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Lehman Deja Vu: There Goes Market Liquidity
European liquidity just went into Defcon 1. Presenting the FRA-OIS spread. Oops.
And now moving to a US near you...
An explanation from a trading desk:
So the fact that Greece itself was stretched further on the rack was not the be all and end all of the new credit crisis and catalyst of the latest Libor jitters.
In reality, analysts immediately warned that the ramifications of any action on the 'threat' of French Bank downgrades was this time a significant event in the financing market.
When other EuroZone Banks had been downgraded or threatened with downgrades, the markets were to some extent immune because any shortfalls in Euro funding were continually topped up via swapped Dollars.
However, this '$-Funding' has been dominated by the Big French Banks and now we see the reality of such a polarized or skewed funding profile for Europe.
Not only are these French Banks significant players in the short-term $ markets, but many investors have large exposures to these entities either via CP?CD/ABCP or the Repo Markets.
**Based on the current market info on their money-market activities, we are told that the 3main French Banks collectively account for as much as 50% of all Eurozone CP/CD exposure as at recent month-end (31st May)...and, furthermore, they account for almost 15% of $ Repo Markets as per the end of Q1 2010 (31st March).!!!**
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Euro, we have a problem!
actually a fresh sell today on the Euro ETFs.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s218921777]&disp=P
EU stock ETFs with a solid new long term short.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s218732180]&disp=P
Hmmmmmmm.
DOW/GOLD ratio @ 7.82!
Along way to 3 , 2 ....1 still.
Vive La France!
God save the Irishmen! Jesus, bail them out, they are swapping shares for bonds. ;)
FIIGS?
Yes.
Like I noted days ago, it is infinitely easier to place Frankreich under another Vichy, than to deal with a Greek intifada.
The F-PIIGS to be precise.
Pfigis. And it sounds kind of German.
Might FIIGS be "Financial Institutions Including Goldman Sachs"?
Separate note - liquidity in equities IS gone except for HFT and options expiry prep. Really raising the stakes for a gianourmous problem when several HFT unable to be got off simultaneously in different names. Get out of the way of that panic!
or...Financial International Institutions Goldman Sachs aka FIIGS.... peut- etre...
LOL. Excellent.
PFIIGS
IF PIGS
- Ancient Chinese Proverb
Heh.
For general enlightenment I coined the term the "USUK"s (US+UK) -
The true, original Mega Fi Scum of the Earth.
The world caught its disease:
Anglo-Fi-Filia (symptums: cannibalism, incest, rape & murder).
Ceterum censeo Angloginem USUKs delendam esse!
Those PhD's Desks @ Soc Gen sure nailed it ;-)
"Lehman who?" - Wall St.
FRA/OIS spread was 128 after Lehman. Not quite there yet.
Where was it before?
80.8 on 08/15/08, exactly one month before bankruptcy.
As the original poster noted, a long way to go.
And how many trillions in short-term central banking bailout capital was pledged on 8/15/2008 one month before bankruptcy?
TD how come Euro zone is short of liquidity given the QE-2 pumping they are supposed to have received according to ZH estimates?
Those Euro banks must be washed with 600 B USD of cash!
and TED Spread heading lower, not higher?
TED spread is completely irrelevant as it is based on LIEBOR
That was base cash needed for statutory requirements. Any incremental cash will need to come from the ECB, which in turn means reactivation of FRBNY FX swap lines.
you guys are totally missing out on Pandora.. empty your pockets and back up the truck!
-- is it a full moon or what
@ falak_p: good question!
ducking the Q of cause here, i think one of the underlying "reasons" for these liquidity events is the leverage of the financials, esp TBTF, even the FED. so, a relatively normal event becomes a whoop-tee-freaking-doodoo as a 2-3% dip wipes out the entire capital equity structure of __________ (fill in blank; use xtra pages as needed).
Not arguing that they should be weighed on the same scale. Just agreeing that implying Lehman II is around the corner via Greece is a bit heavy-handed.
Why? Similar debt levels and possibly more rampant of a contagion, both financially and especially politically. Also need to factor in how more battered, bloodied and bruised the Global Financial System is in comparison to 2008.
The fact they cannot agree on a bailout may infer they simply haven't the resources to do so anymore.
One can only hope they've run out of bullets. All these bailouts should have never have happened in the first place, including here.
another thing to factor in....people are much more alert now, and expect smt to happen....which means they are much more inclined to shoot first and ask questions later...only this could speed things up very quickly....
not the same mindset as prior to Lehman....not many will stand up to the coming wave....people are not so sure the federalis got it together....its everyone for himself...
Excellent point. People are more in touch with where whatever is left of their savings and investments are and can easily call their fund managers and cash it in.
What percentage of the entire system is available in liquid cash? Less than 1% possibly. Imagine more than 1% of people cashing in their chips at the same time?
yep...lets hope for the best and prepare for the worst...
It is I think about 3%.
I have made the point previously that if the people knew there was virtually no "cash" in the system they might panic.
cash is now available, ad infinitum, by the CBs, especially the FRBNY
Good point. I was working on a combined value of €10 Trillion worth of Gold, Silver and liquid M0 cash assets as a tiny subset of €1 Quadrillon worth of Derivatives, Property and real estate, equities, bonds and other capital and short term money market instruments.
