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Rosenberg Explains What (If Anything) Has Changed

Tyler Durden's picture


Still confused by the 500 DJIA point rally in 48 hours? You are not alone. Here is David Rosenberg guaranteeing that your confusion will be even greater when you realize that nothing has really changed, suffice to say that the record confusion has provided the best smokescreen for nothing short of a collusive global window dressing session for massively underwater hedge and mutual funds.

So What Changed?

Well, yesterday afternoon there seemed to be a leak to CNBC's economics reporter that something bold was being cooked up to deal with the debt crisis in Euroland without having to resort to 17 different parliaments for approval, using the European Investment Bank (EIB) as the conduit — establishing a Pan-European TARP plan, if you will.


Nothing has been officially announced, but according to a news article published by CNBC here is what this new structure could look like (there are lots of moving parts):

  1. It would involve money from the European Financial Stability Facility (EFSF), a bailout vehicle created in 2010 to alleviate the sovereign debt crisis in Europe, to capitalize a special purpose vehicle that would be created by the EIB, a bank owned by the member states of the European Union.
  2. The special purpose vehicle would issue bonds to investors and use the proceeds to purchase sovereign debt of distressed European states.
  3. This could potentially alleviate the pressure on the distressed states and on the European banks that hold a lot of the distressed sovereign debt. The bonds issued by the special purpose vehicle could then be used as collateral for borrowing from the European Central Bank (ECB), allowing the central bank to make loans to banks faced with liquidity shortages.
  4. They would buy bonds of the special purpose vehicle, and those bonds could be used to access liquidity facilities from the ECB.

Although the structure is complex, the underlying result is relatively simple. Banks would essentially be allowed to exchange their sovereign debt for debt issued by a special purpose vehicle created by the EIB capitalized with funds from the EFSF.


In some ways, this resembles the original plan for the Troubled Asset Relief Program (TARP). As originally conceived, the TARP would have purchased "toxic securities" from banks. (This plan was abandoned when U.S. regulators concluded that it was too difficult to price the securities and that the plan would take too long to implement.) In this case, the "toxic securities" would be sovereign debt rather than mortgage bonds.


One question is whether this will require an expansion of the EFSF. The fund has already committed to providing emergency loans to Ireland, Portugal and Greece. It is expected to provide over 100 million euros ($134.9 million) in additional funding for a Greek bailout.


After those loans, the fund will be down to about 298 billion euros ($402 billion), according to some estimates. German Finance Minister Wolfgang Schaeuble on Monday said that there is no plan to expand the EFSF.


This is likely why the plan appears to make the new vehicle a levered fund, which borrows far more than it has in equity capital provided by European governments.


Now to reiterate — no official plans have been released. Details may change as European officials work on the structure. Based on the limited details available, George Young, who runs our global macro fund, and Michael Isenberg, our resident financials expert who works on our hedge funds, have boiled it down to the conclusion that the banks would get EIB bonds in exchange for PIIGS debt. That would remove the PIIGS debt from their balance sheets. The EIB SPV would be capitalized with the equity injected by EFSF, and debt issued in the market by EIB.


Germany and France are the main guarantors of both the EFSF and the EIB. Therefore, the SPV would be taking on PIIGS debt and the banks would get EIB paper (effectively German/French bonds) in exchange. The PIIGS debt purchased could be up to 1.8 trillion euros — if they take 200 billion in equity from the EFSF and lever it up 9:1 — and would then be owned by the EIB, whose entire capital structure is guaranteed/backstopped by France and Germany. In effect, this is a stealth Euro bond. The weaker European countries' liabilities are being put into a securitized structure, which has a credit guarantee wrap from the stronger European credits. So the new paper issued to the market is a combination of weak credits (via the assets backing the lending) and stronger credit (via the capital structure guarantee). Thereby creating a blending of credit — voila a Eurobond in sheep's clothing. One might think this could impact France and Germany's credit rating.


No doubt the market wants a solution. And it wants massive amounts of money thrown at the problem, regardless of who pays (so long as it's not the banks holding the debt!). But a proposal, as we have seen, is one thing — getting it in place and approved is another. How big is it? How flexible is it? What will it buy? What are the dilution risks for the recipient banks? Is it legal, specifically under the German Constitution? These are all important questions.


Not only that, but it is surreal actually that the markets could rally on a leak to a CNBC economics reporter on a plan that is still bereft of details (classic shoot first, ask questions later ... like the ballyhooed rumour of China stepping into the fray with a bailout package for Europe). So if this leak is true, Europe is going all in with leveraged bets that will water down the credit quality of both France and Germany. So what this means is that there will be no strong fiscal credits left (the euro has to be a gigantic short here) in the region.


