Rumor PBoC Governor Zhou "John Meriwether" Xiaochuan Has Defected From China After Suffering Half A Trillion In UST-Related Losses

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Mon, 08/30/2010 - 12:01 | 552956 Cheeky Bastard
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Tha fuck ? Isn't that almost a 25% loss on their entire UST holdings ?

Mon, 08/30/2010 - 12:06 | 552970 egdeh orez
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And how could you lose that much money in UST if you're long and yields have gone down so much in the last month?

Mon, 08/30/2010 - 12:14 | 553002 Cheeky Bastard
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That is exactly what I want to know. Maybe they were long yields and/or playing the spreads without hedging. I can not even compute how such a loss could be incurred by simply being long/short the cash. I mean given that the most probable outcome of monetary policy over the last 2 years would be higher yields [did not happen], lower cash value [did not happen]; I would say they fucked up everything; meaning both the yield play, the cash play and the spread play. Multi-year lows/highs [or even all time low/highs] could have done a serious damage.

Mon, 08/30/2010 - 12:18 | 553008 Turd Ferguson
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Makes me feel a little bit better about the beating I've been taking in TBT.

Additionally, this could be...could be...the true trigger. Not necessarily a black swan in the traditional sense but the trigger nonetheless.

Mon, 08/30/2010 - 12:26 | 553029 Cheeky Bastard
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I think this would constitute as a Black Swan. No one, and I literally mean NO ONEexpected this. RE imploding, civil unrests, tight credit and implications of said tight credit coming out of China; yes; but not this. This is enormous if true.  

Mon, 08/30/2010 - 12:31 | 553039 SWRichmond
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CB, I agree, if true this is a genuine black swan.  Even if it's not true, this could be some rumor started by someone massively short USTs, and if the markets can't disprove it quickly then the reaction could be swift.  It doesn't take much to pop the biggest bubble in history.

Mon, 08/30/2010 - 12:40 | 553064 Sudden Debt
Sudden Debt's picture

Black swan or not, I bet the man is sweating bullets right now :)

I bet that anybody who even slightly looks like the guys doesn't dear to leave his house :)

Mon, 08/30/2010 - 12:47 | 553092 Spitzer
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I bet Hugh Hendry and David Rosenberg are sweating bullets too.

Nassim Taleb ? not so much...

Mon, 08/30/2010 - 14:19 | 553333 George the baby...
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Let's hope it's just a rumor, cause this is of biblical proportions, and not the good parts of the bible either.

Mon, 08/30/2010 - 14:24 | 553342 hedgeless_horseman
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Speaking of the Old Testament...

...scapegoat, bitches?

Mon, 08/30/2010 - 19:32 | 553934 kathy.chamberli...'s picture

bastards & bitches, O H   m y

Mon, 08/30/2010 - 13:16 | 553163 equity_momo
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Ok i may have had one too many Harvey Wall Bangers this afternoon but can someone explain how China losing money on USTs is possible when they have had a monster rally this year unless this guy was sidebetting with synthetic shorts? If they are short to that extent on a sidebet then you dont want to be betting on an implosion in bonds anytime soon...

if hyperinflation is for real all i care about is food and a safe place to live. right now i have to trade it as i see it , and that has been for the past 2 years deflation (longer if you look at trends) and will be deflation for the next 2 years.  enjoy stepping in front of that truck - when the poom part of ka eventually comes those betting against UST will all be broke and not able to profit.

calling bonds a bubble is as dumb as saying stocks are a buy and hold.   TRADE IT.

Mon, 08/30/2010 - 16:18 | 553611 Strider52
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They fell for the Tungsten Treasuries.

Mon, 08/30/2010 - 12:35 | 553044 nonclaim
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Assuming this is, at least partially, true, who was on the winning side of the trade?

Mon, 08/30/2010 - 12:37 | 553061 Cheeky Bastard
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Fuck me if I know. But if 3.5 T is the total amount of their short position, I would think everyone of any greater significance. That means probably the top 10 CBs and cca. 200 other financial institutions. You need to use the whole Universe to for this trade. Probably hundreds of counterparties involved in this; IF TRUE.

Mon, 08/30/2010 - 12:52 | 553111 hedgeless_horseman
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Maybe this has something to do with the short position?

This scandal at the heart of the secret world of global high finance made a brief entry into the public conscious in June, 2009 when two Japanese carrying $134.5 billion worth of government bonds were detained in Italy. The corporate propaganda media wrote about this incident before dismissing it by saying the “bonds were fraudulent.” These corporate so-called journalists failed to follow up on why the Japanese individuals, Watanabe and Yamaguchi, were carrying diplomatic passports. That meant their arrest was illegal and that the Italian authorities did not have the right to confiscate the bonds.


