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Chart Of The Day: Taper Fears Lead To Biggest Monthly Loss In Bank Securities Portfolios Since Lehman
Wondering how the blow out in interest rates is impacting commercial banks, which just happen to have substantial duration exposure in the form of various Treasury and MBS securities, not to mention loans, structured products and of course, trillions in IR swap, derivatives and futures? Wonder no more: the Fed's weekly H.8 statement, and specifically the "Net unrealized gains (losses) on available-for-sale securities" of commercial banks in the US gives a glimpse into the pounding that banks are currently experiencing. In short: a bloodbath.
After crashing from $15 billion to just $6 billion, the reported balance of net unrealized gains is barely positive for just the first time since April 2011. And to think this number had topped out at over $43 billion in December 2012. But the worst is that monthly drop in "gains" of $24 billion is the biggest by a wide margin since the Lehman collapse.
Note the crash in the long-term chart:
And zoomed in:
The skeptics will say: $6 billion? Big deal. The Fed did almost that much in its POMO last Wednesday. The issue, however, is that the AFS line, which runs through the Accumulated Other Comprehensive Income line as the last thing banks want is for MTM to crush their reported bottom line is merely a proxy for how rising rates impact on a snapshot basis the consolidated bank balance sheet of US banks, which at last check had $7.3 trillion in loans and leases (still below pre-Lehman levels) not to mention countless other undisclosed instruments that represent their "London Whale" equivalent prop positions, funded with customer deposits.
In other words, the shorthand is to look at the massacre that is going on in the AFS line and extrapolate it to all other levered commercial bank (and hedge fund) rate exposure. Expect math PhD-programmed GETCO algos that determine the marginal momentum of the S&P to figure this out some time over the next 2-3 weeks once banks begin reporting results that are not quite in line with expectations.
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you know how bankers love surprises.
BEN Shalom Taper ???
More like TAPE WORM...
Fucking junkies. By all means, let's continue to fund the immorality.
The only bloodbath I see is in my account....my put options are in a sea of red...this has gone beyond any realm of logic. Oh well, this is my retirement account money which I dont think I will see that anyways when I retire at 90.
You've been here long enough to know that the only strategy you need is to BTFD.
don't give up yet - I'm still expecting another 10% drop from here.
"In short: a bloodbath." When I see these banksters jumping from windows on wall street and around the world, and spilling their own toxic blood on the pavement below, then, and only then, can we can call it a BLOODBATH.
the bottom line impact on earnings won't be an issue - that's why they invented loan loss reserve adjustments
Whoa! And the sequester job cuts in defense start today
http://money.cnn.com/2013/07/07/news/economy/defense-furloughs/index.htm...
Why's a guy on a ship wearing blue camo BDUs ? Is this what they outfit the Navy with today ? Job cut # 1 outta be the guy who came up with that, if that's what theyre freakin' wearing.
Unwealth effect bitchez!
"net unrealized gains" I fucking love it. Some other Newspeakian terms that can be used:
deflation: "inverse monetary valuation protocol"
ponzi scheme: "expectative crowd-sourcing financialization strategy"
inflation: "institutionally mandated securitized exchange-medium growth"
taxpayer bailout: "group-sourced financial equalization package"
Notice the similarity of the terms used for "bailout" and "ponzi scheme".
+1984
++ 401K
+666
ParkAve:
Spealing of that number, the latest End Times revelation going around:
Barack Hussein Obama = 18 letters = 6+6+6
-30-
They said the same thing about: Ronald Wilson Reagan. Considering world events, this time they may be right.
net unrealized gains:
I imagined that I had a 12 inch dick, a bazillion dollars in the bank, had a super hawt girlfriend, a part time porno career and a flying boat plane. There fore I actually have all that stuff because I imagined it.
These are all net unrealized gains. Declaring the fictional as non-fiction.
I believe I can fly!
Jump and prove it...
Will this affect their collateral quality?
Winner winner, chicken dinner! In a world of infinite rehypothecation, any shock to underlying collateral is like shaking the table under the house of cards. 100 bps move in Treasuries in a month (and the wrong direction if you own them) is giving the table a pretty good shake.
Really, for the Fed to have any kind of meaningful control over interest rates, they would need QE to be about 10x it's current size. They are presently a bug on the windshield vs. the IR swaps market.
Involuntary, you are thinking about the gold price aren't you?
What collateral?
Would you take anything they offered? LOL!
Banks should be good until Friday when the tide goes out.
Long FAZ
3x inverse financial sector ETF.
