In The Meantime, European Liquidity Conditions Continue To Deteriorate With An Emphasis On SocGen And Barclays

Tyler Durden's picture

While there are those financial publications who have realized that reliance on shadow markets for unsecured repo and otherwise lending may be troublesome in the short-, medium- and long-run, something we warned back in March 2010, a far more tangible threat is not what is happening in the already largely contracting shadow banking realm, but in real, non-shadow markets. Because for shadow to be impaired, these traditional liquidity conduits would have to be shut down first. Alas, while stocks resolutely continue to ignore anything but both good and bad headlines, all of which justify either QE3 or a surging economy (nothing new - as we have said this will occur most likely through the end of the year in a carbon copy of 2010), liquidity in non-shadow markets is the most impaired it has been in a long time, with 3M USD Libor rising again to 0.327% from 0.326%, although the story as usual lying below the headlines. As the charts below show not only are European banks seeing their LIBOR rates increasing (in as much as any of this is even remotely credible), with SocGen and Barclays the two most troubled banks from a self-reported liquidity standpoint, but also that the spread between the lowest and highest reported LIBOR is now the widest it has been in all of 2011. A few more days in which European funding markets completely ignore what is going on with US stocks (the same as US bonds incidentally), and the time to talk about shadow banking repo halts may indeed be nigh.

LIBOR by bank:

LIBOR min-max difference:

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centerline's picture

Everything in suspended animation mode now - with virtually complete media blackout.  This last week or so has been surreal.  Never before have I seen so much risk being purposely ignored.  Everyday, LIBOR continues to indicate a coming bank crisis.  And we all know something nasty has to hit over here in the States in order to force further easing.

IMA5U's picture

obama sank in the polls.  he wants to expand government while at the same time keeping his job.  

and when has the market puked into a 3 day weekend under his administration?


very rarely...

mayhem_korner's picture

And yet, the sheep will pay to have their fiat housed in S.T. US T-Bills.

Was there a jailbreak of the CDO risk pricers?

Marcuz Aurelius's picture

That's definatly a sound, Heartbeat graph on SocGen's side ! FLAT-LINE here we come.

snowball777's picture

Both the NPL percentage estimate and the write-downs are vastly underestimated; look at how much of the CountryWide business was focused in Cali for starters.

The Bank of Lynching America CountryWide is gonna go boom in a big big way. Here's hoping the goobers are too scared to bail them out agian.


Mactheknife's picture

Even with the conservative estimates he came up with them being 50 billion under capitalized, could be 100 bil. And that's not counting CRE and European exposure. But hey...the stock is up today and those problems are years away.....riiiiiiight.

MarcusLCrassus's picture

JP Morgan will just jump in and take over provided that they get to cherry pick BAC's assets and don't have to take any of the garbage on their books. 

scatterbrains's picture

ot- but the beestank better get on the bat phone to his stooge in the oval office and order another spr oil release or by the time he hits the re-print button brent will allready be at all time highs.

RobotTrader's picture

As a general rule, its best to buy stocks when liquidity conditions are the worst. Especially when all the momentum indicators have confirmed the resumption of the bull move.

SheepDog-One's picture

You better hope for a BIG miracle move momoboy just to get back to your mouth-drooling slack jawed all-in call from DUH 12,700 a few weeks ago!

I TOLD you that you were going to take a brutal beating on that call and you didnt listen, and youre not listening again this time and youll get the corn holing again quick!

DeadFred's picture

Likely to be some nasty numbers in the next few days.

IMA5U's picture

its best to buy them if you think the sell off is close to ending

Drag Racer's picture

also check out more BofA rush for capital as it intends to sell its correspondent biz.

"It is a huge retreat," said Guy Cecala, publisher of Inside Mortgage Finance. "Exiting correspondent altogether will reduce their volume significantly."

Clorox Cowboy's picture

It bears repeating:  BoA does NOT need the capital that this sale would

produce.  They're really just trying to help smaller banks (aka competitors)
get into the mortgage game!  In fact, when they take a fire-sale price
for this business it WILL NOT be because they're desperate.  No, you'd like for that to be true, but in reality it will be
because they would feel genuinely guilty about charging too much for
it...since they DON'T need any more money.  

SheepDog-One's picture

The funniest part is seeing all these momo's chasing the carrot while theyre about to get the stick up the cornhole.

Mactheknife's picture

Looks like the S&P is on its way to printing a "gravestone doji" on the chart today which will mark the end of this uptrend. Look out below. The bond mkt isn't buying any of this nonsense.

buzzsaw99's picture

:gasp!: they may be "forced" to take a loan from the bernank. business as usual.

falak pema's picture

Liquidity in Eurozone is now a function of political will. The only markets providing liquidity are NOT just the Libor and bond markets, but also the central bank ECB printing press, provided they get sovereigns back up and FED maintains swap lines for USD plays. We must look at the political will of Germany to take on the currency/derivative ponzi war with US hot money, Zirp fed speculative plays. But it will need also to install severe banking derivative play regulations in all of EU and beyond...big bloody IF.

