It has been a while since we have referred to Bloomberg columnist Jon Weil. The reason is we were waiting for something juicy, something one can sink one's teeth in, using money from a "tax free" Swiss bank account to pay. The need to wait is now over, as Weil explains why preserving the Swiss bank's bonus pool is right up there in the list of national priorities for the Swiss country as preserving the illusion that only you and your banker know who is behind that "numbered" account, in "Swiss Must Save UBS’s Bonus Pool or Die Trying." Cutting to the chase: "this year’s UBS bonus pool isn’t doomed, per se. It’s “at risk.” And where there’s a risk there’s always a way. What the UBS bankers need is a plan to ensure that the people who bear this loss are people other than themselves. Luckily, I have prepared one. To save the UBS bonus pool, UBS’s leaders must persuade the people of Switzerland to eat the losses the company is blaming on Kweku Adoboli, and to do so with joy in their hearts. Impossible, you say? Consider the following talking points..."
Bill Ackman's HKD Revaluation Trade As Predicted By Deutsche Bank In 2010... And Why DB Thinks It Is WrongSubmitted by Tyler Durden on 09/16/2011 22:46 -0400
Following recent disclosure that Bill Ackman's latest so-called 'slam dunk' idea is a bet on a revaluation of the Hong Kong dollar (as described here), it is interesting to see what someone like Deustche Bank's Mirza Baig thought precisely about the trade that Ackman is proposing as some unique concept (in 151 pages no less) as long ago as November 2010. To wit: "Public complaints against inflation are already loud, and may intensify if the reflationary tide swells further. This could turn up the heat on the authorities. Since 1983 when the current regime was adopted, Hong Kong has experienced CPI inflation as high as 12% and deflation as low as -6%. The current inflation rate of roughly 3% looks benign in this context. In 2008 when inflation crossed 5%, the public debate on monetary policy became more intense, but Hong Kong ultimately braced the peg. In short, we feel the situation will have to become far more extreme, and other policy tools prove ineffective before authorities capitulate and allow a revaluation of HKD. At present, the probability of this scenario is low, in our view. This is why we noted earlier that we expect the reval trade to attract more interest from offshore investors, and possibly reach blow-out levels by the middle of ." And after highlighting the Ackman's trade from 10 months later, DB concludes that "[t]he more likely scenario is that Hong Kong will attempt to ride out the reflation tide with its current policy. The public would gradually move to using RMB for payments, and the HKD would fall into relative disuse. Once China’s capital account is sufficiently open (5-10 years later), Hong Kong would endorse the shift towards China through a formal peg vs. RMB at the then prevailing exchange rate (i.e. without any revaluation)."
Even though it has since provoked a firestorm of denials and refutations, the reality is that Dutch media RTLZ probably had some very good sources (certainly better than the FT's yesterday when China was supposed to LBO Italy for the 4th time in 2011) to release the following information, namely that according to the Finance Ministry, the bankruptcy of Greece is inevitable, and that the "question is no longer whether but how Greece goes bankrupt." Additionally, Reuters added that according to Jan Kees de Jager, "We are studying scenarios in secret together with the Dutch central bank (DNB) and also with other countries. We are looking at our own economy, our government finances, the financial sector and consequences for Europe," De Telegraaf added that the "other countries" also included Germany and Deutsche Bank. He said it was difficult to let a country go bankrupt in a controlled way. "Always, if something goes wrong there are effects on other countries, on central banks. So you will have to take into account side-effects. That is precisely the reason why we are looking at different scenarios behind closed doors." A ministry source later confirmed a report on Dutch broadcaster RTL that the scenarios being studied included default by Greece. Of course, in keeping with the European M.O. of spreading a rumor, gauging the market response, and if response is unpleasant, to immediately refute it, Dow Jones and everyone else has since reported that the Dutch were only kidding and were not calling for an orderly default for Greece. Sure. Just preparing for one. Huge semantic difference there...
Holy Shitshow: Recordathon In French Bank, European CDS Following Atriocious Italian Bond Auction, Dexia Bail Out, Libor ExplosionSubmitted by Tyler Durden on 09/12/2011 07:19 -0400
As we speculated on Friday, Europe has opened, and it is ugly. In fact, Europe has never been closer to a bank and market holiday than it is right now. Why? Let's go down the list...
