Buckle Up... Because It's Game Over For the Fed
Independent, Bombastic Financial News Show Dramatically Scoops the Financial Times On French Bank Run Story
Yesterday
Fed Chairman Ben Bernanke pulled out the last bullet in his arsenal
reaching back almost 50 years in a hope that just maybe this "silver
bullet" will kill the vampiric drain of excess debt on the economy.
Unfortunately, silver bullets don't kill vampires. There is more to
this analogy than just the approaching Halloween season. Our problem
isn't low interest rates - it is excess debt which literally drains the
demand for more credit. The recent release of the NFIB Small Business
Survey showed this as businesses stated that acces to credit is not an
issue. "Poor sales" are their number one concern and the lack of
demand on their businesses do not warrant adding on more leverage. The
number of businesses currently thinking this is a "good time to
expand" is at some of the lowest levels on record. Likewise,
consumers, are trying to pay down debt as worries about job security,
rising food and energy costs and stagnant wages reduce their desire to
consume and make debt reduction a priority. The excess debt that has
been accumulated over the last 30 years as interest rates were in a
steady decline, lending standards were reduced and massive pools of
available credit were supplied has now begun the inevitable unwinding
process.
And
right on cue, just like 2 weeks ago when the FT "broke" the news that
China was about to bailout Europe (all over again), here they come
again, reporting that the EU is "looking to [sic] swift recapitalzation
of 16 banks." From the FT: :European officials look set to speed up
plans to recapitalise the 16 banks that came close to failing last
summer’s pan-EU stress tests as part of a co-ordinated effort to
reassure the markets about the strength of the 27-nation bloc’s banking
sector. A senior French official said the 16 banks regarded to be close
to the threshold would now have to seek new funds immediately.
Although there has been widespread speculation that French banks are
seeking more capital, none is on the list. Other European officials
said discussions were still under way. The move would affect mostly
mid-tier banks. Seven are Spanish, two are from Germany, Greece and
Portugal, and one each from Italy, Cyprus and Slovenia. The list
includes Germany’s HSH Nordbank and Banco Popolare of Italy." And we
are now taking bets on how long until this whole non-news, all rumor
move is faded.
There was some good news for the bulls in the just released NYSE August margin debt update. Chief of these was that margin debt plunged from $306 billion to $272 billion in the past month, the lowest since the $270 billion in October 2010, which was to be expected considering the explosion in volatility of the last month. This means there are that fewer levered long positions that need liquidations/margin call collateral compliance. Another consequence of the market plunge in August was that Net Worth, or Margin Account credit balances, and Free Credit Cash accounts less Margin debt, the most direct proxy for levered beta pursuit, after hitting an all time low (negative net worth ) in May, has surged to nearly unchanged, or just ($4) billion, the most "unlevered" investors have been since June 2010. There is some bad news too however. And it is that at $272 billion in margin debt, there is still far, far more leverage in the market than at the market lows in March 2009, $99 billion or 56% more to be specific, even as many of the economic and market indicators are back to those levels, and in some cases even before. In other words, people still refuse to believe that any market meltdown is for real. And once the margin calls start coming in, the convergence with the 666 on the SPX could come in a matter ot weeks if not days (and, courtesy of the ubiquity of HFT which can just slide the power switch to OFF nowadays, potentially hours).
While
equity markets in the US have been hurt hard the last 24 hours, credit
has been signaling notably more weakness than equities for a while.
Today's action follows a similar path to Europe with equities
underperforming credit and catching up to credit's view. Last night saw
the credit indices close considerably cheap to their fair-value as
investors grabbed index overlays as the most liquid hedges - today we
some unwind of that as HY bonds are net sold and single-name CDS are
decompressing considerably.
