Something is afoul in Denmark. Or Greece. Or Germany. Or France. Or US.
TED Spreads.
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND
If I see a lot of arm flapping in the media about something I go and check this indicator to see if it's real or just a bunch of hot air (usually it's hot air). But this one is getting elevated.
TED Spreads spike when the markets get nervous about solvency of banks. When banks stop trusting each other and slow down their inter-bank lending all hell breaks loose.
This is akin to being in a room full of people. Everyone has to breathe to stay alive. But say someone coughs and people freak out, thinking the bird flu is in the room, so everyone panics and holds their breath until they pass out. Then once they are on the floor (breathing unconsciously) they all get sick.
This is what TED Spreads are like. All the banks panic about bird flu (solvency of their counterparties) hold their breath at the same time (stop inter-bank lending) until they pass out and go unconscious (bankrupt), and require oxygen (bailouts) to revive again.
I'm wide awake on this. The media is missing the boat but this is important. When this metric breaks out ... it's all hands on deck time to see where the fire is, and how it can be doused before it explodes. None of us can stop it... that's a job for our elected leaders and the markets, but I don't like to be sucker punched so brace yourself.
As for cause, last time it was solvency fears triggered by crappy mortgage bonds and related derivatives. This time I'm guessing has to do with solvency fears of fiat currency itself; namely the Euro, the dollar, and the government bonds and related paper games denominated in those currencies to bail out the system a few years ago.
The media are focusing on Portugal, Ireland/Italy, Greece and Spain, which they derisively call the PIIGS. As if everyone else wasn't piggy.
These countries represent important crises but their collective GDP just isn't that big, it's the size of the bets that market participants made on debt that they should have known was crappy is the problem (just like buying mortgage bonds made up of NINJA loans then crying because you lost).
No I think the PIIGS are just the bleeding edge of the whole fiat game in play coming unraveled as it resets to a devaluation scheme. The PIIGS are the straw that is breaking the camel's back. Or in this case maybe the Euro and the Buck.
TED Spreads.
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND
If I see a lot of arm flapping in the media about something I go and check this indicator to see if it's real or just a bunch of hot air (usually it's hot air). But this one is getting elevated.
TED Spreads spike when the markets get nervous about solvency of banks. When banks stop trusting each other and slow down their inter-bank lending all hell breaks loose.
This is akin to being in a room full of people. Everyone has to breathe to stay alive. But say someone coughs and people freak out, thinking the bird flu is in the room, so everyone panics and holds their breath until they pass out. Then once they are on the floor (breathing unconsciously) they all get sick.
This is what TED Spreads are like. All the banks panic about bird flu (solvency of their counterparties) hold their breath at the same time (stop inter-bank lending) until they pass out and go unconscious (bankrupt), and require oxygen (bailouts) to revive again.
I'm wide awake on this. The media is missing the boat but this is important. When this metric breaks out ... it's all hands on deck time to see where the fire is, and how it can be doused before it explodes. None of us can stop it... that's a job for our elected leaders and the markets, but I don't like to be sucker punched so brace yourself.
As for cause, last time it was solvency fears triggered by crappy mortgage bonds and related derivatives. This time I'm guessing has to do with solvency fears of fiat currency itself; namely the Euro, the dollar, and the government bonds and related paper games denominated in those currencies to bail out the system a few years ago.
The media are focusing on Portugal, Ireland/Italy, Greece and Spain, which they derisively call the PIIGS. As if everyone else wasn't piggy.
These countries represent important crises but their collective GDP just isn't that big, it's the size of the bets that market participants made on debt that they should have known was crappy is the problem (just like buying mortgage bonds made up of NINJA loans then crying because you lost).
No I think the PIIGS are just the bleeding edge of the whole fiat game in play coming unraveled as it resets to a devaluation scheme. The PIIGS are the straw that is breaking the camel's back. Or in this case maybe the Euro and the Buck.
No comments:
Post a Comment