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Post-Lehman Deja Vu As T-Bill Yields Turn Negative
The last time Bill yields turned negative (in essence investors paying the Government to hold their money for them) was in the days after the Lehman bankruptcy, when the entire world was about to blow up. So why did Bill yield for January maturity just turn negative once again? In other words, why are investors suddenly running for the hills? As Dow Jones reports, January and February bills hit a yield of -0.03% earlier. Some explanations have to do with Bill scarcity, as nobody wants to be exposed to anything beyond 3 months down the curve, let alone 1 year. However, the fact that bond investors may not be buying into the whole recovery BS (or just realize that there is nobody willing to roll near-dated treasurys into longer-tenor pieces of paper) and are once again running scared and willing to pay Ben Bernanke to hold their money for them should be very, very troubling. Additionally, could there be something more pressing and/or catalytic? We have not heard peep from any of the big banks in a while...
Even more surprisingly, the 1-3 month bill curve has also gone negative, indicating that there is something veru much awry with demand along the Treasury curve.
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It's quiet out there. Too quiet...
+1 :o)
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If the attach is going too well, you are walking into an ambush! A Military Wisdom
Turn negative means something bad happens. We should do some actions to turn back to the positive way.
http://www.paydayloan2u.com/loans/
And gold is slightly up, silver is neutral vs. yesterday, and the USD index looks like the back of a Stegosaurus... "interesting times" I guess. How weird do things get during a "crack-up boom"?
Take a look at Nov.20 '08 SPY volume, then look at today's...
Where can I see intraday volumes that far back?
It was over 800mil, today was a hair over 150mil...
Gold going persistently up, no matter what else is happening, is not a happy market indicator (except for GG!).
Big Friday plans Sheila?
Isn't Black Friday the ultimate Friday news dump?
Add to that Geitner's contentious hearings today on Capital Hill and something must be going on behind the scenes.
Nice insight Tommy, with the media pretty much covering up all the problems on the home front with a recovery story, I don't think the populace is exerting all the pressure.
It's possible we received an ultimatum from China on the Presidential visit, or something else is going on behind closed doors to create internal pressure (knowledge of a further negative outlook on the economy, imminent collapse, or the bank situation). The only bright side is that if it was all truly over, asking him to step down would most likely be pointless - unless just to shame.
I still find Obama's "double dip recession" comment yesterday absolutely remarkable yet it has not been discussed. Just the mere fact that he used those very 3 words after all the efforts to date has me scratching my head a bit.......
was he telling the truth in a CYA moment?
was he indirectly telling the chinese that we will have to keep spending more $$ cuz we are pretty much phucked and can't hide it anymore? and they have no choice but to go along?
yes, i know it is clearly a setup for stimulus version whatever.
I've been wondering the same thing. A couple of things to ponder:
1. Obama suggests getting into stocks after the second crash. Markets go up.
2. Obama states a couple of weeks ago he's 'all in cash.' Foreshadowing?
3. Obama talks about 'chance of a double dip recession'. Markets promptly begin to tank.
4. Obama when he talked about getting into stocks referred to P/E as 'Profit/Earnings' ratio- proving he is indeed a talking puppet and economic idiot.
So... who is the puppet-master?
At a time when the Fed and our country in general needs to restore faith in:
A) Financial institutions
B) The Fed
C) Elected officials
D) Gov't competence
Obama's comment seems designed to provoke subtle chaos in the markets? More Cloward-Piven?
Where did you hear the 'all in cash' comment, what's the context?
That would be interesting if I had a source.
It's madness. It's madness, I tell you!
- Everybody is willing to pay anybody to hold their cash, whether it's equities (even bankrupt ones), treasuries, bonds, commodities, anything as long as it's not the dollar!
- Timmay's in the oven
- Obama giving lip service to everyone
- Bernanke sleeping well at night
Oh, what did you see, my blue-eyed son?
Oh, what did you see, my darling young one?
I saw a newborn baby with wild wolves all around it
I saw a highway of diamonds with nobody on it,
I saw a black branch with blood that kept drippin',
I saw a room full of men with their hammers a-bleedin',
I saw a white ladder all covered with water,
I saw ten thousand talkers whose tongues were all broken,
I saw guns and sharp swords in the hands of young children,
And it's a hard, and it's a hard, it's a hard, it's a hard,
And it's a hard rain's a-gonna fall.
Sing it, Bob-bay!
you ought to hear Bob Weir do this song.....incredibly awesome!
Indeed, a Hard Rain's Gonna Fall.
I'll take El Paso @ Red Rocks.
Great song... and appropriate.
Dylan songs are even better when you don't have to listen to him sing them.
Best version I've come across of this classic.
http://www.youtube.com/watch?v=o6QnaCGJUdA
Nice version, but nothing beats the original from the master himself.
http://www.youtube.com/watch?v=1VC_5IV9SOg&feature=related
T-Bills yielding negative, S&P trading at 100x PE plus.......
.....something not right here, not right at all.
