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Wednesday Trading Session Set To Be "The Most Volatile In Living Memory" Warns Telegraph, Plunge In Bunds Expected
If there was any doubt about where futures will open tomorrow, the following article from the Telegraph should assuage all doubts: "Traders greeted the move by BaFin, the German regulator, with a mixture of
anger and astonishment. One bond trader said he expected Wednesday's trading
session to be one of the most volatile in living memory: "It will be
complete chaos, I really don't know what the Germans think they are doing."
We couldn't have summarized it better if we tried.
One immediate effect was that the cost of insuring European government debt fell as markets were hit by a so-called "short squeeze" where investors with short positions are forced to offload their holdings and buy the bonds, causing the price to increase.
This is certain to please the German authorities, who have waged an increasingly hostile war of words with supposed speculators.
BaFin said the ban was being introduced due to "extraordinary volatility in debt securities issued by eurozone countries".
In a statement, it said short-selling had led to excessive price movements "which could have led to significant disadvantages for financial markets and have threatened the stability of the entire financial system". However, traders said that the measures, which will also prohibit the naked short-selling of shares in major German financial institutions, such as Allianz. Commerzbank, and Deutsche Bank, could lead to an immediate backlash from investors around the world.
They added that the ban was likely to be effectively unenforceable. It will not stop traders from shorting the bonds and shares using other European markets.
"Without the two-way flow the German market is likely to become utterly dysfunctional," said one London-based bond trader. "Nobody ever thought they'd do this in a million years and it raises the long-term question of who is now going to want to buy their debt."
...
Analysts at Bank of America Merrill Lynch summed up the mood with a note titled What's Germany going to ban next? Rainy days, harsh words, the Macarena?
If this pans out as expected, look for Bunds to collapse tomorrow, and wipe out a few billion from Pimco's NAV. We warned in February that the flight to safety in Bunds was both shortsighted, and too good to last. Now that trading in Bunds may be effectively prohibited altogether, we will be very curious to see where market clearing occurs, if anywhere. Because the only thing worse than a low price is no price.
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Edit: Farcism is the only way forward.
Thanks Marla.
Gold down $15 in Asia.
No doubt, this guy is going to be pissed....
He should be pissed that the guy who designed his crooked tie based the design on the scattered liver spots dotting his receding hairline.
Also, the guy who did the spray-on-tan did a shoddy job
RT,
Your recent posts reveal an apparent bitterness about the looming explosion of the market / trading game. Are you afraid of working for a living, or do you not know how?
"If there was any doubt about where futures will open tomorrow"
Euro Green
Dow Futures down 35
COMPLETE CHAOS!
""It will be complete chaos, I really don't know what the Germans think they are doing." "
Oh my on the scale of the Hindenburg!
BS and Trichet were laying in a meadow under a big tree. They had a spread of apples and cheeses in front of them, along with some French wine. BS had brought his guitar. "Hey Jean Claude, you know this one...."
"It's getting better all the time! I used to get mad at my school..." Jean Clause sang backup... "now I can't complain." BS smiled, "Teachers that taught me weren't cool".... JC picked up a glass of wine and raised it "now I can't complain." BS strummed hard on the Gibson, "Holding me down, (ahh), turning me round (ahh), building me up with your rule!"
JC stood up and danced, he sang the verse this time. "I got to admit it's getting better, a little better all the time (it can't get no worse). I have to admit it's getting better, it's getting better, since you've been mine!"
They sang together, "Me used to be angry young man, me hiding me head in the sand. You gave me the word, I finally heard, you're doing the best that I can."
"I got to admit it's getting better, a little better all the time (it can't get no worse). I have to admit it's getting better, it's getting better, since you've been mine! Getting so much better all the time!"
Trichet held up a Euro and a doelarr and set fire to both.
"I used to be cruel to my woman I beat her and kept her apart from the things that she loved. Man, I was mean but I'm changing my scene, and I'm doing the best that I can (ooh)"
"I admit it's getting better...."
