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Bank Of Japan May Buy Derivatives Next

Tyler Durden's picture


Because having legal authority to buy corporate bonds, ETFs and REITs, in addition to everything else the Fed now buys, is apparently not enough to crush, mangle and suicide its currency, the BOJ is now considering adding yet another "asset" to its cocktail of eligible securities for purchase: those which Buffett once declared weapons of mass financial destruction - derivatives.

From Bloomberg: "Bank of Japan governor nominee Haruhiko Kuroda said that the central bank will consider buying derivatives if he’s confirmed as governor and signaled a readiness for a quick expansion in monetary stimulus. “We will carefully consider such a proposal,” Kuroda, the Asian Development Bank chief, said in response to a lawmaker’s question in his second Diet confirmation hearing today." This development makes intuitive sense: central banks are desperate to destroy their currencies in the fastest and most spectacular fashion, and what better way than to have your central bank load up on the riskiest of "assets", which would be one brief downturn away from wiping away all the of the bank's capital and then some, and thus sending the currency into an even greater tailspin - just the outcome sought.

After all, in the new normal, it is he who "collateralizes" their currency with the most toxic biohazard, that wins. The Bank of Japan may have just taken a commanding lead over everyone else. The question now is: how soon until Bernanke follows suit and demands that the Fed be allowed to monetize equities, HY bonds, and other E-Trade baby specials.

There is a possibility that the new BOJ head is just bluffing:

“This is a communications strategy, rather than an actual policy at this moment,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Kuroda wants to impress the markets. Any type of asset, including derivatives such as interest rate swaps, should be on the table.”


Kuroda said in an interview last month that the BOJ could purchase the equivalent of trillions of dollars of assets to expand its balance sheet.

Although with Goldman's Carney about to join the BOE and show the rest of the world how currency destruction is really done, it is much more likely that Kuroda meant every word.

Central bank purchases of derivatives are rare, according to Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo who has done research for the Bank of Japan.


“This would be a first as a systemic policy,” Schulz said. “Central banks need to be very transparent in regard to the risks involved in buying structured products, and that limits the possibilities for what they can buy.”

Ah yes, central bank transparency: all we want to know is if the BOJ will also use Citadel as an arms-length agent through which to transact its swap purchases. Like the NY Fed that is.

Whether buying derivatives could be adopted by the BOJ is “not just an issue of persuading other BOJ board members, but also the technicalities in the market,” said JPMorgan’s Adachi. “If the market is very small and the intervention by the BOJ is significant enough to collapse the market, then perhaps even Kuroda will think it’s not a good idea.”

The good news, at least for one former JPM employee, Bruno Iksil, is that his IG and HY CDX manipulation skills may soon be in great demand. Only this time he will truly have an unlimited balance sheet to whiplash the market around as he desires.

As for the consequences, we just hope to be far away when the house of derivative cards finally comes toppling down.


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Mon, 03/11/2013 - 18:23 | 3320832 Say What Again
Say What Again's picture

Good.  That takes them one step closer to an epic crash.

Popcorn please!

I wonder what Japanes Manga would look like if they were merged with R. Crumb (ZAP Comix)

Mon, 03/11/2013 - 18:32 | 3320864 kaiserhoff
kaiserhoff's picture

Or, they could just sell puts on the Nikki Index.  Crazy as ape shit?

Yes, and the Kingdom of Denmark, actually did it, on the Nikki shortly before the market crashed in 89.  Remember portfolio insurance?  What a cluster fuck, and they are looking for this stuff.  A strong currency is their best tool.  Maybe that radiation is further along than we thought.

Mon, 03/11/2013 - 19:03 | 3320974 Global Hunter
Global Hunter's picture

makes sense to me,  they need to bail out somebody who is short these derivatives.

Mon, 03/11/2013 - 19:19 | 3321015 Zer0head
Zer0head's picture
there is a god



GE nominates Mary Schapiro to its board

Mon, 03/11/2013 - 20:36 | 3321205 Clint Liquor
Clint Liquor's picture

The Crony-Capitalist circle is complete.

Mon, 03/11/2013 - 22:45 | 3321461 eatthebanksters
eatthebanksters's picture

It's like giving Iran nukes...let's destroy the world,or at least hold it hostage!

Tue, 03/12/2013 - 01:42 | 3321612 whotookmyalias
whotookmyalias's picture

If you've ever watched a Japanese game show on TV, you would know they are a bit nutso.

Tue, 03/12/2013 - 02:31 | 3321633 TruthInSunshine
TruthInSunshine's picture

The Bank of Japan is buying my used underwear via 'Subscribe & Save' for 20,000,000 yen per month.

