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Sarkozy Will Get “Stuffed”
It appears that the markets are in for some action next week. The EU
leaders have pledged to put a package of measures on the table for the
market to absorb by Sunday evening.
There are no details of what may be coming as of yet. This is happening
so fast that I doubt they actually have a plan. What plans they will
come up with are all going to be short term fixes for the excessive
volatility we have seen.
We know from an article by Jon Hilsenrath at the WSJ that the US Fed has
opened existing swap lines to the ECB. This means that intervention in
the currency markets is coming. I wrote about this last week. My
thinking is the same today. If the ECB has a “Go it alone”
plan to intervene in the FX markets it will not work for long. Only
coordinated intervention including BOE and the US Fed will have anything
but a short-term impact. Therefore it is critical to see who is going
to be involved come Monday.
There a number of news leaks that suggest that a Euro 600 billion
emergency lending facility will be put in place to support Europe’s
1,000 banks that are in need of some “Fast Cash”. This is
terrible news. This just confirms that those same banks were facing a
liquidity crisis at week's end (AKA- A run on the bank). While E600b is a
big amount of money it is a drop in the bucket when it comes to the
total funding requirements in Europe. The question will quickly arise, “What
happens when the 600B is gone?” This is quite different from
the TARP approach where equity was thrown at the banks. That equity had a
10-15X’s leverage affect. This is just a new funding source. It does
nothing to address the quality of the assets being funded.
What is missing from the leaks from the EU is a plan to buy distressed
sovereign debt in the public market to absorb the excess supply and beef
up prices. We know there is pressure from the Banks to have this
happen. They are sitting on underwater sovereign bonds. These are public
securities with a massive float. I don’t think the ECB has the
resources to make much of a dent in the bond market. It is much bigger
than they are. If they drive the prices of sovereign debt higher it is
likely that they will get offers for more than they could possibly buy.
There may be some demand from global investors for Spanish debt at 6%;
there will be no private demand if the rate is artificially set at 4%.
The higher they drive up bonds the more sellers they will meet.
On the issue of buybacks one has to ask, “Where will they get the
money?” A credible buyback would have to start at Euro 500b. Is
Germany going to backstop that? I can’t believe that they will. If they
do, their debt cost will just rise and nothing will have been
accomplished. My worst fear is that in order to finance the buy ins they
look to the Federal Reserve Bank in NY to provide dollar based funding.
I don’t think that America has yet woken up to the fact that our share
of the Greek bailout is ~$20b (via the IMF quota). When we learn that
the Fed is funding Europe with big money there will be a backlash. The
Fed is already in hot water for their easy money policy. A $500b loan to
Europe by the Fed will not go over too well with the folks in America.
If something like this were agreed to over the weekend and we wake up on
Monday with a new bailout there will be a very sharp reaction. Several in D.C. (Grayson) will attempt to stop it. Bernanke understands this,
Geithner does as well (maybe). A new Marshall Plan for Europe is simply
not in the cards. If that is what is attempted it will fail miserably.
The most likely outcome will be that the US is rapidly sucked into the
European sovereign debt crisis.
There is some very clear anger being voiced from the leaders in Europe.
French President Sarkozy stuck his foot deeply in his (mouth) on Friday
night with these words:
“We will confront speculators
mercilessly. They will know once and for all what lies in store for
them.”
In my view this was a stupid move. He is saying, “Come on
speculators, I will take you all on and crush you!” He has not
one chance in a 1,000 to achieve that. His words prove that he has no
idea what he is talking about. This not a matter of evil speculators and
their evil tools (CDS). This is about massive fiscal imbalances that
everyone understands are unsustainable. Borrowing more to fix the
problem will be the end game for Europe.
