This page has been archived and commenting is disabled.

Bumble Bees 'Technically' Can't Fly; Just Don't Tell Them!

Tyler Durden's picture




 

Blain's Morning Porridge via Mint,

"From a technical perspective Bumble Bees can't fly. For heaven's sake don't tell the bees..."

Lots to talk about today including stroppy phone calls on the Fiscal cliff, more European six impossible things before breakfast, Deutsche Bank and HSBC money-laundering, but let's start with the potential train-wreck in progress that could be the UK. Watching George Osborne on Brek-Drek TV this morning I was pleasantly surprised at how good he was. Unfortunately, it's not over yet - but acknowledging the problem is halfway to a solution - take note France.

Fitch is warning of a UK downgrade this morning, but it's not enough to suggest that since France and the US have avoided catastrophic bond collapses in the wake of the loss of AAA status, then the UK will also be fine. As we cautioned yesterday - the global bond outlook is changing.

My spidey senses are a'jingle and reckon Gilts may struggle in 2013. While we know plenty of UK funds who will lap up the new 60 year Gilt (and we were massively in favour of the Century Gilt mooted earlier this year), the game might have changed. 5 more years of low-growth austerity is a given, but interest rates remaining low is not. Key to our concerns is declining Gilt demand, especially if we see global allocation shifts.

We already know the BOE is not going to be in the market aggressively with more QE. And new Governor shows distinctly bearish tendencies.

We already seen central bank FX managers far less active, so items like the Swiss Central bank and others playing sterling will be less a factor.

We see yesterday UK pension funds no longer Gilt focused as the discount rate is no longer Gilt dependent.

Will foreign investors continue to pump money into UK property market as a Euro hedge and will they be buyers of a sub-growth pants country?

The nasty truth might be we are already past peak-Gilt buying with a number of big-ticket players falling out the mix. Like I said yesterday, it could easily be exacerbated by a UK downgrade triggering unexpected ructions. The UK doesn't benefit from the suspension of disbelief and implied Euro support that explains why France bond yields hit record sub 2% lows y'day. Next year's market will not be so forgiving about downgrades - especially for an economy in recession on the unfashionable edge of an unfashionable continent.

On the other hand, as a prominent UK fund manager sagely noted y'day, there isn't much else for sterling based funds to buy - the sterling bond market is desperately short of long dated and corporate supply. (We'd love to be in the new issue market - it should be fish-in-a-barrel game!) As always, I am a buyer of longer dated sterling assets - hi and low grade!

All my above negative points above can be refuted.. but it's not just me... my colleague Macro-Man (he wears Spandex, flies round the City warning of catastrophe, and answers to the name of Martin Malone) says: "UK economic projections are nonsense". The forecasts released by Office of Budget Responsibility (aka The Ministry of Truth) say 30% of UK growth is going to come from Business Investment. CAPEX is expected to jump from £120 bln in 2012 to £180 bln by 2017. (If you want to talk to Martin, or get put on his releases, just ask!)

If he's right that MOT projections are pants, then on the basis QE has historically proved to be little less effective than pushing uphill on a length of wet wool, then we might just be staring down the Japanese abyss - no growth as CAPEX will stay subdued on the weak outlook.

(And I was amazed at the number of readers who called or blogged yesterday to agree with my observation the UK Tax office has turned from trusted servants of society into an out-of-control licensed gang of extortionists. Write to the papers, write to your MP with your experiences.)

Meanwhile, the news Deutsche Bank apparently sat on potential super-senior losses of $12 bln through the banking crisis is bound to anger the many bankers who saw their careers crumble or subsumed into bureaucracy. Other banks up the ying-yang with unhedgable risk went bust or were forced into the ignominy of public bailouts. Deutsche rather successfully boosted its "strongest European investment bank" credentials and grabbed market share. (Read the article in FT for full story.) And apparently if was bust the whole time? Pon my soul.. who would have known...

From a proper accounting or risk-management perspective DB should have been bust - but to the unknowing world it wasn't. And that sums up the complexity of the bank world - if management can hide or not recognise risks (and even sack whistleblowers who disagree with them), what's the answer? It's the No-See-Ums that kill institutions. On the basis if you can't see it, then it can't see you... should DB have survived? If Lehman had kept schtumm about its leverage and unquantifiable risk, would it still be with us?

Not getting caught is an objective all management have quietly inscribed into their heads - but I suspect Deutsche Bank failing that critical test will be yet more power to the regulators and oversight to stop it happening again. Another nail in the coffin of the investment banking model?