This is now a question of political WILL and vision for the twenty years to come. Either EU zone declares its financial independence from ponzi USA or it flounders. I don't honestly know if it has the balls and the financial reserves to do it. According to banking analysis, other than the RM number crunching presented here, it does. It can go 3 trillion based on these calculations.

But more than anything else is the will, resolve, ability to charter a new course for EU. Its make or break time. Irrespective of what happens in USA, who will suffer its own debt momentum, much worse than EU sovereign debt, where its mainly the private banks which are hocked at the core, not the sovereigns, to the extent of federal USA and the individual states.

Race to bottom but winner loses all anyway! What a shambles the first world has become!

PY-129-20's picture

No, there are enough problems in Germany already. We should not bail out any foreigner again and again and again. They have shown zero credibility, zero responsibility, zero will to change their economic model. Instead they expect us to pay their bills while our country is falling apart and blame us and insult us with their little stereotypes of the 20th century. It's enough. We need to do the only responsible thing here - destroy the EURO project, go back to the European cooperation we had after WWII - the cooperation that Nigel Farage is supporting.

And the same goes to the German banks - let them fail, too. I swear if this continues you will see a very different Germany at the end of the decade.

OpenEyes's picture

Just saw a bulliten on MarketWatch that Obama wants to address congress on Sept 7.  Sept 7,hmmm, what's that date again?  Oh yes, the date that the German high court will rule on the legality (or illegality more like) of the planned bailout of the lessers by the Germans (and to a lesser extent the French)..   boy there could be some real fireworks on that day.  One more week till TSHTF!

Cdad's picture

So...wait...Greece is NOT fixed...again?

SheepDog-One's picture

Dang imagine that! All the free money thrown at it, and it didnt bring about a Keynesian miracle? I dont know what it will finally take to bring this Keynesian red dragon to its knees, but it damn sure wont be pretty.

treemagnet's picture

Say the Euro joke locks up - dollar strengthens...sorta sounds like the last seat on the PMs train leaving town scenario doesn't it?

HelluvaEngineer's picture

Oh, I'm pretty confident they will fix it Monday evening, for about the 1000th time.

jm's picture


Good post, but maybe next time break that 3M LIBOR chart into more charts with fewer banks on each. 

Sudden Debt's picture

That graph looks like a map of the London underground :)


JPM Hater001's picture

I was at a conference in January 2009 when they brought in an economics professor from Georgetown and really layered in the Libor problem.  Then she said we needed consumer borrowing to continue.

Um, Isnt that what got us into this problem and wont be just be back here in a few years?

Didnt think it would be that easy to shut her up but it was...and here we are.

SAVINGS IS THE KEY!!!  But in a debt based monetary system common sense is not a real big factor.  Well, at least not when lolipops and dragons rule your world.

Everybodys All American's picture

It is all about QE and none of the other technical or fundamental rules matter. Til it all blows the hell up. And it will.

ww2vet's picture

the stock market made a low, tested and on monday catapaulted up. to make money trading stocks look at stocks - not europe, jobs,  orr the nfl!



barliman's picture



There is another liquidity crisis that there may be no way to measure. Anesdotal evidence suggests that the cash sitting in offshore subsidiaries is being effectively frozen by sovereign countries if there is an attempt made to repatriate cash back into America.


slewie the pi-rat's picture

thxz, b_man! 

maybe just a way to counter all the "advisors" (most of which have good-to-excellent track records, i might add) who say you should be scared of what is surely coming to the US and start parking the stuff assets are made of (cash, PMs) offshore.  there are many ex-pats among these advisors, and many of them almost certainly use corporate or partnership structures to pass earning to themselves and protect their wealth

but, as zeroHeads know, sovereign countries are the bane of the NWO

hopefully, those who seek such protection, don't run afoul of some tax collector trying to make a name for him/her self and get the ice-9 treatment for that one, too

hackettlad's picture

Alas, while stocks resolutely continue to ignore anything but both good and bad headlines, all of which justify either QE3 or a surging economy (nothing new - as we have said this will occur most likely through the end of the year in a carbon copy of 2010)


But didn't you say previously that QE3 would only come when the market corrects 20%+?  So isn't this just a dog chasing its tail?

SeverinSlade's picture

Yeah Tyler, I was wondering the same thing myself.

So do you seriously expect Bernanke to announce QE3 with the S&P well above 1,200? 

I think the more likely outcome is that Europe begins imploding (perhaps Germany's Sept. 29th vote fails?) which triggers the same panic we saw in early August. 

I don't know.  It just doesn't make sense that the Fed will roll out QE3 (which HAS to be massive) with equities trading at their current levels. 