The Maginot Line failed because it was inflexible and was largely designed to fight the last war. As Europe braces for a potential default from Greece it has to be strong, yet flexible enough to adapt to this particular situation. We learned a lot from Bear and Lehman about what can be done to contain financial panic, but not all the tools will be equally applicable here. Ironically, for all the talk about how bad it was to let Lehman fail, the U.S. banks seem in far better shape than European banks. Maybe as Europe prepares to ring fence its banks, it should remember that letting Lehman fail may be the reason US banks are in better shape now than in 2008. Citi and BAC, which required the most government support – and got it – are our weakest. Europe can use this time to reshape their banking industry and if they are willing to deal with enough short term pain, the ultimate outcome will be a banking system that can prosper and provide true long term growth opportunities for the Euro Zone – whatever that may ultimately look like.
You know the saying...It's not paranoia if they're really after you. Europe is much, much closer to universal bank collapse than the media is letting on. You, my friends, are getting a distorted picture of mis(or dis, depending on your paranoia level)information. Enter Bear Stearns 2.0 without a JPM to swallow it with Fed help, or Lehman Brothers 4.0x5!
Access to Fed backup support “leads you to subject yourself to greater risks,” Herring says. “If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding.” All of this might conceivably make citizens revolt against an entity that uses their money to secretly fund the “Wall Street aristocracy.” It might make them vote for a Gary Johnson or a Ron Paul, someone who favors dismantling the Fed. Or not. When a story as big as this one generates a bare minimum of media coverage, you know it’s probably headed for that huge waste bin in the corner of the parking lot. The one marked Bailout Fatigue.
When it comes to European bureaucrats, the easiest way to determine if they are lying is whether or not their mouths are open. Yet there are those rare occasions in which even the most hardened of liars let one slip. The Economic Collapse, always the master of compiling impactful bulletins, has prepared a list of just such "slip" quotes that "are absolutely shocking. In Europe they openly admit that the financial system is dying, that the euro is in danger of not surviving and that the EU does not work in its present form." In other words, ignore the ceaseless headlines of promises that all shall be well. Because it won't. Here is all you need to know about the imminent end of the Eurozone, straight from the horses' mouths.
Join Rep. Brad Miller In Conference Call Briefing On FHFA Lawsuits Against 17 Biggest Banks At 2PM TodaySubmitted by Tyler Durden on 09/06/2011 11:14 -0400
Miller has repeatedly called on Edward DeMarco, Acting Director of FHFA, to do everything in his power to recover these funds. The Congressman is available for a media briefing at 2 p.m. today to discuss what happened to prompt the lawsuits; what needs to happen next to fix the problem; and what it all means for the taxpayer.
When: Tuesday, September 6, 2011
Start time: 2:00pm (EST)
Dial-in number: 1-308-344-6400
Access Code: 150881#
- The SNB set the minimum exchange rate target for EUR/CHF at 1.2000, and said that it will take further measures if risks to the economic outlook or that of deflation emerge
- According to an article in the FT, global bank regulators are preparing to ease new rules that would require banks to hold more liquid assets to withstand a funding crunch in a crisis
- Early market talk of a planned merger between Societe Generale and BNP Paribas provided support to equities
- The Italian/German and Spanish/German 10-year government bond yield spreads narrowed partly on the back of market talk that the ECB is buying the Italian and Spanish government bonds
We’ve already seen the banking community write down over $1Tn in losses and survive to screw us over another day – do we really think this little wrist-slap will end them or is this just another example of retail suckers being stampeded out of the sector that is likely to benefit most from QE3?
I think we are entering a new crucial phase in the problems in Europe as quarter end reports will drive a notional reduction. During parts of 2007 and 2008, CEO's of banks and other financial institutions, did not want to show any exposure to sub-prime, or to certain banks, or to leveraged loans, etc. The CEO's in particular were convinced that they needed to show ZERO net exposure to the asset classes most in question. As part of the "window dressing", their risk management departments were told to be short and told to reduce notional exposures. It was no longer just an economic decision it had become a "what's best for the share price" decision. The reality, is making money is best for the share price, but that notion gets thrown out the window once CEO's panic. I believe we are there, and there are some real repercussions from that. The main problem is that we will see credit curves flatten and possibly invert. As short dated paper to the current "culprits" (sovereigns and financials) matures, the lenders will not want to roll over the positions.
If history is any indication, the most likely outcome of the FHFA suits against some of the biggest banks on Wall Street could be settlements without admitting guilt.
Perhaps this is the denouement of a week of scary market rumors that seem to have been designed to stop the markets from breaking too high.