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Intraday Observations

Tyler Durden's picture




 
It is odd that over the past 5 days the headlines have been dominated by computer-related events: from program trading fiascoes at Goldman over the weekend, to what seems to be a full scale assault against US governmental and market infrastructure. I have relished in the amusement of Sky Net derived jokes, but this is starting to get all too real. From Yahoo Finance

The powerful attack that overwhelmed computers at U.S. and South Korean government agencies for days was even broader than realized, also targeting the White House, the Pentagon and the New York Stock Exchange.

An early analysis of the malicious software used in the attack found its targets also included the National Security Agency, Homeland Security Department, State Department, the Nasdaq stock market and The Washington Post. Many of the organizations appeared to successfully blunt the sustained attacks.

The Associated Press obtained the target list from security experts analyzing the attack. It was not immediately clear who might be responsible or what their motives were.

The attack was remarkably successful. Some of the affected government Web sites -- such as the Treasury Department, Federal Trade Commission and Secret Service -- were still reporting problems days after it started during the July 4 holiday.

Obviously, especially as pertains to the capital markets, the greater the reliance on computer models and algos in our daily lives, the greater the risk that sooner or later someone will find a big gaping hole that the countermeasure experts haven't caught yet, and one can only imagine the possible abuse that would result. Visions of the Mac guy attempting to prevent a huge Firesale, however without Agent McLane at his side, emerge.
 
In other news, Morgan Stanley is hoping to take advantage of the short bus and irrational exuberance yet again, by repackaging a bunch of crappy loans into what will certainly be a doomed attempt at restarting the securitization bubble. From Bloomberg:

Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.

Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf apital Management LP, an investment firm based in Purchase, New York.

Not really much to say there: if investors into this "AAA" security are willing and eager to throw away their money, so be it. MS' persistence is impressive: if the offering is successful, expect the firm and other investment banks to take CDO^2 and repackage their "riskless" tranches into yet another conduit. While the paperwork is already likely in progress in the bowels of 1585 Broadway, the only question is what will this Frankensteinian aberration be named: CDO Quadratic sounds just a little better than CDO Square Squared. McKinsey is likely already providing its extensive appelation consulting skills... in exchange for a handsome fee. Probably the true name "Yet More Soon To Be Phenomenally Uber-Toxic Crap" has not surfaced quite yet.
 
Let's see what else - Meriwether has blown up his Nth hedge fund....the IMF keeps drinking the Kool Aid... and the market keeps going down. We now have a good 10% retracement from the highs. If Bob Pisani is right, this should be just the opportunity for all the quadrillions in cash on the sidelines to jump in. Many are not holding their breaths.
 
Lastly, and somewhat most peculiarly, Jean-Pierre Aguillard (together with his co-pilot), died in a freak glider accident over the weekend. Many have not heard of Aguilard: it may be surprising for people to learn that he is the French equivalent of Jim Simons, as his firm Capital Fund Management, with $2.7 billion in assets, is one of the largest French hedge funds and at the forefront of electronic and program trading. Curiously, CFM was in the news as recently as on April 22, 2009, CFM replaced its legacy market data distribution system with NYSE Technologies' Market Data Platform at its New York and Paris operations. In fact Automated Trader has quite an in depth article on what happened a mere two months ago in an article titled "Capital Fund Management selects NYSE Technologies for new electronic trading platform."

NYSE Technologies has announced that Capital Fund Management (CFM), the French private hedge fund, has licensed its high-speed real-time market data distribution and integration software.
 
CFM has replaced its legacy market data distribution system with NYSE Technologies' Market Data Platform at its New York and Paris operations. NYSE Technologies’ sub-millisecond feed handlers and high performance Middleware Agnostic Messaging API (MAMA) deliver data to CFM’s trading systems, which handle 100% of the firm’s order flow electronically.

Jacques Sauliere, Chief Operating Officer at CFM, commented, “Since we connect to all major US, European and Asian markets, NYSE Technologies was the clear choice considering the breadth of coverage available through its extensive range of feed handlers, its cutting-edge market data distribution platform and comprehensive value-added services.”
 
