Curve Flattening In Credit - Never A Good Sign

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Mon, 10/03/2011 - 13:33 | 1733758 Long-John-Silver
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Bank of America = Lehman Brothers 2.0

Mon, 10/03/2011 - 13:36 | 1733770 GeneMarchbanks
GeneMarchbanks's picture

BAC or BNP or Dexia or SocGen it's not just an American thing anymore...

Mon, 10/03/2011 - 13:55 | 1733848 trav7777
trav7777's picture

yeah, between those banks and several sovereigns, it's a competition to see who goes TU first.

Like I said back when the bailouts started, they have transferred all of the banking risk to who can backstop those?

The game is over.  Debt is dead.  Debt can only be rolled or repaid by growth and growth is over.  It's not a fiscal problem or a monetary problem or even a problem with "excessive debt."  There is NO amount of debt that is not excessive when debt is expected to grow and it cannot.

Mon, 10/03/2011 - 13:40 | 1733764 Threeggg
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Buy calls on circuit breakers bitchez !

AMR halted for the sixth time today !

Update: Now Seven times @ $1.88 on the latest halt

Mon, 10/03/2011 - 13:41 | 1733781 PulauHantu29
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Very insightful. I compliment you!

Mon, 10/03/2011 - 13:41 | 1733782 Steroid
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Paper backwardation?

Mon, 10/03/2011 - 14:22 | 1733952 slewie the pi-rat
slewie the pi-rat's picture

paper products were strong in today's ISM propagan..., er,..., report...

don't be caught short, BiCheZ!

Mon, 10/03/2011 - 15:17 | 1734111 X.inf.capt
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hello, pi- rat, answered your post you wrote to me earlier...

yes, again, thank you.

Mon, 10/03/2011 - 13:47 | 1733812 Missiondweller
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Not part of Operation Twist?

Mon, 10/03/2011 - 13:56 | 1733852 DoChenRollingBearing
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Well, this article is beyond a bearing's comprehension (with less than two and a half neurons after all), but I can see risks ahead...

All bonds look like a bad bet to me.

Gold > FRNs > electrons on deposit at the bank > longer term bonds

I guess???

Mon, 10/03/2011 - 14:25 | 1733964 mayhem_korner
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What the data is saying is that the premiums on shorter-dated credit default swaps (CDS) are looking more like the premiums on longer-dated CDS's.  So buyers looking for default insurance (or just speculating on default) are saying that the likelihood of default in the near term is as high as over a longer horizon.  Not a healthy sentiment.

Sure feels like weight-bearing lally columns are wobbling today...

Mon, 10/03/2011 - 15:34 | 1734181 Dr. Richard Head
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The question in my mind becomes whether or not the CDS are appropriately funded to pay out (ala AIG of 2008?).  Perhaps I'm confused. 

Mon, 10/03/2011 - 17:21 | 1734671 mayhem_korner
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Excellent question.  I don't think there are CDS sinking funds on the books anywhere.  This is all securities "vaporware."  The whole premise of underwriting CDS's is like playing hopscotch in a minefield.

And to think these hacks took the correlation issue in the wrong direction last time by stacking highly-correlated junk mortgages and CDS's into collateralized debt obligations (CDOs).  2nd derivative of vaporware, once removed.

Mon, 10/03/2011 - 13:58 | 1733858 Snakeeyes
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Operation Limbo Rock - How low can Bernanke go?

Mon, 10/03/2011 - 14:03 | 1733884 Vergeltung
Vergeltung's picture

great article. I learn more & more here everyday. thanks TD.


Mon, 10/03/2011 - 14:11 | 1733924 Mitch Comestein
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I think the last two months have been the Fed and Treasury's "We Need People To Buy Our Debt, screw everything else....twist" plan. 

Mon, 10/03/2011 - 15:36 | 1734190 Dr. Richard Head
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Can't they just continue to circle jerk the debt between the Fed and Treasury with Wall Stree primary dealers acting as the limp biscuit? It's worked since late 2008 no? 

Mon, 10/03/2011 - 14:12 | 1733927 Missiondweller
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Looks like Tyler was right about BAC. Looks like a mini bank run..


"Spokeswoman Tara Burke says customers experiencing slowness or can't get through should keep trying. She says the access problems are a result of the bank managing traffic volume during peak use. She declined to say whether volume has surged in recent days.

