This page has been archived and commenting is disabled.

If It Smells Like A Funding Crisis And It Looks Like A Funding Crisis...

Tyler Durden's picture


Submitted by Nic Lenoir of ICAP

Well, it must be a funding crisis. For all those who have been talking about rate hikes, here is a little reality check: we are on the verge of a full blown funding crisis at the sovereign level and central banks have just only started withdrawing liquidity.

To be sure two factors are at play: the explosion of sovereign CDS's or in other words sovereign credit spreads, and the withdrawing of liquidity.

I have long been convinced sovereign CDS's would be the next stop for the wreck train, but for a while last fall it seemed like we might have a window of recovery, and would have to wait for the roll-over of the business cycle before the market adresses the issue. Greece, however small, provided the spark that ignited the powder keg when the new administration decided to clear its name and reveal the true nature of their government's books and deficit when it took over. It was all downside from there. Greece's ability to keep rolling its debt down the road is pretty much null, despite a lot of the austerity measures committed to. Then of course as we all have learned from recent experience with the banking crisis contagion is quick to arrive, and since most countries are in a precarious fiscal situation the market is not short of ammunition to spread the fire. Let's be clear: if Spain officially only has a debt to GDP ratio roughly equal to 65%, its consumers are massively leveraged, and as a result so are local banks. I hear a lot of people out of Europe saying: "the US is no better, this is ridiculous we are just as solvent as they are". Maybe, but a market is governed by supply and demand and right now no one wants European bonds. As numerous instituations some bigger than other have found out: when you have leverage you are only as solvent as you can roll your debt.

The other factor at play here is the actual funding difficulties we are seeing resurface in the money markets. Remember the ECB has pledged not to renew its 1Y LTOR maturing in June. We expected them to be very pre-emptive and nurse the markets' expectations announcing a ramp up in lower maturities to smooth the liquidity gap. Arrogance being a French natural attribute, Trichet did not really bother with such formalities. At the same time the Fed has slowly been pulling the liquidity rug letting various liquidity programs mature (the federal reserve's balance sheet shrinkage has been covered by none better than our chief economist Lou Crandall for Wrightson ICAP). Risk assets were slow to react in particular US equities (supported by USD strength they were the last to turn this time) but are now catching up. We discussed at length over the past year how the market ramped up every day the Fed injected liquidity in the markets via QE and how the entire advance since the 666 lows was less than the move between noon and the close on QE days over that period! Well now we not only lost our turbo-charged market boost: liquidity should be a drag on equities. FX forwards have showed that USD funding cost has been creeping up and now comes at a premium: the days when European banks are scrambling for liquidity could be back faster than one thinks if one believes the EUR/USD cross-currency basis.

Let's take a step back and look at what the possible solutions are. The first is what Angela Merkel was quoted mentionning as "assisted default within the Eurozone". While I completely agree that defaults are probably inevitable whether it is now or 3 years down the road, it was a calculated political snake move on her part to bring it up publicly like that right on the heels of the Greek bailout and following the European market holiday yesterday. That opens up a door Mr. Almunia didn't know existed ("there is no default in the Eurozone", almost as classic as Trichet hiking in 2008), and also pushes the market down that path. Once you have officials going down that route publicly everybody owning Spanish, Portugese, or any other vulnerable sovereign bonds is feeling a little less upbeat about the Greece-IMF bailout. If that is the road we are following then surely it will be drastically deflationary, the Euro will keep punging and the USD appreciating, taking down EM equities and commodities. Not even Gold is posting a nasty reversal on the day and if the situation is not contained then we are moving to an environment where owning gold is not the answer.

The second is a further string of bailouts. We are not going to get any more help from the Germans, at least certainly not until Saturday because of the upcoming election (was Merkel's statement today part of her own local political strategy?). So that means the IMF a.k.a. uncle Sam is going to have to step up to the plate and shell out some cash. It's a slippery slope, because after Spain comes England, and then Japan, and then the US! The last 3 countries have the possibility to simply devalue their currencies aggressively which Europe can't do as easily. Politicians and central bankers are certainly aware of this and even though sometimes defaulting or cutting massively social programs is what is needed, they will choose the populist way and try to print their way out.

Either way there is so much you can run but you cannot hide when the deflationary ghosts come to haunt an economy with an aging population and massive global overcapacity. Some believe we can get an air-conditioned house and an SUV to every family in Asia and Africa if they experience the same credit boom we have over the past 30 years and delay the time bomb, but I don't think it is a possibility as they do not have the economic and banking infrastructure to achieve it. China is trying to have a fast forward bubble and blow up in 15 years twice as big as we have in 50. I am frankly scared of what will happen when that ponzi scheme comes to an end. For more on our economic views and the deflation prospects I attached the powerpoint of a presentation I gave recently to an investor panel.

I expect the Fed to step in if markets don't settle and re-open the currency swaps channel with other central banks as the USD liquidity squeeze intensifies. Central banks like that of Venezuela or Angola which issued bonds in USD much to our outrage last year should be left out to hang dry as it is the only way they will learn their lessons. Until the money markets are not showing signs of compressing fundind premiums all around and the USD squeeze is not halted, expect equities and commodities to suffer greatly with the major liquid sovereign bond markets as only safe heaven. If it gets to where even these aren't safe, we are afraid that your cash will be safest placed under your mattress. After all we did not deleverage our economy after the 2008 crisis, banks are still holding most of the assets that put them in trouble in the first place, so basically we have done nothing but taking distress to the sovereign stage. It is time to face the structural problems of our economy as we will not be able to go on another run like that from 1982 to 2007 boosted by +280% in the debt to GDP ratio.

We remain convinced USD bulls (short EURUSD core remains the best trade for 2010) against almost every cross out there (exception can be made for JPY though it has not shown traditional risk aversion or correlation to US Bonds of late so watch for the decoupling as a sign of a deterioration of the Japanese sovereign bond market). Until the liquidity situation is resolved we would also be cautious with gold as it has posted a nasty reversal today on the last resistance 1,185/1,187 (c=a since the lows) we had highlighted before the run towards new highs. Once default fears are batted away with the liquidity bat then not doubt the Gold bullish trend will return.   

ICAP Global Macro Monitor



- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 05/04/2010 - 14:21 | 331181 AnonymousMonetarist
AnonymousMonetarist's picture

A google news search of 'GDP Commerce Department' yields 26,600 hits. A google news search of 'GDI Commerce Department' yields 19 unique hits ?!?!

And to the best of my ability, it appears that none of the 19 'hits' even discusses GDI?

How about the blogosphere? 1460 hits for the former selection this last week and ZERO hits for the latter?

For the heck of it went to the gubmint web page but they aren't showin' it and I guess the inability to calculate it for myself shows the limitation of my bachelor degree.

Maybe I shouldn't be so hard on myself...

John Williams (via King Report) on Q1 GDP reliability: 'Given the lack of meaningful data available for the "advance" estimate of first-quarter 2010 economic activity, the Bureau of Economic Analysis will not attempt even to guesstimate the Gross National Product (GNP) or Gross Domestic Income (GDI) for first-quarter 2010 until next month’s (May 27th) "second" estimate, or first revision, of the first-quarter GDP.'

Ominous portent? But wait there's more...

Consumer Metrics Institute (via King Report): 'If the sampling period had shifted to two weeks earlier, the reported GDP number would have been 4.4%, substantially higher. However, if the sampling period had shifted to two weeks later, the GDP growth rate would have been only 2.0%, less than half the reading from only 4 weeks earlier. This is the sign of an economy in rapid transition.'

This morning's King Report : 'When we told a hedge fund consultant that PPI is accelerating at a record pace, he reminded us the Ministry of Truth has the GDP Implicit Deflator at a five decades low! For over a decade we have moaned that PPI understates true inflationary pressure and CPI greatly understates inflation due to OER, hedonics, sampling, geometric weighting and any of the numerous other schemes that have been implied over the past 20 years or so. CPI is constructed to not show inflation. If the US government beancounters employed a realistic inflation metric, there would be no GDP gain. If the US government employed accurate inflation metrics, there would be little or no GDP growth since 1999. Then we would have harmony with the negative job and income growth of the past decade.If not for OER, the CPI would wipe out GDP growth in Q1 – and this includes all the hokey CPI chicanery that understates inflation.'

