Archive - Nov 17, 2011
European Banks Find Depositor-Of-Last-Resort. For Now!
Submitted by Tyler Durden on 11/17/2011 23:37 -0500We have highlighted the crisis-level situation that short-term liquidity markets find themselves in across Europe at length with banks using every gimmick and instrument they can in order to avoid transparency and insolvency. Whether it's cross-currency basis swaps, FRA/OIS spreads, or simply ECB emergency funds and Fed swap lines, its clear they are running out of 'lenders'. With the interbank repo market as good as closed to most of the Italian banking system, NY Times DealBook has discovered an unusual source of funding via the London Stock Exchange's Italian clearinghouse Cassa Di Compensazione E Garanzia SpA (CC&G). Acting as the middle-man for short-term (3-day) collateralized loans, CC&G basically acts as a depositor for the Italian banks (which make up more than half the 15 European financials that are using this source). While arguably they are not explicitly lending money, merely term-depositing cash, the distinction provides cover in the case of a credit event but there is still (obviously) significant risk of loss given the forms of collateral and potential rapidity of cash-calls. In our ever-so-humble opinion, this should be added near the top of the list of crisis canaries-in-the-coal-mine as the cracks of desperation appear more and more across the largest and most-levered financial firms in the world.
Guest Post: Zuccotti Eviction - And The Fog Of Protest: An Eyewitness Account
Submitted by Tyler Durden on 11/17/2011 22:22 -0500At 1:00 a.m. on Tuesday morning, a massive contingent of NYPD officers converged on Zuccotti Park to forcibly evict the Occupy Wall Street protesters who had been encamped there for many weeks. Minutes after the police raid began the Twitter stream flowed with the news. I arrived near Zuccotti Park just after 1:30 a.m. Civilians, including reporters with valid NYPD press passes, were being held back at a police perimeter several blocks away from the park itself. This meant that few reporters were able to witness or record the eviction of the protesters from the park. I was told by a police officer that a “frozen zone” had been put into effect for several blocks in each direction of Zuccotti Park. I decided to wander around on the side streets. At first, I didn’t see any protesters: The only people who were visible outside the perimeter were other journalists and the NYPD. After about twenty minutes of walking, I found a side street that had been gated off with barricades and was being guarded by the police. I decided to wait there. Within a few minutes, I saw a group of about one hundred protesters who had been in Zuccotti Park being expelled from the area behind the police cordon. A few of the protesters were furious -- most just seemed sleepy and confused. One of the cops told me that the protesters were already out of Zuccotti Park itself, and that the park was being washed with fire hoses. Most of the protesters seemed to leave the cordoned area peacefully when the police arrived in the park. It was around 2:00 a.m. As the protesters spilled out to the area beyond the perimeter, the defining feature of the night became a kind of loosely connected chaos.
Playing Chicken With The ECB: The Market Has Issued A Boycott On Draghi Until He Prints
Submitted by Tyler Durden on 11/17/2011 22:07 -0500
If over the past several days the market has seemed as if it is acting more irrational than normal, there is a simple explanation for this: the volumes across all products have collapsed. This includes equities, bonds, single name CDS and index CDS. In essence the market has virtually ground to a halt as the chart below demonstrates. Why? There are two explanations: one is that this gradual shut down of the market is in fact an unintended and delayed consequence of the MF Global bankruptcy, which has seen material liquidity withdrawn from the non-TBTF, which in turn is impacting overall market stability and functioning. The other theory, espoused by BofA's Hans Mikkelsen in tonight's Situation Room publication is that this is nothing short of a boycott by the market on the ECB, and thus the global capital market system, in an attempt to force the European central bank to resolve the helpless situation in which Europe finds itself, where on one side Germany is staunchly against printing more currency for fears of hyperinflation, and instead demands changes to the Eurozone treaty whereby everyone hands over sovereignty to an uber Eurozone headed naturally by Germany, and on the other we have France et al. pushing for immediate monetization but without transfer of sovereignty to Merkel. Obviously the risk is that should Merkel, who has all the levereage, be pushed too far she may simply balk and say "nein, nein, nein" in the process killing the EUR with one statement. Of course Germany will lose from this chain of events as well, which is why as we have claimed for nearly a year, the fundamental equation for Europe is whether the opportunity cost of constantly bailing out European countries and/or taking on the risk of hyperinflation is worth the benefit gained by German exporters from not having a strong Deutsche Mark. We don't know the answer. But apparently BofA does: "We are all waiting for the catalyst to a better or worse market - to us this means that the markets are now waiting for the ECB to step in." And naturally, just like with Deutsche Bank which put together the case for intervention, the outcome is one where the ECB will do everything in its power to resume the Risk On posture. So under what conditions will the ECB step in? Well, BofA conveniently gives us the answer to that as well. Let's dig in.
