Art Cashin On High-Frequency Signing, The Death Of Securitization, And Fleets Of Fed Helicopters

Tyler Durden's picture

Some thoughts on affidavit-stuffing from Art Cashin, which are oddly comparable to our own.

Foreclosure Fiasco Ferments Further – When I wrote last week about the emerging problems in foreclosures, I opined that the problem could get much bigger and more complicated. Boy, has it ever.

Wednesday morning, my good friend David Kotok, dropped by the NYSE to be interviewed, along with Rod Smyth of Riverfront Investment Group, on CNBC’s Squawk on the Street. Before they left, they dropped by to say hello. The conversation quickly turned to the foreclosure fiasco.

It was noted how quickly this had morphed from a potentially isolated processing problem at a single institution (GMAC) to an industry-wide disaster that may threaten the very concept of securitization.

That would be a major problem since at the top of the bubble, it was estimated that nearly 80% of all credit came from securitization. That’s a hole that no fleet of Fed helicopters can fill.

The problem is even being politicized to some degree. Speaker Pelosi and several associates called on the Justice Department and other regulators that the banks be “held accountable for their practices”.

There are fears that the murky comingling of mortgage packages may take months or even years to unravel. In one case, as many as four separate entities claimed title to the same piece of property.

With foreclosures virtually frozen, a surreal new world seems to be evolving. Delinquent homeowners live in the house but make no payments. The banks/mortgage holders get no payments but are still liable for things like property taxes. Could this morph into TARP II?

Before we got each other more depressed, we exchanged greetings and went our separate ways wondering if the “new normal” was morphing into the “new abnormal”.

And some other thoughts from the nimble cocktail-napkin charter:

Put That On Mute – The dollar remained weak against the Euro but in a far more muted manner than we saw Tuesday.

That, in turn, produced a more muted reaction in the various asset classes that are influenced by the dollar/Euro.

Therefore, gold rose slightly, oil rose slightly and the Dow rose slightly. (The Nasdaq fell after a warning from Equinix put a dark cloud over cloud computing.)

Traders spent the day watching the stock market slavishly follow the currency movements. They assume the high level of nearly instantaneous correlation means the high frequency folk may have linked their algorithms to the Euro.

The only oddity of note was that the S&P still appeared to be restrained by the 1159/1163 resistance band that had contained it in Tuesday’s rally. Tuesday’s high was 1162.76. Yesterday, the high was 1162.33. The bulls will have to break above this smartly or risk turning the ball over.

Tempering Tepper – Back on the last Friday in September, David Tepper came on CNBC and said that the Fed’s commitments and actions made the stock market a near lock-in buy. The market listened carefully and a powerful rally ensued.

Yesterday, Kyle Bass of Hayman Capital came onto CNBC and headed down a different road. Courtesy of CNBC, here are a few of the points he made:

“You can't get lost in whether I should own stocks or bonds, you should expand your horizons.”

“I actually own some stocks. I do, I own a few. But you're asking me if I would buy stocks here in general, I wouldn't. There are much better things for you to own. I think productive assets are better.”

He suggested commodities, especially the precious metals.

For example, Bass cited the performance of metals. Although equities have been up within the last few weeks, the metal complex of commodities during the same time period—Gold, Silver, Platinum, Palladium—"as a group if you were to equally weight them are up about 75 percent," he said.

Aside from stocks, one of Bass' biggest concerns is the Federal Reserve's effort to boost the economy.

“I also think with what we've been hearing from the Fed and what we've started to hear the Fed wants to print another trillion bucks. We have a monetary base of $2 trillion today and we're gonna print another trillion—what if that doesn't work?”

"When you start printing money—as such a huge percentage of the monetary base—and the Fed itself has admitted in the last couple days in speeches that they don't know what they're doing. They just hope what they're doing works."

When you are experimenting with such a fragile system and fragile thought, according to Bass, there are two important variables:

"Nominal amount of currency in the system versus the goods and services approaches. If you have $100 dollars in the system and you print 10, you didn't devalue the currency by 10 percent, you devalued it by 15. And you go print another 10, and you don't devalue that by like say nine percent, it devalues it by 20 more. So there is a nonlinearity between the amount of money in the system—the quantitative side of things and the qualitative aspect of people's belief in the underlying currency."

