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SHIBOR: We Have A Liquidity Problem

Tyler Durden's picture




 

In our now globally accepted bizarro world, where problems are priced in before they even appear, disclosing swans of assorted colors becomes a moot point. After all, all the bad news in the universe couldn't possibly matter as long as the irrational exuberance persists. That the higher stocks go, the farther they will crash eventually (and for those with their finger on the sell buttong, good luck selling into a bidless market) is a given, but maybe, just maybe the laws of gravity are different this time. On the other hand, maybe they are not. For those who are convinced that no matter the amount of data fudging, accounting fraud, and dollar debasement that the Fed endorses, nature will eventually take its course, may want to take a look at the below chart of 1 week, 1 and 3 month SHIBOR. In a nutshell: there is no marginal liquidity left in the world's fastest growing economy. Eventually this will dawn on the world. Until then, BTFD.

And since it is not visible on the chart above, all three lines are way above the levels hit when Lehman filed for bankruptcy, when there was another liquidity collapse but for different reasons. The latest catalyst, the PBOC's Christmas Day interet rate hike has certainly not helped.

Here is Morgan Stanley's explanation of what is happening in China:

SHIBOR surged: As multiple RRR hikes have started to take effect, market liquidity has become very tight. Compounded with the year-end liquidity shortage and heightened expectation of further rate hikes, large banks have almost stopped lending into the interbank market. In this context, the SHIBOR has surged in the past two weeks, with the 7-day, 1-month and 3-month rates jumping 269bps, 187bps, and 74bps, respectively (Exhibit 2).

As for what is forthcoming, here is Morgan Stanley's expectation:

What’s next: Given the surging interbank rates and heightened expectation of further rate hikes, the liquidity management function of open market operations will likely remain paralyzed unless the reference yields are lifted aggressively to restore the attractiveness of bill issuances. Since the amount of matured bills should rebound significantly in January (Exhibit 5), the risk of an RRR hike (or differential RRR hike) is rising.

And the 64k question: if China, whose economy is far more than even that of America reliant on excess liquidity is shutting down the interbank market, what does that leave for Bernanke's centrally planned fiefdom?

And incidentally, when we discussed this very issue back in June, when we noted that the "China 1 Month Interbank Rate At Multi Year Highs, More Than Doubles In One Month" we summarized the issue perfectly: "Should China go ahead and reval the renminbi, must we expect a complete
lock up of the Chinese lending market? Perhaps with the Shanghai
Composite hitting a fresh 52 week low today, at least someone is paying
attention." Curiously, since then neither has there been much if any progress in the CNY reval, nor has the SHCOMP actually done anything material. So all those who are claiming liquidity conditions in China are irrelevant, would be very much urged to actually read a book or two on monetary policy and momo theory.

 

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Wed, 01/05/2011 - 13:29 | 849633 RobotTrader
RobotTrader's picture

I think that if there were a funding problem in China, the FXI would be charging towards new 52-week lows right now.

But that doesn't seem to be happening at the moment.

I'll keep my eyes on alert for some weakness, the market will always tell us when there is a problem.

Wed, 01/05/2011 - 14:03 | 849686 101 years and c...
101 years and counting's picture

unless, of course, the bots pull all bids when W&R enter a sell order of 5+ ES contracts.

i can see it now.  harry will be on the shitter....pull out his iPhone and see S&P is down 20...down 25...down 40...and by the time he hits "sell", S&P will be down 120.

 

 

 

Wed, 01/05/2011 - 13:51 | 849730 bob_dabolina
bob_dabolina's picture

Like ZH has said Harry if the economy is so strong why does the FED not turn off the liquidity spigot?

Because Harry if the FED stops printing money to support this illusory economy we are all fucking dead. Do you understand that Harry?

Wed, 01/05/2011 - 13:55 | 849754 SheepDog-One
SheepDog-One's picture

I think Harry actually does get it...he just likes being the negative attention whore around Zerohedge.

Wed, 01/05/2011 - 14:40 | 849903 hardcleareye
hardcleareye's picture

+++++

Wed, 01/05/2011 - 14:54 | 849941 Cognitive Dissonance
Cognitive Dissonance's picture

Harry is a psyops program penned by several different "voices".

Wed, 01/05/2011 - 22:16 | 851327 StychoKiller
StychoKiller's picture

With machine-like emphasis on the "program" part! :>D

Wed, 01/05/2011 - 14:17 | 849830 centerline
centerline's picture

Seems to me that Robo and Harry and just trading, and having fun doing it (swatting the bees nest from time to time for sport).  They are "hanging 10" on the wave that I admit I do not have the gahones to surf.  They are gambling that they can get to the exits right before the casino in evitably locked-down and fire-bombed.  I do wish them the best in all of this.  Godspeed to the exits at the right moment gentlemen.

Wed, 01/05/2011 - 14:29 | 849876 Logans_Run
Logans_Run's picture

I wonder if they are both "Great White" fans?