What would I do without my red pills, Morpheus?

But gosh so many experts rely on GDP, and its obvious that the recovery is (still) nascent right? There's no need to empirically argue otherwise is there?

Experts are also trying to offer a narrative as to what motivated our 'I Can't Believe it's not Capitalism' Plan: too much leverage, OTC derivatives, lax regulation', lax underwritin'. All true no doubt. Seriously doubt though that 'charges' will be brought up on all the culprits contributing to this litany of woe. Whom amongst the banksters would not be charged and whom of the 'chargers' could even approximate chastity?

For example, shouldn't the SEC investigate this?

Huffington Post (March 2004 FOMC Minutes): 'As top Federal Reserve officials debated whether there was a housing bubble and what to do about it, then-Chairman Alan Greenspan argued that the dissent should be kept secret so that the Fed wouldn't lose control of the debate to people less well-informed than themselves. "We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand," Greenspan said, according to the transcripts of a March 2004 meeting…'

And while you're at it SEC how about indicting Yellen as a co-conspirator?

By Jim Grant
Grant's Interest Rate Observer
December 2, 2005

'Former Fed governor Laurence H. Meyer, in a 2003 talk at the Federal Reserve Bank of St. Louis, described a telltale exchange on the subject of how to define[price/financial] stability. The scene was Meyer's first FOMC meeting, in July 1996, and governor Janet Yellen was making the case for inflation targeting; she said she would aim for 2%. Greenspan replied that the Federal Reserve had a mandate to foster stable prices, not rising ones. To which Yellen rejoined that the Fed also had a mandate to promote full employment. To hear her tell it, a small positive rate of currency depreciation is a necessary lubricant for economic growth (not so, according to a survey of 133 economists over 50 years, produced in 2002 by Stanley Fischer et al.)

"Janet then seized the initiative", Meyer related,"asking the chairman how he would define price stability. Greenspan tried to get away with his vague definition; 'Price stability is the state in which expected changes in the general price level do not effectively alter business or household decisions.' But Yellen pressed him and asked him if he could put a number on that. Remarkably, the chairman agreed, and said he preferred zero inflation, correctly measured. Janet asked him if he could settle for 2% incorrectly measured."

Meyer finished his story;

During a go-around on the topic, only a few Committee members preferred a target of zero, and the consensus was very strong for a 2% target. The chairman ended up summarizing the discussions 'an agreement for 2%' but he cautioned members not to reveal that such a discussion took place.'

Most certainly acknowledge that connecting the dots and ascribing consequences to actions is too challenging for the MSM comics but golly might it not be considered preventative medicine to at least glimpse at the similarities between the late 20's and the late oughts? 40 'days' and 40 'nights' from 1932 to 2012 dontchaknow....

(Posted on Sept 5, 2009)
The two most trenchant similarities of the two periods? - 1) Pre- and post Glass Steagel and perhaps not coincidentally, 2) The top 0.01 percent of earners in the US are now taking home six percent of all the income, higher than the 1920s peak of five percent, and a whopping six-fold increase since the start of the Reagan administration, when the top 0.01 percent earned one percent of all the income. There is no consensus among economists on whether large disparities in income lead to economic disruption, but it is hard to ignore the correlation between rising income inequality and the onset of economic crisis. The last time the US saw similar differences in income was in 1928 and 1929, just before the start of the Great Depression.

Fast-forward to today and some PHD per a tucked-away paragraph in the comics:

'The top 1% held 34.6% of all national wealth in 2007, by Dec.31, 2009 they held 35.6%. Meanwhile, the share of national wealth held by the bottom 90% fell to 25% from 27%.'

That's creative destruction 21st century style folks!

Any other lessons to be ignored?

'It was the financial war between European nations attacking each other's bond markets openly shorting them that led to all of Europe defaulting on their debt. Even Britain went into a moratorium suspending debt payments. This is what put the pressure on capital flows sending waves of capital to the United States that to some degree was kind of like the capital flow to Japan into 1989. This put tremendous pressure upon the dollar driving it to new record highs that were misread by the politicians who did not understand capital flow. They responded with Smoot-Hawley misreading the entire set of facts.' -Martin Armstrong

Beware the Trojan Hoax! (The new 100 billion plus bailout notwithstanding.)

Well golly that's scary but just too complicated for J6P ... we need to break it down into pellet form, offer a tonic for the pain that is the 'new normal' and in classic American style, we need a villian...

U.S. vs. Goldie is the Amerikan version of Yukos vs. Russia. Greedy until proven guilty? Better to adjudicate against the participants of the circus then to put the microscope on the folks that baked all the bread. Of them an example must be made, as the pablum narrative falls squarely in line with mob justice. Decimus Iunius Iuvenalis (Juvenal) for SEC chairman!

Actually the Goldie fracas is entirely more discomfiting than a simple plutocratic sacrifice to the hamster-wheeled populace, it is a small glimpse behind a curtain exposing a conspiracy of silence and an assemblage of tribes and machinations that frankly your humble blogger tries his best to not stare too hard at. Its' too damn frustrating, best to just raise your kids with love and kindness than become embittered by the revelations that the truths one holds to be most dear are lies told to you by liars.

And of course, blogging is cheaper than therapy.

Would appear that Goldie is having trouble getting their 'club' membership renewed. Now any settlement from the SEC will involve a sign-off by Justice. Pay no attention that DoJ has not sought any information from Goldie nor have they interviewed any people currently working for Goldie just focus on the word CRIMINAL puh-leeze. For they are as the Washington Post reports 'casting a wider net'... and believe you me that does not mean they are going to charge the derivatives king J.P. Morgan ...oh no!

We need the bookmark for this era, else how can we turn the page and start afresh? Stakes are much higher this time, so someone needs to be 'unmade', you can't just squeeze a family member to get a confession, a la Milken. If Goldie is 'taken out', won't every single soul on the planet herald that as the denouement of the 'What Just Happened Crisis'? If Goldie is, by some mind-boggling turn of events, found innocent by an impartial jury then who could possibly be guilty if the biggest baddest bankster ain't? Goldie is trying to get ahead of this but for your humble blogger something feels wrong, like a glitich in the matrix so to speak. Upon further reflection, would be shocked if the case made it to a jury and frankly given the ominous undertones of between-the-line reading now think the odds favor Goldie being whacked.

But who cares about Goldie? Live by the sword, die by the sword. Its' 'just desserts', 'had it comin' and all that...

While we are it, who cares about free markets? Who cares about a free press? Freedom is for those that can afford it and if you haven't noticed this is the age of austerity, well at least for some folks...Don't forget that old chestnut of... how does democracy end? To the sound of thunderous applause. Maybe we should stop clapping.

When Holder says 'We're here not to win cases, but to do justice' it reminds your humble blogger of a failing bank stating' Nothing to see here. Move along.' or an ideological news slash entertainment channel proclaiming that they are 'fair and balanced'.

You bray it? You ain't it.

Per quantum mechanics there exist an alternative reality where the acid bath of ' proof of an intent to defraud' would be applied to the custodes, all the banksters, and the comedy that is government statistics.

One last rant...

Consumer spending up! Goes to show the power of proper role models, be your own corportocracy writ large. American schemer and synarchy for all. A nation of squatters with revolving credit.

We should fear the austere. Revolving credit spins ever more slowly without evolving incomes. The economic horror movie coming to the local cineplex? 99 weeks later.

Absolving the rater, Goldie as satyr, 99 weeks later ... dude! don't be such a hater!

Tue, 05/04/2010 - 16:00 | 331322 Cognitive Dissonance
Cognitive Dissonance's picture

Nice post AM.

"We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand," Greenspan said, according to the transcripts of a March 2004 meeting…'

Those damn uppity peons might actually expect to discuss their own fate. Can’t have that now, can we? We tell them what to think do and say, not the other way around.

“To which Yellen rejoined that the Fed also had a mandate to promote full employment. To hear her tell it, a small positive rate of currency depreciation is a necessary lubricant…….”

I couldn't resist. K-Y is also a lubricant but at least I purchase it myself and I’m willingly participating in my own lubrication, regardless of the “end” being violated.

“The chairman ended up summarizing the discussions 'an agreement for 2%' but he cautioned members not to reveal that such a discussion took place.'”

There it is again. I haven’t been told “Trust me, I’m doing this for your own good” this much since I was an altar boy.

