Financial Reform Destined to Fail-Hoenig

 

Reforms instituted after the financial crisis to prevent future taxpayer-funded bailouts are bound to fail and will likely be weakened within the next few years, the Federal Reserve’s longest-serving policy maker predicted Monday.

The stark warning, offered by Federal Reserve Bank of Kansas City President Thomas Hoenig, who’s been warning about the rise of too-big-to-fail banks for more than a decade, comes as international regulators finalize plans to increase supervision of and toughen requirements on the world’s largest banking organizations as a reaction to the global financial crisis. Rather than break up big banks, politicians decided to simply subject them to more oversight.

 

Yet debate rages as to whether the requirements are too tough, or not tough at all, and whether regulators will have the backbone to follow through on their commitments. Republicans in the U.S. House of Representatives are trying to dismantle the domestic financial reform law passed last year; banks are screaming that lending will dry up, inhibiting the anemic U.S. recovery; and on the global level, regulators from some countries where large banks dominate the national economy (and thus enjoy overt taxpayer backing) are trying to weaken international accords.

For Hoenig though, the choice is clear when it comes to what to do with the financial institutions that caused the most punishing downturn since the Great Depression: break them up into pieces that regulators can understand and provide a backstop to entities engaged in the so-called real economy — but allow those dabbling in more risk-laden activities to fail.

The Obama administration and Congress chose the alternate route in passing the Dodd-Frank financial regulation law. To Hoenig, they made a mistake.

“Following this financial crisis, Congress and the administration turned to the work of repair and reform,” he said during a Monday speech in Washington. “Once again, the American public got the standard remedies — more and increasingly complex regulation and supervision.”

“The Dodd-Frank reforms have all been introduced before, but financial markets skirted them,” he continued. “Supervisory authority existed, but it was used lightly because of political pressure and the misperceptions that free markets, with generous public support, could self-regulate.”

Regulators will lack the will to wind down failing companies deemed systemically important financial institutions, or SIFIs, Hoenig said. The power to force large firms into liquidation was the centerpiece of the Obama administration’s plan to reform the financial system in the wake of the crisis and Great Recession.

“I just can’t imagine it working,” Hoenig said. Speaking of the difficulty of forcing a large, complex firm like Citigroup or Goldman Sachs into bankruptcy-like proceedings, the Midwesterner admitted that if he were the one ultimately making the decision, “I would be inclined to bail them out.”

“One of the difficulties in terms of supervision of these SIFIs is they are so horribly complex their directors don’t understand it, their management don’t understand it, and the supervisors certainly can’t deal with all the issues,” Hoenig said.

The second part of the administration’s plan — forcing large financial firms to hold more capital as a buffer against the kind of debilitating losses that led policy makers to bail them out — also will inevitably come up short, as bankers will likely game the system once the economy rebounds.

An international consortium of bank regulators hammered out an agreement over the weekend that requires the world’s biggest banks to hold extra capital beyond the requirements faced by their smaller international competitors. SIFIs would be required to hold up to 2.5 percentage points of extra capital as a proportion of their risk-weighted assets, for a total buffer of 9.5 percent.

“I don’t have any faith in it at all,” Hoenig said in response to a question at an event hosted by the Pew Financial Reform Project and New York University Stern School of Business. “It will be co-opted within three years of the recovery.”

“The resistance … is ferocious,” Hoenig said of the banking industry’s objections. “Once the economy turns around and these institutions are thought to be sound again, we will start to erode these capital requirements, just as we have in every instance in the past.”

Bankers argue that increased capital requirements will impede lending, though academic research tends to refute that assertion. “It’s almost propaganda,” Hoenig said of bankers’ reasons for objecting to tougher standards.

Proponents of the measure say bankers are simply objecting because the more capital firms are forced to hold, the lower their earnings will be in relation to their equity. U.S. bankers say they’ll be at a disadvantage relative to their foreign counterparts. Hoenig called that assertion “nonsense.”

Others argue that bankers are simply concerned about their bonuses, as shareholders will likely call for lower pay packages as a result of lower earnings.