Wed, 01/05/2011 - 14:50 | 849934 dark pools of soros
dark pools of soros's picture

just sounds like they are playing around with money they can lose..  or atleast lose a substantial amount of

 

who knows.. they might have been the early adopters of guns, gold, canned food and now have to do something to piss away the time

Wed, 01/05/2011 - 13:57 | 849746 SheepDog-One
SheepDog-One's picture

'Always someone buying'...lol dream on as everyone is trampling each other for the door as the theater burns.
You wont be able to sell Harry, youre like Barney Fife up against Liberty Valance, youre dreaming and theres no gunslinger off to your right to save you with a miracle shot either. Keep dreaming that you can out sell the HFT bots when Bernanke flips the 'remove liquidity' switch.

Wed, 01/05/2011 - 16:17 | 850169 Dr. No
Dr. No's picture

I remember on flash crash day, I couldnt log into my broker.  I did not have stop in place but wonder if they would have been executed if they were.  After a couple of days my broker hinted the issue was with the clearing house and therefore everyone was locked ot who used that MM.  If that was the case, stops would not have executed even if in place (i think).  Was the flash crash a once in a lifetime event and you cant plan according to that?  not so sure.

Wed, 01/05/2011 - 18:35 | 850691 Barb Dwire
Barb Dwire's picture

Harry's somewhere in here...

 

http://www.liveleak.com/view?i=f70_1260080612

 

Wed, 01/05/2011 - 13:58 | 849762 tahoebumsmith
tahoebumsmith's picture

Harry,

"manufacturing is surging, employment is picking up, corporate earnings are strong, etc., etc".

Read between the lines before you use the word surging. Last I checked we had the highest unemployment since the great depression, Corporate earnings are robust due to downsizing, outsourcing, lower wages and free money from the FED, and manufacturing is about back to where it was in the 1930's. You are such a figgy fool you need to move on to Yahoo, Bloomberg or some other MSM site where you can contribute to the discussions instead of being junked all the time. The shill train has hit your station so pack your window decor and jump aboard. This way when the truth plays out you won't have to be a coward and disappear into the night like the rest of them will.

Wed, 01/05/2011 - 13:56 | 849763 traderjoe
traderjoe's picture

Harry, can you post your company's product catalog link? I'm moving and I need to furnish a new place with a variety of items...

thx.

Wed, 01/05/2011 - 14:00 | 849779 SheepDog-One
SheepDog-One's picture

Ive been asking Harry for his catalog for months, he wont even send it in an email. Apparently his company is so great they dont even need to advertise.

Wed, 01/05/2011 - 14:10 | 849812 traderjoe
traderjoe's picture

Of course, he had a "record 4Q" - even though all of my friends in home construction, home furnishings, etc. are struggling financially. 

Any good - real - salesperson would be happy to post a catalog for his company, especially since it wouldn't be necessary to reveal any personal information. 

Wed, 01/05/2011 - 13:57 | 849768 homersimpson
homersimpson's picture

"Believe me, I'm never a moment away from the sell button."

HAHAHAHAHAHHAHAHAHAHAHAHHAHAAHAHHAHAHAHHAHAAHAHAH

Funny funny stuff. I'm sure you had your sell button ready on flash crash day last May.

Like you can overcome a "server is too busy" message on flash crash day..

Your connection was so slow to your brokerage account that infamous day you probably just logged in as HarryWang to save a millisecond.

A moment away from the sell button my arse. Whatever, Blankfein.

Wed, 01/05/2011 - 14:08 | 849809 HarryWanqer
HarryWanqer's picture

I didn't have to sell.  I sold everything the previous trading day.  It was obvious then, that something was wrong.

Wed, 01/05/2011 - 14:17 | 849832 equity_momo
equity_momo's picture

...and with this post you just proved youre full of hot air and horseshyte , Mr Harry Hindsight would be a better handle.  Id wager all your trading talk is paper based and you havent a real world position so to speak of.

Attention whore indeed.

Wed, 01/05/2011 - 14:31 | 849881 Geithner_the_Pe...
Geithner_the_Perverted's picture

You're not that smart, are you ?

Seems like you didn't even see it's wasn't Harry Wanger but some impostor with a slightly different username.

Thank God there are people like you otherwise I'd have to work to earn a living.

Wed, 01/05/2011 - 14:52 | 849938 dark pools of soros
dark pools of soros's picture

i have an ingrained habit of helping these easily fooled people.... is there still time for me to break that habit and get on the easy rich path?

Wed, 01/05/2011 - 20:21 | 851039 TheGreatPonzi
TheGreatPonzi's picture

It has hardly something to do with intelligence, more like attention.

Wed, 01/05/2011 - 19:06 | 850817 ZeroPower
ZeroPower's picture

Mr Harry Hindsight 

LOL

Wed, 01/05/2011 - 14:21 | 849856 SheepDog-One
SheepDog-One's picture

OH right, you sold the previous day, but of course! Well let us know when the next 'previous day' is sensed by the great Harry!

Wed, 01/05/2011 - 13:59 | 849782 CrashisOptimistic
CrashisOptimistic's picture

Oil is everything, of course, but for this particular matter of selling when "told to", it's useful to remember that futures drive the open and circuit breakers trigger at -10% with a closed for the day event.  Which can repeat the next day.  And the next.

You can be down 40% before you can trade.

