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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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Mon, 10/24/2011 - 08:35 | 1803804 trampstamp
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Is my check in the mail? Bastages! Bring this cow down already

Mon, 10/24/2011 - 08:43 | 1803839 LeonardoFibonacci
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At least Silvio Berlusconi has got it right within the EU!!!!

Mon, 10/24/2011 - 08:45 | 1803843 max2205
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We are inches from comfirmation of a new bull market...for what reason i don't know or care

Mon, 10/24/2011 - 08:49 | 1803854 WonderDawg
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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?

Mon, 10/24/2011 - 08:59 | 1803894 redpill
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.

Mon, 10/24/2011 - 09:02 | 1803904 WonderDawg
WonderDawg's picture

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

Mon, 10/24/2011 - 09:05 | 1803915 redpill
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That's it! Europe's problem is they don't have enough financial derivatives tied to the performance of their sovereign debt!

Mon, 10/24/2011 - 09:35 | 1804015 Harlequin001
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...

Mon, 03/12/2012 - 08:26 | 2246803 Delia39
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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


Mon, 10/24/2011 - 09:01 | 1803899 SheepDog-One
SheepDog-One's picture

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

Mon, 10/24/2011 - 08:47 | 1803845 Harlequin001
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Is anybody else having problems transfering USD through the European banking system?

Mon, 10/24/2011 - 09:01 | 1803898 redpill
redpill's picture

The ECB sure isn't.

Mon, 10/24/2011 - 08:25 | 1803805 GeneMarchbanks
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'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.

Mon, 10/24/2011 - 08:29 | 1803813 Chief KnocAHoma
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Chief say time to get out da city - buy a lake house and fish for food:

Mon, 10/24/2011 - 08:48 | 1803823 DormRoom
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%).




Mon, 10/24/2011 - 09:23 | 1803973 GeneMarchbanks
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+ 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?

Mon, 10/24/2011 - 11:50 | 1804573 buyingsterling
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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.

Mon, 10/24/2011 - 09:49 | 1804058 saiybat
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?

Mon, 10/24/2011 - 10:15 | 1804127 DormRoom
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.



Mon, 10/24/2011 - 10:30 | 1804177 saiybat
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?

Fri, 03/02/2012 - 08:15 | 2216306 l.hauri
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I will check it! I am sure that it will work perfect for me. yacht charter marmaris

Mon, 10/24/2011 - 09:04 | 1803897 rwe2late
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 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).


Mon, 10/24/2011 - 09:34 | 1804010 GeneMarchbanks
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''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.


Mon, 10/24/2011 - 09:11 | 1803931 maddogs
maddogs's picture

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

Mon, 10/24/2011 - 09:46 | 1804050 xcehn
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.

Mon, 10/24/2011 - 08:28 | 1803810 djsmps
djsmps's picture

Luckily, China and Brazil will bail out Europe.

Mon, 10/24/2011 - 08:38 | 1803830 CPL
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Mon, 10/24/2011 - 08:59 | 1803887 A Man without Q...
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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....

Mon, 10/24/2011 - 09:49 | 1804060 xcehn
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The Chinese like to TALK big, but they are not willing to rescue Euroland when the chips are down.

Mon, 10/24/2011 - 08:28 | 1803811 Manthong
Manthong's picture

I like Reggie's description "one big, incestuous pool of concentrated risk"

Mon, 10/24/2011 - 08:48 | 1803850 Harlequin001
Harlequin001's picture

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

Mon, 10/24/2011 - 08:30 | 1803815 TooBearish
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The EFSF will be rated AAA - does that help u Pete?

Mon, 10/24/2011 - 08:42 | 1803837 dwdollar
dwdollar's picture

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

Mon, 10/24/2011 - 09:38 | 1804024 Harlequin001
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'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...

Mon, 10/24/2011 - 08:32 | 1803818 Nascent_Variable
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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.

Mon, 10/24/2011 - 08:33 | 1803822 Shitters_Full
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Perfectly illustrates where they're at in the process.  Nice one.

Mon, 10/24/2011 - 08:37 | 1803827 digitlman
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*LOVE* the username!


It's so appropriate!

Mon, 10/24/2011 - 13:19 | 1804940 Shitters_Full
Shitters_Full's picture

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

Mon, 10/24/2011 - 08:50 | 1803856 Harlequin001
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'Perfectly illustrates where they're at in the process.  Nice one.' - and not one mention of who is paying the bill!

Mon, 10/24/2011 - 08:54 | 1803873 WonderDawg
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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.

Mon, 10/24/2011 - 08:55 | 1803877 oogs66
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

Mon, 10/24/2011 - 09:06 | 1803918 Mae Kadoodie
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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.