Where are those "bubbles" that the Fed recently stated that it does not see? In stocks or treasuries.....you be the judge! I know where my money is at.
I saw him deliver that line with a straight face yesterday. Breaks my heart we live in such a world.
Ummmm...isn't S&P closer to 16x PE? What chart are you looking at?
WOAH!!!!!!!!!!!!!!
This is what caused the Japanese sell off!
This is what caused our sell off!
This is the watershed signal events.... this destroys quant models
INTEREST CANNOT BE NEGATIVE..... When it becomes negative in real terms, forget about it. Somewhere, someone just went bankrupt!
If you're going to panic, panic first.
http://online.wsj.com/article/BT-CO-20091119-714012.html
Panic? Hell, this is what preceeds deflation in every case I've found as of yet.
This is what I was looking for on a theoretical basis.... I want to see if it pops
I was referring to a market panic, not a phaesed panic.
I will now retire to my kitchen, pop some popcorn, and watch to see if the waterfall fits through the garden hose.
Not sure there will be a waterfall from this. The question is: If no one seems to care for fundamentals anymore, and the theory that in a stable system rates should never be negative is a type of fundamental aspect of a well functioning market - then is this really an event preceding anything of any significance or yet another blip on the screen?
There should be, that might be part of the reason why issuance just went up 2 billion today
http://acrossthecurve.com/?p=10324
http://www.lewrockwell.com/north/north758.html
And maybe why Tiny Tim was getting so pissed because he knew his chance for good public opinion just passed.
Also the Fed wants to destroy any legislation against it... another crisis would do that theoretically.
Are there no other mathematical economists out there on this blog who aren't keynesians??? *SIGH*
That's definitely true about the fed, nothing will serve better to put everyone back under his umbrella than another collapse. Also probably better for the GS guys as well, as they can make a lot more money with little resources on another big leg down vs spending increasingly larger amounts to move the market less and less up. So in short, all the big guys win from another collapse.
Only question is when will they decide to pull the switch?
As a graduate of Chicago GSB, the last year and a half has been absolute torture. The entire obsession with Keynesian theory and the failure of the practice has been very frustrating. Perhaps some good will come from this disaster.....
I believe we will Batty... we have an entire generation of the most intelligent individuals out there expanding their knowledge on a daily basis. Places like Zero Hedge, Chris Martensen, and the Mises Institute are advancing the theory, they just need to advocate the mathematical schools that have alternative approaches. Indeed, a return to the principles which Fisher himself created would do much to advance our knowledge. Theoretical economics will be reworked, question is if it will be that much better.
http://en.wikipedia.org/wiki/Knut_Wicksell
http://it.wikipedia.org/wiki/Antoine_Augustin_Cournot
I'm serious, I don't want to be one of the few who aren't a part of the bought and paid for academic community. Read these principles... I especially advocate reading W.S. Jevons "The Theory of Political Economy"
http://books.google.com/books?id=uigbAAAAYAAJ&dq=books+google+theory+of+political+economy&printsec=frontcover&source=in&hl=en&ei=ZRIGS7v6DpSINo3G9LMK&sa=X&oi=book_result&ct=result&resnum=11&ved=0CDUQ6AEwCg#v=onepage&q=&f=false
You are correct, there are no events.
There are only gears.
Someone is about to turn the crank. The gears are going to turn as they were connected to do over the last 50 years. No, over 150 years. There will be no event, there will only be motion. It will be as smooth, fluid and flawless as sexual intercourse. Everything will fit together, and the gears will turn in breathless beauty and grand majesty.
And not a single soul alive will understand what the gears are doing, and the gears will then unwind us completely.
If it was an event we could stop it. But it is a machine and we are inside it and it will grind us into sausage.
Probably. Though I hope not. I really really do.
cougar
I really like that imagery, it is true that there have been a very large number of gears going into this machine and the crank had turned last year, but then as expected the government threw a log into the gears in March. We'll see how many more gears or force on the crank will finally make that log break. And I'm in the same boat, I really wish we weren't headed for that ledge, but wishing it away does not mean we shouldn't look for it.
you are so twisted. I like it
Cougar, your writing is erotic.
Ding!
Like in Atlas Shrugged? Maybe supermarket paperbacks with Fabio on the front? Or back-alley style. Yeah.
"If no one seems to care for fundamentals anymore..."
With respect, I believe this is a faulty postulation.
There are many, dare I say the vast majority, who care about fundamentals. Fundamentals are certainly put aside from time to time (see behavioral economic theory vs. efficient market) and at other times they are not.
This is not my beautiful house.
This is not my beautiful wife.
Oh, wait. Wrong board.
Seriously, does anyone have a link?? I'd like to read the release
and yet we got the 3:00 pump, soon followed by the 3:45pm pump
nasdq 20pts above its LOD. and dj cut it's losses in half.
WTF??
with comments like these it is going to be tough to protect you lizzy when we invade Canada...
With some states threatening to leave the federation, there won't be much of a US to invade Canada. You will likely be fighting each other for scraps...lol
timmy and friends selling over $120 billion in treasury notes in 3 days during the upcoming holiday-shortened week.
i think they are hoping everyone will go away for thanksgiving and look the other direction when that auction takes place.