Wed, 01/05/2011 - 16:08 | 850151 malikai
malikai's picture

I have come to the opinion that the futures market is everything. I've also noticed that shorting the dow, s&p, or ndix are bad for your health these days. But it should be a fun ride if we get some double dip to play with.

Wed, 01/05/2011 - 14:03 | 849792 tmosley
tmosley's picture

Do you even know what the word "guarantee" means?  You can't guarantee yourself.

Exchanges shut down.  They cancel and reverse orders.  Banks have "holidays".  When the final straw hits, and you are still caught playing around in the burning building that is the US equities market, you are going to be caught under a hundred feet of burning rubble.

For things to actually get better, there have to be fundamental changes.  The ZH crowd will turn bullish again once those changes have been made.  Until then, we are bearish.  YOU are the only one that is perma-anything around here, well, you and a few other moronic trolls.

Wed, 01/05/2011 - 14:18 | 849843 Lincolns Mullet
Lincolns Mullet's picture

Harry are you that cheeseball broker in all those Scottrade commercials?

Wed, 01/05/2011 - 14:21 | 849852 Amish Hacker
Amish Hacker's picture

The metaphor for market processes that frequently gets trotted out here is the "fire in the crowded theater" meme. The idea is that I can trade profitably, and with impunity, because I'm sitting right next to the exit and my finger is never more than "a moment away from the sell button." But remember, it's not enough to be near the exit. You can't leave the burning theater until you have gotten someone else to agree to take your seat. In a bidless market, no one is going to agree to do that at anything close to your hoped-for price.

Wed, 01/05/2011 - 14:39 | 849905 pslater
pslater's picture

I'd be EXTREMLY careful using the word "GUARANTEE" around something you have NO control over.

Wed, 01/05/2011 - 14:46 | 849918 mberry8870
mberry8870's picture

This is year end liquidity dressing.

Wed, 01/05/2011 - 14:46 | 849922 holmes
holmes's picture

You've got your finger constantly on the trading button AND you're running an incredibly successful company. Mom must be awful proud of you, Harry, but when do you find the time to do your chores?

Wed, 01/05/2011 - 15:20 | 850017 mirac
mirac's picture

Earnings are up because Corporations are not paying their fair share of taxes.  Last week article on ZH...public tax receipts = 1.3 trillion vs corporate paying 160 billion.  When there was a normal middle class, think My Three Sons or The Flinstones, the payouts were about equal.  Welcome to one of the cornerstones of facism.  In the ensuing collapse, good luck getting your money out of the banks should your require it.  Somewhere along the line here the market ,Dow Jones Industrials, are going to drop 2000 points at the openning.

Wed, 01/05/2011 - 15:35 | 850060 system failure
system failure's picture

Believe me, I'm never a moment away from the sell button. If the time comes, I'll sell and I guarantee there will be bids to take my shares. There is always someone "buying the dip" at the wrong time and there will be when the next "wrong time" comes.

 

Add this to your plan to "always someone""buying the dip"";" what if the FED announces a stop to QE2 adruptly and nobody wants to buy your planned dip selling opportunity, of which you can just push that sell button? Especially, with the weak volume, bot buying, unregulated, and rigged market participants. LOL

Wed, 01/05/2011 - 13:39 | 849676 Tyler Durden
Tyler Durden's picture

Actually the only thing it will tell you is when the market's always myopic perception shifts and admits that the problem is there. At that point it will be too late to trade. On the other hand, with nothing but momentum trading operating right now, who knows how long the irrationality can persist. Those trading the inflection point better have some low theta basis as both bears and bulls will eventually be taken out.

Wed, 01/05/2011 - 13:48 | 849712 SheepDog-One
SheepDog-One's picture

When those with Kool Aid coursing thru their veins as they gaze at the markets thru rose colored glasses finally see theres a problem and need to sell, they wont be able to. BTFD.

Wed, 01/05/2011 - 13:58 | 849774 Chappaquiddick
Chappaquiddick's picture

Tyler could you repost the US debt and its roll over dates??  It will be instructive just how much monetization will be required for this year.  Thanks

Wed, 01/05/2011 - 14:10 | 849813 mule65
mule65's picture

Put options.  Make money with WOPR/Cramerica and plenty of time to escape the burning theater.

Wed, 01/05/2011 - 15:10 | 849996 Tyler Durden
Tyler Durden's picture

Great plan except for one small glitch. When a stock is halted through an OTM purchased put's expiration, that goes in the money due to the underlying's collapse, you end up with nothing. Experienced most recently by those who bought RINO puts and the stock was halted for 3 weeks.

Wed, 01/05/2011 - 15:16 | 850010 goldmiddelfinger
goldmiddelfinger's picture

the greatest trade is a short you never have to cover (e.g. WAMUQ) removing (most) of the initial investment via margin and tolling the cap gain tax until closed.

 

Wed, 01/05/2011 - 18:09 | 850579 TheProphet
TheProphet's picture

Yeah, you want to short stocks that will be weak, but no too weak.

And I am not quite sure how one makes that determination.

Wed, 01/05/2011 - 14:42 | 849915 SDRII
SDRII's picture

Where does the Treasury capture to Principal roll of maturing debt? The monthly budget statement has a line item for interest..

