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MAJOR DERIVATIVE MELTDOWN ALERT

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General Electric comes to the begging bowl

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

 

GE to Use Fed’s Commercial Paper Facility Next Week (Update1)

By Rachel Layne and Scott Lanman

Oct. 23 (Bloomberg) -- General Electric Co., the biggest U.S. issuer of commercial paper, plans to use the Federal Reserve’s new short-term funding facility when it starts next week.

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Is there any info on this spa on the web?

 

Not that I know of, I read that much stuff on the net I can't remember where I got the info from but I know it did n't give any details. A quick search does n't reveal anything either. I'd imagine with a long standing reputation and a business like his he probably has the right client base to not have to advertise.

 

Ready 2 Invest of Brighton are promoting a development in a wine growing region to the North of Argentina near the andes, or perhaps that should be changed to "were" now.

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Picked this up from another forum:

 

............

 

Guys, I'm beginning to be of the opinion that the true capitulation is yet to come and that is indeed coming.

 

I wonder what CBs can still do to stop this, other than stopping the whole derivatives market and nationalizing all the big banks in the world.

 

What a great post. Very nice :D

I wish I had more time right now to keep up with you guys :(

 

I have been amazed that after a small house price drop, some people started talking "time to buy". I find the same thing with stocks. IMO it's a long way from the bottom.

I don't really understand why they would go up given my view that the economy worldwide is only just starting its long slide down.

 

I don't think the CBs can do a damn thing except chain themselves to the sinking ship. By doing so they have doomed much more.

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What a great post. Very nice :D

I wish I had more time right now to keep up with you guys :(

 

I have been amazed that after a small house price drop, some people started talking "time to buy". I find the same thing with stocks. IMO it's a long way from the bottom.

I don't really understand why they would go up given my view that the economy worldwide is only just starting its long slide down.

 

I don't think the CBs can do a damn thing except chain themselves to the sinking ship. By doing so they have doomed much more.

 

 

Netwriter, in case missed on another thread how low are you targeting for the PMs in the race to the bottom?

Take the opportunity to add the Yen is really starting to perform <_<

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WaMu CDS settlement payout $0.43 on the buck.

 

 

http://www.bloomberg.com/apps/news?pid=new...id=a21h5cpBspUM

Oct. 23 (Bloomberg) -- Sellers of credit-default swaps protecting against a default by bankrupt Washington Mutual Inc. will pay 43 cents on the dollar after the biggest bank failure in U.S. history.

 

An auction held among 14 dealers today set a value of 57 cents on the dollar for WaMu senior bonds, less than the 63.6 cents after the first round and lower than where the bonds were trading yesterday. The auction determines how much investors who bought default protection in the credit-default swaps market can claim.

 

I really do believe this - and the forthcoming Icelandic bank auctions, not to mention corporate defaults - is what'll tip the US over the edge insofar as the Treasury coughing up more and more dosh is concerned. They're in up to their necks now. The financials are completely ignoring the credit market's "recovery". Be interesting to see if these CDS contracts are worth the paper they're written on come Q1 2009 if the Treasury refuses to let the banks pay out on the protection they've sold to speculators.

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IMO this Argentina business is very BAD BAD BAD. Argentina has gone from having a fundamentally good fiscal position to being a basket case in record time.

 

You have to have sympathy with the Argentinain, how many times have they been through the mill? They went through all this not so long ago. I sure that they are not fooled by their leaders statements. Time for Cgnao to dig out that marvelous video of the Argies banging on their saucepans again.

 

Argentina's economy is very cyclical, both due to the dependence on commodities and the completely idiotic government. (Though those of us in more "developed" countries probably shouldn't feel too superior on the latter front.) But neither of those things is really a major negative for visitors, particularly if your destination is outside of BA. Casey and Bonner weren't starting a bank, but rather a resort, and if the Argentine government wants to destroy the financial system and make things even cheaper for people with currencies other than the peso, that's not good for the citizens of Argentina but it's probably a wash for people interested in vacationing there.

 

That would all be more comforting if I thought the governments of the West were more ethical than the Argentine one, as opposed to slightly less brazen or less desperate. We may yet see nationalization in some form of privately held retirement portfolios in at least the US.

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Financial Ebola has now spread to the foreign exchange market. This is the mark of the derivative beast.

