• Knave Dave
    05/23/2016 - 18:16
    This past Thursday marked the one-year anniversary of the US stock market’s death when stocks saw their last high. Market bulls have spent a year looking like the walking dead. They’ve...

Rosenberg: "Greece Is The Same Coalmine Canary As Thailand Was To LTCM And As New Century Was To Lehman"

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Tue, 05/11/2010 - 10:09 | 343286 LoneStarHog
LoneStarHog's picture

What can the politicos do for an encore?  Simple, put a damn gun in their mouths and pull the trigger, finally doing the entire world a great service!!!!!

Tue, 05/11/2010 - 10:27 | 343338 Joe Davola
Joe Davola's picture

I suspect somewhere on the internet the Bud Dwyer video exists.

Tue, 05/11/2010 - 10:39 | 343366 Cognitive Dissonance
Cognitive Dissonance's picture

Todd Harrison has been talking for the past few years about how the Fed's last bullet will be turned inward. The Fed and the politicos are all puppets manipulated by "higher" powers, so to speak.

Behind every successful politicians is not his or her spouse but TPTB.


Tue, 05/11/2010 - 11:22 | 343498 AnonymousMonetarist
AnonymousMonetarist's picture

Todd Harrison is a pretty cool fella.

Had a chance to meet him once, he's exactly the type of guy his 'writing' persona suggests he is.



Tue, 05/11/2010 - 10:11 | 343293 Al Huxley
Al Huxley's picture

Not to worry, I heard on Bloomberg this morning that the US recovery is taking on a life of its own, independent of the government money.  Apparently the median estimate of 61 economists was that US consumption would grow at a rate of 3%, so looks like everybody can just relax, ignore this little blip in the market and get back to the important business of consuming.

Tue, 05/11/2010 - 10:17 | 343298 Mako
Mako's picture

I have been saying it since Bear Stearns, when there are millions at stake you have a problem, when 10s or 100s of billions are at stake the world has a problem

The Bear Stearn shareholders should have held their ground for $50 a share.  Greece currently holds all the cards, they should take the money and reverse all the measures they put in place last week.   There is no incentive for a country to cut, Greece-Spain-Portugal-Italy should ramp up spending.

What happened on Sunday is absolutely nothing, except they were able to trick people into thinking it was something.

Tue, 05/11/2010 - 10:16 | 343301 Cursive
Cursive's picture

Thailand?  LTCM?  New Century?  That's some bad canary company.

Tue, 05/11/2010 - 10:17 | 343308 DeweyLeon
DeweyLeon's picture

Would this analogy then make the price of gold the gripping hand around the canary's throat?

Tue, 05/11/2010 - 10:23 | 343321 SWRichmond
SWRichmond's picture

...and as Iceland was to UK.

Tue, 05/11/2010 - 10:21 | 343323 TwoJacks
TwoJacks's picture

equity holders are going to read this and say, 'so what!', ltcm was a one-month event, so was the asain contagion. only the bear stearns problem turned out to be a big deal and that was because of housing in general. the buying will continue because the relentless bullish cheerleaders have a bigger army than zero hedge and other bearish sites.  shameful but true

Tue, 05/11/2010 - 10:21 | 343326 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Forget 2012-- it's happening now.

Tue, 05/11/2010 - 10:25 | 343333 trav7777
trav7777's picture

Austerity measures????  WTF is that?

Austerity measures = paying the INTEREST.  To the bankers.  For the right to have money to use.

Money is a public utility and should be treated as thus.  Repudiate, one and all.  Unite against rent-seekers.

Tue, 05/11/2010 - 10:41 | 343369 TaggartGalt
TaggartGalt's picture


Trav, what you point out is the crux of the matter!

Banking is a utility; banks should be nationalized.

Tue, 05/11/2010 - 22:47 | 345262 Dread Pirate Roberts
Dread Pirate Roberts's picture

If you think investor-owned banks are bad, you should see banks owned by the government.  Be careful what you wish for.  Limit size and leverage and let the bad banks fail.  Separate investment banks.  Make them partnerships.  Bring transparency to the hedgies.  Not perfect, but the best we can do.

Tue, 05/11/2010 - 10:30 | 343345 Psquared
Psquared's picture

Outright money printing is the next stop. Otherwise the credit markets seize up. I am surprised that has not happened yet.

Tue, 05/11/2010 - 10:32 | 343347 AnonymousMonetarist
AnonymousMonetarist's picture

Do we blame the umbrella for the rain?

Do we blame the parka for the snow?

Do we blame the roof and the walls for the storm?

