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While the FOMC Minutes due out in less than an hour is what everyone is looking forward to, the big surprise announcement of the day was the repeat of a rumor released initially 6 months ago, namely that the ECB is considering negative deposit rates – a concept we first speculated about back in June of 2012. Alas, just like last time, the latest incarnation of the NIRP rumor appears to be merely more hot air (and certainly will be exposed as such once the non-compliant mostly German ECB members hit the tape). One person who says not to hold your breath for an ECB negative rate, is Citi’s Valentin Marino, who says not only is a negative deposit rate unlikely before the results of the AQR and stress tests as it would accelerate bank deleveraging, but that it “could worsen the pervasive credit crunch and add to the growth headwinds and deflation risks in in the currency block. It would erode investors’ confidence in Eurozone’s financial institutions and accentuate their relative underperformance.” 

Which of course makes sense: just like in the summer of 2011 when the ECB was leaking rumors left and right just to gauge which would have the highest market impact and be the most sticky (a plan subsequently adopted by Japan in late 2012 and early2013), this is just a “market test” by the ECB to see how much credibility its jawboning still has with the market, and how much of an impact it could derive should it truly go down this unprecedented path (which by the way would incinerate the European money market and crush short-dated funding).

But for now, following today’s 100 pip drop in the EURUSD, it appears to have saved European corporations for at least one more day (recall earlier today we reported just how crushed European corporate profits have been as a result of the soaring Euro). Tomorrow is another day.

Finally, there is another issue: should the ECB overshoot and send the Euro plunging, then that scary spectre of the summer of 2012, redenomination risk, would promptly arise again, setting off a chain reaction that would necessitate the “use” of that non-existant ECB deus ex machina, the OMT – something absolutely nobody in the ECB would be willing to risk, especially not with the German constitutional court decision still pending.

Full note from Citi:

EUR and the ECB – this time may mean business

 

Recent media reports indicated that the ECB is considering introducing negative rates of 0.1% on banks’ excess cash. The measure remains highly controversial ahead of the Eurozone banks’ AQR and stress tests. The headlines do highlight the resolve of the Governing Council to respond to persistent disinflation on the back currency appreciation. This should keep EUR under pressure going into the December policy meeting.

 

EUR came under selling pressure following media reports that the ECB is deliberating negative rates of -0.1%on the banks excess cash. If confirmed the policy should be seen as very negative for EUR with investors effectively being paid to spend EUR cash. Weaker EUR could help stimulate Eurozone exports and growth.

 

The above being said, we suspect that the measure remains highly controversial given concerns about the impact of the measure on banks’ profitability and willingness to lend. The amount of excess liquidity in the Eurozone is EUR174bn at present which implies losses of more than EUR170mn (Figure 1). 

 

A potential penalty could lead to accelerated deleveraging by Eurozone banks ahead of the Asset Quality Review (AQR) and stress tests next year. The measure could worsen the pervasive credit crunch and add to the growth headwinds and deflation risks in in the currency block. It would erode investors’ confidence in Eurozone’s financial institutions and accentuate their relative underperformance. All that could reflect badly on EUR (Figure 2).

 

We think that the ECB may want to wait for the outcome of AQR and the stress tests for the Eurozone banks before considering the negative deposit rate measure. Going into the December meeting the Governing Council may consider some of the options below. All that should keep the cyclical headwinds for EUR firmly in place:

1/ LTRO – the Governing Council could indicate it is working on a long-term refinancing program that will help anchor rate expectations, alleviate any liquidity pressures in the Eurozone banking sector ahead of AQR and stress tests and avoid renewed funding tensions in the periphery. So far the Governing Council has been rather vague about any new long-term liquidity measures so that the timing of the announcement could come as a dovish surprise and could weigh on euro.

 

2/ QE – Indications that the Governing Council is looking into more aggressive policy options like QE and negative deposit rates. Recent comments by ECB’s chief economist Peter Praet signaled that such measures could be considered. Media reports over the summer seemed to suggest that the ECB may be looking into buying GDP-weighted amounts of Eurozone bonds potentially in the same way it purchased bonds under the SMP program. Indications by President Draghi that QE is among the options considered alongside LTRO could be perceived as quite dovish and send EUR lower.

