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Sovereign CDS Ban On Deck; Next Up: Any EURXXX Short Recommendation To Land You Straight In Jail

Tyler Durden's picture




 

Dear Greece, good luck placing any more bonds to non-hedged CDS wannabe basis holders. After Angela Merkel just announced that the use of derivatives must be restricted to halt market "speculators" from exploiting the Greek fiscal crisis (for whose creation Greece has had no responsibility whatsoever, duh), it is pretty much game over for sovereign CDS, the SovX index, and who knows what else. And now the stage is set to provide Greece with a full bail out, subject to the crucifixion of at least one hedge fund that bought at least $5 million in Greek CDS in early February.

From Bloomberg:

“We must succeed at putting a stop to the speculators’ game with sovereign states,” Merkel told reporters in Berlin  today after talks with Greek Prime Minister George Papandreou.

“We can’t allow speculators to be the profiteers of Greece’s difficult situation.”Merkel said “the question doesn’t arise” of financial aid to Greece. Instead, the two nations share “a common  responsibility” to curb speculation, and that she will press for action within the European Commission and seek to enlist  the support of the U.S.

Oh, and just in case you were wondering who was going to come up with the brilliant sceme of eliminating the hundreds of billions in gross notional sovereign CDS market, yep - you guessed it: politicians!

“Derivatives must be curbed,” she said. “That’s certainly technically not easy, but this is an issue where politicians lead the way.”

Papandreou said he was “thankful for the preparedness to work together to fight speculation.”

“Greece has not asked for any financial support,” he said. Rather, the Greek government’s 4.8 billion euro ($6.5 billion) package of austerity measures, passed by parliament in Athens today as protestors demonstrated outside, are a “resolute message” to markets, he said.

Next up: any Goldman recos to short the euro will get the author immediately thrown in jail. Better yet, politicians will find a way to make any FX market participants guilty of Class 1 Felonies.

 

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Fri, 03/05/2010 - 14:55 | 255126 Fritz
Fritz's picture

Euro cry babies.

Fri, 03/05/2010 - 14:59 | 255132 Cognitive Dissonance
Cognitive Dissonance's picture

The funny thing about trying to control a (rabid) skunk is that the more you try to hold tight, the harder the skunk fights. Sooner or later, the (demented and desperate) skunk is going to sense it's a hopeless cause and let loose with the bomb, the ultimate weapon, accepting that it might not survive it's own defensive actions.

We are getting closer to this narrative.

Fri, 03/05/2010 - 15:43 | 255235 Cognitive Dissonance
Cognitive Dissonance's picture

Isn't Photoshop amazing? Kind of makes you wonder if anything we see in the newspapers, on the Internet or even on TV is "real" anymore.

Fri, 03/05/2010 - 17:33 | 255409 faustian bargain
faustian bargain's picture

mmmm, boobies.

Fri, 03/05/2010 - 20:17 | 255659 Big Al
Big Al's picture

Furchtbar.  I'll have nightmares tonight from seeing that.

Fri, 03/05/2010 - 15:07 | 255146 lizzy36
lizzy36's picture

Isn't net notional cds o/s on Greece basically a rounding error of about €9bn?

What a fucking joke. 

 

Fri, 03/05/2010 - 15:36 | 255221 Gordon_Gekko
Gordon_Gekko's picture

Ben's dog shits that much in a day.

Fri, 03/05/2010 - 19:33 | 255605 Hephasteus
Hephasteus's picture

Ya since the global setup is going if they have their way the EU will actually grow. If the EU crashes then they will have a hard time putting US, Canada, and Mexico in a union without a printing press and 140 percent of debt to GDP ratio soon to be 200 percent as soon as the US fed brings all kinds of crazy on the books double counted this triple counted that. Crashing the dollar without destroying all the other currencies is going be a tough move.

Fri, 03/05/2010 - 15:09 | 255150 Anonymous
Anonymous's picture

GS and JPM and the rest going up... God... this is just unbelievable.

