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Why Tomorrow It Could Get Even Worse
While today's market dump was certainly dramatic, it was a function of the scant liquidity in the market (as we warned would be the case first thing) and outsized moves following last week's mauling, not the result of any fundamental (or not so fundamental) news.
That could change tomorrow, and change for the worse, because as Barclays reminds us, tomorrow is when the European Court of Justice (ECJ) is scheduled to hear testimony on the ECB’s non-existent Outright Monetary Transactions program (OMT). Recall that the OMT is the imaginary (again: non-existent) byproduct of Draghi's "whatever it takes" speech: a byproduct that was supposed to exist purely in the imaginary realm (as it was merely a verbal bluff, one which was never meant to be actually activated), and never actually take practical shape (hence, why the OMT's legal term sheet still does not exist, over two years later).
Sadly for Draghi, and the entire Deus Ex theater that managed to send European peripheral bonds from record wides yields to record low, tomorrow it will attain some much dreaded shape.
And while a ruling on the legal questions forwarded by Germany’s Constitutional Court is not expected this year, the hearing and questions posed by EU judges may give some early insights into their views and to what extent they might share the view of the German court that, unless several restrictions are imposed, the OMT should be considered illegal under European law.
As Barclays notes, specifically the EU court may agree that the ECB cannot promise pari passu treatment with other creditors in the case of nominal losses (haircuts) on its public bond holdings but must insist on full repayment.
What's worse is that in addition to undercutting and mooting all of Draghi's July 2013 bluster, next to the OMT itself, the ruling could also have an adverse impact on the effectiveness and design of broad-based ECB government bond purchases (QE) which many banks believe will be announced by Q1 15. Unless they aren't of course, should the ECJ shoot itself in the foot and demand more clarity on the OMT which can only have an adverse outcome.
Full comment from Barclays:
European Court of Justice scheduled to hear testimony on the ECB’s OMT on 14 October
The ECJ has scheduled a hearing on the ECB’s OMT for next Tuesday, 14 October (starting at 9am CET), which we expect to last all day. Under the OMT, the ECB could purchase, without limitation, bonds of a member state that has entered into an ESM aid programme and agreed to be subject to its conditions. Earlier this year (see German Constitutional Court's referral of key legal OMT aspects to European Court of Justice is good news, 7 February) the German Constitutional Court (GCC) in an unprecedented move referred a long list of questions to the ECJ (see Appendix below) for a preliminary ruling after it declared admissible a constitutional complaint by some 30,000 plaintiffs (Gauweiler and others) against the OMT. The discussion and specifically questions posed by the EU judges to the parties involved (the ECB, etc) during the hearing might give some early insight on their views. We do not expect the ECJ to come to a ruling this year but the court’s advocate general may announce the schedule for the proceedings next week. Usually, it takes the ECJ about 16 months on average to rule on cases referred by national courts which implies that the OMT ruling could come by June.
German court insists on several restrictions for the OMT
The German constitutional court put some pressure on the EU court and made clear its view last February that there are important reasons to assume that the OMT would be illegal under EU law as it exceeds the European Central Bank’s monetary policy mandate and violates the prohibition of monetary financing of the budget, unless certain restrictions are imposed. These should require “that the acceptance of a debt cut must be excluded, that government bonds of selected Member States are not purchased up to unlimited amounts, and that interferences with price formation on the market are to be avoided where possible.”
Clearly the latter would make an ECB option to proceed with full blown public QE virtually impossible.
So for all those who, rightly, point to the market's oversold condition, news out of Europe tomorrow could lead to even more selling especially where it really hurts: Europe's peripheral, and massively mispriced, bonds. A fair warning, just in case anyone is feeling particularly BTFDippy.
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Go ahead, "call in" all those CDS's...
I double dog dare you.
Do it LoP. Triple dog dare them. Do it.
LOL @Clif_High predicted this a few weeks ago - ROFLMAO - "if" he is right there should be another big dump two weeks from tomorrow, and tomorrow should be a big crap too. lulz, I can't believe I am seeing one of this financial predicts happen.
im getting up early to watch this one...
shit is going to FLY!
and i get to watch the CNBC money honeys look with their 'cow eyes'..saying..'whats happening to the market???'
So, 'Super Mario' better get ready for those barrels they'll be rolling his way in the morning...
yeah, and DONKEY KONG is going slam a 12 pak of MONSTER ENERGY DRINKS around 6am...
mario better eat his WHEATIES...