NYSE Technologie will provides CFM with connectivity to a mix of direct market data feeds including NYSE OpenBook, NYSE ARCA Options, NASDAQ ITCH and CME Multicast. This is complemented with connectivity to a vendor consolidated data feed. Sauliere explains, “The consolidated datafeed serves as a back-up, providing the optimal mix of resilience and coverage needed for CFM’s global trading operations.”
 
Sauliere adds, “During the implementation phase, NYSE Technologies provided us with the ability to work alongside our existing middleware vendor while we transitioned to our new low-latency platform. We were able to consolidate our use of APIs by using its middleware API and write all of our applications to MAMA with the ability to upgrade our middleware in line with technology advances.”
 
In addition, CFM also uses NYSE Technologies’ Data Access and Reporting Tools (DART) Entitlements to control user and application access to the market data feeds and report on unused or underused market data services. Other value-added services include performance monitoring and a real-time tick capture adapter that consumes data from any industry standard or ODBC database for post-processing of internal data.“CFM is a pioneer in the adoption of pure electronic trading systems generating value for their investors. Being trusted with their business in New York and Paris is something we’re extremely proud of and validates our strategy in serving the buy-side,” said Stanley Young, CEO of NYSE Technologies and Co-Global CIO of NYSE Euronext.

“CFM’s enterprise deployment firmly secures NYSE Technologies as the partner of choice for connectivity, transaction solutions and data management services at the world’s largest and most active trading firms and leading markets.” (highlights mine)

Zero Hedge extends its condolences to Aguilard's family. We, of course, hope that the fund's recent close entanglement with the NYSE for program trading facilitation and the loss of the fund's CEO are purely coincidental, especially in these difficult times for the integrity of program trading courtesy of Goldman Sachs' recently disclosed scandals.
 
hat tip Jeffrey and ewing2001
 

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Wed, 07/08/2009 - 15:24 | 5407 Anonymous
Anonymous's picture

You mean they offed the little frog? C'est drole, c'est tres drole.

Wed, 07/08/2009 - 15:32 | 5410 thinkinghardwil...
thinkinghardwillkillya's picture

That remix by MS made me wonder. OK. They can reshuffle the layers of this junk, back it up with some bs monte carlo and produce a better rated most senior bucket. But who is going to hold the rest of this beauty? Perhaps, send it to fed as collateral?

Wed, 07/08/2009 - 15:36 | 5411 Anonymous
Anonymous's picture

IMO the current cyber attacks are a welcomed distraction from the real news on the Goldman Sachs HF trading program code. Some interesting questions posed by Karl Denninger at

http://market-ticker.denninger.net/archives/1192-FLASH-Goldman-Code-Thef...

Something really ugly popped up on Daily Kos yesterday late in the afternoon.....

...GS, through access to the system as a result of their special gov't perks, was/is able to read the data on trades before it's committed, and place their own buys or sells accordingly in that brief moment, thus allowing them to essentially steal buttloads of money every day from the rest of the punters world..........

Wed, 07/08/2009 - 15:48 | 5412 Anonymous
Anonymous's picture

Is it possible this cyber-attack had anything to do with the NYSE's late close last week?

Wed, 07/08/2009 - 16:00 | 5417 RobotTrader2 (not verified)
RobotTrader2's picture

Gotta hand it to Bernanke, Geithner, LLP.  Each time a massive Treasury auction is scheduled, stocks are crashed, gold is bombed, so money instantly flees into the safety of AAA-rated U.S. soveriegn confetti and U.S. dollars.

Today was a Hail Mary play if I've ever seen one, watching the TLT rocket away into Outer Space.

Now the Plutocrats have a green light to issue trillions more in fiatcos, bailout all of the states, float another stimulus plan, or whatever for "the greater good".

Mugabe must be furious.

Ben and Turbo Timmy are able to finance unlimited budget deficits, unlimited trade deficits, finance multiple wars in third-world countries, and have enough left over to bailout Citibank, CIT Group, or whatever walking corpses are remaining.

And the world laps up our bonds like a kid laps up chocolate syrup on whipped cream.

Truly an accomplishment.

 

Wed, 07/08/2009 - 16:57 | 5431 Steak
Steak's picture

Wouldn't the strength in the 10yr be related to the unwind of steepener trades (so lotsa people now going long-10yr short-2yr)?

Wed, 07/08/2009 - 17:03 | 5432 deadhead
deadhead's picture

The rahmster and company will bash through some sort of stimulus at the precise moment where assistance is needed for the mid term CONgressional elections.

