brainstorming tuesday

the X-mas rally is on and will be supported by a very benign New Moon the next days til year end with the full support of all central banks who without any shame work for the bankers profit pools only while cheating and lying to the public.

this will become a weird rise against any sane and sound reason just to make some money on paper for wallstreet and despite the fact that a rise is due briefly the VIX has already reached alert levels with 23 but technically we need 2 lower closes to get to the 12 count and important 13 thereafter. Hence we will move towards the 20 level within this insanity.

We will rise to the 1275-80 level over this X-mas rally, could go as high as 1300-10 on a second layer before the ugly part starts to 1000 as a first target. The next days is uptil next Friday, thereafter it will get a bit tricky again bt overall the rally should last for 2 weeks but could even go for 4-5 with some counter-moves starting early Jan.

Despite all the calls for the ECB to do QE’s ironically they are already done in big size plus the Bundesbank it self just did 450 bil Euro on top of the 3 tril of the ECB. The system is so broken that they have done that secretly and against their mandate. There is not much o be done other for the ECB to go below 1 % and print even more but the effects are random from now on and rather counter productive.


Deus Ex LTRO

Submitted by Tyler Durden on 12/20/2011 – 11:31Belgium Bond China Counterparties Creditors default European Central Bank FranceInternational Monetary Fund Ireland Italy Mark To Market MF Global Portugal Private Equity Repo Market Risk Management Sovereign Debt Yield Curve

So the market has completely latched on to the idea that LTRO is back-door QE. Does this make any sense and can it even work? So banks can borrow money for up to 3 years from the ECB.  They can buy sovereign bonds with that money.  Those bonds would be posted as collateral at the ECB. The bull case would have banks buying lots of European Sovereign Debt with this program. The purchases would be focused on Italian and Spanish bonds with maturities less than 3 years. Buying bonds with a  maturity longer than the repo facility is risky.  The banks would need to be assured they can roll the debt at the end of the repo period.  Some may be convinced, but the bulk of the purchases will be 3 years and in so that they loans can be repaid with the redemption proceeds. So banks buy the bonds and earn the carry and all is good?  Not so fast. The LTRO can help the banks with their existing funding problems without a doubt, but it is unclear that encourages new bond purchases. I think we have already seen the initial impact.  There will be significant interest in tapping the LTRO for existing positions.  Some small amount of incremental purchases may occur at the time, but the banks will use this to finance existing positions. Now we will wait to see rates do well, but will be disappointed.  The big banks with risk management departments will decide to decline.  The risk/reward just won’t be attractive to them. In the end, this won’t do much for the sovereign debt market, but will shine a spotlight on which banks should be shorted and will possibly expedite their default.


~ by behindthematrix on December 20, 2011.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: