Is LIBOR reliable? I read a few weeks or months ago there was some suspicion it wasn't accurate (that banks weren't reporting their true cost or charge to borrow).
Any news on this?
If the number is bogus to begin with then why are they spending so much energy trying to chase it down?
Fed Funds overnight rate at 63 bps...we could be anywhere from 75 to 100 bps for the target rate after today based on the last week of overnight rates:
Somebody please tell the ADD generation that 'glacial paces' are typically measured in thousands of years, not the ten seconds it takes to hit the refresh button.
2 pension related links today Mentioned Lockheed, GM, Dow, Ryder -- seeking reprieve from defined benefit contracts. Related to a 2006 law on pension funding (was follow-up to Enron and other pension disasters)
Can't wait to see what comes out of municipalities/counties/states after a few more election cycles when their payouts will increase substantially and the pay-as-you-go plans disintegrate
Also the newer regulation to enforce fully funding corporate obligations introduces a new market stability mechanism, or as I will coin it "the pension put" -- assuming the government does not accept corporations having underfunded their pensions during the good times to be justification for continuing to underfund them coming off of record cash on balance sheets
"New York Daily News
Stock futures indicate Street will extend gains"
ahhh survey currently says false!
I find myself laughing out loud at this market durring the course of a day.
I check out the market down 3 points. Laugh a little. Go to lunch come back down 6%, laugh a little more. Check before the market closes -> up 9% and you guessed it I laugh some more....
There are many who argue that ted and lobor have been rendered useless due to the level of gov't intervention. Exceopt of course if your ARM reset is tied to libor, which the majority are.
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
Stocks down before election since it will benefit BO. Why? A few weeks ago the rumor was that jpm's dimon was on the short list for BO's SoT. If JD wants to control the spigot he better engineer a drop.
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
IRS doesn't allow that. Of course, if you buy the munis and then just happen to tax a HELOC? Just make sure you mix the money a bunch.
I do not understand why the market would move one way or the other before this huge economic summit in mid-November. You would think at that summit everyone would lay down the law to US; but our attitude is probably saying, "Do you really want to piss off your citizens with falling stock markets?" The goal of these people is to stay in power.
I think Hank will try to do a banker-mafia type hit on the rest of the world like he did to Congress, except I hope the rest of the world is a lot smarter than the idiots we elected. Probably not... dow 9k, is Great Depression II priced in?
If we get Mr. Obama as President will he be able to attend in lieu of Bush? With some potential cabinet members (no doubt Buffet will weasel in to get some market insight).
Banks will only lend to government or government-backed banks. Private sector will be crowded out. Unintended consequences. Lower productivity. Prolong recession. No recovery.
Wish my memory were a bit 'crisper'. Read a discussion of LIBOR methodology within the past month, but where? Yves? Buiter? Can't say.
The gist was that the subject banks produce a figure representing what their over night rate would be, were they lending. Except they're not.
So it becomes essentially a bid - and not the real-world datum intended. Also somewhat subject to manipulation so that it actually represents what it would be 'useful' for LIBOR to be in the view of the reporting banks.
I'll look for the citation, but am not likely to find it, really.
Libor is back to being a real number. Most of this year it has been seriously under-reported, so the improvement in credit conditions has actually been much more dramatic over the past week than watching the TED spread would suggest. The December Eurodollar contract implies a 2.33% libor setting by mid-December, which would contain a year end premium, so the market is looking for libor to drop to about 2% by early next year. Banks are now using credit default swap premiums to set lending rates, so I'd suggest watching cds premiums on a basket of prime banks as the best way to gauge credit conditions going forward.
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
Note: someone in the discussion thread posted the above link as proof that conjure must be jesse... I think they basically come to the same conclusion looking at the same data.
Citigroup, Credit Suisse Link Loans to Swaps in Shift (Update1)
By Pierre Paulden and Caroline Hyde
Enlarge Image/Details
Oct. 29 (Bloomberg) -- Citigroup Inc. and Credit Suisse Group AG are among banks tying corporate loan rates to credit- default swaps, raising borrowing costs and exposing companies to derivatives accused of crippling the financial system.