 

He'll be like Ahminajed (sp?) handing out oil money to rural villagers 2 months ago.

Wed, 07/08/2009 - 20:12 | 5455 ghostfaceinvestah
ghostfaceinvestah's picture

SPX 7/8: 879.56; SPX 5/1 877.52

CL1 7/8: 60.14; CL1 5/1: 53.20

GT10 7/8: 3.310; GT10 5/1: 3.155

A little slippage in Oil, but besides that, it looks like they have the markets geared exactly how they want them.

Anyone long equities should be worried about where SPX needs to go if they want 2.5% on the 10 yr (<800).

 

Wed, 07/08/2009 - 20:18 | 5456 Anonymous
Anonymous's picture

is this the same robotrader on zerohedge.blogspot.com?

Wed, 07/08/2009 - 16:03 | 5418 Comrade de Chaos
Comrade de Chaos's picture

So WTF is all of the noise surrounding yet another stimulus package? Push it, real good, in several minutes, a bit more higher and higher baby....vacancy rates are ~ 9% therefore housing is on rebound..

Wed, 07/08/2009 - 16:10 | 5420 Anonymous
Anonymous's picture

My algorithm trader contact revealed to me 10days ago that these systems were soon to go specatularly bust. Make no mistake. what has been revealed publicly in the Sagyev case is just the beginning. The extent of the fraud at gs and wall street is beyond comprehension for the average person.

Wed, 07/08/2009 - 17:38 | 5438 Ned Zeppelin
Ned Zeppelin's picture

Kind Sir:

Can you elaborate?

Wed, 07/08/2009 - 18:00 | 5442 Veteran
Veteran's picture

I heard that.  What's the dealyo?  Inquiring minds want to know

Wed, 07/08/2009 - 21:48 | 5476 Anonymous
Anonymous's picture

He cannot. Because he's FOS.

Wed, 07/08/2009 - 16:14 | 5421 Comrade de Chaos
Comrade de Chaos's picture

So oil is below 60, someone must be in a rush to reverse their contango positions. : ) First there was a deflationary report by GS and soon after this spectacular drop, is this me or the scheme sounds familiar? Got to give them a credit, to make "the smart money"  believe in oil @ 100 in the deflationary environment , ROFL....

Wed, 07/08/2009 - 16:14 | 5422 mikeyv1970
mikeyv1970's picture

Well looks like computer kicked in hard at 3:40pm and blasted the DOW and other indices positive in just a few dozen seconds.  Looks like GS and JPM have their puters back up...

-Michael

Wed, 07/08/2009 - 16:44 | 5430 Anonymous
Anonymous's picture

Comforting to have the status quo ante back, innit?

Wed, 07/08/2009 - 16:21 | 5423 Bubby BankenStein
Bubby BankenStein's picture

I found it amusing that the MSM credited those guys in funny looking suits on the NYSE floor (Specialists) for manually settling / reconciling their books in the extended session on July 2.  Quite heroic!

Wed, 07/08/2009 - 16:22 | 5424 Comrade de Chaos
Comrade de Chaos's picture

now, what was the % drop in gas prices that caused the spectacular "hedgy" 07 explosion? love is in the air.

(damn, i hope to be wrong, because there is such a thing as too much of excitement...)

Wed, 07/08/2009 - 16:28 | 5426 spekulatn
spekulatn's picture

Great stuff on the poor french fella. This movie gets better by the minute.

 

 

"MARK IT ZERO,DUDE"

Wed, 07/08/2009 - 16:38 | 5428 Bubby BankenStein
Bubby BankenStein's picture

No worries guys, Blackwater is all over this.

Wed, 07/08/2009 - 16:44 | 5429 economessed
economessed's picture

T.D. -- how have you managed to keep Michael Jackson out of this discourse on financial inexplicability, market gamesmanship, and technological mischief?  You have outperformed the MSM for days now.  I have no idea how you are capable of doing this.

Wed, 07/08/2009 - 17:27 | 5436 Anonymous
Anonymous's picture

S&P is 8% off highs on 6/11, dow is 7.87% off highs and NASDAQ only 7.06.

Not quite 10%, but we'll be there soon.

