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The Evolution And Recycling Of The Debt Crisis
From Peter Tchir of TF Market Advisors
The Evolution and Recycling of the Debt Crisis
Evolution:
2007 was the year of the individual. Largely sub-prime mortgages.
2008 saw the shift from the individual crisis to problems at the bank level
2009 started with banks in full crisis mode, but ended the year with a brief vacation from worrying about insurmountable debt
2010 saw the beginning of the sovereign debt crisis
2011 has seen the sovereign debt crisis spiral out of control, banks are back in the crisis mix and individuals are certainly not helping if not back in crisis mode. The feeling that this crisis is bigger and is snowballing is real, because it is. Neither banks nor individuals ever truly repaired their balance sheets fully and sovereigns across the global pillaged their balance sheets for incremental growth and votes.
2012 looks like it will be the year of the supra-national. It looks like any "solution" to this year's crisis will be to push the problem up a level. Creation of new pan-European entities are being discussed while China and the IMF and now possibly Norway step up their support.
Mark Grant, amongst others, have seen the progression from individual to bank to sovereign an saw that each crisis would be bigger and harder to deal with. Now once again the plan is to push the risk up a level - to entities that either don't exist (European fiscal union) or were bizarre entities no one outside of Emerging Markets cared about (IMF). What power these entities really have other than being a good way for individual countries to hide their risk remains to be seen. Since nothing is being actually fixed at the sovereign or the bank or individual level the next crisis will be bigger and uglier and sooner than ever.
All the evolution of the credit crisis is dis-prove the adage that cr@p rolls downhill, because clearly it flows uphill.
Recycling:
Clearly all "bad" ideas are good again. Enron perfected the Special Purpose Vehicle (SPV) and was a master of off balance sheet guarantees. Guarantees with their own equity as collateral in many cases.
SIV's are SPV's with leverage. The kind of "asset" that got Citi in huge trouble and almost took down the bank. SIV's had a special place in CDO hell, but I guess you can't keep a good idea down.
Detachable insurance. So the EFSF would sell insurance that would come with a new issue bond but could be detached and sold separately? If that doesn't sound a lot like the evil enemy "CDS" than I don't know what does. The biggest detractors of CDS always seem to say it is like buying fire insurance on your neighbor's house. U never agreed with that analogy but this is definitely like buying fire insurance on a house that doesn't cover you in event of fire.
The details will be interesting but they had better do as much with cash up front as possible because and ability to require cash in times of stress creates the contagion death spiral they are allegedly trying to prevent.
Clearly everyone "gets it" now. What "it" is and how much damage "getting it" will cause remains to be seen. I find it really hard to believe this is better than forcing a Greek default and restructuring or defaults at the weakest banks and other sovereigns and then getting Italy an Spain to clean up their act.
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Peter: Are you still short the market? You must be having a bad month. How best to hedge in your view?
agreed. As I said before, seeing CNBC talking up the market is disgusting, but it's also not a good feeling to see this site totally focusing on the negative stuff. speaking of polarizing country, it is hard to find a website that could be relatively "neutral". To the financial related issues, can't we just have a site focusing on earning money?
most of postings to me here is like "I believe something, but it's not proving right, so I just keep bitching". kind of sad.
until it does prove right. I believe it was Churchill who said, "I may be drunk, Madame, but in the morning I'll be sober and you'll still be ugly."
or something like that...
Good one, JD!
"You can always count on Americans to do the right thing - after they've tried everything else."
Winston Churchill
@root: in regards to ZH's actionable advice, the only thing I would take seriously is that buying physical hard assets is the only call.
Aside from that, you'll get so much conflicting "actionable" advice that it's impossilbe to follow. So the simple rule should be: don't.
i root for....well why dont you go start such a blog?
now you are mocking me! I would love to though - need the initial funding from VC. maybe I should switch to the other side - it seems like the govt has a lot of cash to spare. just move a bit to me from the solar panels
Gentlemen. You are truly indeed pointing out a genuine market need. Want ZH staff to work to build something like this? Fund them or sit down and keep complaining about the lack of independent media providing facts. I know funding organic growth sounds unsexy but I must admit, aggregating some and building some has been neat adventure. Forget the joy of innovation gentlemen? Then you people have died and not even known it.