SIFIs must be broken up and simplified, Hoenig said, not just to avoid the inevitable weakening of standards and reemergence of timid regulators, but also because they’re un-American.

“I suggest that the problem with SIFIs is they are fundamentally inconsistent with capitalism,” Hoenig said. “They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.”

Hoenig, who became president of the Kansas City Fed in 1991, will step down this October due to the Fed’s mandatory retirement policy. (Huffington Post)

 

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RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 29/06/

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Guest Post: The U.S. Is A Kleptocracy, Too

Submitted by Charles Hugh Smith from Of Two Minds

The U.S. Is A Kleptocracy, Too  

If we dare look at the plain facts of the matter, we have to conclude the U.S. is a kleptocracy not unlike Greece, only on a larger and slightly more sophisticated scale.

Yesterday, I noted that Greece Is a Kleptocracy; the U.S. is a kleptocracy, too. Before you object with a florid speech about the Bill of Rights and free enterprise, please consider the following evidence that the U.S. is now a kleptocracy worthy of comparison to Greece:

1. Neither party has any interest in limiting the banking/financial cartel. The original Glass-Steagal bill partitioning investment banking from commercial banking was a few pages long, and it was passed in a few days. Our present political oligrachy spends months passing thousands of pages of complex legislation that accomplishes essentially nothing.

As Federal Reserve Bank of Kansas City President Thomas Hoenig recently noted (in a rare admission by an insider--I wonder how long it will be before he "resigns to pursue other opportunities," i.e. is muzzled):

The problem with SIFIs ("systemically important financial institutions," a.k.a. too big to fail banks) is they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.

Do you really think Dodd-Frank and all the other "fooled by complexity" legislation has accomplished anything? Hoenig cuts that fantasy off at the knees:

As late as 1980, the U.S. banking industry was relatively unconcentrated, with 14,000 commercial banks and the assets of the five largest amounting to 29 percent of total banking organization assets and 14 percent of GDP.

Today, we have a far more concentrated and less competitive banking system. There are fewer banks operating across the country, and the five largest institutions control more than half of the industry’s assets, which is equal to almost 60 percent of GDP. The largest 20 institutions control 80 percent of the industry’s assets, which amounts to about 86 percent of GDP.

In other words, nothing has really changed from 2008 except the domination of the political process and economy by the financial cartel has been masked by a welter of purposefully obfuscating legislation. This is of course the exact same trick Wall Street used to cloak the risk of the mortgage-backed derivatives it sold as "low risk" AAA rated securities: by design, the instruments were so complex that only the originators understood how they worked.

That is the current legislative process in a nutshell. Much of the 60,000 pages of tax code are arcane because they describe loopholes and exclusions written specifically to exempt a single corporation or cartel from Federal taxes.

The U.S. is truly a kleptocracy because its political leadership actually has no interest in limiting the banking/financial cartel. When questioned why their "reforms" are so toothless, legislators wring their hands and bleat, "Honest, I wanted to limit the banks but they're too powerful." Spoken like a true kleptocrat.

2. Our stock markets are dominated by insiders. It is estimated that some 70% of all shares traded are exchanged in private "dark pools" operated by the TBTF banks and Wall Street, and the majority of the remaining 30% of publicly traded shares are traded by high-frequency trading machines that hold the shares for a few seconds, or however long is needed to skim the advantages offered by proximity to the exchange and speed.

If that's your idea of an "open market," then you're the ideal citizen for a kleptocracy.

3. The rule of law in the U.S. has been divided into two branches: one in name only for the financial Elites and corporate cartels, and one for the rest of us mere citizens. Between corporate toadies on the Supreme Court who have granted corporations rights to spend unlimited money lobbying and buying legislators as a form of "free speech"--ahem, how can something that costs billions of dollars be "free"?--and vast regulatory brueacracies that saw nothing wrong with MERS and the complete corruption of land and mortgage transfer rules, the U.S. legal system is now a perfection of kleptocracy.

