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Two Hedge Funds One Bank? Is There A Concerted Effort To "Destroy" Greece?

Tyler Durden's picture




 

In the pre-math of the Greek collapse, conspiracy theories are swirling about who keeps blowing Greek CDS spreads wider. The answer, so far completely unconfirmed, is that a large US investment bank (we "wonder" just which US investment bank dominates the sovereign CDS market), and two major hedge funds are behind the CDS "attacks" on Greece, Portugal and Spain. According to Jean Quatremer, and his Coulisses de Bruxelles, UE blog, the plan involves blowing spreads to record levels, and is prompted by the hedge funds' anger at not having been allocated substantial amount of the recent €8 billion GGB issue, in order to lock in profits from their CDS long exposure. Being thus unhedged with a short bias, their alternative is to continue buying protection else risking to mark losses on their extensive CDS short risk exposure.

We quote from the Quatremer blog, both in original and in a hastily Google translated version:

Selon des informations fiables que j’ai obtenu vendredi, émanant à la fois d’autorités de marché et de banques, une grande banque d’investissement américaine (qui a bénéficié du plan de sauvetage des banques US) et deux très importants hedge funds seraient derrière les attaques contre la Grèce, le Portugal et l’Espagne. Leur but ? Gagner un maximum d’argent en créant une panique qui leur permet d’exiger de la Grèce des taux d’intérêt de plus en plus élevés tout en spéculant sur le marché des CDS, un marché non régulé et totalement opaque, afin là aussi de les vendre plus cher qu’ils ne les ont achetés. Pourquoi ne pas citer les noms ? Tout simplement parce qu’il s’agit d’un faisceau de présomptions qu’un tribunal risque de juger insuffisant en cas de procès. Et comme le dit un opérateur de marché : « on ne joue pas avec ces gens là ».

Here is the English:

According
to reliable information that I received Friday from both authorities
and market banks, a large U.S. investment bank (which has benefited
from the bailout of U.S. banks) and two very large hedge funds would
behind the attacks against Greece, Portugal and Spain. Their goal? Earn
much money by creating a panic that allows them to demand of Greece
interest rates ever higher while speculating on the CDS market, a
market completely unregulated and opaque, so there also
sell more than they have purchased. Why not mention the names? Simply because he is a bundle of presumptions that a court may not be sufficient in a court case. And in the words of one market operator: "we do not play with these people."

What is the basis for this "destructive" behavior? Simple- the inability to create a synthetic basis by being allocated far too little in the most recent bond issuance to hedge existing shorts. Think of it as a PIPE investor who shorts stock of a company he/she knows will give out stock at a discount to market, a practice since banned by the SEC but being done rampantly to this very day.

According
to my information, the two hedge funds that hold most of the Greek
market of CDS were furious at having received only 2% of the last Greek
loan
(launched January 25, for a period of 5 years, it has
collected 25 billion request for 8 billion last survey). As
they gained a lot of CDS, they needed to secure their gains (in cases
of falling rates of those CDS), put in front of the paper, that is to
say government bonds (so -
loses a CDS, and we won on the loan and vice versa). Because they have a big problem for now, they can not sell the CDS if they would themselves fall classes. To
show their strike force, and further push up CDS, they attack on Greece
in creating panic, "the CDS, is a bottomless pit with 200 million
dollars, you play as if you had a
billion dollars, "said one market analyst. Same
game for the U.S. investment bank, which hopes eventually to lend money
directly to Greece became unable to borrow on the markets.
Once the country to its knees, it will see the government to offer him a loan at a rate obviously prohibitive ...

And thanks to near-infinite leverage courtesy of nominal margin requirements on CDS holdings, the spillover has started to impact the FX market as well. Certiainly, if this is indeed a premediated attack, this could have been coupled with the "two funds" pushing for a lower euro, in an attempt to start the dollar carry unwind, further depressing euro levels, and creating further panic on Greek (and other PIIGS) CDS.

To
increase the panic, these hedge funds and U.S. investment bank began to
sell arms to turn the euro, followed by investors stunned.
If the euro lower, does not mean that the eurozone will burst? What
justifies the required interest rates still highest in Greece, Portugal
and Spain ... Yesterday, the euro has almost reached $ 1.36 in less
than two weeks, he lost
dime, fifteen cents for two months. A
slide that corresponds to nothing, but that side effect, provides air
to the EU economy: over the euro lower, more products made in eurozone
become attractive.
"A very good news in this mess," quipped one analyst.

Who really wins from all this? Germany, who rumors have as saying that they are close to letting Greece go. As Zero Hedge has long speculated, a Greek failure, and a collapse in the EMU, while a significant near-term negative, will be, paradoxically, the event that saves Germany, France, Benelux, and the core of the soon to be former European Union. And yet, it is the alternative that seems to be on the frontburner for now:

It is also necessary that the Union expresses its total solidarity with the countries attacked. This is no time to recall the Maastricht Treaty, which prohibits it comes to the aid of a State member of the eurozone. If investors have the absolute guarantee that Greece will not sink, the dust settles. Germany,
until very reluctant to say that solidarity begins to understand that
the euro is now in danger: Thursday, Angela Merkel, German chancellor,
said in Paris that he had put up "a
Government economic Twenty-seven. " Berlin and Paris will therefore joint proposals at the summit on February 11. Finally,
we must go further in regulating Michel Barnier, the future European
Commissioner for Internal Market, confirmed to me yesterday that he
intended to propose a directive on the derivatives markets (including
CDS)
which 80% is out of control while they represent more than 600 000 billion dollars worldwide. We must reverse this proportion.