Quantum Nucleonics's picture

The higher the better for the market from the Fed's perspective.  A negative print on the jobs number Friday is all the justification the Fed will need for QE3, along with a "moderating" core CPI print.

ZippyDooDah's picture


my thoughts as well.  Those previous ZH posts were persuasive.  The new ones less so.  ??

scatterbrains's picture

don't know bout ya'll but i'm hoping Paulson was short Sprint and long Att about now...luv watching the crooks get smoked

zorba THE GREEK's picture

Greece and Italy just announced 20% pay raises for all public sector workers.



slewie the pi-rat's picture

thxz, t.d.!  you know mucho moro 'bout the shadow bankstering than slewie, but i know there are a shitload of libors b/c one of my kids had a mortgage tied to "the libor rate" a few years back when the well went dry and the banksters didn't trust each other or each other's balance sheet bullshit freaking L-I-E-S, and i did some reasearch

unlike you, tyler, i am not convinced that QEIII is being "priced into" these markets;  the chairsatan may just be doing an A++ job of jawboning and it is not beyond me to imagine him "engineering" certain comments at the last meeting, for this express purpose

so, i'm just not sure.  the "markets" are broken and in the same pockets as the goobermint/justice & enforcement, and if i could see a need for QEIII which overcame the present dangers of more QE, i might capitulate;  but, i don't.  wouldn't be the first time i missed something right in front of me, either

the germans are apparently in the process of changing the law re EFSF to allow their courts not to rule against same, if (L0L) feasible and with a few other changes, the EU may make it to 2012, as will angela m., IF she can get past these votes around the bailouts

i can't help noticing ms BiCh lagarde showing up here & there and as far as i can tell, our benzelbub has a new puppet who will take care of europe, here, as one hand washes the other for the kingpins of the CB criminal enterprise, the lynchpin of the NWO

so, it is "risk on", same shit, different day, but the volume belies the strength of the price manipulations and gold and silver are A-OK 2day, and the sheep who are still in "retirement" accounts will sleep well, again, tonight, and maybe the US will be able to borrow more against all those "deferred taxes" too!

those who have valued the advice of: gold and silver coins, cash, and supplies, never lost a wink, tho, did they?

Joebloinvestor's picture

I got suspicious when the Barclay fuck was on CNBC with his 6 reasons to buy equities shit.


Then he started blaming the news reporting for the shit going on in the market.

Robslob's picture

Tyler basically just told all of you to BUY STOCKS.

REPEAT of 2010



Listen will ya...

cocoablini's picture

In 2010 before Jackson Cornholing, the banks and insiders were told by Geithner and the FED to start accumulating equities before the QE2 confirmation. As they say, the FED saying they are going to do something has just as good of an affect than doing it.
The FED knows that the system is collapsing and that more casino money is required by the banks to recapitalize or "lose." so, they let the POMO buying banks drop the stock market by 20% and freak the politicos, investors call for more nannystate interference.
I fully expect the stock market to collect much of this money during the weak periods of Sept and Oct--as thats where we are prone to crashing.
Just like 2010, as Tyler says. So, killing the shorts, killing the the momentum, killing investment logic and only creating an environment for longs.
Its a command control economy- the powers that be are cattleherding all you suckers around - in bonds, into stocks, sell bonds, sell stocks, sell dollars, buy dollars. I suspect if you have the inside dope like the Primary banks( Bill Gross is now on the outside for talking shit, Buffet insider trading now golden boy)you will do well. Or as Tyler says, be on the opposite of Goldman "advice" and get on the same side where they put their money.
Expect trillions of dollars to be printed and stolen to keep the big banks functioning over the next 50 years- to keep the broken economic model running for centuries and the rich richer.

RobotTrader's picture



Here's the shocker.  PCLN still pinned at lifetime highs with a 127 P/E ratio.  Bears must be pulling their hair out.

Or how about CRM, still trading over $125 with a P/E ratio of 608!

Now if we can only get Newmont Mining or Goldcorp to $125 with a P/E ratio in the triple digits....

I'm amazed it hasn't happened yet with the lowest interest rates on record and a hockey-sticked Fed balance sheet.


RobotTrader's picture




Notice how MS and GS failed to pull in when the market dropped.

More upside to go, 200-day EMA is the target.

IMA5U's picture

its funny how we all post on this blog


but it really is just a roadmap of what the shorts are thinking.  the administration probably reads this to find the maximum points of pain when it plays its trix

RobotTrader's picture

Fed Speak


  1. 12:31 Fed's Lockhart not pushing for further easing MarketWatch
  2. 12:31 Lockhart: 'Comfortable' with current policy MarketWatch
  3. 12:31 Lockhart says he does not expect recession MarketWatch
  4. 12:31 Lockhart: Jobless rate will come down gradually MarketWatch
slaughterer's picture

Robo, if we close below 1220, the rally is over.   We were very bullish all week into 1227-1230, but after that level did not break today, we decided to close long positions.