As this market has been feeling like a bubble waiting to find a pin as the wheels come off Fast and Furious, everything across the board is getting hammered from pillar to post and starting to scream out a major sell-off is coming to a market near you. When the 2007/08 global recession started, the DJIA led the declines with the DAX following suit after. But this time those across the pond seem to be the dying canary in the coal mine. Today, the DAX is down 4.64% on the day and 32% from the highs of the year. On a sign of weakness out of China through the 2mos low on their PMI, the Hang Seng closed down 4.85% on the day and is about to have its largest single weekly loss since 2009 while being down 28.5% for the year. The DJIA is also getting crushed as it is now down 16.4% from the 2011 peak while also being on the verge of a single largest weekly point drop from an open to close basis. What is ironic about all this is the DJIA, SPX, FTSE, and DAX are on the verge of making yearly lows and they all look vulnerable beyond belief. Basically the markets are starting to completely un-hinge and we suspect the wheels are coming off shortly
Globe and Mail: "Canadian Banks Are Fine"
Credit
markets opened extremely weak last night in Europe, underperforming
equities, and continued to slide lower for most of the day. The
interesting divergence that appeared was equities underperforming
credit all day long which provided some modest bid to credit as we
closed and reflects what we have been discussing recently - that
equities had yet to catch up to credit's perspective of the world.
All-in-all things feel very weak out there with sovereigns
cracking their all-time wides and even IG credit in Europe as wide as
it was at the peak of the financial crisis in 2008/9. Equities remain well above levels appropriate to the credit market's perspective
and downside risk remains the bigger threat in a vicious circle of
capital reduction, counterparty risk management, and illiquidity.
While
bank CEOs across Europe (and the US) continue to deny-deny-deny that
they have any liquidity issues, the markets seem to be calling their
bluff (once bitten twice shy?). EURIBOR-OIS has just reached back to March 2009 levels,
3 month EUR-USD basis swap is almost back to late 2008 lows at
-106bps, and while for once the ECB's liquidity facility was not taken
advantage of in size (only EUR179mm), counterparty risk is clearly on
the mind of traders as CDS curves invert and Senior Financials jump
15bps to 304bps (and Subordinated +36 to 538bps!).
09/22/2011 - 12:51
Independent, Bombastic Financial News Show Dramatically Scoops the Financial Times On French Bank Run Story
09/22/2011 - 12:04
Financial Warfare
The (very appropriately named for today) Mike Krieger submits the latest piece, this one on a topic much discussed recently on Zero Hedge: the full blown escalation in financial warfare. To wit: "You have to hand it to these guys. The move was a stroke of central planning genius. Not only did they destroy people with major long Franc positions versus virtually any other currency (the Franc went down 25% versus the dollar in a one month period and 20% versus the euro) which was a way for the central planners to extract a pound of flesh from those betting against them, but it also was just as much if not more so directed at the gold market. Let me explain. Anyone with a large long franc position also likely has a long gold position as they are (rather were) essentially the same macro bet. Such a massive move in a currency such as the franc would have been so unexpected and such an outlier event that it would have wrecked severe havoc on many portfolios. The central planners knew this and they used it to their advantage to stop gold in its tracks as it was headed to $2,000/oz and beyond. This was no coincidence. It was financial warfare. You MUST know your enemy to survive and win the war because the central planners can win battles but not the war."Guest Post: Why The Fed's "Silver Bullet" Won't Kill The Beast
Yesterday
Fed Chairman Ben Bernanke pulled out the last bullet in his arsenal
reaching back almost 50 years in a hope that just maybe this "silver
bullet" will kill the vampiric drain of excess debt on the economy.