What else did we get today? Lots of Europe news - none of which is particularly noteworthy except for he said, she said, he said.

I've been told (forceably) my concerns the Greek buyback could be difficult are completely overstated. I am an idiot for even thinking it... apparently. (I knew I was an idiot... no need to shout it at me...) I'm told Greece will easily spend the Euro 10bln buyback funds to retire about ½ the outstanding Euro 62 bln of longer-dated new GGBs targeted by the exchange, according to sources close to the deal.

Rather than holdouts holding out for higher prices on the basis Germany et Europe will do anything to keep Greece going, most smart money is apparently looking at prices of 32% plus on Greek bonds as the last chance to get out before it degenerates again next year. Let's wait and see what the numbers are...

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 12/06/2012 - 15:22 | 3040083 Robot Traders Mom
Robot Traders Mom's picture

Governments and central banks were forcing investment banks to take money while they robbed everyone else.

 

Yep, this will end well...

Thu, 12/06/2012 - 16:44 | 3040426 DoChenRollingBearing
DoChenRollingBearing's picture

But, but, but, your son said it would...!

Thu, 12/06/2012 - 15:26 | 3040098 Cognitive Dissonance
Cognitive Dissonance's picture

It's all just part of the largest transfer of generational wealth (eclipsing the last Great Depression by a county mile) from the have less to the have more. You didn't really think they'd let the baby boomers transfer all that wealth to their kids.....did you?

<We've only just begun......to bleed.>

 

Thu, 12/06/2012 - 16:43 | 3040420 DoChenRollingBearing
DoChenRollingBearing's picture

Yet another reason to own physical gold.  Pass it along quietly to whom you choose.

<What, you think the Rothschilds paid inheritance taxes on THEIR gold???>

Thu, 12/06/2012 - 22:07 | 3041384 Muppet of the U...
Muppet of the Universe's picture

Dynasty trusts sure are fun aren't they?

Thu, 12/06/2012 - 15:32 | 3040126 williambanzai7
williambanzai7's picture

I distinctly recall Deutsche Bank's CEO lecturing the rest of the financial world from a high horse.

The horse was high on THC.

Thu, 12/06/2012 - 15:48 | 3040177 bank guy in Brussels
bank guy in Brussels's picture

This is a good episode for German people generally, who have believed the lies that German banks don't stink

Now the German public slowly begins to realise they are victims of the big con, too

Just like the Spanish homeowners or the Greek pensioner

Thu, 12/06/2012 - 16:05 | 3040256 GolfHatesMe
GolfHatesMe's picture

There is no THC that could have done that.  Unless he was eating Doritos at the time.

Thu, 12/06/2012 - 21:34 | 3041303 philipat
philipat's picture

With today's Accounting standards, or the lack thereof, and coopted auditors I venture to suggest that if DB can "Hide" 12 Billion, other Financial Institutions could, and probably do the same. Think I'll go out and buy some Bank stocks.

Thu, 12/06/2012 - 15:42 | 3040159 EscapeKey
EscapeKey's picture

So, no one "proved" that a bumblebee can't fly. What was shown was that a certain simple mathematical model wasn't adequate or appropriate for describing the flight of a bumblebee.

http://www.sciencenews.org/view/generic/id/5400/title/Math_Trek__Flight_...

Thu, 12/06/2012 - 16:18 | 3040307 Tursas
Tursas's picture

Bumblebee is the ruler of air density pulses.  It laughs to our childish flying machines.

Thu, 12/06/2012 - 15:51 | 3040179 NoDebt
NoDebt's picture

Tyler- I am telling you (forceably) that your concerns the Greek buyback could be difficult are overstated.  I'll refrain from calling you an idiot, however.

DB sweeps 12B under the rug and we all know what's going to happen- somewhere between NOTHING and a $100MM "slap on the wrist" fine from some regulator somewhere.

Greece?  They're going to sweep the entire fucking country under the rug along with the debt.  There will be books written years from now trying to figure out exactly where it all went.  (Hint: generations of taxpayers all over the world paid for it)

Thu, 12/06/2012 - 15:50 | 3040190 LawsofPhysics
LawsofPhysics's picture

interesting prediction, and what of the debt for Spain, Italy, France,... ... the U.S.?

Do tell oh seer of seers.  Unmitigated moral hazard, sounds like a good time.

Thu, 12/06/2012 - 17:03 | 3040497 NoDebt
NoDebt's picture

Well, I think I was pretty clear about that.  You're going to pay for it.  Whether it's higher taxes or devalued currency, you're going to pay.  So am I.

