What Will It Take For The Fed To Panic And Bail Out The Market Once Again: BofA Explains

Tyler Durden's picture

One of the main reasons a month ago we started carefully following the commodity trading giants, the Glencores, Mercurias and Trafiguras of the world...

... is because nobody else was.

Perhaps due to their commodity-trading operations, these companies were expected to be immune from the mark-to-market vagaries of the commodity collapse on their balance sheet, and as such presented far less interest to market participants than pure-play miners whose stocks have gotten crushed since the commodity collapse and subsequent relapse.

And then, yesterday, Glencore "happened" and everyone was so shocked by the company's abysmal results, which as we explained may servce as "The Next Leg Of The Commodity Carnage: Attention Shifts To Traders - Glencore Crashes, Noble Default Risk Soars." This took place a day after we penned "Noble Group’s Kurtosis Awakening Moment For The Commodity Markets" in which we profiled the ongoing slow-motion trainwreck of Asia's largest commodity trader.

Of course, Glencore's problems should not have been reason for surprise: after all it was a bet on a surge in Glencore's default risk that prompted us to write "Is This The Cheapest (And Most Levered) Way To Play The Chinese Credit-Commodity Crunch?" in March of 2014 as a levered and relatively safe way to trade crashing copper prices (since then, Glencore CDS have doubled).

And so others started to notice.

So with Wall Street's attention suddenly focused, with the usual delay, almost exclusively on the commodity hybrids, it was none other than Bank of America which earlier today reserved a very special place for a possible collapse of these companies. In fact, the "credit event" (read "failure") of a company like Glencore is precisely what BofA's Michael Hartnett said "may be necessary to cause policy-makers to panic."

Bank of America starts with a chart that ZH readers are all too familiar with: a comparison of the CDS of Noble and Glencore which as duly noted many times already, have recently spiked:

And here is why Bank of America decided to suddenly focus on a small subset of the commodity sector, one which we have been fascinated with for over a month: to BofA the collapse of either of these two companies is the necessary and/or sufficient condition for the Fed to exit its recent trance, and reenter and bailout the market.

That's right: Bank of America is begging for another Fed-assisted market bailout, which gladly hints would be accelerated should Glencore experience a premature "credit event." To wit:

Short-term, markets seem intent on forcing either the Fed to pass in September, or the Chinese to launch a more comprehensive and credible policy package to boost growth expectations. Alternatively, a credit event in commodities (note CDS is widening sharply for resources companies – front page chart) may be necessary to cause policy-makers to panic. Markets stop panicking when central banks start panicking. We think that is increasingly likely in September, thus arguing that risk-takers should soon look to add risk, particularly on any further weakness.

We thank Bank of America for making it quite clear what the catalyst for QE4 will be (and why we should double down on the Glencore long CDS trade), but we are confused: how is the Fed expected to "panic" in September when that is when BofA's crack economists predict the Fed will hike rates. If anything, a rate hike is supposed to calm the market and give confidence that the Fed is on top of the situation, even if as has been clearly the case, the US economy, not to mention the global one, are both going into reverse.

And while that is a major loose end to any trading thesis BofA may want to present, it does hedge by saying that all bets on a market bailout are off if the Fed and other central banks have now "lost their potency", i.e., if the market's faith in money printing has ended.

Finally, we believe the inexorable rise in volatility as QE programs wane leads to the ultimate risk. In our view, all investment strategies have been tied in recent years to the power of central banks. There are few bond vigilantes willing to punish profligate governments, fewer currency speculators willing to defy central bank intervention, and investors have become adept at front-running policy-makers and/or expecting central banks will “blink” at signs of market volatility. We believe a loss of central bank potency is an unambiguous risk-off.

