September 21st, 2011
There goes Citi...
While most commentators proclaim that QE is a completely new phenomenon, we have in fact seen a version of it in the form of the Fed’s and Asia’s (especially China’s) purchases of US Treasuries/ currency pegs over the last decade or so.
Buffett tells Obama how to tax the country and all he gets is this lousy shirt that says "I got double penetrated by Moody's on Central Planning day"
"What the eyes see and the ears hear, the mind believes."--Harry Houdini
Time for another bath. This time metaphorical. And based on Moody's downgrade methodology, a Citi downgrade is imminent. "The downgrades result from a decrease in the probability that the US government would support the bank, if needed. Moody's believes that the government is likely to continue to provide some level of support to systemically important financial institutions. However, it is also more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute. Moody's is therefore lowering the amount of support it incorporates into Bank of America's ratings to levels reflected prior to the crisis."
This week alone, longer-dated Treasury yields have dropped 15bps, as 30Y Treasury yields reach 2011 lows and all the way back to January 2009 levels. One can only hope that Bernanke doesn't disappoint...
With Just 2 Hours Left Until "The Announcement", Here Is A Complete Summary Of What Everyone On Wall Street ExpectsSubmitted by Tyler Durden on 09/21/2011 12:10 -0400
With just over 2 hours left until 2:15 pm, the time to place your bets (and if one trades with other people's money, bet big: after all we are sure to see a surge in "Rogue Traders" into this Fed announcement as many blow up once the embargo is lifted), is rapidly approaching. To help our readers out, here is a complete summary of what all the key Wall Street analysts believe will happen today. Handicap as you will.
A turbulent session in Europe ended on an ugly note as broad equity markets closed near their lows, credit spreads near their wides, and financials gave up all their rumor-driven gains. EURUSD, however, managed a spikey end to the day, popping its head back above 1.37 after trending generally weaker all day.
When all else fails, scapegoat, which in corporate America means fire your CEO. According to a headline from Bloomberg right now, HPQ (and soon many other companies) will follow Yahoo in dumping its CEO, Leo Apotheker. The result: a surge in the stock. Our question: will Leo draft his "WTF" letter from an iPad as well? Expect the Netflix board to "spin off" its CEO next.
I remain confused why the Private Sector Initiative isn't finished yet? Are [banks] worried their accountants or the markets would see through the ploy of a "par" bond exchange and not give them any benefit from that trick? Are the governments finally getting concerned that the EFSF should not pay banks par for 40% of their Greek holdings? The IIF proposal must have been structured by Robin Hood's evil twin - the one that steals from the poor and gives to the rich. The swap, that switches Greek exposure from banks to the EFSF ensures the banks lose less, but the people of Europe lose more directly. Nothing has been solved in Greece. Until Greece is fixed or defaults, the markets will remain manic/depressive. This proposal would shift some risk out of the banking system, which is good. But it puts it directly on the EFSF guarantors.
GATA's Chris Powell speaks: "The speaker following me, George Clooney, will be able to tell you what it's like to be handsome, talented, rich, and famous. I could tell you what it's like not to be. But instead the conference has asked me to talk about gold, which at least might make you rich, or help you preserve some of whatever you've got. This opportunity is full of risk, because the gold market long has been manipulated by Western central banks to restrain the gold price. The Western central banks are slowly losing control of the market but they are not giving up easily. Why do Western central banks manipulate the gold market? The gold market is manipulated because, despite Federal Reserve Chairman Ben Bernanke's insistence to Congress a few weeks ago that gold is not money, just "tradition," gold is indeed a currency that competes brutally with government-issued currencies and helps determine not only the value of those currencies but also interest rates and the value of government bonds...."
90 minutes after rumors of forced mergers and recaps and an easing of collateral requirements by the ECB, SocGen (among other French banks) has retraced more than 75% of the gains and senior financial credit spreads have weakened to their widest levels intraday. It certainly feels like any strength is being used to reduce exposure further - even as we wait for Bernanke's Bonanza this afternoon...
UPDATE: SocGen now trades lower than pre-rumor levels!!
Now, nearly everybody knows that French banks, & BNP in particular, may have some serious, "run on the bank style", liquidity issues. Well, here's what you may not know, & what traders very well may punish!
It is popcorn time as the President is only 10 minutes late to address the UN and discuss such innocuous topics as Palestinian statehood.