I think it's a win-win.

Tue, 03/12/2013 - 05:54 | 3321743 GetZeeGold
GetZeeGold's picture



GE nominates Mary Schapiro to its board


Wow.....on purpose? Didn't anyone think to call Jon Corzine first?

Mon, 03/11/2013 - 20:16 | 3321106 Spigot
Spigot's picture

Ummmm...yeah, sense...and an exercise in the processes and mechanics of monetization, sterilization, etc.

So, riddle me this: in order to sterilize the entire Dx market one would need to eat it whole, in an instant, and simply BE the singularity, owing and being owed to one's self alone...yet in the process of consuming the Dx universe what amount of "cash" does one will into existance which then runs amock in the real world? $1 QUADRILLION? $100 TRILLION, $10 TRILLION???.

And the very act of eating the entirety of Dx in more than 1 nanosecond, means that part of Dx is still vulnerable to the flash of monetized hyperinflation which induces bond prices in the secondary market to collapse to about 2% of their current value, which ignites the destruction of all un-swallowed parts of the Dx universe.

An interesting exercise, if failure did not mean the immolation of the planetary financial network.

Mon, 03/11/2013 - 22:27 | 3321431 NoDebt
NoDebt's picture

Your point being....?  ;)

Welcome to the party, friend.

Mon, 03/11/2013 - 22:35 | 3321445 Spigot
Spigot's picture

pink mist may be in our future

Tue, 03/12/2013 - 08:34 | 3321915 Spigot
Spigot's picture

Rethinking this a bit in the AM. What is there to "buy"? Essentially these contracts are risk off putting for a price. So, does this mean the BoJ becomes the counterparty of last resort, guarranty to all losses??? I think that is the only thing that makes sense in the context. Essentially BoJ will print whatever money is needed in order to cover the losses of any party whose counterparty fails to fulfill.

Pink mist indeed!

Mon, 03/11/2013 - 19:06 | 3320981 negative rates
negative rates's picture

Finally? Take a close look at any parking lot in America.

Mon, 03/11/2013 - 18:20 | 3320833 camaro68ss
camaro68ss's picture

They should have thought of this sooner! DOW 20,000 here we come!

This will get MDB licking his chops

Mon, 03/11/2013 - 18:49 | 3320932 Alexandre Stavisky
Alexandre Stavisky's picture

End of Ponzi Prosperity

Mon, 03/11/2013 - 18:20 | 3320834 Lost Wages
Lost Wages's picture

Usually when they say they're "going to do it" that means they're already doing it.

Mon, 03/11/2013 - 18:28 | 3320859 McMolotov
McMolotov's picture

And if they say they "have no intention" of doing something, it means they're getting ready to do it.

"We have no intention of using drones on Americans," etc.

Mon, 03/11/2013 - 19:03 | 3320968 spastic_colon
spastic_colon's picture

.....and only fags need "legal authority" just ask the USSA where the order of events goes like this;


central bank trades derivatives,

somehow a fed audit gets passed,

central banks ask for "legal authority" to trade derivatives,

"legal authority" is granted,

audit is performed,

central bank passes audit.


(no offense to actual fags)

Tue, 03/12/2013 - 07:16 | 3321797 neidermeyer
neidermeyer's picture

EXACTLY , just interpret it the same way as analyst buy/sell/hold ratings.

Mon, 03/11/2013 - 18:25 | 3320849 Vuke
Vuke's picture

Goodness me, derivatives?   They'd do better with gold stocks.  At least they're backed by some holes in the ground.

Tue, 03/12/2013 - 07:29 | 3321818 Acet
Acet's picture

As Grillo said, why go to all the trouble of digging the gold out of the ground just to put it in the ground again under a bank. Might as well just build the bank on top of where the gold is and skip the rest of the process.

Mon, 03/11/2013 - 18:26 | 3320854 Bill D. Cat
Bill D. Cat's picture

Schultz .

Figures .

Mon, 03/11/2013 - 18:41 | 3320904 magpie
magpie's picture

Schultz ? You mean the guy from Hogan's Heroes, or the one from that Operation Bernhard series ?

Mon, 03/11/2013 - 18:26 | 3320855 achmachat
achmachat's picture


Mon, 03/11/2013 - 18:41 | 3320856 MoneyThangs
MoneyThangs's picture

Leave it to the BOJ to buy the biggest pile of pigshit in the world.. Call BAC their ooverflowing with the stuff!

Mon, 03/11/2013 - 22:35 | 3321447 NoDebt
NoDebt's picture

Japan is more desperate than we are (currently).  Therefore, their intervetions will be more insane.  When we reach that level of desperation we will do similar things. 

