• Pivotfarm
    04/18/2014 - 12:44
    Peering in from the outside or through the looking glass at what’s going down on the other side is always a distortion of reality. We sit here in the west looking at the development, the changes and...

Moral Hazard

Tyler Durden's picture

Buffett's 2010 Letter To Shareholders

For those who care what the man whose corporate existence is intimately tied to the government's bailout of the financial system, has to say, below we present Buffett's 2010 letter to shareholders.


Leo Kolivakis's picture

Fraud Bailout Fund Hits Wall?

A recent proposal by a group of Quebec-based advocates to create a shareholder insurance fund for victims of financial fraud could put the province on a collision course with Canada's big banks...


williambanzai7's picture


This just might be our anthem folks...


Tyler Durden's picture

It's Confirmed: ECB "Forced" To Buy Portuguese Bonds

Earlier today we speculated that due to central planning goldilocks breaking down, and the corresponding downtick in the EURUSD, the minions of the ECB's royal palace in Frankfurt will be scrambling to pretend things are under control, and gobbling up Portuguese bonds. Sure enough, this has been confirmed. But even we had no clue to what degree the spin to "explain" the situtation would reach. According to the FT, the ECB was "forced" to buy Portugal bonds. FORCED. Because unless the ECB did what was expected of it (see global moral hazard), the convergence trade between reality and central planning may have finally generated record daily P&L. Luckily for all those who still have their heads shoved deep in the sand, the bank that Weber prudently told to go and do some anatomically impossible things to itself, was FORCED to bail out Portugal from the rough sea of reality yet again. Also, after an untarnished two week record of non-monetization, widely publicized by the ECB's favorite news rag, the ECB's SMP will once again be burdened with exposing that the beautiful dream of prancing European unicorns, purple skittles and rainbows is once again coming to an abrupt end.


Tyler Durden's picture

Gleacher Market Commentary

Last week the S&P 500 experienced its first weekly decline in eight weeks. On January 19th the index fell by more than 1%, something it hasn’t done in 37 trading days. The technology heavy Nasdaq was down 2.4% as AAPL was a big drag, falling 6% on the week. Smaller stocks, captured by Russell 2000, underperformed large caps in their second weekly decline since mid-November, down 4.26%. Further, transportation index diverged from the Dow, sometimes a harbinger of less than optimistic technicals of sorts. Earnings per share reports that beat estimates are coming in at 68%, below the past four quarter average of 74% and risk premiums are too low as VIX indicates complacency which can be seen by the routing in financial stocks last week. In each of the past three years, the stock market has weathered serious January selloff and has never experienced four down Januaries in a row. Pending on the outcome for this week, we will learn if this precedent upheld.


williambanzai7's picture


"Print is the sharpest and strongest weapon of our party."--Joseph Stalin


Tyler Durden's picture

Fed President Charles Plosser Says Fed Is Helpless To Reverse Sharp Decline in House Prices

Philly Fed's Plosser once again releases a slam dunk speech which is the most vocal critique of Ben Bernanke's interpretation of the freedoms afforded to him by monetary policy to date. "How do you use monetary policy to burst a bubble in Las Vegas real estate, where house prices were appreciating at a 45 percent annual rate by the end of 2004, without damaging the Detroit market, where prices were increasing at less than a 3 percent annual rate? Because monetary policy is such a blunt instrument, asking monetary policy to do what it cannot do, such as seeking to deliberately influence the evolution of asset prices, risks creating more instability, not less. Moreover, the moral hazard created by the belief that the central bank would intervene if prices of a certain class of assets became “misaligned” might, in fact, cause more inefficient pricing and more instability, not less...monetary policy cannot reverse the sharp decline in house prices when the economy has significantly over-invested in housing" And more: "I have advocated the elimination of Section 13(3) of the
Federal Reserve Act, which allowed the Fed to lend directly to
“corporations, partnerships and individuals” under “unusual and exigent
" Plosser's conclusion is spot on, and means that Congress should immediately enact a limit on the Chairman's recently self-appointed 3rd mandate, which is to not only reflate the biggest asset bubble in history, but to get the Russell 2000 to 20,000: " I too am concerned that we are in the
process of assigning to monetary policy goals that it cannot hope to
achieve. Monetary policy is not going to be able to speed up the
adjustments in labor markets or prevent asset bubbles, and attempts to
do so may create more instability, not less. Nor should monetary policy
be asked to perform credit allocation in support of particular sectors
or firms. Expecting too much of monetary policy will undermine its
ability to achieve the one thing that it is well-designed to do:
ensuring long-term price stability."


