This page has been archived and commenting is disabled.

The Roof, The Roof, The Roof Is On Fire!!

Tyler Durden's picture




 

Via Peter Tchir of TF Market Advisors

So, I admit that I have dubious taste in music.  But what is going on in Greek CDS is extremely important to watch, and take advantage of.

Somehow CDS always attracts analogies to home insurance.  It is most often written about in terms of being able to buy insurance on your neighbor's house and then set it on fire.  I never thought that was a particularly good analogy, but now we have Greece on fire, and the insurance is potentially being cancelled.  The EU is doing all it can to avoid triggering a CDS Credit Event.  The banks, some of whom would benefit from a Credit Event, appear to be going along with the plan.  They are too scared of their regulators to go against them.  Is this totally coercive?  Yes, but it doesn't matter, so long as there is nothing in the bond documentation that can force a holder to agree to a plan if enough other holders agree, then it is a "voluntary" Restructuring and NOT a Credit Event.

Just because the outcome defies what you would expect a CDS contract to do, doesn't mean the conclusion is wrong.

There are lots of reasons the CDS contracts still have value - nothing is actually finalized, even after the deal, there will be legacy bonds around that Greece may not pay on, ultimately triggering a Failure to Pay Credit Event.  Those are valid reasons, but there is also an element of inertia at play.  We have become conditioned to believe a certain thing about CDS - that it is meant to protect bondholders and basis package holders in particular from losses.  It is hard to throw out conceptions of what CDS is meant to do and how free markets are meant to function, but we are seeing it play out.

On the back of this, there are some good trades, and some bad trades.

I would be unwinding basis packages for all sovereign debt.  If you are at a bank or a bank hedging desk, I would be selling bonds/loans and selling protection.  Everything you thought about CDS and how the hedges would work is potentially irrelevant.  Yes, there are reasons to believe that there may yet be NoR Credit Events on Greece and others, but there was a reason sovereign CDS retained Restructuring as a Credit Event - because that was the most likely way to get triggered.  Restructuring is still the most likely way that a sovereign will handle a debt problem, but it will be done in a way to avoid triggering CDS.

I think this is a landmark event.  It isn't fully reflected in the price because bank hedging desks tend to have a more formal process to change how they operate than a prop desk would.  Meetings will occur, but eventually the decision will be made to reduce the basis on bank hedging desks.  It is too logical of a conclusion not to arrive at.  There are also, allegedly a lot of "interest rate" or "bund" traders who have the basis on.  Their knowledge of CDS is dwarfed by their position size, and they may be in denial stage, saying this cannot be the case.  Hedge funds, which can own bonds outside of the IIF agreements may want to keep on their trades.  They can hold the bond and wait until maturity where they either get paid, or can trigger the CDS if they don't get paid, but I think if you sell CDS, you will be able to reload the trade at much better levels.

The Greek basis package is taking a beating today.  The Greek 5 year bond looks to be up 2 points today, from just under 38 to just under 40.  The 5 year CDS is 8 points better on the day (54 down from 62).  The FX moves dulls some of the pain, but that is a big move on a basis package. Sovereign CDS already has a wide basis - the CDS trades wider than the bonds.  I would expect that to invert, possibly dramatically, where the CDS will trade much tighter than the bonds.  I also expect the curves could get steeper again, as the risk of a Credit Event has probably been pushed off. Again, no details yet, but after having gone through all the machinations to avoid a Credit Event, I doubt they will default on legacy bonds in the very near future.  More likely they will find another way to avoid paying par on the bonds without triggering a Credit Event - I've heard suggestions that a bond repayment tax could be created and withheld.  Not sure if that is really possible, but I wouldn't underestimate the willingness of the EU to do everything in their power to avoid a Credit Event, no matter how ridiculous or unfair it may seem.

UPDATE: Most European Sovereign Basis are back to early August levels with only FRA remaining as a positive basis.

In the summer of 2007, the "basis" for corporate bonds experienced a decent size move.  It went from being able to buy bonds and buy CDS and "pick" 15 bps, to about 35 bps on average.  Some basis package buyers loaded up, seeing more  potential "net income" than they had in awhile, with the conviction that it would move back.  Other people (my boss at the time included) saw this as a serious change in the status quo.  Banks, and investment banks in particular, were going to reduce their inventory of bonds.  The funding costs of banks made it less attractive for them to hold bonds.  The basis continued to grow until 100 was the norm, and ultimately reached a peak the day in 2008 when Citadel had an investor call that was impossible to get on because of overload, that talked about their "basis book".

