Archive - Sep 2011

For those not "lucky" enough to be involved in the CDS market, liquidity is breaking down in Europe. Main was quoted as tight as 1/2 bp markets yeserday, is now being quoted on 2 to 3 bp markets, mostly by traders who seem to wish they had left an hour ago. XOVER, is at least 5 bps wide, and as much as 10 bps wide, but the dealers still brave enough to send something. This is not good, and although wider, it hasn't yet felt like anyone is reaching and paying too much just to get a hedge on, which makes me think this is not yet over.

ETF to form shortly ...

What the critics are saying: "One of the most disgusting and vile films ever made." WB7: You got that right!

We have long discussed what we suspect will be one of the first European financials to hit the proverbial fan. Given today's anarchic behavior in the US and European markets (credit and equity) and the continued insistence by TPTB (yes you Mr. Greek finance minister) that this is all due to a speculative rumor-mongering attack, we decide to layout some basic facts on one of the banks that was saved by the Fed/FDIC.

Just as to Italy it is suddenly America's fault the "crisis was sparked", so now it is "internet rumors" who are to blame that the market, at least in the form of CDS, estimates that the country's probability of going bankrupt is, oh, 100%.

We’re heading into the END GAME for the markets. What’s coming will see debt defaults in Europe and the US, a stock market Crash that makes 2008 look like a picnic, civil unrest and more.

and speaking of Europe...

Our joke di giorno has an unusual source: a Prime Minister with a penchant for buggery, who in this case has discovered a very curious source for all of Italy's woes...

A historic look at gold to S&P correlations.

No sooner has the EFSF "passed" the German constitutional court (with large caveats, most notably that the German government will have a much greater say in any and all future European bailouts, assuming such are actually needed and the Euro does not implode), that we learn that yet another hurdle for the Greek bailout presents itself courtesy of primary fund provider, Germany, which is now finally very angry (as suggested first here "The Fatal Flaw In Europe's Second "Bazooka" Bailout: 82 Million Soon To Be Very Angry Germans, Or How Euro Bailout #2 Could Cost Up To 56% Of German GDP" two months ago) at what it realizes is an ongoing transfer without checks and balances (remember: the insolvent PIIGS hold all the trump cards) of capital from Europe's prudent workers to those who are, well, not. To wit, according to the Spiegel, German FDP Party has just announced that it will seek a referendum on the ESM/EFSF. What this means is that while the hurdle is not insurmountable from a legal perspective, it will merely add further uncertainty to the final bailout of a country that according to the market at least is 100% bankrupt in an alternative universe in which fundamentals matters.

You know the saying...It's not paranoia if they're really after you. Europe is much, much closer to universal bank collapse than the media is letting on. You, my friends, are getting a distorted picture of mis(or dis, depending on your paranoia level)information. Enter Bear Stearns 2.0 without a JPM to swallow it with Fed help, or Lehman Brothers 4.0x5!

Is that H₂SO₄ that Warren is pouring for his next deeply introspective bath? Or will he double down and throw good money after bad money that was good as recently as 2 weeks ago (and according to Cramer was supposed to trigger a "massive short covering squeeze in the XLF.")

The global financial system is experiencing great stress as it adapts to the new, post-crisis rules of the game.  Those new rules are both explicit and implicit.  They call for more capital, reduced leverage, lower risk appetites, more thorough supervision, and stronger regulation, at both the systemic and individual institution levels.  In this environment, open dialog is all the more important as we collectively reach a common understanding of how the new rules should work in practice.

Timber time. Next up: another round of hopeless and very much helpless BOJ intervention. Because after the FX wars come the trade wars, and after the trade wars come the shooting wars.