Unfortunately, silver bullets don't kill vampires. There is more to
this analogy than just the approaching Halloween season. Our problem
isn't low interest rates - it is excess debt which literally drains the
demand for more credit. The recent release of the NFIB Small Business
Survey showed this as businesses stated that acces to credit is not an
issue. "Poor sales" are their number one concern and the lack of
demand on their businesses do not warrant adding on more leverage. The
number of businesses currently thinking this is a "good time to
expand" is at some of the lowest levels on record. Likewise,
consumers, are trying to pay down debt as worries about job security,
rising food and energy costs and stagnant wages reduce their desire to
consume and make debt reduction a priority. The excess debt that has
been accumulated over the last 30 years as interest rates were in a
steady decline, lending standards were reduced and massive pools of
available credit were supplied has now begun the inevitable unwinding
process. Commodity Sector Breaking Down but long term trend is still higher
Trader Dan at Trader Dan's Market Views - 46 minutes ago
Consider this as sort of an addendum to the article on the Australian Dollar
earlier today.
Today's selling onslaught across the entirety of the commodity sector has
wiped out the gains in this sector for the year. That is leading to further
selling as hedge funds are grabbing what little might be left of their paper
profits in there before those entirely disappear.
There are several factors which I think merit referencing on this weekly
chart.
Firstly - the stampede to sell has taken the index below a major horizontal
chart support level that came in near the 600 level. It has als... more »
Captial Is Flowing Into Gold
Eric De Groot at Eric De Groot - 58 minutes ago
Capital flows set the direction of secular trends. Linear up trends have
been broken to the upside in many if not all global currencies. In other
words, capital is flowing in gold at increasing rates across the globe. This
is something to remember when the short-term orientated media likely
characterizes today's action as a gold "pounding". USD Gold Euro Gold Swiss
Franc Gold Yen...
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content, and more! ]]
Extreme Chops Are Tough
Eric De Groot at Eric De Groot - 1 hour ago
Extreme chop or "according style" consolidations reflect the voilence
inherent in the trend. They are often tough manage and experience. The
current consolidation, nevertheless, remains in tact despite today's painful
drop. Extreme chops are as much time as price dependent. When TIME is right,
the market will once again reflect the reality that global policy makers
have no choice but to continue...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
Well, What Now?
Dave in Denver at The Golden Truth - 1 hour ago
Several people have asked me why gold didn't hold its own or move higher in
a "flight to safety" when the market went into a swan-dive. It's a good
question and the best quick answer is to say that you can't look at any one
intra-day timeframe comparison of anything and think that that's the way it
is. In fact, when a broad market makes a big move one way or the other,
typically there will short term correlation with that move in every market.
The simplest explanation for that is that hedge funds tend to drive market
direction on a short term basis because of the way their comput... more »
Euro, Stocks Soar On FT Report EU "Looks To Swift Recap" Of European Banks
And
right on cue, just like 2 weeks ago when the FT "broke" the news that
China was about to bailout Europe (all over again), here they come
again, reporting that the EU is "looking to [sic] swift recapitalzation
of 16 banks." From the FT: :European officials look set to speed up
plans to recapitalise the 16 banks that came close to failing last
summer’s pan-EU stress tests as part of a co-ordinated effort to
reassure the markets about the strength of the 27-nation bloc’s banking
sector. A senior French official said the 16 banks regarded to be close
to the threshold would now have to seek new funds immediately.
Although there has been widespread speculation that French banks are
seeking more capital, none is on the list. Other European officials
said discussions were still under way. The move would affect mostly
mid-tier banks. Seven are Spanish, two are from Germany, Greece and
Portugal, and one each from Italy, Cyprus and Slovenia. The list
includes Germany’s HSH Nordbank and Banco Popolare of Italy." And we
are now taking bets on how long until this whole non-news, all rumor
move is faded.NYSE Margin Debt Plunges To Mid-2010 Levels, Still 60% Higher Than May 2009 Lows
There was some good news for the bulls in the just released NYSE August margin debt update. Chief of these was that margin debt plunged from $306 billion to $272 billion in the past month, the lowest since the $270 billion in October 2010, which was to be expected considering the explosion in volatility of the last month. This means there are that fewer levered long positions that need liquidations/margin call collateral compliance. Another consequence of the market plunge in August was that Net Worth, or Margin Account credit balances, and Free Credit Cash accounts less Margin debt, the most direct proxy for levered beta pursuit, after hitting an all time low (negative net worth ) in May, has surged to nearly unchanged, or just ($4) billion, the most "unlevered" investors have been since June 2010. There is some bad news too however. And it is that at $272 billion in margin debt, there is still far, far more leverage in the market than at the market lows in March 2009, $99 billion or 56% more to be specific, even as many of the economic and market indicators are back to those levels, and in some cases even before. In other words, people still refuse to believe that any market meltdown is for real. And once the margin calls start coming in, the convergence with the 666 on the SPX could come in a matter ot weeks if not days (and, courtesy of the ubiquity of HFT which can just slide the power switch to OFF nowadays, potentially hours).