A lot of the derivatives cancel each other out, so the 3% may be more accurate, in a fire sale event.
Posted the play-by-play to my blog in hopes my regular folks reader will catch the drift - WE WON'T GET FOOLED AGAIN!
So, if a similar event occurred today where do we stand? From the exchange above we gain some perspective:
Link: Here.
eotw ftw
I'm sooo glad I got most of mine out some time ago.
+1
Nice summary of this interesting thread EOTW. Even 5% is a dangerous low number in a day of unravelling credit events.
Do you remember what happened after the assassination of Archduke Ferdinand?
Do you remember what happened after the assassination of Archduke Ferdinand?
Joe ASSHOLE LAFORNICIA on CNBS to the rescue!
And 3...2...1...queue French Riot!
At least the French remember how to properly riot.
No euros left in europe. They're over here buying dollars.
A Bidless market is coming....market crash of epic proportion, dead ahead!
Disclosure: Long VXX, FAZ, UUP
Disclosure: I can't believe I got the fucking math question to post this message incorrect and had to try twice!
don't feel bad, f's with me constantly. I think its a formatting/text issue. gets me posting as well.
I think that Tyler's maths professor may make the occasional mistake,
and I am not sure the learned professor knows about unary minus.
CSCO looks very very sick today
Any minute now, those shares will find "value." Holding my breath...
Time for the Blowhorn to use that phrase today...
Call Liesman and get him back on the air to pump this bitch back up!
Sounds crazy, but I'm gonna be buying soon (CSCO).
Same here not crazy. Short term high probability bounce. cya.
Well, yeah, but it's looked sick since May of last year...
Nokia looks even sicker. The horror. The horror
Globalized, interwoven, incestuous margin/leverage/hot derivative-on-derivative action, bitches!
We've yet to see the prequel, let alone the main show, but we're much closer.
Well said. Pithy.
ORI
Well said. Pithy.
ORI
the TED spread looks like it has heading lower over the last week...what gives?
LIBOR slowly creeping lower.
1mo Libor: 0.185%. Overnight Libor: 0.129%
You would think that a South American style renegotiation and extension for all of these borrowers is priced in the market. Thus the 600 Billion that went to Europe from QE 2 per Zero Hedge yesterday. This looks like the perfect set up for the insiders to load up on stocks and PMs.
Jerome Kerviel was the patsy: he was just far ahead of his time in running his own small piece of a total Ponzi hidden in plain sight! They tried to tell you it was just a one-off, criminal mischief thing but don't believe 'em: he was surrounded by colleagues who were all doing the same (as he testified and as others leaked). He was just the goat.
He needed to be silenced and the market sold off hard on this otherwise "transitory" news because the traders at big Wall Street banks knew: it risked exposing and collapsing the world's biggest Ponzi involving derivatives traded back and forth across the Atlantic as a means of generating fake fees, bonuses and giving the appearance of business being conducted. The big accomplishment of 2008: Now that Ponzi is the headache of not just the banks but US and Euro central banks and governments too.
PFIIGS
The P is silent as in swimming.
calm down folks all of the banks just passed stress tests not long ago..
Markit Itraxx up 4.2%
Uh oh! What is going to happen in Asia tomorrow?
Another Thursday? Blackish looking already?
scrrrrrlllluppppppp.... the sound of liquidity going down a black hole.
ORI
http://aadivaahan.wordpress.com/2010/12/20/twit-twit-2hooo/
This is the crisis they need to justify QE3. More moola to hoist up the Euro ponzi scheme is on it's way!
True but QE3, regardless of how they package it, will redefine the term "crisis" in the end.
Now I feel better. I thought I was the only one who got the math question wrong. And I had a math minor in college when I was a punk. lol
This market almost looks like it is real. Liking this FAZ. And there goes the mighty dollar. I guess we will be the last ones entering Hell.
The captcha should be reformulated to be a Keynesian-Krugman inspired forumula based on the creation/destruction of fiat in a fractional reserve economy.
There could be no right answer to any of the potential queries as the context is fatally and insanely flawed, but it would be more fun.
My keyboard won't let me enter the numeral 8, on its side. ;)
Alt 236
∞
An ∞ is an option-5 on my Mac keyboard.
How does it look to the rest of the group?
bck to the important news my potatoes have appeared in 7 locations.. just tiny little leaves but great to see...
lovin' it
US banks are gonna stop lending to European (French German names), all pretty orchestrated as noted several times. If you cant be the demand, create the demand. All fairly straight forward one would think. EURO sacrificed at the holy altar.
Why so many people are enjoying that market is crashing? I understand that the market is corrupt, rigged and manipulated.
But exactly what will happened in reality if its indeed crashes hard? I am not talking some ideals and sifi theories.
Realistically, if the market will crash what will happened to regular people? 100 People has some gold stashes.... then what? they will be running around to exchange their precise gold for some more amount of fiat money?
