Wednesday, November 16, 2011

Fed To Hike Current Coupon MBS Margins

In a stunning move of fiscal prudence (cough CME cough), the Federal Reserve said it will hike (not lower) margins on current coupon MBS with its 2221 Primary Dealers "in a move that would be aimed at securing an extra layer of protection against settlement risks with its counterparties" the Wall Street Journal reported. But, but, the CME lowered margins in a time of "major market upheaval" to raid said margins of 40% of all equity protect itself them: how can the Fed do something as radical as actually protecting investors by hiking margins? Surely this is some travesty. Apparently not: the WSJ explains: "The measure would be a blow to dealers as it would raise their trading costs. But the move could provide an extra layer of protection for the Fed against the risk that a dealer bank goes belly up. That risk became apparent with the collapse of MF Global Holdings Ltd., an investment bank that until its bankruptcy filing two weeks ago was listed as a primary dealer." But, but, the CME is also exposed to lack of liquidity among its client base: shouldn't it also be hiking margins to protect everyone else, not just help itself to millions of margin dollars from orphaned onboarded MF accounts? And speaking of, is the CME still keeping initial margins low? Wasn't it just a "temporary measure" - surely all MF Global accounts have been properly raided analyzed by the CME at this point and there is nothing else to transfer over. We are confident the CME will hike initial margins any. second. now. You know: to protect everyone else and stuff.

Daily US Opening News And Market Re-Cap: November 16

  • Market talk that the ECB is buying Eurozone government bonds, while some traders suggested that the ECB bought over EUR 2bln worth of government debt
  • Bunds came under pressure following a technically uncovered Schatz auction from Germany
  • UniCredit shares came under pressure after news emerged that co.'s CEO is meeting with the ECB, to ask for more access to ECB funding for Italian banks by widening type of collateral used
  • GBP came under selling pressure following higher than expected ILO unemployment rate from the UK, and after the BoE slashed its growth and inflation forecasts for the UK
  • German Chancellor said that she believes treaty changes are needed to win back market confidence, and Germany therefore is willing to give up some national sovereignty

Every 4 To 6 Years We`ve Had A Slowdown Or A Recession

Admin at Jim Rogers Blog - 1 hour ago
Every 4 to 6 years we`ve had a slowdown or a recession in the US ever since the beginning of the republic. So we are overdue for one in the end of 2011, 2012 or 2013. It always happens, it`s going to happen again despite what politicians or central bankers tell you. The next time around it`s going to be very bad. - *in Nightly News* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomb... more » 

Markets Are Very Volatile

Admin at Marc Faber Blog - 1 hour ago

Markets are very volatile partly because interest rates are at zero percent...and in real terms, negative which essentially stimulates speculation. In addition, we have high frequency trading that lead to very wild swings in the markets. - *in Bloomberg* Related ETFs, iPath S&P 500 VIX Short-Term Futures ETN (VXX) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

Euro Gold Outperforming Bunds and Euro Assets / Celente’s MF Global Gold Account ‘Looted’

One of the more high profile victims of MF Global’s fraud is economist and trends forecaster Gerard Celente. Celente became the latest victim of the MF Global bankruptcy when funds, in the six figures, in his gold futures account were taken (or ‘looted’ as Celente called it) by Chapter 11 trustees. Celente was hit with a margin call within days of the corporate shutdown despite his account being fully funded. Celente told Russia Today (RT), “I really got burned, I got a call last Monday, I have an account with Lind-Waldock, and I have been trading gold since 1978, and I have a very simple strategy. As you well know, I’ve been very bullish on gold for many years…  So I was building up my account to take delivery on a contract, and I got a call on Monday, and they said I needed to have a margin call.  And I said, what are you talking about, I’ve got a ton of money in my account.  They responded, oh no you don’t, that money’s with a trustee now.” He said that MF Global “have cleaned out and ruined a lot of people. So maybe the name MF, I’m thinking the first word of MF is ‘mother’ and we could put the other word in there if you use your imagination . . .  because that is what they are doing to everybody.”  Celente is astute and is on record regarding the importance of owning physical gold bullion. The incident shows the increasingly fundamental importance of owning physical bullion (see table above) – either by taking delivery or by owning in personal allocated accounts.