Zh is free. Zh actually has lots of analysis. Pick and choose what to follow and when. How many people turn to zh as first source of news and analysis? Always right - hell no. Negatively biased - yes. Attempts to be thought provoking cut through the bullshit and dig deeper than the headlines? Hell yes!!! That is why people come here. Greece - way ahead of curve at zh. Dexia - there was no curve to be ahead of. MS and DVA blew the street analysts away. PM's if you only followed recently not so hot but if you started buying early still good.
Go to cnbs. Liesman still backslapping over breaking stories that not correct and sold off. Follow Cramer. Do what you want but zh was never meant to be perfect - it's fight club - but has been right for more often than t has the right to be
2013 the year of midgetrannyporn
1913 was the start of the sovereign debt crisis. Sovereign countries don't have to borrow their 'own' money. See the united states note.
Dang, mine just say Federal Reserve Note. Aww, you made me look!
That's why I "exchange" them for shiny silver quarters and dollars as often as possible.
He's talkin about the greenbacks man.
http://en.wikipedia.org/wiki/United_States_Note
Off topic: but like every other world indice, you just know the U.S. Markets will close at their highs of the day. Sigh.
Oh, and another off-topic: you notic how many companies that DID disappoint and sold off, IBM, AAPl JNJ, etc., are all getting jacked up in this market too?
Correlation 1:1. No need to ever trade an individual stock again.
the only good SIV..... is on the bottle of Makers Mark
Crap (debt) may be seemingly flowing uphill as the onus is placed higher and higher, but the ultimate result will be all this crap avalanching downhill onto the taxpayer with endless bailouts and money printing...
EFSF = Eurozone Financial Suicide Fund
...watch the village idiots of Europe cue up to sign their countries on the dotted line...
Thats just what its for, to chain all of Europe so tightly together as one that no one can escape, it will be taken down as 1 entity. Sure, you can get EFSF....sign your country's sovereignty over on the dotted line....remember the early scenes of The Outlaw Josie Wales? 'Sign right here you men, youll be treated fairly'...gatling gun next mows them all down.
There you go using logic again.
The whole idea behind the EFSF re-packaging of debt into SIVs and levering up is to stall in anticipation of the "miraculous recovery". Which will never come. Because the debt itself along with other realities will always cause the "recovery" to be stillborn each and every time, requiring a deeper adn riskier stall to wait for the next "miracle"
Italy and Spain clean up their act? Have you ever BEEN to these countries?
There is a reason the women there happen to be some of the most beautiful....everyone is in leisure mode 24/7.
Greece should default for their OWN behalf. That, and the fall of the banking system do to it would be lulzy.
Oh they "get it" all right. They just refuse to face the hard decision of doing the right thing. That would be the true "getting it".
Break up the banks
Full Greek default
Kill Nanny state politics
So, with that, we're doomed. Buy silver, MRE's, farm land, protective lead ejecting hardware.
1257 a must close above or computers will freak
MSM's are doing eveything they can to help this process. i.e.-CNBS putting CAT CEO on for interview after 3 pm (most CEO earning interviews are in morning).
Get ready for 3:30ish algo-boner headline du jour to cap it off.
'If [detachable insurance] doesn't sound a lot like the evil enemy "CDS" than I don't know what does.'
So the eurocrats have no objection in principle to CDS -- they just want to be the monopoly issuers of it!
Typical statist hypocrisy ...
If the EU and the FED issue a draft together, it could trigger enough liquidity to ramp the market 100 SP points. destruction for anyone short, of course all of the inflation they creat will be just transitory....lol
Ya just should have known Ben wouldn't be outdone by a declining EUR. Kicking myself in the nuts and kicking my own ass at the moment.
Just one more crisis, please!
That's what Gordon T Long has been predicting for a long time. He is currently targeting 2012 for currency collapse(s) and a new currecy in 2013.
I know, I know, the whole thing is Enron 2.0. Why don't they release enron execs and Madoff? They did nothing wrong but experimented what everyone else will eventually do.
