Lehman Brothers

All you need to read.

And since it's Mr. Moneybags, one "bonus" question for the readers regarding Maiden Lane fraud and the subsequent cover up when the GAO came a knockin'

As Predicted Last Year, The French and the Greeks Are In A Race For The Biggest Bank Run! Each stock showcased has led the drop as well...

Halfway into the year, my warnings on the FIRE sector are starting to come into there own. The first look, banks and bank stock analysts!

All you can read.

Nobody on the Buy Side wants to sue JPM, Goldman Sachs, Morgan Stanley et al for securities fraud on the more problematic deals of the past decade.

In Bankia’s case all of this culminated in the bank receiving a €19 billion Euro bailout, the largest in Spain’s history. And for certain this amount of money will be increased dramatically: Bankia’s loan book is roughly €200 billion in size (1/5^th the size of Spain’s GDP) and I can assure you a major chunk of this is total and complete garbage. That’s not the problem however. The REAL problem is that Spain itself is broke and doesn’t have the money to prop this bank up…

All you need to read.

All you need to read.

It's one thing for liberals to demand one group of Americans pay for another group of Americans, with a third group's money of course (until it runs out), but when a progressive think tank actually has the temerity to tell Bernanke that Europe is not socialist enough, and thus needs liberal US support, that's when things just get plain old silly. Which incidentally, is precisely what the progressive brains of Mark Weisbrot and Dean Baker, co-directors of the liberal Center for Economic and Policy Research, have done. Naturally, we are all for a humanistic effort; we also believe in leading by example. If Messrs. Weisbrot and Baker would first be kind enough to divest themselves of all their earthly possessions and bank account contents, which should be Fedexed and wired in the direction of Spain post haste, it would make their transparently theatrical pursuit of pseudo-noble causes just that more palatable to the masses who already are on the verge of poverty, and are now being asked to bail out other countries. 

What would the weekend be without at least one rumor that Europe is on the verge of fixing everything, or failing that, planning for a master fix, OR failing that, planning for a master plan to fix everything. Sure enough, we just got the latter, which considering nobody really believes anything out of Europe anymore, especially not something that has not been signed, stamped and approved by Merkel herself, is rather ballsy. Nonetheless, one can't blame them for trying: "The chiefs of four European institutions are in the process of creating a master plan for the euro zone, the daily Die Welt reports Saturday, in an advance release of an article to be published Sunday. Suggestions targeting a fiscal, banking, and political union, as well as structural reforms, are being worked out..." Less than credible sources report that Spiderman towels (which are now trading at negative repo rates) and cross-rehypothecated kitchen sinks are also key components of all future "master plans" which sadly are absolutely meaningless since the signature of Europe's paymaster - the Bundesrepublik - is as usual lacking. Which is why, "the plan may well mean that the euro zone adopts measures not immediately accepted by the whole of the European Union, the article adds." So... European sub-union? Hardly strange is that just as this latest desperate attempt at distraction from the complete chaos in Europe (which will only find a resolution once XO crosses 1000 as we and Citi suggested two weeks ago and when the world is truly on the verge of the abyss), none other than George Soros has just started a 3-month countdown to European the European D(oom)-Day.

To be clear, the Fed, indeed, Global Central Banks in general, have never had to deal with a problem the size of the coming EU’s Banking Crisis. I want to stress all of these facts because I am often labeled as being just “doom and gloom” all the time. But I am not in fact doom and gloom. I am a realist. And EU is a colossal mess beyond the scope of anyone’s imagination. The World’s Central Banks cannot possibly hope to contain it. They literally have one of two choices:

1. Monetize everything (hyperinflation)
2. Allow the defaults and collapse to happen (mega-deflation)

All you need to read.

If it appears like it was only yesterday that Goldman was advising clients to short the 10 Year Treasury, it is because it was... give or take a few months: From January: "Since the end of last August, we have argued that 10-yr US Treasury yields would not be able to sustain levels much below 2% in this cycle. Yields have traded in a tight range around an average 2% since September, including so far into 2012. We are now of the view that a break to the upside, to 2.25-2.50%, is likely and recommend going tactically short. Using Mar-12 futures contracts, which closed on Friday at 130-08, we would aim for a target of 126-00 and stops on a close above 132-00." We added the following: "As a reminder, don't do what Goldman says, do what it does, especially when one looks the firm's Top 6 trades for 2012, of which 5 are losing money, and 2 have been stopped out less than a month into the year." Sure enough, as we tabulated last night, those who had listened to this call, and also gone long stocks as Goldman urged on March 21, have lost nearly 30% in about 2 months. Those who listened to us and did the opposite, well, didn't. Which is why the just released note from the very same Garzarelli who 4 months ago was so gung ho on shorting bonds, just cut his bond yield forecast for the entire world, US Treasurys included: "We now see 10-year US Treasuries ending this year at 2.00% (from 2.50% previously, and 30bp above current forwards), rising to 2.50% (previously 3.25%, and 60bp above the forwards) by December 2013. The corresponding numbers for German Bunds are 1.75% and 2.25%." In other words, it is now that Doug Kass should have made his short bonds call: not when he did it, a month ago and got his face bathsalted right off. For those asking - yes: Goldman is now selling bonds to clients.

As anyone who has ever traded CDS (or any other OTC, non-exchange traded product) knows, when you have a short risk position, unless compliance tells you to and they rarely do as they have no idea what CDS is most of the time, you always mark the EOD price at the offer, and vice versa, on long risk positions, you always use the bid. That way the P&L always looks better. And for portfolios in which the DV01 is in the hundreds of thousands of dollars (or much, much more if your name was Bruno Iksil), marking at either side of an illiquid market can result in tens if not hundreds of millions of unrealistic profits booked in advance, simply to make one's book look better, mostly for year end bonus purposes. Apparently JPM's soon to be fired Bruno Iksil was no stranger to this: as Bloomberg reports, JPM's CIO unit "was valuing some of its trades at  prices that differed from those of its investment bank, according to people familiar with the matter. The discrepancy between prices used by the chief investment office and JPMorgan’s credit-swaps dealer, the biggest in the U.S., may have obscured by hundreds of millions of dollars the magnitude of the loss before it was disclosed May 10, said one of the people, who asked not to be identified because they aren’t authorized to discuss the matter. "I’ve never run into anything like that,” said Sanford C. Bernstein & Co.’s Brad Hintz in New York. “That’s why you have a centralized accounting group that’s comparing marks” between different parts of the bank “to make sure you don’t have any outliers” .... Jamie Dimon's "tempest in a teapot" just became a fully-formed, perfect storm which suddenly threatens his very position, and could potentially lead to billions more in losses for his firm.