Fri, 03/05/2010 - 15:15 | 255164 Anonymous
Anonymous's picture

too funny

Fri, 03/05/2010 - 15:39 | 255165 knukles
knukles's picture

Quick Men!  A Distraction!  Mustn't let them know we're to blame!  Pillory Wall Street, the Fed, speculators, hedge funds.  Fine thier rich little asses!  Make busy work.  Appearances Matter!  Don't let 'em see us loot!

Save the Republic!

But Wait!  There's More!
In order to foster full employment, the Brit's'll let CDS's be written on Euros, the French on Sterling, the Irish on anything but Guiness, and they'll all trade in Dubai on the exchange owned by Goldman. 

Fri, 03/05/2010 - 15:31 | 255208 Anonymous
Anonymous's picture

*Sigh*

Even after Wall Street's brinksmanship games and their pleas for bailout, it's still just stultifying to see the members of the finance community collectively moaning and wailing any time the possibility of anti-speculative measures are laid out.

Fri, 03/05/2010 - 17:36 | 255415 faustian bargain
faustian bargain's picture

*sigh* What's stultifying is seeing defaulting nations crying for mommy to clean up their soiled diapers.

Fri, 03/05/2010 - 15:16 | 255170 virgilcaine
virgilcaine's picture

Does this mean Merkel writes Greece the check?

Fri, 03/05/2010 - 15:19 | 255177 AnonymousMonetarist
AnonymousMonetarist's picture

'Thus, we see that one of the obvious origins of human disagreement lies in the use of noises for words.'
- Alfred Korzybski

Fri, 03/05/2010 - 15:28 | 255202 phaesed
phaesed's picture

excellent quote.... Also interesting wiki on this individual. Thanks

Fri, 03/05/2010 - 15:19 | 255178 Anonymous
Anonymous's picture

Next boxing match: And heeeeere comes Merkel vs GS. If I had to put my money on a boxer,amm I figure GS in the second or third round TKO.....

Fri, 03/05/2010 - 15:19 | 255179 Anonymous
Anonymous's picture

Central Bankers of the world are a sick fucking joke

Fri, 03/05/2010 - 15:20 | 255181 jc125d
jc125d's picture

Yeah, lions eat first...then you rat bastards, after we're gorged.

Fri, 03/05/2010 - 15:20 | 255182 Anonymous
Anonymous's picture

PRIVATIZE GAINS

SOCIALIZE LOSSES

Fri, 03/05/2010 - 15:21 | 255185 Anonymous
Anonymous's picture

The only thing between the Western World becomming Zimbabwe is SPECULATION. F.U.K.U.M.E.R.K.E.L.
There isnt a government in power OR in opposition right now in the World that has a fking clue about anything.
Bring on the end game. Oh yeah.

Fri, 03/05/2010 - 15:22 | 255187 THE DORK OF CORK
THE DORK OF CORK's picture

Crucify them Crucify them all.

http://www.youtube.com/watch?v=-6YRou8dxUA

Fri, 03/05/2010 - 15:33 | 255212 AnonymousMonetarist
AnonymousMonetarist's picture

This prisoner wishes to say a word...

http://www.youtube.com/watch?v=RDF7QogcFmU

Fri, 03/05/2010 - 16:07 | 255258 THE DORK OF CORK
THE DORK OF CORK's picture

Maybe William should have ran from the field of battle and lived a contented life of domestic bliss.

 

http://www.youtube.com/watch?v=Nrmcxa1yBec

Fri, 03/05/2010 - 15:30 | 255196 Gordon_Gekko
Gordon_Gekko's picture

Good riddance. One less betting game in the derivatives casino. We need to consign the entire CDS "market" to the trash can. CDS's SERVE NO ECONOMIC FUNCTION. They are just a way to bet on the demise of entities, which the bettors then try to deliberately cause. For example, if you buy insurance on my car then you have a material interest in getting my car totaled and it DOES NOT MATTER to you if I am in the car when it happens as long as you get paid. THIS is the sorry truth behind this particular "free market".

