By Cody Willard
The US Federal Reserve has explicitly come out this morning in favor of redistributing hundreds of billions of more dollars from the working taxpayer to banks in Europe, and that, along with some other economic developments has the markets juice early. But before we all decide that the EU’s biggest banks and their idiot investors have been “saved”, let’s step back and analyze whether any of these market-driving headlines are “game-changers”. Here’s the details, as reported by the WSJ:
The Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements. The move cuts the rate by 0.50 percentage point, with the goal mean to “ease strains in financial markets,” according to the Fed.
So banks can trade their existing temporary US dollar liquidity swap arrangements by one-half-of-one-percent less than they were yesterday. Seriously, that’s supposed to save the EU? No? Then, we’re celebrating because, once again, we are being told that some guys in power are finally getting closer to figuring out how to solve a crisis of their own making that they never saw coming and still don’t understand? Yes.
Here are the captions that were appearing on CNBC while I had it on mute like usual and I happened to look up and see one of the biggie analysts at Goldman who personally helped destroy that once proudly profitable enterprise and turned it into a welfare looting machine in the last decade or so (my comments are in parentheses):
Goldman’s O’Neill: I see circumstances prompting ECB to be more supportive (Rinse and repeat.)
Goldman’s O’Neill: Central Banks have a highly asymmetric bias to help (Understatement of the year. Central banks are stacked with guys who come and go from the same banks they’re constantly feeding welfare to and that does indeed make them incredibly biased. Some might call it corrupt, not just biased.)
Goldman’s O’Neill: This is a sign that Central Banks know when to take action (Really? This is a sign? That’s what we’re betting on now? Signs? If you’ve ever bet on the Federal Reserve “knowing when to take action” you’ve lost everything repeatedly).
Goldman’s O’Neill: I’m very impressed by Central Bank move this morning (I bet you are impressed that they figured out a new way of subsidizing your welfare bank, Goldman Sachs GS, and the others like it, including Bank of America BAC, JP Morgan JPM and so on.)
Goldman’s O’Neill: Central bankers telling us they learned a lot from 2008 (They learned new ways of redistributing a country’s wealth to bankers though stealth bank welfare programs like they announced today that they try to pay with new social austerity programs).
I don’t like to be a bear and I don’t think that the EU collapse matters in the mid- or long-terms for our portfolios. But I still would rather be a seller for the near-term and remain cautious when the markets are convincing themselves that the current system of the EU is fixed.
As for trading, I’m letting our longs run and am looking to buy some more puts on Wells Fargo WFC and Lender Processing Services LPS and perhaps another name or two. I’m also and selling 1/3 of an AMR AMR trade from yesterday, locking in 70% gains from one day’s action from a rare megacap bankruptcy opportunity for a quick trade. Holding the rest til tomorrow and/or Friday.
Link:
http://blogs.marketwatch.com/cody/2011/11/30/now-is-the-time-to-panic-about-the-eu-crisis/
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