Archive - Jun 15, 2011

Tyler Durden's picture

Guest Post: Some Thoughts On The Policy Bias Toward Inflation





Banks fear deflation. They should: sustained deflation will most likely kill the banks. Also, since banks provide high-paying jobs to Federal Reserve types as kick-backs for well-aimed support while they are at the controls, the Federal Reserve fears it as well. As long as they keep banks going, they will be well-taken care once they are no longer with the Federal Reserve. Also, the only thing our current central banker in chief knows how to do to stimulate a basket-case is suppress nominal interest rates, or monetize debt. I don’t really care much about the inflation/deflation debate much anymore, because to me it is aside from the point. What I care about is what the yield curve looks like because rates drive everything. Not much to chase away the gloom in this, just a way to think about stuff.

 

Tyler Durden's picture

SocGen's Future "Anchor Themes" Matrix And Black Swan Probability Distribution Chart





Anyone expecting to see an immediate reference to Albert Edwards or Dylan Grice when the name SocGen is mentioned will be disappointed. Below we present a comprehensive outlook report by the firm's Michala Marcussen and her team, which unlike the abovementioned duo of doom, is far more optimistic (not necessarily an outlook we share), although it does provide several unique approaches to evaluating and quantifying future risk. For one, the firm analyzes 6 "anchor themes" which it believes will shape the near and medium term future, namely a "sustainable recovery", "policy asymmetries", a "US mini-v", a "V-shaped recovery for Japan", "German diet for Euro area" and "China bumpy landing." Then it evaluates the impact of each of these across monetary policy, bond yields, currency and risk assets. As we said we disagree with virtually all of the firm's assumptions, but in analyzing the logical consequences of each faulty premise, one can then merely flip the conclusion. Additionally, SocGen also provides a risk map with a black/white swan distribution curve, which identifies the biggest growth outlook downside and upside risks. Bottom line: not a report of the intellectual caliber one would expect from the firm's two core contrarians, but certainly a glimpse into how the traditional bullish groupthink is trying to explain away the current regression to the depressionary mean, and just what outcomes their delusions will have on various market products.

 

williambanzai7's picture

THe OFFiCiaL BoNDHoLDER HaiRCuT GuiDeS ARe HeRe!





"I almost cut my hair..." --Crosby, Stills, Nash, Young, Merrill, Lynch, Beavis & Butthead LLP

 

Tyler Durden's picture

His Name Was John Paulson (And His Fund Was Down 20%)





When Zero Hedge first reported that the fund most exposed to the Sino Forest collapse is the once fabled and infallible (especially when it gets to pick the CDO portfolio it shorts) Paulson & Co, we suggested that the fund has lost $500 million on this one investment, pushing the firm deep into the red, and further calculated that the firm's flagship Advantage Plus fund was down about 13% for the year. Boy were we off. As the WSJ's Greg Zuckerman reports, Advantage Plus fund "lost more than 13% in the early part of this month, through June 10, leaving it down 19.65% for the year, according to two investors briefed on the performance...One problem for Mr. Paulson: The recent collapse in shares of China forestry company Sino-Forest Corp. The timber company has tumbled 80% since late May, amid allegations by a short seller of questionable accounting, which the company has denied. That collapse has resulted in a paper loss of more than $500 million for Mr. Paulson's firm, based on holding figures as of April 29 from FactSet Research. Paulson & Co. owned nearly 35 million shares of Sino-Forest, according to FactSet." Which means that rumors that Paulson, in addition to being long the stock, is also heavily long the firm's bonds which last traded just south of 60, are likely correct, and the Chinese fraud may have well cost the firm almost as much as it made on the now infamous Abacus CDO. And to think Zero Hedge predicted back in November that the Chinese fraudcaps would snag some very high profile targets. Little did we know that the complete lack of diligence characterizing most retail momo investors would befall the one fund that up until this point had basked in a halo of invincibility. At this point we would not be at all surprised if LPs, seeing a 20% plunge in their P&L, pull their capital from Paulson and put it in Muddy Waters, whose flawless track record is based purely on research and not on allegedly shady manipulative practices or economies of scale.

 

Tyler Durden's picture

The Greek Bankruptcy Case Study Is Now A Cartoon





With the Greek crisis approaching surreal proportions, now that everything from this point on is a carbon copy of events from May 2010 onward, and the only question is whether Europe will succeed in kicking the can down the road for another year (not with the 2 Year at 28% it won't and the 30 Year priced at 40 cents on the dollar) all one can do at this point is laugh at the daily dose of denial at the Keynesian-cum-monetarist experiment. Alas, one also has to be dead serious about this stuff because it just may usher the eventual implosion of capitalism once again, since many (us among them), believe that the downstream effects from the bankruptcy of Greece, and thus the ECB, and thus Europe, will make Lehman seem like a walk in the park (and the only reason Greece hasn't blown up yet, of course, is that Greece does not have a profitable fixed income trading desk that Goldman would love to gets its tentacles around). So in reporting on today's events we combine the hysterical with the  somber. First, we present the latest NMA cartoon summarizing the Greek fiasco in only a way that NMA can. We also share the latest Greek summary piece from SocGen (which itself will be downgraded substantially when Greece folds). It should serve sufficiently well to defuse any left over levity: "This looks like a last ditch effort from Papandreou to save the
situation as his Parliamentary majority is eroded, and the opposition
threatens to renege on the conditions adhered to when the IMF Stand-By
Arrangement was originally signed back in May 2010. Meeting these
programme requirements is a binding condition for a continuation of the
EU/IMF quarterly disbursements, which are necessary to plug Greece’s
funding gap. Greece’s situation, and the euro area’s sovereign crisis, have reached a new level of uncertainty."