I am not bullish on sovereign credit in Europe but I would not express that view through CDS and particularly not short dated CDS (less than a year).

At its most basic level, a bond is a contract, a loan is a contract, and a Credit Default Swap is a contract.  It is the differences in those contracts that provide differences in value under certain circumstances.  A subtle but important feature of the IIF plan is that they want the new bonds documented under English law - why, because the contract affords bondholders more protection (a valid reason why CDS can remain better bid than it would otherwise).

There is mass capitulation in the CDS market today.  I think in sovereign CDS that move tighter is warranted and is only just beginning (bonds won't move to the same extent at all).  I am less sure that the move in XOVER and Main should be followed.  Part of the move there is people who are on the wrong side of the sovereign move, trying to make up some losses by selling CDS whenever and wherever they can.  I don't believe any of this is a real solution so would not be getting long credit in general, and definitely not in a product where the move already reflects pain in SOVX rather than fundamentals.

There are other areas where I would focus my attention.  The CDS market will be on its heels.  The basis move in particular is catching people off guard.

I think moves in MAIN/XOVER may be short lived, but already are pricing in too much of a spillover effect from SOVX.  I would be looking at selling Muni CDS on big General Obligation Issuers.  Muni CDS trades "Old Restructuring" so it might be harder to manipulate events around a Credit Event here, but I would expect them to try.  With US economic data having been above the worst fears, sellers of CA and NY CDS should experience little resistance.  I would think that is a fast macro trade that could play out well.  There are enough people who believe the fundamentals are improving, they trade relatively wide, and government (FED) support is likely if they got in trouble, and the case that governments would work to avoid a Credit Event at all costs is pretty strong.  The fact that all of those line up in the muni market is why I think selling some CDS there is better risk/reward than piling on the MAIN/XOVER bandwagon (it is much harder to get the will or ability to manipulate a corporate default than it is for a sovereign).

At the other extreme, I would look for some thinly traded names that get dragged along for the ride by the "index arb" crew.  This is definitely harder, as you need to do some more credit work, and possibly face more mark to market volatility as the index arb game isn't going away, but I think with the right selections there is some pretty good money to be made.

Let's take a quick look at The McClatchy Company.  According to DTCC there is $15 billion gross CDS on the name, and just under $1 billion in net.  It is in HY17 so in addition to the fact it has been a long standing CDS name, it is part of the "arb" trade.  MNI has a total of $1.8 billion of debt.  A $125 million loan coming due in 2013 and a small bond coming due in 2014 that has already been reduced to only $111 million outstanding through repurchases (it is so nice to talk about millions instead of billions and trillions).  In 2017 the company has the bulk of the debt coming due, but 5 year CDS, wouldn't expire in December 2016.  The 5 year CDS is quoted at 34, and the 3 year is quoted at 20.  So you would receive that up-front and receive 500 bps - whoever is buying protection on this has big negative carry.  My gut feel is that on a name like this, where the outstanding CDS is big relative to the bonds (CDS net is about 50% of total debt), where there are minimal near term maturities, and a lot of traders will have positions just from "swinging em around all day" as market makers, you could push this CDS dramatically tighter in a short period of time.  This isn't relying on a technical issue with whether a Credit Event is possible, it is relying on the view that anyone short CDS is in pain from a mark to market, the basis is less relevant than ever, and with no debt coming due, and a marginally improving economy, the resistance to some off the run date selling would be minimal.  You can probably hit a 20 bid on 3 year CDS, and by tomorrow that dealer will be begging to get out at 15 since there is no real liquidity.  Clearly credit fundamentals play more of a roll in this trade than the others, but you can probably safely bet that less than half the dealers know the fundamentals and will respond to price action more than anything.  I am sure there are many similar names in the HY index world that could be crushed tighter.

I would also look at LCDX.  I think it offers some value after the recent run-up in HY17 and HYG.

I remain bearish and doubt that this rally has much staying power since the plan doesn't actually fix anything, and it isn't even yet clear if it actually works in the near term.  The sentiment has also changed dramatically and there are far more bulls than just a few days ago so the market is potentially now overbought.  But for some long positions that play the technicals to maximum advantage I would target selling CDS where dealers are most vulnerable and the realization of what has happened in Greek CDS isn't fully priced.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 10/27/2011 - 09:06 | 1816779 FLUSA.com
FLUSA.com's picture

I don't know what any of that means....