 

http://www.bloomberg.com/apps/news?pid=206...;refer=currency

Gulf Bank May Have Loss as Derivatives Contracts Sour

 

Oct. 26 (Bloomberg) -- Gulf Bank KSC, Kuwait's fourth- biggest lender by market value, may suffer losses after some clients defaulted on derivative contracts linked to the euro, sparking concern regional banks may be further hit by the global financial crisis.

 

The losses were incurred on currency derivatives after a decline in the value of the euro versus the dollar, state-run Kuwait News Agency said today, citing central bank governor Salim al-Sabah. Gulf Bank will have to absorb the losses until an agreement can be worked out between the bank and its clients, the news agency cited the central bank governor as saying.

 

The defaults will have ``no major'' financial effect, Chief Executive Officer Louis Myers said today. He declined to comment on the size of the losses.

 

...

 

``This is certainly unwelcome news,'' Ali Khan, head of equities trading at Arqaam Capital Ltd., said in a phone interview from Dubai. ``If this trend were to gain momentum and other banks started reporting similar defaults then we would have a much bigger issue to deal with,'' he said.

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Financial Ebola has now spread to the foreign exchange market. This is the mark of the derivative beast.

 

 

The defaults will have ``no major'' financial effect, Chief Executive Officer Louis Myers said today. He declined to comment on the size of the losses.

 

well i think we all now know what happens when they say things like this.

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WaMu CDS Settlement:

 

NEW YORK--(BUSINESS WIRE)--Oct. 24, 2008--The Depository Trust &

Clearing Corporation (DTCC) announced today that, based on gross and

net positions maintained at its Trade Information Warehouse

(Warehouse) relating to the Washington Mutual Inc. (WaMu) credit

event, the net funds to be transferred on outstanding single-name

credit default swaps from net sellers to net buyers of protection are

expected to be approximately $1.3 billion in U.S. dollar equivalents.

 

WaMu is also a component in approximately 35 indices serviced by

the Trade Information Warehouse, with component percentages ranging

from 0.80% to 4.17%. These positions will be incorporated into the net

settlement requirements for buyers and sellers of protection between

now and November 7, the settlement date for the WaMu credit event.

 

DTCC will announce final net

funds transfer results at the time of settlement for these three

entities, Landsbanki Islands hf, Glitnir Banki hf and Kaupping Banki

hf. Cash settlement for the three banks is scheduled for November 20,

2008.

 

Information on the three banks is as follows:

 

-0-

*T

Reference Event Auction Gross Net

Entity Determination Date Notional Notional

Date Value Value

(USD eq.) (USD eq.)

----------------------------------------------------------------------

Landsbanki Islands hf October 8, November $19.2 $1.8

2008 4, 2008 billion billion

----------------------------------------------------------------------

Glitnir Banki hf October 8, November $17.5 $2.0

2008 5, 2008 billion billion

----------------------------------------------------------------------

Kaupping Banki hf October 9, November $34.3 $3.8

2008 6, 2008 billion billion

----------------------------------------------------------------------

*T

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DOUBE POST, but this is the mark cg's favourite beast:

 

http://business.scotsman.com/banking/RBS-s...s-it.4634221.jp

RBS silent on claims it faces a £10bn hit on toxic assets from ABN deal

...

Published Date: 28 October 2008

By Erikka Askeland

...

WRITEDOWNS at the Royal Bank of Scotland are set to blast through the £10 billion barrier this year, analysts warned last night.

...

It is largely the result of the decline in the value of special credit derivative assets designed and sold by ABN Amro, which RBS bought last year.

...

COMMENTS:

3

Jocky,

Aberdeen 28/10/2008 08:08:04

Aswell as handing back all the seven figure bonuses he received in recent years, Fred Goodwin should also:

1. Be stripped of his 'Sir' title for 'services to the Banking Industry' immediately, given the massive failures he has presided over, and

2. Be stripped of his title as 'Fellow of the Institute of Bankers', for bringing the Insitute into disripute per their ethical standards 'Professionalism':

'Financial services practitioners need to be professional to ensure that customers receive the highest standards of service and that their employer’s reputation is upheld'. What reputation does RBS have now? - zero!!

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Here's another one for you junkies - this comes from someone who used to sit on the UK BOE interest rate setting panel !!

 

http://blogs.ft.com/maverecon/2008/10/arbitrage-at-last/

 

October 24, 2008

Arbitrage at last!