Indeed, we too believe that if not even central banks can boost this market, then the time to get the hell out of Dodge is at hand. And while exiting, make sure to have a lot of gold, silver and lead. Because if the days of Keynesian voodoo and fiat are almost over, then absolutely nobody has any idea what lies ahead.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
greenskeeper carl's picture

the question isnt rather or not the fed/govt will be forced into another bailout,(thats inevitable) the question is rather or not it will lead to irrivocable damage to the dollar worldwide. We are in a pretty unique situation right now, we create currency out of thin air, and the rest of the world gives us precious commodities for it. It won't last forever

realmoney2015's picture

Bailout? you mean bail-in....The bankers will try anything to get the money that they believe is theirs. We need to end the fed. Until then, we are slaves to their system. Support the only candidate who wants to end the fed and their schemes!

I am selling candles with silver coin prizes: https://www.etsy.com/shop/ScentSavers?ref=hdr_shop_menu

Every candle sold now through September 7th will go to support the Rand Paul moneybomb on September 7th! Rand is the only one with the anti-fed record. He is the only one who has plans to end the evil banking sytsem!

realmoney2015's picture

"I don't oppose the Federal Reserve because it is secretive, though it is," said Rand Paul at an April 25, 2009, "End the Fed" rally. "I don't oppose the Federal Reserve because it lacks congressional oversight, although it does. I don't oppose the Federal Reserve because it's a private cartel, though it is. I oppose the Federal Reserve primarily because it wreaks havoc on the economy. We need to understand that this is the most important question of the last 30, 40 years. What caused the panic of 2008? Was it capitalism or was it the Federal Reserve?"

kliguy38's picture

nonsense!!  They're doin' gods work

old naughty's picture

you neglected to say which god(s)?

e_goldstein's picture


(ah sweet, looks like the evil lord is running for Pres!)


FreedomGuy's picture

I love the Paul's. I know how popular conspiracies are, especially here on ZH. However, you do not need big invisible conspiracies to understand precisely what Rand and Ron mean. The government IS the root of all evil. Even if you really really like the Jewish, Bildeberger, CIA, Mossad, banker, Sachs, 9-11 Inside Job, Illumanti, John Bircher, neofascist conspiracies the solution to virtually all of them is the same; disempower government/s.

It's not the stuff you cannot see you have to worry about. The stuff right in front of our faces is more than enough.

Credit default swaps, anyone?

Tall Tom's picture

Rand Paul sold out his father...for the implementer of Socialized Medicine in Mass., Mitt Romney, a SOCIALIST.


I do not trust anybody who is disloyal to their own father. I do not support anybody who supports Socialists or Socialism.


Rand Paul did. There are no apologies which are acceptable. He lacks a spine and character.

realmoney2015's picture

Look at his voting record. His meaningless endorsement means next to nothing. Libertarians are supposed to have brains to understand the issues. They aren't supposed to support someone just because someone made an endorsement.

If you really like Ron Paul and need endorsements to tell you who to support, (again, why would you?) you should still support Rand.  Ron Paul endorsed Rand just a few days ago.

CrazyCooter's picture

Just keep in mind that if you are selling to people who are paying attention, you will be thought a fool.

Besides, I only listen to avatars with real names, like RealMoney2014, or maybe RealMoney2013.You know, something classic.

Dance with the one that brought ya!




Tall Tom's picture

Ron Paul endorsed Rand just a few days ago.


That is expected. As a father he is forgving of his own son's faults.


It is just too bad that Rand lacks the character in that he did not support his own father.


YES IT MATTERS. That action spoke louder than any bullshit rhetoric coming out of Rand Paul's mouth.


Rand Paul is just Washington DC establishment controlled opposition.


You might as well choose Deez Nuts as he is connected to the Obama Administration as controlled "opposition".


A vote for Rand is a vote for MOAR OF THE SAME EVIL.


Stop choosing evil. A choice between the lesser of two evils is still a choice for evil.


WE will NOT FORGIVE. We will NEVER FORGET what Romney did at the National Convention.


You and your kind have already lost everything. And I will do as Mitt Romney asked me to do in 2012. I will stay home.


You do not need us anyway, right?


(How many percentage points did Romney lose by? How many of us stayed home and refused to vote? Would it have made a difference? YOU FUCKED UP LARGE, PAL.)

123dobryden's picture

whle you two argue, enemy is at Smolensk, Stalin would make sure you two no longer do that:)

gdiamond22's picture

Yes, Sir.

