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The EFSF As A Hedge Fund
From Peter Tchir of TF Market Advisors
The EFSF Pitching Itself As A Hedge Fund
There are still so many alternatives on the table and each is so confusing it is hard to come up with a decent analysis. In the meantime, here is something to think about.
EFSF walks into a meeting with a potential investor. EFSF is looking to raise some additional capacity so needs to borrow some money.
The meeting starts off great. The investor is told that EFSF has 780 billion of capital. That is amazing, says the investor, not many people walk through the door with that much capital at launch. The investor is curious as to when the fund will get the funding. For the first time, EFSF looks a bit uncomfortable and has to explain it doesn't really have funding, it just has some guarantees. The investor is a bit confused about this since they would rather have money than guarantees, but decides that if the guarantors are good enough, maybe it's okay.
The EFSF instantly replies that the guarantors are great, they are all highly rated. Well, some of them are at least. Well, actually a few are so weak that they won't actually ever provide the guarantees, they just let us include them in the pitchbook so we could have a bigger number. The Investor is getting a little nervous at this time, but still intrigued, so wants to know how much from the good guarantors? They are reasonably happy that the answer is 726 billion. Still very impressive, but at least a little confused why they bother with the 780 billion. Their experience as investors tells them that when someone lies a little, they tend to lie a lot.
The next obvious question is what are they going to do with the investors money, that doesn't have cash below it, just has some guarantees that would take losses before them. The EFSF proudly announces that it is going to pay as much as possible to prop up weak banks and countries throughout the Eurozone. The investors sit there with stunned looks on their face. The EFSF fully enjoying how awestruck the potential investors are, explain that there are many countries and some banks that cannot receive the financing that they need because they are having cash flow problems, are over leveraged, and quite simply are in deep trouble unless someone is will to buy their bonds at aggressive prices. As the investors finally regain their composure, they are sure they must have misunderstood.
So, your business plan is to go and buy stuff that no one wants, that is unlikely to ever be in position to repay the debt, and you aren't even price sensitive? The EFSF guys are getting very excited, they can tell this investor is on the hook, and now all they have to do is reel them in. They explain that it is even better than that. A couple of the big guarantors are in trouble themselves, but by buying their bonds we help ensure that they don't default. Investor, now wishing they were anywhere but at this pitch, frowns, rubs hand over face, and asks for clarity. Are you really telling me that some of the assets you purchase will be debt of the countries that are providing the guaranty? The EFSF can smell a sale, and explains once again it is even better than that, and reminds the investor that not only will they be buying bonds of some of the countries that are providing the guarantees, but they will also be buying equity stakes in the banks of those countries.
The investor now just can't resist and asks what is going to happen if someone defaults. For the first time EFSF is a bit confused. They had been told this investor was a smart guy and they cannot understand why he would be asking such a dumb question. The EFSF guys do a little wiggle of the head, put on their best perplexed look, and trying keep the disdain out of their voice as they ask what the investor means by default? Investor, now beginning to enjoy this says he really wants to know what happens if something they bought defaults. Now the EFSF guys are getting annoyed. They explain the purpose of EFSF is to ensure these things don't default and besides, the banks and the ECB all own the same stuff so they can't default. The meeting is breaking down now. The investor is starting to get frustrated. No longer any chance of getting involved in this fiasco, but really wants to know what the EFSF plan is if there is a default. The EFSF guys have had enough, this investor is clearly an idiot, but out of politeness, explains one more time if there can't be a default, but if there was a default, they would just get more guarantees. The investor is slowly losing his cool, and demands to know who is going to provide you with more guarantees if the guarantees come from the countries who are defaulting? EFSF has had enough, and says with all due politeness, that clearly this deal is just too complex for you and they will have to go down the street to dumb bank who will instantly see the value of this and subscribe for a few hundred million.
Investor is left shaking their head and trying to reach Michael Lewis because they want to be in on the ground floor of the Big Short II.
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Good god copper down 6%, es should be 1130.....wtf
It will be. They kept this shit afloat for so long that when realization hits the panic will be epic. Gravity always wins. Be patient.
Forget ground floor, how do I get to the basement?
Guarantee deflation. Wealth to buy PM is disappearing fast.