 

3/ A refi or depo rate cut or indications that the ECB deliberated more cuts of refi or deposit rate. If the experience of the FOMC or the SNB is anything to go by, the Governing council may opt to introduce a band for the refi rate between zero and 25bp. Negative deposit rates seem less likely to us for the time being. The ECB may want to wait for the outcome of AQR and the stress tests for the Eurozone banks before considering the measure. Signals that more rate cuts are coming could also keep cyclical headwinds in place for the euro.

 

4/ FX market intervention – with the EUR TWI index close to multi-year highs some clients were discussing the possibility of unilateral or concerted intervention in the euro. The ECB engaged in concerted interventions in the FX markets to arrest the sharp EUR depreciation in 2000. The actions came on the back of decisions by Eurozone finance and economy ministers. An FX intervention seems less likely at present given that the G20 countries have agreed to refrain from actions that could target exchange rates. What is more, G20 central banks have agreed to pursue domestic goals (fighting disinflation) by using domestic instruments (no Forex). We suspect that it would take excessive EUR appreciation in combination with severe escalation in market volatility for FX interventions to be considered.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UEa0DR3C_I0/story01.htm Tyler Durden

While the FOMC Minutes due out in less than an hour is what everyone is looking forward to, the big surprise announcement of the day was the repeat of a rumor released initially 6 months ago, namely that the ECB is considering negative deposit rates – a concept we first speculated about back in June of 2012. Alas, just like last time, the latest incarnation of the NIRP rumor appears to be merely more hot air (and certainly will be exposed as such once the non-compliant mostly German ECB members hit the tape). One person who says not to hold your breath for an ECB negative rate, is Citi’s Valentin Marino, who says not only is a negative deposit rate unlikely before the results of the AQR and stress tests as it would accelerate bank deleveraging, but that it “could worsen the pervasive credit crunch and add to the growth headwinds and deflation risks in in the currency block. It would erode investors’ confidence in Eurozone’s financial institutions and accentuate their relative underperformance.” 

Which of course makes sense: just like in the summer of 2011 when the ECB was leaking rumors left and right just to gauge which would have the highest market impact and be the most sticky (a plan subsequently adopted by Japan in late 2012 and early2013), this is just a “market test” by the ECB to see how much credibility its jawboning still has with the market, and how much of an impact it could derive should it truly go down this unprecedented path (which by the way would incinerate the European money market and crush short-dated funding).

But for now, following today’s 100 pip drop in the EURUSD, it appears to have saved European corporations for at least one more day (recall earlier today we reported just how crushed European corporate profits have been as a result of the soaring Euro). Tomorrow is another day.

Finally, there is another issue: should the ECB overshoot and send the Euro plunging, then that scary spectre of the summer of 2012, redenomination risk, would promptly arise again, setting off a chain reaction that would necessitate the “use” of that non-existant ECB deus ex machina, the OMT – something absolutely nobody in the ECB would be willing to risk, especially not with the German constitutional court decision still pending.

Full note from Citi:

EUR and the ECB – this time may mean business

 

Recent media reports indicated that the ECB is considering introducing negative rates of 0.1% on banks’ excess cash. The measure remains highly controversial ahead of the Eurozone banks’ AQR and stress tests. The headlines do highlight the resolve of the Governing Council to respond to persistent disinflation on the back currency appreciation. This should keep EUR under pressure going into the December policy meeting.

 

EUR came under selling pressure following media reports that the ECB is deliberating negative rates of -0.1%on the banks excess cash. If confirmed the policy should be seen as very negative for EUR with investors effectively being paid to spend EUR cash. Weaker EUR could help stimulate Eurozone exports and growth.

 

The above being said, we suspect that the measure remains highly controversial given concerns about the impact of the measure on banks’ profitability and willingness to lend. The amount of excess liquidity in the Eurozone is EUR174bn at present which implies losses of more than EUR170mn (Figure 1). 

 

A potential penalty could lead to accelerated deleveraging by Eurozone banks ahead of the Asset Quality Review (AQR) and stress tests next year. The measure could worsen the pervasive credit crunch and add to the growth headwinds and deflation risks in in the currency block. It would erode investors’ confidence in Eurozone’s financial institutions and accentuate their relative underperformance. All that could reflect badly on EUR (Figure 2).