†
"Bunds expected to Plunge"
(say hedge funds sucking hard on their Bund shorts that they were not able to cover when Angie tossed them a high hard fastball on the inside, about face level)
LOL
Give it a few days. Eventually the German government's impotence to fight the markets will be made clear. Governments always have to learn that lesson the hard way for some reason.
fucking spaniards.... nearly had a failed auction today. if this isn't a telling signal then fuck this system!
http://ftalphaville.ft.com/blog/2010/05/19/235701/italy-suspends-mark-to...
Yeah this should be really good for that wall of liquidity which is about to send all risky assets to the moon.
Better blow the bridge and get the hell out of here.... Remember to use once: http://4.bp.blogspot.com/_wkgIzuqJM0w/S-mFRDvs9kI/AAAAAAAAEVI/A8G3b1J_R0...
Tyler; bon appetit.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aF5tV7uvY0FU&pos=4
Too funny.
And funnier yet, from teh article, and I quote:
"Gia Moron, a spokeswoman for Goldman Sachs, declined to comment."
Gia Moron!! God does have a sense of humor!
i laughed my ass off when i read it on bbg this morning.
fucking epic.
hdskjlhcfkq
Oh look, Mommy won't let baby trade the little pieces of paper anymore!!! Last time baby speculator had to pay on default, baby's capital was a fart in Mommy's face. Now baby speculator can't play with papers no more. Waaaaaaaaaaa!!!!!!!!
+1
good move by the germans....the cds fraud should come to an end. the usa sociopath banksters raped europe first with the fraudulent crapulent mbs...
naked short selling has become a pathological tool of the sociopaths. goldman sachs does not create wealth - it simply redistributes it to itself.
cds do not provide "liquidity" or diffuse risk - they do just the opposite and eviscerate productive economies. germany took square aim ultimately at usa economic imperialism...
You're right. You're absolutely right. The poor, naive Europeans had their lovely little productive economies raped by the nasty American speculators. The problems in Europe are not in any way related by the deranged attempt to jam a random hodge-podge of countries with massive economic and cultural dissimilarities into an ill-fitting currency union, then completely ignore their own criteria for membership and procedures for preventing and punishing fiscal profligacy within said union, serving the interests of Brussels bureaucrats, German exporters and precisely no one else. Nor do they have anything to do with implicit guarantees for French, German and Italian banks with inadequate capital ratios on obviously risky investments around the European fringe. Deranged property bubble in Spain? Fuhgeddaboutit. Nope, it's them thar speculators what done it. String the varmints up.
Please understand that I have no wish to defend the management of major financial institutions in America - or for that matter on the inconsequential rock in the North Sea that I call home, or the governments of either of those countries. But the notion that this is somehow an Anglophone crisis that has been wickedly exported to a blameless continental Europe is delusional when voiced by ordinary inhabitants of the Eurozone and a pack of downright lies when emerging from the mouths of Eurozone politicians or central bankers. Don't like having to pay high levels of interest on your sovereign debt? Then don't run such ludicrous deficits. Don't like buying crappy derivative assets that are far riskier than agency ratings would suggest? Then do your God damn due diligence and don't buy them. Can't work out what the hell they are or do, however hard you look? Don't buy them. Don't like bailing out your banks after they invest in a range of unutterable toxic shit from around the world? Then don't let them operate under the assumption that you will bail out not only them but a wide range of dysfunctional tinpot economies which they might therefore choose to invest in.
There is no evidence whatsoever that CDS, naked or otherwise, was a detectable contributory cause of any of the current problems. When you blow bubbles, they burst. Governments all over the world blew a huge range of exciting bubbles, and now find it convenient to rail against the air for popping them.
Not true.
Those swaps allowed all banks to increase leverage, due to having hedged all existing mortgage backed assets with other banks, who in turn hedged theirs back in return. This allowed risk assesment to derail, and ultimately the situation developed to the extent where it all blew up.
You're right, sorry, I overstate the case. But if the banks had simply been made to believe from the start that they would under no circumstances be bailed out, it would not have been in their interests to lever up in this way in the first place. Governments and their regulators should have thought (and should think in the future) in terms of aligning incentives, not regulating details. If CDS is illegal but large banks are still incapable of failing, they will simply find some equally problematic way of levering up and transferring risk to taxpayers. You can't force banks to behave well, so you have to ensure that it is actually in their interests to behave well. At the moment it isn't: that was the root of the financial crisis. Of course, close to the root of the whole larger problem is that it often isn't in government's interest either: governments want credit booms founded on excessive leverage, because so long as they can keep it going long enough, they'll be out of office by the time the shit hits the fan and the other lot will get the blame. Labour have just pulled off a truly masterly example of the genre.
