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Finally, First Bitchez
You are officially "First Bitchez"
How about Sovereign Debt? Better yet ( Euro ~ Fund) , packages?
Hey ? Check out those inverted ( reborn) , yield curves. I need a haircut for " X-MAS"!
Dr Ron Paul started the national discussion on the Federal Reserve last campaign. Now he has started a discussion on US Foreign Policy that more and more people are starting to discuss.
Here's a good example;
Ron Paul vs. Israel (The Truth)
My recent Youtube video was featured on, check it out;
SNB was inferring a 1.30 purchasing power (vs( euro on the DE-PEG, last week. I call that bullshit! The SNB was basing that call on (USD). Exports!
Now SNB has a better position, slightly. That 120 peg is being tested.
Bonds Stop Flowing as Collateral Gets Stuck at ECB
Dec. 21 (Bloomberg) -- The chains of loaned securitiesbeing pledged and re-pledged in the so-called wholesale moneymarkets are growing shorter, as collateral piles up at centralbanks where it can’t generate additional borrowing. Rehypothecation is the financial alchemy that transmutes$2.45 trillion of assets into $5.8 trillion of collateralat the 14 largest securities dealers, down from a peakof $10 trillion in 2007, according to Manmohan Singh, seniorfinancial economist at the International Monetary Fund inWashington. Once collateral is parked at the central bank, itcan’t be recycled, and may become hard to find in times of need. At the end of last year, banks turned each dollar of securities into $2.40 of collateral, Singh says. As banksgrow wary of lending to each other, those assets are beingpledged instead to the European Central Bank in one-timetransactions that mean the securities can’t be recommitted. “The system is collapsing onto the balance sheet of themost-solid member of the system, which is the central bank,”said Perry Mehrling, professor of economics at Barnard College,Colombia University in New York. “The central bank is on oneside of the market only. The bonds are flowing in and they’renot flowing out again.” The disappearance of the unsecured credit markets as thesovereign debt crisis deepens has underlined the importance ofsecured borrowing through repurchase agreements.
Shortage of Collateral
“There is an enormous shortage of collateral,” said SimonGleeson, a financial-services lawyer at Clifford Chance LLP inLondon. “That’s because the European banks can no longer raiseunsecured funds. There’s never been enough quality collateral sothe only way to do it was to re-use the securities.” European banks are opting to park money on deposit at thecentral bank rather than lend it to one another. They kept anaverage of 272 billion euros ($356 billion) at the Frankfurt-based institution during the past 20 days, within 6 billioneuros of the most since July 2010, according to ECB data. The importance of secured lending in the interbank markethas grown largely unnoticed in recent years, said Matt King,global head of credit strategy at Citigroup Inc. in London. Itssize may make it a source of risk, since borrowers may struggleto find enough acceptable securities should lenders demand moresecurity, he said. “Risk has become channeled here in an increasing way inrecent years, and we just don’t focus on it,” King said.“Everyone is just doing what is efficient under the rules butit’s built up to become a source of systemic risk.” There is“scope for runs on banks due to collateral suddenly becomingvery scarce, as in Europe at present,” he said.
Repo trading volumes in Europe are sliding, according toICAP Plc, the largest interdealer broker and the owner ofBrokerTec, the biggest platform for repo trading, wheresecurities such as government bonds are loaned for a fee. “We’ve seen quite a significant fallback in the past twoto three months, and most of that’s driven by Germany,” saidDon Smith, an ICAP economist, who puts the decline at as much as20 percent. “The German repo market has been getting very, verytight,” forcing borrowers to use larger amounts of lower-quality collateral and pushing up borrowing costs, he said. “There is a lack of position-taking going on which isconsistent with elevated levels of risk aversion, the sense thatpeople just want to buy and hold German government collateral,”Smith said.
Secured lending was viewed as having two big advantages,said Barbara Ridpath, the chief executive of the InternationalCentre for Financial Regulation in London, who was head ofStandard & Poor’s ratings activities in Europe until 2008. “Bankers realized that if they took collateral, two goodthings happened,” she said. “One, they could stop looking atthe credit of a counterparty. And two, they could get ahead ofother creditors in a bankruptcy because they had security.” Rehypothecation, where a bank takes an asset pledged to itand recycles it to another institution, makes it hard forcreditors to keep track of ownership, as was shown in the 2008collapse of New York-based Lehman Brothers Holdings Inc. in thebiggest bankruptcy to date. In a paper dated 10 days before the collapse, King atCitigroup pointed out how assets pledged to Lehman had declined54 percent since November 2007, compared with declines of nomore than 3 percent among its peers. Those still using Lehman asa counterparty when it crashed found the securities they hadpledged as collateral had been recycled through London and theywere now in line for payment with other creditors.
“Once you engage in a repo with me, you no longer have theassets, you have a credit claim against me,” said Gleeson atClifford Chance. “A wise counterparty doesn’t do repo withsomeone in a deep hole.” As secured transactions increase, unsecured creditors getpushed further back in the queue for payment in a default. This,combined with reforms in countries such as the U.K. to makeinsured depositors whole before unsecured bondholders, mean it’smore costly for banks to issue unsecured debt, said SimonAdamson, a bank analyst at CreditSights Inc. in London. “I suspect regulators will become increasingly concernedabout asset encumbrance and levels of collateralizedborrowing,” he said. “Senior unsecured will remain an optionfor banks, at least if and when the sovereign debt crisis isfixed. However, it will be a smaller market, partly because ofbail-in legislation, lower-rated, and more costly.”
Faced with a situation in which the lack of collateral isstarving the financial system of the instruments it needs to dobusiness, the ECB said Dec. 8 that it will offer unlimitedthree-year funding against collateral in two auctions. The central bank also said it would accept lower-ratedbonds and bank loans as collateral in its own lending, and cutreserve requirements, potentially freeing up another 100 billioneuros of collateral, according to JPMorgan Chase & Co.estimates. “Everyone wants collateral, everyone wants dollars,” saidMehrling at Barnard College. “If the central bank accepts badcollateral, then bad collateral goes out of the system. But thatreleases good collateral that the central bank would otherwisebe demanding.”
"buy cheap straddles" [anon. fringe blog publisher]
"Citi lays out five scenarios for 2012's credit market.."
Is this the multiple choice section of Citi's advise???
Could they boil it down to 1 please... or go put their heads in a microwave and boil their multi-hedging (clueless) brains out. Thank you
Citibank seems to have only one plan for recovery - spamming me with credit card applications. I get three a week now from them for various cards. If they are counting on me to save them, they are fucked.
Do what feel wrong? You mean, vote for Obama? Go long on the Euro? Buy B of A? Stock up on European bonds? Dump gold? Turn on the TV?
I think if I'm going to gamble, I should just go to Vegas and put all of my money on Red. Less stress and I will feel more macho.
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