Fri, 03/05/2010 - 15:30 | 255205 Anonymous
Anonymous's picture

.... Yes they do. Just ask Lloyd Blankfein's maids and drivers...

Fri, 03/05/2010 - 15:34 | 255216 masterinchancery
masterinchancery's picture

I guess you didn't understand the part about insurance for bond buyers, GG? Back to your padded cell!

Sat, 03/06/2010 - 08:30 | 255978 perchprism
perchprism's picture

 

I think you should have some demonstrable material interest, as in, you are a bond buyer, or you actually own the car.  I shouldn't be able to buy fire insurance on my neighbor's house, because it would just invite mischief.

Fri, 03/05/2010 - 15:39 | 255226 chet
chet's picture

Hear hear.  Why are we obligated to allow gambling on a level that can collapse the economy?  My state can regulate gambling, but apparently regulating it on a massive scale is some sort of affront to capitalism.

Fri, 03/05/2010 - 15:40 | 255228 rich_maverick
rich_maverick's picture

If they put restrictions to derivatives to those involved in the supply/demand equation, it would eliminate all the risk.  I mean, look at "life insurance".  It's a great product to protect your family if something unfortunate would happen to you.  However, I would hope that only me and my family would be allowed to buy life insurance against my wellbeing.  If say Goldman or my employer would be allowed to buy insurance against me, would I not be worth more dead than alive?  I mean, Goldman could create a new business.  Pick 20-30 year old Americans in good health, buy million dollar insurance policies against them, and errrr... cough...  get into the accident making business.

Fri, 03/05/2010 - 17:44 | 255428 Anonymous
Anonymous's picture

Sorry, too late:

"Ever heard of “dead peasant” insurance policies? We hadn’t either, until recently. In a nutshell, they’re often secret insurance policies taken out by companies on unwitting employees, which can yield sizable corporate tax breaks. "
http://blogs.wsj.com/law/2009/02/24/dead-peasant-policies-the-next-big-t...

Mon, 03/08/2010 - 10:12 | 257660 Anonymous
Anonymous's picture

It has been around for decades (aka "janitors insurance"). Where have you all been??

Fri, 03/05/2010 - 15:42 | 255231 Robb
Robb's picture

+1

Fri, 03/05/2010 - 15:28 | 255201 Mad Max
Mad Max's picture

What are the chances of Soros winding up in jail?  Paulson?  Others?  :)

Fri, 03/05/2010 - 15:32 | 255211 Gordon_Gekko
Gordon_Gekko's picture

Plenty - but only once the politicians are scared - really scared (as in fleeing-the-goddamn-country scared) - of the [armed to the teeth] public.

Fri, 03/05/2010 - 15:34 | 255217 jc125d
jc125d's picture

Magic 8 ball says: No Fucking Way

Fri, 03/05/2010 - 15:40 | 255229 CB
CB's picture

+1

Fri, 03/05/2010 - 15:36 | 255223 Anonymous
Anonymous's picture

(0)^2

Fri, 03/05/2010 - 16:55 | 255345 masterinchancery
masterinchancery's picture

zero, nada, nichia

Fri, 03/05/2010 - 23:10 | 255803 Real Estate Geek
Real Estate Geek's picture

Slim to none . . . and Slim just left town!

Fri, 03/05/2010 - 15:34 | 255215 rich_maverick
rich_maverick's picture

Hold on...  Isn't buying Greek Debt a speculation at this point?  I mean, who would risk 100 Euros in principle for 6.5 Euros in income?  The bond spread between Germany and Greece does not, in any way shape or form, factored in the risks involved to Greek bondholder in saying "bye bye" to their principle.

Now, I'm not opposed to regulating CDS, or limiting their purchases to those who buy Greek debt.  But, making something illegal or banning something which is viewed as a reducing risk, is a perfect recipe for disaster.