Lots of money stuck above 1200; when this bitch drops, itll be a elevator
SPX 1190 is support.. below that, and everyone/algos hits sell.
It is typical for selfish capitalists to only care about PROFIT. The EFSF is not a GREEDY hedge fund - the EFSF was created to HELP struggling countries for free because they are compassionate. This is something right-wing capitalists can't seem to understand. Not everything is about profiting. Sometimes the government needs to take peoples' money by force to make sure it is distributed fairly - otherwise nasty corporations will keep all the money for themselves. Gifted politicians and political advisors can be trusted to make sure resources are reallocated FAIRLY, for maximum freedom, prosperity and upward mobility.
look, it's obvious to everyone here that you're only writing to agitate. someone says A, you say B. it's getting pretty old. it would be fine if you actually believed it, then one could have a normal conversation with you, but you just love being a dick
MDB just likes the attention. The lame sarcasm is lost upon those on the Yahoo Finance boards...
Looks like it's time for this gem again:
http://www.youtube.com/watch?v=LyePCRkq620
"I think it's called laughing as you sink."
No worries, once OWS elects Obama/Stalin 2012 there'll be free money for everyone!
Who needs those capitalist barbaric relics of pigish imperialists - Gold & silver are for the 1% bourgeoisie!
Now, where is my red flag...
It's satire and it's quite brilliant. Green from me. :)
No question he loves the attention...but don't we all?
First time I ran across one of his 'contraian' posts, I spent 15 minutes on a pants-on-fire retort. It was only after posting and continuing to follow the conversations that I realized I had been fooled....badly, too.
MDB is very well informed and very clever. Otherwise, it would be impossible to thrust the spear with such expertise. Now, I look forward to his posts, much in the way I appreciate WB7's socio/econo/political art. In fact, maybe we should ask the Tylers to give him a masthead position from time to time ;-0
@Million dude, I have Karl Marx bedsheets. I'm as left as you can get.
But a leverage EFSF is a vehicle for the French to recapitalize its banks on Germany's dime. It doesn't solve structural imbalances. It's another synthetic financial instument to redistribute wealth from taxpayers to bankers. If Germany goes along with it, it's carte blanche for French banks to rape Europa in the future. In the long run a leverage EFSF will likely hurt, rather than help Europeans, especially if you are German.
EFSF = Euro Fraud Smokescreen Fund
dormroom
bedsheets...that's funny
MDB is getting less subtle (i.e. "Gifted politicians") but his sarcasm is just as much appreciated as a Kliben cartoon. (MDB = +1 from me, as always)
You sure he isn't Barry "TOTUS" Soetoro?
No penmanship or prose. You're not even funny.... just lame and pathetic.
Judging from the other replies, this is actually the intended statement and not a satire? Seriously? How's the weather over there at Zucotti Park, deadbeat?
Nah, it's simply his shtick here on ZH. Million Dollar is a veteran of the Borscht Belt. His routine goes way back.
MDB sounds like a character out of Atlas Shrugged.
MDB...keep 'em comin! You have me looking for your posts now. This lounge show gets better and better every night.
r/sarcasm?
"Gifted politicians and political advisors can be trusted to make sure resources are reallocated FAIRLY, for maximum freedom, prosperity and upward mobility."
-Yup, where are Goering, Goebbels, and Himler when you really need them...?
SPX 1190 is maximum option pain for tomorrow and support. It will be hit and maintained.
Gravity wins unless you're a bubble filled with Helium or hot air, can't decide which is more appropriate here.
Hydrogen.
http://upload.wikimedia.org/wikipedia/commons/8/84/Hindenburg_burning.jpg
.
That's the most sensible thng you've said yet...
this is brilliant. My favorite post of the week.
The dow and S&P 500 are rallying.. lol What the hell is going on? Maybe it's hope for todays european meeting. hahah I dont know.
Hang in there...
That is a really nice read for me, Must admit that you are one out of the top bloggers I ever saw.Thanks for posting that informative article. Luton airport parking and if you are looking for some best deals on meet and greet parking services you can get easily but im sure you need to eat some delicious things for that you need to learn sushi recipes
I can't seem to face up to the facts
I'm tense and nervous and I can't relax
I can't sleep, 'cause my bed's on fire
Don't touch me, I'm a real live wire
Psycho killer, qu'est-ce que c'est?
