Every now and then it is easy to forget that the one or two "better than expected" data points blasted by flashing headlines do nothing that merely mask what is an otherwise quite deplorable and deteriorating reality. For the disconnect between America and the rest of the world look no further than this chart showing the dramatic divergence between the DJIA, which has just gone positive for the year, and every other major global stock market. Yet for those who require a narrative to go with their numbers, here is The Economic Collapse with the latest of their traditionally comprehensive bulletins, this time summarizing the "25 signs that the financial world is about to hit the big red panic button."
- Analysts warn China facing pressure from US, EU debts (China Daily)
- U.S. May Back Refinance Plan for Mortgages (NYT)
- US budget watchdog cuts debt forecast (FT)
- ECB ‘Stands Ready’ to EaseDollar-Market Tensions, Dombret Says (Bloomberg)
- Merkel Rejects Seeking Collateral in European Bailouts as Splits Emerge (Bloomberg)
- Europe Banks Lean More on Emergency Funding (WSJ)
- Apple’s Steve Jobs Resigns as CEO, Will Be Succeeded by Tim Cook (Bloomberg)
- Bernanke Signaling No QE Backed by Higher Data (Bloomberg)
Official Swiss Bank Denials Of SNB/Fed Dollar Swap Line Usage Sends Gold To New Record Just $120 Away From $2000Submitted by Tyler Durden on 08/19/2011 06:11 -0500
When we first presented yesterday that the SNB had used $200 million in FX swaps with the New York Fed, we speculated that this "means that it is not some usual PIIGS suspect, but one of the two "big ones." Obviously by this we meant Credit Suisse or UBS. It took the banks about 12 hours to come out and deny officially that it had been either of them. Well, it simply it is someone else, and hence someone with far less in deposit-based capital buffers. And then, of course, you know what they say about official denials... Anyway, whoever it was, Europe is not waiting to find out: this morning most European bourses are down between 2 and 4%, Dax down 3.7%, CAC down 2.8% and the FTSE down 2.8% at last check, as the specter of a pan-European bank run is back. The net result: spam continues to be a drag in the gold-canned food pair trade, hitting a new old time high of $1878 in the spot market minutes ago, and just $122 away from $2000. Should the market rout persist, we may well see $2000 in the next 48 market hours.
Think you were the only one who could not get within 100 feet of any liquidity in today's market which bounced up and down by 5 points on any chatic whim? Think again. The day after the market saw 844 stocks trigger short-sale restrictions (meaning they dropped more than 10% in one day), not even the robots were able to pull a rabbit out of a hat and at least 21 stocks ended up flash crashing for a millisecond or much longer during today's trading session. Below are the charts of the 21 identified victims of overzealous ask-side algos, as usual courtesy of Nanex.
The stunner in this morning's newsflow (the long, long overdue market collapse which is a much needed catalyst for QE3 should not surprise anyone), comes out of the WSJ which has just reported that the Bank of New York has informed institutional clients it will begin charging a fee of 13 bps on deposits in excess of 110% of the client's monthly average. This is nothing short of outright terrorism to get everyone out of cash and into fiat-based ponzi products. Such as Short Term Bills. Indeed, as was reported earlier the 3 Month bill just hit zero. But you ain't seen nothing yet. As Credit Suisse strategist Ira Jersey reports, courtesy of Bloomberg, "If this is true then we’re likely to see short-end interest rates actually go negative. By what degree depends on who else follows and how much money is involved." Cue unpredictable consequences of a totally broken bond market. What happens next will likely make the market dislocations following Lehman like a breezy walk in the park.
According to Credit Suisse, this is just the beginning of Transpacific central banking warfare. Per Dow Jones: "The Japanese Ministry of Finance's JPY-selling operation Thursday may be the first in a series of interventions over the coming weeks to curb further rises in the unit, and may have come Thursday in part as the Swiss National Bank's move Wednesday to weaken its own currency made it easier for Japan also to step in, says Koji Fukaya, director of fixed income and global foreign exchange research at Credit Suisse. "This may be the start of a number of actions, depending on the yen moves in the weeks ahead," Fukaya says. The SNB's move Wednesday means Japan's own move "could be considered as a kind of coordinated action" in response to broad USD weakness, he says. As traders say the MOF has so far sold under Y500 billion, Fukaya says the total size ahead could rise as high as Y2 trillion, though the move Thursday should be enough to send USD/JPY above 79.00 later, where it should stabilize in coming sessions. The pair is now at 78.32, from 77.10 earlier." To anyone trading in these 100% correlated markets, which are now nothing but a battleground for those who yield the global electronic fiat printing presses, good luck.
Make no mistake, something big is afoot behind the rhetoric and political talking points being thrown around by the White House and the GOP. That something will be some means of letting the banks get through this period without getting crushed.
In the past week, almost every single sellside bank and their mother has released a report on "what happens to the US if there is a [default|debt extension|compromise|zombie apocalypse (if one believes Tim Geithner)]. Sure enough, here is Credit Suisse with its three scenarios. This is notable as it presents the binary outcomes for the stock markets as a result of what develops in Congress. The scenarios are: i) debt ceiling extension (market up 3%); ii) debt ceiling not extended (market down 15%); iii) default (market plummets by at least 30%). Of course, if there is really is a default it is game over for equity markets but that is a moot point. Either way, any report that has zero mention of the word gold when contemplating the impact of a US default goes straight into the garbage. Such as this one.