Japan is the canary in the coal mine.  They're hurt, they're LONG since broke, they've got the biggest debt/GDP ratio, and they're big enough the whole world can't possibly bail them out of their mess.

Pay attention.  They may be where the real hell-on-earth financial crash begins.

Mon, 03/11/2013 - 23:44 | 3321521 jerry_theking_lawler
jerry_theking_lawler's picture

here. here.


ding, ding, ding....we have a winner.


China may push them over somehow (when the timing is right)...

Mon, 03/11/2013 - 18:27 | 3320861 swissaustrian
swissaustrian's picture

My derivates menu for the BoJ: 

- engage in long term interest rate swaps to suppress interest rates on JGBs

- sell calls on JPY.

- 3x long nikkei vs 3x short shcomp spread

- package and securitize life insurance policies for any Japanese citizen >80 years.

- sell long term potassium iodine calls




Mon, 03/11/2013 - 18:38 | 3320888 kaiserhoff
kaiserhoff's picture

Well done.  Love the potassium iodide.

How about adding a line of Hurricane, and Sink Hole insurance for Florida?

Maybe a crocodile farm and a chimpanzee act.

Mon, 03/11/2013 - 18:55 | 3320943 EvlTheCat
EvlTheCat's picture

Hey, if you combine the crocodile farm, and chimpanzee act, replace the chimpanzees with politicians on a tightrope, wearing pink tutus, on unicycles, riding over the croc pit; I will back that investment 100%.

Mon, 03/11/2013 - 19:58 | 3321110 swissaustrian
swissaustrian's picture

Right, I forgot about cat bonds...

Mon, 03/11/2013 - 20:41 | 3321221 andrewp111
andrewp111's picture

My cats signed their NINJA loans with pawprints (in purple ink) for their empire of rental property. Are you saying they qualify to issue bonds as well?

Mon, 03/11/2013 - 19:14 | 3321002 RockyRacoon
RockyRacoon's picture

Lugol's Solution.   2 drops a day and you're covered for lots of stuff.

Mon, 03/11/2013 - 18:28 | 3320863 ekm
ekm's picture

Do you guys want more proof that the Fed has been doing QE1,2,3n with the only goal to provide money to primary dealers and major euro banks recently in order to do CDS payouts?


I have question for those in the know. Can the Fed legally buy derivatives?

Mon, 03/11/2013 - 18:36 | 3320877 american eyedol
american eyedol's picture

they can do it in around about way thru the banks if the wish

Mon, 03/11/2013 - 18:39 | 3320893 ekm
ekm's picture

As I said, they are paying for the payouts, but can they legally buy derivatives outright?

Is there any loophole for them to do it? That would mean can Obama find a loophole to order Benny to do that?


The outcome of doing it is a different story.

Mon, 03/11/2013 - 19:09 | 3320989 AlaricBalth
AlaricBalth's picture

I think Bernanke takes his orders from someone(s) higher up the food chain than Obama.

Mon, 03/11/2013 - 19:16 | 3321006 ekm
ekm's picture

Military complex. Bank lobby is just a minion compared to military complex's power.

Mon, 03/11/2013 - 20:21 | 3321166 Bingfa
Bingfa's picture

I've heard from a pretty reliable source that the big bank Derivative exposure is 3-4 times what's reported. The whole thing is totally out of control. AS far as the FED buying them legally? They're going to do whatever they have to do.

Mon, 03/11/2013 - 21:14 | 3321306 ekm
ekm's picture


Mon, 03/11/2013 - 21:36 | 3321350 Bingfa
Bingfa's picture

Every single number is so skewed...I mean totally out of control skewed.

And yet the band plays on....They're buying way more of our debt than what you think also.

                   The perfect storm is going to be Quasar......

Mon, 03/11/2013 - 22:42 | 3321457 NoDebt
NoDebt's picture

As I read their charter, there is nothing they can't buy.  Which is to say, it's silient on line-iteming what they can and can not buy or sell.  If it bears any passing selmblance to "maintaining stability in the banking system," it's fair game.

Enjoy.  (Or weep.  Whatever floats your boat.)

Even if it was specifically prohibited from doing so would you sleep any better tonight?



Mon, 03/11/2013 - 23:03 | 3321480 Bingfa
Bingfa's picture

 Like there could be an exit?

They own everything now, Literally everything...

                How do they proceed forward? serious question


Mon, 03/11/2013 - 23:35 | 3321511 ekm
ekm's picture

Thx for reading the charter for us.

Mon, 03/11/2013 - 20:48 | 3321238 Bingfa
Bingfa's picture

Or the Fed balance sheet......That's even a bigger hoot

You'd have to be a moron to believe any of these numbers......