Mike Krieger Exposes The Three Card Monti
Submitted by Tyler Durden on 11/17/2011 20:38 -0500Just like the con (confidence) game Three Card Monte through which people have been swindled out of their hard earned money in alleyways and street corners all over the world for half a millennium, the previously sovereign nations of Greece and Italy have now officially been placed into the receivership of “technocratic governments” and are now in the final phase of their looting. It truly is sad to watch these proud nations whose histories form the very core of Western civilization be taken down one by one but what is even more nauseating is watching the corporate media pundits, Wall Street analysts and financial experts cheer the news because it is ostensibly “good for markets.” First of all, it doesn’t take a genius to see that the people that screw up the most get promoted and advanced in the Western world’s current political/economic structure. The primary reason for this is that there is a very serious agenda of TPTB and that consists on using crisis to consolidate power in a one-world government, headed by a global central bank that issues a global fiat currency. People have been saying this on the fringe for decades and have been called conspiracy theorists the whole time but if you look at how things are progressing today you’d have to be asleep to not notice that the guys in charge are completely and totally determined to bring this sick, twisted dream into place. That is why the agenda moves forward despite the repeated, desperate cries of the citizenry for them to stop. Let’s take a look at Mario Monti, the “soft” dictator that has been thrust upon the people of Italy by TPTB. He is a member of the Bilderberg Group, he is the European Chairman of the Trilateral Commission (a think tank founded by David Rockefeller in 1973, see quote at the top) and is international advisor to none other than Goldman Sachs. This guy was put into place by design. Anyone in Italy that thinks they achieved a victory in by ridding themselves of Berlusconi you better think again. You just got the biggest insider, crony financial terrorist around put in charge of your country without having a say in it. Even for someone like me that expects these things, I am amazed by how badly Italy was just screwed.
European Bailout Fund For Greek Money Laundering And Fraud
Submitted by testosteronepit on 11/17/2011 19:51 -0500In October, the EFSF bailed out Proton Bank in Greece. Turns out, it had siphoned off $1 billion through criminal activity. Galling: the Bank of Greece knew of it before the bailout. And now, a bomb exploded...
Payback Time - The Coming Decade Of Deleveraging
Submitted by Tyler Durden on 11/17/2011 17:53 -0500
Having gorged on the fat pipe of cheap credit for much of the previous few decades, the last few years have rapidly and aggressively slapped the US (and indeed much of the world) from its stupor. All that growth, was it real? The speed of economic leveraging began to gain momentum in the early 1970s and accelerated sharply in the 1980s as the cost of debt began its decades-long decline. That leverage enabled consumption and capex to rise quicker and with less capital but obviously with more risk. With the current balance-sheet recession stymieing monetary policy and fiscal policy hardly supportive, it seems the private deleveraging hole will be difficult to fill with public borrowing excess. It seems that credit markets (the ubiquitous source of all that leverage) have again and again sung from a different song-sheet with regard to the way we escape from the inevitable deleveraging we are currently undertaking. Matt King, of Citigroup, provides a thought-provoking (and all-encompassing) slide-deck on the coming decade of deleveraging and how now is time for payback discussing the bubble in credit, ways of deleveraging, and investment implications.
The New Retirement Normal: The Average American Must Work For Two Extra Years After Death
Submitted by Tyler Durden on 11/17/2011 17:31 -0500
While Italy is bickering over just how inhumane it is to raise the retirement age by 2 years in a 15 year span (which works out to a whopping 48 days per year) and will likely lead to mass riots and bloodshed in Rome before the idea is ultimately scrapped, things in America's own back yard, the country that now that the EFSF is finished will have no choice but to come to Europe's rescue via the IMF, are looking horrendous to quite horrendous. In fact when it comes to retirement, 80 is, we are sad to say, the new 65, at least according to Wells Fargo. And with average life expectancy in the US peaking at 78.1, it means that the typical American will have to work for an additional 2 years after death to pay for not only not having any retirement savings (thank you Bernanke ZIRP and VIX>30 stock market), but to make sure Europeans have theirs. You think we jest? Nope.