If my reading of history is accurate, the experience with SPVs hasn't been so successful. The blown opportunity to let Greece default, ring fence it, and have individual countries support their banks I think would yield much more desirable results, even if painful over the near-term. And there are more complications. So the EIB will take the beaten-up PIIGS bonds off the banks' balance sheets? But at what price? Par? Market? Somewhere in between? The banks don't take a haircut at all on this? And if this is all an attempt to prevent banks from taking a hit, I just can't see how German taxpayers are ever going to be willing to bailout Spanish banks. This all smacks of desperation to me and I think there would be a taxpayer revolt in both Germany and France over it.


Then again, there is always the risk of being too pessimistic. Let's hope this is a game changer for Europe. Then we can at least go back and concentrate on the data and recall that the peak in the S&P 500 took place right after the market digested that weak Q1 GDP report and all the revisions to the downside. The data yesterday were ignored but the trio of Chicago Fed index, new home sales and Dallas Fed index was very worrying. I sense that the downward revisions to EPS are going to accelerate. I also believe we are staring a recession in the face and one that will be very difficult to emerge from seeing as what little policy bullets are left in the chamber, both monetary and fiscal, after so much was expended to deliver the weakest recovery of all time. Just contemplate that 295k new home sales number for August — not that the latest data-point has sagged to a six-month low as much as it is 25% lower now than it was in June 2009, at the very lowest point of that massive recession. If that is not cause for pause, I'm not sure what is.


As for the whippy rally we saw yesterday (and the follow-through today), let's not forget other facts on the ground:

  • The Fed just told us that downside risks to the macro outlook are "significant". Since we are coming off roughly flat economic growth in the first half of the year, it would seem as though contraction at some point soon cannot be ruled out. Very few asset classes are priced for that prospect, though credit and raw materials stocks along with financials have come a very long way.
  • Volume actually dropped on the NYSE yesterday, despite the price gain.
  • New 52-week lows still outnumbered fresh highs.
  • The 50-day and 100-day trendlines are in confirmed correction patterns.
  • The market had a chance to break out through the upside of the recent range and failed; stocks that looked set to lead the advance have faltered badly. Only "policy pronouncements" as the S&P 500 trades down to the low end has prevented a more serious correction from taking hold, at least for now.
  • The number of leading stocks that saw higher volume in yesterday's action was few and far between.

From a macro standpoint, what is undermining the U.S. outlook much more than what is happening in Europe is the increasingly uncertain and complicated policy outlook, whether it pertains to health care, financial reform, and of course, fiscal policy. Nobody knows just how austerity in the near future is going to affect them in the pocketbook, and remember all of the Bush tax cuts also terminate in 2013. That alone will drain GDP by roughly two percentage points.


Basic economic theory posits that as households and businesses become more uncertain about the future, the more they save from their after-tax incomes — and a rising savings rate in the private sector at a time of belt-tightening in the public sector is not the prescription for growth, unless somehow exports emerge as a critical safety valve. For sure, if there is one development that does seem encouraging, it is that there is something of a manufacturing renaissance taking hold, but the effects on the overall economy are going to pale next to the round of consumer retrenchment we are likely to see in coming quarters and years.


Let's hope China's 5-year plan to swing its economy away from export dependency to consumerism happens quickly and orderly, because producers in the U.S. are going to need that impetus (and we would have to add that Beijing's strategy of allowing the yuan to strengthen even with all these global jitters is an encouraging sign in this regard).

Source: David Rosenberg of Gluskin Sheff


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Tue, 09/27/2011 - 13:02 | 1715320 james85306
james85306's picture

really?  they ran the stops and it's dead walled at 1188 where real buyers would need to show up

Tue, 09/27/2011 - 13:29 | 1715374 sqz
sqz's picture

There's a fairly huge problem with this plan.

Not only does the leverage come from the EFSF, so increasing French and German exposure. But in addition the UK is joint equal largest shareholder in the EIB (*). Which means if it were to begin issuing effectively "Eurobonds" from this SPV, its AAA-rating would come directly into question!

There's no way this plan can take off in this form, especially when the UK, which is wholly outside the Eurozone, is involved...


Tue, 09/27/2011 - 13:40 | 1715456 UK debt marsh
UK debt marsh's picture

Excellent point!

