The Price Of Supreme Court Conscience: $10,000 Squid Bucks - The Skinny On SCOTUS "Justice" Elena KaganSubmitted by Tyler Durden on 05/10/2010 - 07:09
The scramble to fill the Supreme Court with Fed and Wall Street puppets in advance of Bernanke's last ditch appeal to preserve his secret bailout optionality of his closest Wall Street friends is on. Now that Elena Kagan is a officially the latest supreme court "justice", here is all you need to know about her independent "allegiance", courtesy of the WSJ: "From 2005 to 2008, Ms. Kagan was a paid member of the Research Advisory Council of Goldman Sachs Global Markets Institute, according to financial-disclosure reports she filed after being appointed to her current job. The form shows she was paid $10,000 in 2008, when she was dean of Harvard Law School. Asked if there was a concern that this issue could be used against Ms. Kagan, should she be nominated, Mr. Gibbs said, "No."
Update: Germany now officially joins the fray: Euro zone central banks have
started buying government bonds, Germany's Bundesbank said on
Monday. "We confirm this," a Bundesbank spokesman said. From Reuters.
From Market News: "The Bank of France has begun buying eurozone government bonds, a spokeswoman confirmed Monday, without giving further details." Can't have those French banks face reality now can we. 65 years after France was saved from fascist rule, America has saved its financial system again from insolvency, and instituted something else. What that "something else" is, we are not quite sure yet, but gradually we are getting a sense.
An expanded, if conflicted (it comes from one of the pillars of modern-day Keynesianism: Bank of America) overview of the full European bailout by "Europe", which will now rely on the Fed to purchase EU debt and fund hundreds of billions in FX swaps. Can we now drop the charade that the EU is a viable structure, and stop pretending that Europe is anything but America's most recent geographic and monetary acquisition, or is it still too early?
The latest (and certainly not last) IMF portion of the European bail out is E220 billion, or $287 billion at today's exchange rate. As the US and its taxpayers represent roughly 20% of total IMF funding, today's 3% loss in dollar purchasing power to the middle class will cost the middle class $57 billion. Paying for the privilege of being able to purchase less sure sounds like a squid-pro-quo type of deal for us here. Politicians everywhere applaud this most recent rape of America's working class, even as communism is now the global ideology. Who needs TheOnion.com when reality is now 10 times more surreal. And the direct recipients of taxpayer generosity: SocGen, AXA, Dexia, CA and all other French and German banks, which right now are all up ~20%.
And so we get one step closer to the end. Look for bond yields in Europe, and especially the Bund, to roll over and accelerate to infinity as investors realize what monetary prudence capitulation is. Amusingly, the KomIntern won - comrades Lenin, Stalin, Marx, Engels, and all others who grace the dark pages of US historybooks, would have been celebrating if only they were alive today: May 9, in addition to "victory over fascism" day, is now also "victory over capitalism and free markets day." Rejoice comrades!
The race to the currency devaluation bottom is now in its final lap. And gold is the only alternative to the now imminent collapse of the fiat system: the world had a chance to take writedowns on losses, punish those who took risk and failed, and refused to do so. There is now no risk left, but it only means that eventually all the risk will come back and lead all capital markets to zero. The result will be the end of Keynesian economics as we know it. Do not trade in this broken market, do not hold your money in a bank as they are all now one hour away from a terminal bank run - buy and hold real, FASB mark-to-myth independent assets.
Just plain insanity - EURJPY goes from session highs to session lows, a 100 pip swing, in 2 minutes. Same with EURUSD. And as for the EU conference, don't expect it to happen until a leak finally drives the EUR up for at least 5 minutes straight. We may be at 1 trillion before the night is over.
