Fed Preparing To Bail Out World Again: WSJ Reports Dollar Swap Lines Likely To Be Reopened By The Fed
Thanks to Leo for pointing out that the WSJ’s Jon Hilsenrath has reported that the Fed is considering reopening swap lines with central banks, likely in conjunction with the rumored rescue package. This is the news that shot the market up in the last 10 minutes of trading as the Fed would never allow the market to close at the days lows, as it was preparing to do. “Apparently New York Fed President Dudley and Vice Chair Don Kohn are in Basel this weekend for an already scheduled meeting with European central bankers. A Sunday announcement seems like a growing possibility.” Lehman weekends are back baby. And with that, we are paging Alan Grayson, who personally had a thing or two to tell the Fed lunatic about bailing out the world ever again without getting prior approval first. (via ZH)
The Chicago Board Options Exchange Volatility Index (VIX), known as the “fear index,” rose on Friday to close at its highest level since April of 2009.
European markets were hammered, with Germany’s DAX closing down 3.27 percent and France’s CAC 40 closing down 2.45 percent.
U.S. stocks fell this week largely because the market was unsatisfied with the response of European governments to their ongoing sovereign debt crisis.
[…]
The announcement of the 110 billion euro bailout package for Greece on Sunday, May 2 proved woefully insufficient in calming the market as the euro has sold heavily against the dollar since Monday.
The markets steadily pressured the sovereign bonds of Greece and other heavily indebted European nations and the cost of insuring these bonds against default also rose.
Deteriorating market conditions were exacerbated by the adverse moves of rating agencies and reports of increasingly violent protests in Greece against austerity measures. (via)
Rogoff was right. This time is different.
History doesn’t repeat, it rhymes.
Reads like August/September ‘08
G7 finance minsters and ministers, ECB and the biggest Eurobanks will hold a telefon conference to discuss the situation. The bailout of Greece didn’t calm sovereign debt markets (via FT germany)
El-Erian from Pimco is right, because the EuroUSD tumbles,
- the USD appreciates - skrewing Obama and his export plans.
- 10yr treasuries risen to 8m high 3.55%.
- And banks fear (internally) haircuts (structured defaul managed via the London Club). Banks are junk since +2yrs, they can’t take any further losses, they have problems raising capital for BASEL III (look out for some low prices assets in the future - deflation), the bailing out Greek government was in reality a bailout of the European banks who hold their debt. But which banker an politician opens his pie hole nowadays for the truth anyway? Who cares? Mainstream media doesn’t care, they report what they are told!
Fri 7th 2010. Who is with me in my assumption that markets will be down tomorrow. Lets say +300 points? At least.
Senate Rejects Brown-Kaufman Proposal To Break Up Largest Banks
The Senate is officially bribed, paid for and in the pocket of the big banks. Too disgusted to even comment on this. This country deserves all that the “big banks” have in store for it.
A year ago, before anyone aside from a hundred or so people had ever heard the words High Frequency Trading, Flash orders, Predatory algorithms, Sigma X, Sonar, Market topology, Liquidity providers, Supplementary Liquidity Providers, and many variations on these, Zero Hedge embarked upon a path to warn and hopefully prevent a full-blown market meltdown. On April 10, 2009, in a piece titled “The Incredibly Shrinking Market Liquidity, Or The Black Swan Of Black Swans” we cautioned “what happens in a world where the very core of the capital markets system is gradually deleveraging to a point where maintaining a liquid and orderly market becomes impossible: large swings on low volume, massive bid-offer spreads, huge trading costs, inability to clear and numerous failed trades. When the quant deleveraging finally catches up with the market, the consequences will likely be unprecedented, with dramatic dislocations leading the market both higher and lower on record volatility.” Today, after over a year of seemingly ceaseless heckling and jeering by numerous self-proclaimed experts and industry lobbyists, we are vindicated. We enjoy being heckled - we got a lot of it when we started discussing Goldman Sachs in early 2009. Look where that ended. Today, we have reached an apex in our quest to prevent the HFT “Black Monday” juggernaut, as absent the last minute intervention of still unknown powers, the market, for all intents and purposes, broke. Liquidity disappeared. What happened today was no fat finger, it was no panic selling by one major account: it was simply the impact of everyone in the HFT community going from port to starboard on the boat, at precisely the same time. And in doing so, these very actors, who in over a year have been complaining they are unfairly targeted because all they do is “provide liquidity”, did anything but what they claim is their sworn duty. In fact, as Dennis Dick shows (see below) they were aggressive takers of liquidity at the peak of the meltdown, exacerbating the Dow drop as it slid 1000 points intraday. It is time for the SEC to do its job and not only ban flash trading as it said it would almost a year ago, but get rid of all the predatory aspects of high frequency trading, which are pretty much all of them. (via Zero-hedge.com)
The longer the windows are open [fiscal and monetary policy], the longer, harder and more painful it will be in the future.
We should not talk about ‘the crisis’, it brings up the wrong emotions. I have to warn about the collective angst and the synthetic creation of panic. We should all ask where is the wall, the wall of possibilities.
The crisis is our own creation of perpetuum mobile.
Indeed, crude is a very volatile commodity and a $2-swing is the norm these days. Factors affecting crude`s volatility are the Euro-USD currency cross, equities rise or fall, global economic news, and to some extent inventory levels, with the a rare case of geo-political news such as Iran injecting a short busting rip higher.
Nevertheless, crude is no longer strictly about the inventory levels, it has become an asset class in itself and trades more like a stock these days, rather than a commodity. That is, when people feel confident bout economic outlook, crude may have a high “P/E ratio” relative to the fundamentals; whereas a perception of uncertainty about the growth prospects globally will send its P/E ratio much lower.
Right now, investors feel positive about the global economy, so crude has a relatively high P/E compared to the market fundamentals including the inventory levels. But an event or series of events that create doubts, like overly aggressive financial regulation, trade-wars, currency and debt crisis, or a significant tightening by the Fed, could send crude oil much lower to a a significantly reduced P/E. (via ZH)