Wed, 07/08/2009 - 17:43 | 5439 Ned Zeppelin
Ned Zeppelin's picture

I heard on Bloomberg Surveillance on the way in this morning (having distanced myself from this for a few days to save my sanity) that there was a $19 billion sale of ten years, heard the tick up in price in 10 years and said the same thing about T3, Helicopter Ben and Larry Summers.  Gotta hand it to them - North Korea runs out of  4th of July fireworks and lights off a few ICBMs instead,  cyber-attacks, GS code stolen (gosh!), stock market drops - hell yes I would like to suck up some of that flight to safety paper sir. Damn, Robo Trader  - is it that simple? And the question then is, is this sustainable indefinitely?  

Wed, 07/08/2009 - 17:52 | 5440 wiskeyrunner
wiskeyrunner's picture

Laying the ground work for the government to take over and regulate the intranet. Big brother will be watching. This will be done to prevent any sort of uprising by the masses.

Wed, 07/08/2009 - 18:15 | 5446 Veteran
Veteran's picture

I was curious about that too.  Last I checked an attack of this purported magnitude constituted an act of war.  Evidently not as newsworthy as an ex football star getting zapped by his breezie

Wed, 07/08/2009 - 21:04 | 5462 Buttercup
Buttercup's picture

Your are correct. 

See the Cybersecurity Act of 2009, a John Rockefller Bill.

Wed, 07/08/2009 - 22:05 | 5479 ghostfaceinvestah
ghostfaceinvestah's picture

Rockefeller (a CFR member) would love nothing more than to shut down the internet, in order to forward his goal of One World Government.

 

How that guy keeps getting elected is beyond me.

Thu, 07/09/2009 - 06:42 | 5504 zeropointfield (not verified)
zeropointfield's picture

money.

Wed, 07/08/2009 - 17:59 | 5441 RobotTrader2 (not verified)
RobotTrader2's picture

I think the energy action is being driven by a couple of Amaranth-type funds which are blowing up.  Maybe T. Boone Pickens, since he cancelled his wind farm project.  His BP Capital probably got wiped out trying to jimmy up the oil market.  Poor speculators, they always get the shaft by the CFTC.

Wed, 07/08/2009 - 18:08 | 5444 RobotTrader2 (not verified)
RobotTrader2's picture

Amazing how some retail stocks got hockey-sticked at the end of the day.  Man, I was so close to shorting this yesterday:

Tiffany:

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=tif&sid=0&o_symb=tif&freq=7&time=18

And then there is Family Dollar, favorite shopping destination of the wives of the laid off M & A strategists.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=fdo&sid=0&o_symb=fdo&freq=7&time=18

 

 

 

 

Wed, 07/08/2009 - 19:21 | 5453 FischerBlack
FischerBlack's picture

As I read the Morgan Stanley article on Bloomberg today my jaw just dropped. I can't believe the shamelessness of these fucks. Aren't they even a little embarassed?

Wed, 07/08/2009 - 20:34 | 5457 berated
berated's picture
MS manages our company's retirement account. I wrote our account manager about this article and here was his response: These are specialty transactions associated with Morgan Stanley's hedge fund portfolios and have nothing to do with <my company's retirement account>.  Primarily these deals are custom made offerings for a specific insurance company or bank's portfolio.  Clients like these institutions approach Morgan Stanley and ask us to create securities like this all the time.  This is a large portion of the investment banking revenue associated with us or Goldman Sachs.  No comment from us of Goldman indicates the private nature of these transactions.   There is a strong appetite in the institutional marketplace for such securities.  Not on the retail side, hence not much information is pushed out to the public.  They are very complex, customized transactions not suitable for many clients - only very large institutional ones.
Wed, 07/08/2009 - 21:24 | 5470 FischerBlack
FischerBlack's picture

This guy is obviously a retail broker and is feeding you the line his compliance people fed him. What he means to say is,

 

"You know those fees you pay us to manage your retirement plan? Well we use them to pay off something known as a 'ratings agency' for something known as a 'AAA rating' so we can do something known as 'play hide the sausage' with toxic loans to make it simpler to do something known as 'selling them to widows and orphans' so we don't have to think about them anymore. M'kay?'