When in doubt, blame the CDS traders.

h/t MG

 

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Mon, 02/08/2010 - 12:04 | 222150 Cognitive Dissonance
Cognitive Dissonance's picture

It's all Greek to me.

Mon, 02/08/2010 - 13:24 | 222242 Anonymous
Anonymous's picture

Lets get something straight. If there is any conspiracy, which there is; it spans mutiply international banks, much like the "club of Rome" theory by that dude thats in prison.

An easy short list is : JP, Goldman, Morgan Stanley; and that's just in the US. These 3, because they all, came out twice as strong,(capital, clients, funding more debt).

Next, Barclays, General Society, Deutch Bank obvioulsy are all members too, but the focus in the media is always on US institutions,(ironically many not even US based) Throught the process of "deduction" you conclude that Barclays, The German bank , Deuctch,(sp) General Soc. are "in" the club of rome, because they were the next biggest recipients of the AIG payouts after Goldman. Barcalys because got a penny on the dollar, take over of Bear Stearns, with the FEDS blessing, when the Fed wouldn't touch AIG with a long pole.

So for now my short list is JP, Goldman, Morgan Stanley, Deucht Bank, Soc. General, Barclays, possibly Merril,/Thain.

Any one have some other obvious banks that are "in" on it please email them to the WallStonion@gmail.com

Good Day

Mon, 02/08/2010 - 13:35 | 222259 Anonymous
Anonymous's picture

It is like the giant squid has given birth to baby squid who are now trying to kill the mommy squid, because it' singrained in there nature to suck blood/money. And the giant squid is even been seen sucking on itself self. Not very life perserving?

It's a free for all in the "squid" market.

Time for a "one world currency"

I can see it know, Bernake TIMES man of the year when he coins the phrase next year. "One World Currency"

Shit maybe he will even get a "noble peace Prize" for it.

Good Day

Mon, 02/08/2010 - 15:27 | 222372 WaterWings
WaterWings's picture

These godly workers will not get a noble piece of the treasure stored up in heaven.

Tue, 02/16/2010 - 01:43 | 232220 Anonymous
Anonymous's picture

Somehow, I've come of the impression that their collective future, or lack thereor, lies elsewhere.

Sheesh, you'd think the pay-off would be a bit better if one is doing "God's work."

Mon, 02/08/2010 - 13:42 | 222270 Anonymous
Anonymous's picture

At the end of the day, US needs to attack EuroZone so that people turn to treasury where there's 1.8T sale waiting to be filled, or else.

Mon, 02/08/2010 - 15:16 | 222362 jbcorwin
jbcorwin's picture

+1 for Irony!

Irony (from the Ancient Greek ε?ρωνε?α eir?neía, meaning hypocrisy, deception, or feigned ignorance)

Mon, 02/08/2010 - 19:58 | 222704 Problem Is
Problem Is's picture

"It's all Greek to me."

Hilarious...

Mon, 02/08/2010 - 12:09 | 222152 Leo Kolivakis
Leo Kolivakis's picture

Quelle surprise! Not! The big hedgies and the investment bank you mention have been behind this overexaggeration from the get-go. It's all fucking bullshit, and not just Greece. I work with a senior consultant of Spanish origin who is amazed at the bullshit being spread on Spain. Their top banks and top companies are among the best in the world, and reading and listening to the morons who are short Spain makes his blood pressure go up!

PIIGS is just Dubai on steroids. All fluff, no substance, just more noise so some fucking hedge funds and investment bank can capitalize on fear and make a killing.

Mon, 02/08/2010 - 12:18 | 222166 deadhead
deadhead's picture

Thank you for your insight Andy.

Mon, 02/08/2010 - 14:11 | 222287 Sancho Ponzi
Sancho Ponzi's picture

Perhaps you should ask John Major ;)

Mon, 02/08/2010 - 12:15 | 222161 Cursive
Cursive's picture

No doubt games are being played here, but do not for a minute expect anyone to believe that Greece or any other European country aren't in serious financial trouble.  That includes the Anglosphere as well.  There is too much debt and most of the debt calculations don't even include the unfunded liabilities of public pensions.  So, it's all going to blow up anyway.

Mon, 02/08/2010 - 12:22 | 222173 Reggie Middleton
Reggie Middleton's picture


Their top banks and top companies are among the best in the world, and reading and listening to the morons who are short Spain makes his blood pressure go up!

PIIGS is just Dubai on steroids. All fluff, no substance, just more noise so some fucking hedge funds and investment bank can capitalize on fear and make a killing.

The numbers don't agree with this Leo.  I wouldn't put my money behind rumors, but a few of the big Spanish banks have big problems, and quite a few of the sovereigns in Europe are swimming in multi-faceted financial issues.

Mon, 02/08/2010 - 12:29 | 222178 Leo Kolivakis
Leo Kolivakis's picture

Reggie, please, Banco Satander is one of the best banks in the world. The regional banks in Spain got hit with their housing bubble, but they will all get bought out. Spain has structural problems (high youth unemployment), but they're an economic powerhouse. Their infrastructure companies are among the best in the world too. Americans think that Europeans are lazy bums that get six weeks off a year, but they do not realize that of the world's top 100 companies, almost 50% are based in Europe. Let's be a little more careful in our reporting of the facts!

Mon, 02/08/2010 - 12:34 | 222185 Cursive
Cursive's picture

one of the best banks in the world.

Please refer to definition of oxymoron.

Spain has structural problems (high youth unemployment), but they're an economic powerhouse.