If this is truly as significant as stated it deserves a larger explanation
I'm not surprised. When gold suddenly starts to sell off, it's gonna get ugly Where do you think all that maniplated cash is going?
lizzy36: don't worry too much about the day-to-day manipulation.
It's all window dressing while those in power wait for the next scapegoat to blame for the markets inevitable return to reality.
easy answer: overwhelming supply of liquidity has to find a home. bid up everything.
From Acrossthecurve.com:
November 19th, 2009 3:10 pm
Prices of Treasury coupon securities have posted modest gains today but have retreated from their best levels as the 10 year note flirted with the 3.30 level which has acted as a barrier in the recent past.
I do not speak to often of the T bill market but yields in that market continue to collapse. In one recent conversation a market participant noted that bill yields are negative out to February. There are a couple of factors at work here. There is a massive wall of liquidity, a pile of cash which needs a home. That is driving yields lower.
Typically as the year end approaches clients tend to unwind profitable trades and reduce balance sheet. I think that some of that deleveraging process has created new piles of cash and that money needs a place to park.
Others are preparing to beautify their balance sheet by having some pristine government paper on the books over year end. Some of that trade has begun as investors purchase paper which will carry them into 2010.
In that regard the flight to this short paper has resulted in lower yields on the 2 year note. At one point today that benchmark traded as low as 0.678 percent. It is caught up in the gravitational field of the short bills and consequently it will trade to even lower yields, I believe.
As I wrote earlier this week I am a firm believer that the Federal Reserve will remain on hold for all of 2010. Here is a great trade which one can do if he or she buys the proposition that the FOMC will indeed be on hold for the rest of our natural ( and maybe supernatural) lives.
Acrossthecurve.com is correct
Glad to join,very ineresting site and posts.
forex signals
I was immediately thinking "massive wall of liquidity", and was willing to add that "unwind of the dollar carry" would harm frothy equities and probably prompt a massive move to Treasuries and PM.
With no other news to suggest equities are in trouble -- but no evidence that they are not doomed either at 100x PE -- I'd say the dollar is going to strengthen, the carry unwind, dollar shorts are going to be destroyed but not before they buy every dollar on the planet, BB will shat himself, TG's head will finally and fully explode, and equities will lay up poised to fall off the edge of the earth in a glorious swan-dive back to March levels or less.
All that by Friday next.
But I'll be in the kitchen cooking for Thanksgiving (the only time I get to cook) and won't have noticed, so tell me how it ends won't you?
cougar
"Not with a bang but a whimper."
What is it with all of the deflationists today?
If our foreign creditors buy our debt and hold dollars while not receiving any more growth from trade they will go bankrupt and so will we, which will cause the dollar to collapse.
Every move seems like a hedge, playing everything short seems like bad advice, but it looks like the only path.
So when was the second last time this happend ?
Is your question "When did yields turn negative two times in about a one year period?" Has this ever happened before?
Maybe I'm just simple minded, but why would someone purchase anything with negative interest?
Why not just NOT buy it, hold on to the cash, and NOT lose any of it?
If you're afraid of holding cash, what do you think Uncle Sugar is going to pay you back with?
Anyone?
Bueller?
To a bank, a T-bill is cash... Essentially it means someone was caught short without the funds to cover it. I repeat, somewhere, someone just went bankrupt.
I would guess that "I was holding a lot of cash last quarter, and expect to continue doing so" is a career-limiting admission for fund managers. Better to say "I was all-in Treasuries as a hedge against economic chaos" and hope nobody mentions hyper-inflation and a dollar collapse.
It's a safe bet they won't. And even if those things happen, our hypothetical fundy could say "we're sailing off the edge of the map guys, how was I to know?"
It's all about CYA. Nobody knows WTF is going to happen, only that it isn't going to be pretty and lossa people's gonna die.
cougar
Yes, despite popular confusion, T-bills are NOT cash... big distinction, particularly if a crises hits.
um, yield curve, i mean, er ...arbitrage, that is...full faith & credit, or lice in the mattress. Wait, it's because...okay, I got nothin.
There is only one pluasible explanation for your question. Those who purchase T-bills with known negative interest rates are afraid that the cash that is held by someone else might not survive in 3 or 4 months (i.e. the duration of the T bills in question). Suppose that you are a money manager with hundreds of millions or billions of dollars sitting in cash. Now think about exactly where that cash is currently residing. It's either in a bank account or a primary dealers custodian account. If there is even an inkling of a chance that they might fo under in the next 3 or 4 months then you are dead my friend. The FDIC insurance is 250,000 and the SIPC only insures up to $5 million I believe for brokerage account. If you buy a negative yielding T bill, then at least you know for sure that Uncle Sam will five you back the face value of your T bill even if the Fed has to print up the confetti.
Got it? There is no ther explanation for taking a negative yield unless you are afraid of the people who are "holding" the cash for you.