Mon, 03/11/2013 - 21:02 | 3321277 three chord sloth
three chord sloth's picture

Who, Michelle?

Mon, 03/11/2013 - 22:26 | 3321430 StychoKiller
StychoKiller's picture

Do some research on the "Exchange Stabilization Fund..."

Mon, 03/11/2013 - 23:37 | 3321515 ekm
ekm's picture

I have, a lot time ago. It's not that big.

There is no a concentrated plunge protection team the way I see it.

What we call ppt is basically trading desks of primary dealers who buy stocks that anybody else sells and trade to each other.

Mon, 03/11/2013 - 18:41 | 3320903 francis_sawyer
Mon, 03/11/2013 - 18:37 | 3320879 HD
HD's picture

Can the Fed legally bang the close or suppress the Vix? Can the Fed legally bailout the EU banks on the US tax payers dime?

Legal doesn't matter. Who is going to enforce whatever law is on the books - the politicians who benefit from the lies and theft?

The only cop on the beat is reality, and it's not a fan of hubris.


Mon, 03/11/2013 - 18:38 | 3320889 ekm
ekm's picture

I am talking strictly legal.
Do you know how?

Mon, 03/11/2013 - 18:47 | 3320924 HD
HD's picture

I'm talking out of my ass here - but no I don't believe they can mate.  I remember a ZH story from a while ago about a back door deal with Japan - Fed supplied them with cash and Japan bought US stocks.

As I understand it - the Fed is like an underage kid buying beer. They can't buy it directly but they can pay someone else to buy it for them.


Mon, 03/11/2013 - 18:51 | 3320930 ekm
ekm's picture

This makes sense. Thx.


So it is feasible. As to the outcome, we have to think about.

Mon, 03/11/2013 - 19:19 | 3321017 rhinoblitzing
rhinoblitzing's picture

Legal like a drone stirke on US citizens on US soil drinking coffee?

Impeach Obama Now! - Bitchez...

Mon, 03/11/2013 - 19:01 | 3320967 Meat Hammer
Meat Hammer's picture

Can The Fed legally be?

Mon, 03/11/2013 - 18:38 | 3320886 CH1
CH1's picture

Can the Fed legally buy derivatives?

Who is there to tell them they can't?

Mon, 03/11/2013 - 18:41 | 3320901 ekm
ekm's picture

They have a charter. Derivatives were made legal with the commodity modernisation act pushed by bob rubin and clinton.


I do not think derivatives are in the charter.

Mon, 03/11/2013 - 21:03 | 3321281 three chord sloth
three chord sloth's picture

Has the charter been amended? If it was, would we even know?

Mon, 03/11/2013 - 22:47 | 3321466 NoDebt
NoDebt's picture

As I said, above, it's SILENT on that.  Which means they can do whatever they want "to preserve the stability of the banking system".  Interpret how you want, but it sounds like a "yes" to me, if things get desperate and they decide to get "creative".  In short:  desperate times call for desperate measures.

If the shit was hitting the fan do you want to be the guy placing a bet that they CAN'T do it??


Mon, 03/11/2013 - 20:37 | 3321206 andrewp111
andrewp111's picture

The only check against the Fed is impeachment.

Mon, 03/11/2013 - 18:39 | 3320894 falak pema
falak pema's picture

you answer is in your statement; operation twist is a type of interest swap that helps the PDs and HFs. Zirp allows huge carry trades and all sorts of derivative leveraged plays. Uptil now Fed has let the professionals make the clever plays as that is where the big margins are required; keeping in mind QE/ZIRP is feeding the shadow banking balance sheet. So why play derivatives when you are reserve? Just make it easy for your shareholders!

BOJ is NOT reserve; it has to take MORE risk and remember that Jap banks are already totally upto their ears in Jap bonds, its vvery incestuous the Jap financial market; all of it, the debt, is held locally in closed loop; whence the need for BOJ to venture out and challenge FED/China in currency plays. 

Mon, 03/11/2013 - 18:43 | 3320909 ekm
ekm's picture

I'm talking about outright purchase. So far they've been simply providing money to do CDS payouts.


I am not talking about ignoring the law. My question is: Are there any loopholes in their charter? The fed existed before derivatives became legal with the commodities modernisation act

Mon, 03/11/2013 - 18:52 | 3320938 falak pema
falak pema's picture

ask the man; TD.

Mon, 03/11/2013 - 18:56 | 3320948 ekm
ekm's picture


Can the Fed by derivatives outright legally?

Mon, 03/11/2013 - 19:00 | 3320955 orez65
orez65's picture


Can the Mafia steal?

