Archive - May 20, 2010 - Story

In case you needed confirmation of the wipe out you are seeing on your monitors, here comes Bill Gross. Just headlines for now via Reuters:

• GROSS: FINANCIAL MARKETS EXHIBITING "MINI RELAPSE" OF FLIGHT TO LIQUIDITY
• GROSS: HEDGE FUNDS AND OTHER LEVERAGED POSITIONS NOW LIQUIDATING TO PRESERVE CAPITAL

So you mean Prime Brokers allowing 5x leverage for 130/30s was actually a bad idea?

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 20/05/10

We received this in our tipline:

I don’t know if this is appropriate for your tip line or if it’s even “news” but TD Ameritrade online access is “down.”  It seems to be the whole system…

Supposedly a technical issue with no forecast for when it will come back up.  They also don’t have a system to automatically notify customers of such issues –or their resolution.

Phone support’s advise agreed that I “should just keep hammering on it.”

In addition to the obvious rant about this status, it’s still another vote for why you should never keep all your assets at any one broker.

We have been unable to confirm it as we get automatically disconnected from TD Ameritrade's new customer contact number: 800-454-9272. If any readers are experiencing the same issues, please advise. If TD is indeed down, we wonder how long before all the other retail brokers follow suit.

Regular readers will know Zero Hedge's fascination with Hugh Hendry, who so far has been spot on in his predictions on this business cycle and bear market rally. Here is his most recent May 2010 letter, in which topics are critical as China and hyperinflation/deflation are deconstructed in a way that only the former Goldman/Odey partner can. Must read.

We are trying to procure the report, reported by RanSquawk. If true, Europe's contagion is set to go global, and the JGBs are about to find out what a reversion to the one way tightening path for decades means. Also should stop the JPY appreciation dead in its tracks, and refocus the debt vigilantes on that final bastion of Keynesiansm, the United States.

It is time for Bloomberg to update its analysis from yesterday on how many billions in dollars Goldman's clients have lost listening to the hedge fund's research call. After earlier apologizing for their EURUSD call, here comes the JBWere guys (the firm's down under subsidiary), saying the time for the downgrade of the AUD is nigh.

10:30 05/20 GERMANY FINMIN: NEED RULES FOR ORDERLY INSOLVENCY OF EMU STATS
10:30 05/20 GERMANY FINMIN: CAN'T HAVE EU AID PACKAGE EACH TIME

What's that? We are to expect more "orderly insolvencies" without EU bailouts? What kind of Keynesian travesty is this? But at least the road is clear for Portugal, Spain and Italy CDS to go points up front shortly.

Nobody cares about the euro any longer, but the following chart shows why EUR traders just ran out of money to even prepay their bodybags. The EURJPY just plunged 100 pips in one block!!! This is complete capitulation and the BOJ has no choice but to intervene. Too bad about that GDP miss and record low deflator announced yeterday.

The FDIC's quarterly banking profile has been released. Inbetween all the fluff we find that the deposit "insurance" agency has exactly negative $20.7 billion to satisfy any upcoming bank runs and liquidations. Thank god for that ongoing Treasury lifeline. Atatched is a chart of the Deposit Insurance Fund-to-Deposit ratio. Negative is, well, bad. Luckily, depositors decided to get the hell out of deposits in the last quarter, pulling out $29 billion from the not all that Too Big To Fail any longer.

Yesterday we disclosed that the reason for numerous SNB interventions in the EURCHF was due to billions in deposits rushing out of Germany and seeking the relative stability of Swiss neutrality. A quick look at the trading pattern of the GBPCHF shows that it is now UK depositors who are panicking and shifting their money to unnamed (not so much anymore) Zurich bank vaults. The result: a 300 pip move in the GBPCHF as the SNB rushes to put out this particular capital flight fire. Too bad it only succeeded for about 12 hours. The run on the bank (to another bank) in Europe is now on.

Today, banks are being widely castigated for their stupidity and cupidity. In both the US and in Europe, legal restrictions on leverage, on off-balance sheet vehicles, and on proprietary trading are widely supported in government circles and by the public. Universal banking is probably on its way out in the US. In Europe the rage against those who foresaw the weakness in Greece and protected themselves or profited has fanned the political desire to curb the movement of capital. Protecting weak credits by banning short selling or restricting offshore investors’ access to the markets will drive capital away. If banks can’t protect themselves against risk, they won’t invest at all. Eliminating SIVs and offbalance sheet vehicles may seem smart, but they are the investors in government debt and private bonds. Who will own this debt? Less leverage and smaller banks, plus restricted hedge funds, mean that the global money supply will drop and global GDP will too. Welcome to Smoot-Hawley v.2.0. - John Taylor, FX Concepts

What does it say that we simply expect things like this ten minutes before EU's open now?

Massive firepower and resources are devoted to the activity of evolved trading (scalping). Huge financial institutions called Exchanges cater to this activity so myopically, that they have lost all perspective of the real role of financial markets. And sadly, our regulators have allowed them to do so. In the name of evolution and “adapt or die” mentality, our markets have been hijacked and stripped of its most important role and function. We need to all adjust our thinking, because our economy demands it. We need to adjust our perspective, because our economy demands it. Markets need to be fair, and inspire confidence! That confidence is needed so that those with capital can feel confident in investing. This confidence is unfortunately on the wane. You hear it at parties, and you hear it on the street. Amazingly you hear it from brokerage firm executives (one who yesterday wrote an article suggesting that the source of our markets problems is the market order! Yes… he thinks the solution is to eliminate the market order and tell the world that our “most efficient and liquid markets” can’t handle the 100yr old market order!)