Fri, 03/05/2010 - 16:29 | 255313 Anonymous
Anonymous's picture

Amen.

CDS is not driving a sovereign country to the brink. Folks on this site apparently just hate those who are able to foresee and profit from the foolishness of others.

Fri, 03/05/2010 - 17:22 | 255392 THE DORK OF CORK
THE DORK OF CORK's picture

 Rich Maverick , CDS holders have a incentive to destroy and not to build - a bond holder would wish that a country would have to ability to pay back interest and capital on maturity and therefore would wish that the society has enough strength to fulfill its contract - Powerful rational CDS holders would use all the power at their disposal to insure that the country in question is weakened to such a extent that it is unable to pay its debt.

The Power dynamics between these holders are very different yet they both take risks - to argue that banning CDS holders would prevent risk being expressed in the coupon is absurd since the risk is expressed in the rate of interest in the coupon

Fri, 03/05/2010 - 18:10 | 255473 tmosley
tmosley's picture

Hmmm, so I guess we should ban insurance in general then?  After all, all forms of insurance are liable for abuse, and encourage destruction.

This is stupid.  CDS traders didn't do a damn thing the Greeks didn't want them to do.  It's the government's fault.  Let them lay in their own bed.  I'm not interested in swooping in and saying "you can't enter into this contract".  At that point you might as well put on the Mao suit and start digging and filling in ditches.

Fri, 03/05/2010 - 18:24 | 255497 THE DORK OF CORK
THE DORK OF CORK's picture

CDS holders are a bit like a holder of a insurance contract for your house - the identity of this holder is not known to you yet this holder has a incentive to burn your house to  the ground and yet legally collect the compensation leaving you with a smouldering ruin - I do not believe that such contracts exist in the world outside high finance but hey I could be wrong about that , in any case it is not a sensible way to conduct business.

Fri, 03/05/2010 - 18:24 | 255504 walküre
walküre's picture

Financial Vodoo.

I wonder who invented it?

Fri, 03/05/2010 - 15:50 | 255246 bingaling
bingaling's picture

She may as well put a nail in the coffin for all Bond sales in the EU . This type of talk means all of the EU will be under the same so called protection .

Fri, 03/05/2010 - 15:51 | 255249 Crummy
Crummy's picture

Suburban housewives across America should start throwing Euro shorting parties.

The hors d'oeuvres? Saganaki, of course.

Fri, 03/05/2010 - 15:54 | 255257 Anonymous
Anonymous's picture

Why don't they ban those evil "speculators" completely?

Those speculating to buy bonds go to jail, those speculating to short bonds go to jail. Everyone can put their cash in the mattress and we can end this once and for all.

Fri, 03/05/2010 - 15:55 | 255263 MarketTruth
MarketTruth's picture

"We can’t allow speculators to be the profiteers of Greece’s difficult situation." Merkel said.

So there is no free market. Nice to have someone finally fully admit it in public.

Are you there yet?

 

Are you ready to finally pull out all your funds from banks and Wall Street?

 

Sell off all stocks/trades?

 

Perhaps even go on a labor strike with your co-workers and picket your State government?

 

Or are you just sitting there like a good sheeple?

 

**********************

NATIONAL USA STRIKE
April 15 to April 18TH
Tell Everyone You Know
POST THIS ON EVERY DISCUSSION BOARD
www.taxfree15.com

+++ Also ++++

Join The Civil Revolution
www.REVOLTstartsNOW.com

**********************

Fri, 03/05/2010 - 16:07 | 255271 buzzsaw99
buzzsaw99's picture

World gubmints should just insure anything and everything against failure and put those derivatives writing bastards right out of business. As it is now the redfez and gubmint only get the losers, at least this way they stand a chance to make a buck once in awhile.

Fri, 03/05/2010 - 16:15 | 255280 BlackBeard
BlackBeard's picture

Bwa hahahahahaha!! NO BID bitches!