Rand tried to take advantage of his father's steadfast message of liberty and combined it with trying to play nice with the establishment - which Ron refused. Rand played politics as opposed to being a true statesman. He thought he could combine the two and win - then came TRUMP.

realmoney2015's picture

Yup. You said it! Trump is here to drown out the only voice of liberty (as watered down as you think it is). Hooray for Trump! Im so grateful that he is here to make sure the liberty message wont get out!

Socratic Dog's picture

His whatever-it's-called on the patriot act renewal carried a lot of water for me.  Basically stood up there alone against tyranny.    When Trump starts talking about fascism in the USSA he will have some credibilty.  When he starts raising questions about 9/11.  When he points out that the drive to war with Iran because of its alleged nuke program is identical to that 15 years ago over Iraq and its alleged WMD.  Until then, he's just another loudmouth.  8 years ago it was a smooth-talking nigger.  Now it's a smooth-talking real estate developer.  When th e fuck will the US wake up?

Tall Tom's picture

The people will awaken WHEN THEY BECOME HUNGRY.


Then ALL HELL will break loose across America as it tears itself apart.


Your Donald will not be able to save the day. Nobody will.


There have just been too many LIES uttered out of Washington DC. Nobody will trust any fucking politician as they have all proven themselves UNTRUSTWOTHY with their stewardship over America. 


The USA will fragment and balkanize.


Let's get rid of the corruption and bring on the collapse.


The pain and suffering will be horrific as America awakens.


As we have caused pain and suffering GLOBALLY there are NONE who are more deserving.

Dental Floss Tycoon's picture

When things get really bad a savior will rise up to save us from ourselves.  He will be given all power and take us to a place we have never been.  


I am glad that I am old and will probably not live to see it. 

chubbar's picture

We are definitely getting close to the breaking point all around the world. Greece is back in the news with snap elections and that hardly is a blip on the screen these days. Who knows how much time is left to prepare for this debacle. I've plugged these guys before but if you don't have a firearm and are looking for one, check these out. The least expensive for what you are getting. Here's a new write up from "on target" magazine that outlines what is standard on these excellent rifles. PS Made next town over and I know people who work for them (disclaimer).



Also, take stock of your food supplies as they exist today and make sure you top off things you have used or don't have. You need 3 months minimum along with water if you are on other than a well with back up electric source (or hand pump). 


greenskeeper carl's picture

tall tom, I agree 100%. he has gone back on everything intresting he has ever said. as soon as he gets a little heat about something, he backtracks. Case in point, his position on ending ALL foreign aid got a bunch of heat from republicans about "surely that doesn't mean Israel, too?" what does rand do, 'of course I support israel, I don't mean we should stop giving them taxpayers dollars, just countries that burn our flag'. He DOES support taxing US citizens to give the money to other countries. Thats not the only thing, either. At this point, he is nothing a but another garden variety republican. In trying to pander to the republican base, he lost too many of his fathers supporters to be meaningful, he is done

realmoney2015's picture

Dude, you are flat out lieing!!!

He said in the debate that we should end all foreign aid until we are out of debt (so that is pretty much forever!)


If you want the Fed ended, Rand is the only one you can vote for. Other than that, you support the Fed...or you arent voting, which is another discussion.

FreedomGuy's picture

You keep waiting for the perfect candidate. You will watch leftists rule forever.

I will pick Rand or a few others over the alternatives. You all seem to forget when he has taken stands alone with personal filibusters and has held on to positions contrary to many in his own party.

I love Ron Paul but he accomplished zero for all his time. The only thing he did, which was good, was assert a principled position or counter position for others to consider.

Cabreado's picture

"he accomplished zero for all his time. The only thing he did, which was good, was assert a principled position or counter position for others to consider."

Well, then, you don't understand what the real issue is, do you...

Congratulations -- that is the ignorance that guarantees the trajectory.

Bay of Pigs's picture

These guys are dumber than a box of rocks.

FreedomGuy's picture

Tell you what, you post the issue you think I do not understand and we will debate it right here, genius.