Well if one is an advocate and sycophant of the ex-theory, randomwalking, a pristine and inviolate thesis that has been disproven this last century to the tune of a gazillion-squared, I guess one does indict the forenamed suspects for their obvious culpability.

In the WSJ, lead right section C, the pablum narrative to end all pablum narratives, the silliest, most inane, and flat-out stupid article that these eyes have witnessed in a long long time.

'Did a Big Bet Help Trigger 'Black Swan' Stock Swoon' is the title.. the randomwalkers' version of 'And how long sir have you beaten your wife?'

Universa Investments, a fund that bets to win on discontinuous market movements, where Nicholas Taleb is an advisor, and Benoit Mandelbrot is considered to be a visionary (a sentiment also shared by your humble blogger)... is being blamed for the 'flash crash'!

You have to be f&%$*&g kiddin' me!

The article details how Universa made a big bet, a whoppin' $7.5 million for 50,000 options, that would have paid off about $4 billion should the S&P 500 stock index fall to 800 in June. Admitting that the trade was not 'out of character' for the fund and that 'on any other day' the option contracts 'might have briefly hurt stock prices' the Wall Street Journal then lays out in a breathless array, conclusive evidence, in an attempt to brand Universa as the most likely culprit in a crash that all credible models insist should have never happened.

'The trade may have played a key role', 'traders on the other side of the transaction' led to 'selling to offset some of the risk', then, as the market fell 'those declines are likely to have forced even more hedging ' creating a 'tsunami', a 'tidal wave of selling into a market already on the edge' and 'a blast of orders' causing exchanges to be 'clogged', and causing individual stocks to 'collapse'.

'The working theory among traders and others (others??) involved in the exchange meltdown is that the "Black Swan" -linked fund may have contributed to a Black Swan moment, a rare, unforeseen event that can have devastating consequences.'

Pay no attention folks that the working theory that all our blessed mathematical models are based on emphatically states that the rare and unforeseen can be foreseen to never occur.

And so if it pleases the court (of public opinion) we shall cast the accused into the waters and if she floats she is clearly a witch... may God have mercy on her soul.

Or one can make another argument. Hours before the panic began, selling volume was unusually heavy. The selling of stocks was at its highest since the day the market reopened after the Sept 11 terror attacks. The Universa trade along with likely dozen of other trades across the market, led to a cascade of selling in the futures markets. As the trading volume soared, data systems across the stock market began to get clogged. With the high frequency funds either selling or pulling out of the market, Wall Street brokerage firms pulling back and the NYSE stock exchange temporarily halting trading on some stocks, offers to buy stocks vanished from underneath the market.

'Universa alone couldn't have caused the market meltdown", said Mark Spitznagel, Universa's founder. "We had reached a critical point in the market, and it was poised to collapse.'

Well that's a very convincing counter-argument but here's the thing... I am quoting from the same article.

Edward R. Murrow is convulsing in his tomb.

So why wasn't the headline 'Ex-theory fails again. Universa profits from discontinous market movement'?

Well aside from the obvious reason, one might note from reading between the lines that Barclays most certainly falls under the auspices of the aforementioned 'others' and in part, or perhaps in whole, the enabler for this hatchet job. Universa placed their order on Barclays trading desks, Barclays was selling hard, and a market data feed at Barclays that delivers data on "buy" and "sell" orders went down, although a backup data system purportedly went 'immediately online'. Although Barclays disingenuously 'declined to comment' for the article, their head of electronic trading is cited once and the bank is named seven other times in this missive, suggesting someone over there was squawking and deflecting.

The sentence in this trash worth considering is the brief citation to Taleb's fame referencing his thesis that 'unlikely events in the financial markets are far more likely than most investors believe.'

If quantum theory is correct there is an alternate plane of reality where their Wall Street Journal would expand upon this assertion in the following manner.

Randomwalkin's not pinin'! It's passed on! This theory is no more! It has ceased to be! It's expired and gone to meet 'is maker! 'It's a stiff! Bereft of life, it rests in peace! If you hadn't nailed it to the masses it'd be pushing up the daisies! It's metabolic processes are now 'istory! It's off the twig! It's kicked the bucket, it's shuffled off 'is mortal coil, run down the curtain and joined the bleedin' choir invisible!! THIS IS AN EX-THEORY!!'

Natural law is based upon a "fractioning" of a larger structure into smaller structures that have not only the features of the larger structure but if scaled up will look identical to the larger structure. Mandelbrot showed this scalability by graphing long-term financial data that appeared to be discontinuous on logarithmic paper revealing a fractal relationship in markets.

