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Here Come The CACs: CDS Trigger Is Next

Tyler Durden's picture


First comes the CACs. Then the forced debt exchange offer. Finally - default: as defined by both the rating agencies and ISDA, together with triggered CDS.

From Bloomberg:

The Greek government is drawing up legislation that could be used to impose loses on investors who don’t support the debt swap that’s part of the country’s new bailout package, said two euro-region officials familiar with the situation.


The law may be introduced to parliament in Athens in the coming days, said one of the officials, who spoke on condition of anonymity because the deliberations are confidential


Euro region finance ministers are prepared to back the use of so-called collective action clauses if a voluntary debt swap doesn’t draw enough participation, the other person said


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Fri, 02/17/2012 - 13:45 | 2170332 Temporalist
Temporalist's picture

Everyone's swapping spit but nobody wants the mono.

Fri, 02/17/2012 - 13:50 | 2170365 nope-1004
nope-1004's picture

Tyler, aren't the CAC's invoked to stop a CDS trigger?


Fri, 02/17/2012 - 13:57 | 2170406 trebuchet
trebuchet's picture

my understanding is it wont stop holdouts and brings that subordination thingy into peoples nightmares....

.. which will take some time for people to translate credit risk change ACROSS EUROPE (Ouch!!! ) to wider EUR weakness

Fri, 02/17/2012 - 14:06 | 2170456 There is No Spoon
There is No Spoon's picture

not in this case because this cac would be retroactive.

Fri, 02/17/2012 - 14:30 | 2170620 GOSPLAN HERO
GOSPLAN HERO's picture

It's time for Greece to flat line.

Fri, 02/17/2012 - 14:00 | 2170417 Chief KnocAHoma
Chief KnocAHoma's picture

Does this mean American Idol will be canceled?

Fri, 02/17/2012 - 13:46 | 2170336 WALLST8MY8BALL
WALLST8MY8BALL's picture

CDS with CAC's - Kind of funny!

Fri, 02/17/2012 - 19:39 | 2171831 masterinchancery
masterinchancery's picture

Sounds like a couple of venereal diseases--very appropriate.

Fri, 02/17/2012 - 13:46 | 2170337 Harlequin001
Harlequin001's picture

and all those people who thought they'd got away with it are going to have to pay...

Fri, 02/17/2012 - 13:46 | 2170338 falak pema
falak pema's picture

anti banksta fire wall of Troy!

Fri, 02/17/2012 - 13:46 | 2170340 PicassoInActions
PicassoInActions's picture

if such law will exists, why not to use for 100% haircut?

Fri, 02/17/2012 - 13:50 | 2170363 taniquetil
taniquetil's picture

It's only a matter of time.

Fri, 02/17/2012 - 13:57 | 2170408 WestVillageIdiot
WestVillageIdiot's picture

Not for the politicially connected. 

Fri, 02/17/2012 - 13:46 | 2170345 sankol
sankol's picture

So it begins!


Fri, 02/17/2012 - 13:50 | 2170369 Martial
Martial's picture

This is it!

Fri, 02/17/2012 - 14:06 | 2170446 Chief KnocAHoma
Chief KnocAHoma's picture

I have been hearing this for five years now. The sky is falling... a wolf is coming... no really honey I won't blow in your mouth...

Calm down... the World ain't gonna end... but buy some ammo just in case.

Swear to God that was the advice from one of my brokers at a party last night. The question was what should I be accumulating?

His answer - ammo



Fri, 02/17/2012 - 14:11 | 2170494 Martial
Martial's picture

haha...crazy thing is I've been given similar advice from people you wouldn't expect to say such things.

Fri, 02/17/2012 - 14:25 | 2170592 Temporalist
Temporalist's picture

If either of you are like the majority of the American Idiots you aren't heeding the advice.

Fri, 02/17/2012 - 14:42 | 2170663 IrritableBowels
IrritableBowels's picture

Tested both.  FAST shipping @ cheaperthandirt.


Federal 180 gr. .40 cal HST JHP-50 rds. for 19.89. - - - As cheap as plinking FMJ's.