You will find out how your foot tastes.


malek's picture

You failed to give a reason why Rand -who is still young enough to be able to wait some- cannot assert a principled position as well.

We wouldn't be talking about Ron Paul much anymore if he had sold out for fear of running out of time.


Fukushima Fricassee's picture
Fukushima Fricassee (not verified) realmoney2015 Aug 20, 2015 9:17 PM

Paul shit on himself, toast

Crocodile's picture

Most are slaves or enslaved to something much more heinous than the FED; Satan.


Rand Paul is not his father and is more like Mitch McConnell; Ben Carson is the only truly honest, humble and caring candidate running imo.

Not if_ But When's picture

Yep, Rand Paul imploded.  Leaving Bernie Sanders as the most anti-Fed one left standing.  He was the driving force behind the Fed audit and has grilled the shit out of Fed Chairmen during hearings and testimony (both as a Representative and Senator).

Most posters here don't like Sanders (I do).  But he is the only one standing with us on the Fed issue.

realmoney2015's picture

Rand is still anti-fed. There is still half a year until the of America votes, and about 4 months until the first votes are cast. He is not toast. The only way he is toast is if the people who realize that the Federal Reserve is the biggest problem of the past century roll over and accept some other candidate because he shouts funny things or because the press is pumping them. Look, I think that there is a possibility that the SHTF before the election, but if it doesn't don't you want someone in there that will try tyo stop bail-ins, capital controls, QEs, martial law, Fema camps, etc?

There really is only one choice vote for Rand or don't vote at all. Any other vote gives you the same result: the Fed in control!

realmoney2015's picture

As far as Bernie goes. He wants to ban assualt weaponds. Thats right the two 'outsider' (trump) candidates want to take your protection for when the fed implodes the system. No thanks!

Not if_ But When's picture

C'mon.  There is a HUGE difference between guns for legit purposes (which Sanders is Ok with) and ASSAULT WEAPONS. If you believe citizens really need ASSAULT WEAPONS then we are already toast like Rand Paul.

realmoney2015's picture

The purpose for weapons and arms (assault is a term coined by gun grabbers to make it seem like the weapon itself has a agenda) is for protection. Any weapon can be used for multiple purposes. Shotguns are great for home defense. Handguns are good for concealing, traveling and stopping rapes and muggers. Riffles are good for holding an area. You could be holding from riots and mobs or evil governments.

History has shown that when a government takes the guns, that they soon take the lives and freedom of the citizens. Look at Hitler and Mao. Or if you want an example closer to home, how about the Indians. 

The Japanese Emperor once said that America couldn't be taken over from the outside because there would be a riffle behind every blade of grass. Theglobalists (Trump, Sanders, Clinton, obama and the rest of the goons) want to disarm the population. If you dont want your guns then don't own one. 

If we are toast, and shit is ready to hit the fan I'd rather have a defense riffle, than a can of mase and a phone to dial 9-11.

Time is running out to protect yourself and your family. I hope you realize that you can't rely on the government to do that, unless you want to go to a FEMA camp. I heard they have sweet protection and don't allow assault weapons.

realmoney2015's picture

The government gets its rights from the people, not vice versa. There should be zero talk about the people getting their god given rights of defense and protection taken, especially before the government has that right taken. The amount of guns that the alphabet soup of givt agencies have now is stupid. If you are against weapons, start with theirs. Because we have more rights than our government. If not, who does the government get its power and rights from....read Bastiat's 'The Law'

Tall Tom's picture

Flamethrowers are much more affective. Who needs a gun?


In 48 States it is perfectly legal for a convicted violent felon to own a Flamethrower.


Besides the Body Armor just melts...to the skin.

post turtle saver's picture

you're full of nonsense, and your argument bears no weight at all because it's based on two false premises:

"legit purposes" ("shall not be infringed" has a pretty big problem with that concept)

"assault weapons"

you need to read this thoroughly... you simply have no leg to stand on...


