An Ex-LTCM Trader Will Be Overseeing $70 Trillion In Derivatives
We wish to welcome former LTCM trader, and current TBAC chairman, Matt Zames to his new post as head of the world's biggest, government backstopped prop trading desk, with a hearty and sincere "good luck." Because an ex-LTCMer in charge of ~$70 trillion in derivatives? Why, what can possibly go wrong...
CDS Rerack: Whooosh
Ze CDS sovereign rerack... It's baaaaaaack. And it's not happy.Convergence Plungefest To Continue?
As
we have repeatedly said, "Credit anticipates and equity confirms".
Last year from Feb to June, credit markets (risk-priced not USD-priced
remember) were flashing fundamentally orange-cum-red warning signals of
the unreality that was engulfing the nominal price of stocks. We know
how that ended as stocks crashed and caught up to credit's weakness.
Sure enough, as we have been warning for a month or two now, the same
pattern of credit deterioration is occurring this year with equities
remaining willfully ignorant of the true reality of a non-QE world. At current levels the credit market is pricing the S&P 500 at around 1275
(which would basically remove YTD/LTRO/Twist gains) but as JPM's
efforts extend the credit index losses to better reflect the reality of
single-name credit, the situation looks set to get worse. In a QE-world, credit markets remain the only trustworthy 'market' indication of the business cycle. Must See: Greece Explained In One Picture
We were going to do a caption contest out
of this image, but unfortunately this is not funny. It is tragic. Many
people will lose all their money, savings, livelihood, and more
because of this...Diffusion Index Readings And Seismic Activity In Gold And Silver
Eric De Groot at Eric De Groot - 2 minutes ago
Ephrem, Correct. High diffusion index (DI) readings anticipated tradable
bottoms, but these advances fizzled due to the distribution of paper
control behind the scenes. The "earthquakes before the price eruption"
signal analyzes the distribution of control by the various players - some
players being more important than others. It generates an earthquake
(signal) when conditions turn favorable...
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The Bureaucrats In Brussels Make The Government In The U.S. Look Like An Organization Consisting Of Geniuses
Admin at Marc Faber Blog - 55 minutes ago
I do not have a high opinion of the U.S. government, but the bureaucrats in
Brussels make the government in the U.S. look like an organization
consisting of geniuses. - *in a recent Bloomberg interview* Marc Faber is
an international investor known for his uncanny predictions of the stock
market and futures markets around the world.
I Don't See This As A Great Time To Buy Stocks At All
Admin at Jim Rogers Blog - 58 minutes ago
The economy is going to be bad within the foreseeable future, and the
markets look ahead. I don't see this as a great time to buy stocks at all.
*Related: SPDR SP 500 Index (SPY), IShares Emerging Markets ETF (EEM),
iShares Russell 2000 Index ETF (IWM) *
*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 Bloomberg and CNBC.*
The Case For a 1987 Like Crash
Admin at Marc Faber Blog - 3 hours ago
Yes, if you look at the statements by corporations, it is very clear.
Earlier on, you had a commentator who said the exports to Europe from the
U.S. are irrelevant. I agree with that. What is relevant are the businesses
of American corporations in Europe and the earnings they derive from these
businesses. That is definitely slowing down. The revenue growth is slowing
down and, in my view, you will have more and more corporations that report
earnings that are actually good but they do not exceed expectations...
The bottom line is I think the market will have difficulty moving up
stro... more »
Earthquakes Before The Price Eruption In Silver Coming
Eric De Groot at Eric De Groot - 3 hours ago
Silver will be the key to timing precious metals in the coming weeks.
Silver diffusion index which surged to 75 suggests massive inflows (long
buying and short covering) into price weakness by the invisible hand (see
chart 1). This is extremely bullish. Chart 1: Silver London P.M Fixed and
the Silver Diffusion Index (DI) The invisible hand while focused and busy
may not be...