Edit:  Thought the following description would be appropriate:

"A specially designed hollow-point tip won't plug while passing through a variety of barriers and this bullet holds its jacket in the toughest conditions"

Fri, 02/17/2012 - 15:19 | 2170871 Chief KnocAHoma
Chief KnocAHoma's picture

Hey dude... you would have to know me for more than one minute to determine I am an American Idiot... I went to college and have a job and pay taxes...

What was I saying I lost track. Any way it ussually takes people several days to determine I am an idiot.

Fri, 02/17/2012 - 13:48 | 2170348 JPM Hater001
JPM Hater001's picture

Somebody please... "CACs"

Fri, 02/17/2012 - 13:53 | 2170386 Conrad Murray
Conrad Murray's picture

Picture a bunch of technocrats running around desperately trying to find the can they're supposed to kick before it disappears. A rumble comes from the sky. It's a squadron of bondholder bombers. They set their sights on the can, maybe even coyly hoping to level a few technocrats in the process, and let the CDS munitions loose...CAC CAC CAC CAC CAC

Fri, 02/17/2012 - 14:07 | 2170469 Chief KnocAHoma
Chief KnocAHoma's picture

Too freaking many cans and not enough feet!

Fri, 02/17/2012 - 13:56 | 2170401 The Swedish Chef
Fri, 02/17/2012 - 13:48 | 2170350 resurger
resurger's picture

32,000,000,000,000 worth of Pyro ....

Fri, 02/17/2012 - 13:48 | 2170354 EuroBear
EuroBear's picture

Time to load up EUR shorts.

Fri, 02/17/2012 - 13:49 | 2170360 asteroids
asteroids's picture

Does anyone have an example of a CDS every paying off???

Fri, 02/17/2012 - 13:55 | 2170395 resurger
resurger's picture

They willl pay when hell freezes over.


Fri, 02/17/2012 - 13:59 | 2170413 NotApplicable
NotApplicable's picture

GS was paid nicely by AIG, errr... make that you.

Fri, 02/17/2012 - 14:08 | 2170475 Chief KnocAHoma
Chief KnocAHoma's picture


Fri, 02/17/2012 - 13:50 | 2170362 trebuchet
trebuchet's picture

Ouch, keep the REAL newsflow that MATTERS coming Tyler!  

It is much appreciated.


Ive closed out my longs today was a good ride up on the Rumour/Momo machine, looks like one hell of a ride for the weekend ahead

Fri, 02/17/2012 - 13:51 | 2170373 rubearish10
rubearish10's picture

Slow day. Add this to the weekend "drama" list. 

Fri, 02/17/2012 - 13:52 | 2170375 Cognitive Dissonance
Cognitive Dissonance's picture

"The Greek government is drawing up legislation that could be used to impose loses on investors who don’t support the debt swap that’s part of the country’s new bailout package, said two euro-region officials familiar with the situation."

So......would someone please explain to me the difference between this and good old fashioned highway robbery?

Highway Robbery


Fri, 02/17/2012 - 13:56 | 2170400 nevadan
nevadan's picture

It is legal...(cough cough)

Fri, 02/17/2012 - 13:56 | 2170403 BlackSea
BlackSea's picture

The inconvenience of being stopped in order to be robbed has been eliminated.

Fri, 02/17/2012 - 14:02 | 2170425 WestVillageIdiot
WestVillageIdiot's picture

"As through this world I've wandered
I've seen lots of funny men
Some will rob you with a 6 gun
And some with a fountain pen"
-  Woody Guthrie

It kind of says it all. 

Fri, 02/17/2012 - 14:10 | 2170492 gmrpeabody
gmrpeabody's picture

On a scale of 1 to 10 in honesty..., the man with a gun will usually score several points higher than the man with the pen.

Fri, 02/17/2012 - 13:59 | 2170415 BliptoP3
BliptoP3's picture

for one, highway robbery is much much quicker.

Fri, 02/17/2012 - 14:00 | 2170416 NotApplicable
NotApplicable's picture

You'll get a receipt?

Fri, 02/17/2012 - 14:39 | 2170648 Uchtdorf
Uchtdorf's picture

Pity that none of the men being robbed carried a weapon. (BTW, it looks like the stage coach driver is in on it. "Hurry it up, will ya? It's cold out and I want to put me feetsies up in front o' the fire.")

Fri, 02/17/2012 - 13:51 | 2170376 DOT
DOT's picture

Maybe they could pass the hair-cut legislation in secret.

