The Check Is In The Mail

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

The Check Is In The Mail

So we are still in planning to plan mode.  The markets remain calm in spite of the fact that any plan was delayed again, and it is perfectly clear no one in power in the EU had attempted to work out a single detail of any plan until last week.  There is so much to say about the events of the past week, but I’m left with 4 questions, where we are being asked to believe something far different from the truth.


The EU continues to talk about the EFSF as though it is AAA.  The original EFSF was AAA because the most it could lose was 440 billion, which was less than the sum of the AAA guarantees.  Now that it could lose far more than 440 billion, it is unlikely to be rated AAA, since the WARF of the EFSF after Portugal, Ireland, and Greece “step out” is only AA-.  Even if the EU can stop the rating agencies from rating the EFSF, investors will not treat it as a AAA entity, because it isn’t.

IIF Proposing 21% haircut or 100% Mark-up?

The IIF continues to pitch its plan as a 21% haircut, painting the banks as being helpful and part of the solution.  The reality is that the weakest banks all have their bonds marked at par in spite of being worth about 40% of par.  The exchange will give them a zero coupon bond worth more than 30% of par., and the coupons they will be receiving from Greece have a value of 46% of par using the 9% rate the IIF talks about.  So the banks are trying to trade bonds worth less than 40 into something worth almost 80.  Even at more realistic discount rates on the Greek flows, the new asset will have a much higher value than existing Greek bonds.  Almost comical, is the fact that the IIF now wants to include Greek bonds with maturities longer than 10 years.  Greek bonds longer than 13 years all basically trade below the value of the zero coupon bond.  This “haircut” is actually a way for banks to exchange their bonds into ones with much more value and pretend they are helping the IMF and EU.

Is the ECB really different than the EU or EFSF?

There is a lot of discussion of what role the ECB should play.  Somehow it is made to sound that the ECB is different than the EU or EFSF.  It is different if it is willing to “Print” money.  If the ECB doesn’t want to print money, and losses on its bond portfolio have to be paid for, it will be done via capital calls from the member states – which or course are the EU members!  The ECB money is just as circular as any other form of money in the mix.  The ECB gets its capital from the EU members, if it is not willing to print its way out, than the losses would have to be paid for by the same group that is providing the guarantees for the EFSF.  The IMF is slightly different, in that it manages to add a bunch of other countries into the mix, though the EU members are also a significant portion of the IMF. 

Do banks like or hate government intervention?

Both.  They hate it when it is in the form of regulations, scrutiny, or capital increases.  They love it when it is in the form of QE or bailouts.  So far, having their cake and eating it too.  No wonder the “Occupy” movement is spreading.

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trampstamp's picture

Is my check in the mail? Bastages! Bring this cow down already

max2205's picture

We are inches from comfirmation of a new bull market...for what reason i don't know or care

WonderDawg's picture

That's good stuff. Inches within confirmation of a new bull market. Hahahaha, that's good, man, where do you come up with your material? That's hilarious, and fresh, too. Can I get some of that stuff you're smoking?

redpill's picture

So if I read this right, the grand plan is to reissue the same debt from the same bankrupt EU nations, slap the EFSF label on it, and then pretend it's AAA?

I'd say that's trying to put lipstick on a PIIG.

WonderDawg's picture

Sounds kind of like the sub-prime MBS deal all over again.

redpill's picture

That's it! Europe's problem is they don't have enough financial derivatives tied to the performance of their sovereign debt!

Harlequin001's picture

Eurpope's problem is that their financial bullshit is far nmore visible than the Fed's.

But it's still the same bullshit, and the Fed will ultimately fare no better...

Delia39's picture

Would be interesting to see what would happen to all the greedy pigs if humanity just called it quits on the current currencies. "Sorry those Euros & Dollars are worthless here. Feel free to wash some dishes or bus some tables though." sciatica treatment


SheepDog-One's picture

Or, thats what theyre desperately trying to make you believe.