Thu, 10/27/2011 - 09:06 | 1816782 boom goes the d...
boom goes the dynamite's picture

wtf is going on in the world?

Thu, 10/27/2011 - 09:10 | 1816800 jcaz
jcaz's picture

Berlusconi!  Welcome to the board!

Thu, 10/27/2011 - 09:12 | 1816810 valley chick
valley chick's picture

sounds kind of "greek" to me...

Sun, 03/18/2012 - 01:46 | 2266660 haibop
Thu, 10/27/2011 - 09:35 | 1816897 Eally Ucked
Eally Ucked's picture

Don't worry they don't either, but it is the life of money, or maybe better term, paper pushers. For us idiots there are one message - there is no more new money and all those XOVER,Main,SOVX,LCDX,HY17,HYG and so on are just terms used by bookies.

Thu, 10/27/2011 - 09:46 | 1816937 schoolsout
schoolsout's picture

A little Drum n Bass to start this thread off....

 

http://www.youtube.com/watch?v=8nMAcwGpAJ8

Thu, 10/27/2011 - 09:52 | 1816967 disabledvet
disabledvet's picture

Let me "name drop" for ya: Harry Markopolos and "i'm probably only one of a few guys in the world who understands this stuff." He claimed "no one would listen"...and yet "the FB I paid him a visit and told him he should be afraid." Funny...apparently someone WAS listening! With the near collapse of the ability of the entirety of the Federal Government to finance itself perhaps they should have rephrased that. Anywho "it's still not our finest hour" as they say...but without Credit Default Swaps we'd all be dead right now. Now we will see how Europe does without them. They have a "system of finance" as well...and it seems quite complex. The oddity is that the strong euro tells us that their finances are far stronger than our own. Perhaps these CDS contracts were far larger than Mr. Tchir thought...but i doubt it. My first impulse is "this reaks of national socialism to me" and i have posted as such--and to think that Europe might think "people aren't watching"...well, let's just say no less than our President now understands the importance of this comment and has..."gained control of the message"...quite ably in my view. In public finance there's no such thing as a tough sell. To quote our friends from the South..."that dog don't hunt."

Thu, 10/27/2011 - 10:55 | 1817218 SkySavage
SkySavage's picture

It means the game has changed completely.  Term restructuring should be considered a "credit event", thus triggering payout on the soverign CDS's.  But somehow this is not happening (I must admit I don't understand how it cannot be happening). 

Thu, 10/27/2011 - 09:09 | 1816794 cowdiddly
cowdiddly's picture

The E-trade Baby bought a shitload of CDSs. He can now sell and become the youngest ever Warren Buffet in diapers 

Thu, 10/27/2011 - 09:10 | 1816797 klwilly
klwilly's picture

Jesus CHRIST.  How poor do us shorts have to get before we just have to give up?

Thu, 10/27/2011 - 09:16 | 1816825 boom goes the d...
boom goes the dynamite's picture

That is the fucking question of the day.

Thu, 10/27/2011 - 10:05 | 1817016 Stockspeare
Stockspeare's picture

Shorted at the open..it is clear to short now. Upside play is done. next time use stops. Holding a short up 2000 Dow points is dumb. I suggest you take up checkers- trading may not be your bag;)

Thu, 10/27/2011 - 12:14 | 1817522 Smiddywesson
Smiddywesson's picture

Poor bedside manner, but Stockspeare is essentially correct.  If you have a bias, and that bias is to short, then don't do it when retail is also short and especially when TPTB are desperate to perpetuate the system.  The market is completely and utterly fixed, and it has always been so, but that manipulation is more clear now then ever before.  The worse the news is, the harder they will push to keep the market up.  Using stops is good advice, but they won't protect you, so you have to go to options or reduce your position size. 

TPTB are going to hold up the market, change the rules, break the law, deny reality, spread rumors, and lie, lie, lie, until they get what they want.  They want their heads out of the noose and you to foot the bill.  That's not going to happen if the market crashes.  I'm not against shorting individual stocks, but I don't short this market. 

All your gold are belong to TPTBB 

Thu, 10/27/2011 - 13:55 | 1817981 i root for that...
i root for that fat jersey governor's picture

I started some shorts yesterday after being long for almost two weeks. you know what - got crashed and stopped out this morning. And you know what - I am not gonna try to stay in front of the train.

The debate should not be whether these EU moves are stupid or not (we know that, don't we), but which way the market will react to the news!!! That is how we can make (or lose) money. Who cares about how insane these german, french or italians are?? we should only care about our pocket.