Wed, 01/05/2011 - 13:56 | 849760 bob_dabolina
bob_dabolina's picture

ROBO, what did IWM tell you yesterday when you posted that the Russell2000 was crashing (your words)

Wed, 01/05/2011 - 14:04 | 849789 A Man without Q...
A Man without Qualities's picture

I remember a conference call with the cash desk of JPMorgan in New York back in early 2008.  The question was asked why the spread between Libor and Fed Funds was widening further out the curve.  Got a bunch of bullshit as an answer, but of course the truth was banks were becoming very reluctant to lend to each other, as they knew there were banks out there with serious problems.  

At this time, the equity markets couldn't have cared less, it was up all the way, but the short term interbank lending market is the oxygen on which the whole global economy turns and tends to flash warning signals before anything else.

Wed, 01/05/2011 - 14:21 | 849850 CheapKUNGFU
CheapKUNGFU's picture

and the sheep went 'bah'

Wed, 01/05/2011 - 14:34 | 849890 hardcleareye
hardcleareye's picture

"...the market will always tell us when there is a problem."

We have laws in this country about substance abuse, did you know that hallucinogens are banned now in all states except Texas and Arizona?  Why don't you consider doing some quality time in rehab with Lindsay Lohan?  Maybe you'll get lucky for a change......

Wed, 01/05/2011 - 15:25 | 850030 Cleanclog
Cleanclog's picture

BTW, the market does NOT always "know" and tell us when there is a problem.  Free markets, maybe, but ours haven't been "free" of late.  Take the ban on short selling financial equities from '08 situation.

Politicians/governments can hogtie markets as a force.  Could make CDS trading illegal, or invalidate contracts created under their jurisdiction.  

Could impose K controls and limit the movement of funds.  If China started to sell US Treasuries . . . remember Iranian assets frozen by the US?

The markets are currently so medicated and manipulated that you can trade them, but invest?

Wed, 01/05/2011 - 18:04 | 850567 TheProphet
TheProphet's picture

You mean like it did in 2008?

Would you agree that by the time the market started telling us, it was already too late, like telling someone who was already shot that it might be a good idea to duck?

 

Wed, 01/05/2011 - 13:32 | 849645 MsCreant
MsCreant's picture

Maybe all of us all over the world are withdrawing support from Ponzi.

Wed, 01/05/2011 - 13:36 | 849668 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Precious metals back to where they were before this mornings route.  Seems we have a bttom.  Think Blythe can do that again tomorrow?  Equities were hurting from gold's beatdown today, and equities have to be kept moving higher.  Gold will most likely escape this round and move to a higher range in the coming week.

Wed, 01/05/2011 - 13:47 | 849706 Hephasteus
Hephasteus's picture

Too many vicious assholes breaking the funhouse mirrors in the castle of illusions.

So now they gotta pack up the magic mirror and send it around to europe and ask

"Mirror mirror on the wall. Who's the brokest of them all."

Wed, 01/05/2011 - 13:51 | 849736 geminiRX
geminiRX's picture

Here's to hoping.....got some 1410 gold calls bought today

Wed, 01/05/2011 - 14:32 | 849873 Arius
Arius's picture

thats a nice call. any ideas/recommendations as to options trading brokerages? 

Wed, 01/05/2011 - 14:58 | 849956 Hephasteus
Hephasteus's picture

Interesting. It's like insulting Mike Tyson with those hockey goaley ear covers on. LOL

Wed, 01/05/2011 - 15:00 | 849966 Hephasteus
Hephasteus's picture

Odd mix of safe and risky. Kind of like making fun of Mike Tysons lisp while wearing those wrestling ear covers. LOL

Wed, 01/05/2011 - 15:31 | 850045 Sudden Debt
Sudden Debt's picture

Great idea!

What expiration do you guys take?

Wed, 01/05/2011 - 13:53 | 849744 Bastiat
Bastiat's picture

They started the year with a major paint job -- but paint won't stay on a rotten house.

Wed, 01/05/2011 - 13:57 | 849770 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Painting?  I knew Tom Sawyer was around here somewhere...

Wed, 01/05/2011 - 13:58 | 849773 Pegasus Muse
Pegasus Muse's picture

If she does I'll buy some more Ag rounds -- just like today.  BTFD and FUBM.

Wed, 01/05/2011 - 14:06 | 849799 tmosley
tmosley's picture

I sure hope so.  I can't buy any more until Friday.  I'm hoping we maintain these levels, or go lower between now and then.

Wed, 01/05/2011 - 14:44 | 849916 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Platinum is having trouble breaking long term resistence.  Once it moves past $1800 it is straight to $2200 and possibly lights out across the board.

Wed, 01/05/2011 - 15:37 | 850072 sheeple
sheeple's picture

i could only buy 1 this week =(

(even with the recent paper collapse)

Wed, 01/05/2011 - 13:38 | 849672 Charles Ponzi
Charles Ponzi's picture

My friend, thank you for your concern but my time is not yet come. 

But understand that when it does, it is Ponzi's support that will be withdrawn from the world, not the world's support for Ponzi.

Wed, 01/05/2011 - 13:49 | 849726 Internet Tough Guy
Internet Tough Guy's picture

I trust you, probably because you have a thick and well-waxed moustache. Take my money, please.