As economist Hernando de Soto observed in The Destruction of Economic Facts, the ForeclosureGate mortgage mess is not just a series of petty paperwork mistakes--it is the destruction of the entire system of trustworthy transfer of property rights for non-Elites:

Knowing who owned and owed, and fixing that information in public records, made it possible for investors to infer value, take risks, and track results. The final product was a revolutionary form of knowledge: "economic facts."

Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The very systems that could have provided markets and governments with the means to understand the global financial crisis—and to prevent another one—are being eroded. Governments have allowed shadow markets to develop and reach a size beyond comprehension. Mortgages have been granted and recorded with such inattention that homeowners and banks often don't know and can't prove who owns their homes. In a few short decades the West undercut 150 years of legal reforms that made the global economy possible.

The results are hardly surprising. In the U.S., trust has broken down between banks and subprime mortgage holders; between foreclosing agents and courts; between banks and their investors—even between banks and other banks.

Frequent contributor Harun I. summarized the reality of this political and financial coup by kleptocrats:

As described by Georgetown University bankruptcy expert Adam Levitin, in testimony to subcommittee of the House Financial Services Committee, "If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever, [and] could cloud title to nearly every property in the United States." It would also raise the question of the legality of the resulting millions of foreclosures on American homeowners, since the banks cannot prove "ownership" of the foreclosed property.

The statement above gets to the elemental issue that apparently is lost on many otherwise intelligent people. This is not about frivolous claims based on technicalities. This is about securities fraud (theft) on a ludicrously massive scale. These so-called securities were sold to governments, pension funds and other financial institutions globally. Trillions were made by banks selling what is becoming clearly understood to be worthless pieces of paper and when the jig was up, which ultimately led to the destruction of economies globally, they made ordinary citizens the losers by sliding their worthless pieces of paper to the balance sheet of taxpayers worldwide.

And while some are quibbling over whether someone should get a free house, those who have perpetrated the greatest swindle in the history of mankind are about to get away with it, because they are "systemically important", code for TBTF (too big to fail).

You think money laundering and tax evasion is a specialty only of Caribbean island "banking centers"? Think again; we have corporate oversight equivalent to that of Somalia. U.S.A. a haven for corporate money laundering: A little house of secrets on the Great Plains:

Among the firm's offerings is a variety of shell known as a "shelf" company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity.

"A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy," the company's website boasts. "A person you control... yet cannot be held accountable for its actions. Imagine the possibilities!"

"In the U.S., (business incorporation) is completely unregulated," says Jason Sharman, a professor at Griffith University in Nathan, Australia, who is preparing a study for the World Bank on corporate formation worldwide. "Somalia has slightly higher standards than Wyoming and Nevada."

The U.S. was declared "non-compliant" in four out of 40 categories monitored by the Financial Action Task Force, an international group fighting money laundering and terrorism finance, in a 2006 evaluation report, its most recent. Two of those ratings relate to scant information collected on the owners of corporations. The task force named Wyoming, Nevada and Delaware as secrecy havens. Only three states - Alaska, Arizona and Montana - require regular disclosure of corporate shareholders in some form.

4. Just as in Greece, taxes are optional for the nation's financial Elites. In Greece, you don't mention your swimming pool to avoid the "swimming pool tax." Here in the U.S., that sort of tax avoidance is against the law (smirk). Here, you hire a Panzer division of sharp tax attorneys and escape taxation legally (well, mostly legally--whatever it takes to win).

If you are unfortunate enough to be a successful small entrepreneur who nets $100,000 a year, you pay 15.3% self-employment and 25% Federal tax on the bulk of your income, a combined rate of 40.3%, and a combined rate of 43.3% on all income above $82,400.

Those who net millions pay less than half that amount, somewhere between 17% for the top 1/10th of 1% and 21% for the top 1%: Citizens for Tax Justice, which looks at all taxes paid including federal, state and local taxes, said that in 2010 the top 1 percent of earners will pay 21.5 percent of taxes.