No way the UK signs up for this.


1.  Sweden and Denmark (non-Eurozone memebers are shareholders)

2.  EIB have flatly denied story.


Tue, 09/27/2011 - 13:44 | 1715474 depression
depression's picture

In other words the shell game continues... DDSS

Tue, 09/27/2011 - 14:06 | 1715571 crazyjsmith
crazyjsmith's picture

Same game, different continent.

Just like the dirty Mortgage CDO - a basket of trash, with a tiny bit of A paper (the good trash) sitting at the top, and the rest is total crap. 

We all know how that story ended. 

Ever buy a bag of oranges from a street vendor?  The top of the bag may have one or two good oranges, the rest of the bag is rotten?  Shell games, deception, fraud, all wrapped up in one nice little package for some sucker to buy and left with "the bag" 

Tue, 09/27/2011 - 14:33 | 1715686 Fish Gone Bad
Fish Gone Bad's picture

The stock market is a merchandising game.  This phase of it involves not letting the little guy make any money shorting the market.  EVERYBODY knows that there is going to be a great big sovereign default and a whole bunch of CDS screaming.  The trick here is not to be so heavily leveraged that a person can survive the short squeeze(s).  The little guy always gets flushed/flushed out, then the bottom falls out.  Just wait for it.

Tue, 09/27/2011 - 13:04 | 1715326 TruthInSunshine
TruthInSunshine's picture

All this ESFS and SPV talk, and almost no one is focused on this (the equivalent of a U.S. Supreme Court Ruling, essentially stating that no ESFS expansion, and certainly no leveraging of it, is possible without AN ENTIRE AMENDMENT TO THE GERMAN CONSTITUTION AS VOTED ON BY A POPULAR REFERENDUM!):

German turmoil over EU bail-outs as top judge calls for referendum


Germany's top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new [German] constitution and a popular referendum, vastly complicating plans to boost the EU's rescue machinery to €2 trillion (£1.7 trillion).


The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution). There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit — which might be politically legitimate and desirable  — then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people.

--Andreas Vosskuhle, Chief Justice of the German Federal Constititional Court


Tue, 09/27/2011 - 13:08 | 1715340 DonnieD
DonnieD's picture

Steve Liesman said it. Quit borrowing trouble.

Tue, 09/27/2011 - 13:13 | 1715354 GeneMarchbanks
GeneMarchbanks's picture

The ESFS has been a great distraction from the underlying issue, which, as we've been following since 2008, is insolvent banks and countries. Soon to be continents...

Tue, 09/27/2011 - 13:13 | 1715359 OrdellRobbie
OrdellRobbie's picture

German parliament September 29 vote on EFSF will put this to rest.

Tue, 09/27/2011 - 13:23 | 1715391 espirit
espirit's picture

...and it remarkedly resembles 10 pounds of manue in a one pound bag. Plenty to go around, so no empty bagholders.

Good debt for bad debt?  rotflmao!

Tue, 09/27/2011 - 13:50 | 1715498 oogs66
oogs66's picture

they are voting a version that isn't even what the market is pricing in...this is truly insanity

Tue, 09/27/2011 - 14:53 | 1715768 crazyjsmith
crazyjsmith's picture

That market is totally irrational.  It wants an idea, ANY idea, at ANY cost. 

As the lyric goes..."Lie to me, I promise, I'll believe.  Lie to me, just don't leave"

Pathetic isn't it?

Tue, 09/27/2011 - 15:40 | 1715778 TruthInSunshine
TruthInSunshine's picture




OrdellRobbie:   German parliament September 29 vote on EFSF will put this to rest.

Again, if you read the link, article, and excerpt of the COURT OPINION of Germany's highest court that I posted above, you will find that said highest court has ruled that Parliament can NOT approve the EFSF or any variation thereof, without a referendum vote (by the public at large) to change the German Constitution.

Will the German People cast enough votes to do so? I do not know. I do know that according to Germany's higest court, nothing less would be required.

Tue, 09/27/2011 - 15:42 | 1715981 Joy on Maui
Joy on Maui's picture

Don't think so.   They may approve the current rescue package on the table but have made it quite clear they will not approve anything beyond that, which is what the CNBC story is suggesting.  It really is TARP all over again, European style.

Tue, 09/27/2011 - 13:15 | 1715367 Ned Zeppelin
Ned Zeppelin's picture

Problem is that this is his personal opinion, not a ruling from the court on the issue before them. while it has some persuasive authority, it is hardly enough to stop the banksters from stomping a path to this way to get the sovereign debt off their books.  Tim Geithner has already told them to socialize the losses, privatize the profits, and to do so right away.