 

 

Wed, 07/08/2009 - 21:46 | 5475 Anonymous
Anonymous's picture

Sure. They will all end up in pension funds of states and Unions and the taxpayer has to bail that out too.

Wed, 07/08/2009 - 22:07 | 5480 ghostfaceinvestah
ghostfaceinvestah's picture

exactly.  it is called an "agency" problem - the stupid fund managers are managing someone else's money.

 

no doubt they will get a nice dinner and round of golf from MS for buying this sh*t, though.

Thu, 07/09/2009 - 11:04 | 5551 Wilderman
Wilderman's picture

Just finished "House of Cards" by William Cohan, detailing the end of days for Bear Stearns.  They (and apparently Lehman, as well), tried all sorts of bizarre crap like this at the end.  Looks like desperate attempts to raise cash before the ship sinks.

Wed, 07/08/2009 - 20:51 | 5459 jm
jm's picture

All:

What's new on California default risk? 

Wed, 07/08/2009 - 20:55 | 5460 hohack
hohack's picture

i need me some MAMA right now.... marla, music please?

 

ot:  td what kind of captcha asks  '(-450) minus (-304) equals'  , wtf? minus minus a minus.....  = lol ... stud.

Wed, 07/08/2009 - 21:04 | 5464 Marla Singer
Marla Singer's picture

The Zero Hedge captcha... that's which one.

Wed, 07/08/2009 - 21:34 | 5472 FischerBlack
FischerBlack's picture

I hope you're not tracking wrong answers. I just got two wrong in a row. And that's embarassing because I was using a calculator.

Wed, 07/08/2009 - 20:58 | 5461 RobotTrader2 (not verified)
RobotTrader2's picture

Re:  California

 

I guarantee that the O-Team will step up and loan California billions when the time comes.

After all, why not?

When you can float unlimited amounts of confetti at 1.5% - 3.5%, what does Obama have to lose?

Perhaps Mrs. Obama is waiting for Mrs. Maria Shriver to come to the White House and grovel a bit, shower heaps and praises about how fancifully dressed she is, exchange the usual pleasantries, then the Govornator will finally get his much need bailout.

Watch California credit default swaps crash when this happens.

Wed, 07/08/2009 - 21:04 | 5463 Anonymous
Anonymous's picture

Again the end of the day shotgun was fired both barrels a blazing. At 3.20 pm 160 mil spy traded in 40 min another 80 mil plus. This has gotten so disgusting i can not throw up anymore! S&P Earnings 50 max = s&p 600-750. Will the ppt keep the market proped forever? Should i start to go ALL-IN now for a 10 percent hit or is this the calm before the storm? Opinions please.

Wed, 07/08/2009 - 21:45 | 5474 FischerBlack
FischerBlack's picture

I covered all of my shorts yesterday in my PA, and then got lured into some SDS calls at the day's low today. I'm still contemplating suicide for being such a sucker. I predicted this morning to my assistant that SPY would break below the 200 day and then close near the open. I don't know why I was lured into this loser short position when I had a perfectly sound and reasonable theory that had yet to be falsified.

Now, I'm probably going to have to take a loss tomorrow thanks to all the goddamned 'green shoots' growing out of the ass of Alcoa. (Though, I am very surprised at the lack of after-hours bullishness from little Billy and his odd-lots.)

I think we get a rally here until maybe the third week of July, and then we roll over.

 

 

Wed, 07/08/2009 - 22:10 | 5481 ghostfaceinvestah
ghostfaceinvestah's picture

you might be OK for tomorrow morning, we still have some 30 year debt to sell, but once that auction is over, the market is going to take off like a rocket.

pure manipulation.  oh well, in 5-6 years earnings will catch up to justify S&P @ 900, which is where it will still be.

Thu, 07/09/2009 - 00:46 | 5492 taocean
taocean's picture

take the 10.

Wed, 07/08/2009 - 21:06 | 5465 Anonymous
Anonymous's picture

At a minimum, while spinning relationships between things that have none, at least ZH could spell the name correctly of someone who just passed. His name was Aguilar, not Aguilard.

"hat tip to simple google search."

You may now go back to your unbelievably hilarious conspiracy theory about types of trading that correlate to zero... on a time line that's not so long, really.

