Evolution Securities Warns Of "Total Carnage And Meltdown" As European Bank Sales Of CDS On European Sovereign Debt Soar

Tyler Durden's picture

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Tsar Pointless's picture

So I should count on seeing another seven or eight low/no-volume melt-ups in US and EU equity markets between now and Christmas?

Okay, then. S&P 1330 here we come!

Chris Jusset's picture

"If European counties the size of France or Italy actually defaulted and triggered CDS, there would be total carnage and meltdown. It would be the end of the world,"


Oooh ... now things are starting to get really interesting ....

LawsofPhysics's picture

Threats of financial terror from paper-pushing fucknuts.  How did that Greek CDS thing work out for them again?  Fucking bring it!

Reminds me of an old Bug Bunny cartoon.  I dare you to step over this line, okay, now this line, this line, now this one... etc. etc.

Dr. Richard Head's picture

Who was that assfuck on CNBC today, interviewing Peter Schiff, that said yields should be capped on European bonds.  It's those damn vigilatnes he said.  Caps would fix everything. HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

StychoKiller's picture

Nirvana here we come!  Bonds priced at zero, paying an infinite (∞) interest rate!  Do the math...

tooktheredpill's picture

so i guess Merkozy and the squid won't be allowing any credit events anytime soon. Until they want the next crisis that is.

Stares straight ahead's picture

Naw, that's just an OWS campsite...

Captain Kink's picture
PRECISELY, exactly,  This is exactly the point.  They are right, CDS triggered through a massive event is the end of the entire system AND denial of contracted CDS terms annhiliates the value of Sovereign Debt as every holder sells down their exposure to levels that CDS would have ameliorated via hedge and thus "netted" lower...   This drives higher, unsustainable borrowing rates and the end of the entire system!   There Is NO Way Out. 
LawsofPhysics's picture

Fine with me, that was my point.  The banks are calling in their CDS hodlings on their own countries in some cases.  So who do they expect to actually pay?  Are you saying these banks are now going to turn to their own governments and taxpayers and say "pay up, or else"?  Now that is fucking funny.  End the system, fine.  Many of us still deliver things that people need.  Let the massive restructuring begin already.  It will be good for all of us.

Joeman34's picture

Nope, TPTB will never allow a 'credit event' meaning CDS will never be triggered meaning this won't happen.  Perfect example is the fact Greek CDS has not been allowed to trigger...

JLee2027's picture

The article states a CDS trigger has become irrelevant. As CDS prices rise, cash needs will overwhelm and destory the banks anyway.

Joeman34's picture

Who will continue to believe the CDS market knowing that its a sham?  You need new buyers for prices to rise.

Dr. Richard Head's picture

But then the typical liquidity argument comes into play.  I heard a good argument that liquidity shouldn't be provided if there is no longer a market for the shit someone is selling. I agree with that premise indeed. 

Vergeltung's picture

I see reading comprehension is not your strength. Article indicates it's ALREADY BEEN BOUGHT, by those banks, on their own countries, in amounts that will bleed them dry regardless of a CDS trigger event.


tarsubil's picture

Oh dear, it appears I've gone crosseyed.

smiler03's picture


T. S. Eliot

edit: spelling mistook

onebir's picture

"I see reading comprehension is not your strength."

Nor yours:

"BNP Paribas SA, France’s biggest bank, *sold* a net 1.5 billion euros ($2 billion) of credit- default swaps on the nation’s sovereign debt, according to data compiled by the European Banking Authority."

(If they'd bought them, the seller would be in trouble...)

Amish Hacker's picture

 I think you are being far too logical. What's relevant and irrelevant is a matter open to adjustment. Even if  "positions are netted at the end of the trading day with virtually no exceptions," that might mean that we're about to see some exceptions.

Crisismode's picture

TPTB will never allow a 'credit event' meaning CDS will never be triggered meaning this won't happen.


Until one bright sunny morning when two snowflakes nudge each other, and those two nudge four more, and those four nudge eight more. . . . and 10 seconds later a small drift rolls into another small drift . . . . and 20 seconds later the avalanche begins . . . . 30 seconds later the entire side of the mountain is sliding downhill . . . and 60 seconds later the city at the base of the mountain is buried under 200 feet of snow.