Wed, 01/05/2011 - 18:29 | 850668 MsCreant
MsCreant's picture

I may stand corrected. You look complicated (which is how you can do what you do) but you are quite simple. When you withdraw your support from the world, it is only then that the world is quite sure what happened. But some know it before you withdraw your support, and the larger numbers knowing it, force your hand. Will you wait so long that you cannot get away with your ill-gotten gains? That story remains to be told. Good day Mr. Ponzi. 

Wed, 01/05/2011 - 13:42 | 849680 cougar_w
cougar_w's picture

I've been having a feeling that this is already a done deal.

Think about this: They can ramp the stock market and treasuries all they like, selling to each other. But if nobody else is actually buying, then that market has evaporated. It's just theater.

We've been trading stocks for so long that we cannot imagine the market going away. But does the world actually need a stock market at all? What if all companies of any size simply went private (lots of reasons for doing that) leaving just penny stocks and Chinese "skimmers" playing the field? Would we then even pay any attention to this market? Of course not, no more than we care about Afgani goat traders in the streets of Kabul.

I think the door is closing on the era begun about 100 years ago, of investing in corporations on expectation of returns, mostly on dividends. Maybe we go back to investing in commodities like was done in past ages all the way back to the origins of agriculture and trade routes.

Nothing lasts forever. This is not going to last either.

Wed, 01/05/2011 - 13:55 | 849756 Bluntly Put
Bluntly Put's picture

True, as in many things technological saturation has reached it's climax particularly in trading/investing, perhaps much of the current index leverage is related to the "boon" of computerized trading?

However once your average investor has grasped the idea of placing their wealth into hard assets could a bridge yet remain as in ETF's or some other instrument?

Wed, 01/05/2011 - 14:05 | 849793 traderjoe
traderjoe's picture

It's an interesting thought experiment. 

On the other hand, I think the diffuse nature of public stock/company ownership has encouraged and allowed company executives to increase their pay, retirement, and option packages significantly. It's essentially other people's money and allows the executives to steal from the shareholders. If the companies were private, the shareholders would actually care, and have some influence in the matter. 

That, and all of the 'money-changers', the brokers, accountants, IRS, etc. all skim a little off the top for playing the game - the vig if you will. 

Wed, 01/05/2011 - 14:45 | 849919 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

This post needs a nice wooden frame around it.

Wed, 01/05/2011 - 15:01 | 849964 Cognitive Dissonance
Cognitive Dissonance's picture

I agree. But not your average wooden frame. The post needs to be housed in it's own digs where it can breath and expand.

Wed, 01/05/2011 - 18:18 | 850620 MsCreant
MsCreant's picture

The Potemkin Market.

Remember Rock Ridge from Blazing Saddles? Set up to trick the bad guys into an ambush?Heh!

 

Wed, 01/05/2011 - 13:31 | 849648 Hephasteus
Hephasteus's picture

So I'm guessing some of those bonds didn't age well and they'll just have to keep doing do-overs till it works.

Wed, 01/05/2011 - 13:33 | 849658 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

A nice treasurie is like a fine wine.  Smell that ink, and look at that paper.  Ah, nothing like paper assets!

Wed, 01/05/2011 - 13:47 | 849649 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I am sure Daley will know how to fix the liquidity problem.  Give cash to banks?  I am sure it will work this time....

Wed, 01/05/2011 - 13:56 | 849761 youngman
youngman's picture

not just any banks...political operative banks that will work for him and his leader...

Wed, 01/05/2011 - 13:34 | 849652 Jason T
Jason T's picture

hell I"ll lend them money and convert my US$ to RMB at 5% interest.

In true Rudolf Havenstein policy fashion, hyperinflation in US$  coming soon.

Wed, 01/05/2011 - 13:36 | 849661 apberusdisvet
apberusdisvet's picture

 

keep looking over your shoulder; that 2 x4 to the head may be coming sooner than you think.

Wed, 01/05/2011 - 13:35 | 849667 buzzsaw99
buzzsaw99's picture

Liquidity problem? With psycho ben at the controls? Ben will buy anything, he'll eat a bug on a dare. Ben is the freaking intergalactic rain maker dudez. I am not trolling when I say that I sincerely believe that we will make new all time highs in the stock market, earnings be damned.

Wed, 01/05/2011 - 13:43 | 849692 Rainman
Rainman's picture

.....BTFD- 4- EVA !!

Wed, 01/05/2011 - 13:45 | 849704 buzzsaw99
buzzsaw99's picture

China shmina. ;l

Wed, 01/05/2011 - 13:37 | 849671 RobotTrader
RobotTrader's picture

HSBC seems to be shucking off the SHIBOR difficulties....

As well as AIG, which has a huge operation in China.

By far, one of the most prominent banks in Asia.

Wed, 01/05/2011 - 13:58 | 849780 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

From everyone at the Ministry of Truth, thank you.

Wed, 01/05/2011 - 14:07 | 849800 SheepDog-One
SheepDog-One's picture

About where its been for 2 years? Wow thanks for the great chart Robo, another classic.

