Cue Panic As Fed Resumes Liquidity Swap Lines, Lends $200 Million To Swiss National Bank, Most Since October 2010

If yesterday's news broken by ZH that one bank was in dire need of US dollars and ended up borrowing $500 million from the ECB was enough to send the market down almost 5% today, then the follow up news that the FRBNY just reactivated FX swap lines with Europe will likely send ES limit down at tomorrow's open. The FRBNY has just announced that in the week ended August 17, it lent out $200 million to not the ECB, not the BOE, but the "most stable" of all banks: the SNB. This is the first use of the Fed's Swap Lines since March, and the most transacted under this "last ditch global bailout swap line" (see more on how the Fed bailed out the world using swap lines here) since October 2010. This event also gives us a hint that the European bank in question in dire need of cash is Swiss, which in turn means that it is not some usual PIIGS suspect, but one of the two "big ones." If true, this means that the European insolvency, liquidity and what have you crisis is about to take an exponential step function higher.




The Fed Will Soon Find Itself in the SNB's Shoes: POWERLESS

Posted by: Phoenix Capital...

Post date: 08/18/2011 - 13:09

We’re fast approaching a time in which neither the Fed nor the ECB will be able to hold the market together. Indeed, we got our first taste of what it will be like at the end of July when the S&P... 

Gold to hit $2,100 by year-end but silver is better trade, Davies tells KWN

 

 

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The Evil S&P Empire Strikes Back: Says Broad Muni Downgrade Will Come After Final US Budget

The ridiculous war between Obama and S&P, which escalated last night following disclosure by the NYT that S&P was being investigated for its muni ratings, has just taken another turn for ths surreal after S&P announced that it would most likely downgrade munis as soon as the final US budget is finalized. Granted that could very well mean never. To quote S&P: "In our opinion, the longer-term deficit reduction  framework adopted as part of the Budget Control Act of 2011 (BCA) could undermine the already fragile economic recovery and complicate aspects of state and local government fiscal management. Either of these outcomes could potentially weaken our view of certain individual credit profiles of obligors across the sector." The sector being the US munis. And from Bloomberg: "The company, which said earlier this month that states and local governments could remain AAA even after the U.S. cut, said in a report today downgrades could come after reductions in federal funding or changed policy. Ratings changes would come based on “differing levels of reliance on federal funding, and varying management capabilities,” and, after the Budget Control Act of 2011, will be felt “unevenly across the sector,” S&P said. "Experience tells me I would expect there to be some downgrades,” said S&P credit analyst Gabriel Petek in a telephone interview. “These cuts are coming in addition to the losses of revenue that already came during the recession."" Bottom line: the longer this downgrade over up to 7000 issues is deferred, and it is very much overdue right now, the bigger it will be when it finally arrives, and the greater the gloating by Meredith Whitney will be when it finally arrives.

Is The Next Domino To Fall.... Canada?

While two short months ago, "nobody" had any idea that Italy's banks were on the verge of insolvency, despite that the information was staring them in the face (or was being explicitly cautioned at by Zero Hedge days before Italian CDS blew out and Intesa became the whipping boy of the evil shorts), by now this is common knowledge and is the direct reason for why the FTSE MIB has two choices on a daily basis: break... or halt constituent stocks indefinitely. That this weakness is now spreading to France and other European countries is also all too clear. After all, if one were to be told that a bank has a Tangible Common Equity ratio of under 2%, the logical response would be that said bank is a goner. Yet both Credit Agricole and Deutsche Bank are precisely there (1.41% and 1.92% respectively), and both happen to have total "assets" which amount to roughly the size of their host country GDPs, ergo why Europe can not allow its insolvent banks to face reality or the world would end (at least in the immortal stuttered words of one Hank Paulson). So yes, we know that both French and soon German CDS will be far, far wider as the idiotic market finally grasps what we have been saying for two years: that you can't have your cake and eat it, or said otherwise, that when you onboard corporate risk to the sovereign, someone has to pay the piper. Yet there is one place where that has not happened so far; there is one place that has been very much insulated from the whipping of the market, and one place where banks are potentially in just as bad a shape as anywhere else in Europe. That place is.... Canada.

As Expected, Hewlett Packard Cuts Forecast

Earlier today, we cynically predicted that by purposefully leaking the Autonomy news, HPQ was merely "doing its best to mask ugly news later." Sure enough, HPQ has just released earnings early, with the stock being halted, and for a good reason. In the PR we find the following stunner (totally expected to Zero Hedge readers): "HP estimates full-year FY11 revenue will be approximately $127.2 billion to $127.6 billion, down from its previous estimate of $129 billion to $130 billion. FY11 GAAP diluted EPS is expected to be in the range of $3.59 to $3.70, down from its previous estimate of at least $4.27, and FY11 non-GAAP diluted EPS is expected to be in the range of $4.82 to $4.86, down from its previous estimate of at least $5.00. FY11 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.16 to 1.23 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges." Whoever followed our advice to pound the robot driven spike earlier, congratulations.

Presenting The GM "Insider Purchases"

In parallel with today's latest market implosion, the shares of the once and soon to be again bankrupt vendor of Channel Stuffed vehicles, GM, are down to $23.59, nearly 30% below their November IPO price. Unfortunately, the share performance demonstrates what happens when an artificial HFT price support, in this case, Getco, crashes and burns. Yet what is ironic is that according to alleged GM part-time advertising clerk Phil Lebeau this has to be taken in context with the substantial insider buying that has also been occurring in GM shares. Fair enough: we decided to observe just how substantial this insider buying has been. After all, the one recurring theme we hear non stop is how aggressive insider buying has been in recent weeks. Alas, when it comes to size everyone shuts up. Perhaps here is the reason: since the Company's IPO insiders have purchased a massive... $2.256 million. That's a total of 74,000 shares. And oh yeah, offsetting this are $4.1 billion in insider sales. So, once again, this whole insider buying argument, unfortunately falls flat on its face.

Guest Post: EOCI Index Now At Recession Levels

For the last several months we have been posting our Economic Output Composite Index and warning that it was heading to levels that typically denote that the economy is in a recession or about to be in one.   With today's read of the Philadelphia Fed Regional Manufacturing Survey coming in a not just contraction levels but a massive collapse to the downside, as we have been saying was a possibility, the EOCI index is now at levels signaling recessionary warnings..The safe play in the current environment is hedged investments, cash and fixed income for the current time.   This has not been, nor will it be any time soon, a "buy and hold" investing market.   The management of risk, the conservation of investment capital and the generation of total returns from portfolios is paramount for investors to survive the cycles that we will face in the coming years.

A $2 Million Bet That Bank Of America Will Be $4 By November

Will BAC be at $4 by November? We don't know. But someone just made a $2 million bet that this is precisely what will happen. Minutes ago, 54k $4 BAC November Puts were purchased at $0.37. The total price: $2 million. Will this event occur? Like we said, we don't know, but it sure looks far more realistic than Paulson's bet that BAC will trade at $30 by the end of the year.