Tue, 09/27/2011 - 13:28 | 1715405 bonddude
bonddude's picture

The misunderstanding by Rosenberg of what you so correctly explain has caused him to be wrong wrong wrong about the stock market for quite a while now. He is now hoping the broken clock theory kicks in. Meanwhile he missed a historic run in stock and gold. True???

Tue, 09/27/2011 - 13:54 | 1715510 reading
reading's picture

Not on gold, he's been a advocate of gold for a long time.

Tue, 09/27/2011 - 13:44 | 1715470 MarkTwain00
MarkTwain00's picture

Lets hope the Germans aren't too drunk from the Oktoberfest celebration to stand up for what is right! .....or stumble hunched over to nearest representative and put Das Boot in his/her Arse

Tue, 09/27/2011 - 22:12 | 1717170 Bring the Gold
Bring the Gold's picture

I hope the Germans take you literally and shove actual U-Boats right up the ass of those who vote for the globalist plan.

Tue, 09/27/2011 - 13:20 | 1715381 scatterbrains
scatterbrains's picture

--Andreas Vosskuhle, Chief Justice of the German Federal Constititional Court--

Yea but wouldn't they just do it and worry about the ramification later ?  I mean dude above can always drown in a sauna and a preferable replacement found before it reaches back to their Constitutional Court no ?

Tue, 09/27/2011 - 14:01 | 1715543 disabledvet
disabledvet's picture

It better work then since it's illegal now as well. If it fails these folks might even do something to the perpetrators...or is it perpetraitors?

Tue, 09/27/2011 - 18:52 | 1716622 Bring the Gold
Bring the Gold's picture

Question: Does Germany have Diebold-esque electronic voting systems in place?

Tue, 09/27/2011 - 13:10 | 1715343 Shocker
Shocker's picture

It is great to see, how everything is acting totally messed up. The Market should be down but they are up, Gold should be up but its down. Time are definitely mess, if you try to use logic.



Tue, 09/27/2011 - 13:21 | 1715386 baby_BLYTHE
baby_BLYTHE's picture

huh? The spot price of gold has rallied over 60 dollars today.

Tue, 09/27/2011 - 16:02 | 1715581 X.inf.capt
X.inf.capt's picture

i have no clue, blythe, what is going on with this market

last weds, i posted that i heard and saw people were dumping phyiscal at $39. you saw what hapened, 25% 2 days!

this market isnt making sense at all to me, but i still backed up the truck at a little under $30.

i thought i would feel great, but the last time i was this scared is when i had to see my C.G. as a 2 lt for minor infraction.

playing 'YOU BET YOUR BARS' is no fun....

oh well, back to lurkin'....

Tue, 09/27/2011 - 13:09 | 1715344 TruthInSunshine
TruthInSunshine's picture

Unless there's some extraordinary method that Merkel or any German politician has of circumventing this massive legal obstacle (having the German People at large vote on amending their Constitution to allow the EU to grab more German sovereignty), I don't see how this is anything but a death sentence for the ESFS, even as it is now proposed in its most modest form.

Tue, 09/27/2011 - 13:12 | 1715356 redpill
redpill's picture

Never underestimate the ability of shitbag politicans to violate their respective countries' Constitutions without asking for permission.

Tue, 09/27/2011 - 13:52 | 1715506 piceridu
piceridu's picture

So what kind of fear, threat of Armageddon, meteor strike, shit storm can they come up with to make Germans vote against their own sovereignty?

Tue, 09/27/2011 - 13:13 | 1715348 Ned Zeppelin
Ned Zeppelin's picture

This EFSF is a red herring, to juice up the markets just prior to the announcement of a Greek default. The entire plan is so Rube Goldberg as to be completely preposterous.

"Ned: think if it this way: if you know the plane is going in, but you might be able to do something drastic to halt it before crashing, but you'd need the passengers to go along with it, you make the plane climb first, the start the descent from a higher altitude, and you have a better chance of regaining control before the plane hits the ground. 

"Yes, it might work, Ben, after all that, the passengers will be screaming for you to do something, ANYTHING to get the plane under control.

"Precisely, Ned, precisely."

Tue, 09/27/2011 - 14:17 | 1715518 Kitler
Kitler's picture

Absolutely top notch psy-ops work. Conditioning the Europeans in 'cause and effect' before the sacrificial lamb is to be led to the altar in a co-ordinated 'Lehman' moment designed to save all European banks.