Wed, 07/08/2009 - 21:12 | 5467 Anonymous
Anonymous's picture

by anonymous Gord

will the real ZH please stand up - one article two sites two separate threads and no cross-over

http://www.zerohedge.com/article/intraday-observations

http://zerohedge.blogspot.com/2009/07/intraday-observations.html

and the quantum theory CAPTCHA problems are getting tougher

I look forward to the next iteration of CAPTCHA -- String Theory

and I got the last "math" question wrong WTF

Wed, 07/08/2009 - 21:15 | 5468 Marla Singer
Marla Singer's picture

Blogspot is not long for this world.

 

I have moderated the 700 level discrete math CAPTCHA problems.  (Wimps!)

 

I was considering this:

 

Which word does not belong to the list?: * markopolis smart reliable waters ethical Which word does not belong to the list?: * blankfein courageous waters madoff summers Which word does not belong to the list?: * intelligent honest smart summers hero
Wed, 07/08/2009 - 21:51 | 5477 Anonymous
Anonymous's picture

Turing machines. Yeah eeek.

BTW, the radio buttons are not mutually exclusive.

Wed, 07/08/2009 - 21:52 | 5478 FischerBlack
FischerBlack's picture

LOL, what a great idea! I can tick off around ten people I know personally who would get all three of them totally wrong.

Wed, 07/08/2009 - 23:53 | 5489 Renfield
Renfield's picture

Radio buttons works for me...BTW the CAPTCHA on my PC isn't accepting more than one (1) digit in the answer bar. (Counting minus signs as digits, I've had to go thru 3 (that's +3) attempts.)

Wed, 07/08/2009 - 21:22 | 5469 hohack
hohack's picture

uh oh.

Wed, 07/08/2009 - 23:08 | 5482 Mako
Mako's picture

Every once in a while I will read something someone posts about KD. The guy makes very little sense most of the time.

"That's total credit market instruments, all sectors, and it is still rising. In fact, it is rising fast - very fast! Currently at $52.9 trillion dollars, up from $50.7 1Q 2008, and up from $31.9 trillion in 2002." - From his blog that a friend forwarded to me

He is 100% correct that the US total credit market debt is $52.9T, something I talk about often. What he is completely wrong about is it's NOT "rising fast - very fast". Contrary to his belief the total credit market debt is in fact slowing down at an alarming rate.

At the end of Q1 2009, total credit market debt went up $371B ($1.484T annualized) sounds like a lot, huh. Well, in fact it's not enough to service the $52.9T of total credit market debt. In fact, in Q3 2007 was creating new credit at a $1.3T ($5.2T annualized) rate.... by the time Q2 came around in 2008 it was getting very bad. See federal reserve Z1 report.

http://www.mathwarehouse.com/exponential-growth...

Humans have a credit financial system that is built on the absolute NEED of the system to create credit at an exponential rate, yet humans have no ability to fuel that equation forever.

How dipshit KD comes to the conclusion that total credit market debt is rising faster and at a faster rate is beyond stupid, it's completely WRONG. If it were rising at a fast rate everything would be great.

If he is unable to post the real numbers and figure out what they mean in his own blog than he certainly does belong on CNBC with Big Bird, he will fit right in.

 

What KD and Big Bird fail to understand is that total credit market debt can't be allowed to roll backwards, there is no reverse gear.  KD has been reading my post but he has no idea what he is talking about.  He for sure hasn't gone through the Z1 report back to 1944, if he did he would NOT be saying the freaking thing is rising very fast. 

 

 

 

Thu, 07/09/2009 - 02:32 | 5496 ghostfaceinvestah
ghostfaceinvestah's picture

Your numbers may be correct, but you draw pretty radical conclusions ("Humans have a credit financial system that is built on the absolute NEED of the system to create credit at an exponential rate").

This is nothing but a side effect of a fiat currency system.  In such a system, debt IS money, you are correct in that the beast must continually be fed.

Moving to a stable currency with a stable money supply (PM-based, no fractional reserving) would solve all this.  the transition to such a system would be painful, but the pain would be temporary.

It isn't so much "humans" need the credit financial system you describe, but that we have chosen this system (or more accurately, the system was chosen for us).

Research the currency of the Byzantine empire - it was metal based, and was not debased as the Romans did constantly to their currency, and lasted for hundreds of years, and was used around the globe due to its stability.