Note that the 21.5% paid by the top 1% includes all state and local taxes. Here in California, the small businessperson earning $100,000 pays between 5% and 9% state tax, so their combined state and Federal tax burden on their highest earnings is a whopping 50%. Then there are property taxes and the 9.5% sales tax, and endless junk fees skimmed from small business. Add all that together and the total taxes paid rises to the 60% level, or roughly triple what the top 1% pay.

(Bitter note from a tax donkey: To all those tax-and-spenders who whine that California has "low taxes," please pay my "low" property tax bill, will you? It's "only" $11,000 a year.)

Super Rich See Federal Taxes Drop Dramatically:

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.

Schoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.

"I simply point out to people, 'Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.

Do you really think you don't live in a kleptocracy? Why? Because the truth hurts?

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Obama and the IEA - Egg on the face

On June 23 I wrote about the Obama/IEA decision to intervene in the global crude market. I hated the plan. One of the points I made against it was this:

Is (the IEA intervention) about teaching a lesson to OPEC? I am concerned that this is a factor. The US wanted OPEC to up production. That didn’t happen. So the bad boys who produce oil just got a shot across the bow.

 

Watch if this angle on the story gets “play”. It would piss off those bad boys and they will retaliate. Does O really think he can take on the world oil market?

-OPEC will respond. “We” will pay a price for this.

Bloomberg has a story out just now that Saudi Arabia is not so happy about this and some cut backs in production just might be in order. From the article:

Oil rose in New York, extending the biggest gain in six weeks, amid concern OPEC may reduce output in response to the International Energy Agency’s move to release oil stockpiles.

 

“If IEA countries are releasing stockpiles Saudi Arabia won’t increase production as much as expected,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna.

 

“There are concerns Saudi Arabia will cut production” in response to the IEA move, said Roland Stenzel, an oil trader at E&T Energie Handelsgesellschaft mbH, said from Vienna.

Oil is on a tear as a result of this (and other factors). If the end result is that OPEC cuts off production by a percent or two the ultimate cost to global consumers will be measured in the hundreds of billions.

I also said this last week. I’m now certain that I was right:

-Obama will get some egg on his face with this one.

 

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Finding Investment Treasures in International Markets

Emerging markets are the rage these days. Investors, desperate for growth, have been increasing their allocations to developing countries, where GDP is rising at a faster clip than in most mature nations. Although I agree that investors should look outside the U.S. market — especially given that many U.S. stocks are overpriced or fully valued — they don’t need to be “the Indiana Jones of international investing” by diving into countries where the rule of law is still in its infancy, as I wrote in my book on sideways markets. There are plenty of great opportunities in developed nations that have stable political systems, rule of law and proper financial accounting.

Wherever you put your money, it’s important to stick to your investment discipline. As a value investor, I focus on three attributes: quality, growth and valuation. A quality company will have long-term-oriented, shareholder-friendly management; a competitive advantage that will protect its future cash flows from rivals; a high return on capital; and a strong balance sheet. Its business will also have a high recurrence of revenue, which will result in stable cash flows.

Earnings growth is important, but I am also looking for stocks that pay high dividends. Though stock price movements get the daily headlines, dividends accounted for half of the returns from stocks over the past 100-plus years — and they are especially important in sideways markets. Dividends are also significant for another reason: They usually improve a company’s quality by lessening the chances of capital misallocation. Canceled or missed dividends create mayhem for a company’s management and its stock. Management will cancel its country club membership rather than suspend a dividend.

It is easy to find companies that meet quality and growth criteria in any market environment, but for these companies to be good stocks, they need to meet the third criterion: valuation. A stock needs to trade at a discount to its fair value — that is, it needs to have a margin of safety. It is almost impossible to find a company that flawlessly meets growth, quality and valuation requirements. However, when I find weakness in one dimension, I always look for offsetting strength in the others.

One company that shines across all three dimensions is U.K.-based retailer Halfords Group, which I’ve been buying for my clients’ portfolios. The 109-year-old company trades on the London Stock Exchange and owns and operates 469 auto-parts and bicycle stores in England and Ireland. It has sales of about £800 million ($1.3 billion) and a market capitalization of some £800 million. About 60 percent of Halfords’s revenue comes from auto-related products (windshield wiper blades, batteries, brakes, stereos and the like); the rest comes from bicycle sales. In 2010 it bought the largest independent auto-service company in the U.K., with about £80 million in annual sales.