Problems began on Friday, a day after the bank said it would start charging a $5 monthly fee for customers using debit cards. Burke insists there's no connection. Burke said there's been no hacking and no customer information was compromised."


So the question is, is it a relatively small number of depositors? Or the start of something bigger?

Mon, 10/03/2011 - 15:21 | 1734133 Amish Hacker
Amish Hacker's picture

B of A is "managing traffic volume during peak use?" Whatever happened to adding server capacity to meet increased customer demand? I have a B of A credit card (to get Hawaiian Air miles) but no checking or savings accounts with them. A couple of months ago they sent me a new card, saying there had been a massive data leak, but refusing to take responsibility for their lousy security and blaming a "third party" for the breach. It was a major hassle to reset all my automatic monthly billings to the new credit card number, but there was not a word of apology from B of A.

A few months before that, they had lowered my credit limit, implying that my credit was weakening. But the lower limit was a direct result of the bank's failing balance sheet, not mine, as a phone rep finally conceded to me, without once sounding polite about it.

This latest $5 monthly fee thing is just another example of the stunning incompetence and pure desperation that B of A is sliding into. Spokeswoman Tara Burke is spinning the story, but A.P. Gianini is spinning in his grave.


Mon, 10/03/2011 - 14:23 | 1733955 Caviar Emptor
Caviar Emptor's picture

What's your comment on Eurodollar futures, Tyler? 

Mon, 10/03/2011 - 14:32 | 1733986 ivars
ivars's picture

What is next for stocks- have a look here with pictures-based on prediction from february which is now spot on:

Predictions that are tested and eerie similarity of the USA and Greece stock markets.

And the conclusion for macro economic bacground that will rule 2012-2015:

Recession/deflation in the USA from q1 2012, further accelerating increase in unsustainble debt levels- default/inflation from jan 2015, loss of reserve status. 

One thing I can imagine will grow vs. other currencies during 2012-2013 will be THE USD.


Mon, 10/03/2011 - 14:54 | 1734037 Ag1761
Ag1761's picture

Sometime later this week I think.

Sheep on Awaking:

Walks up to the bank counter,

Good morning Miss, I've been camping out all night and I'd like to close my account please, any denomination will suffice thank you.


Counter Robot:

I'm sorry Sir, that's an internet only account. I can't access it form here, you will have to go online.



But I can't get access online, your site has been down all fucking week and those bastards on the tech support line just won't take my calls. I want my money please, now!


Counter Robot:

I am sorry Sir, you will have to access the account online, now move along please. You should have known that online access makes it easy for us to keep your little savings in the most unlikely event of a temporary liquidity crisis. We did offer you 0.0005% extra on that account so we wouldn't ever have to see your face or hear you bleep. Now move along please before I call over that nice FEMA man.


In another town:


Smart Guy, already wide awake:

Walks up to the counter (coin shop):

Good morning Mr Coin Dealer, what can you give me near spot today please.


Nice Coin Dealer:

Good morning Sir, Nice to see you again, just like every month. I can give you a special on some Silver Maples, $2.00 over spot, i've got kids to feed and stocks are getting low.

Smart Guy:

Thank you kind Sir, I'll take 100 of those please, see you next month.






Mon, 10/03/2011 - 15:24 | 1734062 RSloane
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There is no light at the end of the tunnel. The train is running without a guide light. The best idea is to get off the tracks.

Mon, 10/03/2011 - 16:05 | 1734175 Schmuck Raker
Schmuck Raker's picture

A little help here please.

"CCC" is what?

[edit] Oh fuc* me. I got it. Never mind.

Mon, 10/03/2011 - 15:40 | 1734202 ConfusedIdiot
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TU so very much Mayhem. I too was scratching my head as to the point being made. CI

Mon, 10/03/2011 - 15:57 | 1734278 JW n FL
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Bank of America lives only to die.. load it up and sink it to the depths.

Mon, 10/03/2011 - 17:41 | 1734734 Snakeeyes
Snakeeyes's picture

Look at the relationship between flat yield curves and recession. To paraphrase Chubby Checker in "Limbo Rock," Ben better be nimble and quick, otherwise we all get screwed.

Wed, 10/12/2011 - 14:33 | 1766612 karmete
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