“Actually the Goldie fracas is entirely more discomfiting than a simple plutocratic sacrifice to the hamster-wheeled populace; it is a small glimpse behind a curtain exposing a conspiracy of silence and an assemblage of tribes and machinations that frankly your humble blogger tries his best to not stare too hard at. Its' too damn frustrating, best to just raise your kids with love and kindness than become embittered by the revelations that the truths one holds to be most dear are lies told to you by liars.”

My God, so ignorance IS bliss? You have just described why the average Joe will stare truth directly in the face and call it a lie. And exactly why we want our political leaders to tell us more lies. Daddy, tell me another lie so that I may pretend it’s the truth.

“Goldie is trying to get ahead of this but for your humble blogger something feels wrong, like a glitch in the matrix so to speak. Upon further reflection, would be shocked if the case made it to a jury and frankly given the ominous undertones of between-the-line reading now thinks the odds favor Goldie being whacked.”

It’s not just the hamster wheeled population that wants the lies to continue. It’s in every one’s interest to look the other way lest we acknowledge the emperor has no clothes. When the only thing holding the USS Titanic together is bailing wire and CONfidence, look out below when we can no longer fake the CONfidence.

Tue, 05/04/2010 - 21:37 | 331868 Mitchman
Mitchman's picture

Just catching up on my reading late at night, but that is one great post.  Hope you see this.

Tue, 05/04/2010 - 23:02 | 331947 Mr Lennon Hendrix
Mr Lennon Hendrix's picture


Wed, 05/05/2010 - 00:22 | 332008 chindit13
chindit13's picture

CD, I always enjoy your posts, even the ones that tend towards the incredible heaviness of being, but until now I never fully appreciated your wry sense of humor.  Given that humor is about all we have left, this is most welcome.  I like laughing.

Wed, 05/05/2010 - 01:44 | 332052 Seer
Seer's picture

But, it's all a house of cards, ot matter whether the truth is told.

I've said it before, and I'll repeat myself (and in no way am I protecting these suckers), if they tip their hand some foreign entity or major corporation can come in and rip.  Yes, I know, it's happening now, but mostly with the banksters.  The banksters, however, have to realize that all that funny fiat crap is worthless the second everyone believes it so; at some point their accumulations of excess will be that tipping point, and then, boom, they've hung themselves.  They're just trying, in desperation, to keep the long-running game going.  It's over.  Mother nature won't be sharing enough to keep the Ponzi scheme going, banksters or anyone else (groups, individuals...) "taking back" the system.  It's the system!  It's finished.  And these folks' antics are just a distraction; it's time to sign them off and get on getting on...

Wed, 05/05/2010 - 01:51 | 332058 bretondog
bretondog's picture

Nice one CD!


And note above AM's has garnered 17 JUNKS!


Too tough to follow for more than afew.

Good one on ya, AM



Tue, 05/04/2010 - 16:01 | 331333 kaiserhoff
kaiserhoff's picture

 CPI is constructed to not show inflation. If the US government beancounters employed a realistic inflation metric, there would be no GDP gain. If the US government employed accurate inflation metrics, there would be little or no GDP growth since 1999.

Some good points here.  Many of us are aware of the problems with CPI, but hadn't thought about the implications for all financial reporting.  Your general thrust is correct.  GDI is a more accurate measure of household well being.  Right now the Fed is transferring roughly 200 billion annually of interest income to the banks.  How convenient.  

Tue, 05/04/2010 - 17:59 | 331624 Sam Clemons
Sam Clemons's picture

CPI also is unfortunately used by many private employers for setting annual raises.  I assume that the changes to CPI reporting were meant to merely hide real inflation, but this is a huge negative as wages deflate relative to the price of things.  An economy where each person gets poorer year over year is not a good economy for the numbers or for the people.  Less wages, less spending, less investment, vicious cycle.

Tue, 05/04/2010 - 18:41 | 331675 RobD
RobD's picture

Annual raises? What are these raises you speak of? Really who has gotten a raise since 08/09?

Tue, 05/04/2010 - 16:44 | 331476 Bananamerican
Bananamerican's picture

EXCELLENT post AnonymousMonetarist...

How you got 9 junks out of it I do not know....

guess that's what makes zerohedge so special.....


Was it for pissing on gold ??

Tue, 05/04/2010 - 16:52 | 331493 Cognitive Dissonance
Cognitive Dissonance's picture

"Was it for pissing on gold ??"

Nope. People had to execute two complete revolutions of their mouse scroll wheel to move past the post so they flipped AM the bird on the way by. Do you know how much work that is? My finger lost 2 lbs on the way down.

Not to worry AM. Shakespeare was egged before he became famous. Of course, that might mean you need to go toes up first. :>)

Tue, 05/04/2010 - 17:01 | 331517 rubberduckie
rubberduckie's picture


Tue, 05/04/2010 - 17:03 | 331520 Bananamerican
Bananamerican's picture

Thanks for clarifying CD.....i think....

Tue, 05/04/2010 - 19:02 | 331712 gmrpeabody
gmrpeabody's picture


Tue, 05/04/2010 - 23:13 | 331951 GoinFawr
GoinFawr's picture

Speaking of 'pissing on gold'. Nu Yawk had to do a nice job of that this morning. No thanks to those lazy brits.

Nothing like a UK holiday to spice up the price of Au. Mickey Mawse had to swoop in hardcore this morning frantically waving 'paper promises' to avert what always happens when the PM market  operates relatively freely for anything more than two hours:

From Bloomberg (no. really):

I like especially,

"Gold rose to $1,184.25 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,179.25 at the afternoon fixing on April 30. No fixing took place yesterday, when U.K. financial markets were closed for a national holiday. "

followed immediately, and utterly incogruously by,

"Bullion will trade at $1,100 an ounce in six months and $1,050 in a year, below previous forecasts of $1,250 and $1,175, Robin Bhar, an analyst at Credit Agricole Corporate & Investment Bank in London, said in a report today"


I have been camping, and trust me, unless you are a good way upwind,  pissing is NO way to put out a fire.



Tue, 05/04/2010 - 18:27 | 331656 taraxias
taraxias's picture

He got 9 junks because he wrote a 10,000+ word post that said basically nothing......or at least nothing everyone who's a regular on here wasn't already aware of.

Tue, 05/04/2010 - 19:17 | 331730 Miles Kendig
Miles Kendig's picture

Ya, but we are all newbies at one time... As someone that wrote massive missives early on I can only appreciate those early ZH readers that brought me along.

Wed, 05/05/2010 - 00:29 | 332015 Howard_Beale
Howard_Beale's picture

I miss DH. I really do. I hope he comes back soon.

Wed, 05/05/2010 - 00:48 | 332032 Miles Kendig
Miles Kendig's picture

Same here.  Until he does I cannot but remain concerned for him and his.

Wed, 05/05/2010 - 05:53 | 332138 Cognitive Dissonance
Cognitive Dissonance's picture

I sent him a personal e-mail asking if all was well a few days ago and have not heard back. I will keep you informed if and when he does.

Wed, 05/05/2010 - 04:18 | 332103 i.knoknot
i.knoknot's picture

as a perpetual newbie, i require the review...

so what was the original article about, anyway?

call that one 'hijacked'.

fortunately they were both good reads.

Wed, 05/05/2010 - 00:36 | 332018 chindit13
chindit13's picture

I'm also guilty of the crime of being garrulous.  My excuse is I do not speak my native tongue much, so I need to write to keep current.

BTW, I liked AM's post, even the parts with which I might take exception.  A good argument is a good argument.

Wed, 05/05/2010 - 08:34 | 332224 blindfaith
blindfaith's picture

just like folks who stare at a traffic accident with blood on the road, no one MADE you look or read the post.  At least he had something to say, you don't.  Have some respect.  You want folks to respect you and what you write, it is a two way street.  Frankly, I have been on HZ for a year and I JUST LEARNED SOMETHING from that post.  We are so glad that you are two weeks ahead of the rest of us.


 I think it is time the ZH post the ID's of those who flag and the number of flags they post while they hide in the darkness like a thief.  Special interests? Who knows, but HZ needs to get these people under control, they are ruining the open forum that ZH is.