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The Invisible Hand Will Do Its Magic
Admin at Jim Rogers Blog - 4 hours ago
"We don't need more bankers. What we need are more farmers. The invisible hand will do its magic." - *in CBS Market Watch * *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 Bloomberg and CNBC.*
Cashin On "The Rationality Put"
Many
floor types think that there is a kind of “rationality put” in the
markets. It evolved in the post-Lehman chaos. The premise goes something
like this: world leaders were shocked and stunned by the scope and
size of the nearly instant damage from Lehman’s fall. That shock caused
them to rescue AIG, a far, far bigger project than Lehman. Since then,
central banks and governments have stepped in quickly as each new
crisis emerged. However, as UBS' Art Cashin notes somewhat ominously,
the Greek exit / Euro-breakdown risk has made it hard to exercise a “rationality put” if things turn irrational beyond your control."I Ain't Gonna Work On Angie's Farm No More" - Bob Dylanopoulos
I am asked, from time-to-time, why I write about Europe with such frequency. The answer is quite simple; there is nothing more important, nothing that will have a greater impact upon the world’s financial system, nothing that will impact any and all markets more than what is transpiring on the Continent. It is a grand experiment gone bad, a Federalist’s dream floundering in the dust, a vision of Heaven that is being dragged through the narrow gates of Hades and there is no longer any painless way home if home is to be found at all. The notion that there is some sort of decoupling in the marketplace between America and Europe is an adage quoted by the village idiots for the fools listening in the town’s square; nothing more than that.Spot The Odd One Out
The
major US financial stocks have generally rolled over heavily post
their stress-test exuberance, catching up to credit's much more sombre
reality the whole time, however - who is right? There remains massive
divergences among stock performance, e.g. Morgan Stanley -4.9% YTD or
Bank of America +35% YTD and while some individual names have caught up
to their credit pricing, US financial stocks have yet to catch up to
the reality that broad US financial CDS markets have been pricing for
two months...JPM "Retires" Ina Drew, Appoints Former LTCM Trader And Chairman Of Treasury Borrowing Advisory Committee As Replacement
As reported yesterday, here it is officially:- JPMORGAN SAYS INA DREW TO RETIRE; MATT ZAMES NAMED NEW CIO
- JPMORGAN SAYS DANIEL TO STAY CEO OF EUROPE/MIDEAST/AFRICA
- JPMORGAN SAYS CAVANAGH TO LEAD TEAM OVERSEEING RESPONSE TO LOSS
- JPMORGAN CHASE SAYS ZAMES NAMED NEW CIO
Now... Matt Zames... Matt Zames... where have we heard that name before... OH YES: he just happens to be the Chairman of the Treasury Borrowing Advisory Committee, aka the TBAC, aka the Superommittee that Really Runs America. The Matt Zames who... "previously worked at hedge fund Long-Term Capital Management LP, may have benefited as the collapse of Lehman Brothers Holdings Inc. and JPMorgan’s takeover of Bear Stearns Cos. left companies and hedge funds with fewer trading partners in the private derivatives markets." In other words, the US Treasury is telegraphing it is now firmly behind JPM.
JPM Blowtorching Continues As IG Surge Refuses To End
As
first pointed out here last week, IG9 10Y credit risk has pushed
nothing but wider since the JPM news broke. Between the size,
common-knowledge, and technical richness of the position, liquidity is
providing its helping hand as the legacy credit index is now 25bps worse than last week's lows (and 17bps worse than when JPM announced)
- while the on-the-run IG18 is only 10bps wider over this period.