Today's Economic Data Docket - Or Largely Irrelevant Stuff Compared To Headlines Out Of Europe

It is completely irrelevant since nobody cares about economic data anymore, but it deserves a mention: today we get the CPI, industrial production and homebuilder sentiment.

Monti Forms Technocratic Government Which He Will Lead And Be Finance Minister

Looking why the EURUSD has just gone berserk? Here is the reason - another barrage of flashing red headlines out of Italy:
  • MONTI NAMES GNUDI MINISTER                             
  • MONTI NAMES PIERO GIARDA MINISTER                       
Yet across the Alps this is the only headline that matters:

UniCredit Failure Concerns, Spanish Bond Margin Hike Rumors Drives V-Shaped Recovery In "Risk Off"

Following a relatively quiet overnight session which despite various bond auctions in Europe did not see any flagrant contagion, and in which ongoing ECB buying of Italian bonds led the 10 Year BTP spread back to 6.75%, things have taken a very quick turn for the worse once again, and the BTP is now back at the day wides at 7.10%, following the following Reuters headline which is rather self explanatory: RTRS-UNICREDIT CEO, IN MEETING WITH ECB, TO ASK FOR MORE ACCESS TO  ECB FUNDING FOR ITALIAN BANKS BY WIDENING TYPE OF COLLATERAL  USED-SOURCE CLOSE TO BANK. Hmmmmm, UniCredit....where is that name familiar from. Oh wait, that's right - it was, once again, the top name on yesterday's Sigma X report of most actively traded companies by Goldman's special clients. Good to see there was no leakage here at all, none. And making things worse across the Mediterranean is the rumor that LCH Clearnet will promptly follow suit, and hike Spanish margins now that the spread to German Bunds is over 450 bps. Bottom line: Same Europe, Different Day. Here is our perfectly uneducated guess - market plunge in the morning in which institutions dump, ramp in the afternoon in which retail and HFTs buy.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 16/11/11

ETC Morning Briefing RANSquawk

Guest Post: IEA Report Advises Governments To Embrace Renewables And Nuclear

The good news is that on 8 November the International Energy Agency released its 2011 “World Energy Outlook.” While it will cheer nuclear advocates, overall the report makes for grim reading. Pulling no punches, the report states at the outset, “There are few signs that the urgently needed change in direction in global energy trends is underway.” Stripped of its cautious language, the IEA report essentially noted that should present trends continue, the world’s governments through a lack of progressive initiative embracing alternative energy sources would continue to rely on ‘tried and true” fossil fuels, resulting in increased pollution, more fossil-fuel dependency and increasingly upward energy prices. For environmentalists, this is all good news, but the report contained a caveat virtually anathema to all green movements, that accordingly, governments should reconsider their reluctance to embrace nuclear power, as it does not generate greenhouse gases. Like many discussions in Western economies since 2008, when the global recession first began to draw blood, the issue of reliable energy production ultimately devolves down to dollars and cents issues. The grim reality for environmentalists is that no single renewable energy resource, from wind power to solar energy through biofuels, has remotely become competitive with kilowatt hours of electrical energy generated by coal or oil-fired power plants. The debate pits those opposed to a transition to greener technologies to those considering the bottom line, despite greenhouse gas emissions.

The Next Step Towards The End Of The Euro
11/15/2011 - 22:12
The massive cornerstone of support for the euro—German exporters—just cracked: "We need a common market, not one currency.”

11/16/2011 - 07:02
  Harvard University Professor Martin Feldstein, who predicted in 1998 that the euro would prove an “economic liability,” said the single currency will survive for now, even as he bets...

If you find useful information, please consider making a small donation, to help cover some of the labor and cost for this blog.

Thank You

I'm PayPal Verified

No comments:

Post a Comment