This post is schizophrenic and, no, I'm not calling the OP schizophrenic.  I'm saying that it can't be both.  Spain is no economic powerhouse.  There are no economic powerhouses anymore.  There are only mirages built on too much debt and very little capital.  That includes China.

Mon, 02/08/2010 - 12:40 | 222195 Leo Kolivakis
Leo Kolivakis's picture

Right, only solution is a revolution, bring down capitalism and bring back communism. Ease up on the bran in your diet. World is not ending, the sun will shine tomorrow but we got a shitload of messes to deal with.

Mon, 02/08/2010 - 12:58 | 222217 SmalleyD
SmalleyD's picture

Yes, the sun will rise, but banks still fail. And no one is talking about a collectavist revolution. We just want sound money and less government intervention.

Mon, 02/08/2010 - 13:06 | 222226 Anonymous
Anonymous's picture

it's too late to worry about the collectivist
revolution as it happened here decades ago...it
intensified with the obushma administration
just as it did with the hoovervelt administration...

Mon, 02/08/2010 - 13:08 | 222227 Missing_Link
Missing_Link's picture

Right, only solution is a revolution, bring down capitalism and bring back communism.

Seriously, Leo.  Several people tried to debate you on the facts here, and instead of debating those facts you throw out hysterical nonsense like this.  It's the Eric Cartman "Screw you guys, I'm going home" defense.

You might as well wave a white flag at this point.  If this is the best you can do, it indicates to me that you don't really have a leg to stand on.

Mon, 02/08/2010 - 13:30 | 222252 Anonymous
Anonymous's picture

Bring down Wall St.

Bring Bank samll business.

Maybe a new currency (local) backed by medical marijuana.?

Ignore the fed er al gov, and relect the local reps.

Then possibly we come out alive.

Mon, 02/08/2010 - 14:13 | 222286 Leo Kolivakis
Leo Kolivakis's picture

Missing_Link,

I can't take people who never visited Greece, Spain, Portugal or Europe seriously. The majority of Americans are so parochial, so inward looking that they haven't the faintest idea of what is going on out there. I don't blame them, even when I watch CNN, I am appalled with the low coverage of world events. It's beyond laughable, it's actually pathetic and ensures mediocrity rules the day.

Mon, 02/08/2010 - 15:26 | 222371 jbcorwin
jbcorwin's picture

+1

Mon, 02/08/2010 - 15:39 | 222382 WaterWings
WaterWings's picture

Dewd! +1,000 French babes, anti-gravity dogs, lasers, fanny packs, and roving gangs of disadvantaged minority teenage street thugs beating people with asps:

http://www.youtube.com/watch?v=uHF3X8tQYPU

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

http://www.youtube.com/watch?v=JqYhuwu614Y

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

All in only one country. Think of the possibilies. Way better in real life.

Mon, 02/08/2010 - 16:49 | 222453 Cognitive Dissonance
Cognitive Dissonance's picture

My response to your first video selection.

http://www.youtube.com/watch?v=9uDrFEXcg_A&feature=fvw

Mon, 02/08/2010 - 19:22 | 222686 WaterWings
WaterWings's picture

Awesome. American boys are not graduating from college anymore. And everyone likes American women...well, not all of them:

http://verydemotivational.com/wp-content/uploads/2010/01/129087539863604...

Mon, 02/08/2010 - 17:16 | 222469 Missing_Link
Missing_Link's picture

Yes, but so what?  You don't need to go to Greece to see what's going on.  Taking a tour of Athens isn't going to give you any insights about Greece's sovereign debt.  You can go to a Greek bank and stare at its walls for as long as you like but you won't learn anything about its debt-to-equity ratio.

Do you really think your amazing global attunement gives you so many insights on the fiscal situation of these countries?

I haven't been to Greece, but I have been to Italy, and my take-away was that nearly every part of the country was screaming "this is all going to end in chaos, riots, and looting" at the top of its lungs.  Much of Italy is a third-world country that spends like a first-world one.

Again, why can you not argue with FACTS?

All you're doing is trying to throw the conversation off course again and again with random tangents, and I can only conclude this is because you've run out of actual ammunition.

First it was basically "Yeah wtf ever let's throw away capitalism lol" and now you're giving us "Yeah but I've been there and you haven't so stfu."

[...  Which is, of course, based on an erroneous assumption that none of us have been to Europe, which you apparently pulled out of your ass.  I'm sure many of us HAVE been to Europe.  I've been to 6 European countries myself.]

Several commenters above posted lucid and highly rational arguments with regards to the Greece situation.

I can't take you seriously if all you can do is try to derail the argument rather than responding to those.

Mon, 02/08/2010 - 18:19 | 222573 Leo Kolivakis
Leo Kolivakis's picture

Well if you've been to Italy, then you would know that tax evasion is a national sport over there, just like in Greece. In other words, there is more money than meets the eye. A lot more money. If you really think Italy, Greece or Spain or going to implode, go ahead and short their markets. Don't cry to me afterwards when nothing happens. Stick with all those "lucid analyses" here (gag me with a spoon!)

Mon, 02/08/2010 - 21:06 | 222772 dark pools of soros
dark pools of soros's picture

so their government is going to steal from all the rich hidden cash stashes to pay its debt??

 

are u stoned?

Mon, 02/15/2010 - 00:20 | 231156 Anonymous
Anonymous's picture

I can't take anyone who doesn't know Communism was financed by the bankers, seriously. Seriously.

Pure staticism and pure dynamism always end in destruction.

You're only capable of whining about the present moment. Couch warming seems like a more appropriate sport for you illiterates.