Does a bear shit in the woods?

Mon, 03/11/2013 - 19:02 | 3320969 ekm
ekm's picture

Correct, but nobody can sue the mafia.


The Fed can be sued as far as I know, the same way groups of intellectuals sued bundesbank and the german gov for bailouts of greece and ireland.

Mon, 03/11/2013 - 19:12 | 3320998 negative rates
negative rates's picture

Yes they can, and yes they have. But all have been unsuccessful to this date for one reason or another. Give it time and it should either collapse on it's own, or be swept away by a rising tide.

Mon, 03/11/2013 - 19:18 | 3321014 ekm
ekm's picture

Thx a lot.

Did they simply discard the law or is there a loophole?

Mon, 03/11/2013 - 21:47 | 3321369 WmMcK
WmMcK's picture

Is the Pope Catholic or just retired?

Mon, 03/11/2013 - 19:11 | 3320993 ZeroPower
ZeroPower's picture

You do realize derivatives can be as plain vanilla as calendar spreads on gold or an equity index right? 

Mon, 03/11/2013 - 19:17 | 3321011 ekm
ekm's picture

No I don't.

Please explain

Mon, 03/11/2013 - 18:31 | 3320867 Tsar Pointless
Tsar Pointless's picture

Why not?

Mon, 03/11/2013 - 18:32 | 3320871 falak pema
falak pema's picture

when a CB buys derivatives that means that there are NO checks n balances in the system; Mike Milken would be a baby in this junk bond, interest swapped, CDS pumped world....

Mon, 03/11/2013 - 18:36 | 3320872 JustObserving
JustObserving's picture

It has been rumored for years that the US PPT (Plunge Protection Team) buys stock index futures to prop up markets.  That is the easiest way to goose US markets.

Former Federal Reserve Board member Robert Heller, in the Wall Street Journal, opined that "Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole."

In August 2005, Sprott Asset Management released a report that argued that there is little doubt that the PPT intervened to protect the stock market.[10] However, these articles usually refer to the Working Group using moral suasion to attempt to convince banks to buy stock index futures.[11]

Mon, 03/11/2013 - 19:27 | 3321026 Haager
Haager's picture

That's the PPPT - pre-plunge protection team.

Mon, 03/11/2013 - 18:36 | 3320878 max2205
max2205's picture

This will be worth watching when it blows skyhigh

Mon, 03/11/2013 - 18:38 | 3320887 BigInJapan
BigInJapan's picture

Jesus, if they want inflation that badly, why not hand out 10 million Yen to every man, woman and child in the country?

Mon, 03/11/2013 - 18:57 | 3320947 cougar_w
cougar_w's picture

Dude. 10 million yen is like $50 or something. Or is that pesos?

Mon, 03/11/2013 - 21:45 | 3321365 WmMcK
WmMcK's picture

Maybe the New Lira -- I do pray for Grillo, though.

Mon, 03/11/2013 - 20:02 | 3321125 Spigot
Spigot's picture

It would be more honest. However it would also put the money in the hands of the prols, NOT into the hands of TPTB. Remember that the entire ediface of the financial (scam) system is to benefit TPTB, in sum and total.

Mon, 03/11/2013 - 18:40 | 3320896 Yen Cross
Yen Cross's picture

 Monetary expansion? The BoJ was the second biggest swaps borrower behind Europe on those POMO charts on Friday! What the fuck do you think BoJ is doing with all those reserve? Buying usd!

Mon, 03/11/2013 - 19:24 | 3321022 Haager
Haager's picture

Not only usd but also xau, xag, chf, eur, rmb, aud, cad, gbp, sek, nok, zty, hun, isk, zmk - and almost everything from Amazon.

Hey, I've heard that on japanese creditcards they already have negative rent. That's the future!

Mon, 03/11/2013 - 18:41 | 3320900 Karl von Bahnhof
Karl von Bahnhof's picture

They must. This is what fukushima was about.

Mon, 03/11/2013 - 18:42 | 3320906 The Fonz...befo...
The Fonz...before shark jump's picture

I can't wait until it bows sky high...didn't know derivatives were assets lol ok...whatever according to you logic the drawer full of save 10cents off of shaken n bake coupons is actually booked as a drawer full of shake n bake...

This has to be the final act in the scam....we're else can they turn? In a corner with fresh paint all around you what's your next move....

Effin bankers...

I cannot wait until every banker gets their pretty little throats cut...

Mon, 03/11/2013 - 18:50 | 3320908 Kirk2NCC1701
Kirk2NCC1701's picture

The Fed should see them and raise them.  Up the fiat ante, Ben!  Stoke 'er and smoke 'er real good, till the fiat boiler goes kaboom! 

