October 11th, 2011
The Latest Incarnation Of The European CDO Cubed Bailout "Swiss Army Knife": A Multi-Trillion Insurance PolicySubmitted by Tyler Durden on 10/11/2011 14:13 -0400
A few weeks ago Steve Liesman ramped stocks higher for the day after he released a subsequently disproven rumor that the EFSF would become a CDO square, recycling private investments into sovereign debt. Well that rumor is now dead and buried, so it is time for the next one involving that uber multi-functional Swiss Army Knife which is the EFSF, and apparently has an infinite+1 number of applications, none of which involve actual cash funding. The source of this latest brilliant idea is Pimco parent, Allianz, which has trillions in fixed income exposure all over the world, so it is no wonder it is pushing hard for the world's taxpayers to bail it out. Only instead of a recycling cash, this time the EFSF will become Fed-Lite, "insuring" trillions in debt.
Anyway, the short story is that, after seeing the S&P fail at the 1,200 level 5 times in 8 weeks, we take the opportunity of another run-up to take a short position.
Nice try, mainstream media ...
On Friday, Zero Hedge broke the story of the "next ABX", in the form of PrimeX, or the game of jumbo prime whack-a-mole. It appears that was indeed the beginning. Here is today's update from Morgan Stanley in a market which had gone suspiciously silent since our post, and has now gotten quite vocal again with a vengeance. From MS: "On a day where most macro indices point to bullish sentiment, PRIMEX is getting clobbered again. Last week, it felt like px action was driven by dealers hedging cash inventory/unwinding index longs, with retail providing a bit of a short-covering bid. Today, however, it seems that the short-covering bid has gone silent, and the marginal buyer can't be located under his desk."
Italy rejected the budget today. I can't imagine that it is because the opposition wanted more austerity. That must make the Slovakians even more eager to provide the EFSF with money to buy Italian bonds. The IMF has declared that they went to Greece (because they had purchased non-refundable tickets) but are going to give our money to Greece even though none of the alleged criteria were met. How long are countries going to let IMF control their money so whimsically? Since EFSF will likely be approved, I wanted to see what the Eurozone was going to do with all that "cheap" money. As you can see clearly from the graph, French bond spreads are widening relative to Germany, and EFSF spreads are widening slightly faster than that.
Today, at 1:15pm Pacific Time (4:15 EDT), the head of DoubleLine Funds, Jeff Gundlach will hold an open discussion and webcast on the question of whether risky assets are cheap enough. Among the headline topics will be what the most efficient portfolio allocation for the current market going forward is (for those who missed the efficient frontier including real assets, gold appears to have been the best performer over the September 2008-September 2011 with a comfortable margin especially over equities, period much to the chagrin of various naysayers).Anyone can join the webcast at the following link; phone lines will also be made available at (877) 407-1869 or for international calls (201) 689-8044. Full webcast presentation of the webcast presented below.
It seems that everyone's favorite Dr.Doom is selling his consultancy after only several years of operation, David Faber reports. The consultancy, according to confidential sales materials, will generate $11MM in revenue and $2MM of losses. The bulk of clients of the 85 person shop, Faber reports, is corporations, not actual investors, making the buyside wonder "who incremental clients will be." We wonder just how any potential buyer will be able to lock up Roubini for several years, without whose presence RGE will have questionable going concern value. We wish @Nouriel the best of luck in his sales process, whose successful conclusion (or otherwise) probably means that Roubini will end up as a blogger and paid panelist.
It’s always troubling when governments go after firms like GoldMoney. The more signs I see, the more I’m starting to believe that we’re heading down a path where precious metals are once again confiscated, outlawed, or at least severely restricted in many countries. Let’s start with the why. What possible sense would it make to reduce or restrict gold ownership? Simple. The modern financial system is a complete joke. Money is conjured from thin air, backed by false promises from bankrupt governments. Then there’s the fractional reserve swindle, centrally planned interest rates, government-produced inflation, manufactured statistics, insane credit and sovereign debt bubbles, etc. It’s a total fraud… and like any good con, it depends on just that: confidence. In order for a system based on -nothing- to perpetuate, it’s imperative that it commands the confidence of the people within it. And people in rich western countries have been programmed since birth to believe that the colored pieces of paper circulating around in their economies are intrinsically ‘valuable’. It’s funny, because developing countries already know it’s a scam. They don’t trust their governments, and they don’t trust those silly pieces of paper either. Out here in Asia is a great example– most of the region is very gold-oriented. They use paper as a medium of exchange, but it’s a cultural norm to save with gold.
Looks like #OccupyWallStreet is morphing into #OccupySenate first and #OccupyCongress soon.Next up: #OccupyWhiteHouse? From a reader: "Here is a live feed to Occupy DC which has stormed the Hart Senate Office Building in D.C. – there are several dozen protestors chanting, arrests being made, and a flag that was hung upside down (sign of distress)."
It seems like the Slovak Republic will agree to the current plan. It seems like some politicians have decided that getting a general election and a chance to be in charge and have power is worth selling out what they believe in. In the meantime, with the current structure the Slovak Republic, as small as it is, has an equal vote on some items. Anything that is unanimous requires them to vote. People are already downplaying any potential "NO" vote as something the other member countries would just step up and assume the Slovak's portion. Sure, but what happened to the integrity of the Euro? Isn't this someone starting the process of leaving the Euro? I wouldn't dismiss the implications too quickly. It certainly makes dreams of Eurobonds look plain silly.
And Belgium and Austria were doing so well there for a few hours...
Jim Chanos Mocks Latest Chinese Attempt To Support Its Stock Market, Sees It As Confirmation Of DeteriorationSubmitted by Tyler Durden on 10/11/2011 11:22 -0400
Yesterday we presented our cynical perspective on the latest Chinese intervention in its stock market, whose sole intention was to prop up the stock market, and create the illusion that the economy is stronger (following in the Chairman's footsteps, it appears that now the SHCOMP is the best proxy for economic prosperity) now that bank speculation of a Chinese hard landing has grown significantly louder (see here and here). Today, it is Jim Chanos' turn to jump on the, pardon the pun, cynical bandwagon, who, as Bloomberg reports "said a rally spurred by government purchases of the shares hasn’t changed his bearish outlook. The MSCI China Financials Index surged 6 percent today after state-run Central Huijin Investment Ltd. started buying shares in the four biggest Chinese lenders. The gauge of banks, insurers and developers had tumbled as much as 43 percent in 2011 through Oct. 4, sending its price-to-earnings ratio to a record low of 5.6 on concern that slowing economic growth will spur bad debts after a three-year credit boom. “The fact that people are even talking about the government stepping in to shore up the banks, when two months ago people thought there was nothing wrong with the Chinese banks, should tell you just how seriously this situation is deteriorating,” Chanos, founder of New York-based hedge fund Kynikos Associates, said in a Bloomberg Television interview." Needless to say this is glaringly obvious, which is why it will have no adverse impact and the only thing the markets will care about is how many trillions in additional government liquidity/purchases will come down the line to prop up the illusion that is the global economy.
Sarkozy and Merkel continue to make "plans" for what to do... The reality is all they're doing is playing for time while they prepare for a Greek default. Indeed, German officials recently told the Telegraph that a "hard" default for Greece is coming which will feature investors taking a 60% "haircut" on their investments in Greek bonds.
The "powers that be" have lost control of the markets. Both the IMF and the Bank of England have warned we are facing a financial meltdown of historic proportions and possibly the worst ever in history. These are the very groups that are supposed to hold up the financial system... telling us that we're facing a "meltdown."