...
Kicker writes:
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
IRS doesn't allow that. Of course, if you buy the munis and then just happen to tax a HELOC? Just make sure you mix the money a bunch.
How will the IRS know how RobDawg uses his heloc draw?
I've never had to deal with this issue: does the IRS offset HELOC deductible interest with MUNI earnings before one can itemize it?
But note that U.S. has refused funding to ITER ITER - the way to new energy
(Intl Nat. fusion project)--over an estimated $1 Billion US would need to bring to the table.
Kids say the darndest things. We've got our 3-year old son on the couch due to strange baby-sleeping arrangements. He woke up today to CNBC and said, "It's football!".
HELOC interest is deductible only in the case that the money is actually spent on home repairs/improvements...
Interest on the first $100K is fully deductible regardless of the use. There is no cap on the interest on any amounts used for home improvement on repair. So a $250K HELOC draw for an addition is fully deductible.
Basel Too writes:
HELOC interest is deductible only in the case that the money is actually spent on home repairs/improvements...
Interest on the first $100K is fully deductible regardless of the use. There is no cap on the interest on any amounts used for home improvement on repair. So a $250K HELOC draw for an addition is fully deductible.
I also found out last year while determining my taxes, that heloc interest is backed out to determine AMT.
The problem before the bailout plan was that LIBOR was reacting not so much to actual news as to the likelihood that we were moving toward a complete shutdown of the financial system as we know it.
If LIBOR and the TED spread now react in a volatile way to news, that's unfortunate, but I think it seems as if those indicators are simply reacting to a weak economy, not to the Apocalypse. To me, it seems as if that's a huge improvement.
I believe that in the USA politics trumps economics. Politically Obama needs the voters to be scared to death when they go in to vote. That would argue for his friends and supporters, here and internationally, to make sure the market tanks by Monday. I look forward to an interesting next few days.
I can see everyone is waiting for the 2:15pm statement followed by the sell-off followed by the in-depth analysis of "it's priced in" or "market no-likey" or "market has soiled itself in jubilation"
followed by "that didn't last long" drip drip drip gush drip drip drip gush
/snip
Oct. 29 (Bloomberg) -- Fannie Mae will write down about $20 billion of assets after being seized by the government last month, eroding its capital and increasing the likelihood the U.S. Treasury may need to inject cash into the mortgage giant.
/snip
annie's $20.6 billion of deferred-tax assets as of June 30 accounted for almost half its $47 billion in regulatory capital, according to company filings. Freddie applied $18.4 billion in tax credits toward its $37.1 billion in regulatory capital in the second quarter, according to company filings.
Limited Profitability
Deferred-tax assets are created by previous losses and can be carried forward and applied against future earnings to lower a company's tax bills.
Writing down the assets may indicate that Fannie sees little chance of returning to profitability soon. Accounting rules require a company to assess whether it can use the tax asset. If future earnings are in doubt, a company must consider reducing the value of the credits.
/snip off
Remember when they told taxpayers, 'Hey, we'll probably even make money on this deal!'
I can confirm that the first $100,000 of heloc or home equity loan is deductible regardless of use. The rest of heloc has to be used for home improvements to be deductible. The total deduction is also limited to the interest on the first $1M of indebtedness.
Also, it's true that the heloc/equity loan interest deduction is added back to determine amt, which could obviously make a big difference.
blackhat: annie's $20.6 billion of deferred-tax assets as of June 30 accounted for almost half its $47 billion in regulatory capital, according to company filings. Freddie applied $18.4 billion in tax credits toward its $37.1 billion in regulatory capital in the second quarter, according to company filings
As many people noted at the time of the takeover, this seemed inevitable. If the accounting rules were enforced they would have been insolvent long ago. Or rather, they were insolvent and it would have been generally accepted long ago.
The same is true with banks, of course. If assets could be market to their real values how many banks should the FDIC have taken over by now?
This indicates to me that The Fed and Central Banks are in collusion with The Hot Money Boys and that they play a part in providing global systemic imbalance and manipulation. No single power on earth can overpower the collective leg humping of these pirates!