The Italian government tried to sell the bonds to the Chinese government at 40% of their face value but the Chinese said that if they bought the bonds the Italians would also then have to pay back their debts to China. The Italian authorities realized this would bankrupt Italy.

Instead, the Italians then asked a Vatican Banker by the name of Daniele Dal Bosco to try to sell the bonds back to their original owners, an organization known as the Dragon Family, at 10% of their face value. The Dragon family refused to buy back their own bonds.

Mon, 08/30/2010 - 14:01 | 553280 Mont Bleu
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this article you quote is full of BS....


my favorite excerpt "according to the CIA", oh really the CIA makes official statements now?

Mon, 08/30/2010 - 14:15 | 553318 tmosley
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Uhhh, yes, yes they do.

CIA - The World Factbook

Mon, 08/30/2010 - 15:37 | 553500 Mont Bleu
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tmosley, think before posting please?


(anyone else noticed ZH being more & more polluted by conspiracy freaks comments here?)

Mon, 08/30/2010 - 17:19 | 553747 hedgeless_horseman
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Mon, 08/30/2010 - 19:37 | 553940 kathy.chamberli...'s picture

then spin for the you hope, as being coincidental.

spin your heady attempt, spin for every member

spin the cold fish & the strange dish

spin for every gender.

Mon, 08/30/2010 - 17:36 | 553776 tmosley
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You act like the CIA is some super-secret organization that doesn't have a public face and never makes public statements.  The fact is that they publish huge volumes of information, from basic geopolitical research (ie the world factbook) to in depth analyses of any number of subjects (white papers).

Who the hell mentioned any conspiracy?  Certainly not me.  I just pointed out the facts. 

Mon, 08/30/2010 - 18:22 | 553843 Spitzer
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yes, I noticed too, just bring up 9/11.

Mon, 08/30/2010 - 12:55 | 553118 nonclaim
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That is my point... it's too much money to be unknown. I'd assume the value is greatly exaggerated, a decimal point misplaced in the currency conversion, maybe.

Mon, 08/30/2010 - 12:38 | 553063 Turd Ferguson
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Rroldman Rrachs

Mon, 08/30/2010 - 12:54 | 553116 williambanzai7
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I think you mean Gordman Socks

Mon, 08/30/2010 - 13:08 | 553140 Clayton Bigsby
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oldman-gay acks-say?

Mon, 08/30/2010 - 12:44 | 553083 Spitzer
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""Gold bugs"" expected it and still do.

Trouble in the treasury market, whatever form that trouble takes is irrelevant.

Keep buyin those 30 year treasuries....

Mon, 08/30/2010 - 12:51 | 553106 Cheeky Bastard
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Sure you did ....

Mon, 08/30/2010 - 12:58 | 553125 tmosley
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Only in a very vague way, ie "hyperinflation will be triggered by the popping of the treasury bubble".  You are right that no-one expected China to be short.  I'm not sure I really believe it at this point.

It's a crazy, mixed up world we're living in, though.  Who is John Galt?

Mon, 08/30/2010 - 14:32 | 553359 RichardP
RichardP's picture

It's a strange, strange world we live in ...

Mon, 08/30/2010 - 13:16 | 553143 Mako
Mako's picture

Don't waste your breath on these wacko's Cheeky.

Cheeky, Spitzer is the same guy that was promoting Peter Schiff nonsense.  I am sure he expected this... hahahaha.

I for one would like to see additional information.  Seems pretty unlikely but if there is smoke most times there is fire.  We'll see, the numbers seems kind of far fetched though.


Mon, 08/30/2010 - 13:31 | 553202 Spitzer
Spitzer's picture

Even if this story is BS, (STRATFOR hates China, listen to his interview with Themadhedgefundtrader) there will be trouble in the bond market in the future. Use this story as a warning.

Use your head and just get the hell out. Why participate in the most unbalanced market manipulated market the world has ever seen ? 

Peter Schiff and most Austrian economists expect trouble in the bond market.PERIOD

Mon, 08/30/2010 - 13:39 | 553216 Mako
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Peter said to go to the Europe and Asia... good luck. 

Then he said not to short US stocks. 

If anything you would think Peter would be short Ts and getting his ass handed to him or more like his stupid client.

I would guess the rumor is false but I will wait and see.