Thank you. Very helpful for those of us who aren't professional money managers. The prior explanations weren't quite enough for us outside that business.
So who went/is going bankrupt? Is that the 64x10~12 question?
If your brokerage holds the t-bills then there is as much guarantee as cash (from my understanding)... after your $5 million, the rest of your bills will still be assets to pay off creditors.
Ahhhhhhhhhhhhh.
Thank you sir.
There is another explanation:
You are a foreign central bank that just bought a few billion dollars overnight to keep your currency artificially low and you are just following procedure by investing the proceeds in T-Bills.
Sounds simpler than speculating on bank bankruptcy fears that are now mathematically impossible unless its the government itself that goes bankrupt. And then you may ask why T-Bills. And then again again the government can just print to avoid bankruptcy anyway.
What do you think makes more sense?
W
I didn't say bank.. I said someone... Most likely a large hedge fund.
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There is only one pluasible explanation for your question. Those who purchase T-bills with known negative interest rates are afraid that the cash that is held by someone else might not survive in 3 or 4 months (i.e. the duration of the T bills in question). Suppose that you are a money manager with hundreds of millions or billions of dollars sitting in cash. Now think about exactly where that cash is currently residing. It's either in a bank account or a primary dealers custodian account. If there is even an inkling of a chance that they might fo under in the next 3 or 4 months then you are dead my friend. The FDIC insurance is 250,000 and the SIPC only insures up to $5 million I believe for brokerage account. If you buy a negative yielding T bill, then at least you know for sure that Uncle Sam will five you back the face value of your T bill even if the Fed has to print up the confetti.
Got it? There is no ther explanation for taking a negative yield unless you are afraid of the people who are "holding" the cash for you.
If you are a foreign government and think the USD is going to strengthen vs your currency, hold a tbill with a slightly negative interest rate might not mean you lose value in your currency.
****************Ghost************,
Your answer still doesnt make sense. Consider the time 0 decision of deciding whether or not to park your money in a T bill versus holding cash. Then at Time 1 after you have sold that T bill versus holding cash from Time 0 to Time 1. Regardless of whether the dollar appreciates or depreciates, your cash holding of USD at time 1 is less under the T bill scenario then under the holding cash scenario.
It is true that depending on whether the dollar appreciates or not during the Time 0 to Time 1 period, the entity in question may actually get more i terms of foreign currency denominated returns, but its is unequivocally clear that the entity is better off holding cash and not T bill under all scenario.
Think about it again. Time 0 til Time 1. Holding cash is Pareto optimal.
No, you are correct... but your timing the trade as of today....
Now if you timed this trade say six months ago by borrowing a one year t-bill (going short) and purchased a two year t-bill and basically were timing the interest rate spread, betting that rates would rise because cash would be less attractive now that the "recovery" would be in full force. And in fact it has.... in equities, not in t-bills... of which you were massively short because you purchased a boat load of equities and made plenty of money in a mismatched duration portfolio.
Now, you need cash on delivery within the next six months and you go out to look at what you need to pay back.... well unfortunately this is a highly leveraged play with swaps and you've wound yourself all the way up the chain, at no point having tangible dollars and instead have leveraged yourself impossibly... At this point cash at anytime is optimal because that cash is due and it's easier to have it on hand because your capital requirements are increasing as these durations are due.
Everyone is short cash... basically cash is experiencing a short squeeze for all delivery for all the super smart quants who couldn't imagine cash would be so cheap for so long... if positive low rates increase prices... what do negative rates do?
http://206.71.64.13:12001/graphics/thu/Chart%20%2392.png
Just to be clear, if I, the manager of Turd Ferguson Asset Management (TFAM) have $100 million in cash in my Datek Online ('memba them?) account and Datek blows up I get nothing? But if TFAM holds 100 shares of Excelera XLA and 100 shares of CMGI (at $225 a share) and $100 million worth of T Bills, then I get to keep all of my positions when Datek blows up? I know I'm trying to be a little bit funny, but I can't understand why T bills would be covered but cash in a cash account wouldn't be??? forgive my ignorance please.
Thanks
Biff
You can actually hold the physical $100 million in T bill at your office or segregated lock box in a large bank. It's only ten $10 million T bill or 1 large $100 million issued directly to TFAM with the cusip number registered, etc... Now consider the alternative with cash. Where will you be able to park $100 million in cash, and what bank or other entity can raise such a sum and hand it over to you to protect by yourself? Will you take a $100 million cashier's check or a $100 million T bill? If it's a $100 T bill, I can fold it up and put it in my wallet or sock and roll it out at the Treasury when the time comes to redeem it. If some bank like State Street can hand me $100 million in cold hard cash, then ther's no way any T bill rate can ever be negative.
Negative T bill rate is a fear of insolvency of the custodiam pure and simple. There is no other explanation. No mismatch in duration, no short the T bill and failure to deliver, etc... none of that. It is a pure fear of insolvency and so the TFAM manager will take less to guarantee that his money will be returned to him. Period. Somewhere/someone is blowing up right now!!!