Mon, 02/08/2010 - 13:11 | 222229 Anonymous
Anonymous's picture

if we ease up on the alleged bran in our
diets will you stop riding skittle shitting
unicorns at midnight?

those shitloads of messes include the implosion
of the pigs and whoever else may be on the brink....
and doesn't happen, contrary to your hero bernanke,
because people are feeling onery or irrationally
fearful...it is because, as you said, there are
a shitload of messes, including greece, spain, and
portugal whose solvencies are slipping fast...

spanish banks have as much solvency problems as
usa banks in part because their real estate crisis
is as severe as the usa - if not more so and
becuase its economy has weakened greater than the
ability to carry its public and private debt loads...

sorry, the problems are real even if the sun
comes up tomorrow...

Mon, 02/08/2010 - 13:04 | 222225 H.W. Plainview
H.W. Plainview's picture

Dang Leo - puff puff give my man.  You need to put down the pipe and Wake TF up to reality.

Any poor soul still counting on a pension to fund their golden years better wake TF up as well, and realize that morons like you are running these things.

Gold bitches! (and silver)

"I am an oil man"

Mon, 02/08/2010 - 14:05 | 222283 Leo Kolivakis
Leo Kolivakis's picture

Spoken like a two-bit crack whore trader. Maybe we should let traders manage pension funds. Oops, too late.

Mon, 02/08/2010 - 15:33 | 222377 Hephasteus
Hephasteus's picture

Wake the hell up Leo. We don't have a real security based money system. We have a bullshit scam. Cities and states and governments don't discuss what the citizens they serve want to see happen or see built, collect the money and build it. NO they issue bonds. Do whatever the hell they want and think it's a great system until the people who actually run the system decide to screw everybody over. Countries will go broke, states will bounce checks, cities will cancel projects and bulldoze them over. People will be kicked out of their houses. Why? Because our money system allows freedom for a few and slavery for all when it should allow freedom for all. It doesn't even freaking add up. There's no way to run the stupid scam without it tearing itself limb from limb. They know the scam is over. They know why it's a scam. They will simply hurt and abuse people because that's all they want to do anyway. These are the first pimps that bitched slapped a ho and made her completely dependant on them. They've been doing this for centuries. They turn anybody they can turn into a chicken and then they just keep fucking them as long as they can.

Mon, 02/08/2010 - 13:15 | 222234 Anonymous
Anonymous's picture

i'm sorry - but how does europe having nearly
50 of the top 100 global companies mean that
greece, portugal, and spain have serious financial
problems?

how does banco satander's health help the entire
nation of spain....and why would structural
problems be a buttress to spain being an economic
"powerhouse"?

how's the debt ratios and gdp growth in spain
these days?

Mon, 02/08/2010 - 18:41 | 222616 Reggie Middleton
Reggie Middleton's picture

You know you don't need to go to a country or a company to recognize a problem. That being said, I have been to the Sun Coast and have witnessed the froth. What is the off balance sheet exposure and leverage for "one of the best banks in the world"?

To its credit, Banco Satander is one of the best Spanish Banks, but their are plenty that have signficant issues with Texas rations over 50% and that's with likely fibbing on their NPAs. In addition, the structural issues in Spain are more signficant than you are making it out to seem. I will be posting on Europe in detail throughout this week. I think you may find it interesting. Remember, I called the Spanish issues and BBVA well in advance, see

The Spanish Inquisition is About to Begin...

Check out the following for your bank Satander, and this is one of the better banks:

 


(q-o-q change)   % increase in chare offs 19.9% 40.2% 13.0% 9.9% % increase in NPA's 3.9% 15.1% 33.5% 22.0%
Mon, 02/08/2010 - 20:07 | 222706 Problem Is
Problem Is's picture

This is why I like Reggie the Sledge Hammer. He pounds away with facts.

A novice question... could you compare the above Banco Satander numbers to say JPM or BofA for a relative comparison?... Or would that not be useful?

Mon, 02/08/2010 - 13:38 | 222263 Anonymous
Anonymous's picture

I think your solar theme has fried your brain.

Mon, 02/08/2010 - 12:20 | 222167 10044
10044's picture

2 hedgefunds one bank?? Hmm, I doubt it. How bout ONE VAMPIRE SQUID

Mon, 02/08/2010 - 13:11 | 222228 Missing_Link
Missing_Link's picture

That would be the "bank," if you read between the lines.  I'm not sure who the hedge funds are.

Mon, 02/08/2010 - 12:20 | 222169 Stuart
Stuart's picture

John Perkins, hoodwinked.   Somehow similar thoughts come to mind here.

Mon, 02/08/2010 - 12:21 | 222172 Anonymous
Anonymous's picture

Clearly, the only problems here are those caused by e-vil speculators.

Mon, 02/08/2010 - 12:25 | 222175 credittrader
credittrader's picture

If CDS traders are to blame for all this malarkey then someone explain why the HUGE and liquid GGB market still trades 50bps wider to Bunds than Greek CDS to Germany...

If the argument is that CDS 'fears' have spurred selling in GGBs then a simple retort is that those 'stodgy old' bond holders were not exactly confident in the first place...

The demand for the last Greek auction was clearly about rerisking to either: a) lock in some profits on CDS shorts, or b) lock in the basis vs CDS, or c) reach for yield in a typically dumb perspective.

Sorry but the sheer volume differentials we are discussing here between GGBs and Greek CDS make it preposterous (even with 5x leverage) to blame CDS for greek widening. There may have been some arguments during the LEH stuff that CDS were being used to exaggerate the stress and that fundamentals were not clearly weak (although to many of us they were).