 

We think that the ECB may want to wait for the outcome of AQR and the stress tests for the Eurozone banks before considering the negative deposit rate measure. Going into the December meeting the Governing Council may consider some of the options below. All that should keep the cyclical headwinds for EUR firmly in place:

1/ LTRO – the Governing Council could indicate it is working on a long-term refinancing program that will help anchor rate expectations, alleviate any liquidity pressures in the Eurozone banking sector ahead of AQR and stress tests and avoid renewed funding tensions in the periphery. So far the Governing Council has been rather vague about any new long-term liquidity measures so that the timing of the announcement could come as a dovish surprise and could weigh on euro.

 

2/ QE – Indications that the Governing Council is looking into more aggressive policy options like QE and negative deposit rates. Recent comments by ECB’s chief economist Peter Praet signaled that such measures could be considered. Media reports over the summer seemed to suggest that the ECB may be looking into buying GDP-weighted amounts of Eurozone bonds potentially in the same way it purchased bonds under the SMP program. Indications by President Draghi that QE is among the options considered alongside LTRO could be perceived as quite dovish and send EUR lower.

 

3/ A refi or depo rate cut or indications that the ECB deliberated more cuts of refi or deposit rate. If the experience of the FOMC or the SNB is anything to go by, the Governing council may opt to introduce a band for the refi rate between zero and 25bp. Negative deposit rates seem less likely to us for the time being. The ECB may want to wait for the outcome of AQR and the stress tests for the Eurozone banks before considering the measure. Signals that more rate cuts are coming could also keep cyclical headwinds in place for the euro.

 

4/ FX market intervention – with the EUR TWI index close to multi-year highs some clients were discussing the possibility of unilateral or concerted intervention in the euro. The ECB engaged in concerted interventions in the FX markets to arrest the sharp EUR depreciation in 2000. The actions came on the back of decisions by Eurozone finance and economy ministers. An FX intervention seems less likely at present given that the G20 countries have agreed to refrain from actions that could target exchange rates. What is more, G20 central banks have agreed to pursue domestic goals (fighting disinflation) by using domestic instruments (no Forex). We suspect that it would take excessive EUR appreciation in combination with severe escalation in market volatility for FX interventions to be considered.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UEa0DR3C_I0/story01.htm Tyler Durden

 

 

The Law demands that we atone

When we take things that we don’t own;

But leaves the lords and ladies fine

Who take things that are yours and mine…

Anonymous, circa 1764

 

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The dice of this moron are loaded

All trust is our system’s eroded

But still he plays on

A Kleptocrat Con

He’ll play till the world has exploded

The Limerick King

 

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We Americans are basically a very simple people.

Our formula for past successes has essentially been distilled as follows: maintain a can-do attitude, believe in the “American way”, honest hard work will be rewarded, abundant opportunity and upward mobility for all.

Those who play the prosperity game correctly may look  forward to retirement in a spleniferous life of leisure and Obamacare.

 Once upon a time, this is is what American Thanksgiving was supposed to look like…

 

 

Most Americans desperately cling to the foolish pipe dream of a notion that this Thanksgiving dream is still possible.

And for some PhD morons who evidently borrow subprime QE money to purchase shitty American vehicles made principally of plastic components sourced in Shenzen, the dream has been fullfilled.

Unfortunately, for reasons far to numerous to enumerate in this post, this is all just a Ponzi Pilgrim’s delusion.

There is one big kahuna of a fucking reason so very plainly obvious.

When it comes to ridding our fucking system of finance, the “fucking system” if you will, of all the learned fucking thieves sitting the top of the fucking Ponzi pyramid, we are hopelessly screwed up each and every one of our Holland and Lincoln Tunnels.

The same cheap fucking QE paper that buys those shitty vehicles will also pay the much ballyhooed $13 Billion JPM shyster fine. Half of JPM’s profits in 2013. 

Gobble fucking Goebbels.

I won’t insult anyone’s fringe low brow intelligence by asking who has been convicted.

In any event, such a scenario is far to fetched to even consider. 