 

Sun, 02/26/2012 - 00:05 | 2196969 haibop
haibop's picture

frustrating, isn't? reverse phone detective

Tue, 05/01/2012 - 21:06 | 2389836 haibop
haibop's picture

agree Inteligator

Thu, 10/27/2011 - 09:19 | 1816837 klwilly
klwilly's picture

who is the ASS that gave me one down?  i speak the truth bitch.  you don't like the truth GFY.  

Thu, 10/27/2011 - 09:19 | 1816838 azusgm
azusgm's picture

Hope you aren't short BAC.

(Why can't that abomination ever die?)

Thu, 10/27/2011 - 09:25 | 1816851 alien-IQ
alien-IQ's picture

If you're gonna short this market, it has to be intraday ONLY. Never ever ever ever leave an open position overnight...especially an open short position.

Today, for example, with a 300 point gap up in the DOW, I'm looking to go short at some point....but you can be damn sure I'll be out of all positions before the end of the day.

To hold any positions in this market over night (let alone over a weekend) is nothing short of playing with fire.

Thu, 10/27/2011 - 09:54 | 1816977 disabledvet
disabledvet's picture

"stick with Cramer." He's a bears best friend, too...if you listen.

Thu, 10/27/2011 - 10:12 | 1817057 Stockspeare
Stockspeare's picture

Wrong. Now is the time to short and hold. Shorted at the open. Sell the news. The market manipulation is topped out for now. Hold for a nice consolidation and use stops to protect yourself.

Thu, 10/27/2011 - 09:10 | 1816798 GeneMarchbanks
GeneMarchbanks's picture

'I remain bearish and doubt that this rally has much staying power since the plan doesn't actually fix anything, and it isn't even yet clear if it actually works in the near term.'

I'm not even sure what being "bearish" means anymore? I can't imagine any sell-off anytime soon...

Thu, 10/27/2011 - 09:14 | 1816817 alien-IQ
alien-IQ's picture

Bearish, in todays market environment, simply means "I am not blind to the reality that this situation is FUBAR...and Central Bankers will do all they can to hide the facts and save their own kind".

Thu, 10/27/2011 - 09:33 | 1816886 ChitownTrader
ChitownTrader's picture

Bearish means "I was short last week and was hoping this would collapse this week, but now have to wait till next week until things settle down"

Lets be honest, when you highlight g3 gdp and make it seem like some type of settlement is resolved, things will rally a bit. There will need to be a couple days where there is a serious retraction considering we are almost at yearly highs.

Thu, 10/27/2011 - 09:11 | 1816803 The Axe
The Axe's picture

Market wants to believe that it is March 2009 again, only a Europe event...The market could start a 9 month melt up,,,it could be a reply of FED invention in the US..that did not fix anything, but saved the bankers and brokers.....be careful...Cental Bank invention is destruction to a bears P&L

Thu, 10/27/2011 - 09:13 | 1816813 jcaz
jcaz's picture

LOL- but not a 10 month melt up?

Brilliant....

Thu, 10/27/2011 - 09:11 | 1816804 alien-IQ
alien-IQ's picture

US Dollar in meltdown mode. Getting completely monkey-hammered.

Imagine my surprise.

The Euro problem is solved huh? Sure it is....

Thu, 10/27/2011 - 09:15 | 1816824 JohnG
JohnG's picture

Plunging....waiting on gold to sky, why is it not?  Manipulation.

Thu, 10/27/2011 - 09:30 | 1816876 GeneMarchbanks
GeneMarchbanks's picture

'US Dollar in meltdown mode. Getting completely monkey-hammered.'

DXY is heavily Euro-measured. It gives no real indication of market place selling of USD in my opinion except in relation to Eurozone.

The currency action is over in JPY...

Mon, 09/03/2012 - 12:16 | 2757838 haibop
haibop's picture

look at where gold goes now... cmo network

Thu, 10/27/2011 - 09:12 | 1816805 Gene8696
Gene8696's picture

Guess yesterday's timing to go Short S&P was bad? Oh well, move those into the medium term horizon column.. Or I'll see how weak I am?

This should be a fun two days.. Will be interesting to see how many longs stay in over the weekend. I just called in sick and busted up a dubbie at 7am. About to go long popcorn

Thu, 10/27/2011 - 09:41 | 1816919 LongBallsShortBrains
LongBallsShortBrains's picture

Yes I added to my Dow shorts.... Ouch. But by short 30 year bond is making up for it 640 here on west coast. Just fired up 1st doob of the day. I'm staying short!