Mon, 08/30/2010 - 15:14 | 553454 Mr. Anonymous
Mr. Anonymous's picture

Firmly in the camp of 'This is an absurd, BS rumor'.  On the other hand, if it were true, it would seem to explain Treasuries historic lows and set the stage for the hyperinflation many see as the next stopping point.  It would also set the stage for a colossal ass-raping of the dumb money piling into bonds.  Max pain, anyone?

Mon, 08/30/2010 - 13:48 | 553248 Spitzer
Spitzer's picture

I will  concede that this story is more or less bullshit but it should be taken as a warning for everyone that is pretending that treasuries are gold.

STRATFOR knows nothing about economics, just listen to the recent interview with the CEO on themadhedgefundtrader website. For some reason, he thinks the US economy is in a position of strength right now.

How can any good come out of the news that the US's financier took a half trillion dollar loss ?




Mon, 08/30/2010 - 14:11 | 553305 SDRII
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Friedman is a shill; he used to have a talkback blog up back in 2006-7 timeframe when the NIE came out upon which his posts were systematically ripped to shreds/discredited. He ended that "experiment" in engaging the audience when he seemingly determined that the audience knew far more than he did. That his economic analysis is lacking is clear (understatement of the day) which makes him incapable of tying together his geopolitical hearsay with things macro.

Mon, 08/30/2010 - 13:39 | 553229 Eternal Student
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Cheeky! Great to see you again. It's always a pleasure to see someone with obvious intelligence here.


Mon, 08/30/2010 - 13:48 | 553250 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

I'll second that.

Mon, 08/30/2010 - 14:26 | 553346 Rick64
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Third, miss your insight and humor.

Mon, 08/30/2010 - 15:16 | 553462 Mr. Anonymous
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Fourth.  Cheeky has always been a bigtime personal favorite.

Mon, 08/30/2010 - 15:19 | 553469 AccreditedEYE
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Mon, 08/30/2010 - 16:02 | 553566 silvertrain
silvertrain's picture

6X FOR ME ..Great to see you back my friend..Hope all is well for you...

Mon, 08/30/2010 - 19:40 | 553945 kathy.chamberli...'s picture

you all, must be H O M O's, just speculating though, h a r d on, for some cheeks.

Mon, 08/30/2010 - 15:40 | 553524 BobWatNorCal
BobWatNorCal's picture

Right, there would be all kinds of complications if China stops buying US debt.
But probably it is just a rumor.

Mon, 08/30/2010 - 12:38 | 553065 SDRII
SDRII's picture

Any sense of what the relative short position would have to be to offset the long side gain? If the position is that big (counterparty Sack?) would not the UST know who the owner of record is on that position (and perhaps act accordingly)? Sov CDS spreads have moved all that much. Sounds like disinfomazia. Good to know th Carrier killer ABM is ready to go (see link in comments)


Mon, 08/30/2010 - 15:30 | 553495 Ben Graham Redux
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Perhaps Robert Citroen (Orange County) was an advisor to Zhou - that would explain everything.

Mon, 08/30/2010 - 12:37 | 553051 knukles
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Just being LONG treasuries this year has been a gift from GOD.  The returns have been positive, outshining just about everything else on a risk/duration adjusted basis (eg, 30 yr. vs. S&P 500) 

If there have been losses in the portfolio related to treasuries, been currency related.  But that's not the dollar treasury position, that's currency.

But Wait There's More!
What about any funky derivatives, hedges, twisties that they'd put on the books to "hedge" their exposure?  Hah!  Betcha therein lies the rub.  And that would be a great reason to get the hell outta Dodge.

Own one of the best performing asset classes of the year and screw it up.  Opppppps.

Long ago in countries far away, when the advisers to the Kings rendered bad advice imperiling the kingdom, they were summarily executed, impaled for public display upon pikes surrounding the Gates to Heaven. 

Might be a good lesson for some of our own kind.  Pay attention now, ya'll hear?

Mon, 08/30/2010 - 12:11 | 552989 Tyler Durden
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Official holdings of $840 billion means losses of more than half on notional. Which would also mean that China has been shorting far more bonds (which would not show up on TIC) than it has been buying, ostensibly via London. If true the implications are huge. Also, if true, begs the question how much of the recent bond move was due to Chinese covering.

Mon, 08/30/2010 - 12:14 | 552995 Bad Lieutenant
Bad Lieutenant's picture

Ah, ok, thanks.  I was with Cheeky and egdeh on how this loss would be possible.

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