Fri, 03/05/2010 - 16:15 | 255281 Arm
Arm's picture

Blaming CDS's for a sovereign's plight is like blaming a foreclosure on the man giving you the court notice.

 

Merkel et al. you can shoot the messenger, but the facts remain.  You are broke.  But let us erase all insinuation of this so that pension funds can flush even more cash down the government drain when you inevitably default. (sure you will get a few more months of government salaries, well worth the hard work of em pesioners)

Fri, 03/05/2010 - 16:42 | 255326 reload
reload's picture

This is just politics. Nobody in their right mind believes that Greece is at 23.59 on the bancruptcy clock because of the CDS market. The price of Greek CDS rose (and has fallen back some) because Greece is almost bust! They are not in difficulties because the CDS premiums on ther debt have risen. For every buyer of a CDS there is a seller and each has their own motives for entering the trade. The CDS market has ben a convenient way for speculators/ traders/ hedgers to get positioned on sov bond spread moves and for those on the buyside to have some worst case scenario protection as well.

Take the CDS market away and in ten minutes flat something else which fulfills those `needs` will be created. The politicians know this, but the new instrument (say a synthetic sale of GGB v UST/Bunds)  will not have the level of leverage available in the CDS market. In my oppinion what REALLY scares the politicos (& regulators) is not that buyers of insurance may collect on their policies but that the writers of those policies will not be able to pay out - perhaps. Unless they get a government bailout.

Fri, 03/05/2010 - 17:18 | 255384 Gordon_Gekko
Gordon_Gekko's picture


WHAT THE HELL IS A "JOBLESS RECOVERY"???

---www.taxfree15.com

Fri, 03/05/2010 - 17:23 | 255394 Gordon_Gekko
Gordon_Gekko's picture

Coming soon to a town near you in the USSA:

Demonstrators clashed with riot police during a protest outside the Greek parliament in Athens on Friday - NY Times

Fri, 03/05/2010 - 21:13 | 255713 Anonymous
Anonymous's picture

What those cops don't realize Goldman-Sachs is stealing their pension too.

ignorant little robots

Fri, 03/05/2010 - 17:54 | 255452 Anonymous
Anonymous's picture

“We can’t allow speculators to be the profiteers of Greece’s difficult situation.” ~ Merkel

Maybe I'm just really, really dense, but I fail to see how CDS speculation in any way, shape, or form is actually a problem. If speculators are profiteering, WHO THE HELL IS ON THE OTHER SIDE OF THE TRADE LOSING ALL THE MONEY?

These politicians keep running their mouths about how evil CDS is. Want to get rid of it? STOP BAILING OUT THE BANKS/ENTITIES that wrote the deals! It's that simple. Eventually, after enough idiot companies blow themselves up with CDS, people will stop writing it.

This just doesn't make sense. If the rating agencies used CDS as a determinate for credit quality, then, sure maybe speculators could destroy a rating and cause the cost of borrowing to go up. An analogy would be a currency speculator destroying a countries purchasing power. HOWEVER, I don't anyone complaining if I buy $10B of Euros to speculate on appreciation. Which is, in effect, a speculative bet AGAINST all other nations issuing currency.

I'm for regulating CDS as insurance, therefore limiting it in size to notational of underlying outstanding and who can own it.

Dear politicians, you want to know what DOESN'T get speculatively attacked? Entities that are fundamentally sound and solvent.

"“Derivatives must be curbed,” she said. “That’s certainly technically not easy, but this is an issue where politicians lead the way.”"

Actually, it's technically really fucking easy. Write a bill that limits leverage to 10:1 or 5:1 or whatever number is deemed safe based on the underlying volatility. I do agree with her that politicians lead the way in making simple things impossible to accomplish.

Fri, 03/05/2010 - 18:08 | 255472 Gordon_Gekko
Gordon_Gekko's picture

WHO THE HELL IS ON THE OTHER SIDE OF THE TRADE LOSING ALL THE MONEY?

That would be you, my friend. Ever heard of a company named AIG?