Bass turned to the connection between Fed action and the stock market. "So when you talk about what's going on, yes they are trying to ignite equities, they are also trying to change expectations in people," Bass said, adding, "you don't have the confidence to go spend. You still have 25 million people out of work."

"I personally don't know how you're going to create sustained growth if there is no certainty on taxes and you are literally printing a trillion dollars," he concluded.

Bass also pointed to the risk of hyper-inflation if the Fed’s attempts to expand the money supply suddenly go awry.
While Bass’s sober assessments didn’t have the same instant impact on the market that Tepper’s had, nevertheless, they inspired a good deal of buzz on the floor. It puzzled some that two such brilliant men saw the probabilities so differently.

Cocktail Napkin Charting – As noted above, the S&P has remained contained by the 1159/1163 resistance. Should it continue to test and fail at this area, it could raise the specter of topping. That, in turn, could resurrect talk of those two cycles we discussed a few days back.

For today, the napkins suggest the initial resistance is 1159/1163 then they look to 1172/1176 followed by 1181/1184. Support looks like 1149/1153 with fallbacks at 1138/1141 and 1130/1133.

Trivia Corner

Answer - "I.O.U." stands for "I owe unto" as in I owe unto Priscilla.
Today’s Question - Who was the first President to have both parents out live him?

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Jim in MN's picture

Better call in another Fed Hawk to cover the first one


Battleaxe's picture

Fed set to announce FUCT: Federal Unrestrained Currency Tampering program.

Bill Lumbergh's picture was just gang raped and kicked to the curb in a matter of minutes.

firstdivision's picture

If you think gold got gang raped, check out Platinum.

hbjork1's picture


It is Al Nobel's fault.

They just gave the chemistry prize for a "palladium-catalyzed cross-coupling" reaction pathway that is expected to find broad application in making of difficult to synthesize pharmaceuticals. 

PALL is actually up.

LoneStarHog's picture

Watch the PERCENTAGE of change and not the AMOUNT in pennies/dollars.  So far the percentage of change is minuscule.

sullymandias's picture

You're right, the percentage change is minuscule compared to the dollar amount!

firstdivision's picture

Nice sell off after that open with futures up 7+.  We are defo in a massive resistance and seems to be lots of sells willing to dump at these levels than buyers.  Fed should of had a POMO today.  I am sure Brian Sack is busy figuring out what he can buy to prop this carcass up.

Bob's picture

This lawsuit sums up much of the securitization fraud liability very nicely:

Note the filing date of April 28, 2010.  The word has apparently been out for quite a while now. 

Note also that it is a Qui Tam (False Claim) action filed by a single individual on behalf of the state of Tennessee.  While Qui Tam is federal law, originating with Lincoln, in this case it is filed in State Court under TN's Qui Tam statute.  The guy who filed this against all the bankster institutions stands to make at least $2500 per violation of law . . . on 1M violations in TN alone!  Sure, he may only get 30%, but . . .

We don't have to wait for the government--at any level--to go after the banksters.  If you have knowledge, say as a realtor, mortgage rep, county clerk office secretary, filing clerk at a bank, anything at any level, you too can file . . . and get fabulously rich for pushing the courts to do the right thing. 

Who could ask for anything more?  Realistically, I mean.  Only the Fed can fart dollars, after all. 

mrcmmm's picture

This is part of why I think it is big, very big.  The same investment banks that are going to be the targets of the homeowners, the state and federal tax authorities, false claim suits, and state and union pension fund investors, are ALSO the ones having to deal with the CRE maturity cliff that starts ramping in, oh, nine months.  It's like that Calvin and Hobbes cartoon where he's got the family minivan, the train, the airliner and the fuel tanker all heading for a cataclysmic event.   Fed might have a plan for throwing another $1T+ at the banks to handle the impact of either RRE or CRE, but not another $1T+ to handle both.  Why would one not short JPM, DB, WFC by the truckload at this point?  Or am I being naive about the lengths the Fed can and will go?  And even if it what?