Thu, 10/27/2011 - 10:00 | 1816987 Gene8696
Gene8696's picture

To be honest, I have no clue as to what to expect. But short of needing to open the safe to buy a chicken for dinner, I'm happy watching for the next few days.

At some point the Madam Madof suicide attempt will be responsible for a market move.

Thu, 10/27/2011 - 09:12 | 1816807 paul_Liu
paul_Liu's picture

Tyler, what about stocks?

Thu, 10/27/2011 - 09:12 | 1816809 azusgm
azusgm's picture

Ha! At first glance as the headline, I thought the roof on fire was the copper roof.

Thu, 10/27/2011 - 09:13 | 1816811 myne
myne's picture

We don't need no water, let the motherfuckers burn!

Burn motherfuckers, burn.

Thu, 10/27/2011 - 09:14 | 1816815 fonzanoon
fonzanoon's picture

Yup. I have no idea what that means. I am short financials and long precious metals. As far as I can tell when the shit hits the fan I will probably break even. In the meantime I will focus on fantasy football.

Thu, 10/27/2011 - 09:14 | 1816816 TradingJoe
TradingJoe's picture

El Shorto! NYMO @ much overbought levels!

Thu, 10/27/2011 - 09:14 | 1816819 Nascent_Variable
Nascent_Variable's picture

So many questions - can the French banks handle a 50% haircut?  Can the ECB?  Is the downgrade of France now a foregone conclusion?  How are the German people reacting to all this, especially if there's a French downgrade?

Europe is such a mess.  It will be interesting to watch the last stand of the central planners, and especially to watch their exit strategies as it all starts unraveling.

Thu, 10/27/2011 - 10:07 | 1817029 Invisible Hand
Invisible Hand's picture

N_V,

Not disagreeing with your comment in general but, an important detail: The ECB does NOT take a haircut!

How is that possible that private institutions "voluntarily" give up 50% of the value of an asset but a governmental entity gets par?

Do the banks have no fiducial responsibility to their shareholders to either get 100% or trigger the insurance (CDS)?

We are back to the era of absolute monarchs when the law is what the ruler says it is, nothing more nothing less.  Nothing matters now but survival of the ruling elite.  When Charles I tried this in 17th century, the English revolted and Charles eventually lost his head (literally).  I don't think that will happen today.  We will accept our serfdom and be grateful for the crumbs the powerful leave us. 

 

Thu, 10/27/2011 - 12:02 | 1817467 BigJim
BigJim's picture

I agree. The rule of law appears to have finally left the building.

Thu, 10/27/2011 - 09:14 | 1816821 monopoly
monopoly's picture

Holding short positions is dangerous when markets are broken and succumb to every headline. I am not chasing this and  will just sit and watch the circus. So they have an agreement in words, not actions yet. Anyone buying this is really gambling. But the party goes on.

Feel a lot safer with gold and miners.

Thu, 10/27/2011 - 09:22 | 1816844 jcaz
jcaz's picture

It's disturbing that you don't realize you're contradicting yourself.....

Thu, 10/27/2011 - 09:16 | 1816828 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Anyone seen GRAHAM SUMMERS lately? I'm wondering how is wonderful crash indicator is holding up?

"Indeed, last week we got a confirmed SELL on my proprietary Crash

indicator. This is the SAME indicator that registered before the 1987
Crash, the Tech Crash, and the 2008 collapse."

Thu, 10/27/2011 - 09:20 | 1816840 kito
kito's picture

leave graham alone, he is tylers brother.

Thu, 10/27/2011 - 09:16 | 1816830 monopoly
monopoly's picture

And none of the idiots even talk about US. We are next. But it is taking longer than most of us imagined. The tricks these politicians pull out of the hat are truly remarkable.

Thu, 10/27/2011 - 09:17 | 1816831 alexwest
alexwest's picture

i'd like to look at list of counterparties in Greek CDS.. especially who sold ##cuking expensive CDSs, and

now lobbing to cancel them off...

 

what next... federal goverment cancells out commodities futures, currencies swaps . what next ?

 

alx

Thu, 10/27/2011 - 09:21 | 1816842 Waterfallsparkles
Waterfallsparkles's picture

What I do not understand is why the Banks are up today.  Especially if the have to take a 50% hair cut and will not be able to collect on their CDS's.  I would think that the Banks would be down.