So, will it be a French Bank to play the role of Jesus and die for the sins of the many? Or will operation "la twiste" be aimed at convincing those reluctant German savers to goosestep into abyss?

Tue, 09/27/2011 - 13:11 | 1715353 LongSoupLine
LongSoupLine's picture

but, but Bob PissOnYou on CNBS just said it's 25% rebalancing and 75% real rally.

Total Full Fuctard!

Tue, 09/27/2011 - 13:56 | 1715515 reading
reading's picture

well, if nothing else, he definitely has his numbers flip flopped.

Tue, 09/27/2011 - 13:12 | 1715355 ZeroPower
ZeroPower's picture

Where the hell is the 9x leverage # from? Who ever said the EIB wants to/agreed to take on bad debt?

Honestly this seems like the most rapid half-assed poor excuse of a rumor to ever be constructed. If this kind of effort was put on a tear sheet for a pitch, this person's balls would get ripped off and hed never work in finance again.

Tue, 09/27/2011 - 13:15 | 1715364 redpill
redpill's picture

The longer no one adamantly denies it, the longer financial markets will assume it is going to happen.  Which bureacrat wants to be the asshole to stand up and end the stock party?

Tue, 09/27/2011 - 13:14 | 1715357 trampstamp
trampstamp's picture

I thought this leak was already debunked this morning. TD?

Tue, 09/27/2011 - 13:17 | 1715358 Zero Govt
Zero Govt's picture

Dead Cat Bounce ...back to 'Bear Business' next week, if not sooner... next

Tue, 09/27/2011 - 13:14 | 1715362 Oh regional Indian
Oh regional Indian's picture

How come the UK continues to hold this peculier place in the EU? That has to be a gigantic clue towards what might be coming down the pipe shortly. Why was the GBP so damned important to keep alive as a currency?

And that is clearly the Iraq/Afghanistan/Libya troika along with Uncle "No Boots on the Ground" Sam.

And they have been some of th eheaviest buyers of US paper from the EU zone in general.

Something stinks and it' snot HtwoEssoFer.


Mauled and Gandhian Tales

Tue, 09/27/2011 - 13:38 | 1715447 maverick91919
maverick91919's picture

Don't forget there are 27 EU countries and only 17 use the euro currency so it is not especially peculiar to the UK. We kept the pound in the UK because at no stage was there any public opinion to change to the euro and the politicians knew that. The country was promised a referendum should the conditions be met where it could be argued in favour of joining but the polls have always shown the British people would reject it.

Tue, 09/27/2011 - 13:43 | 1715468 reload
reload's picture

I think the UK kept the Pound Sterling for simple reasons. No political party could have won an election on a`join the euro` platform, and we have such a long & strong tradition of currency debasement, that ceding controll of that process would have been too much of a wrench.

As far as the heavy paper buying goes, its hard to tell where it ends up, but the Fed has more than one proxy to do its `bidding`.



Tue, 09/27/2011 - 13:46 | 1715480 Oh regional Indian
Oh regional Indian's picture

Thanks reload and above. And that is surely the generally accepted opinion. Rather easily manufacturable opinion too.

I see something wicked. The other countries not in the Euro system don't matter as much. City of London is in the UK.

Maybe we'll know soon enough?



Tue, 09/27/2011 - 13:19 | 1715375 buzzsaw99
buzzsaw99's picture

The 2y auction was well bid. People who care about their money are still buying Ts.

Tue, 09/27/2011 - 13:27 | 1715401 topcallingtroll
topcallingtroll's picture

No risk, no reward.

Tue, 09/27/2011 - 14:48 | 1715749 buzzsaw99
buzzsaw99's picture

i prefer: no risk, no risk.


besides, some have collateral backed debts to satisfy.

Tue, 09/27/2011 - 13:18 | 1715376 anynonmous
anynonmous's picture

posted earlier

Macro Man on the "Liesman Plan"


Tue, 09/27/2011 - 13:19 | 1715378 Ando
Ando's picture

I remember coming to zero hedge in mid 2009 and all we read here was that nothing was getting better BLAH BLAH BLAH.  Meanwhile the market ripped in your face and then things did get better.  Now Europe is ripping higher.  You can say nothing has changed all you want but the market is rallying.  I love coming back to zero hedge to see all the angry traders that piss and moan as the market rips in their face.  THE MARKET DOESNT CARE WHAT U THINK. MUAHAHAHA

Tue, 09/27/2011 - 13:30 | 1715407 fuu
fuu's picture

<points and laughs>

"Meanwhile the market ripped in your face and then things did get better.  Now Europe is ripping higher."