Risk-Assets Collapse As Knife-Catchers Are Nowhere To Be Found
Submitted by Tyler Durden on 11/17/2011 16:39 -0500
Unlike yesterday's close, which was led by stocks and not sustained by broad risk assets, today's notable dive in ES was fully backed and supported by credit, commodity, FX carry, rates, and spreads. Volumes dried up as the afternoon progressed as we suspect machines were turned off on the vol regime shifts and real 'value-investing' money was patently absent - now Bill Miller has left the building. HYG underperformed and was first to move as we sold off just after lunch (on what we suspect was driven by the transparency of the USD funding difficulties we discussed). Liquidations, thanks to CME margin moves, did not help and dragged commodities hugely lower - even as the dollar (and EUR) ended almost unchanged from yesterday's afternoon close. The clarion call for the ECB's bazooka will be loud this evening.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 17/11/11
Submitted by RANSquawk Video on 11/17/2011 16:38 -0500New York Fed Swap Lines With Europe Increase By $390MM, Rise To $2.248BN
Submitted by Tyler Durden on 11/17/2011 16:15 -0500The New York Fed has released its updated FX swap line data: while the USD line with the BOJ has been cut from $102 million to just $1 million, what is more disturbing is that the swap lines with the ECB increased by $390 million to $2.248 billion. This amount is split between $500 million in a 7 day line at 1.08% and the balance locked up in a 84 day swap at 1.09%, which is where the addition was found. And now we start getting the denials from European banks as to who it may have been to need rescue funding from the Fed via the ECB, and was unable to access USD Libor at a far lower rate.
Sorry Europe: China's Pockets Are...Empty
Submitted by Tyler Durden on 11/17/2011 15:37 -0500As every central banker, politician (except Chuck Schumer), and bank CEO looks towards Chinese central planners as their apparent bottomless pit of dumb money, it seems that perhaps the cupboards are bare. Reuters, via The China Post, highlights in a recent article that while there are indeed reserves, they are gainfully employed and the unwinding of those positions (in size enough to matter) to provide the cash that is so desperately needed to keep the ponzi going, will itself cause a vicious circle of negative sentiment. In fact, analysts reckon China's armory has only about US$100 billion to spare.
Are The Conservative Dutch Immune To Contagion? Are You Safe During An Earthquake Because You Keep You Keep Your Shoes Tied?
Submitted by Reggie Middleton on 11/17/2011 15:35 -0500This collapse will come in waves, and the CRE wave hasn't even started yet. When it does come, it will crash against the Sovereign defaults and rate storms to combine with a derivative malaise that will collapse much of the banking system. Ok, now for the bad news...
Watch Nigel Farage Dance On The Euro's Grave
Submitted by Tyler Durden on 11/17/2011 15:21 -0500
Nigel Farage needs no introduction: the famous Euroskeptic is one of very few men who has had the temerity to question, often in an abnormally high decibel fashion, the stupidity of the Eurozone leaders from day one. Now that he has been proven correct, he has every right to gloat, which he does to everyone's delightful amusement in the European parliament. The look on the unelected von Rompuy's face, especially as he watches his decade-long bureaucratic nirvana crash and burn every single day, is quite priceless.
Real Free Market Capitalists Demand that Financial Fraud Be Prosecuted
Submitted by George Washington on 11/17/2011 15:06 -0500Adam Smith and the leading Austrian economists were FOR prosecution of fraud ...
US Celebrates $15 Trillion In Debt By Announcing Latest $99 Billion Forward Issuance Calendar
Submitted by Tyler Durden on 11/17/2011 15:05 -0500Barely has America had the pleasure of enjoying its new found status as a 15-handle country (as in $15 trillion, or $15,033,607,255,920 to be specific) that the US Treasury went ahead and announced its latest forward issuance calendar of $99 billion in bonds and $11 billion in TIPS. Sure enough, by the end of next week, total US debt will be greater by $62 billion including a Bills auction, bringing the revised total to just under $15.1 trillion, and less than a $100 billion from the re-re-revised debt ceiling, even as the Supercommittee is deadlocked beyond fixing. Also, this means that even assuming the Q3 GDP is not revised lower, total debt-to-GDP will almost certainly surpass 100% by the end of the calendar year since December will have at least another $100 billion in issuance net of redemptions.