Instead I will pose the following question:

The biggest mo
st egregious case of financial fraud and chicanery by a US banking institution measured by the fiat of the fine.

The biggest fine ever!

“Hoooly Cow!”–Phil Rizutto

Have the regulators who are in charge of the whole JP Clusterfuck (you know the ones who keep getting reappointed, promoted or hired by private equity firms) forced the Shyster in Chief of JP Cesspool to cede his shysterly position by resigning?

Is this something that could have happened? Of course it is.

Don’t believe me?

Go and ask our distinguished colleague Bill Black, Esq what he thinks.

Does the fact that the same schlemiel will remain in charge of the old JP Cesspit send the rest of us a message?

You better believe it does…

Whatcha are you gonna do sisters and brothers?

Sadly, for most of the rest of America it all boils down to this…  

 

Goebbel, Goebbel, Goebbel!

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/h29V1pn_Cfk/story01.htm williambanzai7

From a Zero Hedge reader:

My company, based in California, employs 600. We used to insure about 250 of our employees. The rest opted out. The company paid 50% of their premiums for about $750,000/yr. 

 

Under obamacare, none can opt out without penalty, and the rates are double or triple, depending upon the plan. Our 750k for 250 employees is going to $2 million per year for 600 employees.

 

By mandate, we have to pay 91.5% of the premium or more up from the 50% we used to pay.

 

Our employees share of the premium goes from $7/week for the cheapest plan to $30/week. 95% of my employees were on that plan.  Remember, we used to pay 50% now we pay 91.5% and the premiums still go up that much!!

 

The  cheapest plan now has a deductible of $6350! Before it was $150. Employees making $9 to $10/hr, have to pay $30/wk and have a $6350 deductible!!! What!!!!

 

They can’t afford that to be sure. Obamacare will kill their propensity to seek medical care. More money for less care? How does that help them?

 

Here is the craziest part. Employees who qualify for mediCAL (the California version of Medicare), which is most of my employees, will automatically be enrolled in the Federal SNAP program. They cannot opt out. They cannot decline. They will be automatically enrolled in the Federal food stamp program based upon their level of Obamacare qualification. Remember, these people work full time, living in a small town in California. They are not seeking assistance. It all seems like a joke. How can this be the new system?

 

Pelosi, pass the bill to find out what’s in it? Surprise! You’ve annihilated the working class.

Q.E.D.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/yb6SGIcLPQA/story01.htm Tyler Durden

From a Zero Hedge reader:

My company, based in California, employs 600. We used to insure about 250 of our employees. The rest opted out. The company paid 50% of their premiums for about $750,000/yr. 

 

Under obamacare, none can opt out without penalty, and the rates are double or triple, depending upon the plan. Our 750k for 250 employees is going to $2 million per year for 600 employees.

 

By mandate, we have to pay 91.5% of the premium or more up from the 50% we used to pay.

 

Our employees share of the premium goes from $7/week for the cheapest plan to $30/week. 95% of my employees were on that plan.  Remember, we used to pay 50% now we pay 91.5% and the premiums still go up that much!!

 

The  cheapest plan now has a deductible of $6350! Before it was $150. Employees making $9 to $10/hr, have to pay $30/wk and have a $6350 deductible!!! What!!!!

 

They can’t afford that to be sure. Obamacare will kill their propensity to seek medical care. More money for less care? How does that help them?

 

Here is the craziest part. Employees who qualify for mediCAL (the California version of Medicare), which is most of my employees, will automatically be enrolled in the Federal SNAP program. They cannot opt out. They cannot decline. They will be automatically enrolled in the Federal food stamp program based upon their level of Obamacare qualification. Remember, these people work full time, living in a small town in California. They are not seeking assistance. It all seems like a joke. How can this be the new system?

 

Pelosi, pass the bill to find out what’s in it? Surprise! You’ve annihilated the working class.

Q.E.D.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/yb6SGIcLPQA/story01.htm Tyler Durden

The big trouble in massive China that we discussed here is weighing heavily on the liquidity in the debt-fueled nation. As The FT reports, several banks have had to delay or dramatically reduce Chinese bond issues as the impact of a tight onshore credit market begins to be felt. “China is much more funding dependent than in the past,” warns one analyst, as issuers are dealing with a string of problems stemming from the drying up of interbank market liquidity and fierce competition from wealth management and trust products for investors’ funds. “Government and policy banks have suffered the most. Now pressure is coming to corporates,” one trader pointed out, adding, ominously, “it’s going to end pretty ugly unless PBOC changes its attitude to liquidity;” which, of course, is exactly the situation the 3rd Plenum outline is looking to change.