FYI - when you buy/sell CDS, the dealer you execute with will demand an upfront (initial) margin, and ongoing variation margins will be paid (as in Mark-to-market) - so while you can buy $10mm protection by lodging say $2-5mm in collateral - you are certainly facing a levered position with all its implicit risks and anyone who was derisking in Sovereigns for the last 10 months knows what a massively painful squeeze on the testicles that has been...

Also - No-one is out there arguing (except Almunia) that Greece fundamentals are solid...LOL!!!!

Today's market action shows that investors are clearly repricing risk in the credit markets up and down the credit quality spectrum whereas the sheeple in the equity market are just following what works - arb EURJPY...

OK - rant over...

 

Mon, 02/08/2010 - 13:18 | 222235 A Man without Q...
A Man without Qualities's picture

Why would you need to lodge $2 - $5mm of collateral when buying $10mm of protection?  Assuming the CDS spread is 400 bps, then for a 5 yr trade, the pv of those spreads is about 14% (4% * risky duration, say 3.5 yrs).  There is no need to pay anything more than this...

Mon, 02/08/2010 - 12:30 | 222180 Abu Morpheus
Abu Morpheus's picture

I think they already made a movie about this, but in that movie somebody blew up parliament in Britain.  This time CDS are being used as the explosives.

Meanwhile, as their country burns, Greece's largest union is about to go on strike:  http://business.timesonline.co.uk/tol/business/markets/europe/article7019126.ece

These people deserve, nay, desire to suffer, and I hope they get their wish.  Either way, bailout or no bailout, it should make for some entertaining theatre.

Mon, 02/08/2010 - 12:46 | 222201 Leo Kolivakis
Leo Kolivakis's picture

I am not sympathetic to Greek unions or rich shipowners who show no loyalty whatsoever to their country first. Fuck both of them. They are a cancer on the flip-side of the same coin. The unions strike on a whim and the rich shipowners basically pay no taxes. Both are traitors in my book.

Mon, 02/08/2010 - 13:34 | 222258 nonclaim
nonclaim's picture

What are the reasons for shipowners to pay tax and why should they be loyal?

Mon, 02/08/2010 - 14:15 | 222293 Lexington Duffet
Lexington Duffet's picture

Some believe cutting taxes on the wealthiest 1% of a country's individuals will increase their goverment's revenue.  Ergo, cutting the tax rate to zero should, if you believe the model, maximize government revenue.  Mayhaps the clever Greeks invented part of the Tea Party Platform. 

 

By cutting the tax rate on the wealthy ship owners, to zero or close to apparently, someone convinced the greek government this will increase income.  In short, they borrowed Reagonomics and its working in Greece the same way it worked in the US and in California.

You see, you may lose money every year but you are going to make it up on the long run volume. 

LMS that, to have a civilized society, one needs a goverment, which has expenses like police, courts, banks, emergency relief, etc.   More complicated structures are more expensive because they need more complicated rules and policing.   Anarchists disagree and I suggest they should move immediately to Somalia, which has a government largely lacking those expenses.  (Don't bring a pretty female).  Liberterians disagree on general principals, forgetting that a goverment governing 300 million will be a lot larger than the government governing say, 150 million.

Do not despair for the ship owners.  It is in their self interest to be "loyal." 

So, if you have a civilized goverment, in line with arguments advanced by other self interest groups, in the case of short falls or emergencies (like financial crisis for unions or the wealthiest 1% of individuals), then the government then should borrow money on public guarantee to bail out the wealthiest 1%.  So even the tax cut crowd believe the goverment needs money--to bail their ass out. 

In short, they are loyal to themselves.  

And if one disagrees with the policy and point out the errors in logic (such as that a 50% tax cut requires generally 100% income growth for a break even offset and 100% growth rarely exists in mature markets which is most of 'em), then they believe you are retarded unpatriotic idiot who "doesn't understand"  and advocate physical violence such as beating you up or blowing up "liberal biased" newspapers.   

 

Mon, 02/08/2010 - 14:27 | 222305 nonclaim
nonclaim's picture

I made a simple question and this blahblah has not even touched it... and stop using % as a logic symbol.

Mon, 02/08/2010 - 14:15 | 222294 Lexington Duffet
Lexington Duffet's picture

Some believe cutting taxes on the wealthiest 1% of a country's individuals will increase their goverment's revenue.  Ergo, cutting the tax rate to zero should, if you believe the model, maximize government revenue.  Mayhaps the clever Greeks invented part of the Tea Party Platform. 

 

By cutting the tax rate on the wealthy ship owners, to zero or close to apparently, someone convinced the greek government this will increase income.  In short, they borrowed Reagonomics and its working in Greece the same way it worked in the US and in California.

You see, you may lose money every year but you are going to make it up on the long run volume. 

LMS that, to have a civilized society, one needs a goverment, which has expenses like police, courts, banks, emergency relief, etc.   More complicated structures are more expensive because they need more complicated rules and policing.   Anarchists disagree and I suggest they should move immediately to Somalia, which has a government largely lacking those expenses.  (Don't bring a pretty female).  Liberterians disagree on general principals, forgetting that a goverment governing 300 million will be a lot larger than the government governing say, 150 million.

Do not despair for the ship owners.  It is in their self interest to be "loyal." 

So, if you have a civilized goverment, in line with arguments advanced by other self interest groups, in the case of short falls or emergencies (like financial crisis for unions or the wealthiest 1% of individuals), then the government then should borrow money on public guarantee to bail out the wealthiest 1%.  So even the tax cut crowd believe the goverment needs money--to bail their ass out. 