Thu, 12/06/2012 - 17:59 | 3040661 FeralSerf
FeralSerf's picture

We Earthlings "owe it to ourselves".

Thu, 12/06/2012 - 15:50 | 3040186 Zer0head
Zer0head's picture

this looks like a title to a Banzi piece but alas it is not, however it is proof positive that  America has gone Full Retard

The Carbon Footprint of Santa’s Trip Around the World [Infographic]

http://sustainablog.org/2012/12/the-carbon-footprint-of-santas-trip-arou...

Thu, 12/06/2012 - 16:08 | 3040276 steve from virginia
steve from virginia's picture

 

Excellent!

 

I first thought this was permanently irascible John Ward but someone unfamiliar.

 

Good job Tyler, keep this sort of thing coming (and get rid of the Neo-Nazi militant-group apologists and other 'Liberty' spokesmen, ditch Simon Black/Sovereign Man while yr at it.)

Thu, 12/06/2012 - 16:42 | 3040415 Aurora Ex Machina
Aurora Ex Machina's picture

"Bumble-Bees can't fly".

Oh, please: it was a rumour / joke started in the 1930's and disproven in the 1930's.

Thu, 12/06/2012 - 17:01 | 3040483 ebworthen
ebworthen's picture

Favorite line:

"...on the basis QE has historically proved to be little less effective than pushing uphill on a length of wet wool..."

LOL, very true.

Of course central bankers and their banking masters would respond that the wool came from fleeced sheeple, so what's the problem?

Thu, 12/06/2012 - 17:08 | 3040510 Diogenes
Diogenes's picture

What you don't know can't hurt you until you wake up in a train wreck with your face on fire.

Thu, 12/06/2012 - 18:04 | 3040676 FeralSerf
FeralSerf's picture

If it's a bad enough train wreck -- and as train wrecks go, this one's a humdinger -- you don't wake up.

Thu, 12/06/2012 - 17:17 | 3040544 NEOSERF
NEOSERF's picture

Two points; when you get to a farce such as Greece buying back $10b of their own bonds with money they don't have and the markets yawn, why should we be surprised at Deutche?  Every bank has had carte blanche under the auspice of saving the world to pull this crap with immunity. 

Secondly, when the market yawns at countries losing triple AAA status and by extension the very mechanicsms like ESM and EFSF losing that status shortly after, we have entered a period where ratings simply don't matter.  The velocity of money is all that matters because if this calliope slows down, it will be obvious and then the rush for the doors will be catastrophic. 

The world since 2009 has been to look the other way on losses and ignore downgrades as traders have to trade...if they can't the velocity dies and so with it this magical unicorn fairy world the powers that be have constructed.  No doubt in my mind, we will all wake up some morning and see a seemingly innocuous event (by itself) was the one that let the dam break and it won't be pretty.

Thu, 12/06/2012 - 18:16 | 3040715 Dick Fitz
Dick Fitz's picture

One of the best comments ever. +100000000000

When it crashes it will be sudden, epic and catastrophic. Phyz bitches!

Thu, 12/06/2012 - 20:57 | 3041202 smart girl
smart girl's picture

Buy back of Greek Bonds, "We will pay you in six months"- giving you six month bonds - ya right; or am I just too cynical?

http://www.bloomberg.com/news/2012-12-03/greece-offers-10-billion-euro-d...

Thu, 12/06/2012 - 22:09 | 3041387 Muppet of the U...
Muppet of the Universe's picture

only the smartest money is piling into cheap ass european debt.  its btfd to infinity and beyond!  ;D

Thu, 12/06/2012 - 22:29 | 3041444 smart girl
smart girl's picture

I'm really not smart. I can't tell if people are joking or serious.

Fri, 12/07/2012 - 01:45 | 3041775 mkhs
mkhs's picture

Are you at least a girl?

Fri, 12/07/2012 - 05:27 | 3041918 smart girl
smart girl's picture

he he!

Fri, 12/07/2012 - 03:09 | 3041842 nastaking
nastaking's picture

Nokia has poured most of its energy into the flagship ZJT H1 Android 2.3920 Windows Phone, but the company hasn't completely ignored the entry level ZJT H1 Android 2.3 Smart Phone.

Fri, 12/07/2012 - 04:15 | 3041878 EZYJET PILOT
EZYJET PILOT's picture

This writer trys to make it sound like it was bad for the other insolvent banks to take a public bailout. I would say they're in a better position at the taxpayers expense through not lying than DB. In the end DB will accept a bailout just like all the rest. 

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