TPTB will exercise control . . . . until it doesn't. And when it loses control, it will lose it very, very fast indeed.

LongBallsShortBrains's picture

joeman...Did you miss this part?

"banks will simply bleed to death due to daily variation margins demanding more and more and more cash each and every day as spreads blow out wider. Recall that in CDS trading, variation margins has to be posted and positions netted at the end of the trading day with virtually no exceptions. Which means that a CDS trading at infinity (or the underlying bond trading at zero which is equivalent) will put the seller of such product into insolvency, whether or not an actual event of default has been declared, thus making ISDA involvement irrelevant'

LawsofPhysics's picture

Yes, what is the best way to short the entire CDS market?  Perhaps this simpy means the end of paper altogether and the question is mute.

WonderDawg's picture

"Moot" is the word you're looking for there. Not mute. Moot.

LongBallsShortBrains's picture

'what is the best way to short the entire CDS market?'

Jump on the same side of the trade as the banks and go short. (not advised)

TruthInSunshine's picture

707 trillion USD notional value of derivative contracts floating out there, chiefly amongst major financial players, all interwoven throughout what is a repository of what would be the receptacle of fungible source of payment, fiat (chiefly USD/EUR).

So, just for purposes of simplicity, cut that number in 1/2 as a first step, as, and again, bear with me for a moment in trying to reduce this to the basic elements, 1/2 of the derivative 'bettors' will win, and 1/2 of the derivative 'bettors' will lose.

Thus, we are left with approximately 358.5 trillion in derivative 'bets' that would become payable to winning counterparties, over some period of time.

As a second step, let's just throw a SWAG out there that in the event of systemic, global event that throws world credit markets into turmoil, 10% of outstanding derivative 'bet' losses would be triggered, and thus become payable (you can use whatever % you'd like, since this is mental masturbation).

10% of 358.5 trillion USD = 35.8 trillion USD.

As a third step, this is just the derivative, off market, unregulated exchange, but that will have major implications for any adversely affect counterparties and creditors of those counterparties, who have relationships with those counterparties based on deposits, leases, equities, bonds, mortgages, etc. etc., so that the contagion affect of the [10%/20%/whatever%] of the derivative 'bets' that would become triggered in the event of a global systemic crisis would become quite large, and impact the banking, equity, credit, general bond and sovereign debt markets, including pensions, 401(k)s, mutual funds, money markets, etc. etc. etc. pretty quickly.

I wonder what % of the 10% of the 50% (which is the winning side of the total ledger) that would have to pay up would be able to, if such an event were to take place...

I don't have any specific point, but was just thinking out loud.

Chief KnocAHoma's picture

All very good points and analysis. The total nut is not 700-trillion... it is a fraction of that as you have sumarized, but also as you have noted...37 trillion is more money than even Corzine can steal. Where will it all come from?

Dr. Richard Head's picture

Where? From my ass, your ass, and anyone's ass not connected to the lips of Goldman, Londan, the IMF, ECB, and other assorted legalized theft operations. Fuck fiat and the Congress it rode in on.

earwiggle's picture

Agreed Richard, the workers create the wealth. Our skills are not lost. Money is nothing, Capitalism is flawed.

vast-dom's picture

Precisely! SP up is what's truly mind-boggling!!!!!!!!! 




I got some derivatives to the Nth I'd like to peddle against ur CDS's pls.

john39's picture

why not?  they know that the ship is going down.  why not steal money by selling this shit.

The Axe's picture

I am with you on the melt-up......5 melt up no volume...one big volume wash out day...rinse....do it again until new years...

AbelCatalyst's picture

It's like a bum on the street selling million-dollar life insurance policies... Anyone who buys this crap is an idiot!

billhilly's picture

Well put Abel.  An analogy even a billhilly can understand.

Honey Badger's picture

Or like selling insurance against the end of the world without a reserve fund to back up your policies.