Thu, 10/27/2011 - 09:26 | 1816855 Note to self
Note to self's picture

It's cause its all fake.

Thu, 10/27/2011 - 09:33 | 1816874 azusgm
azusgm's picture

The writers don't have to pay up and get to keep the premium.

To know what the net positions and rates would take insider information, so expect some "experts" to get rich off this.

Thu, 10/27/2011 - 09:59 | 1816989 disabledvet
disabledvet's picture

Perhaps there's a Spanish Banker who likes to "silver surf" nearby.

Thu, 10/27/2011 - 09:23 | 1816843 Johnny Lawrence
Johnny Lawrence's picture

Art Cashin this morning (pardon the formatting):

 

The European Deal -

Markets around the globe are bubbling joyously this morning. The key metric (in my mind) is the
reaction of the credit default swaps (CDS).

 
Here’s a bit of a note I sent to some friends early this morning:

 
The key response to the 4:00 a.m. proposal has been a sharp narrowing of CDS spreads. If they felt there was
no efficacy to the plan, CDS spreads should have exploded (recall Bear Stearns/Lehman). A big help on the CDS
spreads may have come from comments that guidelines of the International Swaps & Derivative Assn (ISDA)
don’t trigger a CDS event since the haircut is voluntary (Thanks TJ). If the ISDA makes an official ruling it may
rule the day.

Gossip is that the bank negotiators took the “voluntary” 50% haircut because the alternative was a 100%
default (Merkel hardball).

Keep your eyes on the CDS spreads. They are the whole story not the stock market, bond market, etc. The
contraction in CDS spreads suggest that markets see the plan as workable, so far. Watch how CDS spreads
respond to further details.

Away from CDS response, I believe markets like the apparent involvement of IMF. They trust Lagarde and think
she’s smart and can pull the trigger if need.

For weeks the concern had been that a big haircut on Greek paper might cause an “event” (a technical default). That would mean that the insurance of the swaps would kick in. Each counterparty would then have to pay off - instantly. That would erupt into a round of severe 2008 - style contagion.

As I noted, the ISDA has not made a specific statement on the Greek paper but so far the market is reading it as
“voluntary”.

(Gossip is that Merkel’s team gave the bankers’ team an ultimatum - Take it or leave it - 50% or default. Yup! That’s voluntary.)

Thu, 10/27/2011 - 09:49 | 1816948 LongBallsShortBrains
LongBallsShortBrains's picture

So if I get this right..... If even one bondholder refuses to the haircut, and demands payment in full, (refuses to "voluntarily get shafted") then that is a default? Or no? Smells like smoke and mirrors. Why settle for a haircut if it devalues your CDS? Set me straight please!

Thu, 10/27/2011 - 15:44 | 1818416 Hot Apple Pie
Hot Apple Pie's picture

That's my understanding as well. If you decide against it, then you can either get paid 100% or get your CDS paid off. It would seem like a simple game of Prisoner's dillemma -- if one bank had more CDS bought than sold, it makes financial sense for them to wait for default as long as nobody else does. If everyone does, then they all go bankrupt because they don't have the ability to pay off the whole circlejerk.

Thu, 10/27/2011 - 10:02 | 1817000 disabledvet
disabledvet's picture

"Greece peaked in 400 B.C." Larry Kudlow.

Thu, 10/27/2011 - 10:43 | 1817171 Gavrikon
Gavrikon's picture

Damn, that might be the first useful comment ever made by that rat-faced whiner.

Thu, 10/27/2011 - 09:23 | 1816846 qussl3
qussl3's picture

EUR/CHF is down.

 

Thu, 10/27/2011 - 09:24 | 1816848 PaperBear
PaperBear's picture

non-Federal non-Reserve Bankers Want 'Bloody Rebellion'; Hiring CIA Mercenaries To Kill NYPD

click http://www.godlikeproductions.com/forum1/message1682065/pg1

Thu, 10/27/2011 - 09:25 | 1816852 paul_Liu
paul_Liu's picture

We shorts' life no good.....

Thu, 10/27/2011 - 09:50 | 1816956 LongBallsShortBrains
LongBallsShortBrains's picture

We, shorts, know life is good.

Fixed it fer ya

Thu, 10/27/2011 - 09:59 | 1816988 DeltaDawn
DeltaDawn's picture

I would appreciate it if you would put some shorts on and I assume the men in the room would agree.

Thu, 10/27/2011 - 10:44 | 1817179 Gavrikon
Gavrikon's picture

Or perhaps choose "Butters Stotch" with the latex balls on his chin as an avatar?