Swaps mean higher leverage. Higher leverage means the unsustainable game goes on for another decade or two; the politicians here in the U.S. signed on for this (Fannie/Freddie, ending Glass-Steagall, etc) because they wanted the money to continue the welfare/warfare state and they hoped it'd blow up on someone else's watch. I have no reason to believe the EU was any different. Unsustainable socialist economic policies, free stuff for everyone who didn't want to work, the welfare/warfare state without the warfare made so much more welfare available in EU. Fools in the U.S. point to Europe's social welfare state and pine. It's all broken now.
Unless wealth is first created it cannot be redistributed. The world is finally learning that the FIRE economy doesn't produce wealth, it just redistributes it. Finance will be lucky if it is merely reduced to a public utility and not completely taken over by governments. Banks CAN be forced to behave well. They've brought this on themselves. Now, rather than a return to genuine free markets (without bailouts), we're going to get governments (here in the U.S., Congress) running the economies in real time. They call it "reform", but it is of course a takeover. It will get much worse before it gets better. Eventually we will start making things again, actually producing wealth. Traders, central bankers, hedgies, and other parasites will have to get real jobs.
That scares the shit out of all of them.
In a moral world, you'd be right. But the people, the corrupt finance ministers (they just killed one in a more balanced country) who agreed to this shite were likely wined and dined and paid off, made rich, and spent copious amounts of time in their Furbie outfits, with Eastern European beauties.
The only problem with your scenario is the monumental avarice and appetite for vice in the governators.
Oh, I pretty much agree. I think the vast majority of politicians are essentially corrupt - though I think I disagree slightly with many people around here about the precise make-up of that corruption. Sure, plenty of it is about material wealth, but a lot of it (more, in my opinion, at least in British MPs and ministers) is about the desire for power and status. I think political self-interest drives a higher proportion of bad decisions - or at least the most important bad decisions - than financial self-interest.
Power and money usually mate.
I am reminded of a rather disgusting thing I see on grassy lawns when the ground is fairly soaked. The earthworms from two different holes about 1-6 inches apart, surface and move towards one another, and engaging all along their bodies in an embrace until someone comes along and they separate, or so it appears. It may be just one nightcrawler surfacing from two different holes and hugging itself.
can they really ban the macarena? nooo..
Bunds up nicely on my screen. Panicky London guys are rarely right.
Remember, remember, Gleiwitz in September.
I told youse Angela would know what to do. The Party's Over. Just freeze all CDS. EveryWhere. Poof. A bunch of overlevered losers, "covering" each other in sub-collaterallized cross-risk. To the tune of 600 Trillion? Use the Off Switch. ....There It Is, Circuit Zero...SHUTDOWN.
yeah Go Merkel. Look its simple. its time for the politicans of the world to stop shaking in their boots and pissing down their pants everytime a banker walks in and sys if they dont do this or that - the world financial system will collapse, people wont get their paychecks and the ATMs will stop working. Either that or we gotta get politicians who have an IQ greater than 70.
Look its simple. have the central govt. provide an unlimited guarantee of all checking, savings and money market accounts. Then shut the rest to shit down and tell the bankster to go fuck themselves.
You'll find that nothing so terible happens.
+1
No more free toasters? $26 million apartments? No more Lord Blankfeins, Jamie Dimons? John Macks? Ken Lewises?
Bring it on!
This.
There's no need to run around banning things at random, just let the fuckers fail. They'll soon stop doing it for themselves.