Per Benoit: 'Price changes are not independent of each other.My heresy is a different, fractal kind of statistical relationship, a "long memory." Why this should be is not certain; but one can speculate. Whatever the explanation, we can confirm the phenomenon exists- and it contradicts the random-walk model. Contrary to orthodoxy, price changes are very far from following the bell curve. Such theory predicts that index swings of more than 7 percent should come once every 300,000 years; in fact, the twentieth century saw forty-eight such days.(Over 50 now!) Truly, a calamitous era that insists on flaunting all predictions. Or perhaps, our assumptions are wrong.'

Mandelbrot discerned that markets exhibit a wild trait of abrupt change or discontinuity. This hierarchy of turbulence, a pattern that scales up and down with time, he describes as the Noah Effect - catastrophic, but transient. This Noah Effect is seen in the market's discontinuity : this is the pillar of fractal geometry.

The market's second wild trait - almost-cycles- he describes as prefigured in the story of the prophetic dreams of Joseph, a biblical tale of pattern recognition or long-term dependence. The Joseph effect is the influence of a long-term memory through which the past continues to influence the present.

Per Benoit: ' But how exactly do these two effects- Noah and Joseph, dependence and discontinuity - interact in markets? Answer: At least one market mechanism I identified naturally leads to the other. Suppose, for instance, that you have an "almost-trend" emerging in a stock price: a few weeks, say, in which a stock price rises seven days out of ten. The pattern must eventually break up, of course; otherwise, it would be a real trend that you could bet on continuing a few weeks, and hope to make some real money. But when the "almost-trend" finally does break, it can do so rapidly. A sudden lurch downward, perhaps. A discontinuity. Or, in the terms of the Biblical metaphor, a Noah Effect produced by Joseph-style dependence.

For some real-world examples, think about investment bubbles. They seem calamitous -but they happen all the time. Conventional economics tells us they are aberrations, "irrational" deviations from the norm, caused by a rapacious speculator, mass greed, or some other unpleasant factor. But under certain circumstances they can be entirely rational and flow from the entwined effects of long-term dependence and discontinuity.

The distribution of price changes in a financial market scales. Given that event X has happened, what are the odds that Y will happen next? With financial prices, scaling means that the odds of a massive price movement given a large one are akin to those of a large movement given a merely sizable one. Such is the confusion of scaling. It makes decisions difficult, prediction perilous, and bubbles a certainty.'

Tue, 05/11/2010 - 10:43 | 343376 Salinger
Salinger's picture

do you have a link to the above essay?

Tue, 05/11/2010 - 10:56 | 343407 CD
CD's picture

The WSJ article that 'explains it all':


I especially liked the nonchalant reasoning given for the instantaneous snapback after the dive.

Tue, 05/11/2010 - 11:15 | 343478 Cognitive Dissonance
Cognitive Dissonance's picture

Thirty one paragraphs explaining the drop. One paragraph to explain the rapid recovery. Proof from the world's financial newspaper of record that markets should only go up. And that when they do go up, for any reason explained or unexplained, it's not news.

Move along, nothing to see here.

Tue, 05/11/2010 - 11:25 | 343439 Cognitive Dissonance
Cognitive Dissonance's picture

".....the pablum narrative to end all pablum narratives, the silliest, most inane, and flat-out stupid article that these eyes have witnessed in a long long time."

As usual, a quality presentation by AM.

Your weary eyes will be seeing this type of MSM denial of reality more often as the crazy train pulls further into the station. Any reality has two choices. Be cognizant of all other realities or be in total denial of all other realities. Our realty has chosen/is practicing the latter path as its basis of support and it's becoming very unstable.

Most people don't even understand the concept of what an outlier really is, let alone ever consider the possibility that our entire way of life, our very existence as human beings here and now, is so far outside the norm with regard to "nature" and the "natural" world that it's continuation defies the laws of the universe. And as you quoted above, once the trend breaks, it breaks rather quickly.

Before you pass from this reality AM consider setting up the paperwork to allow the donation of your wonderful brain to science for further study. I like how you think and I would like to see how you're wired. I just hope they don't lose your gray matter like they did Einsteins. :>)

Tue, 05/11/2010 - 11:59 | 343639 AnonymousMonetarist
AnonymousMonetarist's picture

Mandelbrot was (and is) an economic Einstein no doubt...

Tue, 05/11/2010 - 10:36 | 343358 stickyfingers
stickyfingers's picture

Key words or phrases in MSM: 'different this time', 'well contained', or 'you just don't get it'.

