Greek Bank Run Hits Record: Unprecedented €6.8 Billion In Deposits Pulled From Greek Banks In October
While it is no surprise that Greek bank deposits are rapidly fleeing both the country's banking system, and the country, following September's record outflow of €5.5 billion, the situation just got far worse, after October data reveals that a record €6.8 billion was taken out of corporate and household deposits in one month. This is unprecedented 4% of all of the country's period end deposits of €176 billion at the end of October, and represents a €33 billion decline, or almost 20%, of the country's deposit base in 2011 which started with €210 billion in bank cash buffer, and is now down to €176 billion. Furthermore, according to recent article in the German press, this number has supposedly ramped even more in recent months to double digit withdrawals, an event which means the Greek financial system is completely and totally finished. Because as history always shows there is no such thing as a bank run that gets fixed on its own. One thing is certain: November data, and then December, and so forth, will only be worse and worse and worse, until the whole country finally implodes.
The "Neutron Bomb Of Capital Calculations" And A Kyle Bass Refresher
In a double-whammy of downbeat dystopian discussions, GMO and Kyle Bass are active on the inevitability of Europe's demise. Perhaps that is too strong but the two are focused directly, in separate pieces, on the huge need for capital and the dire dearth of it available. GMO's central focus on the direct capital needs of the European banking system in the case of a recovery (but under Basel III) and under stress scenarios. Dismissing the EBA's efforts, and recognizing that the problem is capital/solvency (if there were more, the market would not be worrying about liquidity and deposit flight), their 'neutron bomb' scenario where sovereign debt is recognized as a 'risky asset' (which seems more than plausible to us), the capital needs are almost EUR300bn with Spanish and French banks dominant but Italian and German banks are close behind. As Kyle Bass notes "There is no savior large enough with a magic potion of capital to stave off this unfortunate conclusion to the global debt super cycle.". This leads to only a bad and worse outcome for Europe, as the cataclysm plays out because the banks do have an alternative to raising capital – shrink the balance sheet. Deleveraging is already going on in a number of countries, with loan-to-deposit ratios dropping in recent months in Portugal, Spain, and Italy. This reduces the capital needs of banks, but fairly quickly starts to cut into the muscle of the financial system. The banks have little alternative but to keep holding sovereign debt in the short term, since it is the collateral for their borrowing needs. And as we have been so vociferously explaining recently, should they be forced to delver even more, and sell reduce these sovereign assets, then the daisy-chain effect of de-hypothecation on shadow banking will not end well for anyone.
CME Executive Chairman Terry Duffy Throws Jon Corzine Under The Bus, Implies The "Honorable" Governor Lied Under Oath
Following another boring day of hemming and hewing, during which Corzine repeatedly exhibited unbearable amnesia and said he had no knowledge of virtually anything until Sunday night, here comes the CME Executive Chairman Terry Duffy, under oath, with what Roberts said "is a bomb" statement which basically says that Corzine lied under oath. Specifically, according to Duffy's remarks during the Q&A, an MF Global employee, a woman, advised the CME that Corzine had been aware of a $175 million loan made to Euro affiliates just days prior to the bankruptcy: a loan which effectively was that of commingled customer accounts, and more importantly a refutation of previous statement under oath by the man who was "financial advisor" to none other than the vice president of the United States who said he did not know about this until late on Sunday. This was not in his prepared testimony. What was is that "Transfers of customer funds for the benefit of the firm constitute serious violations of our rules and of the Commodity Exchange Act." And now we know that according to the Chairman of the CME, the MF Global head lied about the timing of the disclosure. And where it gets worse, is that MF Global was well aware of this, it told the CME to it knew about the segregated account money, and most importantly, it told the CME to stop looking for the segregated account money! Because being the firm of Obama's handler apparently makes you equivalent with the law.Continue watching the hearing here as it is i) getting interesting and ii) the first perp walk of an ex-Goldman criminal may finally be approaching - link
As Disenchantment With Idiocy Surges, Ron Paul Support Soars
Every legacy media and central planner's worst nightmare is slowly coming true: as the broader field of GOP candidates is rapidly dropping like US secret drones blowing up nuclear power plants in Iran, due to general idiocy, incompetence, too much baggage-ness or general reverse American Idol syndrome where Americans get tired with any given "leader" only to vote them out of the primary the following week, the one clear winner is becoming Ron Paul, who according to Public Policy Polling has seen his support soar in the past week and is now neck and neck with presidential candidate du week, Newt Gingrich. From the PPP: "There has been some major movement in the Republican Presidential race in Iowa over the last week, with what was a 9 point lead for Newt Gingrich now all the way down to a single point. Gingrich is at 22% to 21% for Paul with Mitt Romney at 16%, Michele Bachmann at 11%, Rick Perry at 9%, Rick Santorum at 8%, Jon Huntsman at 5%, and Gary Johnson at 1%."