Then the secret financial police could (with ECB assistance ) make the collar.

No one needs to know............Shhhhhhhhh.


Fri, 02/17/2012 - 13:52 | 2170381 fonzannoon
fonzannoon's picture

Is there a point where the market does not like this stuff?

Fri, 02/17/2012 - 14:03 | 2170439 WestVillageIdiot
WestVillageIdiot's picture

Yes.  And to the person that can find it there will be great riches.  And for all of those seeking that magic moment, and time it wrong, there lies much pain and hardship. 

Fri, 02/17/2012 - 22:08 | 2172108 WonderDawg
WonderDawg's picture


Fri, 02/17/2012 - 13:53 | 2170384 williambanzai7
williambanzai7's picture


Fri, 02/17/2012 - 19:32 | 2171814 Cpl Hicks
Cpl Hicks's picture

It looks less like a Persian Messenger than Barry Obama wearing an east-African ghetto beanie but the lecturing with the pointer is very apt, given the academic credentials of our Dear TOTUS.

Fri, 02/17/2012 - 13:53 | 2170388 tobinajwels
tobinajwels's picture

Does this mean a Default? Final Chapter?

Fri, 02/17/2012 - 13:53 | 2170389 fonzannoon
fonzannoon's picture

The volatility index is on the floor with all this about to unfold. Makes sense.

Fri, 02/17/2012 - 22:10 | 2172113 WonderDawg
WonderDawg's picture

Makes sense from a complacency/all is well perspective, which appeals to the contrarian in me.

Fri, 02/17/2012 - 13:56 | 2170394 AC_Doctor
AC_Doctor's picture

Oh my, the poor Precious Metals Suppression Conglomerate is going to need permanent iv's coctails of Xanax and Oxycontin to help them cope with their upcoming pains and stress while gold and silver shoot to new highs. 

Fri, 02/17/2012 - 14:02 | 2170431 NotApplicable
NotApplicable's picture

Physical sure, but I wouldn't bet on the paper price following a logical path.

Still way too many weak hands to shake out first.

Fri, 02/17/2012 - 13:55 | 2170396 lolmao500
lolmao500's picture

Anyone who bought Greek bonds should lose 100% of their money, plain and simple.

Fri, 02/17/2012 - 14:03 | 2170437 NotApplicable
NotApplicable's picture

But Papa said they were good for it!

Fri, 02/17/2012 - 14:05 | 2170453 WestVillageIdiot
WestVillageIdiot's picture

"Anyone who bought Greek bonds should not be punished for their noble act of courage."
-  Central bankers

Fri, 02/17/2012 - 13:56 | 2170399 adr
adr's picture

I feel like I'm in a room of a whole bunch of filthy rich people. All of a sudden some guy comes in and says,"Guys you know that safe bet we all went in on? Turns out it wasn't so safe, we've lost everything." Another guy says, "Well who knows about this?" The guy replies, "Well only us and the broker, he lost everything too."

The other guy replies, "Well if nobody knows, then everyone thinks we're still rich. Let go buy everything we can and skip town before anyone finds out. Leave the suckers to take the fall."

Fri, 02/17/2012 - 14:00 | 2170402 TradingJoe
TradingJoe's picture

The Fat Lady(Merkel) hasn't finished singing, yet!


As in..."if we can't sucker them in from the long side, let's try it from the short side, again! What a nice squeezzzeeee, AGAIN!" Or NOT!

Fri, 02/17/2012 - 14:07 | 2170464 WestVillageIdiot
WestVillageIdiot's picture

Has she at least finished cleaning out her crack for tonight's performance?

Fri, 02/17/2012 - 13:56 | 2170404 combatsnoopy
combatsnoopy's picture

Who wants to make a bet on the next European riot?  After buying gas, I still have a few worthless greenbacks to throw into the pile.  They may not be worth as much when this debacle occurs.  

Fri, 02/17/2012 - 14:03 | 2170430 BliptoP3
BliptoP3's picture

I'll put in a couple bucks on the Irish.

Fri, 02/17/2012 - 22:13 | 2172117 WonderDawg
WonderDawg's picture

I'll put a fiver on Greece. Stick with the hot hand.