Bob's picture

I ate my shorts last year and lost my appetite.  My impression is that trading on a collapse won't be allowed.  I would expect Barry or a proxie to close the markets if a "systemic risk" appears a second time. 

Kina's picture

Of course, the criminals are at it again. Will be interesing to see how long it stays down.


Never fear, when SHTF the regulators and minipulators will have their own special necktie party.

RaymondKHessel's picture






tecno242's picture

Nothing has to give..

there's enough money being montetized to push up everything.

Mr. Bubble is creating a bubble in everything.

screw that one sector bubble crap.

Vampyroteuthis infernalis's picture

Yep, everything is a giant bubble.... until one day it is not. They can keep on buying things at inflated asset values, but in the end someone will need to purchase products whether it be commodities or products from companies. Then, we will have the panic and collapse.

tecno242's picture

yup pretty much it.

and Tyler, I love you.. but you should pay attention to this..

when the bubble spider web collapses... The collapse will destroy all the printed monetized dollars too.  Cause all the dollars that are printed are being put into assets. 

When those asset prices collapse, all that created money just goes poof.

Gold will succomb to the same fate as all other assets, as the monetary base is severely contracted.

at some point we'll probably see 10 trillion in US denominated assets go poof in less than 6 months.

The US Dollar will first gain tremendous value as asset prices are destroyed.

That will be followed by the economy tanking and at some point, the US dollar going from extremely highly valued to nothing very quickly as the realization hits that the US will default as the economy tanks.

so why keep buying gold at 1300.. when you'll probably be able to buy it at 500 before the dollar collapses.

Slartebartfast's picture

so why keep buying gold at 1300.. when you'll probably be able to buy it at 500 before the dollar collapses.

Listen to what's coming out of your pie hole for a second.  Buy gold for 500 what?  Dollars?  No way buddy.  The dollar is going to zero worth.  Nothing!  You say it yourself.  Gold will be worth something.  Dollars - nope.  I know of a guy that bought a 40 acre ranch during the great depression for 4 ounces of gold.  "But gold was confiscated!"  Only from the stupid and lame.  Those with sense flipped of Frankie the Limper and kept their gold.  It was worth PLENTY in private barter, and it will be again.  So stuff your mattress with your dollars.  You can use if for toilet paper later.

firstdivision's picture

I will tell you what gave, it was the markets connection to reality.  Fed manipulation equates to a correlation of 1 on everything.

frankTHE COIN's picture

I'm going to get into my Fiat and drive across country.

Jeffrey Lebowski's picture

Im patiently waiting for the MERS system to blow itself, and the securitzation business to hell.... I mean, how can it not ? 

I can seen invetsment bankers swinging from lamp it just me ?

Greyzone's picture

No, they committed crimes, including, if you bother to open your eyes and look, aiding and abetting Al Qaeda in avoiding US laws intended to deny financing to that organization. So they've not only committed fraud, they've actively engaged in treason and assisted in the execution of American troops abroad. You can argue all you want about whether we need to be over there or not (I'd prefer not) but legally, under the law, assisting the enemy is treason and the potential punishment for treason is death.

So yeah, let's hang 'em all and let God sort 'em out.

snowball777's picture

Fuck securitization. When it morphed from a way to spread risk into a way to HIDE risk, it became a (pun!) liability.

Careless Whisper's picture

illegal foreclosures are... illegal

43 Steelie's picture

It's a stretch to call Tepper "brilliant".

"Savvy gambler" or "Ballsy trend spotter" are far more accurate. 

Hype Alert's picture

Speaker Pelosi and several associates called on the Justice Department and other regulators that the banks be “held accountable for their practices”.

Hey Pelosi, here's an idea...  let's hold congress accountable for their actions!

snowball777's picture

Isn't this approach a bit biased in favor of Pugs, since they haven't been big on 'actions' lately?

Except for possibly turning out Rangel to pay his debt to society in the East Village as a tranny hooker, what did you have in mind?