In short, they are loyal to themselves.  

And if one disagrees with the policy and point out the errors in logic (such as that a 50% tax cut requires generally 100% income growth for a break even offset and 100% growth rarely exists in mature markets which is most of 'em), then they believe you are retarded unpatriotic idiot who "doesn't understand"  and advocate physical violence such as beating you up or blowing up "liberal biased" newspapers.   

 

Mon, 02/08/2010 - 13:00 | 222219 Anonymous
Anonymous's picture

"These people deserve, nay, desire to suffer, and I hope they get their wish."

I don't think it's the same people striking as those looking for credit. Obviously the union sees the government as weak and have chosen the correct time to make demands. BTW you could also say that Americans "wanted to suffer" when they took on astronomical levels of debt...

Mon, 02/08/2010 - 16:07 | 222402 Abu Morpheus
Abu Morpheus's picture

BTW you could also say that Americans "wanted to suffer" when they took on astronomical levels of debt...

 

Whether they wanted to or not, you are right, they will suffer, as they should.


Mon, 02/15/2010 - 00:27 | 231161 Anonymous
Anonymous's picture

Really asshole? Where did mom and pop sign their economy?

This is called odious debt.

Mon, 02/08/2010 - 12:31 | 222182 Anonymous
Anonymous's picture

While that "big bank" and hedge funds do paly those games,but at the same time,can anybody tell me what does Spain has in economy to justify a Trillion dollar debt?. Of course the possibility of traders spreading rumors to benefit a certain established position will always happen. And yeh that helped tank the market,but the market was too high and nobody was buying anyway. But again this is like blaming Lehman on shorts. I believe any company or any country go down the drain only because they were not solvent in the first place. Just as your selves,why GM went bankrupt and not Ford?.

Mon, 02/08/2010 - 12:40 | 222194 Anonymous
Anonymous's picture

I dry-heaved when I read the title to this article: "Two Hedge Funds One Bank?"

Mon, 02/08/2010 - 12:43 | 222199 Anonymous
Anonymous's picture

Spain has 20% unemployment Leo. How does that chime with an economic powerhouse?

Mon, 02/08/2010 - 14:35 | 222317 Leo Kolivakis
Leo Kolivakis's picture

I mentioned their high unemployment but they remain one of the largest European economies. Unemployment/under-employment is a structural problem affecting most developed economies. Still have no solutions for addressing this long-term issue.

Mon, 02/08/2010 - 12:46 | 222202 Bruce Krasting
Bruce Krasting's picture

Reading this I wonder out loud.

What would happen if we woke up tommorrow and read that Greece says screw it. We are dumping the Euro.

Would the dollar fall or rise??

I think it would fall sharply. The dollar is heavily overbought right now. But what is the value of the Euro sans the weight of Greece? Got to be more, right?

Don't worry dollar bulls. You will not see Greece folding anytime soon.

Old rule, when the dollar gets to be front page of the Times and the evening news it is time to square up and watch for a bit....

Mon, 02/08/2010 - 13:40 | 222266 nonclaim
nonclaim's picture

I see an upside for the dollar and yen, at least in the short term. One reason would be the flight from EM monetary units.

Mon, 02/08/2010 - 14:29 | 222309 Anonymous
Anonymous's picture

It seems like once one EM country scares the crap out of the market, all these other known problems become REALLY known and all liquidity will dry up. The way that South Korea was fucked over during the financial crisis despite being a vastly different economy from a place like Peru or Thailand.

Mon, 02/08/2010 - 12:47 | 222205 andrew123
andrew123's picture

Tyler, do you have an opinion on this?  It seems hard to beleive this is really what is going on, or at least that this is having a significant impact.

Mon, 02/08/2010 - 12:57 | 222214 Anonymous
Anonymous's picture

WHy wouldnt a soverign credit who knows they cannot default bang the crap outta CDs to help reset borrowing costs? Ifn I were greece I wouldnt go to IMF or EC- go to Ben, say how about a small line o credit, say 10Bil Where we cld knock back a few hundy BPs really quick...and take some back from the guys that want to buy our credit at userous rates.

I heard urban CDs legend that a Cali developer, early in the game, floated CDO financing through LEH, then when the spreads gapped out oversold the CDs to the tune to be able to give all the homeowners principal to pay off the mortagage! Which clearly turn the CDs to zero...was probably Tyler's first effort ala Project Mayhem....

Mon, 02/08/2010 - 12:57 | 222215 asdf
asdf's picture

While civil servants have already called a 24-hour midweek strike and private sector unions will strike later in February, Mr. Papaconstinou appears to have the support of the majority of voters. Weekend polls show the majority backing the government’s policy of austerity, saying that the measures are both necessary and fair. From the domestic perspective at least, there may yet be hope for the Greek rescue plan. The trickier aspect is to persuade the markets that the government means business.

 

http://pragcap.com/g7-ministers-fail-to-inspire-the-euro

Mon, 02/08/2010 - 12:59 | 222218 Anonymous
Anonymous's picture

Quite frankly this sounds extremely like government disinformation or finance porn. They always blame speculators for market volatility. It is much easier than accepting blame for accumulated fiscal imprudence. (remember Soros and the PM of Malaysia).

Further, I find the story leaking from all angles. Mainly hedge funds are not suicidal. 1 investment bank and 2 large hedge funds do not actually add up to that much capital, specially considering this is just one of their trades (let's say 3% of AUM max (let's say a max position of $1B for all 3). While you could temporarily move the CDS, you can bet your ass that you have value traders and more importantly government sponsored banks purchasing Greek debt and lowering the CDS spreads.