Harlequin001's picture

Is anybody else having problems transfering USD through the European banking system?

GeneMarchbanks's picture

'No wonder the “Occupy” movement is spreading.'

I'd love to pretend that the movement is spreading because of this but I can't for the simple reason that it's not. There are ten kids overwhelmed with debts and unemployment for every person who joins that has deep understanding of the actual way modern finance operates.

Chief KnocAHoma's picture

Chief say time to get out da city - buy a lake house and fish for food:

DormRoom's picture

There are ten kids overwhelmed with debts and unemployment for every person who joins that has deep understanding of the actual way modern finance operates.


Modern finance isn't functioning properly.  You have banks that have been bailed out by taxpayers, and these tax-payers are being foreclosed on by the aforementioned banks. 

Banks aren't lending, cuz no wants debt, so they use those reserves, lend to  hedge funds, that speculate on commodities, pushing up food/energy cost for the 99%.  


Governments provide a huge social safety net for banks, while cutting it for the 99%.  Somehow, in our social contract, banks have taken a priviledge position, undermining the bargaining position for the rest (99%).




GeneMarchbanks's picture

+ 1

Agreed. Two things, most of the protesters do not seem to articulate anything even remotely close to this when interviewed.

My other point is simple. Now that you've put together a coherent argument no doubt, what are you proposing and/or demanding?

buyingsterling's picture

The OWS focus is too broad, so lots of innocent people will get swept up in their net. There's a big difference between the 1% and the .01%.  Are 3 million+ Americans really the enemy, or more like 30,000? .01% means about 700,000 people run the world. That still sounds high.

saiybat's picture

I lost the link to the poll but 49% of OWS protestors in NY support bank bailouts. All I can find is a bunch of sites with a spin on it so take it for what you will. I don't get it. Why would anyone like the merger of state and corporate power? Am I out of touch or has politics taken another reverse flip?

DormRoom's picture

bank bailouts were necessary, if we wanted to preventa global depression.  Reforms attempted to seperate the utility, and speculative divisions of finance.  Frank-Dodd & the Volcker rule  were attempts at addressing these problems, but the bank lobbyists diluted it, losing most of its effectiveness. We bailed them out, but they continue behave perniciously, as though we didn't. So we are in a worse position.  Even bigger banks; Even less likelihood for the governments to let fail.



saiybat's picture

If banks went under they wouldn't be able to lend and lending leads to growth and they're not lending now even though they got their bailouts. Same situation in either case. The banks are still here with the same problem. Is another bail out even more necessary since it's worse?

l.hauri's picture

I will check it! I am sure that it will work perfect for me. yacht charter marmaris

rwe2late's picture


 It is somewhat condescending to believe that protestors are incapable of the "deep understanding" (which you doubtless possess) that  bankster finance is connected to unemployment and debt.

Given the causal connection to unemployment and debt, it seems fair to say that past and ongoing bankster shenanigans are causing the "Occupy" movement to spread...

(fair even if one presumptuously believes the "Occupy" protestors lack  the alleged "deep understanding" supposedly necessary to motivate their protestations against Wall St. and the Fed).


GeneMarchbanks's picture

''It is somewhat condescending to believe that protestors are incapable of the "deep understanding" (which you doubtless possess) that  bankster finance is connected to unemployment and debt.''

I don't base my belief(s) on whether or not something is condescending or not toward others, my concerns here are genuine.

''Given the causal connection to unemployment and debt, it seems fair to say that past and ongoing bankster shenanigans are causing the "Occupy" movement to spread...''

I'm not ready to say that they are causing Occupy to spread. I won't deny correlation. Nonetheless, the movement is fractured and isn't really posing any threats to "banksters"... yet IMHO.


maddogs's picture

modern finance - The inability to pay debt(student loans), the ability for bondholder and counter risks to profit(student loans)

xcehn's picture

Don't forget about the people drowning in underwater mortgages, who bought houses they could easily afford and put down the traditional 20 percent.  Many young people emphasising only their student loan situations do the movement a disservice by failing to mention the misfortunes of others.

djsmps's picture

Luckily, China and Brazil will bail out Europe.