Fri, 03/05/2010 - 18:19 | 255491 Anonymous
Anonymous's picture

Yeah I know, I just wish the media would have the balls to ask her this. WHO'S THE SUCKER AND WHY ARE YOU MAKING MORE NOISE THAN THEY ARE? would be a great start.

Fri, 03/05/2010 - 18:22 | 255498 walküre
walküre's picture

Rewarding SPECULATION ON A SOVEREIGN DEFAULT with money is criminal!

Why the fuck do you guys think the bankers will be tared and feathered one certain day?

It is only a matter of time! People are waking up to this and realize that the financial fascists are benefiting handsomely without as much as lifting a finger by simply speculating against a currency or in this case a country.

How is this ok? How is this explainable?

Merkel is covering her own ass. She knew about this all along. She and her party realize that Germans are pissed off. The Greeks realize their people are pissed beyond belief.

You haven't seen anything yet in terms of mayhem and chaos.

The war on bankers will ensue, no matter what Merkel or others try to do now.

These trades are financial vodoo exercised by a financial fascist elite.

It needs to stop and if they don't stop it, the people will make them stop.

 

 

Fri, 03/05/2010 - 18:30 | 255512 Anonymous
Anonymous's picture

"Rewarding SPECULATION ON A SOVEREIGN DEFAULT with money is criminal!"

No, a GOVERNMENT backstopping a private company that made a losing bet is criminal.

Fri, 03/05/2010 - 18:50 | 255546 walküre
walküre's picture

This is a showcase of financial fascism!

Greek government was desperate so they went to the loan sharks on Wall Street.

The loan sharks bought CDS to insure their losses in case of a default.

Then the financial fascists realized their winnings would be higher in case of default than going with the original loan repayment.

The financial fascists conspired to take down the Greeks and make their profit.

This is financial warfare in simply layman terms and that's how it will be reported.

Loan sharking and pure greed on the backs of the Greek citizens.

Wars started over less than that.

Fri, 03/05/2010 - 18:49 | 255544 THE DORK OF CORK
THE DORK OF CORK's picture

If it was their money CDS trades would at least have the virtue of occasionally improvising these creatures of the night but they are using essentially free currency that has been extracted from citizenry somewhere else and loaned at nearly zero interest to these vampires and after extracting this from one of their client central banks they raid another entity and extract even more blood from their victims.

How could a person who believes in free markets tolerate such piracy

They must get a  kick from listening to comments which extol the virtues of "risk" taking in a free and fair market.

I must admit it is quite funny in this tragic farce of a western civilisation - even the old Greek Gods must be getting their laughs from this madness.

 

Fri, 03/05/2010 - 18:52 | 255550 walküre
walküre's picture

"How could a person who believes in free markets tolerate such piracy"

WALL STREET IS FOR PIRATES WHO GOT SEA SICK.

Fri, 03/05/2010 - 19:12 | 255572 THE DORK OF CORK
THE DORK OF CORK's picture

Sorry I just can't resist the Monty Python sketches today

Ladies and Traders

The HMS Crimson Permanent Assurance Vs USS Rape and Pillage 

http://www.youtube.com/watch?v=lNlYBNTCBG8

I just love the ending - even back in 1983 the writing was on  the wall

Fri, 03/05/2010 - 19:37 | 255614 walküre
walküre's picture

Thanks for sharing.

Which is more powerful?

The pen or the sword?

I'd say the pen. Hands down.

Sat, 03/06/2010 - 00:39 | 255857 Grand Supercycle
Grand Supercycle's picture

 

EURO weekly chart remains bearish (counter trend rally from oversold levels is still possible)

USD index weekly chart remains bullish.

http://www.zerohedge.com/forum/market-outlook-0

 

Sat, 03/06/2010 - 05:50 | 255962 Anonymous
Anonymous's picture

Speculators can determine market prices? Somebody should tell the SEC about this... so they can do something about it!

Fri, 04/16/2010 - 08:40 | 303655 mark456
mark456's picture

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