Wed, 05/05/2010 - 02:29 | 332046 Howard_Beale
Howard_Beale's picture


Tue, 05/04/2010 - 17:12 | 331541 velobabe
velobabe's picture

glad your sharing your love, babe.

i would never ever junk you, your ready student has arrived†

Tue, 05/04/2010 - 21:47 | 331876 merehuman
merehuman's picture

I junked mr Beale once cause i didnt like the way he treated me. If we junk we ought to own up to it. 

Btw i get a lot of junks for using the word jew. Whats up with that?

Tue, 05/04/2010 - 21:53 | 331885 velobabe
velobabe's picture

i don't know anything jewish, but am learning on this site, it is sensitive.

Tue, 05/04/2010 - 23:01 | 331946 merehuman
merehuman's picture

velobabe, i recently was made aware that caucasions are a minority. I am a little old and late to learn. Got dropped on my head when small, besides that i was a premie. Its a wonder and i am grateful to have come this far. As  a being of love i acknowledge all as my family and myself.

Doesnt mean i am blind, i just learn slower than most.

Wed, 05/05/2010 - 00:14 | 331979 Howard_Beale
Howard_Beale's picture

And I still appreciate your posts. Because I see you have a big heart and some real depth inside. That is why I was surprised at our battle last week.

Tue, 05/04/2010 - 23:15 | 331957 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Own up to the junking!  I love it.

Wed, 05/05/2010 - 00:12 | 332001 Howard_Beale
Howard_Beale's picture

Whoever junked this post needs to go back to kindergarden and start all over. Owning up to junking, or just plain bad behavior, is a good thing. I've done it. Many of us have. It's about the integrity of the site, phucknuts. It's about keeping this blog's content credible when the comments are idiotic...the two don't mesh. 

Get it? ZH observers watching an out of control commenting crowd may decide the content isn't worth much either. Stop the junking unless it serves a real purpose. Owning up to junking is honest. Why junk that? Or Lennon Hendrix loving it? What's your point?

I dare you junkers to reply with an intelligent response.

Wed, 05/05/2010 - 00:22 | 332007 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Bravo Beale.  As I have read ZH for well over a year, I have always been impressed by the zeitgeist of this site.  It is the quintessential family forum (no kids allowed, go to bed).  There is a shared love of truth, absolute and unequivocal.  May we hold each other up, for better and worse, if only we continue to make progress with our endeavors.

Wed, 05/05/2010 - 02:30 | 332013 Howard_Beale
Howard_Beale's picture

Thank you...and may we all sleep well knowing that those who have been here a great while will continue to do our best to maintain the integrity of the site.

Wed, 05/05/2010 - 07:20 | 332172 boiow
boiow's picture

i junk all of bates/ yipcarl/peterpeter posts automatically.  does that make me a bad person?

Wed, 05/05/2010 - 07:40 | 332181 Renfield
Renfield's picture

Yes. Yes it does.

I sometimes junk people for fun when I don't like them; I have 'junk' regulars. Then I unjunk them again after I got all the anger out. :-)

So, unlike you, I am not going to hell. Just to purgative.

PS: In all seriousness, I think the junk button really should be reserved to flag trolls and spammers for the forum moderators. But then, I date from the old days when forums were a lot smaller and less widespread. I sympathise with 'serial junkers' just b/c there really isn't any other way to express a quick reaction to a comment. (Or to a commentor who's regularly an idiot and isn't worth the disruption of replying to all the time.) I have said many times that there should be a sort of 'voting' or 'agree' or rating by number system on these comments...I find that feature quite useful on other boards.

PPS: Thought I better add that I was just kidding above. Sometimes snarky doesn't come across in comments.

Tue, 05/04/2010 - 23:33 | 331975 Hephasteus
Hephasteus's picture

People can't seem to understand that the people who run and control the jewish group are assholes. Just like the people who run and control the christian groups and muslmim groups etc etc. The problem is when you make a bunch of weak willed tards ego expressions of yourself they tend to form a tight knit group. That way you got all these stupid little weak willed ego extensions standing in front of everything you do wrong trying to protect you. This is a common approach that has always been used.

The very first thing goldman did when they came under attack was try to raise the "jew" shield. I think they regularly allow the horrible things like the holocaust and slavery for the blacks just to make enough sympathy and fear of racial and religious persecution into people to get them to respond and come running when they raise the "jew shield" or pull the "race card".

The native americans the just fucked them over and then made movies that net 200 billion dollars pretending that they won.

The people in control of the energy and the groups and the universe are evil. Evil beyond measure.

Wed, 05/05/2010 - 00:23 | 332010 Howard_Beale
Howard_Beale's picture

Assholes unlimited. My 2 cents...the Rothschilds, J.P. Morgan, oh must I go on, are just people. Phuck all the race, ethnic cards...the people in power, no matter what their ethnic background, have created a Corporate Fascist state. Donald Rumsfeld...Dick Cheney...Hank just doesn't matter what their lineage is. It's irrelevant.

It's immaterial to the discussion.


Tue, 05/04/2010 - 17:31 | 331576 carbonmutant
carbonmutant's picture

Good Stuff AnonMon, but maybe we can do the Ciff notes next time with a link to your site for further details..

Tue, 05/04/2010 - 21:47 | 331874 DaveyJones
DaveyJones's picture

"blogging is cheaper than therapy"  and the group sessions are incredibly private. Good stuff. 

Tue, 05/04/2010 - 21:47 | 331875 timhinchliff
timhinchliff's picture

Beautiful post my friend it would get me riled, like I so often find myself these days but your line

Its' too damn frustrating, best to just raise your kids with love and kindness than become embittered by the revelations that the truths one holds to be most dear are lies told to you by liars.

puts things into perspective. Fuck all these goddam idiots I'll just try and bring my kids up so they aren't walking consombies, shuffling towards their graves with 30 credit cards and 275 inch plasma screeens. Happy they are though, except they aren't. Its generally regarded that happiness in America is less now then in the 70's, taken by almost any measure.

Tue, 05/04/2010 - 22:05 | 331894 Jesse
Jesse's picture


That was really well done.

Wed, 05/05/2010 - 01:13 | 332044 Howard_Beale
Howard_Beale's picture

Excellent comment, AM. Great quotes, soundbites, perfect synergy, well thought out, and a rhyming end--and 16 junks as of 1 am EDT. Thanks AM --you are greatly appreciated.

Wed, 05/05/2010 - 08:16 | 332205 Rollerball
Rollerball's picture


Tue, 05/04/2010 - 14:25 | 331187 Crisismode
Crisismode's picture

The Hand is writing on the wall.


And what the Hand is writing will make you very, very ill.

The denouement is approaching at light-speed.

Tue, 05/04/2010 - 20:39 | 331811 bigkahuna
bigkahuna's picture



the outcome of a complex sequence of events.

Tue, 05/04/2010 - 22:29 | 331920 Bolweevil
Bolweevil's picture

thank you!

Wed, 05/05/2010 - 00:24 | 332011 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Where the fuck is Solo?!

Tue, 05/04/2010 - 14:25 | 331189 truont
truont's picture

Where is the PPT???

Tue, 05/04/2010 - 14:32 | 331198 docj
docj's picture

Randolph Duke: Where's Beeks? Where in the hell is Beeks? 

We are all Beeks, now.

Tue, 05/04/2010 - 16:20 | 331395 jmc8888
jmc8888's picture


Al Franken: "The brown one must be the female"


Tue, 05/04/2010 - 20:56 | 331828 Nikki
Nikki's picture

M1 is done climbing. So is the market. Simple enough ?.

Tue, 05/04/2010 - 22:31 | 331922 Bolweevil
Bolweevil's picture

Is that Mindcrime you're sporting there? Haven't seen them since they came out, very fitting.

Tue, 05/04/2010 - 14:28 | 331193 Captain Obviousness
Captain Obviousness's picture

Bernanke/Trichet/G-Pap/et. al.:  "If it smells like a funding crisis and it looks like a funding crisis, then it's not a funding crisis because the funding will be provided when needed.  By... someone.  Anyway, move along!  Move along!  Nothing to see here!"

Tue, 05/04/2010 - 14:31 | 331196 Leo Kolivakis
Leo Kolivakis's picture

I have a feeling they're preparing another "Operation AIG". QE 2.0, coming right up. Whatever it takes to avoid the debt deflation trap!