Cramer's boo-hoo is my boo-yah bitchez.
good luck man. I learned the hard way not to short anything that can be bailed out and mark to unicorn.
I do think the banks may become the de facto way of playing the mining industry, as it seems they are intent on owning all of them. When the price of gold explodes and those bankrupt mining companies become the most valuable companies on the planet...of course the banks will be the way to play it.
nauseating.....
Better to short FAS and pocket the decay associated with levered ETF's.
Agreed, but somehow it doesn't work out that way. Seems like everything is engineered such that no bet against the status quo will ever be rewarded.
To make money like a sociopath one needs to think like a sociopath, and since I'm not nor do I ever plan to be a sociopath, I'll just go on being a broke dick.
SPY puts + VXX short = trade that works pretty well. VXX is the mother of all piles of shit that is heavily traded/liquid.
I bought a grip of the $35 January 2015 calls when Goldman upped their S&P EOY to 1750. Made a killing flipping those in June.
Took my principle off the table & now holding the same position with just profits. No risk, now just waiting for rewards.
Same experience. Better to go 3x long the banks and 3x short the miners. Then you're following Ben's playbook, and since he and his buddies write the rules you're almost sure to be on the right side of the trade.
+1 "Mark to Unicorn." he he. Aint that the truth.
No. Nien. Nyet. NON!. Nee.
Just don't. You think you've found a pot of gold, you haven't. Don't touch it. Don't touch any of them, they are toxic and harmful to a portfolio.
These banks are loaded with deposits right? I am pretty sure no one in the bank has seen their deposit rates go up. So the banks are now taking in the spread, so all I see is us getting bombarded with how great their net interest margin is due to rising rates.
They'll spin it one way or another that's for sure. Everything is peachy in fantasy land until something real goes wrong. And it still looks like they're going to hold it together for the time being. PMs firmly under control, I guess the only present wild card is oil. Bonds, I don't know, I still think they can crank up the monetization if need be, and not even tell anyone they're doing so.
The only thing for sure these days is no matter what is going on in the world, in the economy, with other asset classes, stocks are up. AMZN new high today!
Oil and USD denominated bonds are super duper linked to the actual problem, which is the rapid erosion and approaching end of USD hedgemony. That is the one and only thing that matters. There are interested parties in maintaining this hedgemony, and they are fighting like cornered animals, but they are very clearly losing. Those with "something to lose" aren't fans of waiting around for the shoe to drop, they didn't get to where they are by way of irrational loyalty.
It will be interesting to see how they "manage" the trillions in losses from the IR swaps as rates continue to rise. What you want to bet that MTM on govt securities, even if held as "available for sale" is "temporarily" suspended ..... and the beat goes on, LMAO.................
But those are all off balance sheet and marked-to-model so they don't count.
http://seekingalpha.com/article/301260-bank-of-america-dumps-75-trillion-in-derivatives-on-u-s-taxpayers-with-federal-approval
Lots of fun things happened in the aftermath of August 2011. Now lets all remember how much money the FDIC has available.
Bail-in's, bitches.
Nobody needs banks anyhow. Get rid of them.
I thought we would have tanks in the street without them.
Stop it. I'm getting all misty.
You're right, q99x2 ... can I call you "q"?
Objectively, what is a bank but a brick-and-mortar depository of one's extra paper money? Gold is not money, by tptb's own definitions - it's a commodity, like orange juice, or pork bellies used to make bacon, for your BLT - so why do you need to store it at a bank, why do they want to hold it?
Why do I need a bank to clear my paychecks?
Who cares? S&P +20 on open YAYYYYYY!!!
dont worry, somehow all the banks will beat expectations on top and bottom line, and they will give good forward guidance how everything is doing perfectly fine.
this green on my screen is nauseating
I often wonder what it must've been like on that day when the banksters could confirm with absolute certainty that they had finally reached the point where they could not only completely rig the market, but they didn't even have to hide it anymore.
FED in process of fixering it now. S&P +11. They've returned to transfering the wealth of nations from te people to the banks and are doubling down. It is not their fault. They are like pedophiles and aren't able to stop until they are locked up.
Corporate fascist market controls running on autopilot with the moon dialed in. Several unicorns have been released, truckloads of skittles are on the way. The Dow and S&P should achieve escape velocity this week, and never fall back to earth.
FORWARD!
Guess the Big Banks will have to raise their bounced check charges to $100.
Yea really....the ONLY question here is 'In what way will the precious banks losses be bailed out again?'
