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Proposed Reason For This Morning's Market (Read EUR) Strength
From CS:
- This morning, the ECB opened its first 84 day swap line with the fed at which banks can borrow USD @ OIS+100bps in exchange for worthy collateral (20% posted collateral for total USD amount borrowed).
- Low demand = positive for market (means they can find funding elsewhere). If confident with funding liquidity, banks should continue to tap the 7-day swap rather than lock up the same rate for a longer period (less margin is also needed for the 7 day loan, 12%).
- Any strong demand in this auction would be deemed negative for the market as banks are seen as concerned about ST funding liquidity.
- Total swap line exercised was $1B, far less than the $10B level that CS viewed as significant. This data was released at 5am and the market has been tracing higher ever since.
- Note this data comes out every Tuesday so we'll get another read in a week
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So this triggered the Euro short covering. Means nothing really. Does this change the fact that Europe is bankrupt? No. Does it change the fact you can't solve a debt problem by piling on more debt? Nope. Just a wash, rinse and repeat cycle facilitated by the ECB.
Exactly. And this little gem:
Is the fact that this credit line even exists not significant to Credit Suisse? What planet are these people from?
Agree. I thought the banks gave credit lines to other people. A bank that needed a credit line was a dead bank. Now, as long as the bank only takes a billion lifeline (out of potential mega-billion?), it is no big deal. I don't get it but maybe it's just me
Can we get a read on the demand at some point today? Demand is obviously going to be relevant. Looks like the Euro is just holding on to it's gains as we speak....
No, no, everything is all better now. The Band Aid is on the boo-boo. Everything will be okay now, son. That little scrape will heal fast. Uncle Benny and Uncle Jean will take care of you.
Of course it doesnt change any of those facts, but this market hasnt traded on facts since March 9th, 2009. Get ready for the ramp. Ugh.
Means something. It means that the European market ain't as dysfunctional as some would like to see it.
Also the € 750 bn emergency fund isn't something that will be necessarily used, it's just a mutual European insurance, which needed to be put into place because of the countless headless chicken panicking....
EUR is oversold and the range volatility reflects that fact. It is as if no one knows which way to trade so they just hedge-unwind-hedge-unwind all the time. Plus the increase in short interest is beyond ridiculous exploding 400% above historical average. Tyler called it right when i said the maximum low in the EUR should be no more than 1.25 and maximum high no more than 1.40. FX-ers reacted on fear and monetary infusion; and FED foresaw what would happened and that is the reason swap agreement was announced not an hour after the EMU issued its statement. But what you see is the same market reaction as was in answer to US bailout and LEH. Panic and nothing else than panic and fear. Longterm; EUR 1.33-1.38.
You are Dmn right...
+1.
Its amazing what happens when politicians just shut up, isnt it? I dont think i've heard any really crass idiotic comments for, ooh, 24hours.
I'd say EUR retraces before the various problems reappear. Long term, who knows. Surely they cant keep their mouths shut long enough to save this? I'd feel awful being long at 1.33, lets say and implicitly trusting them not to fuck it up.
or headless chickens are a global phenomenom?
Can u point what exactly is NOT dysfunctional in EU socialism ??? Feeding the fat lazy greeks because they are not fat enough ??? Today Greece got 14billions and its already starting to be used
Greece receives EU part of bailout loan
http://www.google.com/hostednews/ap/article/ALeqM5iXUJvBknZVGqsBenIusBgB...
how much of those money will be used to buy new audis and new pools ???
You should tone down your empty rhetoric since currently 50 million Americans rely on food stamps [surviving only because of the gov] FED is buying all MBS [meaning all mortgages], housing is still subsidized [you aint gonna see that in Europe] etc etc. It is the adopted Anglo-Saxon model which is at fault here. Everyone in Europe wanted to follow Thatcher and her privatization bullshit [meaning only the big guns can enter that game, ramp up the prices and still make most of the profit from gov. subsidies]. And it was going great for a short period of time; until it didnt. Europe worked pretty well during times of domination of public-private partnerships [think France during Mitterrand where he made banks utilities; of course later reversed by Chirac]. Blame wild west capitalism which took over Europe in the early nineties for its downfall [and the federalist politics of unification which is slowly transforming into centralized exercise of power legitimized by an awful and anachronistic law system], and not, like you say, "fat socialist pigs". Socialism had nothing to do with this; Free Market Liberal Democracy did. All EU parties which call themselves socialist are calling themselves like that just to attract voters; economic policies are identical with the those of the parties on the right.
+750000000000
Spot on, CB.
CB - you make so many valid points in a short space. I get pretty tired hearing americans talking about the evils of socialism. They dont seem to understand the first thing about it. And they end up with some perverse "communism for the rich" whereby the US government takes money from the poor to give to the millionaires (billionaires?) in the form of bailouts. I'm not trying to start an argument...the americans are welcome to do whatever they wish in their own country and I genuinely wish them well. Leave the Europeans alone.
