The debate about the usefulness of sovereign credit default swaps (SCDS) intensified with the outbreak of sovereign debt stress in the euro area. SCDS can be used to protect investors against losses on sovereign debt arising from so-called credit events such as default or debt restructuring. With the growing influence of SCDS, questions arose about whether speculative use of SCDS contracts could be destabilizing - and this caused regulators to ban non-hedge-related protection buying. The prohibition is based on the view that, in extreme market conditions, such short selling could push sovereign bond prices into a downward spiral, which would lead to disorderly markets and systemic risks, and hence sharply raise the issuance costs of the underlying sovereigns. The IMF's empirical results do not support many of the negative perceptions about SCDS. In particular, spreads of both SCDS and sovereign bonds reflect economic fundamentals, and other relevant market factors, in a similar fashion. Relative to bond spreads, SCDS spreads tend to reveal new information more rapidly during periods of stress, admittedly with overshoots one way or the other. Given the current apparent 'stability' in many nations' bond market spreads, the chart below suggests an alternative way of judging what the credit market thinks - the volume of protection bid - and in this case some interesting names emerge.
I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets!Submitted by Reggie Middleton on 04/12/2013 11:45 -0400
And you thought this would stay in Ireland and Cyprus right? Keep hope alive. RBS bailout per UK taxpayer = £1,414 or €1,654 or $2,177. but they didn't tell you everything, did they?
Despite the mainstream analysts' calls for a "great rotation" by investors from bonds to stocks - the reality has been quite the opposite. While the 10-year treasury rate rose from the recessionary lows signaling some economic recovery in 2009; the decline in rates coincided with the evident peak in economic growth for the current cycle that begin in earnest in 2012 - "With rates plunging in recent weeks the indictment from the bond market concurs with the longer term data that the economy remains at risk." Despite the calls for the end of the "bond bubble" the current decline in interest rates are suggesting that the real risk is to the economy. The aggressive monetary intervention programs by the Federal Reserve, along with the ECB and BOJ, continue to support the financial markets but are gaining little traction within the real economy. Of course, this is likely why the current quantitative easing program is "open-ended" because the Fed has finally realized that there is no escape. The next economic crisis is coming - the only questions are "when" and "what causes it?" The problem is that next time - monetary policy might not save investors.
After showing Ireland's biggest banks failed to report borrowings/encumbrances, I give EVERYONE means to play credit analyst. Calculate Ireland needing another bailout right here (hint: this app probably shames your favorite ratings agency).
Since the Financial Crisis erupted in 2007, the US Federal Reserve has engaged in dozens of interventions/ bailouts to try and prop up the financial system. Now, I realize that everyone knows the Fed is “printing money.” However, when you look at the list of bailouts/ money pumps it’s absolutely staggering how much money the Fed has thrown around.
Witches Brew: Part 4 - Reality Bites
- The Specter of Things to Come
The road to ruin is on plain display and the playbook is easily seen at this juncture. Let’s take a look at how that playbook will unfold. Contrary to popular outrage of the SOLUTION being IMPOSED it is the correct one once the insured depositors where PROTECTED. In this edition the elites suffered FIRST followed by the private sector depositors who foolishly believed false BALANCE sheets which were POLITICALLY CORRECT but PRACTICALLY incorrect fictions approved by fiduciarily (regulations and regulators allowed ONGOING insolvent operations rather than protect the public by ending and prohibiting them) challenged governments (work for the banks and crony capitalists not for the public at large).
50% In Favor of Directly Breaking Them Up ... Many More In Favor of Stopping Artificial Support and Letting them Shrink On Their Own
What is the meaning of the markets hitting new all-time highs. The general consensus of the analysts and economists is that the rise in capital markets, given weak current economic data and a resurgence of the Eurozone crisis, is clearly a sign of economic strength; and, combined with rising corporate profitability, makes stocks the only investment worth having. There is, however, a more pragmatic perspective. Suppressed wage growth, layoffs, cost-cutting, productivity increases, accounting gimmickry and stock buybacks have been the primary factors in surging profitability. However, these actions are finite in nature and inevitably it will come down to topline revenue growth. However, since consumer incomes have been cannibalized by suppressed wages and interest rates - there is nowhere left to generate further sales gains from in excess of population growth. The reality is that all the stimulus and financial support available from the Fed, and the government, can't put a broken financial transmission system back together again. Eventually, the current disconnect between the economy and the markets will merge. Our bet is that such a convergence is not likely to be a pleasant one.
It begins here: Introduction of cold, hard evidence of bank shenanigans (with complete documentation) that A) should be prosecuted & B) cause enough concern to make you worry about your bank's integrity.
By manipulating the price of money through sustained and historically low interest rates, Greenspan and Bernanke created an era of asset mis-pricing that inevitably would need to correct. And when market forces attempted to do so in 2008, Paulson et al hoodwinked the world into believing the repercussions would be so calamitous for all that the institutions responsible for the bad actions that instigated the problem needed to be rescued -- in full -- at all costs. David Stockman, former director of the OMB under President Reagan, lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few.
The Canadian Government Offers "Bail-In" Regime, Prepares For The Confiscation Of Bank Deposits To Bail Out BanksSubmitted by Reggie Middleton on 03/30/2013 11:12 -0400
It's not just Cyprus, and no - it's not just Canada either. I'm preparing a list of specific banks that I have 1st hand knowledge that would prevent me from keeping my money in them. Get "Cyprus'd"!!!
This is precisely what I feared would happen: that any basic rules or laws would be tossed out the window during times of extreme crisis. This has unfortunately proven to be the case.
Mainstream Media Says Cyprus Salvaged By EU Deal, I Say Cyprus Is Sacrificed By Said Deal - Thrown Into DepressionSubmitted by Reggie Middleton on 03/25/2013 11:29 -0400
The IMF offered Cyprus a bailout with no specific amount or even range and no time period while in the process gutting confidence in the banking system by robbing depositors and imposing losses on bondholders. A Damn good plan if I ever heard one!!
Liar, Liar Banking System On Fire! Watch As I Spit Fact That Burns Down The Sham Formerly Know As The EU Banking SystemSubmitted by Reggie Middleton on 03/23/2013 08:21 -0400
Choice excerpts: "Have we forgotten what a bank is & what they are used for?" "The rules haven't been changed, they've been revealed!" Liar... Liar... Ass on Fire!!!
I was a little early, but just as I promised, those European bank runs are coming as expected. Wait until I release my newest EU crash analysis, Lehman x 3, nearly guaranteed!!!