The other side of this $1B trade is essentially the EU governments with a $14 trillion economy worth of fire power. Which lone gun hedge fund would play chicken against that? Is it not infinitely more likely, that every Greek bondholder is selling?

Governments are presently intervening and buying EU debt securities. Who do you think benefits from this story? Once again, they believe that spinning the news and manipulating asset prices will buy them a reprieve.

Mon, 02/08/2010 - 13:03 | 222222 Anonymous
Anonymous's picture

Thanks for this French quote. Very interesting

Mon, 02/08/2010 - 13:03 | 222223 Anonymous
Anonymous's picture

Honestly you're driving me nuts. From what I understand from the article, I should sell my house, my car and get back into the market.

Mon, 02/08/2010 - 19:09 | 222668 WaterWings
WaterWings's picture

Sometimes last minute choices hurt others a lot more than you:

http://www.treehugger.com/car-accident-cyclists-mexico.jpg

Mon, 02/08/2010 - 13:12 | 222230 Anonymous
Anonymous's picture

Yap, EU core does need those euros to go down... way down.

Mon, 02/08/2010 - 13:16 | 222233 JR
JR's picture


As a German I would not want to be responsible for the debts of other nations, just to fill the pockets of the loan merchants with their strings attached.

In a similar vein, because Americans have no control over other elected legislators in our hemisphere, such as the government of Mexico, as an American I would not want to be responsible for the debts Mexico might have incurred through strings-attached arrangements with the investment bankers. Goldman’s depravity brings to mind Bill Clinton going over Congresses’ head and engineering an international rescue package for then secretary of the treasury, Robert Rubin, by bailing out Goldman for its losses in Mexico, Russia and many Asian countries.

Later, Uncle Sam was bailing out deadbeat American banks the likes of Rubin’s Citigroup, FleetBoston and JP Morgan Chase in Brazil and Argentina, ad nauseam.

 

As background to the 1995 Mexico bailout, Robert Rubin while lead pony at Goldman Sachs "led that investment bank into plunging billions into Mexican bonds. As head of the White House Economic Security Council, he failed to see the Mexican default barreling up the tracks. But as treasury secretary, he was able to shovel billions of U.S. dollars down Mexico way, thus saving the Goldman Sachs investments."

How many more times will Uncle Sam and the IMF (ie Uncle Sam) be asked to post bail for the Goldman and the Citis and the JP Morgans for their binges? Thank goodness for the Germans’ ability to say, NO! They know the impoverishment such exploitation brings.

Writes Ann Coulter in Financial Woes Have Ties to Clinton, Mexico Bailout on January 29, 2010:  Larry Summers, currently Obama's National Economic Council director, warned that a failure to rescue Mexico (in 1995) would lead to another Great Depression. (Ironically, Summers' current position in the Obama administration is "Great Depression czar.") 

http://www.clarionledger.com/article/20100129/OPINION/1280370/-1/archive/Financial-woes-have-ties-to-Clinton--Mexico-bailout---FOR-ARCHIVES--don-t-publish.

Mon, 02/08/2010 - 13:34 | 222256 Nout Wellink
Nout Wellink's picture

As a German I would not want to be responsible for the debts of other nations, just to fill the pockets of the loan merchants with their strings attached.

I am from Holland and totally agree with your view. There are a few countries making a total mess out of this and I refuse to have my tax money used to bail these people out. Let's reinstate the D-Mark and clean our own house, while leaving the others to clean their own mess.

Fri, 02/12/2010 - 03:48 | 228151 Anonymous
Anonymous's picture

my what a very narrow self-intersted nationalistic view you people have.

Imports from Italy Holland and Germany are why greece is in debt. In other words you loaned GR the money and they spent it on your economy and your jobs... our economies are no longer separate and cannot be separated. If Greece goes down EVERYONE goes down, and that's the only reason your governments are even entertaining the notion of helping Greece.

United we stand divided we fall... and maybe we should.. who am I to say... but don't go thinking that you can have your euro and your economies untouched when the IIPGS and others can no longer buy your products.

Wed, 03/03/2010 - 16:50 | 252779 Anonymous
Anonymous's picture

Yes, let us all unite and then the hedgies can fuck us all as one collective unit! Oh and Germany, it is obviously in your best interest to bring down your competitiveness by by sucking up the lazy-ass S. Europeans and assuming their debt. Also, as your profitable industries are outsourced to the aforementioned shit holes, your leaders can ease the pain by going on 10 year credit binge a la Spain and USA. By that time, and once the jobs are all gone, you can scratch your head and say yeah, solidarity! go EU! and then go to your shanty and eat your ramen noodles and then hopefully kill yourself because by that time the govt will have nothing left to tax and you are in the end another mouth to feed on the dole.

Mon, 02/08/2010 - 13:46 | 222275 Hephasteus
Hephasteus's picture

It's relativity of economy. You get the same thing in the United States as you have seen. You can look at statistics of social pogram outflows from the major coastal areas to the smaller inward areas and think THAT'S NOT FAIR. But they are not equalized and normalized economies they are relative to each other which is why when you bubble you always bubble in florida, new york, and california because they are the ones that got the free money.

The EU is rediculous because it tries to maintain relative values across things that are equal and maintain equal values across things that are relative. The Unitied states is the same way. It's the internal-external paradox of economics. There's always a trade between two external parties but economics always tries to make an external to external trade an internal to internal or internal to external affair, this is how the banks get inbetween all giving and recieving and control who gives and who recieves and once they do that they get drunk on power and try to set up a little gang of 'insiders' who do nothing but take from the 'outsiders' by simply declaring thier own relative worth to be extreme or invaluable or you can't live without me or I'm crucial, while the outsiders take on a macabe fucked up picasso painting role of well we can train you to meet this need or train you to meet that need or blah blah blah.