Willzyx's picture

selling insurance policies to good christians to take care of their pets after the rapture

matrix2012's picture


"Or like selling insurance against the end of the world without a reserve fund to back up your policies."

ha ha quite funny...WHY an end of the world needs any fund??? does heaven or hell need any mundane fund??? LoL

+1 coz it's amusing :)

TruthInSunshine's picture

I am planning on starting a company, whereby most of my initial investment goes into hiring an esteemed and highly credible spokesperson/executive, marketing firm, and in the event that I want to go public some day, payments to a prestigious underwriter giant of Wall Street, with my said company engaged in the bisnazzz of selling all types of derivative, insurance, hedging or any other type of policy/contract/indenture, etc. at a price that is far below competitors (and for good reason, as follows).

In the event that the revenue my company receives is at any point unable to pay out liabilities outstanding, I will simply declare bankruptcy, after having fleeced the company for what will have been hopefully many years, pulling down ludicrous salary, stock options, pensions, use of corporate assets, and generally filtering the bulk of the initial revenue derived from operations into my pockets and those of my co-execs and board of directors.

Hey - isn't this how the equity game is played, anyways (with shareholders last in line, and bond holders having relative priority, but still a shitty posiition, next)?

At any rate, I know there are technical capital reserve requirements of 2.3% to maybe 5% (of outstanding liabilities that could unicornium-gamed be projected to be triggered any one given simultaenous point in time) to run a scheme like this, so now I need to go about the business of bribing...I mean meeting with the appropriate regulators and ensuring that I comply with these capital reserve and any other prerequisite regulations.

I've been thinking of naming my prospective entity 'London Werewolf, Inc'.

I wanna be bona fides, legit, compliant - yo.

topcallingtroll's picture

Your strategy is the classic insurance scam used for centuries until insurance became ostensibly regulated.

(Ostensibly---apparently but not actually)

New word I learned this year.

hadriansnightmare's picture

I just watched an old movie called "high pressure"  1932
pretty much your company but they were selling artificial rubber that didn't exist.

Funny thing, the rubber industry bought them out for nuisance value at the end.... and they all made money.

LongBallsShortBrains's picture


It is better not to talk about that.

tedstr's picture

.....drinkin a pina colada at trader vics

luckylogger's picture

Are you taking resume's yet. I have a business degree in finance and have been trading for 7 years and would love to cut a head off of the squid. I think it is one of the best business models out there, ask Mr. Corzine.

dereksatkinson's picture

It looks like the ECB is engaged in QE afterall!



The ECB's decision to provide unlimited 3-year liquidity to banks should give them the funds they need to finance economic growth and purchase sovereign debt, helping to lower euro zone bond yields, ECB Governing Council member Christian Noyer said.

In an interview with French news channel LCI, Noyer also said that a EU summit deal on Friday to move toward greater fiscal union in Europe should help to underpin a recovery in confidence.

"What we decided yesterday in the governing council of the ECB was to use our bazooka ... so that banks can continue to do their job, continue to provide credit to the economy and ... buy sovereign debt," Noyer said.

"That is the role of insurance companies, banks and financial investors. We will give them all the liquidity they need so they can do this."

Noyer said Friday's "historic" agreement by European countries to set automatic sanctions on budget rule breaks -- agreed by all 27 EU members except Britain -- should help stabilize investor sentiment toward the euro zone.

"I am convinced that this should be well received and that should allow interest rates to fall," he said.

by Stephanie Ditta 10:28 AM


Snakeeyes's picture

Seriously folks, look at the IMF's forecast of Eurozone GDP. It STINKS! And they predict that Greece will be the big GDP growth champion! Seriously!

This is all a bad joke and just meant to prop up banks. Period. EOS.

Europe Moves Ahead With Fiscal Union, UK Declines – Europe Buys More Time With Bailout And Vague Promises Of Budget Cuts – Mission Impossible!


TooBearish's picture

Hate to rain on ur Armegeddon Play Mr Durden , but I think that selling soverign CDs will work for them banks and is a cheap source of "funding" for them....NOW GO AHEAD AND TRASH ME

Tyler Durden's picture

No need Joe Cassano. History has spoken.

gojam's picture

"History has spoken."