Markets witnessed a risk-averse sentiment in early European trade following lack-lustre European corporate earning releases from the likes of Credit Suisse, Telefonica, Siemens, France Telecom, among many others, together with concerns surrounding a lack of progress in the US debt negotiations. Renewed market talk that the Italian finance minister, Tremonti, is set to resign further dented sentiment, although the rumour was later denied by the Italian government. The negative news flow resulted in European equities to trade lower, whereas Bunds and Gilts traded higher, with particular widening seen in the Italian/German 10-year government bond yield spread. Bunds did come under some pressure following market talk of the ECB buying in Eurozone peripheral debt, however that failed to provide any sustainable appetite for risk. Elsewhere, strength was observed in safe-haven currencies including USD, CHF and JPY, whereas the EUR traded under pressure for a vast majority of the European session. Moving into the North American open, markets look ahead to key economic data from the US in the form of jobless claims, and pending home sales reports. In fixed income, USD 29bln 7-year Note auction is also scheduled for later in the session. Markets will also keep a close eye on US corporate earnings from the likes of ExxonMobil.
- Fed under Fire over Default Talks (FT)
- Debt-Crisis Vote Goes Down to Wire in House (WSJ)
- U.S. Rating Rests On S&P’s View of Washington (Bloomberg)
- Why the Debt Crisis Is Even Worse Than You Think (BusinessWeek)
- Japan's Industry Set for Rebound (WSJ)
- Warren Buffett Is Wrong On Taxes (WSJ)
- After the debt-ceiling standoff is resolved (blogger extraordinarie Maddy El-Erian)
- Banks Bracing for Downgrade See Little Panic (Bloomberg)
- China Regulator Targets Nonbank Entities (WSJ)
- How to Cut Taxes, Boost Revenue (RCM)
Another European Market Implosion On Weak Italy Auctions, Tremonti Resignation Rumors, Deteriorating Economic Data And Earnings MissesSubmitted by Tyler Durden on 07/28/2011 06:10 -0500
On the one week anniversary of Europe's second bailout one may be tempted to ask "what bailout" looking at the across the board deterioration in European market metrics: Spanish 10 Year bonds over 6.00% again, Italy CDS surging to 330 bps, Italy Bunds spreads at 331 just inches away from all time wides of 353 bps, EURUSD plunging by over 100 pips overnight, CAC, DAX, OMX all falling by more than 1 standard deviation as VW, chemical maker BASF, and Credit Suisse all missed earnings estimates, and, of course, numerous Italian banks (don't disappoint us UniCredit) once again on the verge of being halted after plunging by a solid 5-6%. Several reasons for the weakness: i) Italy auctioned off €8 billion in 3,4,7,10 and year fixed and floating rate notes generating weaker than expected results with the 10 year bond gross yield rising to 5.77%, the highest since 2000, and just under the all time record of 5.81%, and the 3 year gross yield of 4.80 pushing to the highest since 2008, ii) more rumors of Tremonti resigning, iii) European retail sales declining for a third month according to Markit, and iv) a decline in Euro-area economic confidence more than estimated, dropping from 105.4 to 103.2, below the consensus of 104.0. German bunds are once again well bid with September futures rising 0.2% to 129.63. But not before rumors of ECB buying peripheral bonds via the SMP spooked bunds lower, with the resulting rise being only a result of the flight from Italy. And putting a cherry on top of it all was ECB's Mersch who once again resumed the old party line, saying that fears of a "premature end to euro are unfounded." And to think that just a week earlier the ECB told us we would never have to worry about the end of the euro.
Relevant news by www.thetrader.se
In a must read Op Ed, Bloomberg's Jon Weil takes another long hard look at the balance sheet of the most undercapitalized bank in America (thank would be Bank of America) courtesy of the worst M&A transaction in history, namely its purchase of Countrywide, observes what everyone, even John Paulson now knows, that due to trading at half its book value nobody in the market gives even remote credit to the bank's asset "marks", and concludes that this organization, courtesy of an extremely lax regulatory and audit structure, which continues to allow it to mark any assets at whatever price it desires, could well be the next AIG: "There’s more
at stake here, however, than whether Bank of America’s shares
are a “buy” or a “sell.” The main thing the rest of us care about is the continuing
menace this company and others like it pose to the financial
system, knowing we never should have let ourselves be put in the
position where a collapse in confidence at a single bank could
wreak havoc on the world’s economy. Here we are again, though.
Curse the geniuses who brought us this madness." Indeed: once again, right before our eyes, day after day we allow various higher status quo-embedded individuals to take advantage of the gullible public by misrepresenting the massive risk that the left side of BAC's balance sheet represents, which can have only one conclusion: the same epic implosion that brought down AIG once the market reality caught up the with book myth. Yet in the case of AIG unbridled risk-taking and book mismarking we can at least put the blame on one person: the man at the heart of AIG FP, Joe Cassano, whose reckless bets nearly brought down capitalism. So our question is: is there someone at or affiliated with Bank of America that could soon double as a Joe Cassano for the 2010s? We have one suggestion (although certainly not exhaustive): Brian Lin of RRMS Advisors.