Mon, 10/24/2011 - 08:33 | 1803821 John Law Lives
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.

Mon, 10/24/2011 - 08:37 | 1803826 tim73
tim73's picture

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

Mon, 10/24/2011 - 08:40 | 1803832 John Law Lives
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Nobody said the USA didn't have its problems.  However, the subject of this thread was re. the EU.

Mon, 10/24/2011 - 08:41 | 1803836 spankfish
spankfish's picture

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

Mon, 10/24/2011 - 08:47 | 1803848 campag
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.  

Mon, 10/24/2011 - 08:58 | 1803886 SheepDog-One
SheepDog-One's picture

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

Mon, 10/24/2011 - 08:51 | 1803859 Saxxon
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.

Mon, 10/24/2011 - 08:51 | 1803861 mayhem_korner
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.

Mon, 10/24/2011 - 08:56 | 1803879 SheepDog-One
SheepDog-One's picture

Cant head into recession when you never left the depression.

Mon, 10/24/2011 - 08:59 | 1803892 oogs66
oogs66's picture

they have decided that one month of ok data, can only be followed by continued improvements, so no recession ever again

Mon, 10/24/2011 - 08:57 | 1803882 Ellesmere
Ellesmere's picture

Don't know why GeneMarchBanks and others (that crueleconomist ?)are so taken with trying to discredit OWS.

If you don't agree, who cares.

On the other hand don't judge the quality of the message by its messengers.

The ad hominem does nothing to negate the fact the the U.S. people have been royally screwed by their government.

Mon, 10/24/2011 - 08:59 | 1803888 rhinotrader
rhinotrader's picture

Inches from confirmation of another bull mkt? We are in a bull mkt. Look at the financials, MS, C, GS. They are all up 15 to 40% in 12 trading days!!!!. I would love to short this mkt but you can't. Everyday it is the same crap and nothing has changed. How does CAT blow out #'s? I just know that if you short this crap you are history.

Mon, 10/24/2011 - 09:04 | 1803907 SheepDog-One
SheepDog-One's picture

Theyre desperate to get the last short long again. Best plan is to just get out....only lunatics play in a 100% rigged casino.

Mon, 10/24/2011 - 09:03 | 1803909 Johnny Lawrence
Johnny Lawrence's picture

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.

This is a great observation. 

Mon, 10/24/2011 - 09:42 | 1804027 LMAO
LMAO's picture

Do banks like or hate government intervention?

The Banks run the government, so what's there to hate?!

Mon, 10/24/2011 - 09:05 | 1803917 SheepDog-One
SheepDog-One's picture

Europe refuses to lay out their plan, because there isnt a plan possible and they know it. Promises, promises.

Mon, 10/24/2011 - 09:10 | 1803927 Johnny Lawrence
Johnny Lawrence's picture

So did anything of note happen this weekend with the meetings in Europe?  Or did they just delay any announcements until later this week?

Mon, 10/24/2011 - 09:15 | 1803939 xcehn
xcehn's picture

Governments are established imposing LIARS that will say anything to keep the casinos going.  For instance, if the choice were between endangering the health and welfare of the people and keeping the markets humming, they would choose the latter, every single time.  Ask the Japanese people about trust in government.

Mon, 10/24/2011 - 09:47 | 1804056 earnulf
earnulf's picture

The levels of Hopium in the air inside the meeting room reached a peak, until they stuffed the participants into the room at which point the levels of Hopium began to fall alarmingly and wisps of pessimism began issuing from under the doors.    After 12 hours, they opened the doors and allowed the participants to stampede out, turned the hopium jets back on and allowed the MSM to enter for the formal announcement that more meetings would be held until morale or the economies improved.

Mon, 10/24/2011 - 09:56 | 1804084 rubearish10
rubearish10's picture

Peter, always good write-ups and objective thinking including facts. Thank you!


Mon, 10/24/2011 - 10:28 | 1804175 Schmuck Raker
Schmuck Raker's picture

Any of you helpful types know what Pete means by: W.A.R.F.?

Mon, 10/24/2011 - 10:38 | 1804209 slewie the pi-rat
slewie the pi-rat's picture



the check is in the mail
the chicks are at the mall
the banksterz need a bail-out
the sovereignz need to crawl

the swiss bought all the euroz
italians sell their debt
good lord!  it's only monday
the wash ain't hung out, yet!


Mon, 10/24/2011 - 12:11 | 1804660 buyingsterling
buyingsterling's picture

Europe's just a little sleepy. Ben is ahead of the game; he's ready to issue variable rate treasuries. It's not enough to enslave our descendants, we have to do it at floating rates, to maximize their peril.

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