Fri, 02/17/2012 - 13:57 | 2170407 Madcow
Madcow's picture

isn't there a court date - or some kind of deadline to determine if there is in fact a default or in fact not a default?

Or is the plan to have 30 years of limbo, confusion, rumors and unconfimred press releases?

Fri, 02/17/2012 - 14:02 | 2170427 Conrad Murray
Conrad Murray's picture

If you can't dazzle them with brilliance, baffle them with bullshit.

Fri, 02/17/2012 - 14:09 | 2170486 trebuchet
trebuchet's picture

@Madcow and TradingJoe,


EU have issues signing off on the full bailout: (Belgian, Dutch dissent, Mekel/schooble rift, Fins holding out for collateral) plus upcoming LTROII so need to buy time. 

PSI deal is sticky, some looking for ECB to get down to their level in the deal, which is not going to happen, its a central bank. 

Greece has a weapon they proved they can use: Democracy via parliamentary vote (they lost the far right) plus the peoplez who by vast majority dont want euro exit (of course they dont want pain either).

So plan of action is to talk up action, screw the PSI deal for what it can take, rope up as many holdouts with CACs via Greek parliament (but some under UK law...) and wait for march 20 to make the payment from a mini-bailout 

 - then deal with the fallout..... 

... ratings agencieswill declare a selective default (they said so) but if it doesnt trigger CDS then they hope to skip the consequences, but... as Tyler keeps saying this leads to whole issues across europe


Thats my understanding of where things are going into the weekend...











Fri, 02/17/2012 - 13:57 | 2170409 q99x2
q99x2's picture

And here comes the US markets counter attack: Congress Passes Payroll Tax Cut Bill, Sends to Obama

Fri, 02/17/2012 - 13:58 | 2170410 skistroni
skistroni's picture

Our GS-given Prime Minister convinced (most of) the deputies that default would meant chaos. So they supposedly voted "not to default". 

They should be very careful in phrasing the CACs, because if it eventually means "default" there might be more deputy resignations coming. ("You said that we wouldn't default, and now you're asking us to legislate the means to default?")

It's getting more complicated than their IQ can handle.

Fri, 02/17/2012 - 14:01 | 2170423 Jlmadyson
Jlmadyson's picture

So March 28th is on then.

Fri, 02/17/2012 - 14:07 | 2170467 astoriajoe
astoriajoe's picture

Will make sure I've got plenty of beer, nachos and guacamole at my desk that day.

Fri, 02/17/2012 - 14:05 | 2170450 Rathmullan
Rathmullan's picture


Good! But either way, the pastrami munchers at the NYSE are, as usual, being lazy and stupid because either: A) The bond swap and haircut triggers the Credit default swaps CDS dominoes fall, or; B) The CDS's are not trigerred, thereby rendering the insurance contracts on sovereign debt null and void with the immediate consequence of increasing the risk premium on all soverign debt.


Fri, 02/17/2012 - 14:11 | 2170499 WestVillageIdiot
WestVillageIdiot's picture

That's the thing.  If they don't declare a default why would anybody ever buy CDS?  It seems to me that the market for CDS should already be dead and buried.

Fri, 02/17/2012 - 14:06 | 2170458 slewie the pi-rat
slewie the pi-rat's picture

hey, shithead!

what "collective" would you like to trade paper with, next?

Fri, 02/17/2012 - 14:09 | 2170480 bobola
bobola's picture

(It would seems that the word 'voluntary' is the key. ..)


Does it matter whether the event is "voluntary" or "mandatory"?

The CDS Definitions do not refer to a distinction between voluntary and mandatory events, though it does come up indirectly. An important element of the definition of Restructuring is that the event has to occur in a form that binds all holders of the "restructured" debt. Thus, for example, if bonds contain a Collective Action Clause (CAC) with a 75% threshold for making a change to bond terms, then if 75% or more of the holders vote in favour, that change is binding on all the holders, even those that voted against. That is, the change does not have to be agreed upon by all the holders to trigger a Credit Event, just the relevant majority of them. In that sense, the change is "mandatory" for those who voted against it. We understand that Greece’s domestic law debt, which accounts for over 90% of all of its outstanding debt, does not contain CAC clauses.

Would a debt exchange trigger a Credit Event?