(from today) Oil advanced as much as 9.9 percent on forecasts that the U.S. Federal Reserve will cut rates today to help spur a recovery in the world's biggest fuel-consuming country. China lowered rates today and the European Central Bank may reduce them next week. Prices also rose because the dollar fell the most against the currencies of six major U.S. trading partners since 1998.
(from the other day) And so, simultaneously, without a clear trigger, traders piled out of the yen and into stocks. Overlay a graph of yesterdays moves in the S&P 500, which gained more than 10 per cent, with a graph showing the number of yen to the euro, which rose by more than 11 per cent at one point, and it is hard to tell the difference. Every downtick for the yen was matched by a rise in US stock FT.com / Registration / Sign-up...? nclick_check=1
Let's predict a 700 point down market today based on FED cut.
And also, we'll be back at square one. Again.
By next Tuesday.
Again.
The race to the bottom continues
jo6pac
Oh, and first.
Hey, 5 basis points is pretty good.
Is the volume of interbank lending reported anywhere?
blackhat,
Brave first call there.
Nostrovia,
Is LIBOR reliable? I read a few weeks or months ago there was some suspicion it wasn't accurate (that banks weren't reporting their true cost or charge to borrow).
Any news on this?
If the number is bogus to begin with then why are they spending so much energy trying to chase it down?
Is TED a better number if LIBOR is bogus?
TIA
Fed Funds overnight rate at 63 bps...we could be anywhere from 75 to 100 bps for the target rate after today based on the last week of overnight rates:
Federal Funds Data
Somebody please tell the ADD generation that 'glacial paces' are typically measured in thousands of years, not the ten seconds it takes to hit the refresh button.
sigh
-- w
2 pension related links today
Mentioned Lockheed, GM, Dow, Ryder -- seeking reprieve from defined benefit contracts. Related to a 2006 law on pension funding (was follow-up to Enron and other pension disasters)
Canadian companies seeking to boost 5 year window to 10 or 15 yrs in which to re-establish full funding of pensions as required by law. Half the companies monitored were underfunded at the start of 2007
Can't wait to see what comes out of municipalities/counties/states after a few more election cycles when their payouts will increase substantially and the pay-as-you-go plans disintegrate
Also the newer regulation to enforce fully funding corporate obligations introduces a new market stability mechanism, or as I will coin it "the pension put" -- assuming the government does not accept corporations having underfunded their pensions during the good times to be justification for continuing to underfund them coming off of record cash on balance sheets
OT, but I didn't wake up early enough for the CC post:
Russia begins to refuse credit cards in worsening global financial crisis
Several Moscow city centre restaurants are now refusing to accept cards in a move not seen since Russia's last financial crisis almost a decade ago.
Some automated teller machines at Sberbank, the country's biggest state-owned bank, have also stopped accepting cards from other banks.
Several electronics and mobile phone stores said they no longer accepted credit card purchases.
Russia begins to refuse credit cards in worsening global financial crisis - Telegraph
I say the rally continues after the rate cut.
Dow 10k by friday.
then of course there's the alt-a reset calendar...
sigh
Lions and tigers and bears.. oh my
Lions and tigers and bears.. oh my
Iwasawa
No one makes out of this one alive...
I turn on g-finance and the head lines:
"New York Daily News
Stock futures indicate Street will extend gains"
ahhh survey currently says false!
I find myself laughing out loud at this market durring the course of a day.
I check out the market down 3 points. Laugh a little. Go to lunch come back down 6%, laugh a little more. Check before the market closes -> up 9% and you guessed it I laugh some more....
This is maddness...
i was offline mostly yesterday not sure if this was posted. this region buys a bit of our debt, but for how long...
highly leveraged derivatives hit Dubai's second biggest lender, fitch lowers rating.
FT.com / UK - Gulf Bank head steps down after losses on derivatives
There are many who argue that ted and lobor have been rendered useless due to the level of gov't intervention. Exceopt of course if your ARM reset is tied to libor, which the majority are.
re: dryfly @ 9:28
That was the gist of the conjure communication that mp provided with much anticipation.