"To Have And Have Not" - Complete Jeff Gundlach Presentation
Earlier
today, DoubleLine's Jeff Gundlach's held another of his comprehensive
overview webcasts, which unfortunately we missed due to the excitement
in the Senate Ag Committee where Duffy "let one slip", however for the
benefit of our readers we wanted to share the complete 72 page
presentation as it covers diverse and critical topics in every aspect of
the domestic and global economy.Globally Coordinated Nothing
Equities
dramatically retraced to the very edge of the global bailout rally top
with credit very much in sync and most notably HYG not finding a bid.
Implied correlation (sometimes considered crash risk) rose to contract
highs for the 2013 maturity as cheap protection was very bid this
afternoon. Peter Tchir, of TF Market Advisors, said it best today: "I can't get the Amy Winehouse No No No song out of my head. No ECB. No IMF. No Fed. No PSI. No balanced budgets. No QE."
Commodities were demolished late on with Gold, Silver and Copper all
falling down 5% on the week and while Oil managed to hold its
'Iran-risk' premia, even that started to leak lower as everyone derisked
as 'market-saving-interventions' seemed obviously impotent.
Financials, rightfully so, were hardest hit with the majors seriously
lower (and wider in CDS) from the open. Equities which remain rich to
credit markets on a medium-term basis, underperformed broad risk assets
as some late-day covering pulled TSYs off their low yields of the day
and gold/silver managed to pull back a little. However, the syncing of
HYG and the equity and credit markets (with credit ending at its wides)
suggests protection weas heavily bid and HY bond pressures could be
coming on outflows.Is The Euro Today The Gold Standard Of The 1930s For EU Economies?
As
the IIF continues to believe it is negotiating with Greece on
voluntary haircuts and Ireland follows the Greek playbook by threatening
referenda and asking for bailout term adjustments, is it any wonder
that the words of a supposedly united Europe ring hollow in the ears of
investors who seem to expect a Euro breakup sooner rather than later.
Deutsche Bank's credit team see two noteworthy similarities between the
world today and where it was in the 1930s. First, they view the Euro today as creating the same problems for Europe as the Gold Standard did in the 1930s
and secondly, the austerity now is perhaps equivalent to the tightening
of fiscal and monetary conditions in the US in 1937. Obviously this
led to a deep recession after the fragile post-Depression recovery and
given the current central bankers' tendencies outside of Europe, the
inevitable (and so much more easy to achieve now) print-fest solution to
the necessary deflation.JP Morgan Stock Breaks Down On News Company's Role As MF Global Lender To Be Probed
Not an hour after we asked who gave permission to MF Global estate to sell Italian bonds to JPM (which was a lender to MF Global, discussed extensively here) at preferential terms and we get the following headline from Bloomberg:
JPMORGAN ACTIONS AS MF LENDER LIKELY TO BE PROBED: LIQUIDATOR
Needless to say, we are quite happy. Someone who isn't however, are JPM's shareholders, as the stock just took out the lows on the news.
Commodity Liquidation Accelerates As Margin Calls Strike
UPDATE: HYG just bounced hard off the lows and disconnected from stocks and credit - it seems they really do need to save that asset-heavy ETF.
There is a clear and significant sell-off across all risk assets. Equities are leading CONTEXT lower (after converging perfectly pre-Fed) but equities and credit are falling tick for tick for now with HYG (the high yield bond ETF) falling significantly (which remember has been critically important recently). Commodities are where the real action is though for now with Silver now down over 4.5% on the week (and Gold and Copper not far behind). The velocity of the moves suggest the disappointments in other risk assets are leading to forced selling as a dearth of QE-related comment from Ben and the boys has the USD now over 2% stronger on the week legging higher once again as EURUSD is now -220pips from its early morning highs.
No QE3 Mention In FOMC; Fed Leaves Twist Untouched; Dove Evans Continues To Cry - Full Redline Comparison
Headline summary:- FED: FINANCIAL STRAINS STILL POSE `SIGNIFICANT DOWNSIDE RISKS'
- FED REPEATS `EXCEPTIONALLY LOW' RATES THROUGH AT LEAST MID-2013
- FED SAYS ECONOMY `EXPANDING MODERATELY' AS GLOBAL GROWTH SLOWS
- FED LEAVES OPERATION TWIST PROGRAM UNCHANGED
- FED SAYS CONSUMER SPENDING `HAS CONTINUED TO ADVANCE'
- FED SAYS UNEMPLOYMENT RATE TO DECLINE `ONLY GRADUALLY'
- FED EXPECTS `MODERATE PACE' OF GROWTH IN COMING QUARTERS
- FED: FINANCIAL STRAINS STILL POSE `SIGNIFICANT DOWNSIDE RISKS'
- EVANS DISSENTS FROM FOMC DECISION, PREFERRING MORE EASING
Who Gave Permission To A Bankrupt MF Global To Sell Italian Bonds To JPM At A 5% Discount To Market Value?