I think your forgetting its fixed..they just type a number that they want and it goes there.the rest is for show.
My guess..well be in the green by 10 am.
Well apparently Japan didn't get that memo - Nikkei is currently (11pm Central) down 249?
Update: Make that 258
Update: Err 261
...
Please, we all know th ECJ will wallpaper over this, because, European unity and all other such nonsense. Besides, if they side with BuBa and the BfG -- it's the end of the "experiment."
I find the word experiment -- interesting in this context. It implies that when it (the experiment fails) you end it. How an "experiment" can be "irreversible" ad Dragi said it was -- is beyond me.
Then again -- why a customs union needs a flag, anthem and (toothless) "parliament" also escapes reasoning.
I've been informed that the Berlaymont building had a network crash this morning so Ghordius will be a little late with his Euro-apologia; he's waiting for his compEUter to reboot and all of his notes are stored there.
LOL
nonsense?
first, the very delay the ECJ and the German Constitutional Court have managed to build up suggests they might side with the German Federal Government and the BundesBank
second.... one word: EuroGlut
fact is that we are hearing loud English-speaking voices shouting for EUR-QE for 18 months... while the ECB's balance sheet is... shrinking
-----
meanwhile, even a football club like Borussia Mönchengladbach has a hymn and a flag
and your contention that the EU Parliament is toothless is in direct contrast with your contention that the EU is... you know what? I'm tired of this... NEURotic talk. You do not understand the triangle of relations between Germany, France and Italy, period
Why should I care about relations?
I care about fiat and the purchasing power that goes with it. Read chapter 2-4 of Der Crash ist die Lösung and come back a EMZ fan.
Next -- sure lots of football clubs do. However footballs clubs do not impoverish millions while stealing millions from other people. Football clubs do not sposor Coup de Etats and over throw democratically elected governments. Football clubs do not create law that -- they enforce on other football clubs. Football clubs do not start out as a little league team that morphs into a pro football club without the consent of the players and fans.
Weak analogy is weak.
Why should I care about relations?
I care about fiat and the purchasing power that goes with it. Read chapter 2-4 of Der Crash ist die Lösung and come back a EMZ fan.
Next -- sure lots of football clubs do. However footballs clubs do not impoverish millions while stealing millions from other people. Football clubs do not sposor Coup de Etats and over throw democratically elected governments. Football clubs do not create law that -- they enforce on other football clubs. Football clubs do not start out as a little league team that morphs into a pro football club without the consent of the players and fans.
Weak analogy is weak.
Since when as any governmental, quasi governmental or bank owned by bankers given a rat's ass for the law?
A: when other oligarchs stand to lose a fortune
Oh, sorry. I'd forgotten about them, focusing upon my own financial problems and getting by, of late. Shit. I am just so self centered. I'm sure Mark Andressen or Jamie Dimon would be happier if I were to concentrate on their well being a bit more. Selfish, selfish, selfish me
No more Girl Scout Cookies for you!
Cancel your organ donor card while you still can. And don't answer the door if you see a white van parked outside.
Jim Cramer speaking: Buy, buy, buy!!!
commerciallised dog shit? oh, forget it.
All priced in. Bullish! Super Mario will just eat a star for invincibility.
Ms, pacman and a power pill might work better...
Janet Yellen IS Ms. Pacman !!
It just goes to show you, it's allways something.
CNBC says Gartman moved to cash... Weimer hyperinflation tomorrow. Long wheelbarrows.
Leveraged 10x long wheelbarrows . . . they're also good for rounding up corpses.
Remember Weimar...
Well, there is one thing with which I agree in his comments.
When markets open weak and rally through the day that usually is a good sign.
When markets open strong and fall through out the day (like today, etc., of late) that's usually a very very bad sign.
It is a great example of money moving from weak to strong hands, FWIW
On the other hand, I'm of the personal opinion that the recent price in oil IS indicative (as are all the commodities) of a weaker economy, although the magnitude of that element is hard to judge when the dollar has been very strong which also accompanies weak commodity prices.
BUT, right now.... the weak oil and commodity complexes synched with strong gold and bonds begets the underlying theme of a terrible economy ahead.
Ergo, lower stock prices.
For once, all of the markets are throwing off a consistent theme.
Lousy economies, low growth, lower commodity prices, flight to the dollar, stronger gold and bonds.
PPT was taking the day off is all. Can't miss out on those Columbus Day festivities.
