LIBOR

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UBS' Take On The Swiss Shocker: "The SNB's Standing Is Undermined... There Could Be A Significant Deflationary Shock"





The other question is about the cost of today's decision for the SNB, both in monetary and credibility terms. The SNB is holding roughly half of their CHF500bn in euros, which implies a loss of possibly not dissimilar to the CHF38bn that the SNB made in profit last year. The monetary impact might thus be manageable. The credibility impact might be harder to gauge though. Domestically, many economic actors relied on what was seen as a 'promise' to hold the 1.20 floor. Internationally, following the negative rates confusion back in December today's decision might be further undermined the standing of the SNB among investors.

 
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"It's Carnage" - Swiss Franc Soars Most Ever After SNB Abandons EURCHF Floor; Macro Hedge Funds Crushed





Over a decade ago, George Soros took on the Bank of England, and won. Less than two hours ago the Swiss National Bank took on virtually every single macro hedge fund, the vast majority of which were short the Swiss Franc and crushed them, when it announced, first, that it would go further into NIRP, pushing its interest rate on deposit balances even more negative from -0.25% to -0.75%, a move which in itself would have been unprecedented and, second, announcing that the 1.20 EURCHF floor it had instituted in September 2011, the day gold hit its all time nominal high, was no more. What happened next was truly shock and awe as algo after algo saw their EURCHF 1.1999 stops hit, and moments thereafter the EURCHF pair crashed to less then 0.75, margining out virtually every single long EURCHF position, before finally rebounding to a level just above 1.00, which is where it was trading just before the SNB instituted the currency floor over three years ago.

 
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The Stimulus Monkeys Are Screeching And The Central Banks Are Pushing On A String





There is overwhelming evidence that the rampant money printing of the past decade or two has done nothing to generate sustainable growth in mainstream living standards and real wealth. Yet the monkeys keep rattling the cage, promising and demanding more ZIRP(and now N-ZIRP) and more fraudulent purchase of government debt with fiat credit congered by their printing presses. Consider some striking proof of failure...

 
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How Bad Is It For Shale Companies: The Cost Of Resolute Energy's New Second-Lien Debt: 25%!





Over the weekend, we saw the first casualty of low oil prices as WBH Energy went into bankruptcy. Today, Bloomberg reports,Resolute Energy Corp. has been forced by low oil prices to borrow at distressed levels. The Denver-based company, which we previously highlighted as having a 4.5x Debt/EBITDA (there are a lot higher), managed to procure a new $150 million 2nd term loan from Highbridge Capital (mostly used to roll old debt). The cost of funding: 11% coupon plus 5% upfront (and a guaranteed 25% return for the lender if Resolute pays it back early). At that cost of funding, it is no wonder that Resolute's bonds remain, to borrow a Charlie Evans phrase, catastrophically priced.

 
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The WSJ Looks At "Non-GAAP" Earnings, Is Horrified By What It Finds





The WSJ is shocked to learn that among the costs companies "exclude" from non-GAAP earnings include such items as regulatory fines, “rebranding” expenses, pension expenses, fines, costs for establishing new manufacturing sources, fees paid to the board of directors, severance costs, executive bonuses and management-recruitment costs, and much, much more.

 
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Is The CDS Market Manipulated?





As investors and market participants become increasingly aware of the regulatory failures that allowed for manipulation of LIBOR, FOREX, municipal bond bidding and certain commodities markets, regulatory sources are increasingly expressing concern that they have paid too little attention to potential manipulations of an arguably larger, more systemically important and less regulated market – the CDS market as self-governed, through ‘regulatory license’, by the International Swaps and Derivatives Association (ISDA).

 
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Massive 1,500 Ton Gold Vault For Sale In The Heart Of London, One Previous Owner, Asking £4,500,000 O.B.O.





As a result of Deutsche Bank's gold-rigging problems, the German bank's practically brand spanking new Singapore gold vault, just over a year old, is about to go on sale. But while one can debate when the brand new storage facility will see a "for sale" sign attached to the main vault door, one thing is clear: Deutsche Bank's massive, and even newer, gold vault in London is already looking for offers. According to Reuters, Deutsche Bank is "open to offers for its London-based gold vault following the closure of its physical precious metals business."

 
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2014 Year In Review (Part 2): Will 2015 Be The Year It All Comes Tumbling Down?





Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."

"I’m tired of being outraged!"

 
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Central Banks Are Now Uncorking The Delirium Phase





Virtually every day there is an eruption of lunacy from one central bank or another somewhere in the world. In short, the central banks of the world are embroiled in a group-think mania so extreme and irrational that it puts one in mind of the spasm of witchcraft trials that erupted in the Massachusetts Bay Colony nearly four centuries ago.  As a practical matter, this mania amounts to a race to the currency bottom and the final extinguishment of the price discovery mechanism in every financial market on the planet. Flying blind, the financial markets are thus bubbling - in the delirium phase - like never before. That is, until they don’t.

 
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Swiss Central Bank Plunges Into NIRP, Sends Deposit Rates Negative, Scrambles Against Safe-Haven Capital Flight





Everyone thought that any major monetary policy surprises and/or capital controls today would come from Putin during his annual press conference. Boy were they wrong: just after 2 am Eastern, none other than the Swiss National Bank joined the ranks of the ECB in scrambling to stem the wave of capital flight, not to mention the cost of money, when it announced it too would start charging customers for the privilege of holding cash in its banks, when it revealed a negative, -0.25% interest rate on sight deposits: a step which according to the SNB was critical in maintaining the 1.20 EURCHF floor.

 
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Central-Bankers Have Their Hands Full As 30 Year Yield Falls Below 2014 Lows





Not quite as many fireworks overnight, in another session dominated by central banks. First it was revealed that China had injected CNY400 billion into the banking system to add liquidity as the economy slows, which is ironic because on the other hand China is also seemingly doing everything in its power to crash its nascent stock market bubble mania, following the latest news that China’s CSRC approved 12 IPOs ahead of schedule which is seen as a pre-emptive step to tighten interbank liquidity amid the recent rise in margin trading. Another central bank that was busy overnight was Russia's, which proceeded with its 5th rate hike of the year, pushing the central rate up by 100 bps to 10.50% as expected. Elsewhere, the Bank of England wants to move to a Fed-style decision schedule and start releasing immediate minutes as Governor Mark Carney overhauls the framework set up more than 17 years ago. The Swiss National Bank predicted consumer prices will drop next year and said the risk of deflation has increased as it vowed to defend its cap on the franc. Finally Norway’s central bank cut its main interest rate for the first time in more than two years and signaled it may ease again next year as plunging oil prices threaten growth in western Europe’s biggest crude exporter.

 
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Frontrunning: December 8





  • Welcome to the recovery:
    • Euro zone warning hits stocks, currency as oil plumbs depths (Reuters)
    • Japan GDP Worse Than Initially Reported (WSJ)
    • China trade data well below expectations (BBC)
    • German industrial production frustrates forecasts (FT)
  • Oil Extends Retreat With European Stocks as Dollar Gains (BBG)
  • California police, protesters clash again after 'chokehold' death (Reuters)
  • Ruble’s Rout Is Tale of Failed Threats, Missteps (BBG), not to be confused with "Yen's Rout Is Tale Of Keynesian Success, Prosperity"
  • Uber banned from operating in Indian capital after driver rape (Reuters)
 
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