Currently, I feel that Angrygerman has the best avatar.

Thu, 10/27/2011 - 09:26 | 1816853 agent default
agent default's picture

End game.  Sovereign debt is the new subprime.

Thu, 10/27/2011 - 09:27 | 1816858 SAME AS IT EVER WAS
SAME AS IT EVER WAS's picture

Is there anyone who still believes the market is ever priced correctly?

Thu, 10/27/2011 - 09:28 | 1816861 navy62802
navy62802's picture

I want to know where Rule 48 is on this shit. If DOW futures were DOWN 240 points, this would be a Rule 48 opening without a doubt. However, futures are UP 240 points. They should just rewrite the text of Rule 48 and call it what it really is ... a stop-loss program for arbitrarily designated "market makers."

Thu, 10/27/2011 - 10:03 | 1817005 disabledvet
disabledvet's picture

that's rule 52. We don't enforce that rule.

Thu, 10/27/2011 - 10:23 | 1817086 Ethics Gradient
Ethics Gradient's picture

Rule 34 of rule 52 anyone?

Thu, 10/27/2011 - 12:31 | 1817604 common_sense
common_sense's picture

This is the INVISIBLE FREE MARKET RULE : FED DOES THE RULES, IF SOMEONE DOESNT AGREE... DONT PLAY THE FED-GAME, MOTHER FUC...ERS.

Mon, 12/26/2011 - 17:07 | 2012181 haibop
haibop's picture

exactly... Matt Huston Ex2

Thu, 10/27/2011 - 09:29 | 1816865 paul_Liu
paul_Liu's picture

So contraction in CDS spreads up to now?

Thu, 10/27/2011 - 09:37 | 1816901 eddiebe
eddiebe's picture

More smoke, more mirrors. Mirror mirror on the wall, who is the ugliest of all? Putting lipstick on pigs only goes so far even to the eyes of the most inebriated sailor.

In a world where debt is money, figuring out what has actual value is critical. Flipping IOU's is ultimately deadly in this game of musical chairs. 

Thu, 10/27/2011 - 09:41 | 1816921 eddiebe
eddiebe's picture

More critical than ever for 'them' to step on gold, and for you to buy.

Thu, 10/27/2011 - 09:43 | 1816930 azusgm
azusgm's picture

Question: Were hedge funds included in this deal? More particularly, would private contracts between hedge funds be covered by the 50% non-default?

Can't imagine serious bear hedgies who aren't on the verge of extinction and dependent on central banks and governments for their existence will agree to this.

Thu, 10/27/2011 - 09:54 | 1816943 Mercury
Mercury's picture

We have become conditioned to believe a certain thing about CDS - that it is meant to protect bondholders and basis package holders in particular from losses.  It is hard to throw out conceptions of what CDS is meant to do and how free markets are meant to function, but we are seeing it play out.

It's not hard to throw out conceptions of how free markets are meant to function once you've just witnessed one of the major table legs of free markets (clear and enforeceable contracts) kicked out the window.

Who would buy CDS at this point (and to whom are you going to sell to) when the rules on which all of one's sharp pencil analysis rests might be changed at the drop of a hat?

Thu, 10/27/2011 - 09:55 | 1816980 LongBallsShortBrains
LongBallsShortBrains's picture

Anybody that was sure they would eventually get paid would buy them. Of course it would be better that the whole market believe them to be worthless before trading fiat for them. Especially thhe pencilholders Who know. It's all who you know.

Thu, 10/27/2011 - 09:49 | 1816946 bnbdnb
bnbdnb's picture

Are investors really so stupid to continue buying EU debt knowing that in the next 3-5 years they could end up with a 50% haircut?

Yields MUST explode.

Thu, 10/27/2011 - 10:00 | 1816991 Stockspeare
Stockspeare's picture

It is clear to short now. The bombing is over...sell the news....Picked up some FAZ to short the financials..no reason to go into details about why this , why that...either the market is going up or down. The upside story is played out.

Thu, 10/27/2011 - 10:05 | 1817012 TJ00
TJ00's picture

So a lot of bankers who would have been making nice bonuses if the CDS had been triggered will now not get them, I wonder how long it will take them to realise this. Maybe they will make up for it by shorting their bank with their own account and then deliberately blowing it up (financially not literally)  to make up for the loss of bonus? Now that would be fun!