It is likely that as a result of what will be forthcoming there
will be some very big swings in market prices on Monday. The Vol. will
be going up, not down. The initial result will, no doubt, be a backup in
many markets. The Euro will be higher, European sovereign bonds will
trade higher; maybe even equities could catch a bid. But the critical
question will be, “For how long?” Depending on the resolve
of those in charge this could last for a bit. At least a week and more
likely a month. But it is doomed to failure. Should we get to June and
the benefits of these emergency steps wane there will be yet another
crisis. The bonds will fall again as will the Euro. When that happens
there will be no second bailout. Sometime in the next two months we will
hear that great sucking noise again. And when it is heard there will be
no stopping it.
Get your seat belt on speculators. You are about to be attacked. This
will be a lifetime opportunity to make money. For investors, stay clear
of this. There is nothing but risk and downside. “Risk off” is
the right place to be if you don’t have a helmet on. I can’t wait.
»
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Very unfortunate, because the US private federal reserve has refused to return the Germans' their gold.
THE EMPEROR BEFORE EURO-LOO:
http://williambanzai7.blogspot.com/2010/05/emperor-before-euro-loo.html
Want to know a little secret? The FED's pincode of their visa is: 4232 ;)
Sure its not 2010?
Want to know a little secret? The FED's pincode of their visa is: 4232 ;)
Yeah, but you can only withdraw $10B a day that way.
Not 666?
Or 911?
5150 would be a good one.
Money moves in tidal forces. It moves into and out of things. Once it has left a thing, it generally does not come back to it for quite a while, or with the same strength. Money moved into housing, inflated prices, and then came out. Money moved into dot coms, and then out. Now it looks like money is coming out of sovereign debt and it will take any of the spread thin entities with it.
If anyone has seen the video, Money as debt (http://www.youtube.com/watch?v=vVkFb26u9g8), it talks about a $1000 debt creating something around $10,000 in money. What happens to the $10,000 if the $1000 debt defaults? So on a larger scale, what happens to money when a country defaults?
These fools are still acting like they have control of the situation and are making positive actions as if they can do something about it. It is only a matter of time before the situation takes on life of it's own and starts taking it's own "actions".
http://www.youtube.com/watch?v=zrzMhU_4m-g
Whoops I double posted that...credit to you ; )
Stop it, speculators, or I'll say stop it again.
Double Secret Probation
http://www.youtube.com/watch?v=hostgKc7qV4
If you listen to Gerald Celente, the global revolution is here:
She's cute Leo, how do I meet her??? I need a babe in the bunker!
Celente is spot on. been a subscriber to the trends journal for years..
This clip mixes up apples and oranges a bit.
In the U.S. the health care protests, the Tea Party movement and at least some of the bailout protests are protests against the federal government and the public sector becoming too big, powerful and intrusive.
In Greece the public sector already is too big, powerful and intrusive and as a result the S has HTF. From what I can tell the rioting in Greece is mostly by public sector employees and those who receive government benefits. They don't want cutbacks or longer work hours or belt tightening of any kind it seems.
It this country public sector employees are cheering the Obama administration on and taking the day off from work to go to his staged 'town hall' meetings. I don't think there are many SEIU members in the Tea Party and related movements which are trying to raise the alarm about turning down the road which Europe is already on.
well put.
while left and right extremists generally meet full circle - violence for control - this isn't a case of that.
The only way to save Europe is to devalue the Euro, which they are doing-it's just more disorderly than they want it to be. But basically, everything is going as planned. At 0.85 Euro/dollar, the PIIGS are rescued.
Try 0.025.
Leverage works going UP and DOWN!
i hope the fed gets involved, and it draws the attention and increased anger of the public. it might be just what is required to really pressure the senate to get the 'audit the fed' bill reintroduced and passed.
They will, and Obama's dick will be really caught in the Watergate.........
In one week we have gone from bailing out Greece, to talking about bailing out Spain to talking about bailing out all of Europe.
Its not just the speculators they will have to neutralise, it is the entire hollow teetering edifice, chuck full of all that deep liquidity we all saw in brilliant technicolor on Thursday.
Let the force be with them.