Good observations... true, it might not be failure to deliver. I do believe someone is blowing up right now, several someones in fact. Be interesting to see what happens this failure friday... but I do believe it will be a series of blowups as the shock runs through the curve.
thank you for the explanation my friend
Nice Rusty, now add the transaction fee and management fees to the negative interest rates and we are beginning to approach the recommended taylor rule rates.
The default risk of a major bank (money manager with deposits in excess of FDIC limit and SPIC limit) and/or the foreign government/SWF that believes its currency will weaken against a strengthening dollar both make sense.
The world wide debt ponzi scheme including derivatives is like a black hole:
Stuttering
Cold and damp
Steal the warm wind
Tired friend
Times are gone
For honest men
And sometimes
Far too long
For snakes
In my shoes
A-walking sleep
And my youth
I pray to keep
Heaven send, Hell away
No one sings
Like you anymore
Black hole sun
Won't you come
And wash away the rain
Black hole sun
Won't you come
Won't you come
Black hole sun
Won't you come
And wash away the rain
Black hole sun
Won't you come
Won't you come
Hang my head
Drown my fear
Till you all just
Disappear
Can't Buy A Thrill
http://www.youtube.com/watch?v=GD_DyoB4Cjs&feature=related
The Royal Scam
http://www.youtube.com/watch?v=lRjItDLnAwc&feature=related
Personally I'd prefer to hear Black Friday (say tomorrow about 4pm).
Rusty, Think of it this way:
You've got a quadzillion dollars and need to "store" it somewhere. Can't keep it in the office safe.
Two choices:
1. Put it in the bank and earn .5% in a quadzillion CD
2. Buy a quadzillion US treasuries at , let say, -.5%.
Here is the catch. You're CD or any bank deposit is only US insurance to $250,000 by the FDIC (you have other choices for insurance but that's complex, to hard and costs $$$)
But the U.S Treasuies are backed 100% by the Feds for any amount. (so the quick and dirty "insurance" costs you -.5%)
What do you do, go with the 250,000 backing by FDIC or 100% backing by the Feds?
Once last thing, you want to transact it quickly and it must be liquid
Books
PS, I forgot to mention one little tiny item, you're scared shitless!
their probably affraid that the bank that's hold the cash will go under, better to have a shiny piece of paper from the fed for less than to have nothing.
dude
you've got 8 million in your cash account. it's insured by insurance that can't pay. what do you do?
TD's second chart shows 25 bps fall over three months,
http://www.zerohedge.com/sites/default/files/images/user5/Feb%20Bills.jpg
The Chinese moving aggressively to the short end of the curve perhaps? Capital inflows into Treasuries have been strong despite the USD fall.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWtvMO5Krd84&pos=2
Still, Zen Master Bob is right,
"I heard the sound of a thunder as it roared out a warning
I heard the roar of a wave that could drown the whole world
I heard one hundred drummers whose hands were a-blazing
I heard ten thousand whispering and nobody listening"
By their design, the treasury's TIC reports are purposely stale by the time we read them. This is trumpeted today by Bloomberg, but September is ancient history already. No relevance to today.
Look at TD's chart again, September dropped 10 bps, this has been going on for months,
http://www.zerohedge.com/sites/default/files/images/user5/Feb%20Bills.jpg
Sorry heatbarrier, yes the t-bill rates have been steadily dropping. I was refering to the Bloomberg article only.
Prechter publisted today, and by the way, plug ZH. He lays it out pretty nicely what's going on - it boils down to "everything is deflationary" You may not agree with Prechter, but he is no fool. If he is 10% correct, we are all "Screwed, Blued, and tattooed"
Books
of couse the Chinese are going short. they know that WHEN not IF they dump the dollar then they want to be able to turn over those bonds quickly and just before they hit us. They are telling citizens to buy gold and silver for goodness gracious! we are so F'ing screwed in the US. our gov wants us to buy more Crap- not save our $$...
great blog BTW.
If a tree falls in a forest with no one around to hear it, does the sound exist? Something is imploding somewhere but no one can hear what and where.
One additional thing: the TED spread has just broken out of its trading range to the upside. Chart here:
http://charts.dacharts.net/2009-11-19/Lionhead%20TED%20spread.png
I think the answer lies at the feet of the usual suspects:
http://www.reuters.com/article/bondsNews/idUSN194124420091119
http://www.reuters.com/article/companyNews/idUSN1812105720091118
http://www.reuters.com/article/companyNews/idUSN1347175020091113
Oh Boy, the "Too Big To Save" EU banks,
DBank 2x Germany GDP
UBS 5x Swiss GDP and not even EU, on its own.
http://www.ft.com/cms/s/0/61d7e148-8f15-11dd-946c-0000779fd18c.html?ncli...
OK, ready for something juicy? These two countries and banks were most likely involved in the holocaust or involved in funds related to the holocaust. This could be a clever culmination of a 60 year financial revenge pay back.
