You Don't Put in THE Bottom With a Spike in Libor

Remember our good friend LIBOR? Well, he's totally causing shit again. So don't get too excited about this short squeeze... errr... rally. (You don't put in THE bottom with a spike in Libor.)

Three-Month Libor for Dollars Increases for 11th Day (Update2): "The cost of borrowing in dollars for three months in London rose for an 11th day as banks sought cash to cover their commitments through the end of the first quarter.

The London interbank offered rate, or Libor, that banks say they charge each other for such loans climbed two basis points to 1.33 percent, the highest level since Jan. 8, the British Bankers’ Association said. The Libor-OIS spread, a gauge of bank reluctance to lend, increased to the most since Jan. 9.

Banks are balking at lending amid a squeeze on cash toward the end of March on concern more financial institutions will need to be rescued by governments following almost $1.2 trillion of writedowns and losses since the start of 2007. Italy’s Banco Popolare SC today became the nation’s first lender to seek state aid. Lloyds Banking Group Plc, the U.K.’s largest mortgage provider, ceded control to the government March 7 in return for state-asset guarantees.

“The liquidity will be horrible in the next couple of weeks,” said Vincent Chaigneau, head of international rates strategy at Societe Generale SA in London. “We have seen renewed stress in the Libor-OIS spread.”

The spread, the difference between the three-month Libor for dollars and the overnight indexed swap rate, widened two basis points to 107 basis points. It averaged 11 basis points from December 2001 to July 2007, and soared to 364 basis points in the weeks following the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc."

Remember how giant spikes in Libor occurred PRIOR to the absolute meltdown in equities? October 2008 resulted in panic liquidation of risky assets (translation: the stock market shit the bed). Just prior to the absolute destruction of your 401k, Libor perked up.

09/24/08: Libor, Fed Funds, Money Markets: It's All Broken
06/26/08: LIBOR Perks Up Gain...
05/27/08: LIBOR Liars: UBS, HSBC, Royal Bank of Scotland
05/20/08: ZEW Hits Record Lows, LIBOR Woes Hurting Eurodollar
05/13/08: Libor Poised For Shake-Up, Credibility GONE
04/24/08: RISE Dark Lord Libor! RISE!
04/21/08: The Race To The Bottom Accelerates
04/17/08: The South Sea Bubble and Today’s Central Banks: FRB, BOE, ECB
04/14/08: The TED Spread, LIBOR and EURIBOR = Scary Bad

So when you read about how stocks "popped" yesterday, consider that Libor is getting ready to crash your party.

Stocks Post Best Rally of 2009 on Improving Citigroup Outlook: "Stocks around the world staged the biggest rally of the year after Citigroup Inc. said it was having its best quarter since 2007, spurring speculation the worst of the banking crisis is over. Treasuries and gold fell.

Citigroup jumped 38 percent as Chief Executive Officer Vikram Pandit wrote in an internal memorandum that the bank, which reported five straight quarterly losses, was profitable in the first two months of 2009. JPMorgan Chase & Co. climbed 23 percent and Bank of America Corp. surged 28 percent as Federal Reserve Chairman Ben S. Bernanke urged an overhaul of financial regulations. General Electric Co. rose 20 percent, its steepest advance since at least 1980."

In conclusion, if you really believe Citigroup (C) has suddenly started making money (excluding mark-to-market losses) you are quite possibly border line retarded. They've had the "best quarter since 2007"! Really? They did as well NOW as during the absolute apex of the greatest credit bubble ever? HOW? HOW is that even possible? WHERE could those profits possibly come from? (These are the same clowns that quietly moved a $1 trillion SIV onto their balance sheet.)