Tue, 05/11/2010 - 11:20 | 343492 AnAnonymous
AnAnonymous's picture

Reminded me of Troma classics "Class of nuke'em high"


There is no danger, governor. We have the situation well in hand.


Tue, 05/11/2010 - 10:39 | 343364 Divided States ...
Divided States of America's picture

What a friggin joke this country is. We have states with deficit yet we are bailing out foreign countries (via IMF). Shouldnt we be solving out our own problems first before we help our neighbors? I guess the rich socialistic F%CK$ are helping out each other first, whether they are in another country. And we powerless middle class keep taking it up the ass.

Tue, 05/11/2010 - 10:58 | 343410 snowball777
snowball777's picture

Depends how profligate your neighbors in the US happen to be.

Tue, 05/11/2010 - 11:06 | 343441 Hulk
Hulk's picture

States are next. Ca equivalent to Greece, Austerity not in the vocabulary. Simply stunning to watch Ca....

Tue, 05/11/2010 - 10:41 | 343370 Salinger
Salinger's picture

From the NY Times

Debt Aid Package for Europe Took Nudge From Washington

PARIS — President Obama had just flown into Hampton, Va., Sunday morning to deliver a commencement address. But before he donned his silky academic robes, he was on the phone with Chancellor Angela Merkel of Germany, offering urgent advice — and some not so subtle prodding — that Europe needed to try something big.


(I still find it too coincidental that the German Finance Minister took ill just as the emergency Ecofin meeting was beginning)

Tue, 05/11/2010 - 11:00 | 343416 AnAnonymous
AnAnonymous's picture

Causality maybe? The man might have endured a prolonged period of stress and thus might have grown more vulnerable to diseases.

A quote from the article:

In the process, the European Union, under crisis conditions, moved fitfully toward more centralization, toward a French vision of an economic government for the region. It is a role not totally unlike the one that the federal government in the United States played during the early stages of the financial crisis in 2008.



Tue, 05/11/2010 - 10:45 | 343380 Ripped Chunk
Ripped Chunk's picture

Deeper coal mine, no?  Much deeper I think.

Tue, 05/11/2010 - 10:46 | 343382 Sisyphus
Sisyphus's picture


Okay, I will say it before someone else does:


  • Who listens to him anymore...
  • Rosenberg has missed the entire rally from...
  • A broken clock is right twice....
  • That dude is a widow maker...
  • If you traded based on his missives, you would have ....
  • He is so fat that ...
  • We are in a bull market of a life time and he is a perma bear who...
  • 9 out 10 people on this website do not trade for a living. So you all suck and are christened as nincompoops.


Tue, 05/11/2010 - 10:52 | 343392 snowball777
snowball777's picture


First to fall over when the atmosphere
is less than perfect

Your sensibilities are shaken by the slightest defect
You live you life like a canary in a coalmine
You get so dizzy even walking in a straight line

You say you want to spend the winter in Firenza
You're so afraid to catch a dose of influenza
You live your life like a canary in a coalmine
You get so dizzy even walking in a straight line

Canary in a coalmine

Now if I tell you that you suffer from delusions
You pay your analyst to reach the same conclusions

You live your life like a canary in a coalmine
You get so dizzy even walking in a straight line

Canary in a coalmine

Tue, 05/11/2010 - 11:03 | 343433 Oedipussy
Oedipussy's picture

thx for that

when I was a teen, listening to this song by the Police, I thought it said "Canary in a Coma"

it's funny to think of it like that today as well

this was a good essay by Rosenberg

Tue, 05/11/2010 - 10:55 | 343399 chancee
chancee's picture

I can't believe no one has made more of the news that the European bailout was practically forced upon the European Union by the Obama administration.  Not only did they basically twist their arm to have it done by the end of the weekend, they pushed for the 'shock and awe' approach (1 trillion).


To me this only highlights the fact that the Administration will stop at nothing to keep our stuck pig of a stock market elevated.  All so the mid-terms aren't a disaster, and all so Obama can get re-elected.  It's one thing to destroy the integrity of our own markets... but to now selfishly destroy markets and countries overseas, all at the behest of a misguided Fed Chairman and obsessed President?  Not good.

The article referencing Obama's tactics in this matter were discussed in the NYT yesterday. 

Tue, 05/11/2010 - 11:00 | 343418 snowball777
snowball777's picture

Lessee...one trillion each business day for 26 weeks straight is...$130T.

Tue, 05/11/2010 - 11:09 | 343454 JW n FL
JW n FL's picture

Obama? the Liberal Commie? and the Fed? Noooooooooo! how could they? Obama is a Commie and the Fed is, well the Fed.