Paper is still at this link.
Not sure what you were doing around then but a ton of people were around on a Sunday waiting to see what Mr. bag had to say...
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
my conspiracy theory.
Stocks down before election since it will benefit BO. Why? A few weeks ago the rumor was that jpm's dimon was on the short list for BO's SoT. If JD wants to control the spigot he better engineer a drop.
this region buys a bit of our debt, but for how long...
The end of the UST bubble looks more imminent...
ot, but curious about Cr's take on the durable goods report?
Is there any way in creation this number is even close to accurate?
Previous month was revised down a full percentage point.
What are the methodological flaws in this data [as with so many others..]
DryFly,Libor is as trustworthy as Dana Perino.BTW she has false teeth.Don't ask...
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
IRS doesn't allow that. Of course, if you buy the munis and then just happen to tax a HELOC? Just make sure you mix the money a bunch.
I do not understand why the market would move one way or the other before this huge economic summit in mid-November. You would think at that summit everyone would lay down the law to US; but our attitude is probably saying, "Do you really want to piss off your citizens with falling stock markets?" The goal of these people is to stay in power.
I think Hank will try to do a banker-mafia type hit on the rest of the world like he did to Congress, except I hope the rest of the world is a lot smarter than the idiots we elected. Probably not... dow 9k, is Great Depression II priced in?
If we get Mr. Obama as President will he be able to attend in lieu of Bush? With some potential cabinet members (no doubt Buffet will weasel in to get some market insight).
Oh, no BB is getting information from the little man that lives in his finger and has been to the moon... twice!
http://i2.cdn.turner.com/cnn/2008/images/10/29/t1home.bernanke.file.gi.jpg
http://www.collider.com/uploads/imageGallery/Muppets/muppet_treasure_island_image_3.jpg
( If you have seen the movie you understand )
Banks will only lend to government or government-backed banks. Private sector will be crowded out. Unintended consequences. Lower productivity. Prolong recession. No recovery.
Wish my memory were a bit 'crisper'. Read a discussion of LIBOR methodology within the past month, but where? Yves? Buiter? Can't say.
The gist was that the subject banks produce a figure representing what their over night rate would be, were they lending. Except they're not.
So it becomes essentially a bid - and not the real-world datum intended. Also somewhat subject to manipulation so that it actually represents what it would be 'useful' for LIBOR to be in the view of the reporting banks.
I'll look for the citation, but am not likely to find it, really.
THE LINK IS HERE, HERE, HERE!!!!
I suppose I was added to some folks greasemonkey noscript, eh?
Except they're not.
Do we really know? Unless there is near real-time public data on lending volumes we're going on rumor and gossip.
Libor is back to being a real number. Most of this year it has been seriously under-reported, so the improvement in credit conditions has actually been much more dramatic over the past week than watching the TED spread would suggest. The December Eurodollar contract implies a 2.33% libor setting by mid-December, which would contain a year end premium, so the market is looking for libor to drop to about 2% by early next year. Banks are now using credit default swap premiums to set lending rates, so I'd suggest watching cds premiums on a basket of prime banks as the best way to gauge credit conditions going forward.
Rob Dawg writes:
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
Unless the make you pay a clawback.
WE going to get some more 'yentervention' today?
Anyone everyheard of a CRE CDO. If so what are thoughts on risks and the market size potential.
One of the better discussions on LIBOR in the current environment was here on the 11th:
"Are Central Banks Making Libor WORSE?" « naked capitalism
THE LINK IS HERE, HERE, HERE!!!!
That site is a little hinky for my taste - any other source?
1929er the site works fine. No problems with th file. Just unclick the advert and your o.k.
Dana Perino.BTW she has false teeth.Don't ask...
I'm asking.
It's just a site that hosts specific files but I'll see if I can scrounge up something else...
Link to similar post...
Note: someone in the discussion thread posted the above link as proof that conjure must be jesse... I think they basically come to the same conclusion looking at the same data.