Our future's so bright, we gotta wear shades!  Now where's that Gamma sunscreen?  Never mind... Chekhov, raise the shields!  Clearly we are not in the Virgo cluster.  Sulu, ready us to leave orbit!  /sarc

Mon, 03/11/2013 - 18:44 | 3320911 Rompoculos
Rompoculos's picture

The bullshit question is whether anything tangible bought with counterfiat can constitute a legal transfer of ownership. If a public company is bought with fiat and owned by the state, is that not expropriation? And if a private company is bought with counterfeit and owned by a private bank, is that not fraud and theft?

Mon, 03/11/2013 - 18:47 | 3320923 WallowaMountainMan
WallowaMountainMan's picture

i bet that the jp will only buy good derivatives....

Mon, 03/11/2013 - 19:39 | 3321052 yogibear
yogibear's picture

According to the central banks there are no bad derivatives. They will make any bad ones good, like magic.

They will turn a turd into a skittle pooping unicorn.


Mon, 03/11/2013 - 21:43 | 3321357 WmMcK
WmMcK's picture

But the 3rd derivative is a jerk.

Mon, 03/11/2013 - 19:21 | 3320933 Yen Cross
Yen Cross's picture

   Does anyone think China and South Korea are just going to sit around and watch this? US T-10s are back over 2% so inflation plus the strong dollar are going to create headwinds for the so called us recovery.

Mon, 03/11/2013 - 18:55 | 3320946 cougar_w
cougar_w's picture

I see a light at the end of the tunnel!

Oh wait it's getting closer ...

Mon, 03/11/2013 - 18:57 | 3320953 Yellowhoard
Yellowhoard's picture


That's all I'm gonna say.



Mon, 03/11/2013 - 18:59 | 3320958 km4
km4's picture

> he who "collateralizes" their currency with the most toxic biohazard, that wins. 

The global financial system is a giant ponzi clusterfuck that has spun outta control

Mon, 03/11/2013 - 19:14 | 3321001 negative rates
negative rates's picture

When do they officially unwind though?

Mon, 03/11/2013 - 18:59 | 3320959 Unprepared
Unprepared's picture

Fukushima 2.0

Mon, 03/11/2013 - 19:05 | 3320979 Michelle
Michelle's picture

Since Central Banks are in the business of buying bad assets that no one else will buy this must mean that derivatives of all flavors are about to blow up. A quadrillion worth of derivatives, yeah sure. Who's in line for the great moral hazard and which companies are gonna be targeted for bk? Can this get any sicker?

Mon, 03/11/2013 - 19:17 | 3321010 negative rates
negative rates's picture

Sure, those derivatives are closely tied to health care gambling. You know, the cadilliac plan, if you can't afford a cadillac, your taxes just bought some derivatives.

Mon, 03/11/2013 - 20:03 | 3321133 Spigot
Spigot's picture

Exactly so, my friend, exactly so...

Mon, 03/11/2013 - 20:33 | 3321195 andrewp111
andrewp111's picture

Derivatives are a quadrillion in USD. In Yen that is 1018.

Mon, 03/11/2013 - 21:42 | 3321356 WmMcK
WmMcK's picture

Is that a quintillion or a cotillion?

Mon, 03/11/2013 - 19:08 | 3320987 Clowns on Acid
Clowns on Acid's picture

Ahmmm....wouldn't the BOJ buying derivatives be a "Arbitrary and capricious" decision?

Mon, 03/11/2013 - 19:14 | 3321000 ziggy59
ziggy59's picture

Seems this thread has struck a nerve! If you read the multiple postsby ZH and theyre junked, and most are valid, and junked, well... Someone or some peeps cant handle the truth..


Mon, 03/11/2013 - 19:19 | 3321012 Yen Cross
Yen Cross's picture

   It's amazing how fast people forget the BS slack jaw misinformation C/Banksters spew. I can't wait to see the squeeze that is coming in usd/jpy.(remember the 1/2 life on Draghis' speeches?) The pair hasn't even put in a 23.6% retrace since the Feb.25 drop. (90.80- 96.60) 6 big figures. The $ is being treated like a risk on currency right now, and it's extremely overbought. Something is going to snap.

    POMO is not keeping rates in check, right now. The more fuel Chair Satan pours on the fire, the stronger the $ gets. His little house of cards is facing some headwinds.

Mon, 03/11/2013 - 19:24 | 3321023 Theos
Theos's picture

what kinda derivatives?

Mon, 03/11/2013 - 20:06 | 3321135 Spigot
Spigot's picture

Jim, the question is: "Which counterparty who needs a bailout can sell what to the BOJ?" for ten points.