Thu, 10/27/2011 - 10:07 | 1817030 K_I_T_T_Y
K_I_T_T_Y's picture

I wonder why banks have agreed so quickly to the haircut without triggering a credit event....

maybe some of the biggers banks where short CDS on Greece? Better to take the haircut loss that you payout all the CDS?....

Thu, 10/27/2011 - 10:13 | 1817059 imapedestrian
imapedestrian's picture

I hope all CDS holders... especially naked holders really get a nice kick in the nuts!

Enjoy...

Thu, 10/27/2011 - 10:16 | 1817069 Stockspeare
Stockspeare's picture

I am taking all bids from you wiped out shorts! I'll buy them from yeah! Next time don't play "The Hopium Trade" for crashes and let the the bulls run you over. And for goodness sakes...use stop losses...trading 101!

Thu, 10/27/2011 - 10:55 | 1817220 three chord sloth
three chord sloth's picture

I don't think this plan is well thought out. It seems to me that a lot of bond buyers were willing to go along with the fictional "A" ratings given to second-rate bonds only because they could insure it with a CDS. They were operating under the assumption that a bond down in the "B"s + a CDS = functionally an "A" bond. If this plan sticks, that "+ a CDS" part will be worth zero, bond buyers will demand a more realistic rating for bonds, and a lot of formerly "A" level bonds will find themselves down in the "B"s.

Thu, 10/27/2011 - 11:27 | 1817334 Jumbotron
Jumbotron's picture

The Greeks, The Greeks, The Greeks are on Fire !!

We don't need no breakup, let the ECB Print !

Print, MOTHERFUCKERS, PRINT !!!!!!!

Thu, 10/27/2011 - 11:51 | 1817418 Lmo Mutton
Lmo Mutton's picture

627 posts and only 1 youtube inbed??  

WTFO??

Thu, 10/27/2011 - 11:57 | 1817441 Smiddywesson
Smiddywesson's picture

I remain bearish and doubt that this rally has much staying power since the plan doesn't actually fix anything, and it isn't even yet clear if it actually works in the near term. 

You're kidding Peter, right?   There aren't any fundamentals behind this market action, or any market action for that matter, for months, and months, and months.  So, why look for any?  That kind of mind set keeps one out of the rallys.  You either want to bet on the puppet show, knowing the market is fixed and you may lose your money, or you don't.  But don't speak of fundamentals, this is about a delaying action being taken to give TPTB enough time to suck up as much of the world's gold as possible.  That's it.

  1. bailouts
  2. rally
  3. move liabilities onto the Fed and USG balance sheet
  4. rally
  5. change the accounting rules to deny reality
  6. rally
  7. phoney stress tests
  8. rally
  9. quantitative easing
  10. rally
  11. mirage green shoots from doctored numbers
  12. rally
  13. leadership by rumor
  14. rally, rally, rallytober

So now the new rally cry is that anything that is inconvenient to kicking the can is defined out of existence, even contracts and default.  There are no rules anymore.  How can anyone have an opinion about anything anymore?  This painted whore is going to rally as long and as far as TPTB want it to rally.  That should be apparent to everyone by now.

 

Thu, 10/27/2011 - 14:03 | 1818019 AGuy
AGuy's picture

Just heard this new song on the radio from the band "BailoutNation"

 

Bail!
This is how I hide my crime
I made all this debt because
I blame it on my entitlements baby,

This is how a banker cries
I blame it my own inaptness
Blame it on my N.P.L. baby

Bail!
Bail!
Bail!
Bail!

Maybe I should cry for bail
Maybe I should dump it all
Blame it on my N.P.L. Baby

Maybe I'm a different breed,
Maybe I don't really care
So blame it on my N.P.L. Baby

Bail!
Bail!
Bail!
Bail!

Bail me out with the EFSF, baby
Bail!
Bail me out with the EFSF, baby
Bail!
Bail me out, Baby!

Thu, 10/27/2011 - 16:28 | 1818586 LookingWithAmazement
LookingWithAmazement's picture

So then. The whole "financial weapons of mass destruction", the "multi-trillion CDS market" appears to be a paper tiger. No black hole now Greece "defaults". No crisis, meltdown, collapse, Armageddon. All the doomprophets can pack their stuff and create a useless panic elsewhere. Bye bye CDS & crisis. Told you so. Merry Christmas. Boring world we live in.

Mon, 11/14/2011 - 06:08 | 1874989 dida
dida's picture

I agree with you and I never been a big fan of greek music, I don't like this type of music. Cazare Poiana Brasov

Do NOT follow this link or you will be banned from the site!