Halfords is a high-quality operation. Management has done a terrific job of running the business — its return on equity, profit margins and free cash flows are up, and net debt is down. The company is also a good steward of capital: In April it raised its dividend and announced a buyback of 9 percent of its outstanding shares. Halfords has stable cash flows and a decent balance sheet; it can pay off all of its net debt in a little more than a year if it chooses to do so.

The company’s growth prospects also look good. With 220 shops, its auto-service business will be an important driver of that growth. Since 2003, British law no longer prohibits nondealer auto-repair shops from servicing cars that are still under manufacturer warranty (previously, doing so had voided the warranty). Halfords recently started a national campaign to alert consumers that they can save a lot of money (usually 30 to 40 percent) by servicing their cars at its shops. In addition, the company plans to open about 30 new service stations annually. Auto service will likely contribute a few percentage points of growth a year. Same-store sales in retail stores (which in England are called “like-for-like sales”) will add another few percentage points. Halfords will probably continue to buy back stock; this should add 3 to 5 percentage points to earnings growth. Last, the retailer pays an almost 6 percent dividend, which will likely rise over time with earnings.

Halfords does very well on the valuation test. It is an exceptionally cheap stock. The company generates about £100 million of free cash flow, resulting in a very modest 8 times free cash flow multiple. Comparable companies in the U.S. with a fraction of the dividend yield and a similar growth profile trade at close to double Halfords’s valuation.

That’s a story that even Indiana Jones would love.

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo.  He is the author of The Little Book of Sideways Markets (Wiley, December 2010).  To receive Vitaliy’s future articles by email, click here or read his articles here.

Investment Management Associates Inc. is a value investing firm based in Denver, Colorado.  Its main focus is on growing and preserving wealth for private investors and institutions while adhering to a disciplined value investment process, as detailed in Vitaliy Katsenelson’s Active Value Investing (Wiley, 2007) book.

Copyright Vitaliy N. Katsenelson 2011.  This article may  be republished only in its entirety and without modifications.

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Federal Withholding Tax Data Says US Already In Recession

I linked to this article yesterday, but if you didn't see it then, here's the full article by Lee explaining why he thinks we're already in a recession. - Ilene  

Federal Withholding Tax Data Says US Already In Recession

Courtesy of Lee Adler of Wall Street Examiner 

I wanted to follow up with you on the June 17 report on Federal Withholding Tax collections, which I cover regularly in the Professional Edition Treasury Update (latest report here). I like tracking withholding taxes because they are one of the only economic barometers that we can follow virtually in real time on a daily basis. The charts below contain daily data through June 23. If you are a Professional Edition subscriber this is largely redundant data, but there are two new charts and one new critical fact which I think tell the story better and will show you more clearly just what's going on. I will include these charts in the regular weekly updates in the Professional Edition.

The first chart shows this year and last year superimposed on one another. The blue shaded line is this year. The brown shaded line is last year at the same time date. That this year has had gains versus last year most of the time as indicated by the spread between the two lines. However, that has begun to change in recent weeks, with this year no longer showing material gains versus last year.

I was wondering how much of the gain was due to inflation, so I calculated the year to year difference and then adjusted it by the government's employment cost index annual rate of change. That measure has been consistently running around 2%, which is lower than the CPI (surprise, surprise, surprise). The resulting chart is below.

There are some interesting points to be gleaned from this, once you get past the day to day volatility and just look at the cycles. First is the decline in the linear regression over the course of the year from the 4% area to around 3%. That still is not bad as a real rate of gain, but down is not as good as flat, or up, and there's been a great deal of variation. Before this, there have been good excuses for any negative periods, but not this time.  Let's look at each swing.