No, afraid not. Keep going, you'll find out. This collapse is on track. The PTB were on duty. Ebola is a globalist tool.
Spot on.
he also said that he recomends buying gold instead of USD. So tomorrow gold is going to be sold off and the USD will gain strength.
Bring on the 'worseness', whatever, means nothing to me!
Suspected ebola case in Kansas City.If its confirmed tomorrow will be a bloodbath.
Must be. Royals game has been cancelled
Listen.
Have we lost any Zero's to the little worm? Are we keeping track somewhere on The Hedge?
Why don't we make you responsible for that tally.
Each and every morning, why don't you report to the rest of us, after counting noses, the number of Hedgies succumbed to Ebola.
Like a newbie in the Program making coffee, emptying ash trays, etc.
In a couple of weeks we might even let you be the greeter so you learn everybody's name.
Tell ya' what. Why don't you take the testicular cancer meeting. I'll take Marla to the SLAA meeting down the street.
Hey, not so fast giving away that testicular cancer meeting slot to the new guy. I go for the Meatloaf.
OK OK. You're right. I'm sorry. So self centered of me. I forgot you go to that one. Uh.... how about the LGBT NA midnight group. Those are usually pretty difficult, gnarly meetings. Yeah, be a great place for him to start.
Well, ebola already killed me, so that's one.
Listen nuk,
Marla left the Hedge years ago after the first change of ownership. Keep dreaming hopefully it will protect you from eBola because everyone in Liberia loves your comments.
"What chance does a returning deceased war veteran have for that good paying job, more sugar and that free mule you're dreaming of? Well, think it over. Then take off your shoes. Now you can see how increased spending opportunities mean harder work for everyone...and more of it, too"
Shoes for industry, shoes for the dead...
It a fuckin worm now..wtf
I see a 350 down on the DOW at a minimum....For reasons I can't articulate on this post,, I think we all know why.. JY
Tomorrow will be a bloodbath because today was a revolutionary paradigm shift. Confidence has been completely shattered--the emperor has no clothes/the wizard behind the curtain has been exposed, i.e., the old parlor trick (smoke and mirrors) is dead. Everybody who naively imagined the Fed had their collective back, now smell the coffee. Shit, meet fan.
No, tomorrow will look like a drunken sailor searching for a whorehouse....
If you were in a race and already ran 2 Laps trying to catch the guy who got a 20 lap head start, would you be pissed that you already ran 2 Laps , if they started the race over ???
Italian bankers, ya gotta love em...lol.
Listen.
Your USSA Federal Reserve has too much invested in the current market to "LET" it fall.
Now.
I sometimes enjoy chewing on scabs that I pick from my skin. They are tasty and chew well like good scabbed skin should. My question to you is: does this make me a cannibal?
No more than chewing off one's leg to escape a trap.
@Bangalore
Very Goldmember of you.
When I got caught in a speed trap I just took a valium and gnawed my leg off.
You should bag them. Then sell them. Like jerky.
disturbing
Curruied Scab Jerky Treats
"...Your USSA Federal Reserve has too much invested in the current market to "LET" it fall.
Now. "
Yeah, you're right, their clicking finger must be all worn out,
No need for clicking, the FED just needs one of these. http://www.youtube.com/watch?v=fldj5GXMy6o
Now this is more like my MBA students! Hey Bangalore, want a PhD scholarship? We could use more bright minds like you.
Listen Professor.
Oh joy! I covet American toilet paper. Please, please how can I get a roll of your PhD?
You forget or intentionally omit a crucial factor.
If the Fed can profit from the market decline, it will.
I'm not a trader, but I believe that there are ways traders can bet on, and ulitimately profit from declines in the market.
If the market were truly manipulated, and I believe it is, wouldn't the manipulators do things in such a way as to ensure maximum profits for themselves and maximum theivery from the stupid goy, I mean retail investors?