Many of us come to ZH to affirm our joint opinion that the debt crisis will cause a collapse. Because we are clear in our vision, we want the markets to also affirm that we are 'correct' and not 'perma bears' or cronic negative thinkers. Trouble is, the markets won't comply. Being denied this gratification, some ZHers start to doubt themselves and contain or modify their opinions. But true believers remain true to their core and never abandon their asset positioning and do not use leverage.
Using leverage is hypocritical to the ZH belief and if a person wants to play Mr. Markets games, be prepared to lose.
"The more the plans fail, the more the planners plan."
Maybe these solutions would be good if our economies could grow out of the problems. "Growth" is the panacea that comes out of every pols lips but it is BS. We cannot possibly grow out of the problems because the debts are too large! And they magnify with the passage of time. I'd like to ask Ben Bernanke, Tim Geithner and anyone in Europe who suggests that growth is the solution to show me their numbers. Come on main stream media... ask some questions here.
Correcto...growth is no longer possible bacause all these extend and pretend schemes are focused on making sure the current pile of crappy debt can be serviced. Countries are not getting gobs of new money to waste on pork barrel projects or buying high end manufactured products from Germany and Japan and cheap snazzy crap from China/Asia.
A credit bubble of epic, global proportions burst in 2008.
It doesn't work like that.
Deus et machina incarnatus.
Off topic. My new avatar is a graphic of "1318 companies that control (60 percent of) world assets", and how they are all tied together.
http://www.businessinsider.com/capitalist-network-runs-the-world-2011-10See this
http://tiny.cc/otg4x
Thanks. After reading the author of the study's comments, change BI's word "control" to "potential control through ownership".
Everything is ok, everything is fine.... all is going up... sure because, politicians all over the world are REALLY engaged with the financial system. so, it's a bad news for shorts...
We all must be satisfied with this financial people, they are going to get -again- their fantastics bonuses due to the happiness of the economy... UP UP UP. Financial engineering, once again is a very good thing for people happiness. WTFIT?
dream, dream , dream...
The market manipulators dont gain anything by 'market up up up'....they do 'market up down up down'. No sense of a pump without the ensuing dump, Bulls money just as green as Bears money, hell everyone knows that.
The Vatican has different ideas about what should be done, and if you watched Godfather 3 you know they run the entire show.
Vatican calls for global authority on economy, raps “idolatry of the market” | Reuters
Many assumptions here that I find repulsive -
1) The assumption that OWS would be for this global governance model.
2) The assumption that this global governance model would serve as an effective counter-weight to the international finance cartel aided by the political-managerial class.
3) The assumption that this supranational organization would manage finances better than Wall Street.
I love watching the market close these days....
I have an image of some fat guy sitting in a windowless room somewhere drinking diet coke. In the room are 2 super computers - one is labelled "buy", the other labelled "sell". When ever the market needs a boost he gets a text message and hits the button and the 2 supercomputers spring into action buying and selling to each other. Market prices go up. When he is not hitting the button, he plays World of Warcraft.
People on Zero hedge spend all day and night trying to interpret the market gyrations, slowly going mad in the process.
I dont, Im just watching it all from the bleacher seats with my shit proof poncho on for when the shit hits the fan.
Where did you get the shit proof poncho? My last one failed and I am looking for a better one.
Remember Euro shit is stronger than domestic shit, so be careful.
Army surplus. They have unlimited funding to procure only the finest equipment.
Someone mentioned earlier that the "lunatics are in charge of the asylum" Sadly, it appears the asylum has been closed, and the former patients are now wandering the streets offering advice. Yet, these wandering souls with mental illness so profound that they are unable to seek help, are still in charge, still being directed by people from the asylum that have one goal. Keep the asylum the same as it ever was.
We are subjects of a crown that has nothing but contempt for us, and still demands we worship them. We have inbred rulers incapable of understanding how hopelessly deficient their mental faculties are, and that are never questioned about their incompetent decisions when everyone knows they are beyond irrational.
it is 1775, we have no representation, we are being taxed to death, the leaders are unresponsive, and we, the people, have no say in our own nation. These times are those times that try men's souls.
Sadly there is no new world this time around.
The united states of Antarctic?
http://www.youtube.com/watch?v=Sbmo0MfLiBE
John Cale - Antarctica Starts Here
Everybody's gone serfin'...
Serfin' U.S.A.