Gold Eyed Cat's picture

Can you please explain exactly what your definition of an assault weapon is.  You certainly do not hesitate to mention the term several times in all caps so you must have a pretty clear and concise idea of what the fuck it is you want to ban.  Also, who exactly is the great decider who chooses which guns have legit purposes and which are non-legit, or less legit, or only semi-legit, or seasonally adjusted legit.  

r00t61's picture

If you believe in the fake, MSM-invented PSYOP term "assault weapon" - can you define what an "assault weapon" is, by the way? - then you are already toast.

And tell me, how many goons, with shiny badges and ASSAULT WEAPONS, will be needed to ensure that the general population is disarmed in accordance with your edict?

Rusty Trombone's picture

Legit Purposes ?

Shut up you fucking cunt.

Faggots like you will be the first on their knees sucking cop dick.


Not if_ But When's picture

Real classy.  I'm thinking in terms of a detachable magazine when I say assault weapon.

I believe in civil liberties as much as anyone on ZH (anti NSA spying, etc, etc, etc).

But there are some people such as yourself (apparently) who envision the right to arm yourself in this fashion as though you expect to go out in a blaze of glory.  You know, defending yourself and your home against an army of armed government agents coming specifically to seize your property.  Or you want to blow away anyone you don't like under the guise of self protection. Your utter over-reation is precisely why the issue cannot be reasonably addressed.  Heck, you have to resort to this puerile crap.  Go ahead mr. manly cool dude & have a nice day.

Socratic Dog's picture

Ahh jesus.  Another fucking moron.  Look, the 2nd amendment didn't say anything about "legit purposes", there were no caveats whatsoever.  What is so difficult to understand about "the right of the citizens to keep and bear arms shall not be infringed"?

Incidentally, if what you mean by "assault weapons" is battle rifles, then there is EVERY fucking reason for the citizens to keep them.  The point of the 2nd amendment is it's a (or was hoped to be a) guarantee against government tyranny.  Your .22 repeater is not a lot of use there.  Battle rifles are.  That's what they do.  And the founders considered it a "legitimate purpose".

OldPhart's picture

Kindly define what an ASSUALT WEAPON is.  I'm an ignorant gun owner, and I have no idea what that is.

detached.amusement's picture

 anything beyond that which Mac mowed the forest down with, looking for that strange gelatinous looking creature.

FreedomGuy's picture

Bernie will not get rid of the Fed but he will further erode liberties and the economy.

I Eat Your Dingos's picture

As a Fed income taxpayer I am still waiting for my bail in. Where's my bail in? BAIL IN BITCHES.


ZHers how many: 100 million, 200 million, 300 million, 310 million (not including illegals), 315 million +  or more?

Who will be CYPRUS'ED?

Carpenter1's picture

THere'll be no rescuing the markets this time. Stealing our money out of our accounts? For sure, but no market rescue.

Bro of the Sorrowful Figure's picture

at this point all the fed can do is more QE. raising rates brings the financial system to its kness, if there is a large market crash, deflationary event, or credit contraction (whatever you want to call it) there is only one policy response for the fed, and that is more QE. they'll save the markets, govt, and banks by killing everything else. 

fockewulf190's picture

"Because if the days of Keynesian voodoo and fiat are almost over, then absolutely nobody has any idea what lies ahead."

The Great Reset lies ahead. 

StychoKiller's picture

I'm still calling it "The Great Implosion™!"

TheRideNeverEnds's picture

We are under the 68 week moving average in the ES which if we remain for any appreciable amount of time marks the start of the bear market.  That is the death average with the exception of the 2011 rout and subsequent stick save by the FED.


First they came for the miners and you did nothing cause you weren't in the miners,

Then they came for the drillers and you still did nothing cause you weren't involved in the energy sector,

Then they came for your small caps but only speculators trade the small caps so you remained balls to the wall long the story stocks, buying every dip, Apple back to 1000 you would think to yourself at night as you blew coke off the 2000$ hookers asses.  

Now they are coming for the story stocks and you are trapped like a rat on a sinking ship that is already under water.



Clearly the only variable is the FED.  Will they come in and save us like they did in China?  How is that going over there by the way?