Extrapolating the $200mm DV01 we assumed from the initial announced loss
and spread movement, this is potentially an additional $3.4bn loss for JPM already
(who we can only assume have been trying to unwind). Until the skew
(the spread between the index and its components) narrows further -
which it is today (though momentum will take over at some point in the
index itself) - it is likely that the runaway train will keep going and going, until JPM issues a formal announcement
that the firm is fully out of the trade, together with a final tally of
its losses, which will probably be double the reported loss as of
Thursday. Here is the good news: we are 100.4% certain
JPM was the ONLY prop trading bank to be massively, massively short
IG9-18 into this epic blow out. Because if other had suffered billion
dollar losses, they would all pull a Jamie Dimon and fess up. Right? Today’s Items:
Some time ago, I said that the euro was
destined to fail because divergent economies using the same currency
cannot last. Well, the recently public debate on, not just Greece, but
Spain, Portugal, and perhaps, Italy leaving the Euro-zone is starting to
gain traction. After all, why the hell would the economic engine of
Germany want to seriously drag these money leaches around? With that
said, the promises of fiscal relief are going to drag down the rest of
the Euro-Zone as well. So, Germany will lose even as Merkel has suffered
a crushing defeat in Sunday’s elections.
Well folks, it looks like JP Morgan may
have lost more than $2 billion dollars. They may have been downgraded by
S&P and Fitch. They may be under investigation. So, who can they
blame… In the end, they have to blame Sugar Daddy Benji Bernanke’s
policies. Without him, they would not have been forced to go gambling,
and lost big, on the euro crisis to meet earning requirements. How big?
We will see.
In recent weeks, gold and silver prices
have fallen and they will undoubtedly continue to fall as everyone races
to the the false security of the dollar based assets; however, those
who are physically stacking, and prepping, will be vindicated when the
dollar fails because of the expanding debt obligations. The idea is to
not pay attention to how much gold and silver is, in terms of dollars,
but how many ounces or pounds you have; therefore, keep stacking.
Next…
Americans Stashing Cash at Home as Mistrust of Banks Spreads
http://www.naturalnews.com
http://www.guardian.co.uk
Americans Stashing Cash at Home as Mistrust of Banks Spreads
http://www.naturalnews.com
http://www.guardian.co.uk
After the tsunami hit Japan on March
11th, many private safes, filled with cash and valuables, were washed
away. Americans are following the Japaneseby keeping money at home
because of the same reasons.
1. Mistrust of banks ethics – especially the MF Global debacle.
2. Outrageous fees with virtually no interest on money in banks
3. The eventual bank holiday
Safe sales have increased 40% from just a few years ago. Perhaps, for the long run, owners may fill those safes with gold and silver.
1. Mistrust of banks ethics – especially the MF Global debacle.
2. Outrageous fees with virtually no interest on money in banks
3. The eventual bank holiday
Safe sales have increased 40% from just a few years ago. Perhaps, for the long run, owners may fill those safes with gold and silver.
The latest executive order signed by
Obama now permits United Nations rules and regulations to take root in
local communities. Obama’s latest escapade shows where his loyalties lay
and it is not with the U.S. or the Constitution he swore to protect and
defend. This is a sneak attack and it will not be publicized in the
mainstream media.
This stuff is just too incredible to make
up folks… A report from the Government Accountability Office on the
Pentagon’s study of it’s study about studies from 2010, concluded that
it was a flop. In addition, a Pentagon report concurs with the GAO
report on the Pentagon’s study about studies on studies. Now, if that
confuses you, consider the amount of tax dollars involved in this.
Sounds like another prospect for another study.