Wed, 01/05/2011 - 15:06 | 849987 erik
erik's picture

The market doesn't always know ahead of time, and the market isn't always right.  I think the market as a leading indicator is bunch of crap personally.

Shibor is an indicator.  I don't know if it matters.  Based on the chart, it seems to actually follow S&P selloffs instead of leading them.

Wed, 01/05/2011 - 15:10 | 849993 erik
erik's picture

nm

Wed, 01/05/2011 - 13:39 | 849682 Oh regional Indian
Oh regional Indian's picture

Holy SHITBOR!

Wed, 01/05/2011 - 13:40 | 849683 Jerry Maguire
Jerry Maguire's picture

We have to stop the madness, but how?  It's like an out of control freight train.  Who wants to step in front of it and try?

The partnership between banks and government has to end, though.  Everyone should be able to see that one. 

http://strikelawyer.wordpress.com

 

Wed, 01/05/2011 - 13:50 | 849717 cougar_w
cougar_w's picture

Stopping this madness (as you call it) is no more difficult than avoiding an actual out-of-control train:

You just walk away.

So long as you are not on the tracks or in the way or in any fashion involved, it's simply not your problem.

Now, one can be not on the tracks but rather on the train itself. Yes that is ... difficult. If the problem is that one does not have a productive line of work or produce anything of value to society and just day-trades oneself into bullion, then one might have less a market problem and more of a personal problem. Being in the wrong place at the wrong time, so to speak. We have Community Colleges and trades schools for people with problems like that.

Wed, 01/05/2011 - 14:03 | 849790 SheepDog-One
SheepDog-One's picture

True, avoiding getting hit by an out of control train is very easy. Step off of the tracks. Dont buy stocks, dont play their game at all, as they now desperately try to get retail to come buy their crap and become bagholders, just walk away and make sure youve got stores of things you need. Dont play their game.

Wed, 01/05/2011 - 13:42 | 849693 chistletoe
chistletoe's picture

looks like it "corrected" a bit today ...

 

http://www.bloomberg.com/apps/quote?ticker=SHIF1W:IND

Wed, 01/05/2011 - 13:45 | 849699 tahoebumsmith
tahoebumsmith's picture

Red Swan a swimming....One thing the FED wizard has no control over and the one thing that will pull the curtain all the way back.

Wed, 01/05/2011 - 14:02 | 849788 CrashisOptimistic
CrashisOptimistic's picture

The Fed can control that.  Concerted action can control that.

There is only one thing the Fed can't print and that is civilization's alpha asset: Oil.

Nothing else matters in the end.  Not gold.  Not silver.  Not GDP.  Not unemployment.

Everyone's life derives from oil.

Wed, 01/05/2011 - 13:45 | 849700 Fredd00
Fredd00's picture

Who bothers these days, people just looking for the fucking dips to buy BTW pretty one on Au, Ag and AUD

Wed, 01/05/2011 - 13:58 | 849777 Don Birnam
Don Birnam's picture

...And Dr. Copper, that industrial, red-headed stepchild of the PM family, has rebounded as well ( with the caveat, "as of this writing," of course ).

Wed, 01/05/2011 - 13:45 | 849701 101 years and c...
101 years and counting's picture

btw, BDI dropped to 1621 today, down another 4.3%.

Wed, 01/05/2011 - 13:47 | 849707 Stoploss
Stoploss's picture

That chart looks painfully familiar. Got that Dec 08 - Jan 09 chill running down my spine.

Wed, 01/05/2011 - 13:48 | 849715 THE DORK OF CORK
THE DORK OF CORK's picture

The ECB revalued Euro Gold at to 364,402 billion up 33,018 billion at 1055.41 Euro a ounce and also reduced their cash liabilties a bit after the Christmas shopping period.

Just saying.......

Wed, 01/05/2011 - 13:52 | 849735 homersimpson
homersimpson's picture

The SH of SHIBOR really stands for s**t...

Wed, 01/05/2011 - 14:08 | 849806 tmosley
tmosley's picture

God dam Mongoweans tearin down my shittibor!

Wed, 01/05/2011 - 14:26 | 849866 andybev01
andybev01's picture

+1

Wed, 01/05/2011 - 13:54 | 849742 Quinvarius
Quinvarius's picture

China never should have raised rates.  Their money velocity was already rolling over and they had their loan quotas maxed out for the year.  They screwed up.

Wed, 01/05/2011 - 13:58 | 849758 The Count
The Count's picture

Spain and Italy have to refinance 400 billion Euros this spring. How is the ECB going to pull THAT much money out of its arse?

PS Or is Ben going to bail out those Bozos too?

 

Wed, 01/05/2011 - 17:48 | 850476 LudwigVon
LudwigVon's picture

The Chinese just said if the debt is for sale they will buy it. They say that now and they know there is a large need for Spanish refinance this spring.

That adds stability here and time for fiscal changes. 

Wed, 01/05/2011 - 17:51 | 850500 The Count
The Count's picture

When did I get beamed into the bizarro world? We gave the Chinese most of our manufacturing, are their biggest debtor and now they will bail out Europe. It's all so freakin insane it's killing me.