Tue, 05/04/2010 - 14:38 | 331208 Cursive
Cursive's picture

Look at my quote in the post immediately below.  The jig is up.  I don't know why it took this long, but debt roll is the new problem.  Rock, meet hard place.

Tue, 05/04/2010 - 15:36 | 331307 trav7777
trav7777's picture

We were all on TF in 2008 and talking to other shorts when TARP came up.

We all pretty much agreed that it was to liquify the PDs so that they could roll the next year's debt.  We didn't see them getting past 2010 with it.

Either the Fed cracks open its balance sheet or else the sovereigns are DONE within the next few weeks.  There isn't enough real capital out there to maintain the facade that treasury auctions have become.

They either print it or we are dead.  If there weren't mystery directs showing up with capital from god-knows, it'd already be over with.

Somebody please tell me some plausible explanation for where the billions and trillions the Treasury needs soaked up is coming from.

Tue, 05/04/2010 - 16:18 | 331381 Double down
Double down's picture

After the shit kicking today that should be a little easier to hold these auctions... for about a week.

Tue, 05/04/2010 - 16:21 | 331400 Assetman
Assetman's picture

As freightful as it might sound, Bernanke is on record that the "worst case" balance sheet capacity of the Fed is in the $8-9 trillion range.

So yeah, depsite the intended consequences, they do have the capacity. 

The difficult question is whether the Fed has the political will to pull off QE 2.0 -- for Foreign Governments.

Do you get the sense that the global populace is just getting more enraged by this?

Tue, 05/04/2010 - 16:48 | 331484 Bonesetter Brown
Bonesetter Brown's picture

In my opinion, the politics of further QE only work after serious stress in the Eurozone, including a semi-breakup.  It becomes a latter day Marshall plan of sorts, and puts to rest once and for all the notion that the Euro is a rival for global reserve currency.

The issue is this: US Gov and Fed must appear helpful in the short term.  Increased IMF funding/support is probably the instrument for this, even though it is "half a loaf".  QE2.0 for the sole purpose of FX swaps with the Eurozone? That dog won't hunt pre US midterms.

Instead, look for pressure to be put on ECB to produce their own QE1.0, with all political hell breaking out in Germany.  The EU/EMU will be revealed for what it is.

Tue, 05/04/2010 - 16:59 | 331513 Madcow
Madcow's picture

Yes - QE2 - 

But AFTER the lows of 2008 are taken out.  

Buy USTs.  Short EVERYTHING else - especially the American People and the Citizens of Europe.

Tue, 05/04/2010 - 19:42 | 331737 Miles Kendig
Miles Kendig's picture

What seems so sadly hilarious is that TPTB are just waking up to a notion that the global populace has been aware of for some time.  Namely that the ratings agencies have been made redundant in the sovereign arena at least by the actions of the central banks themselves.....[tt_news]=2780&tx_ttnews[backPid]=901&cHash=d751e6c84b

And the previous days kicker...  enjoy AssetMan.  As modern "leadership" reduces itself to incoherence on both sides of the Atlantic.[tt_news]=2779&tx_ttnews[backPid]=743&cHash=5336885dcc

Wed, 05/05/2010 - 01:52 | 332059 Assetman
Assetman's picture

Very nice...enjoyed the article greatly... thanks. 

And we thought out own so-called "leaders" have issues...

Tue, 05/04/2010 - 16:38 | 331455 B9K9
B9K9's picture

Whether a battle of wills is an actual military engagement, or a simulated version like football, tension keeps ratcheting up during a tight match until a crisis point is reached. The moment of truth; the turning point, etc.

Like many others, I'm surprised the charade has gone on this long. But that merely indicates how clueless even free-market cynics were to how embedded the level of corruption and fraud had become.

So now we're finally reaching the hold-em or fold-em stage. Frankly, I wouldn't be surprised at all to have the PTB just come out and state that since there's a national emergency at stake, they're going to print with wild abandon.

Think of it as a cardiac arrest situation - who cares if internal organs are damaged from repeated electro-shocks if the patient is dead/dying anyway? This is the fight/flight moment on a battle field when the opposition decides to break and run.

They cannot let off the gas - if they do, the whole freakin' thing rapidly implodes into one massive deflationary unwind.

Tue, 05/04/2010 - 14:47 | 331224 Amsterdammer
Amsterdammer's picture

A view from Europe: ECB is meeting tomorrow

in Lisbon and took very hard criticism for its

silence during the unwrapping of the Greek debt

crisis, so, as the only central bank in Euroland,

I would not be surprised to see it move into

Q.E 2.0, to save or try to save the ship

Tue, 05/04/2010 - 14:56 | 331230 Cursive
Cursive's picture

Did anyone read the post?  World governments are going to have a major problem with QE 2.0 when we are experiencing sovereign defaults.  And I quote:

After all we did not deleverage our economy after the 2008 crisis, banks are still holding most of the assets that put them in trouble in the first place, so basically we have done nothing but taking distress to the sovereign stage. It is time to face the structural problems of our economy as we will not be able to go on another run like that from 1982 to 2007 boosted by +280% in the debt to GDP ratio.

Tue, 05/04/2010 - 15:14 | 331251 B9K9
B9K9's picture

Leo, good to see you focusing on the underlying issues, rather than take periodic strolls through green shoots land.

It appears many more people are finally waking up to what is occurring. As Mako has pointed out countless times, private credit expansion peaked in 2008, and overall credit expansion peaked in late 2009 even with massive public sector deficit spending.

In other words, the system already died 2 years ago, it's simply been a matter of choosing which way to recognize the truth: default or devaluation? Unsurprisingly, contrary to most market disciplinarians, the PTB chose the devaluation path because ... they and central bankers would be in charge of the process.

It's all very simple - we must get back to the relative balance of around 2001. Here's a short recap using OC as a baseline model:

  • Dow - 10k
  • Housing - $250k
  • Salaries - $75k
  • Gas - $2.50/gal
  • Gold - $800/oz

Now, as everyone knows, housing shot up 3x, to around $750k, or 10x annual income. The PTB let this drift back to $500k, but drew the line at that point. So, in order to reach a new balance point, the DOW should get to 20k, gas $5.00/gal, salaries need to hit $150k, gold at $1,600oz, and the $USD needs to lose about 50% of its value.

How do you get salaries to increase by 100%? I don't know, have the take over the entire economy? What not? After all, national security is at stake. /snark

What about fixed-income investments (SS, pensions, etc)? Look, they already went to -0- back in 2008 (remember, they are the 'asset' side to all the unpayable debts). So if they lose 50-75% of their value, savers are still net-net ahead.

The only last bit of housekeeping would then be for all the world governments to devalue their currencies in unison. After all, US debt would be up around $25-30T to pull off this level of re-inflation, so it's gonna need to be cleared out.

There is just one little nit is this story - will the people go along with it? That is, will some insist that we are free men and that government was created in the first place to serve our ends? Or will we continue to answer to our global masters and meekly follow their direction?

Tue, 05/04/2010 - 22:49 | 331937 Crab Cake
Crab Cake's picture

In other words, the system already died 2 years ago....

Hey B9, I've never seen a catfish so lively and talkative as when it's flopping around on the ground gasping for air.

Death throe rally.

There is just one little nit is this story - will the people go along with it?

Well, my gut feeling is Americans won't in the end, and that is why we stand a better than average chance of having our country become a fallout zone imo.

Wed, 05/05/2010 - 02:12 | 332068 KTV Escort
KTV Escort's picture

great line (about the catfish)

Tue, 05/04/2010 - 16:11 | 331355 Ned Zeppelin
Ned Zeppelin's picture

Not much choice. QE The Sequel: This Time, It's Global!

Tue, 05/04/2010 - 19:26 | 331739 Miles Kendig
Miles Kendig's picture

"Growth" at any cost!

Tue, 05/04/2010 - 19:43 | 331761 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

A new t-shirt idea!  Where is Beale?

Tue, 05/04/2010 - 22:26 | 331916 Howard_Beale
Howard_Beale's picture

I'm here! Just recovering from a rough day...