Tue, 09/27/2011 - 14:04 | 1715560 mayhem_korner
mayhem_korner's picture

What'd you do with the pistol-wielding chimp, ye bludgeoned of the 3rd Reich?

Tue, 09/27/2011 - 16:10 | 1716105 fuu
fuu's picture

The chimp will be back. This was jsut a special gift for Redneck Repugnicant/Libertarians for Prosperity from yesterday.

Tue, 09/27/2011 - 13:40 | 1715457 ghostfaceinvestah
ghostfaceinvestah's picture

I remember coming to Zero Hedge in 2009 and all we read here was "buy gold" because the Central Banks of the world were going to try to paper over private and public insolvency.  Folks like GordonGekko (where did he go?) and Chumawamba kept saying "sell everything and buy gold".

What a bunch of losers.

Oh, wait...

Tue, 09/27/2011 - 14:03 | 1715551 Johnny Yuma
Johnny Yuma's picture

Market is rallying?! What chart are you looking at? Sure we've bounced from support again but the average range in this chop area has been huge. Don't forget the market just sold off huge down into it's support area again.  

Tue, 09/27/2011 - 17:26 | 1716353 JuicedGamma
JuicedGamma's picture


Tue, 09/27/2011 - 18:05 | 1716486 Thepnr
Thepnr's picture

@Ando "I remember coming to zero hedge in mid 2009 and all we read here was that nothing was getting better BLAH BLAH BLAH.  Meanwhile the market ripped in your face and then things did get better."

That's the point! the only thing to get better was the market, UNEMPLOYMENT UP, INFLATION UP, WAGES DOWN, HOUSE PRICES DOWN. I'd pretty much call Zero Hedge correct on that basis. There are some right fcuking twats around who believe that a rising market means "then things did get better".

Tue, 09/27/2011 - 13:19 | 1715379 Ando
Ando's picture

I remember coming to zero hedge in mid 2009 and all we read here was that nothing was getting better BLAH BLAH BLAH.  Meanwhile the market ripped in your face and then things did get better.  Now Europe is ripping higher.  You can say nothing has changed all you want but the market is rallying.  I love coming back to zero hedge to see all the angry traders that piss and moan as the market rips in their face.  THE MARKET DOESNT CARE WHAT U THINK. MUAHAHAHA

Tue, 09/27/2011 - 13:24 | 1715394 Joe Shmoe
Joe Shmoe's picture

I agree with you Ando.  ZH posters are a herd of bears who think they're on to something innovative.  When the market goes down, the posts are all I told you so's and congratulating each other about how bearish they are.  When the market goes up, it's all conspiracy theory.  

As to the article, I generally like ROsenberg.  But he was sooo wrong last year.  He's a bear

Tue, 09/27/2011 - 13:31 | 1715411 bonddude
bonddude's picture

Damn right he was wrong.

Tue, 09/27/2011 - 13:35 | 1715431 bonddude
bonddude's picture

Incidentally, a little while ago the "Fast Money" faders said sell the rally. 

TRANSLATION- buy with both hands and feet. Except that options guy -Next stop 1225 S&P.

Tue, 09/27/2011 - 13:48 | 1715489 Piranhanoia
Piranhanoia's picture

You guys come here for trading advice?   That is only offered in the comment section.

Tue, 09/27/2011 - 17:39 | 1716405 LooseLee
LooseLee's picture

How'd that work out for 'ya?

Tue, 09/27/2011 - 14:44 | 1715713 drivenZ
drivenZ's picture

seeing as we're now back to where we were in the indexes one year ago...I'd say ZH has done an admirable job of covering the Euro crisis and being a voice of bearishness in a hopium filled world. Not sure how you can say Europe is ripping? maybe today...tell that that to all the soverign debt holders and the folks selling CDS protection. you can't short a market like 09 forever. For those who got sucked into the rally since dec/jan because the "recovery" was here, well what do you tell those people? 


Oh and for those people that bought gold in 09 or 10 or early 11? well they're making out alright aren't they.

Tue, 09/27/2011 - 17:31 | 1716361 JuicedGamma
JuicedGamma's picture

Hey Andro,

You probably went all in this morning. Good luck to you!
Stop back in another 2 years and let us know how it turns out.