The bankers will reprise and reframe an old Sex Pistols melange:
"We have cum for your children's college savings, and your 401ks, and your IRAs. Got any PMs? - we'll have that, too."
Haircut? More like head lop.
A serious plus +100 for The Tyler's continuing the good fight against this rigged, widow making, fed driven shitstorm.
I'm pleased to announce that shitstorm has actually found its place in the German dictionary, at last. They recognized there was a gap in the language.
A serious plus +100 for The Tyler's continuing the good fight against this rigged, widow making, fed driven shitstorm.
I'm pleased to announce that shitstorm has actually found its place in the German dictionary, at last. They recognized there was a gap in the language.
Permanent backwardation of gold. World econometrics are on a flight path and speed similar to the one taken by the rookie pilot who crashed in SF.
Crash and burn, with fatalities and multiple spinal injuries is all set for touch down for the global Ponzi. Paging Ben Shalom's tapering dick in 3...2...1...
Not a good analogy sir, too many people lived through that SFO ordeal.
Maybe a Challenger or Discovery event perhaps?
Fairy dust profits and an excess reserve of unicorn shit, need two rivers to hose out the New Yuk Fed.
It's clear that the Fed doesn't understand the relationship between QE, interest rates, and bond prices. I'm not of the belief that QE necessarily causes interest rates to fall and I don't believe the reason interest rates were so low is because of QE. If you have persistent deflationary conditions where you have massive levels of debt, no private sector credit demand, and falling asset values, which asset classes become good investments? Is it equities? Real estate? Alternate currencies like gold, silver, platinum? Real/productive assets? Or cash and cash equivalents(like government bonds)? The best choice in that situation is long-dated government bonds. Flattening yield curves across the zero lower bound over decades is actually the result of an extremely tight monetary policy where the private sector is not creating money(no credit creation from no private sector credit demand) and no government created money. This is exactly what happened to Japan over the past 20 years.
Let me explain the phenomenon a little bit further in a slightly different way. There is a short run liquidity effect from printing money to buy bonds that pushes bond prices up(more buyers than sellers). However, the information is then dissipated through the market. There is a short run effect that pushes bond prices up, but a longer term effect(higher inflation expectations and future economic risks) that actually pushes bond prices down and yields up.
I think the recent rise in bond yields has to do with banks and hedge funds borrowing short, buying the 10 year(or 30 year), and collecting the spread. Now, I think you're starting to see margin calls due to the leverage. I do think Treasury Yields are headed lower, especially if China goes into a full scale debt deflation while the Yen collapses. I'm really considering buying TLT at this point. I think deflationary pressures hit in the long run and Treasuries end up surging.
TBTF-monopolized monetary policy,
serving a TBTF bubble, only
encourages the continued building and propping up
of known bubbles in the making and
bubbles already established but desired
for the gains from adversity they offer.
But TBTF has needed those who sold the
bubble to hand it over before they could
play the adversity.
Privatization comes from market
controllers saying something
ran out of money so we'll buy it.
It's an LBO of an enterprise.
One can encourage the opportunity's
arising in business, or, in government,
through corrupted government policy.
Does Mr. Bernanke see it that way?
Does he see it?
If he sees it, does he feel there's
no genuine alternative?
Does he feel he can't single-handedly
advocate an alternative?
A resolution trust type plan still could've
included the state buying the banks'
assets acquired through bad decision making,
preserved the bank equity holders' stakes
(is distinct from the depositors) but avoided
the years of Liquidity Trap.
That would have still ripped off all who sold
the bubble, but not have raided savings' income
from everyone else plus leaving most economic
consideration dominated simply by the fact that
when interest rates rise it requires less
principal for equivalent return (not much else
matter when the economy's benchmarked to 0, though
that may now finally be in the rear view mirror.)
Insofar as the TBTF group sold at the top
as well as wanted to play the adversity,
they simply couldn’t share the fluff with the
millions of Americans who also sold at the
top and whose proceeds were left with
the real negative rates benchmark, just as
were all savers but especially their retired
parents living on retirement nest eggs, the
offerings of those who conducted the above.
Talk about controlling the vulnerable.
It's really only now that so much as the
Beveridge Curve and IS/LM start to matter
beyond that simple case.
John R. Hicks on:
The Liquidity Preference
Reflected Only Makes Sense In The
Presence Of Uncertainty.
The Liquidity Trap defined that uncertainty,
except for there being one known thing,
not the fault of what's happening with the
yuan, or Medicare, or Social Security, but
simply what happens when rates can't go
below unsustainable real negative rates.
Have a nice day.