QE The Sequel: This Time, It's Global!   How about on a picture of the earth from space--with "You loved QE--the most expensive trillion dollar horror film ever made!    QE 2--sure to thrill QE lovers and a guaranteed Fiatsco with a cast of billions and a cost of bazillions!    Executive Producers: The US Taxpayers Directed by Ben Bernanke Demille
Starring: Ben Bernanke Demille, Timothy Geithner, Larry Summers, Angela Merkal, Whoever is elected in England, etc. Thoughts?
Tue, 05/04/2010 - 23:17 | 331961 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

First T-Shirts, next movies, then....THE WORLD!

Tue, 05/04/2010 - 22:26 | 331917 Howard_Beale
Howard_Beale's picture

I'm here! Just recovering from a rough day...

QE The Sequel: This Time, It's Global!   How about on a picture of the earth from space--with "You loved QE--the most expensive trillion dollar horror film ever made!    QE 2--sure to thrill QE lovers and a guaranteed Fiatsco with a cast of billions and a cost of bazillions!    Executive Producers: The US Taxpayers Directed by Ben Bernanke Demille
Starring: Ben Bernanke Demille, Timothy Geithner, Larry Summers, Angela Merkal, Whoever is elected in England, etc. Thoughts?
Tue, 05/04/2010 - 22:40 | 331929 Bolweevil
Bolweevil's picture

QE 2 - The Austerity of Hope


QE 2.0 - The Audacity of Austerity <--- (this one)

Tue, 05/04/2010 - 23:47 | 331983 Howard_Beale
Howard_Beale's picture

I like #2 as well. This will take a day or two...did some research and I have to just give attribution at the bottom of the poster that the photo is courtesy of NASA--I will put photo courtesy of NASA, and the US Taxpayer.

Don't we own them too? Phucknuts.

Tue, 05/04/2010 - 17:32 | 331560 DosZap
DosZap's picture


As Jim Sinclair say's, it is QE to INFINITY from here...........

Hell, and we haven't even discussed the US States that are Foooked.

If PM's are worthless, (we know essentials are a must  for LIFE), but for wealth protection..where the hell do you go?.

Uhmmmmmmmm....Fiat(toilet paper, your choice,can't eat land, cars,trucks,lawn mowers,food stockpiling(is Out), esp if you cannot cache it really well......the martial Law boyez will do house to house, clean you out, and take you with them.........

I KNEW those damn Black helicopters, and internment camps were not a joke...SOB.

Tue, 05/04/2010 - 14:36 | 331205 Cursive
Cursive's picture

As numerous instituations some bigger than other have found out: when you have leverage you are only as solvent as you can roll your debt.

Maybe it has started.  The Big Sell.  By Halloween, there will be a lot of unhappy people.

Tue, 05/04/2010 - 14:43 | 331212 WaterWings
WaterWings's picture

Threatening ad campaigns might work!

But if the Gov't runs out of freebies there are some that will do nasty things:

Tue, 05/04/2010 - 17:35 | 331584 DosZap
DosZap's picture


Ewwwwwww............that SOB should have been arrested on the spot..........BIG time.........

Tue, 05/04/2010 - 14:42 | 331214 43 Steelie
43 Steelie's picture

Somewhere in Toronto, David Rosenberg is doing a little dance right now.

Tue, 05/04/2010 - 15:17 | 331272 Bam_Man
Bam_Man's picture

He's so fat I'm sure it's a very little dance.

Tue, 05/04/2010 - 16:21 | 331398 Double down
Double down's picture

He probably waddles.

Tue, 05/04/2010 - 14:46 | 331220 jory
jory's picture

What?  Gold isn't the Cure All?  LMFAO!!!  Goldbugs repent!


Tue, 05/04/2010 - 17:40 | 331586 DosZap
DosZap's picture


What's your answer to it then?.

No one here, buying PM's were doing it expecting a frigging GLOBAL total meltdown, at least not at the same time.

Better with it, than w/out it..........IMHO

Tue, 05/04/2010 - 19:28 | 331741 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Jory thinks we will trade barbies for ken dolls when it is all said and done.

Tue, 05/04/2010 - 19:58 | 331774 SamThomas
SamThomas's picture

Gold is down a few bucks?  Take a chill-pill.  Ain't nothing in a big bull market...maybe yet to be one of the very biggest.  Remember back in 2008 gold dropped 30%.  These things happen.

As Sinclair points out, gold does not change.  Its supply is finite.  IT is the standard which is why it has been used so consistently throughout history as real money (money:  store of value, means of transaction, unit of account) along with silver. 


Paper currencies fluctuate against it, not the other way around.  

Tue, 05/04/2010 - 22:03 | 331892 abalone
abalone's picture

As much as I like Gold short term it pays to be open minded

Tue, 05/04/2010 - 21:35 | 331864 demsco
demsco's picture

Comments like this are plain retarded, sorry, but its true. If you ever bother to read about things you would find out that all the Latin American debt issues that went down most people traded gold for their goods when things got really bad. I think Nic is wrong about gold. Sure, it might dip hard, but it will come right back if massive defaults start happening. All I know for sure is this, dollars can easily be put into the system, think stimulus checks, but those dollars might be worthless. I also do not believe we will get the type of liquidation we saw in 2008, this is not a banking crisis II yet. Time will tell, but for those who think gold is dumb, what other investment performed as well as gold or other PM's over the last decade? OK, shut up then.

Tue, 05/04/2010 - 14:59 | 331221 FranSix
FranSix's picture

I don't think we are on the verge of a sovereign credit crisis at all.  We're on the verge of a very serious commercial banking crisis, where charges are likely to be laid.  Buh-bye.

Bullion prices are NOT -repeat- NOT an armageddon flag.  Bullion prices are a mitigating factor in deflation, or credit contraction by devaluing currencies and soaking up liquidity.


Then we also have the CDS market.  No way of knowing just how much of it is sheer, rotten naked garbage.

Tue, 05/04/2010 - 15:07 | 331248 Fraud-Esq
Fraud-Esq's picture

agree. But, isn't a commercial banking crisis pretty much a sovereign debt crisis?

Tue, 05/04/2010 - 15:18 | 331262 FranSix
FranSix's picture

It would be that way if  the commercial banking sector held all of the treasuries, but these are held by foreign nationals and foreign central banks.

Commercial banking can add to liquidity, but they're not the treasury.

And my understanding of central banks is that they have most of the gold.

So with sovereigns doing their worst to prop up the commercial banks, and the commercial banks utterly dependant on sovereigns to keep them from blowing up, and with popular discontent at corrupt banking institutions, and the commercial banks writing naked credit default swap garbage like there's not tomorrow, just who do you think is going to lose in this scenario?

Tue, 05/04/2010 - 16:26 | 331419 Double down
Double down's picture

May not matter much but the gold sector on the TSX was the only green there  353.1 up 1.37

Tue, 05/04/2010 - 17:39 | 331593 Implicit simplicit
Implicit simplicit's picture

The commercials hold a lot of mortgages & CDOs still. Eventually they have to foreclose and take the market price which is about 20-30% lower than their marking it presently.

The fed didn't buy all their garbage, and it hasn't been marked to market. Thus, they better have CDSs as hedges, otherwise their ass is grass and the bond vigilantes are the lawnmower.

 In addition, much of their debt they hold has to be rolled over, and if interest rates rise, they're screwed.

Wed, 05/05/2010 - 01:06 | 332041 Fraud-Esq
Fraud-Esq's picture

I hear you, that's sort of what I meant,  "and the commercial banks utterly dependant on sovereigns to keep them from blowing up" . If not, it's widespread trouble. How much are we backstopping the commercials, FHA, and all non-big six banks through all those creative guarantees? trillions yes? I wish I had a handy breakdown of the 27 trillion I could refer.  

Tue, 05/04/2010 - 15:35 | 331300 Augustus
Augustus's picture

We can identify the segment related to Greece, Italy, Spain and Portugal as certainly rotten.  That is unless the ECB will take in all of those bonds at par.  That would be a great form of QE2.

It is very hard to believe that the Euro banks have still been writing the CDS on the different govt debt over there.  Pretty large numbers.

Tue, 05/04/2010 - 17:37 | 331588 DosZap
DosZap's picture


Then they best do some INFLATING..........last thing we want is Hyper Deflation.

Tue, 05/04/2010 - 14:47 | 331222 Gloomy
Gloomy's picture

GS is up today-yes, I see it all plainly now!!

Tue, 05/04/2010 - 15:39 | 331312 Augustus
Augustus's picture

Long GS because they are short.