WW2 ArchivesManfred Pohl, director of the bank's historical institute, said it was the first time that Deutsche Bank had been linked to the financing of companies that built the Nazi death camp. Other recently unearthed documents showed that the bank serviced accounts for the Gestapo, the Nazi secret police, which deposited proceeds from auctions of property confiscated from deported Jews, he said.
Mr. Pohl said the bank's archivists had found detailed loan records to construction companies that built facilities for "Waffen-SS Auschwitz," the camp's security police. They also found records of loans by Deutsche Bank to companies for the construction of the IG Farben chemicals plant adjacent to Auschwitz.
Eastern Europe is the spot to watch, especially Ukraine. EU banks exposure is dangerous.
IMF, EBRD urge E.Europe banks to recognise losses
11.17.09 Thomson Reuters
The European Bank for Reconstruction and Development's (EBRD) Chief Economist Erik Berglof said that delaying the build-up of both non-performing loans and of the reserves set aside to cover them was particularly pronounced in Ukraine.
'The country that illustrates best the lack of recognition is Ukraine where all the banks have been 'evergreening' credit,' Berglof told reporters on the sidelines of the conference.
Ukraine, whose economy is on track to shrink by 15 percent this year, has one of the highest levels of bad debt in Europe with about 30 percent of all loans impaired at the end of the second quarter.
The banks' strategy to go easy on building reserves has allowed them to safeguard profits and avoid massive dilutive cash calls at depressed prices earlier this year.
But having run down the ratio of reserves to non-performing loans to as low as 50 to 60 percent -- from close to or more than 100 percent going into the crisis -- there is little room left to manoeuvre.
http://www.forbes.com/feeds/afx/2009/11/17/afx7130485.html
November 19th, 2009 7:47 am | by John Jansen |
One trader reports via email the HKMA purchased a rather chunky $ 2.1 billion US dollars overnight.
Perhaps that in combination with the litany of banking legislation getting set to pass.
Someone explained earlier why T-bills can act as cash for banks, thank you.
After being bearish all fall, I suddenly felt good last night..mom seemed somewhat employment secure yesterday, things seem to doing okay, she locked in a re-fi that will save her some money, I even asked her to take a little money out for house improvements, cause that last remodel, the gas fire place with remote control...man I love laying in front of that on a cold fall night! All was good in life.
And then it hit me, I had succumbed to the "things are getting better" mood...in fact, wagging tail and excited yips of yesterday may be a sign of "peak pet social mood". Wonder if Prechter has a graph for that.
I finally felt good yesterday...so, I'm thinking...we're toast...and yields are not the only thing going negative.
After H1N1 fizzed (fizzing? - Mandatory Vaccinations - aaaaaAAaaaah!) I have noticed a similar warming feeling. This time like, "Aaah. Goodness my new slippers from Target are oh so comfy. Honey, we need to get you some too! We could get matching ones for our taquito trips to 7-11."
And then I come to ZH and am in total disbelief I'm not already living in a tent.
funny, I just heard a health official here in MN say our recent H1N1 wave was declining, but she said, that had happened in other hard hit areas, and then a few weeks later another big wave hits....we'll see, but I'm stocking up on Vitamin D and cash...
I may have another angle on this, and it could relate to large banks going bankrupt over their gold and perhaps silver shorts in conjunction with comex delivery failures.
The Asians are upset and backing the fraudulent gold lessors into a corner by taking physical delivery on comex. These big boys could easily default, and it is not like Congress can go to the american public hat in hand and state that the banks have been shorting gold and silver without the physical and could we please have more money to bail them out. With some of these banks at risk, large money managers are using the safety of the largest military in the world for deposit insurance.
This is a must read article from Jim Willie - Gold, Hyper-Inflation
http://www.marketoracle.co.uk/Article15143.html
Thanks Apocalypse Now, this is just more pressure on the banks that have participated in the paper gold/silver scam. Now the new wrinkle with the tungsten scam. Watch the TED spread for the market's reaction if this latest scam is blown open to the general public. Oh, boy! Tally ho!
Resignations coming?
That's a very interesting theory. Seems plausible.
"Banks going bankrupt over their gold and perhaps silver shorts". You are quite the information speculator.
The Jim Willie article is unsubstantiated. Please provide a credible news source for the salted bars. What's that? You cannot, except for some goldbugs web blog! LoL.
You're credibility is approaching tooldom with all this nonsense that you are posting. Apocalypse Stupid.
Anonymous- Please do not get your panties into a bunch, life is too short and the big banks are too short on precious metals as well. With you so worked up, I must have touched a nerve and would be interested in knowing which post made you so upset - it's OK take a deep breath and calm down. Once you bring the emotions into check, perhaps you could articulate the so called "nonsense" with something more than an ad hominem attack - the equivalent of a drive by shooting.
I would suggest a filtered MSM source that tows the agenda line for you, something owned by the banks like one of the big networks, perhaps CNBC. Perhaps you should engage an assayer to determine the backlog yourself so that you have first hand knowledge. You probably think the fed is a federal entity, and believe yourself wise.