Fa, fa, fa, fa, fa, fa, fa, far better
Run, run, run, run, run, run away
Oh-ho-ho
Psycho killer, qu'est-ce que c'est?
Fa, fa, fa, fa, fa, fa, fa, far better
Run, run, run, run, run, run away
Oh-ho-ho-ho, aye-yi-yi-yi-yi, ooh
--Talking Heads, Psycho Killer
AND FT Dutifully reports:
- Private Investors Independently Evaluate EFSF fund for Participation
- Investor To Potentially Contribute 243 Billion [Random number that sounds like it is based on a non-random number]
And..Now we Do Melt up Dance.
Bring out the French Virgins for faucking!
Well, if the "investor" with the $243b is our bath-tub letch from Omaha, then BRK will be downgraded in a week or two by at least S&P and Fitch (BRK owns Moody's). (After all, Warren has some significant Euro investment). But I suspect it is actually PIMCO.
Euro Is ‘Burning Building,’ so Burning Down The House might be more appropos.
Either way, it ends up in 'Life During Wartime'
We dress like students, we dress like housewives
Or in a suit and a tie
I changed my hairstyle so many times now
Don't know what I look like
I guess 'reflexivity' [pace Soros] and 'circularity' ain't the same thing.
Let's break the Bank of Europe!
And of course Gold and Silver sell off massively. Yep, makes perfect sense folks, people are just anxious to dump their Gold right now!!
margin rumors?
The PPT draws a line at 1200 S&P it appears.....even if the music stops!
I want whatever the EFSF is smoking.
Nice way to understand this
The EFSF is a fraud
A monster just like FrankenDodd
The Kleptocrat game
Is always the same
They get rich while the sheep get the rod.
Priceless Mr. Tchir.
NASDAQ megaphone pattern on daily chart indicates big move ahead.
USD weekly chart remains bullish and as predicted for some time further dollar upside expected.
http://stockmarket618.wordpress.com
'12:01 Last missing wild animal likely eaten: sheriff MarketWatch'
RISK ON!!!!
A hedge fund created specifically designed to overpay for bonds.
Sounds like a Bernanke project.
Fine, now how do we front run it?
why, short the sh1t out of french banks of course
We dont even know how will EFSF look like, and you already know it´s a hedge fund. Says it all about your analysis´
Umm...read the heading, did you?
Slightly ot:
You can now contribute $17,000 annually to your 401K. Hey, lets all prop this bitch up.
that's because the tax rate will be 95% by the time you retire
How long before they confiscate the trillions just sitting there in our 401k's? We can't be trusted to do the right thing with their money....
"Their experience as investors tells them that when someone lies a little, they tend to lie a lot."
Understatement of the century.
My name is Timmah ... and I resemble that remark!
hedge fund to save the world... that is the kicker... Hedge funds are born to make their investors rich. Why save th world when you can be rich in a destitute world where your riches are like faeces. Do we want to save the world or make riches in a vacuum?
Maybe Peter Pan can tell us what the priorities are in this mad logic of 'I'm richer than you are' but it'll buy me nothing'...
Unless he feels there is another way out that nobody has seen... We're all waiting breathlessly that the financial world in place show us how to repair the damage they have already unleashed.
Debt Jubilee? Gold monoploy? Zero reset? dead silence...nobody has a clue.
Dude, it is all about pussy.
We can all live in mud huts and eat grubs, but if I am slightly more wealthier than you, lets say I invent a way to fatten grubs faster and put up mud hovels more efficiently, then i will have more cowie shells.
More cowie shells means more, and better, pussy.
Relative wealth ultimately is the only wealth that matters.
Now there is a sensible investor.
I admit to going long pussy and losing.
Never a short squeeze when you need one...( until I am short. damn!)
you sound like simple simon who met a pieman and lost his head. Dream on. Self delusion is the sign of the smug on the way to going to humbug. And it all depends how you measure wealth. Ask Q-daffy...or his ghost.
Darn those Euro jitters!
Well, that intro did it for me! I'm going to sell all of the gold I own (what little there is after the boating accident) and invest in the EFSF! What could go wrong?
"Their experience as investors tells them that when someone lies a little, they tend to lie a lot."