Nah that could never happen. /sarc
I thought Mediterranean Squid was out of season this time of year?
that's oysters
draghi looks like a vampire bat that eats swiss cheese. how much more american money is the fed going to send over there to support this failed fabian dream???
european bonds are worthless. if germany was smart it would make that deal with those uk viking/pirates and let the rest of europe go to putin.
europe is selling the same bond scam schoct tried under hitler. socialist losers. hypocrits.
who's sick of getting screwed by the govt and these crazy diversity/toterance socialist elites here in the u.s and abroad???
now we have gay marriage by default because the supreme court stabbed us in the back,,,, again??? !!! ???
what gives judge roberts the right to re-write law and pass obamacare???
the supreme court just nullified our voting rights by saying that corps can give all the money they want to campaigns, so now we are supposed to put up with euro style politics and campaigns??? !!! ???
and now the pinko commie pope is telling the sheeple catholic masses that they need to bend over and accept gay marriage and divorce??? !!! ??? ( im suprised commie-pope wasn't handing out freshly pressed underwear to the kids !)
the beauracrocies are being militarized and obama is trying to take our guns??? !!! ???
i've seen it all now.
sofa king a mad house
Francis is an Antipope and is speaking contrary to defined Catholic dogma. If this doesn't unblind the masses to the apostasy of the Novus Ordo, perhaps nothing will. Anyone who is interested can find a good introduction to Sedevacantism here:
http://novusordowatch.org/index.htm
Kim Jong UN, I mean Banzai7, here.
Did someone say Swiss cheese?
Seriously, you are not fucking listening. Buy the fucking dip. If you don't, you are a fucking idiot.
Listen, what we have here is a failure to communicate. Let me make my position very clear to you in no uncertain terms... Buy the fucking dip you fucking idiot. Is there anything in those seven words you do not understand?
That video was funny. Tyler should repost it.
BooYahhh... ~Broccoli Man~
http://www.youtube.com/watch?v=0akBdQa55b4
BTFD starring Broccoli Man
- it is different this time
LOL... so true but it only works until it doesn't.
I'll stick with my metals thankyou...
Been good strategy since the summer of '32.
Watch a headline 'Person with Ebola symptoms spotted where Draghi to speak later today, court postponed' ...in 3.2..1..
Mario never would have offered it without first going to the people that can tell him "no" and setting them straight. If they don't do full blown QE, the EU could have real trouble before all those justices retire - and they don't want that.
It'll be approved.
As much chance of happening as Scottish independence.
g20 meeting,
http://en.ria.ru/politics/20141011/193937840/G20-Finance-Chiefs-Consider...
Whose empire does the author think this is? If the USA wants QE out of Europe, they will get it. No court will stand in the way.
Kinda surprised ZH hasnt posted this one...
http://www.telegraph.co.uk/finance/economics/11159649/The-great-Lira-rev...
Nice article, but the empire will not allow a withdrawal from the euro without a fight. I recall a Greek prime minister was going to hold a referendum on that matter, and was removed from power in a matter of days.
"Touch my phi king gold and I'll kill ya."
Move along...
Looks like Nikkei kind of puking....
https://finance.yahoo.com/q?s=^N225
You are watching the absolute destruction of the monetary system as we know it.
Never, ever trust a central banker! When you do a deal with the Devil you become the junior partner.
If you elect me, I promise a mortgage for every home, and a loan for every car! This is Amerika, there's enough debt to make everyone rich!
The root problem of going "all-in short" is that they will wait until they know it, then they will use a no-limit margin account (133 Liberty) to take you out, EXACTLY as they have done since March/2009. Do any of you REALLY think that broken markets will go out in favour of the shorts? or the regulators? or the Gov? or gold and silver owners? WHAT is the catalyst that halts the interventions? Or is that where we are RIGHT NOW?
Hey, what happened to "Whatever it takes"?
Hopium Promisess smell like fiat.
"On Monday, October 21, six million shares swapped hands, the largest number in the history of the exchange. But then, on the morning of Thursday, October 24, 1929, it went into freefall. When the New York Stock Exchange opened there were no buyers, only sellers.
The Great Crash had begun. On the floor of the Exchange, there was pandemonium.
Watched by none other than Winston Churchill, who was in the United States on a speaking tour and had come to see how his American investments were faring, there was ‘bedlam’ with ‘the jobbers (trying to buy or sell stocks and shares) caught in the middle’.
As Selwyn Parker, author of a new book on the Crash puts it: ‘In vain attempts to be heard above the din, they were screaming orders to sell; when that did not work, they hurled their chits at the chalk girls.
'Others, transfixed by the plummeting share prices, simply stood where they were in an almost catatonic state."
http://www.dailymail.co.uk/news/article-1057303/So-learn-Crash-1929-avoi...
Call me schizo but I think we go up and stay up for a while now.
1865 is the support line for S&P 500 futures. Fed tested it again last night as they did yesterday.
Fed is just finding support line and making stawks low priced for big money to draw them from bonds today.
Yesterday bond market was closed.