A Man without Qualities's picture

This was a desperate attempt to look like they had more than one "idea".  As far as I know, there is no confirmation they will invest in the EFSF, which still needs funding, never mind the second derivative super SIV....

xcehn's picture

The Chinese like to TALK big, but they are not willing to rescue Euroland when the chips are down.

Harlequin001's picture

of course, no body knew that did they...

TooBearish's picture

The EFSF will be rated AAA - does that help u Pete?

dwdollar's picture

I'm sure they could trade something with Warren in exchange for the Buffet AAAA rating.

Harlequin001's picture

'in exchange for the Buffet AAAA rating'

all they need do is put a 'H' on the end of that and it will sound so much more accurate...

Nascent_Variable's picture

French sources have confirmed that the parties have reached a final agreement on the seating arrangement at the next conference.  German sources vehemently deny that such an agreement has been made.

French sources are now confirming that they forgot to reserve a conference room, so the seating arrangement agreement is on hold indefinitely.

Shitters_Full's picture

Perfectly illustrates where they're at in the process.  Nice one.

digitlman's picture

*LOVE* the username!


It's so appropriate!

Shitters_Full's picture

Yes, it's time to flush this system and start again.

Harlequin001's picture

'Perfectly illustrates where they're at in the process.  Nice one.' - and not one mention of who is paying the bill!

WonderDawg's picture

Username from one of my favorite all-time movies. And it's the coming season, too. I'll watch it two or three times this year, probably. Unless, of course, my puts move into the money, at which time I'll probably hire 4 hookers for the month of December.

oogs66's picture

lol, they spend more time organizing these summits than they do on the details of the plans or their own budgets...probably have a bigger staff of conference organizers than financial analysts

Mae Kadoodie's picture

The IMF has just announced that they have a conference room that is available so an agreement between the German and French seating charts will be valid.  Bondholders will be invited to such meeting.  Dress is business casual and haircuts required.

John Law Lives's picture

The EU has been doomed for a long time. Much of Europe is rapidly aging, and the demographics do not bode well for them. It is pure folly to think a select group of bureaucrats can now come up with a comprehensive bailout plan to "fix" this problem.

They will kick the can down the road until it can't be kicked... and then hit the R-E-S-E-T button.

100% FUBAR.

tim73's picture

Yeah, so much better in the USA with hordes of janitor Latinos invading the place from the South.

John Law Lives's picture

Nobody said the USA didn't have its problems.  However, the subject of this thread was re. the EU.

spankfish's picture

If 100% FUBAR was what was being served as our last meal one of its main ingredients would be CDS.

campag's picture

most US stock traders dont know or care where Europe is ! So to infinity and beyond for US stock prices. Trying to short stocks when so firmly bid up in the last half hour of trading is pointless.  

SheepDog-One's picture

'Most US stock traders'....these arent the droids youre looking for.

Saxxon's picture

To say 'no one wants debt' we have to define our strata.  Joe Sixpack would take a new Visa card right now, even at 29 percent APR; but Massa Bank will not give it to him, uh uh.  Banks don't lend into contractions.  There is not a damn thing our political masters will do because they are owned by the banks.

One of the advantages to the Troika's fingerfucking and kicking the can is that it keeps the short-selling vultures at bay.  I still believe the grand announcement, if we ever get one, will be followed by the most brutal sell-the-news swathes in the history of commodity and equity markets.

The Troika knows they cannot hold back that hurricane and that efforts to do so, such as banning short selling or any permutation thereof, will get steamrolled.

Fact is none of the white economies have anything left to throw at the debt hydra.  The social engineers, our masters, cannot create jobs, force banks to lend, et cetera.

mayhem_korner's picture



Hey - CNBC declared victory this am when they said they were right that the U.S. is not heading into another recession.  I agree.  You can't head into another one until you exit the first one.