Dollar Liquidity Swaps Become Permanant

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank announced on Thursday that their existing temporary bilateral liquidity swap arrangements are being converted to standing arrangements, that is, arrangements that will remain in place until further notice.
src: FRB Press Release

One might think they've been doing this for a while and finally made it official. Not so, at least not between the U.S. and Switzerland. According to the SNB, they stopped making this available back in February 2010 for a time, and then started up again on May 11, 2010. The Bank of England had a similar note about May 11, 2010. We're not sure what was specially about that day, but it's now permanently special.

Maybe they are making lots of money on this deal, or maybe they simply need it so much they finally admit they can never stop swapping currencies. One wonders if all the QE money is sloshing around so much the big brokers keep the Central Banks scrambling to keep the currency availability high for some HFT regimen in international bonds.

The Central Bank of Japan provided and interesting set of amendments revealing (at least for Yen/Dollar swaps) the Federal Reserve will set the interest rates without qualifications (they struck the methodology for rates and now just hand it over the the New York Fed.

Here are the links for further reading.
SNB Guidelines
CBJ Amendments
BOE Guidelines

Confused Market Mechanics

Someone posted today that market signals are conflicting. It might just be the commodity sell off and the side effects on the rest of the market, but only time will tell. What's interesting is a lot of commodity company stock prices are close to where they were in 2008 when the world as we know it was about to end. For more details and some links to market indicators, see our post on Seeking Alpha.

Risk, Risk, Everywhere

We try to avoid sending our readers to anything that smacks as an advertisement to sell newsletters, but sometimes the questions are relevant enough to justify addressing them head on, even if there is a sales pitch in there. Fortunately John Mauldin not only has a good pulse on the global investment community, but any sales pitch in his material is minimal compared to the content.

So with that, we point out some serious questions and concerns he addressed in a recent email which we happen to agree with. One might ask, how can you not agree with observations from the real world? Right, well, some do, so we just want to point that out.

From John's survey of readers, he concludes:

When everything is manipulated... you don't know the TRUE value of anything, right?

The Fed-driven fixed interest rates are breaking the backs of retirees (or near retirees), who find their nest eggs dwindling unless they take larger investment risks.

And the growing federal debt and the resulting "true" inflation is eating away at investors' capital.

They see interest rate risk, inflation risk, central bank and currency debasement risk, confiscatory tax rates... and bonds on life support, running out of air.

src: How to Find REAL in a World Full of FAKE

Stocks, Bonds, and Currencies doesn't agree with everything said or implied by John Mauldin or Grant Williams, but they have a long-standing reputation that justifies considering some of what they say. If you take a look at the video, come on back and tell us what you think.

Apparently the way to make money in publishing the news is to have a good database of past stories so you can paste the new name of the next story into your old copy. The folks over at MarketWatch appear to have taken the stories about the Greek debt crisis and replaced "Greece" with "Cyprus"

Seriously, don't these claims and fears sound familiar? To us it sounds like the same thing we read about when Iceland, Ireland, and Greece were set to destroy the E.U. and bring the global economy down with it.

"The problems may be worse than imagined, requiring changes to the bailout or making it unworkable."

"... the effect of capital controls ... will mean a prolonged recession which will make it impossible for [name_of_country] to meet its targets and repay its bailout debt..."

"the guarantee [plan_detail] is from the insolvent [name_of_country] government"

"...allocating losses to investors and bondholders may prove challenging in practice."

Source: 7 reasons Cyprus is more important than you think

Yup. Been there, done that. Time to go buy more high-yield bonds while the prices are cheap [again].

A Funny Thing Happened On The Way To The Treasury

Looks like the United States Government is officially over it's debt ceiling limit. More interestingly, the world financial system hasn't come crashing down [yet]. Here are a few excerpts from today's Publication of Daily Treasury Statements. A footnote on page 7 informs us:

* Act of February 4, 2013 temporarily suspended the debt limit through May 18, 2013.

We find that rather funny in itself. Did anyone (even in Congress) actually know they voted to pretend we don't have a statutory debt limit? <waiving parts=hands>Ignore that, look over here.</waving> Moving along now, just above that line we are given an important piece of information:

Statutory Debt Limit    *    *    *    $ 16,394,000

Ok, I hope you aren't laughing yet, because here comes the real punch line. Just above that informative piece in the column labeled 'Closing balance today':

Total Public Debt
   Subject to Limit        $ 16,710,017

If you aren't accustomed to high finance and really big concepts like "national debt", look carefully at the two numbers. Which one is bigger, the statutory limit or today's closing balance?

Yes indeed boys and girls, your illustrious leaders have blasted right on past the national debt limit and spent an extra $316 BILLION of your hard earned money. And of course we are to believe they'll have it all fixed before May 18th

If you have access to this article on a smartphone, you might want to bookmark it and pull it out when some cop pulls you over for speeding. Showing her the details, assure her with, "It's ok officer, our federal government has provided precedence for putting aside the rule of law for the expediencies of the day." Then present your expediency and assure here no one is harmed by your driving, so you should both just go on your way as you'll be complying with the speed limit tomorrow after you've had time to fix things.

I mean seriously, you've just read this and that's exactly what you are going to do, right? No harm, no foul, screw the law. It's a dumb law anyway.

For more fun, mark your calendar to watch the security markets in the third week of May. Option expiration for May is on the 17th. You might want to buy those June puts now while they are cheap.

U.S. Debt Service Hits Historical Low

With low interest rates come historical low debt servicing costs. Granted, this is based on the history of The Fed tracking this, so it might have been lower in the days of sound money (gold and silver) when the common worker paid for stuff instead of having the neighbors pay for stuff on credit, but still, it might explain the strong stock market, if not why the bump in payroll tax isn't killing everyone. Check out the chart for yourself at The Fed.