I agree, but that solution doesn't give anyone any more power, so it will never be followed. The reality of politics.
thank you - what saved US from "bank" run/collapse was govt backing of money markets and increase to 250k, not TARP, and what did that cost compare to TARP?
that is as long as country's GDP can plausibly back deposits...if in doubt, run proceeds..see Iceland
looks like another bleak day for equities :)
most index's down 3% already and it's only 10am here in the UK
my purchasing power also in decay again :(
GBP and FTSE both down - not a particularly good sign
The conclusion as to the reason for Germany's action is quite simple. The first serious shot fired by the the good ship "Trade War" has been fired. In a time of economic chaos, the first major global exporter to the bottom of the currency valuation ladder gets a sharper economic boost to their economy. At least that is the shorter-term perception. In the longer-term of course, should further trade war initiatives be launched (tariffs, etc), we set up the world for much bigger troubles. WW III anyone?
People might not want to buy German debt?
Eh?
Probably the safest debt in the world.....
This is great fun, too many smug people in the financial sector who think they know everything that is going to happen. There ain't any rules now.
This fight is going to be to the death, and so it should be.
I am buying BUNDS.
Germany will raise interest rates quicker than the Fed because they can.
Europeans are savers and typically allot more fiscally conservative than the US.
The ECB raises interest rates in the EUR zone, not the Bundesbank.
And if the ECB raises rates you wouldn't want to be long Bunds, you would want to be short.
Bundesbank = ECB
Germans take over the seat after Trichet departs as part of the bailout concession.
When ECB/Bundesbank raise rates, the yield on Bunds goes up. Correct me if I'm wrong.
Uhm yea the yield on Bunds goes up but your long bunds go down in value at the same time. Look what happened to bunds in 2005/2006 when the ECB went on its hiking campaign (hint: it wasn't pretty). Obviously the ECB won't hike rates in a long long time so bunds are a pretty decent bet on protacted, low inflation.
Strauss Kahn nuked the IMF.
Merkel nuked CDS.
The US Senate nuked bailouts for Eurozone.
I'd say it's been a pretty good week.
If the Senate nukes the bailout of American local & state gov bailouts it would be a really good week in hastening the nadir of this mess.
Dude,
The toxic waste that Wall Street banksters sold to European investors among others, was stuffed with promises, hope and packaged with AAA pomp and glory.
The scamsters are on Wall Street, the bamster is in the White House.
This time is different. This time, America is not getting away with raping the world. We have learned, we pay attention and we're going to fuck back.
Cheers,
Walkure
One minor point, it's tha Oligarchy not tha other 99.5% that did this.
Nice post btw
Absolutely.
The American people have no control, no involvement.
They're being screwed by their government and banking cabal just like the rest of the world.
Surprising that not a single US flag got burned in Greece. Either it didn't happen or the media didn't report it.
Make no mistake, the rules have changed. There is renewed resentment against the US all over the world, not just Europe.
In a nutshell.
The world was led to believe and searching for potential WMDs in the desert, when at the same time financial WMDs were produced, packaged and positioned around the world.
You tell me what's worse? A freak rogue dictator in the desert that pisses on his people but poses no threat whatsoever to the world or a banking cabal and oligarchy that has the ability to bring down nations with a push of a button?
Walküre, I share your indignation and general outlook on the new rules of the game vis-à-vis the US Empire. You seem to overestimate however the independence of the political caste in Germany. Germany, Italy, South Korea and Japan are tribute-paying provinces of the Empire, and not truly self-determined entities as you imply. Their political systems were made from ground up to serve US geopolitical interests, and if they tend to be less responsive to demands of the Imperial metropolis now, it is less a sign of sovereignty than the increased entropy and overhead of a collapsing empire.
Merkel is a composite character created and put in place in a desperate attempt to give legitimacy to a dissolving system of oligopolic rule. She’s a discardable PC plastic toy like her counterpart in the White House.
the game has changed
and thats the news... nice of you to remind him how not only meaningless he / she is but as well thier entire way of life is but too serve U.S.!
Why is it top heavy and why is it falling down? save your feelings for your mother, source it, site it and off we will go... if you lack the will power to continue, fuck you coward... I hope that is plain enough to not be misuderstood as cryptic.
Service!
Cool off, JW boy.
Your hyperventilating betrays a certain malaise with the shape of things to come, and that's too bad...for you of course.
as much as I LOVE! to read You! and as much as I really do agree... with YOU!