Tyler Durden's picture

A Global Album Of Sovereign Insolvency

When it comes to providing analytical perspectives and empirical insights into the realm of sovereign deterioration, few come close to the work of Reinhart and Rogoff. Citi’s Willem Buiter is one such man. In his latest summary piece describing in excruciating detail just how bad things are at the sovereign level (and judging by tonight's opening print in the EURUSD more are starting to realize this), Buiter provides a terrific country by country guide of what is now an insolvent world, starting with the merely extremely risky, going through the backstop-baiters, and finishing with the time bombs that have already gone off and everybody pretends not to care. For those who do care, this is a definitive guide to what each individual European (and not only) country can look forward to in an age of global moral hazard. The only open question: with China's interest now to preserve the Euro's viability, how will Beijing act in the next few months as the eurozone finally starts unraveling.


Tyler Durden's picture

On The Four Year Anniversary Of The Paulson-ACA Meeting That Conceived Abacus

Four years ago to the day from Saturday, a team of "experts" from ACA Management took the elevators to the 29th floor of 590 Madison, the then address of Paulson & Co., and sat down to discuss the structuring of a CDO. For both firms, this was supposed to be a by the numbers transaction: ACA, which had the financial acumen of any borderline retarded rating agency, was going to provide the wraparound insurance and be the portfolio selection agent in a synthetic CDO, while Paulson & Co. would be the transaction sponsor, and which, through Goldman Sachs, would indicate on various occasions, that it was a beneficially interested party, and represent direct and indirectly that it was long the equity tranche: an indication that it was beneficially inclined for the success of the portfolio. Little did ACA know that Goldman would assist Paulson in lying to investors about the fund's orientation, and the numbers in question would be one billion for Paulson and a comparable loss for everyone else. The CDO in question is of course Abacus, and has since resulted in the biggest ever SEC settlement with an investment bank, pardon, governmentally subsidized hedge fund. And while Goldman may have thought that the settlement put the embarrassing Abacus situation to rest, ACA certainly harbored no such intentions, and on January 6 filed a lawsuit against Goldman seeking monetary and punitive damages. The reason: ACA claims, and has evidence, that despite Lloyd Blankfein's representation to Congress that it was merely making markets, and did in fact nothing illegal, the reality was far different. In fact, as ACA demonstrates in the attached filing, Goldman repeatedly represented that Paulson was long the equity tranche, and neither Goldman nor Paulson did anything to debunk such an assumption. In fact, in solicitation materials Goldman misrepresented outright the economic interest of the transaction sponsor. We are confident that as many other firms that loathed doing their own due diligence (of which ACA is most certainly guilty) realize that Abacus is still a mini goldmine, we will see other such copycat lawsuits, as banks, primarily those out of Europe (and preferably still in business), attempt to collect a few hundred million here and there.


ilene's picture

Tuesday's Economic Temperature - Too Hot or Just Right?

The Rich (who control this country) do not want a strong dollar - only people who get paychecks in dollars want them to be strong but the people handing them out in exchange for labor are perfectly happy if Treasury Notes are as worthless as toilet paper.


Phoenix Capital Research's picture

Sailing to Disastrium: What’s Past, Passing, or Yet to Come

In plain terms, the system is broken. Everyone, including the Fed, knows it. The financial world has collectively chosen to ignore this due to political pressure and career pressure. However, this will not last forever.


williambanzai7's picture


“God Bless Bankstas, each and every one!” said Tiny Timmah...


MoneyMcbags's picture

A Visit From St. Bernanke

Twas the night before Christmas, when all through the White House...


Syndicate content
Do NOT follow this link or you will be banned from the site!