Comment Thread and link to the conjure paper being released.
You can follow further discussion in the link below... might've gotten missed by some people.
Nice to have the discussion back without all the mindless chatter.
Interesting article about loan rates at Bloomberg:
Citigroup, Credit Suisse Link Loans to Swaps in Shift (Update1)
By Pierre Paulden and Caroline Hyde
Enlarge Image/Details
Oct. 29 (Bloomberg) -- Citigroup Inc. and Credit Suisse Group AG are among banks tying corporate loan rates to credit- default swaps, raising borrowing costs and exposing companies to derivatives accused of crippling the financial system.
...
Given that CDS are subject to manipulation, I'd think tying loan rates to them is a poor choice.
Kicker writes:
75 bps? I have got to look at my HELOC for the precise terms of converting to a fixed rate. Heck, I'd just max out and buy long date double tax free munis yielding 200 bps more and the loan is still deductible. win-win.
IRS doesn't allow that. Of course, if you buy the munis and then just happen to tax a HELOC? Just make sure you mix the money a bunch.
How will the IRS know how RobDawg uses his heloc draw?
I've never had to deal with this issue: does the IRS offset HELOC deductible interest with MUNI earnings before one can itemize it?
OT,
But note that U.S. has refused funding to ITER
ITER - the way to new energy
(Intl Nat. fusion project)--over an estimated $1 Billion US would need to bring to the table.
404 Not Found
$1 Billion.
That's it.
So we've pulled out of international science collaboration over a $1 Billion commitment.
Seriously. Go it alone, right into the crapper. Remember that bailout bill? Would couldn't pork-it with a few billion for homegrown research?
That leaves Euro Area, Russian, & Japan to reap the rewards post 2016 (when first plasma is supposed to yield energy output).
Over-all point here is that decisions have been made and are continuing to be made that short US future longterm.
So, unless US plans on doing an Alamos crash-program for it's own fusion research (super-collider anyone? no?...) were going to decline.
And that pisses blackhat off.
IIRC, HELOC interest is deductible only in the case that the money is actually spent on home repairs/improvements...
Kids say the darndest things. We've got our 3-year old son on the couch due to strange baby-sleeping arrangements. He woke up today to CNBC and said, "It's football!".
Tom Stone - please don't talk about my Dana that way - she may be a nazi, but DAMN! she's good looki
HELOC interest is deductible only in the case that the money is actually spent on home repairs/improvements...
Interest on the first $100K is fully deductible regardless of the use. There is no cap on the interest on any amounts used for home improvement on repair. So a $250K HELOC draw for an addition is fully deductible.
Snake Eyes,Dana is hot,and it was just a cold sore thankfully...
Cool site
JP,I was working he NRA Booth at the National Sex Symposium when we met...
Basel Too writes:
HELOC interest is deductible only in the case that the money is actually spent on home repairs/improvements...
Interest on the first $100K is fully deductible regardless of the use. There is no cap on the interest on any amounts used for home improvement on repair. So a $250K HELOC draw for an addition is fully deductible.
I also found out last year while determining my taxes, that heloc interest is backed out to determine AMT.
cool site
The problem before the bailout plan was that LIBOR was reacting not so much to actual news as to the likelihood that we were moving toward a complete shutdown of the financial system as we know it.
If LIBOR and the TED spread now react in a volatile way to news, that's unfortunate, but I think it seems as if those indicators are simply reacting to a weak economy, not to the Apocalypse. To me, it seems as if that's a huge improvement.
been on vaca pca, what's your status?
no longer persecuted?
what's your market call?
Tom Stone writes:
JP,I was working he NRA Booth at the National Sex Symposium when we met...
Your life is obviously more interesting than mine.
OT
Welcome to the Three Headed Dog That Guards the Gates of Hell National Bank of America.
I sure hope the gov gets a huge guarantee fee for bailing out Snow, Quayle and the Boys.
LIBOR is subsudized and does not reflect the true cost of money anyway.
No Hope for Homeowners – Foreclosure Prevention Program Falters « Your Mortgage or Your Life…
They are ripping us off big time!