In the summer of last year things looked good comparatively speaking because the comparisons versus an extremely weak 2009 were easy. But then in August there was a stall. With the growth rate suddenly going negative in early August as the stock market was beginning to peel off points, the Fed announced what I've been calling QL1.5 or Quantitative Leveling 1.5, the precursor to QE2. Tax collections then started to recover. Coincidence? I don't believe in coincidences when it comes to these things.

Then in mid November the Fed floored the accelerator with QE2. That worked for a while, with the growth rate averaging 5-8% until Christmas. The Administration and Congress then cut a deal to cut payroll taxes beginning in January. Collections plunged as a result, but it was due to the tax cut, not an economic decline, and the theory was that the cut would stimulate growth.

Beginning in March, the theory seemed to be working as withholding tax collections surged versus last year around the same dates, with a spike to a 50% gain for a couple of days in early May. But that was an illusion partly because of a plunge in collections last year when census workers got laid off. But even with that, the surge was sizable and it persisted until the middle of May.

Then things fell apart. The government was peeling off its stimulus programs, gas and food prices had skyrocketed, and suddenly on May 17 tax collections fell versus the same period last year. Since then, the difference between last year and this year has been near zero in real terms. That drop versus the strong gains in March and April suggests that the US may have entered recession a month ago.

I've reached that conclusion, rather than expecting another up cycle for several reasons. First, the Fed, recognizing that the disastrous unintended consequences of QE were far more damaging than any benefit from higher stock prices, had concluded by April that QE must end. It is likely to stay off the playing field until crisis conditions reach a crescendo. Furthermore, politicians, in their infinite wisdom, have now decided to cut the only thing creating the illusion of economic growth, which is massive borrowing to fund current spending. Any further reductions in the budget here will only enhance the downward momentum.

It's going to be an interesting summer.

I'll follow the story and tell the tale weekly in the Fed and Treasury reports in the Professional Edition. I hope that if you already have not done so, you will Click this link to try WSE’s Professional Edition risk free for 30 days! 

Pic Credit: Jr. Deputy Accountant 

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Ugly 7 Year Auction Caps Miserable Week For Bond Bulls

Today's 7 year auction capped a miserable week, in which the 2 and 5 Years auctioned off placed at very ugly terms, although none probably quite as ugly as today's 7 Year. The $29 billion QT0 priced at a 3 bps tail to the when issued, replicating yesterday's action, and pricing at 2.43%, the same as last month, but at a Bid To Cover of just 2.62, the lowest BTC since March 2010 when QE1 was ending and the future was unclear. And like during the past two auctions, the internals were decidedly ugly as Dealers had to take up 56.07% of the amount offered: the most since May 2009, when however the Direct bidder category was a non-factor. Indirects continued their trend of stepping away from all issuance and bought just 32.17% of the bond, the lowest since March 2009. Additionally the hit rate on the indirect bid was a whopping 86%. If anyone has figured out just how foreign banks will step in to fund US bond issuance, please let us know, because we are confused. And Dealers will not be all that excited to have to convert risk assets into paper yielding just over 2%, in the absence of the Fed's vacuum pump... Certainly not at these rates. Slowly, the realization that OT2 is not coming a week ago is starting to soak in as the Treasury complex is finally realizing that Gross was right all along. Exhibit A for the past statement: the performance of the 5 year in the past 3 days, whose 32 bps blow out is the 3rd biggest such move. Ever.

But don't take our word for it. Key excerpts from Stone McCarthy's take:

• "today's 7-year note auction was atrocious."
• "The auction stopped a full 3 basis points above the 1:00 P.M. bid side, and the 2.62 bid/cover was the smallest since March 2010."
• "It was the smallest Indirect bid since April 2009, two months prior to the change in bidder classification rules that resulted in more of the auction bids being attributed to Indirect bidders. The bid accounted for just 14.3% of the overall bid, which was a record low."
• "the 32.2% Indirect takedown today was the smallest since March 2009."

Curiously, the bond vigilantes may skip Italy altogether and focus on the biggest ponzi of it all.

7 Year historical results:

The 5 Year move in the past 3 days in context:

h/t John Lohman

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