We already knew previously that shortly after it filed for bankruptcy, George Soros bought $2 billion in Italian bonds from the bankrupt MF Global. One thing we did not know was the terms of the purchase. Today, the WSJ has disclosed another facet of the bankruptcy which like Lehman will expose gigabytes of dirt on the corrupt US financial system. Namely, that after liquidating, MF sold Italian bonds - the culprit that ultimately led to the bank's bankruptcy - to none other than JP Morgan and "one large hedge fund."So far so good. Where it gets disturbing is that as the WSJ discloses, "buyers paid about 89 cents on the dollar for the Italian bonds, compared with a market price of about 94 cents at the time, according to the trader who bought them...Today, those bonds trade at more than 96 cents, according to Tradeweb." Our question is first, why did the bankrupt MF Global estate proceed to unload post-filing assets and under whose discretion: after all the company had entered bankruptcy, and it is up to the estate, which includes bondholders and other stakeholders to determine what assets and under what conditions, can be liquidated. Did MF Global believe that the same exemption from the law that it apparently thought was applicable to its pre-petition, was also valid under bankruptcy? Because if the firm did not get prior-permission form a bankruptcy judge to liquidate these assets, this is an act far worse than commingling and even the firesale of Lehman's US Brokerage to Barclays for pennies on the dollar - this is flaunting bankruptcy law front and center. Secondly, and perhaps just as important, who on the estate agreed to give JPM a 5% explicit discount to what the article notes was a fair price that is 5% higher and which by definition would have had bidders at that price. We hope someone in the Senate will take a quick look at this note, and the related WSJ article, and ask Messrs Corzine et al to provide some much needed clarity on this topic.Rate Plunges, Bid To Cover And Foreign Bid Soars In Just Completed 10 Year Auction
If there was any concern that today's auction of 10 year bonds may have trouble finding buyers, the just released results should sweep any fears deep under the rug: the $24 billion 10 year auction priced at 2.02%, the second lowest ever, higher only compared to the 2.00% from September 2011, while the Bid To Cover soared from 2.64 to 3.53, the second highest ever only to the 3.72 from April 2010, and lastly, the Indirect Bid jumped from 41.6% to 61.9% of the total takedown, amounting to $12 billion of the total ex Soma, which is the second highest ever only to the record 71.3% from February 2011. Further, coming 2 bps to the 2.045% When Issued, shows that there was nothing about this bond not to like. In other words, the market continues to drift off in some QE3 hopium-inpsired parallel reality (which will promptly crash if and when Bernanke says nothing in exactly one hour), even as credit continues to flood into the relative safety of US paper (earlier we saw 4 week Bills price at 0.000% - some "risk taking"). One wonders where and why the surge in foreign demand for safety came from. We will likely very soon know.
No More Dead Presidents As Mint Stops Coin Production
In continuing efforts to save governmental money (and waste) the Washington Post
is reporting that the United States Mint will cease production of
Dollar coins (with each carrying a deceased President's likenesses),
saving a stunning irrelevant $50mm. More than 40% of the coins have
been returned to the Fed because no one wants them. Who needs real money when 1s and 0s are all that counts nowadays?Gold drops through $1660
Gold is coming under increasing selling pressure as technical chart support
levels are giving way. As these levels are broken, technically oriented
computer selling is occuring. That, coupled with an exodus of traders to
the sidelines ahead of the Christmas holiday, is leading to exaggerated
moves as liquidity issues are now impacting trading. That is only going to
get worse from here through the end of the year. The one plus is that this
same dearth of liquidity can result in sizeable pops higher if some large
bids hit the market on any news flashes that might impact trading.
Gold ... more »
The Bears Control Copper
W.D. Gann observed the market(s) as a function of supply and demand.
Failure of the 1x1 line (linear slope) represented a market increasingly
dominated by supply (over demand). In other words, he saw this setup as the
bears exerting control of the trend. This is risk off in today’s headline
lexicon. Copper ETN (JJC)
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
Upon Further Review
*The bottom line is that the money needed to bail out Europe and to fund
America’s spiraling debt and future unfunded obligations is in the ten of
trillions. IT DOES NOT EXIST. It has to be created by printing money in
massive quantities, and despite all the rhetoric you will hear against such
policies, in the end it’s the path of least resistance. Printing money is
an invisible tax on savings, much easier to initiate, than, say, raising
taxes or cutting back on services and entitlements. ** **- Frank Guistra,
founder of Silver Wheaton*
Here's the link for the source of that quot... more »
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