Experience with humans has forged this relation into law. That said, the utility of truth in today's world is fairly low. Unless you're a comedian or artist, it won't put food in your mouth and it won't help you procreate.
It's possible there will come a time when truth will be generally valuable, but today isn't that day.
Quoted in Spanish by Dra. Ana Maria Polo - (Caso Cerrado) - and translated into English:
"Even the most mendacious liar out there will sometimes tell the truth when he runs out of lies to tell."
Well, we're waiting..........
EFSF hedgefund-An ultra short strategy: "I'm gonna short you're grandchildren's future to pay for the profligacy of your unruly neigbbour" fund.
They should rename it the FRGM: Financial Rube Goldburg Machine
Steve Wynn should be selling grout cleaner on late nite tv.
In case you need anyone to "shovel shit or value stocks", this guy should still be available:
http://goo.gl/1FNHc
(This is golden, BTW.)
If that isn't scripted, I don't know what to say.
If it IS scripted, then it was well-written and performed. "I'm willing to do anything. I have a great resume, but my computer's down. My education will blow your arm off. I'm one of the smarest people... I'm a genius. I'm terminally ill, 2 months to live, been that way for 6 years..."
LOL
nyse
WHERE do find stuff like that?
Financial engineering is a joke, it always has been it just took time for everyone else to realize the scam. All the sophisticated jargon to explain an untenable situation or illogical one: solving insolvency with more debt.
That the problem with a monetary authority that has 11 owners trying to enact a FISCAL solution when they have no authority or agreement to do so....where the IMF check book? Where's Hank "the Hammer" Paulson to go on bended knee to Merkzoy to beg for A TRAP bill?
Its planned interdependence, just like how China and the US are interdependent of each other, the same is being done between the banks, the ECB and the EFSF (and financial institutions from around the world, to boot).
It makes the crises into MEGA-crises. Its a symptom of too much centralization of power, too much concentration of wealth, but don't think its by accident.
I LOVE this article! The only shitty thing is that i'm paying taxes into that fiasco......
What the fuck, go for the gold (LOL-no pun intended)
Just make the bloody thingalimebob an Even Trillion (use the largest denomination you can possibly get away with) fuck whether it's a CDO, CLO, Bank, Insurance Comapny, Savings and Loan, Credit Union, Automobile Finance Recievables Company, Whore House, VIG lender, Soda Pop Wholesaler, Porn Web Site, or Bistro.
Don't fucking matter.
Raise the fucking money.
Then change the fucking rules. (Use NAtional Security as the Excuse... quit fucking around, make a right proper hash of it.)
Let it do whatever needs be done that every and anyone might not only agree upon... in fact, no agreements necessary... what anybody proposes. Anything under the sun at the moment.
Appoint the most in-fucking-competent IQ-less Long Term Public Servants Completely Beholden ot Political Masters as the decision makers (AKA, business as normal).
And Spend with Reckless Abandon. (Nothing new there.)
And do regular follow-on offerings.
Also, as part of the plan, as mentioned by Goldilocks and Krugman (you know you're in good company there, eh?) have Everybody Everywhere Target Nominal GDP, boost inflation to Kingdom Fucking Come.... maybe then everybody'll figure there is "some sort of" fucking growth
Oh wait, we tried that about a year or two ago when the Bernak said that there was a need for some infation (remember, he was worried about deflation) and Viol-fucking-ah we got some great rally mode out of Gold and SIlver. Bring it on, Benji Boy.
And maybe even that's why they're leaning so Bloody Hard on the PM's of late. Like Volcker said upon reflecting about the Plaza Accord, that they "didn't but should have intervened in the gold market"....
Yeah.
No Benji... I gots some bad fucking news for ya'.
You've already added some totally unprecedented never before in the history of manking except maybe the Weimar Republic's post WWI print episode, so much reserves to the bankling system, you can add all the more your littl heart desires but it ain't gonna do shit, because...
We're caught in a Liquidity Trap.
For which the only way out is .... increased confidence upon the pert of business and consumers.... Which you don't control, that's the job of theose miserable fucks in the Administration and Congress.
So Go the Fuck Figure.
Print away. And best way, just like last time to make sure people know about higher Nominal GDP is through an indica like Gold Going Up.......
Go figure.
This is just sooooooooooooo fucked up.
