Whether greed-prone, fear-stricken, or full-prepper; the post-election performance of both gun-and-ammo 'makers' and gun-and-ammo 'searches' on-line has been remarkable...
Earlier today, the BIS, which has been doing everything in its power today to defend the 1.27 support in the EURUSD since the market open this morning, released its H1 OTC derivatives presentation update. There was little of material note: total OTC derivatives were virtually unchanged at $639 trillion gross, representing $25 trillion in net outstanding (market value), and $3.7 trillion in gross credit exposure. Here the PhD theorists will say gross is irrelevant because Finance 101 said so, while the market practitioners will point to Lehman, counterparty risk, and less than infinite collateral to fund sudden implosions of weakest links in counterparty chains, and say that it is gross (which until a recent revision of BIS data had been documented at over $1 quadrillion) that mattered, gross which matters, and gross which will always matter until finally everything inevitably collapses in a house of missing deliverable cards. Because not even the most generous sovereigns and central banks can halt the Tsunami once there is a failure of a major OTC Interest Rate swap counterparty. And whereas Basel III had some hopes it would be able to bring down the total notional in derivative notionals slowly over the next few years with a gradual deleveraging across all financial firms, the bankers fought, and the bankers won, because the last thing the current batch of TBTFs can afford it admit there is any hope they can ever slim down. The will... but never voluntarily.
Over the past several days there had been concerns that even if Greece managed to roll its maturing €5 billion in Bills with a new Bill issuance (which it did earlier today), it would be unable to actually obtain cash for this worthless paper, through a repo with the European Central Bank. The reason being that last week the ECB allowed a temporary extension in Greek ELA collateral eligibility to expire, enacted on August 2, which in turn reduced the amount of repoable T-Bills from €7 billion to just €3.5 billion, in the process reducing the amount of cash Greece can obtain in half from the Bill roll. And while there had been lots of speculation and rumors that the ECB would, as in the case of Spain, either make a "mistake" or extend the collateral pool exemption once more, this did not occur. Instead, as we have just learned, the ECB has allowed Greek banks to use "asset-backed" securities to plug the collateral gap. Needless to say, one can only conceive just what unencumbered assets still can be found on Greek bank balance sheets (here is one artist's impression) but it was largely expected that in the race to debase its currency, the ECB would once again admit that when it comes to perpetuating the Ponzi, especially at a marginal cost of a token €3.5 billion, anything goes (just don't tell Germany). And so, Greece kicks the can once again.
There was a time when bears looked on with dread as a Fed Permadove and vice chair Janet Yellen cleared her throat in advance of delivering prepared remarks, knowing well the algos would go full liftathon retard as soon as the flashing red highlights hit the screen. Well, Yellen did just that in a speech titled "Revolution and Evolution in Central Bank Communications" (link here). Some of the highlights:
- YELLEN SAYS FED SHOULD LINK LOW-RATE OUTLOOK TO ECONOMIC GOALS
- YELLEN FAVORS ELIMINATING CALENDAR-DATE COMMITMENT TO EASING
- YELLEN WOULD LINK STIMULUS EXIT TO INFLATION, JOBS THRESHOLDS
- YELLEN SAYS 2% INFLATION SHOULDN'T BE CONSIDERED A CEILING
- YELLEN SAYS OPTIMAL POLICY FOR BALANCED APPROACH INVOLVES KEEPING ZIRP UNTIL EARLY 2016
Now that The Show is over, we are left with the equivalent of a Sunday morning hangover following a binge of promises and lies. After the Supreme Court upheld the PPACA, a spate of mergers rippled through the managed health care realm, to ostensibly cope with smaller profit margins and ‘compliance costs.’ But really, it’s because each firm wants to corner as much as possible of the market, in as many states as it can, to garner more premiums and control more disbursements and prices at the upcoming insurance ‘exchanges.’ Meanwhile the more hospitals are viewed as profit centers, the more their Chairmen will cut costs to maximize returns, and not care quality. They will seeks ways to sell underperforming assets, programs or services and reduce the number of nonessential employees, burdening those that remain. And if insurance companies can manage doctors directly, they can control not just costs, but treatment – our treatment. It’s not an imaginary government takeover anyone should fear; but a very real, here-and-now insurance company takeover, to which no one in Washington is paying attention.