Ok, forgive my distemper... I cannot help it... I was bitten by an infected Goldman Employee..
Be well Brother... and for the record I thought you would have enjoyed it is why I offered... far less for the bad of either one of us and more for the broad majorities ed-u-makashun!
If you better see what I was up too... maybe another time when it suits you better understanding my primary motivation... cant do it now, becuase of this disclosure.. but later if you want.
My very best to You and Yours Shylockracy now and always, JW
I've always said real reform would have to come from outside the usa. Americans like things the way they are, why should we want change? Think about it.
Americans by and large don't understand, or are interested to understand what is happening.
Merkel's decision has some populist character. The German people understand that they're paying for Greece's debt because Greece was funded by Wall Street after Wall Street showed Greece how to fudge the books.
Then Wall Street pulled the plug on Greece and positioned bets against the country's debt and the entire currency, the Euro.
It's treacherous as Merkel said in an interview. It's assinine and where do you think this leads?
You understand, many Germans including myself understand this.
Time to look for new dance partners.
I'm sorry dude, but this is just not true. Greece was largely funded by banks in the UK and the Eurozone, not on Wall Street. That's why the EU wants to bail it out: to protect European holders of Greek bonds, particularly the French banks. The architects of Greece's problems live in Athens, and the architects of Europe's problems live in Brussels, Paris, London, Berlin and Madrid. It is childish for us to reflexively blame America for our own problems when we have largely caused them ourselves.
You have us pegged exactly.
I'm changing my given name to Wolfgang.
world resents US as they should, but there is this strange dynamic...when I, a US citizen have travelled in last few years and talked to folks that critique US, I envitably agree, and says something like: "yes, we are an empire in decline, our days are over, we will suffer and our power will recede, we have mis-managed things, let the crooks rob us, and we are rotted at the core"...and even tho as a US citizen I prefer this not be true, I am resigned to it and it does not drag on me much, it will suck for us, but it just is...but I get, to me, the strangest reaction from foreigners to me saying US is over, on the way down...they kind of look like a young kid who has been told Santa Claus does not exist. I can't explain it, but its like they are more attached to US myth than US people are...
Bring it on Beeg Booy. Love it , love it to hear that dirty talk - love that avataaar too - Die Valkure? How dyall pronounce dat?
Dumping UST should start soon.
A CDS is counter-party risk. You already know that if needed every counter-party would be unable to pay. Of course in the US the FED would pay but with your children's (grand-kids, great grand-kids) future.
Right or wrong it was a ballsy move and will bring some interesting discussion. Taking Naked Shorts and CDS off the game table isn't the end of the world. There is no sanity in finance and both governments and players share guilt. Everything is about gaming today -
OK, so it looks like a global currency reset is approaching fast. Pretty much all paper is toxic waste these days...
What is the next trusted currency going to be?...trustedcurrency.com?
Well, I'd say the Norwegian krone was pretty much trustworthy right now, and if there is a new Deutchmark in a year or two that would be a-ok as well. But if you want to build a sound currency for the future my suggestion would be that it should be pegged to a broad basket of commodities - gold, silver, copper, aluminium, wheat, sugar, oil, whatever - but convertible into gold or silver at a floating rate dictated by the prices of the backing commodities relative to each other.
To illustrate, suppose
1 Commodollar = 0.25oz gold + 4 barrels oil + 2.5 tons grain + 100lbs copper
And suppose that on the day you choose to convert your Commodollar, 0.25oz gold is worth exactly the same as 4 barrels of oil, which happens to be the same as 2.5 tons of grain, which by the most miraculous coincidence is on that particular day the same as 100lbs of copper. On this remarkable day of easy maths, you would get precisely 1oz of gold in return for each Commodollar you converted. On another day, you might get 0.96oz, or 1.04oz. Ten years later, it's not inconceivable (though perhaps a little unlikely) you might get as little as 0.5oz, or as much as 1.5oz, but even if you operated the currency in this way for 100 years (which might admittedly require some occasional tweaks in the basket's make-up) you would never find yourself getting 0.02oz or some similarly ridiculous figure, because these changes would be driven by fluctuations in demand for component commodities, not government's desire to inflate away its debt. It would actually be a sounder currency than gold or silver, because the sudden discovery of a solid gold asteroid or something would not cause the same kind of monetary inflation as would be the case with a pure PM-currency. The rationale behind PM-convertability is that some kind of convertibility is essential in order to keep the currency honest, but that actually storing (or indeed holding) vast quantities of all the backing commodities would be an unreasonably ownerous demand on the issuing government. Plus, getting tons of grain and barrels of crude home from the bank would be, um, a serious faff.
