SP 500 and NDX Futures Daily Charts

What European crisis? What Bank downgrades? lol

As a reminder, today was the end of the month, and the funds had a lot of catching up to do after one of the worst Thanksgiving week markets on record.

Currency Wars: Fed Acts To "Increase the Availability of Dollars Outside the United States"

Several people have asked what I think about this.

I wrote about this just yesterday.   I could not ask for a better straight man than Ben Bernanke.

"I think the major monetization is already occurring in the Eurodollar markets, and an ongoing stealth bailout of European debt, in order to save the big money center banks at home and broaden the reach of the Dollar.

And this is why the Fed stopped reporting on Eurodollars some years ago, as a component of M3. It was to pave the way for the monetary equivalent of a financial neo-con, to addict European governance to the US dollar and pave the way for a stronger position for the dollar as a one world currency."

Currency Wars: The Anglo-American Century and Why the Financial Engineers Hate Gold and Silver

Here is a primer on the Fed Swaps. Keep in mind that it is written by the Fed.

I had also suggested after the bell that there would be an effort to blow off the downgrade of the big money center banks. I suspected there would be a more singular effort to pump up the SP futures from the Fed's house banks, but it appears the Central Banks, led by the Fed, decided to hit the markets with a major sugar rush of cheap dollars. That is US dollars.

"I will be surprised if they do not try and rally stocks in the face of this to put the brave face on and whistle past the graveyard once again. This is what traders like to do when they have been caught offsides by the news. But they may not be able to sustain it without official help from the strong trading desks of the financial sector."

The Chinese cut reserve requirement ratio on their banks by .5 percentage points. This will help them release more of their huge hoard of US dollars back into the global financial system.

This action, led by the US Fed, has had a marked effect on commodity prices in dollars. So the beneficiaries, or at least those protecting their wealth, are those holding precious metals and positions in dollar sensitive commodities.

Although the Fed will say that there is no potential loss in this to US taxpayers, in fact there is ALWAYS a loss to be realized at some point in the deliberate mispricing of risk.  This loss will be taken by all holders of US dollars.

This is not QE3 and does little to help the US economy per se.  This is just a big serving of a quick energy drink to ease the short term liquidity problem in Eurodollars. It is also timed to dull the news impact of the bank downgrades.

When the sugar rush wears off, and it will because this is does little to help the average person in the real economy, we will see how the markets react to the ever growing piles of paper dollars covering the landscape of a mismanaged and ruined economy.

But it was extraordinarily kind of the Fed to announce this just in time for the banks and the hedge funds to repair some of the damage from the stock market decline before they close their trading books on November.

The Eurozone problems have not been solved by this. The US domestic economy has not been improved by this, except to weaken the dollar and increase commodity prices.

It has only bought the Western banks some time, and further addicted the world to US dollars. This is government of the one percent, by the one percent, and for the one percent.

NY Times
Central Banks Take Joint Action to Ease Debt Crisis
By Binyamin Appelbaum
November 30, 2011

WASHINGTON — The Federal Reserve moved Wednesday with other major central banks to buttress financial markets by increasing the availability of dollars outside the United States, reflecting growing concern about the fallout of the European debt crisis.

The central banks announced that they would slash by roughly half the cost of an existing program under which banks in foreign countries can borrow dollars from their own central banks, which in turn get those dollars from the Fed. The banks also said that loans will be available until February 2013, extending a previous endpoint of August 2012.

"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the banks said in a statement. The participants in addition to the Fed are the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Canada and the Swiss National Bank.

The move makes clear that regulators increasingly are concerned about the strain that the European debt crisis is placing on financial companies, which are facing increasing difficulty in borrowing through normal channels the money that they need to fund their operations and obligations.

The European Central Bank borrowed $552 million through the existing facility during the week ending Nov. 23 to meet the liquidity needs of European banks. Data for the past week is not yet available.

Under the new terms of the program, the existing interest rate premium of 0.1 percentage points on those loans will be reduced by half, to 0.05 percentage points, effective Dec. 5.

The other central banks said they had also agreed to make similar loans of their own currencies as necessary, but they noted that the only extraordinary demand at present was for dollars.

Stocks surged after the action was announced, with European markets up more than 4 percent in afternoon trading, while United States stock futures were up sharply.

“U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses,” the Fed said in its statement.

$500 Million in Missing MF Global Customer Money Found in London and at JPM

As predicted, the London operations of MF Global, the group that received bonuses the day before the bankruptcy filing, was apparently involved with the 'misplacement' of customer account money. And some of that customer money was in the hands of JP Morgan.

Bloomberg
KPMG Recovered $500 Million of MF Global U.K. Client Assets
By Kit Chellel
Nov 29, 2011 2:12 PM ET

MF Global (MF)’s U.K. administrators have recovered about half of the estimated $1 billion of customer funds frozen when the brokerage collapsed on Oct. 31.