Greece Virtually Out Of Cash One Day Before Critical Bond Maturity
Things are moving fast now."Is It One Of Those May’s Again?" - Goldman's Jim O'Neill Frazzled That Reality Refuses To Go Away
Just because it is always amusing to watch the cognitive dissonance in the head of a permabull, here is Jim 'Soon to be head of the BOE... allegedly' O'Neill's latest missive to (what?) GSAM clients. Yes, the same O'Neill who week after week, letter after letter kept on saying that 2012 is nothing like 2011, finally being forced to admit that 2012 is, as we have been saying since January 1, nothing but 2011, as the central planners' script writers prove painfully worthless at coming up with anything original. That, of course, and that the lifelong ManU fan had to suffer the indignity of interCity rivals picking up the trophy this year after a miraculous come back win against QPR. Oh, the horror...Gold Negative YTD In Dollars But Bull Market Not Over - Morgan Stanley
While gold is now negative year to date in dollar terms, it remains 0.7% higher in euro terms. Gold prices dropped 3.7% last week and silver fell 5.1% to $28.89/oz. The smart money, especially in Asia, is again accumulating on the dip. Demand for jewellery and bullion in India has dipped in recent weeks but should resume on this dip – especially with inflation in India still very high at 7.23%. Also of interest in India is the fact that investment demand has remained robust and gold ETF holdings in India are soon to reach the $2 billion mark. This shows that recent gold weakness is primarily due to the recent bout of dollar strength. Morgan Stanley has said in a report that gold’s bull market isn’t over despite the recent price falls. Morgan Stanley remains bullish on gold as it says that the ECB will take steps to shore up bank balance sheets, U.S. real interest rates are still negative, investors have held on to most of their exchange traded gold and central banks are still buying gold.The Canary In Spain's Coalmine - On Bankia's Downfall
Last week, the Spanish government carried out the biggest financial bailout since the outbreak of the economic crisis. BFA-Bankia (BKIA), the giant which resulted from the merger of seven savings banks only a year and a half ago, was nationalized by Prime Minister Mariano Rajoy’s government through the conversion of a 4.5 billion euro holding of preferential shares into equity. As part of the bailout, and as part of a more comprehensive effort to reform the country’s ailing financial sector announced on Friday, the bank will need to provision additional taxpayers’ money (7-10 billion), which will come in the form of contingency bonds (CoCos). Bankia has put Spain’s financial system under scrutiny from investors and analysts worldwide who worry about the country’s capacity to strengthen its banks while adopting harsh fiscal consolidation policies in the midst of a recession. However, among the many questions raised by Bankia’s nationalization in extremis, there is one that cannot go unanswered: who is responsible?Daily US Opening News And Market Re-Cap: May 14
The failure to form a coalition government in Greece this weekend has prompted risk averse trade across the asset classes this morning with publications across Europe continuing to speculate about the potential exit of Greece from the Euro-area. As a result of this the Spanish 10yr yield touched 6.2% and the respective spreads over benchmark bunds in Spain and Italy have traded as wide as 30bps so far today. The knock on effect has been a sell-off in the financials which has seen the IBEX and FTSE MIB under perform in the equity markets with a relative safe-haven bid into the USD weighing on crude futures and precious metals. Spanish t-bill auctions and a variety of lines tapped out of Italy did stem the tide after selling around the top end of their indicative ranges but focus will remain solely on Greece given a lack of tier 1 data out of the US. Moving forward the next meeting of party heads in Greece is scheduled to commence at 1730BST, however, the head of the Syriza party has already indicated he will not be attending with the leader of the democratic left suggesting he is doubtful that a coalition can be formed.JPMorgan Estimates Immediate Losses From Greek Exit Could Reach 400 Billion
While our earlier discussion
of the implications of Greece's exit from the Euro are critical reading
to comprehend the real-time game of chicken occurring in front of our
eyes, JPMorgan's somewhat more quantifiable estimates of the costs and contagion, given the results of the Greek election have raised market expectations of an exit of Greece from the Euro, also provide key indicators and flows
that should be monitored. Identifying what has gone wrong with Greece's
co-called 'adjustment' program, they go on to identify key
transmission mechanisms to Spain and Italy, how it could potentially
improve (Marshall-Plan-esque) and most critically, given the
exponentially growing TARGET2 balances, if and when Germany throws in the towel. Immediate (cross-border claims) losses are estimate at around EUR400 billion, but the
EUR1.4 trillion of Italian and EUR1.6 trillion of Spanish bank domestic
deposits is the elephant in the room which a Greek exit and the
introduction of capital controls by Greece has the potential to
destabilize.Please support our efforts to keep you informed...
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