Wed, 01/05/2011 - 22:41 | 851378 StychoKiller
StychoKiller's picture

The Chinese seem to be trading all those FRN's for Euros.  How this is an improvement to their situation is anyone's guess.  Maybe they think like a loan shark -- more "customers" owing them money makes them richer (until legs and other limbs have to be broken to teach the deadbeats a lesson...).

Wed, 01/05/2011 - 14:06 | 849784 virgilcaine
virgilcaine's picture

The euro is in a death spiral.. stocks are a useful distraction to the rot within the system, easy to entertain a monkey,

China is just  the Communist Mother of bubbles. The Mother land.

 

TD I believe the BDI is expressing that tight credit.. as Reggie would say credit is tight as frogs ass..lol

Wed, 01/05/2011 - 14:09 | 849807 SlorgGamma
SlorgGamma's picture

China's banking system is 99% owned by China's developmental state. China's corporations are 40% owned by the state, and the remainder have all kinds of buy-ins from local and regional governments. If a company needs liquidity, it will get that liquidity.

All China is doing is choking off excess, speculative liquidity, before it blows economy-wrecking housing/real estate/stock bubbles.

A much bigger story: China is getting tired of funding America's debt addiction.

Wed, 01/05/2011 - 14:58 | 849958 cougar_w
cougar_w's picture

China is getting tired of funding America's debt addiction.

Yup. We've stopped buying their trinkets, they no longer need us. The pull out has already started. Give it 6 more months, by then everyone will have noticed. The talk then will be "well we really don't need Chinese investment in our debt ha ha the dollar is the reserve currency we'll just print money and buy our debt internally ha ha screw them." At which point you'll know the insanity has hit the core and the end is nigh.

Wed, 01/05/2011 - 14:13 | 849817 Ricky Bobby
Ricky Bobby's picture

Santelli just mentioned the SHIBOR and referenced Zerohedge.

Wed, 01/05/2011 - 14:13 | 849822 Rudeger
Rudeger's picture

Rick Santelli just referenced this post @ ZH.....

Wed, 01/05/2011 - 14:23 | 849861 DaBernank
DaBernank's picture

I saw that, an unabashed shoutout to ZH on tv, Santelli's on a few more watchlists now.

Wed, 01/05/2011 - 18:25 | 850646 TheProphet
TheProphet's picture

He probably found ZH by Googling himself, and finding all the wonderful things people here say about him. That brings a smile to my face.

Wed, 01/05/2011 - 14:14 | 849827 Misean
Misean's picture

Liquidity problem?  Just talk to the indiginous WoW gold farmers...sheesh! It's all digital fiat anyway...

Wed, 01/05/2011 - 14:23 | 849841 virgilcaine
virgilcaine's picture

The precursor to a 'HL'.. Hard Landing in China. 

 on 'red alert' for market crash..gonna be good.

Wed, 01/05/2011 - 14:25 | 849862 virgilcaine
virgilcaine's picture

Wasn't sure if it would be China or the Euro that would crash first.. they're neck and neck.

Wed, 01/05/2011 - 14:25 | 849863 augmister
augmister's picture

... and when the bough breaks... IT ALL comes crashing down.  Everything.  Big sales are coming soon!   Hold on to your FRNs.......

Wed, 01/05/2011 - 14:51 | 849935 Hephasteus
Hephasteus's picture

Oh hell ya. Nothing wrong with buying the house that corruption built. Slapping some new siding on it and flipping it.

Blink. Blink.

 

Wed, 01/05/2011 - 14:28 | 849874 trav7777
trav7777's picture

This may demonstrate at least how inimical current market conditions are to CB rate increases

Wed, 01/05/2011 - 15:05 | 849947 thepigman
thepigman's picture

 

 

Wed, 01/05/2011 - 15:04 | 849955 thepigman
thepigman's picture

 

 

Wed, 01/05/2011 - 15:15 | 850003 erik
erik's picture

Shibor followed S&P drops in every case in that chart.  However, the move in the last few weeks doesn't compute.  I would guess it is not a good sign.

Tyler, can you post a longer term Shibor chart please?

Wed, 01/05/2011 - 15:22 | 850016 erik
erik's picture

It appears that the Shibor has come down from its peak since the new year began.

http://www.reuters.com/article/idUSTOE70302D20110104

"China's money market rates and debt yields fell on Tuesday, with the seven-day SHIBOR losing a record 208 basis points, as an unprecedented liquidity squeeze in the market last month eased with the start of the new year."

As of yesterday, 1 week Shibor 4.31, previous close 6.38.  It is still elevated but did drop dramatically.

Wed, 01/05/2011 - 15:50 | 850101 Hugh_Jorgan
Hugh_Jorgan's picture

You can be sure that when the kabuki economics charade starts to mess with stability in China, they will pull out all the stops to defend their economy. Even if that means severe consequences outside their borders, this bears a close eye...

Wed, 01/05/2011 - 16:19 | 850173 streetman
streetman's picture

Second Santelli hat tip just now, think he appreciated ZH crediting him with the "win" in yesterday's Bernstein match...