 

Via The FT,

…

 

“Chinese 10-year Treasury bond yields are at a six-year high and are up about 100 basis points versus a year ago,” said one senior bond banker in Beijing. “CDB’s yields have widened by a bit more than 100 basis points and other corporate bonds are seeing yields rise by 150-200 basis points.”

 

The head of fixed income sales and trading at a European bank in Shanghai said the policy banks pre-disclose their issuance plans, so it is easy to see when they delay. “But for most corporations, they just quietly delay their issues and no one knows that except for the underwriter.”

 

…

 

China is much more funding dependent than in the past – total social financing is set to hit a new record of Rmb18tn-Rmb19tn this year up from the Rmb15.8tn record set last year,” he said.

 

…

 

However, a big problem for Chinese issuers right now is the tougher competition from alternative fixed income investments, such as wealth management and trust products, which offer yields of 8 or 9 per cent and are guaranteed by the issuing banks.

 

Banks are also doing more interbank business because the current tight supply of liquidity means it creates much higher returns than bonds.

 

…

 

Chinese issuers are papering over the difficulties with more offshore issuance, raising a record $51.6bn outside China so far this year, according to Dealogic, a record figure and more than double the $24.5bn raised in the same period last year.

So there it is – if you can’t fund domestically (since the domestic flows are being diverted into higher yielding crazy wealth products by the banks) then you borrow offshore (just like Indian, Indonesian, and Venezuelan firms) because there’s plenty of yield-hungry free-money just choking the pipes of rationality around the world…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uvcBqzvtMaM/story01.htm Tyler Durden

The big trouble in massive China that we discussed here is weighing heavily on the liquidity in the debt-fueled nation. As The FT reports, several banks have had to delay or dramatically reduce Chinese bond issues as the impact of a tight onshore credit market begins to be felt. “China is much more funding dependent than in the past,” warns one analyst, as issuers are dealing with a string of problems stemming from the drying up of interbank market liquidity and fierce competition from wealth management and trust products for investors’ funds. “Government and policy banks have suffered the most. Now pressure is coming to corporates,” one trader pointed out, adding, ominously, “it’s going to end pretty ugly unless PBOC changes its attitude to liquidity;” which, of course, is exactly the situation the 3rd Plenum outline is looking to change.

 

Via The FT,

…

 

“Chinese 10-year Treasury bond yields are at a six-year high and are up about 100 basis points versus a year ago,” said one senior bond banker in Beijing. “CDB’s yields have widened by a bit more than 100 basis points and other corporate bonds are seeing yields rise by 150-200 basis points.”

 

The head of fixed income sales and trading at a European bank in Shanghai said the policy banks pre-disclose their issuance plans, so it is easy to see when they delay. “But for most corporations, they just quietly delay their issues and no one knows that except for the underwriter.”

 

…

 

China is much more funding dependent than in the past – total social financing is set to hit a new record of Rmb18tn-Rmb19tn this year up from the Rmb15.8tn record set last year,” he said.

 

…

 

However, a big problem for Chinese issuers right now is the tougher competition from alternative fixed income investments, such as wealth management and trust products, which offer yields of 8 or 9 per cent and are guaranteed by the issuing banks.

 

Banks are also doing more interbank business because the current tight supply of liquidity means it creates much higher returns than bonds.

 

…

 

Chinese issuers are papering over the difficulties with more offshore issuance, raising a record $51.6bn outside China so far this year, according to Dealogic, a record figure and more than double the $24.5bn raised in the same period last year.

So there it is – if you can’t fund domestically (since the domestic flows are being diverted into higher yielding crazy wealth products by the banks) then you borrow offshore (just like Indian, Indonesian, and Venezuelan firms) because there’s plenty of yield-hungry free-money just choking the pipes of rationality around the world…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uvcBqzvtMaM/story01.htm Tyler Durden