Gold investment sites believed we were in a bull market and that gold would go from $800 to in excess of $1000 quickly with government monetizing, what tools they are....oh, what, wait, gold is at an all time record of $1,150 as of this week? hmmm maybe you are the tool. My credentials if revealed would surprise you.
Again, I would be happy to debate on any particular item if you provided an argument - but you are too weak and you hide your embarassment by wearing a paper bag on your head.
AN
LMAO JAPAN! Way to open.
Five years ago (Nov 2004) foreign holdings of US debt was $1 trillion; today $3 trillion according to the FED custodial accounts. That's the pressure that is about to blow.
On 31 Dec the $250K FDIC deposit limit expires and drops back to $100K, thus there's an awful lot of money looking for (relative) safety. The choice is an extra bank-and-a-half for each existing deposit, or just consolidate at the "safest" place.
Thanks for that misinformation, you fit right in.
Try Dec 2013 and NEVER for IRS's.
I thought not until 2013, am I right?
Wouldn't yields go negative if there was an expectation (or fear) that the dollar was about to soar? Foreign banks would pay a little to get into dollar-denominated investments.
The facts of the case are these:
the .IRX is down to the lowest levels since mid-september of '08, prior to all the carnage.
the tedspread is indeed breaking out, also happened prior to the carnage
http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP:IND
Moody's has downgraded several large European banks...Could it be UBS or DB is going to blow up? Where is Reggie??
I, like many of you, feel like something is going to happen.
The small cap indexes are not confirming the new high in the SPX. Neither are the international indexes. New Highs are also not confirming...
We are the hollow menWe are the stuffed men
Leaning together
Headpiece filled with straw. Alas!
Our dried voices, when
We whisper together
Are quiet and meaningless
As wind in dry grass
Or rats’ feet over broken glass
In our dry cellar
Shape without form, shade without colour,
Paralysed force, gesture without motion;
Those who have crossed
With direct eyes, to death’s other Kingdom
Remember us—if at all—not as lost
Violent souls, but only
As the hollow men
total pwnage
The stuffed men.
UBS has been reporting massive outflows since it gave the IRS most of what the IRS wanted.
Would be an extremely loud way to tell people worldwide to pay their taxes or else. And more importantly, to tell all the banks what the US et al will do to a bank that helps tax evasion (or commits it itself).
But by killing UBS, couldn't the global uberrich also be telling banks NOT to cooperate with such inconvenient 'legalities'? That is also a very loud signal. A signal of a very complicated war deep in the gut of the Matrix.
Call it the sound of musical chairs being played to one hand clapping...it takes a couple of years to stop this much music, I guess. Plenty of time to knife the guy next to you and take his chair--just watch your flank while you 'operate'.
Not good for us road kill middle classes.
'And when you lose control, you'll reap the harvest you have sown.
And as the fear grows, the bad blood slows and turns to stone.
And it's too late to lose the weight you used to need to throw
around.
So have a good drown, as you go down, all alone,
Dragged down by the stone.'
I know that one-hand clapping is supposed to present some great spiritual insight, but somehow, when I hear one-hand clapping, I think of Bernanke...
Along those lines, someone about 60 years told me many years ago their professor explain economic cycles this way, he blew up a baloon slowly saying this was good times, then he release a little air, and said this was a recession, then he blew it up til it popped, he said that was a bubble bursting, then he blew on the popped ballon, and of course it refused to reflate, and he said that was a depression.
Good one :)
Goldman Sachs chart is strangely bearish -- total loss of relative strength versus SPX.
And that State Street chart -- oh my.
Why is this story not getting more attention???
Here is a quote from Buffet after the last time this happened:
Berkshire Hathaway had only one slide at this year’s annual meeting. It showed a Dec. 19 trade ticket showing a Berkshire sale of $5 million of Treasury bills. They were coming due on April 29 this year, roughly four months after Berkshire sold them. But Berkshire sold the bills for $5,000,090.70. If that buyer had instead put their money in a mattress, by April 29 they would have been $90.70 better off, Buffett said. Negative yields on Treasury bills show how tumultuous last year was, Buffett added. “We may never see that again in our lifetimes,” he noted. – Alistair Barr of Marketwatch
That was in December 2008. And we all know what happened between January and March...
It's an echo from last fall's events. Money was pulled from questionable institutions (FDIC or SPIC insured) and put into Treasuries, for safety for a year. Now the mechanics are such that many of those bills need to be rolled over. I know, I am in that position myself. Clearly, many are deciding that FDIC and SPIC are at least as underfunded as they were a year ago, and rolling into Treasuries.
wish i was in position to have more than $100k nin cash to worry about its safety...but really, how many bones does a dog need to be happy?
Business funds. Don't necessarily think in terms of personal funds.
With negative short term rates, banks going bust, and FDIC broke, pretty soon people will just hold their cash AT HOME (no FDIC limit!). These withdrawals will kill bank reserves,
EITHER banks will have to call in loans due to reserve requirements and further strangle, deflate the economy...
...OR the Fed will have to monetize more of their trash.