 

Tyler Durden's picture

LulzSec Takes Down Cia.gov





Nope. This is not an Onion headline. Go ahead. Try it out. http://www.cia.gov

Internet kill switch on in T minus 5...4...3... as full blown retaliation against all (cyber)enemies foreign and domestic hits new highs. And since no crisis can go to waste, next up is the the appointment of the propaganda Internet Tzar.

 

Tyler Durden's picture

Guest Post: Why The Wheels Are Falling Off China's Boom





Despite their many differences, the economies of China and the U.S. share a number of key traits: both are corrupt, rigged, crony-Capitalist, rely on phony statistics and propaganda and operate with two sets of rules: one for the Elites, and another for the masses. Given these similarities, it's no wonder that the wheels are falling off both economies. There are some key differences, of course, which will make the crashing of China's boom all the harder. China's leadership likes to do things in a big way, and so its campaign of "extend and pretend" over the past three years has been unprecedented. This isn't just the consequence of a Command Economy overseen by a Central State; the "extend and pretend" boom was fueled by stupendous borrowing by local governments and private enterprise as well. This flood of money has severely distorted China's economy, yet the imbalances are now normalized. When a system become this precarious and imbalanced, it can best be modeled by stick/slip destabilization: blaming the last grain of sand that destabilizes the entire pile for the collapse is to ignore the real cause: the entire system is unstable. Here are a few factors which are widely misunderstood or discounted by the mainstream financial media.

 

Tyler Durden's picture

Market Volume Explodes To Third Highest Since Flash Crash As FNSR Implodes For Second Time In A Row





Stock volume, hiding for so long, finally made an appearance. The all dominating ES, which determines the stock price for virtually every other security in the stock market, surged to 3.7 million shares, the 3rd highest in 2011, with only the post-Fukushima nuclear explosion panic from March, when the Nikkei briefly went bidless, higher, and also the third highest since the Flash Crash days of last May. As reported earilier, now that all support lines have been breached, the next bounce can be expected at around 1,244 or the 200 DMA. Should that be taken out and it will be to make way for Operation Twist 2, we will promptly see the 1,150s once again. After that, we are straight down to Jackson Hole levels.

 

RANSquawk Video's picture

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 15/06/11





RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 15/06/11

 

Tyler Durden's picture

Pandora Box's Unleashes Nothing But Selling Algos: P Closes At Lows Of Day, 30% Off Intraday High





Something tells us the guy or gal who bought P (better known as the "new old, and always worthless, American Launchcast") at $25 post break is a little angry right about now. Not to mention down by 33%. It seems our forecast of Pandora at $2 in 6 months is quite achievable. In fact at this rate, we give it 4 days.

 

Tyler Durden's picture

G-Pap Releases Video Clip





Don't ask. It's all Greek to us. But since he is not tearing up we assume no penis shots are involved.

 

Tyler Durden's picture

Papandreou Issues Pre-Recorded Announcement: Will Stay, Reshuffle Cabinet, Seek Vote Of Confidence; Long Weiner/Short G-Pap Pair Trade Started





From Bloomberg:

PAPANDREOU SAYS THAT HE WILL CONTINUE, RESHUFFLE CABINET, SEEK VOTE OF CONFIDENCE

He also says that he has been struggling to save the country and is attempting to reach a national consensus. More importantly, it appears he bluffed when saying he would leave, a decision likely halted as nobody wanted to pick up the live grenade of responsibility.

Kiss bailout #2 goodbye.

 

Tyler Durden's picture

Charting Key Breakdown Levels In The EURUSD, The S&P, The VIX And The Spanish 10 Year





Looks like John Noyce's prediction, who among the Goldmanites, has long been bearish on the EUR, is about to be proven right. Below we present his latest technical observations not only on the key FX pair, but on the VIX, The S&P, and, perhaps most importantly, the Spanish 10 Year. In brief: if today's weakness is not contained, there could be a very signficant downside risk breakdown in numerous market indicators.

 

4closureFraud's picture

Fraudclosure | Michigan Attorney General Subpoenas (CRIMINAL) Lender Processing Services, Fidelity National Financial Inc. (FNF) and CT Corporation System in Probe





The subpoenas are part of a criminal investigation into questionable mortgage documentation (Linda Green) filed with Michigan’s Register of Deeds offices. The subpoenas were approved by the state court in Lansing June 13 and require responses by June 30.

 

Phoenix Capital Research's picture

SYSTEMIC RISK IS ON RED ALERT





Remember, we never actually “took the hit” we needed to take in 2008. The same junk debt remains in the system (it’s just been hidden by loosened accounting standards). The same enormous derivatives time bomb is still ticking (it’s over $600 TRILLION in size). None of these problems were solved. None were even addressed.

 
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