CB you make an excellent point about politics in general. It doesnt matter what it says on the tin anymore, whats inside is the same, which is so say that democracy has more or less failed in the western world. The difference between Republican and Democrat (USA), Conservative and Labour (UK), SDU and CDU (germany) is to all intents and purposes - nil. Its the same difference between Coke and Pepsi - just the branding really. Some say that they taste different, but with a blindfold on the tests are inconclusive. Ultimatley, when you mix democracy with capitalism, capital ends up buying the system.
Capitalism will eat itself.
Sorry, lefty, but socialism has *everything* to do with these problems. Social spending is resource misallocation and these states have run themselves into massive debt problems by buying off their idle populace with entitlements. I'm not letting the bankers off the hook, either, but the simple fact is that massive deficit spending is precisely what has run Europe into the ground, right along with the US. It's all part of the debt-based fiat money system. I can prove it to you, too: You can't blame free markets or liberal democracy because neither one has ever existed in any major way in my lifetime and I'm nearly 40 years old now! What free market? Where? Which one wasn't taxed and/or heavily regulated, cartelized, or had no barriers to entry? The European and UK people have been taking it right up the ass with taxes for decades and yet you come on here and tell us all the socialism isn't the problem. What...the...hell?
Taxation of Europeans has gone up due to these facts
- a) higher borrowing and debt servicing costs [fuck you American Rating Agencies and your USC pricing model]
- b) liabilities which were held on countries balance sheets even-though privatization was conducted [pensions etc etc]
- c) lowering of wages ["free market"] due to oversupply of labor and relocation of production areas due to free-market multi-lateral agreements and transformation of economic structure from industry to service based one
- replacing consumption which has fallen [adjusted for inflation] [see 3 to know why] with government spending to maintain growth
- servicing healthcare [which is a good and necessary thing; i would not want to live in some medieval system where i either earn enough money or die because i can not afford 4000$ for 6 pills ]
You see where im going with this; it is a death spiral. The only thing I wish to hear from the apologists of "free market/market knows best/there is an invisible hand in the market which i made up based on my theistic belief in the existence of order [better known as Adam Smith]]: "Adam Smith was wrong". I have explained from both a technical side and practical one why free market is a dogma, not much different from theological dogmas or metaphysics; but i got nowhere simply because i did not oversimplify my reasoning and proof, and people dismissed it because they function on static, non-changeable system of beliefs for which they would both die for and kill for. So i stopped talking about it. I will not, and it is not my intention to, impose anything on anyone. Truth is [and believe me when I say this]; i really dont care what happens to humanity or this system; since both are neither self critical enough, introspective enough or rigorous enough to question underlying principles [dogmas] upon which they function.You may not get many thanks for your efforts, but you have mine, for exposing the empty promise of faith-based market driven economies.
There are no perfectly self-guiding political, social, or economic "systems." None can be better than the people that live within them.
Which in the Sweden I came from was called Socialist.
Well, I can point in a westward direction for you. California.
California with its dysfunctional politics, entrenched unions, inability to devalue. And you know what is most disturbing...California is the largest issuer of subsidised bonds in the USA (tax deductible....some poor bastards in other areas pay for this).
And finally...they are doing their own QE...They pay their trade creditors with IOUs...All performed by a Republican Governor.
how much of those money will be used to buy new audis and new pools ???
None.
Something else, subtle yet sybaritic, is afoot. Lemme give you a hint.
There will be a strike this Thursday.
There was a strike last Thursday. And the one before. And the one before that.
Why not on Friday, you say? Of course not -- no one works on Friday anyway!
Have you seen the light yet? 4-DAY WEEKEND!
We are way beyond the acquis europeen, baby.
Cars... HAH!
(Porsche density is higher in Athens than in Los Angeles. We aim for loftier goals... financed by Other People's Money, of course, of course. God bless ye kind gentlemen.)
Demand will increase as the banks become more confident about the whole mechanism. The mechanism is, IMHO, structured better than what the market can offer and banks [especially those EU banks which debt declined and derivatives widened] will exploit it.Can not say much more than that without going into harmful speculation line of thinking.
Word, dude.
Good to see you this morning cb, you feeling ok?
same here silvertrain. yeah, i feel better. didnt manage to post any stories today since im more asleep than awake, but will tomorrow. how is your day going so far.
Just fine thanks.
People are only now starting to realize there is just a global financial credit system... there is no US system and Euro system and Asian system. It's one system, has been from the beginning.
Euro is falling into the Med, eventually the US will fall into the Atlantic and Pacific. Until then, cycles within the larger cycles. Life would be boring if everything went in a straight line.
Life is never boring in Somalia....
http://www.spiegel.de/international/world/0,1518,695224,00.html
K'naan, Blues for the Horn
http://www.youtube.com/watch?v=pIrFMtVkw6w
many people try to come up with a reason why the market is up today, and for that matter, may be tomorrow. The Euros, yens, greece or other kind of shit. Scamman said this long ago, and this is option related kind of scam or robbery. He coinned a phrase "C-2-shining C". others don't matter, believe or not.
Silver is telling you everything you need to know...
Silver is about to break through resistance, and JPM is going to have to let it go.
BS seems to have remembered the cheat for his Nintendo printing press. Up, down, left, right, left, right, a+b, select+start.