Short everything else financial because they are stupid.

This is banking crisis stage II.  It has little to do with iPhone sales, except that no merchant will be able to get inventory financing, for the second time.

Wonder how GE Credit has tried to insulate themselves from a banking crisis II?

Tue, 05/04/2010 - 16:06 | 331345 Dburn
Dburn's picture

2% reserves was the last I heard with almost 90% of their assets split between commercial and residential mortgages totaling roughly 300 billion. They have 6 Billion in reserve for 338 billion in assets.

Tangible Equity for all of GE is around 117 Billion. I'm just guessing here, but it seems like they are having unprotected sex with derivatives.

Tue, 05/04/2010 - 16:13 | 331363 Reggie Middleton
Reggie Middleton's picture

It is actually stage 1.1. The first stage never ended, the government just told you it did as it allowed risky asset prices to hit another bubble. Here's a pop quiz. What happens to a bubble in a funding crisis? And you guys thought Lehman caused some problems. I don't even think we've hit the tip of the iceberg.

Tue, 05/04/2010 - 16:36 | 331438 assumptionblindness
assumptionblindness's picture

"What happens to a bubble in a funding crisis?"

Matter meets antimatter.

Tue, 05/04/2010 - 17:24 | 331557 Implicit simplicit
Implicit simplicit's picture

I don't mind cause it doesn't matter, it ant-matters.

Tue, 05/04/2010 - 17:14 | 331544 Madcow
Madcow's picture

yes - its all one big crisis - the one that started when the fiat money scheme started to run out of gas a few years ago.

from here on out, the money supply continues to vaporize. all the rents collapse. there's no way out. this is the deal with the devil made by the central bankers 100 years ago (or 300 years ago if you're keeping score that way).

to force the credit pyramid to continue to expand, global governments and bankers are resorting to more and more creative and illegal behavior. but there's no stopping the collapse of all the "Phantom Assets" - inclusive of Western fiat currencies.

Tue, 05/04/2010 - 17:44 | 331602 DosZap
DosZap's picture


What's your plan of action IF, and a big IF, all this shit hits at once?.

Is there any way to protect your savings, I know how to protect my life..

Tue, 05/04/2010 - 19:29 | 331743 Mr Lennon Hendrix
Mr Lennon Hendrix's picture


You keep writing.  Not all of us are confirmed Jedis.  I will continue to try to do this eyes closed.  Many thanks.

Tue, 05/04/2010 - 21:57 | 331835 velobabe
velobabe's picture

wink, wink i am startin' to get your sublime side.

 tried posting this on AM blog, no response.

Jump Jump
The Mac Dad will make you Jump Jump
The Daddy Mac will make you Jump Jump
Kris Kross will make you Jump Jump


Don't try to compare us to another bad little fad
I'm the Mac and I'm bad give you something that you never had
I'll make ya Jump Jump wiggle and shake your rump
Cause I'll be kicking the flavor that makes you wanna Jump
How high? Real high
Cause I'm just so fly

Tue, 05/04/2010 - 22:08 | 331898 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

A young lovable, hugable type of guy....we commence to make you...JUMP!

This song is one of my guilty pleasures.  JD did his best work back in the day, not counting Janet.

Tue, 05/04/2010 - 22:43 | 331931 velobabe
velobabe's picture



Tue, 05/04/2010 - 23:40 | 331977 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Clothes backwards (insert dagger)

Hosed actors

They Jumpin'!

Pose Factors is......what we want it to be

jumpin off of buildings and they callin' me is....sublime....jump.....

Sun, 07/11/2010 - 12:37 | 332707 velobabe
velobabe's picture


Tue, 05/04/2010 - 14:52 | 331228 ZackAttack
ZackAttack's picture

I cannot for the life of me understand why central banks have purposely misdiagnosed and treated a secular demographic shift as a liquidity issue.

Tue, 05/04/2010 - 16:38 | 331458 JiangxiDad
JiangxiDad's picture

Aging pop. countries can sell land, or import younger workers, or neither I guess.

Tue, 05/04/2010 - 16:42 | 331468 JiangxiDad
JiangxiDad's picture

Aging pop. countries can sell land, or import younger workers, or neither I guess.

Tue, 05/04/2010 - 14:59 | 331237 Mako
Mako's picture

The end has always been known, the exact time and exact details before the end where not known. 

It's game over, it was game over before most of the people on this board were born. 

Tue, 05/04/2010 - 15:32 | 331293 JiangxiDad
JiangxiDad's picture

Yeah, true. But by that logic, the transition period from one game to another should also have been expected. Personally, I hadn't thought about it until practically too late. Still not sure what to do, even if I turn out to be right as to what ultimately happens. So, if we're between games, what's a good gameplan?

Tue, 05/04/2010 - 14:59 | 331238 tom
tom's picture

Take a look at the breakdown of who is funding the Greek bailout (in billions of euros)

#1 IMF 30, #2 Germany 22.4, #3 France 16.8, #4 (stop that wincing!) Italy 14.7, and #5 (drum roll please)

Spain! 9.8 billion euros!

And where are these governments supposed to get this money? Why, by borrowing it on private debt markets, of course.

Now listen here, you mischievous credit agencies, don't you even think of trying to call our spade a spade, or we'll sick the Spanish Inquisition on you!

Tue, 05/04/2010 - 16:20 | 331392 kaiserhoff
kaiserhoff's picture

That's funny.  How can anyone believe that daisy chain might work?

Tue, 05/04/2010 - 16:27 | 331426 Assetman
Assetman's picture

Well... it worked here in the U.S.  Riiiiight????

Tue, 05/04/2010 - 17:14 | 331548 Implicit simplicit
Implicit simplicit's picture

Oh oh. Doe this mean the european market is going to start skyrocketing as the IMF through the ecb start repoing and jacking the market up like the fed did in the US.

 They can start buying the worthless bonds at 100% and the ecb bankers will get huge bonuses while they jack the market. How would the European masses respond?

Tue, 05/04/2010 - 19:33 | 331747 Miles Kendig
Miles Kendig's picture

Depends on which European masses you are looking at...  Just as auto workers in South Carolina could care less about what happens in Detroit same thing there...

Tue, 05/04/2010 - 21:22 | 331852 Implicit simplicit
Implicit simplicit's picture

Good point. Probabably even care less as one union.

Tue, 05/04/2010 - 22:38 | 331927 Miles Kendig
Miles Kendig's picture

While the only real follow through in Europe happened on a financial services basis, with an all too predictable result.  The macro can only work with sound micro level action and vis a vis.  What is simply stupendous is the level of complete and utter helplessness and ignorance with respect to financial services displayed by the elites of Europe. I have to question if there is any capacity left within the elite sovereign levels of European society to actually provide sovereign leadership?  Highlights at 11.

Tue, 05/04/2010 - 17:52 | 331612 kaiserhoff
kaiserhoff's picture

Not quite.  It only appears to work in a similar manner because they had household interest income and small business to rip off.  Without a sucker in the game, it's all just shovelling smoke.

Tue, 05/04/2010 - 19:31 | 331744 Miles Kendig
Miles Kendig's picture

Tom, the ratings agencies are irrelevant in the sovereign arena just now... since central banks will take any collateral regardless of rating or actual credit worthiness...  So, the ECB could care a less what some useless American firm has to say and the last thing the EMU wants to do is loose the inquisition..

Tue, 05/04/2010 - 20:06 | 331786 tom
tom's picture

I had in mind more the Monty Python version of the inquisition, which is about all the EU could muster. They're trying to intimidate the US ratings agencies with talk of creating a new, European ratings agency and giving all their business to it. As if the US agencies weren't enough of a joke.

They should be irrelevant, they really, really deserve to be irrelevant, but you know, the funny thing is, markets still react to their downgrades. There are still lots of people who control big piles of money who, by company rule or by habit, sell on major ratings agency downgrades. When you can see them coming, it's one of the easiest arbitrage trades in the business.

It's not that the ECB doesn't care about ratings, au contraire. It's declaring itself a legal dumping ground for Eurozone government junk bonds. Reminds me of another Monty Python scene. Bring out your dead!


Tue, 05/04/2010 - 21:39 | 331865 Miles Kendig
Miles Kendig's picture

It's just a flesh wound...  heh

Tue, 05/04/2010 - 15:01 | 331242 Sudden Debt
Sudden Debt's picture

But this would imply that oil, gold, silver ALL go down bigtime while on the other hand most people are pumping Gold.


