49.2 Do Not Rule Out a Market Panic Next Month
A Financial Times column warns of a US Treasury Bill air pocket in March. Learn the little-known history of a mid-market, 1970s German bank that compelled regulators to move towards capital and supplementary leverage ratios. The very ratios that may now trigger uncertainty.


Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
Art: https://davidparkins.com/

Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski. Art by the King of the North, David Parkins.


But first, this from Eurodollar Enterprises! The motion picture event of the summer: (Con)Tango & Cash. When an international smuggling ring uses the local commodity exchange to send gold into backwardation, two macroeconomists take matters into their own hands… and onto the spot market.
Starring Travis ‘the President’ Kimmel as Contango, “You can take delivery of lead — punk.”  
And Steven ‘the Monarch’ Van Metre as Cash, “You know how I promised to let you close out that trade?”
“Yeah man, you did Cash!  You did promise!”  
“I lied.”
With Grant Williams as the polite British guy, “Well chaps, you put the mockers on, didn’t you?”  
This motion picture will never be rated. Available only on-demand at Real Vision.


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00:05 Who was Bankhaus Herstatt, the mid-market German bank that would upend interbank markets?
02:53 What was Herstatt doing in the eurodollar (offshore US dollars) market?
04:34 Why did Herstatt come to the concerned attention of German and British regulators?
06:01 Where did Herstatt have its correspondent relationship (USA) and why did that matter?
10:06 When could CHIPS members clawback “settled” funds? The next day! A violation of the spirit.
14:08 International regulators get involved to develop an early warning for “Herstatt risk”.
18:50 Capital ratios gave no warning of Bear Stearns nor Lehman Bros, thus the SLR came to be.
25:01 In May 2020 US regulators gave SLR relief that expires on March 31 2021. A cliff(hanger)?


Beware, There’s Another SLF ‘Cliff’ Coming At the End of Q1: https://bit.ly/2NdNpMv
John Dizard’s Do not rule out a market panic next month: https://on.ft.com/3pCGaLc
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7