"Humans" are not doomed to an unstable financial system.  It just happens to benefit the few at the expense of the many.  A literal road to serfdom.

BTW, this captcha system has some glitches, some answers require 4 digits but the system only accepts 3.

Thu, 07/09/2009 - 07:43 | 5510 Mako
Mako's picture

"Moving to a stable currency with a stable money supply (PM-based, no fractional reserving) would solve all this."

Let me see, the system blew up in the 1929, 1873, and 1807 here in the US and you had a fixed "money" supply.  Why?  Because "credit" is not fixed, you must pay interest or the system collapses.  Now if humans stop using compounding interest which requires exponential growth than yes... but a fixed standard does not do this.  During all those periods above there was fixed money, so what?

You ran out of money to support the equation.  You don't need a central bank to have fractional reserve.  Are you going to outlaw the right to contract?  How exactly are you going to do this?  Are you going to outlaw banks?  Are you going to outlaw people lending to each other?

 

Go to that system today, tomorrow will look like WW3.

 

There is one and only one direction once you go to exponential growth model, UP.  You are either creating enough or you are not, if you are not than within a very short period of time DEATH SPIRAL.

 

What KD said about total credit market debt is not only wrong it's dead wrong.

Thu, 07/09/2009 - 07:48 | 5513 Mako
Mako's picture

http://market-ticker.denninger.net/uploads/total-credit.png

(here's KD numbers that he is going to show Big Bird)

 

There is no deleveraging, deleveraging = greatest of all depressions. 

The global financial credit system does not run in reverse.  What those numbers show KD is that the credit market is about to collapse. 

How can you deleverage when you owe service to the outstanding amount?  It's a one way system.

KD would fit right on in at CNBC with this nonsense. 

 

Wed, 07/08/2009 - 23:38 | 5485 Anonymous
Anonymous's picture

Marla can we get some tougher captcha problems? We need to keep those with IQs below 150 from writing here.

I am still trying to figure out the difference between a delta hedge and a vega spread.

I just want to see a picture of the charming Vanna speeding in red colored Vega.

Thu, 07/09/2009 - 00:07 | 5490 Anonymous
Anonymous's picture

FOS? I was in the industry 25 years ago. I have maintained some friendships with a few; including one that commited suicide at the very very beginning of this financial tsunami. he was one of the biggest yield curve traders in europe. I have friends who were selling these sytems for millions 20 years ago. If you walked away with a program, your life was in danger. I met someone about 7-10 days ago. He is one of the very high level people in this field. (There arent that many PhD Maths guys running around this field with experience.) He plainly told me that this is the ONLY way wall street can make money. The ONLY way. His words. he said that it will all go spectacularly bust and everyone knows it in this field. i could go on.

Thu, 07/09/2009 - 02:34 | 5497 ghostfaceinvestah
ghostfaceinvestah's picture

i believe you.  any idea of timeline?

Thu, 07/09/2009 - 09:15 | 5526 Veteran
Veteran's picture

Re:  captcha update.  Sweet fecking jeebus.  If I wanted to feel stupid by failing  math questions I'd go back to work.  Thanks for nothing.  (I had to repost this because I got the first answer wrong)

Thu, 07/09/2009 - 10:40 | 5545 dnarby
dnarby's picture

Hmm...  My captcha for this message was  X * -6 = -144.

 

Next up calculus, after that...   Differential equations!

Thu, 07/09/2009 - 10:51 | 5547 Gilgamesh
Gilgamesh's picture

Congress is acting like Google AdSense here.

 

RANsquawk:

US House of Representative member Maloney says commercial real estate is a ticking time bomb Thu, 15:14 09-07-2009

 

Time to cover?

Thu, 07/09/2009 - 14:07 | 5595 Anonymous
Anonymous's picture

Timeline? I asked him. he said no one knows. my sense is that since he raised the issue, that it is closer rather than farther. and something they are planning for. he believes that the harvard endownment bust was just the earliest indicator of things to come for this specialized field. (Yes, many of the harvard endowment traders were from ENRONs trading desk!!!!). it would be pure guesswork. his analogy was the mbs/cdo catastrophe. he said that many of them knew it had to happen; but they speculated it would occurs years later than it did.

Fri, 01/22/2010 - 08:11 | 202036 Anonymous
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