Ideally, the ratios of the quantities of the basket ought to be calculated to make the aggregate price as close as possible to cycle-neutral.
Got Wampum?
On October 27, 1648, the same day the Charlestown ferrymen were granted their petition (see the commodity money introduction), the General Court voted to officially accept wampum, not just as single beads (called seawant) but, in strands of set denominations (called peag). This was a trial period to last until the convening of the next court. In all there were eight different denominations. Each denomination was to be made of a string of unbroken and unblemished beads (defined as "without breaches...without deforming spots"). White beads would circulate in standard strands of 1d, 3d, 12d and 5s, while black beads (sometimes called blue or violet) would circulate in strands of 2d, 6d, 2 1/2s (that is, half a crown) and 10s. The rate of exchange for the beads was not given, but using the October 18, 1650 rate of 8 white beads or 4 black beads to the penny, the strands would be as follows:
White 1d = 8 beadsWhite 3d = 24 beads
White 12d = 96 beads
White 5s (60d) = 480 beads Black 2d = 8 beads
Black 6d = 24 beads
Black 2 1/2s (30d) = 120 beads
Black 10s (120d) = 480 beads
wampum is actually a really good idea if taken with the approach Mr. Shush has above.
Go Angela, you're awesomosity on motion! Wall St has the Obama admin and the rest of the world kissing their ass then Ange, waiting patiently, turns around and says 'fuck you' - wham! Global financial system in chaos. Ange has more balls than the entire Administration, Congress and the rest of the Reserve Banking system. Aussie$ at .8443 - bye bye.
It seems like cutting off a gangrenous arm, without any way to staunch the blood.
Gambling may be bad, but so much of the money supply is currently based on it.
Our economies have functioned for decades without gambling.
We don't need our ability to sustain financially to be gambled away, thank you very much. But no thanks.
What may be acceptable to the US economy that's based on hype, hysteria and cardboard boxes is not acceptable to solid, traditional economies with centuries of experience to back it up.
The American model does NOT work for all people. Of course if you have a nation of serfs that is inundated by propaganda day and day out, you can get away with it.
Dangle that carrot to millions of people that need 3 min. wage jobs just to sleep, drive and buy groceries... and watch American Idol of course. Tell them voting makes a difference and they actually believe it. Genius and lucrative for those on the right side of that trade. Millions are not and they are maxxed out, physically, financially and mentally.
"Without the two-way flow the German market is likely to become utterly dysfunctional," said one London-based bond trader. "Nobody ever thought they'd do this in a million years and it raises the long-term question of who is now going to want to buy their debt."
A trader never thought of something in a million years.......doesn't sound possible. Don't traders only think like ichi moko and retracements and head and shoulders and crap.
Its incredible that no one thought this would happen given the UK and the US (along with Germany et el) banned conventional shorting on banks in 2008.
Germany can get away with this fellas. Its finances are not America's or Southern Europe's ponzi scheme.
A forced shutdown of CDS would force them to find a way to clear them. The problem is the "protection seller" made money "protecting" the "buyer", all this time, until The End. They may have to "cough up" some of those payments.
The Thai protesters found a way to reduce stock market volatility:
Protesters Set Fire to Thai Stock Exchange
OT: RBC firebombed in Glebe:
http://www.cbc.ca/canada/ottawa/story/2010/05/18/ott-glebe-bank-fire.html
Dambit, double post.
The Telegraph is popular media. They may be right, but if they are it's just a coincidence.
Sell in May, go away till next March:0
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I'VE GOT A PERFECT PUZZLE FOR YOU
OOMPA LOOMPA, DOOMPADAH DEE
IF YOU ARE WISE YOU'LL LISTEN ME!"