Germany is simply both New York and Calfornia relative to other liliputian economies of the area. Greece is simply florida with a much much smaller population, economy and weighting factor because Greece is not a retirement place for wealthy germans or french or whatever. It's a real live seperate economy. The truth behind it all is so screwed up you can't even begin to get at it till you look at abstract. Germanies wealth is damaging to Greeces wealth. If they are scewing you over so bad why do you have all the nice cars and go on all the nice vacations. Bitches.

Mon, 02/08/2010 - 18:32 | 222595 Anonymous
Anonymous's picture

Ann Coulter quote? Next we'll have posters crossing over with John Edwards or using Hal Lindsey as their higher authority.

Sun, 02/14/2010 - 21:15 | 231038 Anonymous
Anonymous's picture

"Later, Uncle Sam was bailing out deadbeat American banks the likes of Rubin’s Citigroup, FleetBoston and JP Morgan Chase in Brazil and Argentina, ad nauseam"

The first and third of those banks lent money to the illegal Argentine 1976-1983 dictatorship, which sextupled Argentine debt and led to the current debt matter there. The debt is clearly odious and should have been repudiated in 1983. Looks like it might well get done now, finally.

In essence Argentina was never legally in debt nor is it so now and its image was trashed to rob it of everything it had, by banker scum. The heat in on in Buenos Aires to get these criminal banks and others... could this South Europe shark fest be a pathetic attempt to smoke-screen Argentina-and-friends anger while trying to squeeze a penny or two out of Club Med?

Mon, 02/08/2010 - 13:23 | 222240 bugs_
bugs_'s picture

Its those dastardly speculators not our financial incompetence!

Mon, 02/08/2010 - 13:26 | 222247 Anonymous
Anonymous's picture

Re: CDS manipulation

Now that Cantor Fitzgerald is trying to bring betting on gold and other financial-based wagers to Vegas (per last weekend's WSJ), it is time to look at *all* forms of derivatives and see if there are in fact any positive economic/policy justifications for them. If not, then let's move the whole thing to Vegas and at least get free drinks and comped rooms while we try to blow up the global financial system.

Mon, 02/08/2010 - 13:36 | 222261 You Cant Handle...
You Cant Handle the Truth's picture

"Two Hedge Funds One Bank" ... I LOL'd.

Mon, 02/08/2010 - 13:39 | 222265 Anonymous
Anonymous's picture

Doesn't Greece have an economy about the size of Ohio's? Who gives a rats ass.

Mon, 02/08/2010 - 14:38 | 222319 carbonmutant
carbonmutant's picture

If this story is true Pimco is involved.

Mon, 02/08/2010 - 14:52 | 222337 IveBeenHad
IveBeenHad's picture

is it foolish to think that they are one of the few straight shooters when it comes to playing the game. they have their own agenda that they preach 4sure but i dunno if i imagine that gross could be involved in these shenanigans! 

let it not be tru gross :-(

granted the money they made off mbs's at the expense of the taxpayer is at the very least questionable but it could be argued on moral ground that they really did nothing wrong.. maaaaaaybe ok that might be a stretch

Mon, 02/08/2010 - 15:00 | 222347 Leo Kolivakis
Leo Kolivakis's picture

Pimp-co? You think?

Mon, 02/08/2010 - 14:49 | 222329 IveBeenHad
IveBeenHad's picture

this is why i love this site. even if this is just another ridiculous conspiracy theory at the very least it teaches the importance of skepticism especially when it relates to the dense world of the capital markets... 

Mon, 02/08/2010 - 14:50 | 222333 GS is short Gold
GS is short Gold's picture

Maybe GS hates that gimp Leo K. like the rest of us.

Mon, 02/08/2010 - 15:05 | 222353 Leo Kolivakis
Leo Kolivakis's picture

One order of fried squid coming right up.

Mon, 02/08/2010 - 15:17 | 222364 carbonmutant
carbonmutant's picture

LOL

Mon, 02/08/2010 - 15:26 | 222370 carbonmutant
carbonmutant's picture

How Goldman Sachs Helped Greece to Mask its True Debt

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

http://www.spiegel.de/international/europe/0,1518,676634,00.html

 

 

Mon, 02/08/2010 - 15:46 | 222383 Gimp
Gimp's picture

Have you noticed that in every major financial crisis past, present and probably in the future the same cast of characters names keep appearing?

Bankers are in control and individual governments lick their boots. This scenario has played out before, the Knights Templars, the bankers or their day found out what happens when the European Kings/rulers decided to default on their loans...they killed all the Knights.

Mon, 02/08/2010 - 16:54 | 222456 Anonymous
Anonymous's picture

I wrote here many months ago that there is an ongoing attempy by New York banks to destabilize europe. First the central european nations were targeted. Then the Swiss banks. And now Greece. Europe will not stand for this much longer. New York city is a criminal enterprise that now has TRILLIONS of $'s courtesy of the US taxpayor to dstabilize the world. But Americans will fight to the death to protect its new york cabal.

Mon, 02/08/2010 - 18:22 | 222582 Anonymous
Anonymous's picture

Anyone willing to speculate on which Hedge Funds are acting as tentacles for the squid? If we list the Top 10, than theirs no liability.

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sun1's picture

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sun's picture

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