Mon, 03/11/2013 - 19:33 | 3321035 billwilson
billwilson's picture

Note however that in Canada ... Carney did NOT print. One of the few exceptions out there.

Mon, 03/11/2013 - 22:43 | 3321459 Clowns on Acid
Clowns on Acid's picture

bill - lets not be naive here....BOC does swaps with US Fed and ensures low vol in Canuck markets. BOC does not "print" openly like the Fed because the jig would be up. The Fe3d has been providing "liquidity" for all western CBs via their printing mechanism.

If markets knew that ALL CBs were printing...price of gold = 2000/oz in a week. Fed (maybe BOJ) will be the only one that admits it. Otherwise Int'l chaos before the Fed (and its owners) are ready to deal w/ chaos.

Mon, 03/11/2013 - 19:37 | 3321049 rsnoble
rsnoble's picture

"As for the consequences, we just hope to be far away when the house of derivative cards finally comes toppling down."

And which space colony might you be referring too?

Mon, 03/11/2013 - 19:43 | 3321065 yogibear
yogibear's picture

No worry.

Bubble Bernanke and the Fed will buy everything. Print and throw money at stocks, buy toxic mortgages, toxic debt as well as derivatives.


Mon, 03/11/2013 - 19:39 | 3321058 eddiebe
eddiebe's picture

This whole banksta thing is really getting beyond ridiculous. And you who are wondering if this is legal:

Do you honestly think that matters one bit and to whom? And if it does, what can they do about it?

Mon, 03/11/2013 - 19:44 | 3321067 Zgangsta
Zgangsta's picture

It's all good.  Hyperinflation is unthinkable.  If inflation rises by more than 2%, the central bank will just do what is necessary to reduce it again.

Mon, 03/11/2013 - 19:45 | 3321073 medium giraffe
medium giraffe's picture

I thought it was a bit strange the other day when I had a parking ticket from the Bank of Japan.

Mon, 03/11/2013 - 19:56 | 3321102 chump666
chump666's picture

Go Japan, you are nearly there, your past is your future.  All with the blessing of Keynesian voodoo.

"The current situation has been caused by the Japanese side single-handedly," Yang said, noting that "the root cause of the Diaoyu islands issue lies in Japan's illegal seizure and occupation of China's territory."

Mon, 03/11/2013 - 20:02 | 3321123 Orly
Orly's picture

Major Bull Trap formation on EJ Daily.  Looks like the real deal.

This derivative thing seems like it went over like a lead zeppelin.  I'm going to look to sell with a failure of the push above the Fibo @~126.5.

How do you think, Chump?


Mon, 03/11/2013 - 20:08 | 3321137 Spigot
Spigot's picture

straddles (bet on both extreme up as well as down side) , as it could go ballistic against you as well...hyperinflation tends to lift all paper boats.

Mon, 03/11/2013 - 20:47 | 3321224 chump666
chump666's picture


So far bear traps on the AUD, EUR (constant on the 1.30 handle support = ECB intervention).  USD and forwards are all bid, not from recovery trades, more so from rates going up and Asia/S.A buying.  The FX market is showing more volatility and less suppression of volatility, hence the good movements.  Note GBP/AUD trades.

Short YEN on futures, you got a 1.24 on the 5day MA which is a HFT support, so there is a sell there on overbought signals (126 and 127 handles).  The FX/bond and parts of the ETF (emerging economies) are actually showing reality.  The suppression of volatility on equity markets is all central banks  - who are now out of control.  They have crushed stock volatility on stock markets with Japan leading the charge ala insane in the membrane, if they now are attempting to suppress derivative volatility, more so CDS volatility (print and buy 80's and 90's commie/cartel style ends-in-tears trade). 

It appears Japan, from a financial perspective, is readying for war.

Mon, 03/11/2013 - 20:54 | 3321253 Orly
Orly's picture

"It appears Japan, from a financial perspective, is readying for war."

And by that, I suppose you mean a shooting war with the Chinese.  Frankly, I am not seeing the value in it for either side, except to say that they can dredge up their Ancient Bogeyman and make him The Sick Man of Asia again.

If there were bullets flying, that would certainly lead to a very heavy risk-off move, which would favour selling yen crosses and buying dollars big-time.

Central banks out of control...did you see that blatant vol suppression at the close of the US session, the robots going nuts into the close?  I mean, seriously?  And somehow that's okay with everybody?

I think they're losing control here and, perhaps in order to have a bogeyman of their own to blame for equities falling off a cliff, we're going to get a major event, like, say...The South Asian Sea War.