What did it look like when they where togther? was it crazy, crazy? or what?


come on spill.. dish. what was it like when the Fed was with the Commie?




Tue, 05/11/2010 - 11:22 | 343499 Mitchman
Mitchman's picture

My recollection is that the "shock amnd awe" nomenclature came from the second Iraq war and that in that war, the "shock and awe" campaign didn't "shock and awe" anyone.  So it is not surprising to see the same result the second time it was tried by essentially the same bunch of government hacks.

Tue, 05/11/2010 - 11:01 | 343421 Robert J Moran
Robert J Moran's picture

"I see Dead Canaries"!

Tue, 05/11/2010 - 11:05 | 343432 John McCloy
John McCloy's picture

Who said we are so passed ridiculous we cannot even get back to it with a bus? I am thinking the Spaceball 1 on ludicrous speed could not return us from this insanity. There comes a point where you cannot undo the debt created. It is as if they are purposely trying to become more systemically connected to force more Too Big Too Fail interconnection. We have definitively gone plaid.

Tue, 05/11/2010 - 11:10 | 343457 JW n FL
JW n FL's picture

The idiots screwing us, treat us better than the mob would, FACT BITCHES!!!! and I offer as the most simple of truths, if the lights go out... you will give me your Gold and fucking all of it... or I will enjoy getting it out of you.


                      I love to hear the polite crowd talking about what will in fact happen if your Austerity measures are implemented. The un-winding of all of that debt that is backstopped by Federal dollars… the end, and I am all for it. You may call me King James… in the event that the lights go out… you in your house with your Remington(s) will never suffer such a fate… my your daughter looks tasty… you can take your wife with you, into the shallow grave…


                       All of the would be, wanna fucking be… intellectuals who can in fact frame a proper sentence and use spell check, often… discussing whether or not pulling the Federal backstops out of the Market Place, AUSTERITY will end badly… my favorite dumbass quote “ we can survive without Citi… we did before they got here… we will after they are gone!” Yayyyyy! Fucking mental midgets with spell check who belong to a book club hashing out reality.


                      I hope that you get your way, I hope Austerity measures are brought to bare… but know this, your soft underbellies will be in fact some of the first fed upon. Buy Gold Bitches!!!! I need more than I have and I am happy when the lights go out to confiscate yours for my own purposes! Lie to yourselves and tell yourselves you are safe. Tell yourselves that when the lights go out all will be well. Marshal Law? I hope your ties to the military community are better than average. Plainly, if you get your way… and Austerity measures are implemented the lights would go out… or more accurately the common fibers that allow for your protection now would be hurriedly severed, and if not me… then someone else would get you… BOO!


                     Does JP Morgan do God’s work buy controlling the prices of precious metals as it relates to the value of our Dollar? Yes! Sir!


                     When the Fed opens the International Swaps window will the Fed in fact be buying the currencies at their bottom or close there too? How long will Europe? be working for the Fed? To pay off simply the gains made in which ever PIIGS country you would like to talk about… once their currencies bounce… would we not own their hard work for free… damn exchange rates!

Tue, 05/11/2010 - 11:14 | 343473 hp12c
hp12c's picture

The law of diminishing returns: $1T=400 point pop

Tue, 05/11/2010 - 11:27 | 343511 williambanzai7
williambanzai7's picture


It is a good time to break out Minsky's Financial Instability Hypothesis and poner whether we have reached the "sovereign Minsky moment" (S&M).



Tue, 05/11/2010 - 12:17 | 343715 Cognitive Dissonance
Cognitive Dissonance's picture

It looks like the only thing the Euro is good for these days is it's strategic placement to cover up nipples. But is her's (nipple, not the Euro) a little high or is it me? Maybe I just don't know what "perky" is anymore. I must be getting old. 

Tue, 05/11/2010 - 12:54 | 343770 williambanzai7
williambanzai7's picture

This gives me an idea ;-)

Tue, 05/11/2010 - 11:36 | 343549 sunnyside
sunnyside's picture

Everyone in the room who actually believes that Greece or any other European countries will actually implement and follow the required austerity measures please raise your hand.  Anyone?

Tue, 05/11/2010 - 11:55 | 343622 sushi
sushi's picture

Question: If the ECB soaks up all the bad debt as collateral for further funding.


At the end of this tortous process the EU breaks apart into independent sovereign states.


Who is left holding the bag on all the assets held by bad bank ECB?

Tue, 05/11/2010 - 13:54 | 343968 reload
reload's picture

The Fed................who else?

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