Tue, 09/27/2011 - 13:19 | 1715380 Racer
Racer's picture

Window dressing to put people off redemptions? If 'markets' go up, then people get greedy for  more profits and won't redeem

Tue, 09/27/2011 - 13:21 | 1715383 fdisk
fdisk's picture

"Still confused by the 500 DJIA point rally in 48 hours?"

f*ck NO! :)))

I told ya, look out above, or you think everything should just

collapse straight to ZERO? US Equity Market should finally decouple

from European BULLsh*t.. I see we finish today more than 300+..

Keep whining, cause you shouldn't short the BOTTOMS!!!

Short now at least.

By the way, you better pray for Market Rally,

as Gold/Silver currently running head to head with the Market.

I don't see anyone complaining about Silver been up 7%+

Wtf? :)))

Tue, 09/27/2011 - 17:41 | 1716409 LooseLee
LooseLee's picture

Maybe you missed the 50%+ sell-off into the close....

Tue, 09/27/2011 - 13:23 | 1715392 breezer1
breezer1's picture

collapse will be msm evident by mid-oct. huge distraction on the way.

Tue, 09/27/2011 - 13:25 | 1715396 fdisk
fdisk's picture

keep guessing..

Tue, 09/27/2011 - 13:30 | 1715409 Joe Shmoe
Joe Shmoe's picture

Breezer, Such certainty!  Don't you know yet that you (and I) can't predict shit?

Tue, 09/27/2011 - 13:24 | 1715393 topcallingtroll
topcallingtroll's picture

Unlike some of the biotches I post my trades.
Remember Brazil EWZ at 53.70 about a week ago?
( of course not, troll. We dont read you)

Unless there is a huge market dislocation brazil is the place to be.

It is kinda like a primitive exotic version of america in 1950 with a little more chaos.

Debt is low. Plenty of room for expansion and keynesianism before the brazil olympics. Keynesianism does work with relatively low total debt to gdp ratio.

I cant retire on expected developed market returns. Double or nothing.

Tue, 09/27/2011 - 13:49 | 1715493 Panafrican Funk...
Panafrican Funktron Robot's picture

Not a bad call, but why this vs. EEM?  EWZ is about 1/3rd Petrobas and Vale; don't get me wrong, they are solid holdings, but overall this one is not well diversified imo.

Tue, 09/27/2011 - 13:27 | 1715403 Gringo Viejo
Gringo Viejo's picture

Hopeium gettin' thinner by the day......................

Tue, 09/27/2011 - 13:35 | 1715419 drivenZ
drivenZ's picture

 to quote myself from last week(now the third time I've re-quoted this)....

"well it looks like they're going for integration...And at this pace they're going to get it whether they like it or not. When the shitstorm comes everybody's going to have a house full of shit. They're going to need a larger shit insurance policy(EFSF) not underwritten by themselves and quick. "


they can rig it up anyway they want but at the end of the day the swinging pendulum of debt is going to hit somebody. 


Tue, 09/27/2011 - 14:01 | 1715540 depression
depression's picture

Shell Game

Tue, 09/27/2011 - 13:33 | 1715421 YesWeKahn
YesWeKahn's picture

This is like playing bridge, you (bear you) and your partner (bull you) play trump card on both sides. This feels great. Just dumped all my longs, am preparing to short again.

Tue, 09/27/2011 - 13:34 | 1715423 BORT
BORT's picture

This really has becomoe a Yahoo message board. 

Tue, 09/27/2011 - 13:33 | 1715425 mendigo
mendigo's picture

Today we drink for tomorrow we die!

Tue, 09/27/2011 - 13:36 | 1715426 adr
adr's picture

All the debt goes to a magic fairyland where the inahibtants live on debt. If they do not get the daily feedings they turn into gremlins and will drop from the sky and destroy our planet. They were discovered by NASA in 1971 and that is why we abandoned the gold standard and went on a decades long debt fueled binge. It was actually Russia's fault when they detonated the 50 megaton test bomb. It opened the doorway to the debt eating fairies and that is why there were punished and forced to adobt the criminal  system of spending ten times what you take in. That is why the Cold War needed to end because a new greater threat emerged. Of course the Russians denied it at first but after Chernobyl they couldn't deny the gremlins anymore.

Sorry but this latest hopium fest has driven me off the deep end.