Obviously, the latter will be Bernanke's choice, killing the dollar--his goal despite the jawboning.
Barring further gold swaps or leases, people will bid up gold further. At the very least, negative T-rates will shut up those who berate gold for not paying any dividends!
the fact that the rothschilds exited the gold market in 2004, after participating from their beginning, was definitely for a sound reason. distance and didn't some secretary fall from her highrise apt window, 3 days after reporting that her boss arranged to illegally remove gold from ft knox. oh yeah her boss was a rothschild
They exited right when the news was hushed up that tungsten bars were discovered and an investigation of the operations executive that would have had access to the gold that has not been heard from again - the gld etf came out shortly thereafter that states the bars may not be the same quality as london good for delivery standards.
The scandal you discussed was Rockefeller's secretary, she blew the whistle that he was selling fort knox gold to european interests (Rothschild) at discount prices - and then mysteriously fell 6 stories to her death.
Spend like there's no tomorrow! If only the US government did spend for some kind of tomorrow... instead all the 'printed' money disappears straight into coffers of Bank X (previously known as (your pick)). Any investor KNOWS that, for example, the deficit is not going down as long as unemployment is rising & consumer spending made up to 70% of the overall economy. Talk of reigning in spending is therefore dangerous nonsense. The result would be even more destruction of the economy.
Apart from such impossibilities as removing every Federal politician (preferably by declaring them persona non grata), what may be feasible is an end to issuing public debt. Operationally it's as useful as lipstick on a pig.
short term govt securities have been negative before. In 1932 and 1940 & 1941 (if not more often- I cant find docs I had which MAY have shown more datapoints): http://fraser.stlouisfed.org/publications/bms/page/409/61/download/409.pdf
If the treasuries were counterfeit, you may not care what the interest rates are. You want the principal.
Real interest rates are negative, i think negative yield in short maturities simply reflects that. Few months paper is like cash. I dont see anything significant in that.
I suspect that the tungsten filled bars have created a lot of uncertainty and distrust out there and that helps explains gold's big rise lately even on days where the dollar is up. Those who were shorting it have had their heads handed to them and as one of the above posts suggested, may mean that some sort of failure among whoever has been shorting (big bank, bullion bank, hedge fund etc) has either taken place or is about to.
Considering the overextended rally in the stock market with PE ratios way, over-valued (Trailing SP500 above 100) and the fact that the dollar is approaching dangerously low levels, it seems that the PTB need to take action to cause the dollar to rise which should simultaneously apply downward pressure to gold. This would also most likely put an end the overextended bear market rally in the over extended stock market based on a bogus recovery news media spin using bogus data.
This is a dangerous set of conditions that appear to be coming together at once. An it appears likely to lead to another deflationary phase of the economic collapse that is well in process and is irreversible simply because there is more debt than can ever be re-paid.
Ultimately we are likely to end up with an inflationary/hyper-inflationary collapse, but like what we saw in 2008, it is very much possible for a deflationary economic disloation to take place. This of course will be met with even more money printing; all as part of the game to kick the can down the road for as long as it is possible.
The run to t-bills at negative interest rates suggests those in the know are expecting this event to happen soon.
I suspect that the tungsten filled bars have created a lot of uncertainty and distrust out there and that helps explains gold's big rise lately even on days where the dollar is up. Those who were shorting it have had their heads handed to them and as one of the above posts suggested, may mean that some sort of failure among whoever has been shorting (big bank, bullion bank, hedge fund etc) has either taken place or is about to.
Considering the overextended rally in the stock market with PE ratios way, over-valued (Trailing SP500 above 100) and the fact that the dollar is approaching dangerously low levels, it seems that the PTB need to take action to cause the dollar to rise which should simultaneously apply downward pressure to gold. This would also most likely put an end the overextended bear market rally in the over extended stock market based on a bogus recovery news media spin using bogus data.
This is a dangerous set of conditions that appear to be coming together at once. An it appears likely to lead to another deflationary phase of the economic collapse that is well in process and is irreversible simply because there is more debt than can ever be re-paid.
Ultimately we are likely to end up with an inflationary/hyper-inflationary collapse, but like what we saw in 2008, it is very much possible for a deflationary economic disloation to take place. This of course will be met with even more money printing; all as part of the game to kick the can down the road for as long as it is possible.
The run to t-bills at negative interest rates suggests those in the know are expecting this event to happen soon.
Dubai request for debt 'standstill' raises fear
http://news.yahoo.com/s/ap/ml_dubai_desperate_times
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Considering the overextended rally in the stock market with PE ratios way, over-valued (Trailing SP500 above 100) and the fact that the dollar is approaching dangerously low levels, it seems that the PTB need to take action to cause the dollar to rise which should simultaneously apply downward pressure to gold. This would also most likely put an end the overextended bear market rally in the over extended stock market based on a bogus recovery news media spin using bogus data.
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This is a dangerous set of conditions that appear to be coming together at once. An it appears likely to lead to another deflationary phase of the economic collapse that is well in process and is irreversible simply because there is more debt than can ever be re-paid.
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