The final recovery amount will depend on how much can be taken back from the third-party financial firms which held money for MF Global’s U.K. clients, said Richard Heis, a partner at KPMG LLP.

KPMG, which was appointed to supervise the administration of MF Global UK Ltd., said Nov. 27 that it hoped to return some money to the broker’s clients by March.

MF Global Holdings Ltd., the New York-based holding company, sought protection on Oct. 31 in the fifth-largest financial company bankruptcy by assets. There may be more than $1.2 billion missing from MF Global Inc.’s customer accounts in the U.S., according to the court-appointed trustee in the U.S., James Giddens.

About $200 million of the missing customer funds may have been found at JPMorgan Chase in the U.K., the New York Times reported today.

While KPMG wouldn’t confirm the accuracy of the report, it said it didn’t believe the $200 million reportedly found would affect recoveries for U.K. clients.

“Based on the information available, the joint special administrators are not aware of any threat to the segregated money held on behalf of MF Global U.K. clients arising from the matters set out in the New York Times report,” the firm said in an e-mailed statement today.

S&P Cuts Credit Ratings On 37 Global Banks

If Europe wobbles any harder, the global money center portion of the financial sector may slide into the sea. Or more likely onto the backs of the unsuspecting public.

I will be surprised if they do not try and rally stocks in the face of this to put the brave face on and whistle past the graveyard once again. This is what traders like to do when they have been caught offsides by the news. But they may not be able to sustain it without official help from the strong trading desks of the financial sector.

Forbes
S&P Goes On Downgrade Spree, Hits Most U.S. Banks
By Michael Aneiro
November 29, 2011, 5:04 PM ET

Standard & Poor’s on Tuesday afternoon grabbed its downgrade stick and went on a rampage, whacking just about every major financial institution in sight. Most big U.S. banks got hit, as did many European institutions. The downgrades were part of the rating agency’s application of its revised bank criteria to 37 of the largest rated banks. Here’s a partial list of the carnage:

Bank of America Corp. (BAC) to A- from A
Bank of New York Mellon Corp. (BK) to A+ from AA-
Barclays PLC (BCS) to A from A+
Wells Fargo Bank N.A. (WFC) to AA- from AA
Citibank N.A. (C) to A from A+
Goldman Sachs & Co. (GS) to A from A+
JPMorgan Chase & Co. (JPM) to A from A+
Morgan Stanley (MS) to A- from A



Bloomberg
BofA, Goldman, Citi Credit Ratings Reduced by S&P
By Dakin Campbell and Hugh Son
Nov 29, 2011 5:14 PM ET

Nov. 29 (Bloomberg) --Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C) had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the largest global lenders.

Standard & Poor’s made the same cut to Morgan Stanley (MS) and Bank of America’s Merrill Lynch unit. JPMorgan Chase & Co. (JPM) was reduced one level to A from A+. S&P upgraded Bank of China Ltd. (3988) and China Construction Bank Corp. (939) to A from A- and maintained the A rating on Industrial and Commercial Bank of China Ltd., giving all three lenders higher grades than most big U.S. banks.

The moves may increase pressure on firms bracing for Europe’s mounting sovereign debt crisis and navigating economic weakness. Bank of America, which has plunged 62 percent this year in New York trading, said in a regulatory filing this month that it may have to post billions of dollars of additional collateral and termination payments on its trades if it were to be downgraded one level by rating companies.

“It’s evident that stress from the European banking system is taking its worldwide toll,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an e-mail.

S&P, a unit of New York-based McGraw-Hill Cos. (MHP), has been changing the way it looks at debt after its faulty grades contributed to the credit-market seizure that brought down Lehman Brothers Holdings Inc. and Bear Stearns Cos. It started to review the methodology in December 2008, months after the collapse of those two firms.
`Adverse Impact'

Downgrades “could likely have a material adverse effect on our liquidity, potential loss of access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical,” Charlotte, North Carolina-based Bank of America said in this month’s filing.

The company, which noted the risk of downgrades from S&P and Fitch Ratings in its third-quarter filing, previously said it has prepared by lining up funding for a year.

The following table shows firms that were downgraded by S&P, followed by a list of banks that were upgraded.

Downgraded:
Banco Bilbao Vizcaya Argentaria S.A.
Bank of America Corp.
Bank of New York Mellon Corp.
Barclays Plc
Citigroup Inc.
Rabobank Nederland
Goldman Sachs Group Inc.
HSBC Holdings Plc
JPMorgan Chase & Co.
Lloyds Banking Group Plc
Morgan Stanley
Royal Bank of Scotland Plc
UBS AG
Wells Fargo & Co.

Upgraded:
Bank of China Ltd.
China Construction Bank Corp.