Or the idea that it will be like a switch flip? All rich will become poor and every1 who managed to get some gold will became rich overnight?
Of cause there are plenty of comments that if it crashes hard we will be on the way to healthy recovery.. will we?
When was the last time you ate some radish ?
I have today, after a long period of abstinence.
It was delicious and very spicy.
Yummy !
had Radieschen tonight for dinner along with smoked salmon and horseradish. num num!
the ones we get at the market are meant to look nice, and just that. They don't have the small very spicy not so pretty ones anymore :-(
I grow strawberries in my backyard!
Just about a month ago, on these pages and elsewhere, I said we would see a massive June liquidity crisis and almost all of the postings and data by Tyler and others have confirmed that fact.
Welcome to the crisis. This is going to make 2008 look like a piker.
So what you are saying is The Bernanke is going to have to buy approximately 5 to 20 times the amount of U.S. Government Fiatski-based Notes, and pump about 5 to 20 times the liquidity into the global markets, just to temporarily prevent a collapse, as a direct result of his actions circa 2008-present, as he did during that same 2008-present period?
And you're further saying that assuming that he did do this, the resulting inflation would be in the triple digits in emerging markets and double digits in developed nations, and this would crush whatever is left of any organic, non-government propped economic activity, and throw us into an absolute economic black hole for a very, very long time?
I concur.
Big difference between 2008 and today:
We had a myriad of "Fed Programs" to openly support various parts of the financial system lending to banks and buying assets. Now we just have, uh, the discount window. That window ain't big enough to save the PIIGS and our system so it's an either or all women and children for themselves proposition.
The Fed's only goal this time is to save the Fed, rest of the world and the U.S. be damned.
Agreed.
The Fed has already planned their own fake suicide, like a hedge fund manager who has been engaged in a massive Ponzi for years, but only recently widely disovered and busted by the people, so he flies his plane that was supposed to contain his 'body' into a mountain or the ocean, while parachuting out prior to impact.
I wonder what the new, colorfully named, replacement version of the 'Federal' Reserve Bank will look like?
John
Will you stand by your prediction if i reply back to you on July 1 asking "wheres the liquidity crisis?"
Remember, inflating the US economy (trying to, anyway) with countless billions of $ does not induce a full fledged liquidity crisis.
A good side effect will be the required use of scientific notation to express future liquidity injections. For example, "Today the FED provided 2.2 * 10^12$ of liquidity, approaching its limit of one mole or 6 x 10^23$ of total injected funds. FED chairsatan, Bernake, commented that one mole is still a pretty small number compared to the total number of atoms in the universe.
If we're going to need scientific notation capable calculators to discuss further QE, screw it - it's all for naught.
Tyler has it covered at the top of his comment box:
So now we have my prediction for QD3:
1050 Amerazoos
Q: But what is QD3? A: Quantitative Diseasing 3.
And thank you muchly, Tyler, for anticipating our needs.
... but unfortunately it doesn't display properly on Firefox.
It was supposed to be 10^50, but Bernanke is right
- why feel constrained by some piffling lttle number
such as the number of atoms in the universe?
Just wait until Mr. Market or the ratings agencies wake up and realize that exposure of the Spanish Caja's to Greek paper will cause even more havoc within the French banking system.
Smoke some SocGen if you have it.
Perhaps the recently announced massive reductions in daily/weekly ATM availability of funds by La Banque Postale were a notable exception to the fiscal imprudence of France's banking sector.
Someone has kept doing their homework. Are you still in contact with CB?
I am affraid that this is just the begining.
Bankia - hahahaha (just that)
Bank of ireland - needs 5.3 bln EUR of capital form investors, MCAP 680 million EUR (goooood luck with that, the general meeting was today)
Banco Santander - last week sold only about half the offering of 1 billion EUR of covered bonds backed by loans to Spanish regional and local governments
Dexia - Zerohedge said it all some time ago, if you realy want to laugh go look at their short term debt structure.
Unicredit - Needs aprox. 6 bln EUR of capital
and the list goes on, and on, and on...
That list doesn't even include the G14 banks who need to migrate OTC derivatives to an exchange and properly collateralize them. Billions in new bank capital needed, billions in billions refinancing needed, and trillions in sovereign current operating issuance also needed... No room at the FED inn for both a regulated and shadow banking system, when they announce, "if it ain't sovereign, it ain't Tier 1", they will have exceeded the stupidity and risk miscalculation that led to AAA-Sub-Prime-Slime.
Timberrrrr
so do any of you really believe QE3 won't happen? of course it will; QE-nth will happen so they can save their asses. Also perpetual wars, and more 'false flag attacks' can be expected as well. They'll do ANYTHING to keep that position of power....even 'genetic cleansing' [mass murder]...
QE was an illusion, a decoy to muster the heard into the shearing paddock. What happens if there really is no more QE is what I want to know?
RE Pigs: According to Lenovo(referrring to speculation profit), "in a typhoon even pigs can fly" (this is a translation so may not be totally accurate). I guess the EEU is lucky that it does not suffer serious weather events. The French won't have to lug umbrellas around to protect against the fallout from flying hogs.