Achim Duebel sent an interesting nugget in the form of this advertisement from Citibank in Germany. Those of you who read German can see the evidence here, where financial engineering meets the New Paradigm (remember the New Paradigm - from the bubble before last?).

 

Those of you who never learnt to sing “Die Lorelei”, will have to take it on faith that the ad says:

 

Loans for 3.99%

Deposits for 5.15%.

“But Heinrich, you are making a loss on every euro invested in your bank. ”

 

“Sure do, but just look at the turnover!”

 

As Achim put it: we must already be in paradise …

 

link to Citibank advert - http://www.citibank.de/DEGCB/JPS/portal/Index.do

- its in German (I think) - GF might like it !!

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There's an interesting comment below the FT Article;

 

This is no free lunch for the individual because of income tax.

 

As an individual you don’t get a deduction for the interest expense from your taxable base.

 

Therefore the arbitrage, even with a generous 30% income tax rate is a losing proposition.

 

Euro 50k * ((5.15% * 0.7) - 3.99%) = (192)

 

Now if you can legally avoid the income tax because you are non German tax resident, and elect to pay your local income tax under the European Savings Directive rules, you might just have a winning proposition depending on the local tax rate.

 

Note this is very different to illegal evasion where you take up this generous offer, claim not be German Tax resident, and then don’t tell your local tax authorities about your offshore income.

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This is the mark of the derivative beast

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Fed Opens Swaps With South Korea, Brazil, Mexico, Singapore

 

By Craig Torres and William Sim

 

Oct. 29 (Bloomberg) -- The Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore to boost the liquidity of dollars in emerging markets.

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This is the mark of the derivative beast

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Fed Opens Swaps With South Korea, Brazil, Mexico, Singapore

 

By Craig Torres and William Sim

 

Oct. 29 (Bloomberg) -- The Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore to boost the liquidity of dollars in emerging markets.

possibly a dumb question:

Do these swap lines increase the reserves of US banks? (which are then fractionally-reserve inflated?)

 

 

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possibly a dumb question:

Do these swap lines increase the reserves of US banks? (which are then fractionally-reserve inflated?)

 

They are exclusively used to manage manipulate exchange rates and postpone the implosion of tens of trillion $ in currency derivatives.

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The beast has long grown larger than major banks and it is now larger than nations and central banks.

 

http://www.telegraph.co.uk/finance/comment...is-spreads.html

 

IMF may need to "print money" as crisis spreads

The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money.

 

By Ambrose Evans-Pritchard

Last Updated: 1:22PM GMT 28 Oct 2008

 

The Fund is already close to committing a quarter of its $200bn (£130bn) reserve chest, with a loans to Iceland ($2bn), Ukraine ($16.5bn), and talks underway with Pakistan ($14.5bn), Hungary ($10bn), as well as Belarus and Serbia.

 

Neil Schering, emerging market strategist at Capital Economics, said the IMF's work in the great arc of countries from the Baltic states to Turkey is only just beginning.

 

"When you tot up the countries across the region with external funding needs, you get to $500bn or $600bn very quickly, and that blows the IMF out of the water. The Fund may soon have to start calling on the West for additional funds," he said.

 

Brad Setser, an expert on capital flows at the Council for Foreign Relations, said Russia, Mexico, Brazil and India have together spent $75bn of their reserves defending their currencies this month, and South Korea is grappling with a serious banking crisis.

 

"Right now the IMF is too small to meet the foreign currency liquidity needs of the larger emerging economies. We're in a dangerous situation and there is the risk of extreme moves in the markets, as we have seen with the Brazilian real. I hope policy-makers understand how serious this is," he said.

 

The IMF, led by Dominique Strauss-Kahn, has the power to raise money on the capital markets by issuing `AAA' bonds under its own name. It has never resorted to this option, preferring to tap members states for deposits.

 

The nuclear option is to print money by issuing Special Drawing Rights, in effect acting as if it were the world's central bank. This was done briefly after the fall of the Soviet Union but has never been used as systematic tool of policy to head off a global financial crisis.

 

"The IMF can in theory create liquidity like a central bank," said an informed source. "There are a lot of ideas kicking around."

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Huge tremors in the government bond market.

 

A bond panic can be postponed for a little longer but not avoided.