Wed, 01/05/2011 - 16:24 | 850186 Horatio Beanblower
Horatio Beanblower's picture

I am pleased to report that my father, a 66 year old retiree, just BTFD in gold.  He actually said BTFD and giggled like a schoolboy.  It gave me a warm and fuzzy feeling inside.  He also thinks that Blythe Masters is a very scary looking woman - it would be hard to disagree with him.  

Wed, 01/05/2011 - 16:44 | 850240 Wags
Wags's picture

Back in Sept 2008 there were an awful lot of smart people who got crushed. Uncle Ben & Tiny Tim are very smart people too ya know. They did zilch to prevent the disaster that was Wall Street. I will not pretend to say I am a smart person, just very very wary of what is happening.

Wed, 01/05/2011 - 22:45 | 851388 StychoKiller
StychoKiller's picture

Even a blind sow finds an acorn once in awhile.  Keeping your tail out of the fire is getting harder and harder...

Wed, 01/05/2011 - 17:00 | 850300 37FullHedge
37FullHedge's picture

The SHIBOR Chart looks very scary, I understand China is a high risk area but what isnt? Reading this blog I thought I would have a look at my China fund, Its a managed fund and I live in the UK I looked last week it was just in the red about where its been for ages today its up just over 2%

Buy low sell high its not as easy as it looks I foul up regularly so my view on China It may blow up and if it does buy buy buy as it will come back probably and if it holds together it should produce good returns,

This blow up in rates is possibly a good thing longterm as it will flush out a lot of crap sooner rather than later when the problem is worse, Because my timing skills are to be desired I will just hold on for a very long time as my original plan because if China as I suspect is buckling underinflation imput costs food etc It can put those to bed easy by revaluing the Yuan hence exporting it to us and if I sell tomorrow this will probably happen before weeks end.

For me if China has a severe breakdown I will add to my position as I am looking at a decade or two away before I intend to take profits and if it goes all wrong I wont lose any sleep as its not big my position.

Wed, 01/05/2011 - 19:20 | 850858 Silversinner
Silversinner's picture

When the so called shtf I won't waste a second

on the computer trying to sell something wich

has no more value.I will try to exchange my

last fiat money for goods(esp food,tabbacco and liquir)

to save myself some gold later on.

Created my own little central bank years ago

by buying PM and yes it's extremly solvable

because it has only assets on it's sheet.

During the crisis of 2008 I created my own

supermarket inside my home and it hasen't

been without stock since with lower prices

on the labels and stocking up on the cheap.

Save a lot of money this way and use these

saving to buy more PM also on the cheap,

like today from JP discount window.I am

a simple man but doing all right.Most goldbugs

are no doomsday believers but just prepare

according to the lessons learned from history.

Economy will go on because commerce won't

stop but this fiat system will not survive this

extreme abuse and corruption.

Wed, 01/05/2011 - 19:26 | 850885 ZeroPower
ZeroPower's picture

The first chart unfortunately doesn't tell the whole story when comparing.

 

Here is a relative chart which includes Lehman: 

http://static.businessinsider.com/image/4d24ba30cadcbb95030e0000/shibor.jpg

Thu, 01/06/2011 - 07:00 | 851890 saulysw
saulysw's picture

Thanks, that helps put things into perspective....

Wed, 01/05/2011 - 19:28 | 850890 Kina
Kina's picture

Yes I can pick the tops, I know when to sell, when a dip is not a dip but a crash...I will be able to sell and get out the door first. I will push the sell button because I will know and others will not. So no fear here, I can hold and sell when the time comes.

hahahaha

Wed, 01/05/2011 - 20:08 | 851010 cougar_w
cougar_w's picture

The great thing about this game is that if you win big you get to enjoy a lifetime of gloating and bragging, and if you lose big you can jump out a 20th floor window.

We call that no down side.

Wed, 01/05/2011 - 22:12 | 851323 Mark Noonan
Mark Noonan's picture

Well, there was that employment report which was pretty astounding today...but I'd like to see someone drill down in to those numbers and tell us who and what was being hired.  But, for the sake of argument, let's say that all the new debt and fake money has worked just like Bernanke, et al, said it would...now, what?  When is the plug to be pulled on stimulus?  And will the rising price of things like gasoline tip us back in to crisis just as they did in 2007?

Thu, 01/06/2011 - 00:45 | 851620 Wolf in the Wilds
Wolf in the Wilds's picture

I think there is some misunderstanding of Shibor.  Frankly speaking, the local banks do not use the interbank level for funding.  They are sitting on deposits that is able to fund what they need.  Shibor is more a reference rate for FOREIGN BANK branches who need to fund from the local banks. 

The shortage in the interbank will hurt these branches but work the advantage of the local banks who can squeeze for higher rates.  Shibor is a very very bad guide for the real liquidity in the market. 

The real guage of liquidity is more difficult to come by.  My best indicator would the loan to deposit(less reserves) ratio of the big 4 banks.  Unfortunately, the data is not readily available.  Or this data from the PBOC (http://www.pbc.gov.cn/publish/html/2010s01.htm). 

As for a real time guage, well, government bond levels might give a better indication.  If there was a real shortage, that yields should be heading higher.  That is not happening.

 

 

 

 

Thu, 01/06/2011 - 05:11 | 851846 scaleindependent
scaleindependent's picture

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