Popular satellite radio/youtube news show naming names of corporatist senators. Good to see other media outlets (albeit small) get the word out:
http://www.youtube.com/watch?v=d8-JXhzXdSU&playnext_from=TL&videos=6QrAduSFPRk&feature=sub
Bruce,
With all due respect, while I get your point, all the hedge funds in the world are no match for the Fed and the ECB. Central banks can and will crush the speculative frenzy going on right now. You might subscribe to the 'benign speculators" theory, I don't. Far too many are merely financial parasites who smell blood and are trying to go in for an easy kill. Fuck them and kudos to Sarkozy for voicing his frustration. My only advice to him is to keep his mouth shut and allow the Fed and ECB to attack speculators when they least expect it.
Do you call a long - only government bond fund who chooses to sell their holdings a speculator ? They are the people driving up yields. Only a fucking idiot would deduce otherwise
The speculators are the banks, Goldman etc. The real selling is genuine- before the paper/ sovereign bonds becomes worthless. Besides the Fed is in league with Wall Street and the banks. Catch them attacking themselves. They will feed off their own carcasses if need be.
Tough talk from a desparate man. The fear is palpable.
This credit collapse is suddenly devolving into a full blown crisis of confidence. The system is literally imploding. The CB's are pushing on a string.
Yeah, screw the free markets and the speculators, let's have the secret government behind the goernment take them down with money from thin air the tax payers will pay for.
You mean speculators will be crushed just as Soros was "crushed" by the Bank of England back in the 1970s?Leaving Soros with the annoying problem of where to put the billions he made? I'm sure they are frightened to death.
It's amazing to read the comments here from people who don't seem to know about this. It's pretty basic really, the Fx markets are a lot bigger than what the ECB can throw at any dis-equilibrium that they don't like.
Leo, saving the euro and the EU is the wrong place to plant the flag and man the redoubt. If you don't believe it's a dead man walking, wait two months.
Bruce is right.
Fed and ECB to attack speculators when they least expect it.
the fed is powerless .
sinclair
The name of the "Roulette Wheel" is Credit Default Swaps. It does not matter what the G-7 or the G-20 does. It does not matter what the IMF, ECB and Fed under a beard do. Mrs. Merkel’s foolish political strategy fits right into the equation.
CDS are going to take down every major currency, making trillions for the players. It will in time turn on the USA as it is already operating against the financially weaker Illinois and New York debt.
The dollar, as it gains ground due to the mirror image of the euro, becomes weaker and weaker due to overvaluation with no fundamental legs. The dollar’s time will come.
The OTC derivative credit default swap is about to clean the clock of the world. Der Spiegel is right but the debt is there. It
LOL.
No.
A CDS against the United States is worthless. Paid in what?
One of the more significant recent developments; a CDS on the dollar - payable in gold.
PM, oil maybe.
Certainly not USD!
What do we have, everyone wants?.The Federales just SNAGGED another 13 million acres in the West( guess where most of out oil,gold,silver, and gas are).
LAND..............productive Land, along with tons of natural resources.
We have a LOT.
dumpster
Please explain by giving an example of how "The OTC derivative credit default swap is about to clean the clock of the world" works.
Thanks
The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.
these are unregulated, with no oversight , but the seller receives a premium to cover the risk . as the debt implodes the buyer looks to the credit worthiness of the seller to cover debt.
the ultimate seller is a hot dog stand in Bangladesh
the large banks ,, hedge the bet with shorts against the debt
the country or entity goes bankrupt not being able to collect . the fee lost .
the big banks make trillions on the bet against the credit swap.
these things infest the very guts of financial arrangements... are grinding away and will bring down all indebted countries.. the Europeans the USA yadda
Haha! Love it, dumpster!
Bernanke, meet your nemesis! He sells franks made from hapless, scavenging canines and "other" proprietary ingredients.
But as in all trades/markets, its still a zero sum game. No net real wealth is either created or destroyed (sort of like energy conservation), it just gets transferrred from one party to the other. So, for all the home buyers who "lost" capital there was an equal number who "gained" capital in the housing market collapse. The real problem occurs when the contracts (CDS, currency swaps, interest rates swaps) aren't or can't be honored. Paper assets are not wealth, they a they are just false security blankets and represenations of wealth.