Don't Try This At Home Kids - EUR Traders Holding On For Dear Life As FX Vol At Never Before Seen LevelsSubmitted by Tyler Durden on 05/09/2010 - 17:25
More flags, more fun - 500 billion flags! A 50 pip move in an FX pair in a week is big. A 50 pip move in an FX pair in a minute is a several hundred sigma event. As all correlation algos are near unity, we believe the risk of Thursday's 2:40 pm festivities to recur in the afterhours session (either up or down) is frighteningly high.
Germany proposed on Sunday evening the establishment of a comprehensive plan of financial aid can be used for countries in the euro area, totaling 500 billion euros and involves the IMF, told AFP European diplomatic source. "Germany has put on the table a proposal of 500 billion euros," she said. It would include 60 billion euros in loans from the European Commission, he was in the last day, and 440 billion would accrue if necessary, the euro zone countries and the International Monetary Fund. This envelope would be established "bilateral loans, collateral for loans and lines of credit from the IMF," the source said. It would be in scale, if the subject of an agreement, an assistance plan is unprecedented in history.
Uhm, we have one simple question - where will the money come from? The EUR is surging currently on the kneejerk, although for all those who realize that the next step in this now entirely Federal Reserve mandated playbook is debt monetization, it provides just a good re-shorting opportunity. Of course, before our own Maestro Junior finds a new and improved way to pummel the greenback.
With less than 2 hours before Asia opens, the EU is scrambling - on net, the newsflow this weekend has been far more negative than Europe had hoped, with just the token minimum provided so far by the IMF (thank you Joe Sixpack) which the political situation in the UK and Germany deteriorating substantially. The live webcast from the Counsil of the European Union, the Extraordinary meeting of finance ministers - press conference is starting imminently at the following link.
First posted 17 November 2008, this column's analysis is more relevant than ever. It asks why investors rush to government securities when the US was at the epicentre of the financial crisis? This column attributes the paradox to key emerging market economies’ exchange practices, which require reserves most often invested in US government securities. America’s exorbitant privilege comes with a cost and a responsibility that US policy makers should bear in mind as they address financial reform. - Carmen Reinhart and Vince Reinhart
Political doctrine - meet Newton's third law. Headline from Reuters. This will serve as a huge setback to a consolidated European rescue of not only Greece but all PIIGS (and then all of Europe itself). Polls are now closed and the first preliminary read is as follows: 34.5 CDU, SPD 34.5, 12.5 Green, FDP 6.5 Left 5.5.And the biggest losers from this, aside from the line of willing bailout recipients may be German public utility: as Bloomberg notes: "Chancellor Angela Merkel’s parliamentary spokesman for economy and energy, Joachim Pfeiffer, said that the German government may not have to get approval from the federal parliament’s upper chamber to extend the operating life of nuclear power plants." EON, RWE and other utilities may not appricate their 10 year ultimatum in tomorrow's DAX.
The reason given by Reuters why the FinMin is in the hospital is due to an adverse reaction to a new medicine. While we wish Schaeuble all the best, his the timing could not possibly have been worse: the whole world is watching with baited breath to see what happens in Europe before 6pm eastern tonight. Anything less than an "ironclad" bailout program will result in a total market wipeout tomorrow.
The story of financial markets in the past twelve months has not been one of organic growth. It has been a central bank accommodated liquidity story. This melt up will end in melt down when unsustainable liquidity policy is insufficient to address deleveraging and default. Macro trade positioning needs functional measures of liquidity. As has been said before, liquidity will always be around until you need it.
Given the explosion of financial product innovation, international capital flows, and leverage some measures of liquidity are not as informative as they once were. New ones are needed. Further, thinking through liquidity phenomena to their essence is really about understanding connections to market-maker and/or seller distress, manifested in the bid-ask. So measures that exhibit a myopic view on credit risk of market players in some ways serve as a function liquidity measures.
Yes, it is really happening. After years and years and years of market manipulation, JPMorgan is about to realize there is only so far you can push your luck against the criminal envelope.In other news, when silver doubles shortly, Andrew Maguire is about to become a patron saint to generations of long-suffering gold and silver "bugs" the world throughout.