Hype Alert's picture

Rangel is a great example of corruption in the system.  A tool with one last purpose.


I'm for returning to the foundations of the country instead of this self-serving bunch and if that means, and it probably does, removing everybody and replacing them I'll start in November.  It's not a lost cause yet, but it's getting close.

pemdas's picture

"...I think productive assets are better.
He suggested commodities, especially the precious metals."

Gold a productive asset?  You lost me there.

Hype Alert's picture

Why are people only talking about foreclosures??  If the banks can't foreclose on the property because of an unclear title/paper trail, why should anyone make more payments on their mortgage?  The problem isn't just with foreclosures, it's everything that's been through securitization.  The foreclosure process is just exposing that most mortgages are toxic.

centerline's picture


Here it comes.  No wonder there has been a media blackout on mortgagegate.  

centerline's picture

As speculated on here, this mortgage/securitization fiasco could very well be the next "tanks in the street" situation.  Guaranteed that the banker gun is to the head of our corrupt politicians right now.

centerline's picture

This crap is going to either going to go big or go out with a whimper.  The outcome will depend solely on whether or not our legal system has any shred of integrity left.  Or if it is as captured as the balance of the system.  The wildcard here is that most lawyers are the same middle-class folks that are taking a beating.

Kina's picture

You have to think there will be point at which Americans will object to being ganged raped in turn by Banks and Congress.

Congress seems quite happy to sell Americans down the drain so long as their bribe-masters are kept in the money.

Hope they televise the revolution.


Thunder Dome's picture

Ignorant public is the problem moreso than the banksters and politicos.

Rusty Shorts's picture

WTF, these scumbags can rot in hell.

aheady's picture

I can't take any more of this shit.

His Dudeness's picture

1st time, short time.

Those math problems are TOUGH!

Bring the junk...

Robslob's picture

This makes perfect sense too me if you think it through.

1) Allow rapid fire foreclosures

2) Banks take properties

3) QE 2.0 will provide funds for speculation on low cost housing

4) Banks "cover" their losses buy selling to property speculators

5) People get screwed.

This event could actually "delay" QE 2.0 as banks need those speculaters...maybe I am wrong?

Restcase's picture

If the banks can't foreclose on the property because of an unclear title/paper trail, why should anyone make more payments on their mortgage?

If you paid off the mortgage, you'd get title. If there's a clear enough paper trail to give title, then this current legal situation is just a hiccup.

If titles are seriously fouled, however, may I suggest an exciting new career in title lawyering? 

After the Mexican War, there was a parallel gold rush of title lawyers to California and they did very well for the rest of their lives. IIRC Pres. Buchanan appointed Edwin Stanton AG because of his expertise in land/title law and the need to manage the overwhelming backlog of cases.

blindfaith's picture

If your mortgage was created in the last 10 years, it is likely that it was chopped up and is inside many CDS. 

Theproblem exists for the guy who pays off the mortgage... be it a sale, short sale, or payoff...if every party who has a slice of that notedoes not sign off, the title is NOT clear.  The same "robo-signers" signing the paperwork in question are signing the paperwork for all the good standing mortgages too.   They have no idea if all parties are signed-off, nor do you, the buyer, or real estate agent, or the title company.  ANY paperwork recorded in the public records which is not traced and verified as a "sign-off" is a cloud on the title, and it can show up at any time now or in the future.  Make no mistake, this is what makes third world property such a danger to buy.

Don't be surprised if you start seeing the Banks issuing a disclaimer that they can not verify the accuracy of the 'sign-off', and that in turn means the title can not be transferred with all rights defended ( aka warranty deed).  Next step is a 'special warranty or masters deed' issued by a judge or sellers quit claim deed, neither of which is a quality deed and defendable.

The political powers need to make some serious examples out of the banks involved. Where is the Department of Justice and the FBI...this is interstate fraud. This is not just about money scheems this time, it is about the fundamentals of LAW, filing false documents, lieing to judges, and selling property they do NOT legally own.

Ratscam's picture

@ El Duderino

more private lessons in math or another white russian?