Always interesting.  Thanks, Chump.


Mon, 03/11/2013 - 21:14 | 3321310 chump666
chump666's picture

I think it's likely, check this:

Russia is now tapping the Nat gas in that region, Japan, if they could tomorrow would begin gas exploration around the Senkaku islands, as would China.  This is the dispute.  Also a war is a great distraction to inflation and other self induced economic blunders.  Both China and Japan are fretting.  Japan going all in and China worried about market collapse i.e housing.  All the elements are there, just a matter of when.  Could be close.

Failed empires always create bogeymen for their errors of judgment.

As for the HFTs.  I think ZH has reported it, current rally is like a handful of HFT companies and Wall Street.  Great combo ;)

Mon, 03/11/2013 - 21:21 | 3321317 Orly
Orly's picture

I got a bad link there.

I figured with the desperation on the faces of the central bank heads these past couple of weeks that something major is in the cards.

It would be a great time to revalue both the Euro and the Pound as USD strength soars.  DXY has been soaring anyway, so why not let 'er rip.

With the movement in the DollarCHieF going firmly against the grain these past couple of weeks, it could be that someone knows something somewhere.  Interesting in that it all fits together...

So you think the major event is going to be in South Asia?  Any timeline?  Look into your crystal ball.


Mon, 03/11/2013 - 21:48 | 3321371 chump666
chump666's picture

try this:

Crystal ball?  No, just my guts doing flips lately, had to suppress it with Tequila last Friday night.  What is scary, commodity markets tanked on USD strength, which means, any major stock crash will send indust commodities further down.  Polly don't like that cracker.

Mon, 03/11/2013 - 21:52 | 3321383 Orly
Tue, 03/12/2013 - 00:38 | 3321565 maskone909
maskone909's picture

What are the implications for jgb's thx fellas

Mon, 03/11/2013 - 20:35 | 3321203 Totentänzerlied
Totentänzerlied's picture

I'm pretty sure I stated the Fed would end up buying anything and everything, eventually, back in the QE3 On/Off days. I didn't have the BoJ in mind as an archetype, but they are ahead of us, chronologically, in the whole ponzi game.

Mon, 03/11/2013 - 20:39 | 3321215 Catullus
Catullus's picture

Even better: sell puts on everything. Oh wait....

Mon, 03/11/2013 - 21:11 | 3321300 Frastric
Frastric's picture

As usual the BOJ are twenty steps ahead of the Fed with equal measures of failure...

Mon, 03/11/2013 - 21:20 | 3321314 YHC-FTSE
YHC-FTSE's picture

This might be the moment of Japan' ritual suicide. They are either going full retard to add to the infinite mountain of dx out there or become the dumping ground for the tbtf banks' off book crap in the trillions of dollars. Either way, they are dead. We'll know in a year if/when JPM, AIG, BOA, GS & the rest announce themselves to be suddenly solvent and free from toxic assets.

Derivatives are the ultimate multiplier. Its supply is infinite, and you can even have a derivative of a derivative of get the picture,  although it's hard to imagine what multiples of infinite might look like. All related vaguely to something in the real world whose outcome determines whether the whole thing is worth anything or nothing. It's pure greed and pure gambling in a nutshell, created to circumvent the fact that the world has finite resources.

What's the game here? "You take our toxic waste, we'll support you in a war with China"? In that case, somebody remind Abe that the last leader who asked his close allies in Washington permission to invade his neighbour and got a go-ahead was a chap called Saddam Hussein shortly before he invaded Kuwait.

Whatever the truth of the situation,  I think Japan is being set up to die. Its economic cancer is terminal anyway.

Mon, 03/11/2013 - 21:49 | 3321377 Orly
Orly's picture

You're probably right. Japan is now the global "bad bank."


Tue, 03/12/2013 - 00:10 | 3321542 Yperkeimenos
Yperkeimenos's picture

And i thought that the ECB was.

Wed, 03/13/2013 - 12:31 | 3326237 resurger
resurger's picture

This Article is for Kyle Bass

Mon, 03/11/2013 - 21:34 | 3321342 Go Tribe
Go Tribe's picture

I think I'll buy some silver tonight

Tue, 03/12/2013 - 02:56 | 3321640 vulcanraven
vulcanraven's picture

"Bank of Japan MUST buy derivatives next"

Tue, 03/12/2013 - 03:39 | 3321665 shinobi-7
shinobi-7's picture

I would advise the BOJ to sell Yen put options to itself at 100. Comes the end of March they should be able to book their first profit. They can do it again in April at 110, more profits... Some relaxing in May for Golden Week; it should easily become the most profitable central bank by the end of the year.

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