Great post!!
What an amazing post. Great story. So sad that it's true....
This is nothing new. Basically, Europe wants China to exchange its gold for eurocrap banknotes.
EFSF
European Financier's Self-assured Failure
EFSF
EVERYBODY'S FUCKED, SO FUCKED
Where is that little cocksucker Bernard Lietaer?
Thanks to him my fucking screen is all red today.
FRENCH BANKS ARE DEATH
they are for the french, but they are peanut sellers in comparison to US banks and its derivative mountain.
Maybe, just maybe, the eurocrats have got their heads screwed on. The EFSF and the uncertainty around it is a bluff, designed to win a little time - its as bent as this article shows it to be. Eurobonds are around the corner (or another rose smelling as sweet) - but basically, they're going to have to realise that it will need to be collateralised, moving assets out of the pool for state default and moving into super seniority. The EFSF is just a cover for an entirely different set of euro meetings where I bet this discussion is going on. EFSF is the half-animated dead parrot that keeps confidence from evaporating completely, even as its near deadness saps slowly at confidence anyway. The way out is default, credit events, prior debt wipe-out - there's absolutely no way that Germany wants any facility to be around to allow current creditors to recycle prior unaffordable debt into new unaffordable debt (but with the German taxpayer on the hook) - Eurobonds will be the post-default (financial apocalypse) reconstruction device, it just needs a bit more... working out. They just need some steriods for the EFSF parrot / sock puppet first while they get the other one ready.
At least, I hope so - otherwise we're really fecked.
The biggest SCAM is being able to take the debt of one country and list it as an asset on another countries balance sheet.
The EU is like "Musical Chairs", except that when the music stops, there won't be any chairs.
Kind of like the band playing on into the night on the Titanic.
Basle III...guvvies for bank Tier One up the wazoo...SPP (Self-Perpetuating Ponzi).
Don't insult Hedge Funds !!!
http://books.google.com/ngrams/graph?content=freedom%2Cgold&year_start=1500&year_end=2008&corpus=0&smoothing=3
I keep mentioning the ngram viewer but I love the possibilities with it.
Out of millions of books, you can look up the usage of terms over time.
Check out searching "freedom,gold". They are parallel *until* the gold window was closed and they crossed. Now look at the right side, they are growing closer to each other.
I think the ngram viewer is a very useful piece of software as it reflects on the psychi of the people of that time through their writings.
EFSF is -guaranteed- monoline-insured to succeed.
But hey, pitching a bitch is bitch: "When a man with experience meets a man with money, the man with experience leaves with the money, and the man with money leaves with an experience"
Nothing happening? The Bots can't get enough Euro and ES right now...or shorts are covering in anticipation of a speech filled with sex, lies and videotape
Let's hope the decision has been made to flush Greece and take their lumps...
Peter, well done. A nice easy way to navigate the ridiculousness of the situation.
Sorry, off subject… (or is it?)
UPDATE:
10/20/11 @ 11:01 AM Bought GLD @ 156.99 . As stated previously, I was waiting for 154 but a slight possible variation to the trend-line would point to this as the sweet spot. With a 2.5% stop I’m still OK if we go down to the original trend-line. I should be in for the next few weeks (months) if I can make it through this week. Cheers!
I wrote on 09/23/2011 - 16:25 http://www.zerohedge.com/news/goldsilver-plunge-fest?page=3
For those interested in the swing for cash using paper PM... IMHO if we reach around 1590 (GLD 154) in two to three weeks we will be back to the bullish 3 year trend-line and positioned for a nice climb in Q4. If we brake through that, we might be repeating 2008 all over again... 6-9 months 25% down. My money is going to be on the up ramp with a 2% stop, but if this is 08 again... Fantastic time to pick up phys at the bottom of the 6 year trend-line.
Disclosure: I'm not as experienced as some of you here so don't use this as investment advice...
OCCUPY THE EIFFEL TOWER
You are taking the hedge out of "Hedge Fund".
I see. Another 'turning crap into gold' story.
This is what I felt like when bankers were pitching synthetic CDOs to me. As a long-time manager and investor in cash flow CDOs (with real assets), I understood the CDO concept well. But the synthetic CDOs never made sense. I was convinced for quite some time that I was incredibly dense.