A voluntary debt exchange typically would not trigger a Credit Event. A restructuring credit event requires an amendment of terms of outstanding bonds or loans, whereas an exchange means the original bonds are redeemed and replaced with new bonds on the new terms. Economically they may be the same but legally they are different, which could have very different consequences for CDS.

Fri, 02/17/2012 - 14:12 | 2170514 AC_Doctor
AC_Doctor's picture

Please give it to me in the ass "voluntarily".  I don't think many bond holders are going for this option.

Fri, 02/17/2012 - 14:12 | 2170505 buzlightening
buzlightening's picture

Law among these bankster vipers.  Walk through the ilk and get bit every time with a high dose of sovereign ruin.  Stand a better chance of squeezing a bb up the thugs tight corrupted asses than having the thieves come in harmony with law.  You don't think 100% possession will be the law among these lawless bankster rat bastards, you are stuck in a mark to fantasy world of assets based on zero.  Reality bites and nothing but hell ahead for ameriCON'd. 

Fri, 02/17/2012 - 14:18 | 2170558 Rathmullan
Rathmullan's picture

And here comes the nationalization of Commerzbank, -- which when you think about it, explains merkel's schizophrenia.

Fri, 02/17/2012 - 14:19 | 2170570 PaperBear
PaperBear's picture

Excuse my ignorance but will someone expand the acronym CAC.

Fri, 02/17/2012 - 14:21 | 2170578 Conman
Conman's picture

Hint its spelled out in the last sentence.

Fri, 02/17/2012 - 15:00 | 2170775 PaperBear
PaperBear's picture

so-called collective action clauses - d'oh.

Fri, 02/17/2012 - 14:47 | 2170697 IrritableBowels
IrritableBowels's picture

Shame, shame... That wasn't even a long article!

Fri, 02/17/2012 - 14:54 | 2170743 Bansters-in-my-...
Bansters-in-my- feces's picture

Can't help myself again.

FUCK YOU's Bankers.....

Eat shit....

Fri, 02/17/2012 - 15:01 | 2170768 Nobody For President
Nobody For President's picture

A CAC with a 10% threshold would probably insure the PSI deal will fly, but with a CDS trigger; so I have a MUCH simpler idea - when the 14.5 billion debt rolls in, just pay it off with Drachmas - sheesh, why do I have to do all the thinking around here?


There Will Be Blood and Lawsuits.

Fri, 02/17/2012 - 16:16 | 2171128 Bertie Wooster
Bertie Wooster's picture

It's the Charlie Sheen economy.  If you're losing, just extract some tiger Hedge Fund blood by changing the rules so that you're winning again.  Always be winning no matter what.


My grandfather taught me in Blackjack that by measuring your card-counting ability and the rules of the particular house, you can caclulate your advantage on the house per every hand you play.  He also taught me this:  "If the dealer is dealing himself blackjack from the bottom of the deck, your advantage on the house is less than zero".  


Wait, can we get back to bashing Apple now?  After all, they make a product that everyone loves and uses every hour of every day of their lives.  And then they have the gall to book 100% of the revenues for themselves so that cash flows match earnings.  They also willfully pay bankrupt 3rd World companies for trademarks and then defend themselves when the bankrupt companies sue them for more after Apple ends up making a ton of money on the trademarked product.  Lastly, Apple has the balls to force poor Asians to accept money for hard work in China of all the horrible places.  They even force 25% pay raises on those poor people in their effort to enslave them.  I can't wait to short their 8x earnings stock with $103 in net cash on the balance sheet because their balance sheet has too much cash and not enough debt to suit me.   Stupid assholes.  Everyone knows that cash is the bane of all companies existence.  I'll cover the short at maybe 5x earnings after earnings estimates are raised for 2012 due to iphone 5's 4G experience being too smooth and desirable for the all the 2-year-mark iphone 4 retreads re-upping for another 2 years.  4G phone, yuck.  iTV, what a stupid idea, talking to your TV instead of searching your couch for the remote.  Dumb assholes, what a fraud.  Who can seriously own this POS and look at themselves in the mirror each morning knowing what a fraud Apple's stock price is.



Fri, 02/17/2012 - 16:58 | 2171302 Financial_Guard...
Financial_Guardian_Angel's picture

EPIC sarc rant. +1

Rant of the week winner!

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