Liborrates
Crack is still negative and rbob gas at 1.40.
the world is truly upside down right now.
INO Futures and Commodities - Energy - RBOB CRACK SWAP Dec 2009 (NYMEX:RM.Z09) Price Chart and Quote
Baltic Dry way down again to 925
. After adjusting for inflation, this is similar to the 2001 recessionary value of about 800.
I believe that in the USA politics trumps economics. Politically Obama needs the voters to be scared to death when they go in to vote. That would argue for his friends and supporters, here and internationally, to make sure the market tanks by Monday. I look forward to an interesting next few days.
Comrade Beach writes:
Nice to have the discussion back without all the mindless chatter.
Interesting article about loan rates at Bloomberg:
Citigroup, Credit Suisse Link Loans to Swaps in Shift (Update3) - Bloomberg.com
Comrade Beach--that is a very interesting article.
This, to me, is big news, no?
Aetna's Profit Declines 44% on Failed Investments (Update2) - Bloomberg.com
Nice contagion for Aetna booking losses from Lehman & WaMu, but their portfolio has plenty of assets...which are?
Inquiring minds...
I can see everyone is waiting for the 2:15pm statement followed by the sell-off followed by the in-depth analysis of "it's priced in" or "market no-likey" or "market has soiled itself in jubilation"
followed by "that didn't last long" drip drip drip gush drip drip drip gush
U.S. Treasury Program Shuns Banks That Need Cash Most (Update2) - Bloomberg.com
U.S. Treasury Shuns Banks That Need Cash Most
Remember folks, this is consolidation activity, and most consolidation involves laying off 20-30% of the workforce in the first year.
Paging FDIC, FDIC, please place your pizza orders on the bulk-order hot line.
Thank you,
BH
Blackhat,you sound just like Dana.
Fannie Mae to Reduce Value of Deferred Tax Assets (Update2) - Bloomberg.com
/snip
Oct. 29 (Bloomberg) -- Fannie Mae will write down about $20 billion of assets after being seized by the government last month, eroding its capital and increasing the likelihood the U.S. Treasury may need to inject cash into the mortgage giant.
/snip
annie's $20.6 billion of deferred-tax assets as of June 30 accounted for almost half its $47 billion in regulatory capital, according to company filings. Freddie applied $18.4 billion in tax credits toward its $37.1 billion in regulatory capital in the second quarter, according to company filings.
Limited Profitability
Deferred-tax assets are created by previous losses and can be carried forward and applied against future earnings to lower a company's tax bills.
Writing down the assets may indicate that Fannie sees little chance of returning to profitability soon. Accounting rules require a company to assess whether it can use the tax asset. If future earnings are in doubt, a company must consider reducing the value of the credits.
/snip off
Remember when they told taxpayers, 'Hey, we'll probably even make money on this deal!'
Really?
Then why move at all.
Exactly.
Tax payer losses don't matter. Like deficits.
I can confirm that the first $100,000 of heloc or home equity loan is deductible regardless of use. The rest of heloc has to be used for home improvements to be deductible. The total deduction is also limited to the interest on the first $1M of indebtedness.
Also, it's true that the heloc/equity loan interest deduction is added back to determine amt, which could obviously make a big difference.
blackhat: annie's $20.6 billion of deferred-tax assets as of June 30 accounted for almost half its $47 billion in regulatory capital, according to company filings. Freddie applied $18.4 billion in tax credits toward its $37.1 billion in regulatory capital in the second quarter, according to company filings
As many people noted at the time of the takeover, this seemed inevitable. If the accounting rules were enforced they would have been insolvent long ago. Or rather, they were insolvent and it would have been generally accepted long ago.
The same is true with banks, of course. If assets could be market to their real values how many banks should the FDIC have taken over by now?
This indicates to me that The Fed and Central Banks are in collusion with The Hot Money Boys and that they play a part in providing global systemic imbalance and manipulation. No single power on earth can overpower the collective leg humping of these pirates!
FT.com / Registration / Sign-up...? nclick_check=1