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Bet On Central Banker Lies, Double Your Money

Tyler Durden's picture




 

From mid-March, the difference in credit risk between banks that took LTRO loans and banks that decided not to become stigmatized and subordinate their existing senior unsecured bond holders has now more than doubled. Another day of decompression today has pushed the so-called LTRO-Stigma to 142bps - its widest in 5 months and worse than at any time since LTRO1 was undertaken. Since we first noted the disingenuous commentary by Draghi on 'there is no stigma' and suggested this trade on the back of the early recognition of the implicit subordination and unintended consequence of self-loading and self-referencing banks buying their own sovereign debt locking them into a vicious circle with one another, the spread has more than doubled (meaning anyone who TRS'd this deal likely would have seen this spread doubling result in a doubling of P&L) and reflects very closely the market's movements during the crisis period heading into the announcement of the new fiscal compact and the LTRO scheme. This time around, there is less collateral and a banking sector that knows what it means to shake hands with the devil.

 

 

Chart: Bloomberg

 

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Fri, 04/20/2012 - 10:46 | 2361141 silver500
silver500's picture

But LTRO was an “unquestionable success” - Mario Draghi

Fri, 04/20/2012 - 10:48 | 2361153 Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

There is no risk of that...

Fri, 04/20/2012 - 11:02 | 2361195 Pladizow
Pladizow's picture

Yes Sir the casino is rigged!

Do you wish to play?

Fri, 04/20/2012 - 11:25 | 2361276 The trend is yo...
The trend is your friend's picture

You now have better odds at an actual casino then in the financial markets.  At least in the casino you know the rules of the game won't be changed mid Shuffle

Fri, 04/20/2012 - 11:53 | 2361354 johnu1978
johnu1978's picture

I think I'll put my money towards learning primitive skills rather than putting it towards playing poker!

 

-John
Primitive Skills Classes - Edible Plant Tours
http://www.heartrootnatureconnection.com

Fri, 04/20/2012 - 10:52 | 2361164 the 300000000th...
the 300000000th percent's picture

He can call anything a success as long as he defines success right

Fri, 04/20/2012 - 11:02 | 2361200 silver500
silver500's picture

Stop questioning it, Saddam Draghi said "it is not helpful to question LTRO".  You are not being helpful.

Fri, 04/20/2012 - 11:46 | 2361346 Vince Clortho
Vince Clortho's picture

What could possibly go wrong?

Fri, 04/20/2012 - 10:50 | 2361157 fonzannoon
fonzannoon's picture

Mining stocks are funny, and by funny I mean they suck.

Fri, 04/20/2012 - 10:52 | 2361163 LawsofPhysics
LawsofPhysics's picture

Done and done, this is the most useful aspect of ZH.

Fri, 04/20/2012 - 10:57 | 2361177 Mercury
Mercury's picture

WSJ: Governments Are Sowing Seeds of the Next Crisis:

As a young stock-market reporter, I remember being bamboozled by the panoply of data, facts and rumors that could sway investors' perceptions of when to buy and sell.

But in recent times, that seemingly infinite set of variables has been reduced to one: whether governments and central banks will step in again to help sluggish growth and a patched-up banking system.

Fri, 04/20/2012 - 11:21 | 2361264 Dumpster Fire
Dumpster Fire's picture

—and vital parts of the system, such as derivatives trading, are gummed up by fears of new regulations.

 

lol

Fri, 04/20/2012 - 10:59 | 2361191 Ted Baker
Ted Baker's picture

LIES AND MANIPULATION IS WHAT DEFINES CENTRAL BANKERS THESE DAYS. WHEN ONE LOOKS AT THE LEVEL THE EURO IS TRADING VERSUS THE DOLLAR IT IS HARD TO UNDERSTAND WHY GOLD PRICES IN DOLLAR TERMS ARE NOT HIGHER....THE RATIO OF 1 TO 1O IMPLIES THAT GOLD SHOULD BE OVER THE 1,700 LEVEL AT LEAST...

Fri, 04/20/2012 - 11:02 | 2361199 Stoploss
Stoploss's picture

Patience..

Fri, 04/20/2012 - 11:08 | 2361212 Everybodys All ...
Everybodys All American's picture

Central Banks Daily Routine:

        

1. Buy futures in the morning.

2. Monitor the market to insure the markets remain up 100 dow points.

3. Sell gradually in the afternoon in order to get out of long positions.

4. Get ready for the next day setting the buy orders in the que.

 

Fri, 04/20/2012 - 11:17 | 2361250 YesWeKahn
YesWeKahn's picture

When we are out of asset, we will make the previous LTRO the assets.

Fri, 04/20/2012 - 11:52 | 2361355 Snakeeyes
Snakeeyes's picture

This is getting so messed up it is unbelievable. Parsons blaming Glass Steagall for the financial crisis (at the leftist Roosevelt Institute in DC). He failed to recognize Clinton's Trifect of bad bets on low income housing and mortgages. THIS was the root cause of the crisis. Glass Steagall was the final step to open the floodgates.

http://confoundedinterest.wordpress.com/2012/04/20/parsons-blames-glass-...

Fri, 04/20/2012 - 12:08 | 2361389 Yen Cross
Yen Cross's picture

 Where is the Santelli rant this morning? I could use a dose of that guy, right about now!

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