in fact low: the 3.5% minimum common equity ratio by 2013 means leverage will be just under 30x, or enough for every bank in the world to pull a Lehman, which blew itself up at roughly the same leverage. All who think European banks will survive through 2019 with this type of leverage should look into investing in these great companies: New Century Financial, Countrywide, and IndyMac.

• Asian stocks, oil rise as China output, retail sales expand; Yen declines.
• Banks worldwide face stiffer capital requirements as Basel forges accord.
• British unions warn government that public spending cuts will spark wave of strikes.
• China set Yuan's reference rate at 6.7509 vs USD - lowest level since 1980s.
• China shares, led by tourism, rise amid stronger economic indicators for August.
• China's Industrial production rises 13.9% in August, betters 13.4% growth of July.
• Economy recovering faster than expected across the European Union, but remains fragile.
• Hong Kong housing risks may exceed 1997 on rising rates, HKMA's Chan says.

Nothing on the economic front, just Tim Geithner speaking and the budget balance…

Hey everybody, bank shares are rallying world wide today. The banking problems are over and bubble times are hear again, courtesy of taxpayers world wide. Many problems and the results of those problems from 2007 are present right now! Ridiculous loans, moral hazard, frail counterparties, liquidity traps, risk concentration, ralliying stock prices... Will we ever learn???

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 13/09/10

→ Washington’s Blog

A number of American soldiers are blowing the whistle on the American
military practice of indiscriminately killing Iraq civilians - by
randomly firing bullets in a 360 degree circle - anytime that an
improvised explosive device hits a U.S. soldier.

A REALLY long-term commodities play?