 

Skyrocketing long term yields will blow up hundreds of trillion $ in credit and interest rate derivatives.

 

This is all you need to know and is 100% correct, guaranteed.

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Qatar Bonds Offer `Opportunity' as Yields Soar: Chart of Day

 

Oct. 29 (Bloomberg) -- Qatar bond yields have soared to their highest levels in six years, making the debt cheap, according to Mohieddine Kronfol, who helps manage about $1 billion in assets at Algebra Capital Ltd. in Dubai.

 

The CHART OF THE DAY compares Qatar's $1.4 billion of 9.75 percent bonds repayable in 2030 with the 30-year U.S. Treasury security. The yield on the Qatar bond has climbed to about 7.81 percent from as low as 5.22 percent in February, driving the gap to U.S. government debt to a seven-year high of 365 basis points.

 

``The spread on this bond is showing the lack of liquidity, and general nervousness among investors,'' Kronfol said. ``Qatar has an excellent financial position with absolutely no risk of default. I definitely see an opportunity here.''

 

Qatar has ``very solid banks, highly capitalized, highly liquid, and nothing needs to be done by the central bank,'' Qatar's central bank governor, Abdulla Bin Saud al-Thani, said today in Dubai. ``We have a lot of instruments at our disposal to intervene in the market.''

 

Qatar is rated Aa2 by Moody's Investors Service and AA- by Standard & Poor's.

 

 

http://www.ft.com/cms/s/0/bcebf04e-a48f-11...0077b07658.html

Austria abandons its bond offering

 

Published: October 28 2008 02:00 | Last updated: October 28 2008 02:00

 

Austria, one of Europe's stronger economies, cancelled a bond auction yesterday in the latest sign that European governments are facing increasing problems raising debt in the deepening credit crisis.

 

The difficulties of Austria, which has a triple A credit rating, highlights the extent of the deterioration, which saw benchmark indicators of credit risk such as the iTraxx index hit fresh record wides yesterday.

 

Austria is the fourth European country to cancel a bond offering in recent weeks amid growing worries over its exposure to beleaguered eastern European economies such as Hungary.

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Netwriter, in case missed on another thread how low are you targeting for the PMs in the race to the bottom?

Take the opportunity to add the Yen is really starting to perform <_<

 

Ooops, I missed your post !

 

Low for gold ? We've had it. GoldUS$=685.

Target ? GoldUS$10,000.

 

My view is a simple one. Either they inflate, and we get 'high' inflation, or they fail, and we get systemic collapse.

Either way, I'm holding on tight to my gold :D

 

I hope the Yen do well and I can get out before the banks collapse.

 

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$10,000 is a figure I have been playing with as well. Let's hope we're both right.

 

Ooops, I missed your post !

 

Low for gold ? We've had it. GoldUS$=685.

Target ? GoldUS$10,000.

 

My view is a simple one. Either they inflate, and we get 'high' inflation, or they fail, and we get systemic collapse.

Either way, I'm holding on tight to my gold :D

 

I hope the Yen do well and I can get out before the banks collapse.

 

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Another nail in the coffin.

 

http://online.wsj.com/article/SB122532365317982209.html

OCTOBER 30, 2008

 

U.K. Bank Bailout Risks Overrun of Planned Cost

 

Treasury Chief to Discuss Funding With Small-Business Representatives; Setting the Stage for More Government Borrowing

 

LONDON -- The U.K. financial-sector bailout plan, used as a model around the world, is looking increasingly expensive for the government that launched it.

 

As HBOS PLC and Royal Bank of Scotland Group PLC prepare to issue new shares in a capital-raising effort underwritten by the government, the latest bout of market turmoil has sent the banks' share prices below the level at which they plan to sell them. That means private investors could be less likely to participate, potentially forcing the government to pony up the full £23.5 billion ($37.4 billion) required to buy the stakes of ordinary shares.

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The new "rules" allow them to value dead "assets" at full face value but they can't sell them to anyone at any price.

 

Ignoring cancer and failing to remove the tumour quickly and aggressively only hastens the onset of fatal metastasis.

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Deutsche Bank Reports Profit as New Rules Limit Writedowns

 

Oct. 30 (Bloomberg) -- Deutsche Bank AG, Germany's biggest bank, reported a surprise third-quarter profit after new accounting rules allowed it to book fewer asset writedowns.

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