Actually I have a idea, somebody inlighten me if it sounds good or bad.

Take for example 1000$

Put 500$ in a short position on gold 900$ 1/1

and 500$ in a long position on gold 1400$ 1/1

Both for 2011 (paribas warrants in €)

Either way, the market is going to boom in one direction or the other. It's just to unstable. It migh blow, it migh sink, but it will not stay flat. Both warrants are cheap, but if it breaks either way =$$$


What do you think about this play?

Tue, 05/04/2010 - 17:16 | 331549 WaterWings
WaterWings's picture

This isn't roulette with 50% on both black and red - this is Russian roulette if you don't have physical.

Tue, 05/04/2010 - 17:54 | 331613 DosZap
DosZap's picture


Marc Faber is predicting China going in the shitter in less than 9-12mos............well, there goes that YUAN!!!!!!!!!!!!

Wed, 05/05/2010 - 05:52 | 332136 Reflexivity
Reflexivity's picture

Either way, the market is going to boom in one direction or the other.

Spoken like a true Black Swan believer (whether intentional or unintentional)...and I totally agree.

I, however, do not have much trading experience, but I think your question about 'straddling' the gold (or another market) with options to cover the extreme moves (i.e. 'high impact of rare events') is an excellend idea.

Any real, experienced traders have a reason why this wouldn't work?



Fri, 05/14/2010 - 19:58 | 352964 Miles Kendig
Miles Kendig's picture

Given your handle I suspect that you would appreciate the unknown correlations that keep presenting themselves in the damnedest of places once pressure is applied elsewhere.. (What I refer to as the partially filled water balloon)  In essence this seems a wholly worthwhile general strategy.  However, as is the case in all generalities flexibility, quickness and a firm connection with your foundation is a must.  There will be tons of coin made and lost on the rotating eddies of capital flows (especially as the quest for "stability" will squeeze participants) and I would be looking for the juxtapositions in unrealized locations and presentations.  There is no question that these are out there..  Someone just has to commit to looking while remaining open to the responses achieved when when Mr Market is prodded and pressured.

Tue, 05/04/2010 - 15:16 | 331263 Fraud-Esq
Fraud-Esq's picture

I smell commercial bank indictments in the muni bond market. Anyone else? Just feels like a news event coming to me 

Tue, 05/04/2010 - 15:23 | 331281 Mitchman
Mitchman's picture

Muni bond business cannot be done without bribes, whether over or under the table.  A year without a major muni bond scandal would be like a year without spring.  There are only two new twists on the customary muni bond perp walk: the first is to make even more money selling interest rate swaps to barefoot, hooched up, dummy public officials and the second is to bribe so many high public pension officials that one becomes head of an important government program - like say, head of an auto task force, just to pick a wild example out of the air.

Tue, 05/04/2010 - 15:30 | 331288 Greater Fool
Greater Fool's picture

+1 million

Tue, 05/04/2010 - 22:14 | 331904 Mitchman
Mitchman's picture


Tue, 05/04/2010 - 17:02 | 331518 Implicit simplicit
Implicit simplicit's picture

I was thinking that while reading the article. The states are similar to the countries. Califronia and Illinois have comparable GDPs to any mid size country, certainly larger than Greece. Many municipalities were "sold" ridiculous leveraged swap deals that have blown up.

The states can't print money on their own, so there not much different than other countries hitting up the IMF and getting US support.  

Tue, 05/04/2010 - 17:55 | 331615 abalone
abalone's picture

Well done Implicit on being staunch through all this. By the way I'm hearing Harry's & Cyan's dentist is nervous about some outstanding invoices.

Tue, 05/04/2010 - 21:16 | 331848 Implicit simplicit
Implicit simplicit's picture

Thanks.Too funny abalone. Just trying to tell my truth. It is slightly different than the truth some others believe.


Tue, 05/04/2010 - 17:56 | 331617 DosZap
DosZap's picture

Screw that, I say we all Secede, and print our own damned cash........worth as much as what we have now.

Tue, 05/04/2010 - 15:16 | 331268 Pladizow
Pladizow's picture


Tue, 05/04/2010 - 15:19 | 331277 Captain Willard
Captain Willard's picture

"After all we did not deleverage our economy after the 2008 crisis, banks are still holding most of the assets that put them in trouble in the first place, so basically we have done nothing but taking distress to the sovereign stage."

He has nailed it, more or less. We are delevering, but it is a long process. The Authorities have tried to shift the burden to sovereign balance sheets. Mr. Equity Market likes it. Mr. Bond Market isn't so sure........

Tue, 05/04/2010 - 16:05 | 331343 Brett in Manhattan
Brett in Manhattan's picture

If this is really the case, then, from whom did the Fed buy its trillion plus dollars worth of MBSs?

Tue, 05/04/2010 - 16:59 | 331512 Augustus
Augustus's picture

How about FNM new issue?  Maybe GNM new issues?

The problem with the idea of "deleverage" is that there is no one to "deleverage" to.  If I want to sell my house, I must find someone who is without a house and needs one.  When all of the finance operators are leveraged up to their eyeballs, which one can take on what I want to sell? 

I don't care what they write about bank lending, it is bull ship.  Why the heck would I make a loan on pizza ovens when I've got three of those who are going broke on me now?  First I'm not too sure about the business.  Second, why finance the guy who will make my loan shakier?  Is it any different from any sector?  Generally the tech deals don't use much leverage.  Loans to medicals that Obama is going to screw with funding cuts?  Farmers with lower prices for commodities?  How about a big deal to buy PeterSty village?

Tue, 05/04/2010 - 23:54 | 331989 Oh regional Indian
Oh regional Indian's picture

Augustus, to answer your question and bring out a very pertinent point that seems to be totally missing in this general discussion...

They (the whole, up to their eye-balls in leverage anglo banking world) are de-leveraging into the "third" world.

Most of this third world focus is on the BRICS. Writing from the I in said acronym, I can see that destabilizing de-leveraging going on all around me.

Like a ruptured well-head if you'll all pardon the insensitive pun.

They are de-leveraging into an India (as an example) down the whole pyramid.

They are funding a sell/supply side infrastructure in every field so that in a short span of ten years (give or take 1), India resembles the US I ran away from.

They play the Indian stock market (crazy swings engineered to denude the average investor). Billions coming in and out every day, with barely a whimper from regulators, making the market see and saw like a mad thing.

They are funding Indian banks (two of the fastest growing, through predatory lending practices) are over 75% foreign owned.

They are funding Indian industry (of every shade) to make shit no needs or can buy. Oh wait, the starved Indian connedsumer will buy, but only with teaser induced cheap credit form said foreign owned bank.

They are funding Indian farmers who cannot afford to eat to buy tractors they cannot afford to run (and don't need) in a classic bait/switch/kill, now we own your land kind of thing.

The list goes on and on.

So, basically, and I'll use the terms as I understand them, they are deleveraging finance into a much greater eco-no-mikey bubble or historic proportions, in the BRICS and beyond.

Make sense?

I'll said it before and I'll say it again, what we are witnessing is the end game of supply-side-ism, understood at it's most meta-level of viewing. And there are plenty of hungy poor (with TV's though) who actually think buying that shiny new bike or car (depending on where you are in the food chain) is better than food or worth selling your land/hocking your gold for).

And they have a few billion people more to give cell-phones to and refrigerators (where electricity is yet to reach)....

It's a different dimension of the Ponzi and only becomes visible when you live (as I do) in the belly.

I hope the system collapses before they fully corrupt and pollute what is left untouched by the ugly hand of usury and unearned entitlement-ness.


Wed, 05/05/2010 - 00:13 | 332002 Oh regional Indian
Oh regional Indian's picture

Please see

As an excellent example.

Tue, 05/04/2010 - 19:36 | 331753 Miles Kendig
Miles Kendig's picture

PIMCO, Black Rock, primary dealers and most especially several foreign nations where a switch in paper type held by the FRB was accomplished in classic Houdini fashion.

Tue, 05/04/2010 - 23:41 | 331980 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I wonder if BS gets upset..."You are not supposed to reveal the majik trix!"

Do NOT follow this link or you will be banned from the site!