Thank You
I'm PayPal VerifiedCDS Rerack: Equity Catching Up To Credit
While
equity markets in the US have been hurt hard the last 24 hours, credit
has been signaling notably more weakness than equities for a while.
Today's action follows a similar path to Europe with equities
underperforming credit and catching up to credit's view. Last night saw
the credit indices close considerably cheap to their fair-value as
investors grabbed index overlays as the most liquid hedges - today we
some unwind of that as HY bonds are net sold and single-name CDS are
decompressing considerably.Technical Perspectives: Global Markets Starting To Un-Hinge
As this market has been feeling like a bubble waiting to find a pin as the wheels come off Fast and Furious, everything across the board is getting hammered from pillar to post and starting to scream out a major sell-off is coming to a market near you. When the 2007/08 global recession started, the DJIA led the declines with the DAX following suit after. But this time those across the pond seem to be the dying canary in the coal mine. Today, the DAX is down 4.64% on the day and 32% from the highs of the year. On a sign of weakness out of China through the 2mos low on their PMI, the Hang Seng closed down 4.85% on the day and is about to have its largest single weekly loss since 2009 while being down 28.5% for the year. The DJIA is also getting crushed as it is now down 16.4% from the 2011 peak while also being on the verge of a single largest weekly point drop from an open to close basis. What is ironic about all this is the DJIA, SPX, FTSE, and DAX are on the verge of making yearly lows and they all look vulnerable beyond belief. Basically the markets are starting to completely un-hinge and we suspect the wheels are coming off shortly
Paging The Globe And Mail
Globe and Mail: "Canadian Banks Are Fine"
Market Snapshot: Europe Down Large But End-Tone Better In Credit
Credit
markets opened extremely weak last night in Europe, underperforming
equities, and continued to slide lower for most of the day. The
interesting divergence that appeared was equities underperforming
credit all day long which provided some modest bid to credit as we
closed and reflects what we have been discussing recently - that
equities had yet to catch up to credit's perspective of the world.
All-in-all things feel very weak out there with sovereigns
cracking their all-time wides and even IG credit in Europe as wide as
it was at the peak of the financial crisis in 2008/9. Equities remain well above levels appropriate to the credit market's perspective
and downside risk remains the bigger threat in a vicious circle of
capital reduction, counterparty risk management, and illiquidity.With Just One Day Left To Avoid Government Shutdown, Here Is Goldman's Take On What Will Happen Tonight In DC
Today at some point, the House votes (again) on a continuing resolution to fund government past Sept. 30. Will it fail to reach an agreement as it did yesterday, with just a day before yet another break which will likely mean no more votes until the actual shutdown? Goldman explains what to expect from the events this afternoon/evening.European Liquidity Update
While
bank CEOs across Europe (and the US) continue to deny-deny-deny that
they have any liquidity issues, the markets seem to be calling their
bluff (once bitten twice shy?). EURIBOR-OIS has just reached back to March 2009 levels,
3 month EUR-USD basis swap is almost back to late 2008 lows at
-106bps, and while for once the ECB's liquidity facility was not taken
advantage of in size (only EUR179mm), counterparty risk is clearly on
the mind of traders as CDS curves invert and Senior Financials jump
15bps to 304bps (and Subordinated +36 to 538bps!).
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