Money is most definitely NOT like a physical quantity. There are no conservation laws. It is definitely NOT a zero sum game. Thursday's mini crash prove this is psade. headline blared " Trillion dollars of value wiped out!!" - how many shares actually changed hands at the bottom tick?!!
One distressed seller of a house drives down the comps for all the houses. banks will therefore lend less. causing further distress. Everyone "loses" - no one gains.
Money - asset values - are a mental phenomenon - a function of confidence, optimism, pessimism, etc - these quantities are not 'conserved".
Seems like whenever a trade bites someone in the ass, there has to be a shadowy conspiracy theory involved.
On the bear side, you see all kinds of tinfoil-hattery around gold manipulation, the PPT, the Fed buying stock futures, etc. I always say 'Show me a shred of evidence.'
Now on the bull side, there have to be a cabal of evil speculators intent on destroying the eurozone for their own insidious purposes. By the same token, I say 'Show me a shred of evidence.'
When someone says something like this, it tells me a lot more about them than it does about the world.
I guess it's more palatable than just plain being on the wrong side of the trade.
Holy shit, you are one stupid naive fuck. The PPT is a well documented entity created by presidential order under Regan. Larry Summers activated it at 2:45pm after being interupted during a meeting if you follow what Gibbs said. Despite world markets being down Friday, US futures were up 70 at 7:30am. Bad trade ?. Who were the buyers at the -225 point Friday ?. Day traders ?. Institutions ?. Warren Buffett ?. Who withdrew 300 billion in mm funds in 08 ?. Who demanded changing the uptick rule ?. Who overturned Glass-steagel ?. Brooksey Born and the derivitive rule ?. Who stopped the market role over July 9th 09 ?. A cabal is at work here. Show me the evidence otherwise.
+1000000000000
Thanks for being the voice of reason Nikki. Only a complete rube would think these markets, especially the DOW and precious metals, are anything other then a rigged game. One is ponderously propped up at every turn like some kind of undead shapeshifter sloughing off the dead and engorging itself with healthy companies. The precious metals market is so obviously manipulated as to only fool the dyed in the wool believers in / apologists for, power.
Wake up and smell the vast international conspiracy! Bilderbergs, BIS, Club of Rome, Davos etc. etc. You don't have to be Alex Jones to reach the obvious conclusion. Bankers aren't prone to accidents, unless they threaten to talk of course.
http://www.cnn.com/2009/US/10/26/madoff.investor.dead/index.html
Never attribute to conspiracy that which can be explained by stupidity.
Occam is rolling in his grave right now.
"No you morons, I meant when dealing with natural occurrences not criminal enterprises!!!!"
Sometimes the sound of galloping hooves IS a zebra herd. Especially when you are on safari in Africa.
I can't believe how many folks fall for the "Key Stone Cops" explaination when said Key Stone Cops are actually caught in the act of stuffing endless sacks of cash into their paddy wagon.
If it's all an accident how come they keep getting richer, and their cronies in government more centralized power? You really buying that? I mean REALLY?!?!?!
Seriously, please don't go into investigative work...ever.
You might want to read up on organized crime, because attributing their actions to stupidity instead of conspiracy is itself stupidity.
I swear if these guys were named Guido, Guisseppe and Louie the hatchet instead of Blankfein, Geithner, Sarkozy and Berlusconi this wouldn't come up. Hey wait, that Berlusconi guy is rather swarthy...
A conspiracy of the stupid ?. Blowing bubble after bubble thinking this time will be different. Ever hopeful, always hopeless. Not evil elite oligarchs but silly Harvard frat boys that never grew up from playing Monopoly ?.
Good post. But.......if you are still saying "show mw a thread of evidence when it comes to the manipulation of the gold (and silver) market or the propping up of equities by the FED, you haven't been paying attention.