Tue, 09/27/2011 - 18:34 | 1716564 IQ 145
IQ 145's picture


Tue, 09/27/2011 - 13:34 | 1715427 mayhem_korner
mayhem_korner's picture

Let's hope this is a game changer for Europe. Then we can at least go back and concentrate on the data and recall that the peak in the S&P 500 took place right after the market digested that weak Q1 GDP report and all the revisions to the downside

Reality, reality, wherefor art thou reality?  When is the collective world going to come to grips with the mathematical certatinty that western sovereigns are indebted beyond repair, and that this jostling is nothing but hopium fumes?

Equities are supposed to be claims on residual cash flows from business enterprises.  Those enterprises are so choked by the weeds of fiscal overextension and over-regulation that there is absolutely no hope of recovery.  If stocks really priced in the value of future cash flows, the S&P should be at something like 500.  And it would crash from there.

Pray for a market rally?  For what - so we can lop more icing onto the turd of the world economy? 


Tue, 09/27/2011 - 13:46 | 1715475 Smiddywesson
Smiddywesson's picture

We are all lemmings.  We breed and prosper until our culture, our population, and our civilization reaches the point where it is held up by nothing by bullshit, and then it collapses and we hurtle over a cliff of our own making, and that cliff is called debt.

Stop complaining about our core nature, you know you love it.

Tue, 09/27/2011 - 13:58 | 1715524 mayhem_korner
mayhem_korner's picture

Man's gotta rant, Smiddy... Don't shoot me with that 'thing' in your paw.

Tue, 09/27/2011 - 13:35 | 1715433 reader2010
reader2010's picture

Remember that trader on BBC telling you short the market? It's all set up.

Tue, 09/27/2011 - 13:37 | 1715442 fdisk
fdisk's picture

well, he's f*cking broke by now :)))

Tue, 09/27/2011 - 13:57 | 1715517 bonddude
bonddude's picture

Yes his big bad GS lament was soooo tired.

Tue, 09/27/2011 - 13:36 | 1715436 Stoploss
Stoploss's picture

So i can stay up longer, work harder, and make more money to buy more coke, so i can stay up longer, work harder, and make more money to buy more coke, so i can stay up longer, work harder, and make more money to buy more coke, so i can stay up longer, work harder, and make more money to buy more coke, so i can stay up longer, work harder, and make more money to buy more coke.................................................................

Tue, 09/27/2011 - 13:36 | 1715440 FoieGras
FoieGras's picture

Markets rally (and crash) *BEFORE* the economy turns. Anyone dismissing a rally (or crash) because 'nothing has changed' is absolutely clueless and will be used as cannon fodder in the markets.

Tue, 09/27/2011 - 13:41 | 1715460 adr
adr's picture

The economy has already fully recovered and crashed again multiple times in the last hour. We just don't notice because of the time dilation effect of HFT. If you slow down HFT and look at microseconds in terms of days it all makes sense. The Algos are simply running economic simulations that influence ou overall macro situation. Economic cycles that used to take decades to play out now can do so in a matter of days.

Tue, 09/27/2011 - 13:41 | 1715449 radish juice
radish juice's picture

The govts are interesting in the sense they save the same hedge funds that come back and then bite them by shorting their curency/bonds etc and are leveraged to hilt. Does anyone understand this self destructive behavior? In the last meltdown, had the govt not made TARP/TALF/whatever facilities available to hedge funds many of them would have been evaporated. An advantage of that would be that we would not see run into soverigns running for cover as they are now when their currencies/bonds are under attack at least with the same intensity/leverage that hedge funds use today. Why not let the speculators die? until they do this, we will keep the scnario happening again and again. It is strange that you are trying to save someone who is obviously tryin to kill you, which living things exhibit that behavior (who have survived over long enough time?)

Tue, 09/27/2011 - 13:46 | 1715481 adr
adr's picture

skorpion and frog?

The government can not exist without the elites buying elections and the elites cannot exist without the government giving them preferential treatment.

The only answer is for the common peple to quit playing the game. Boycott the stock market and boycott the election. If nobody went to the poll on election day it would send a clear message to TPTB that the people no longer wish to play.

Tue, 09/27/2011 - 13:51 | 1715499 reload
reload's picture

Some of the hedge funds are big enough to do massive harm to their prime brokers (TBTF) banks if they were allowed to evaporate.

Also some seriously powerful, real insider money is parked in some of the better `connected` hedge funds - gives them `protection`

Tue, 09/27/2011 - 13:43 | 1715466 Boilermaker
Boilermaker's picture

Yada, yada, let's get back the rip your face off rally before the lunchbox class realizes what's going on.

Tue, 09/27/2011 - 15:00 | 1715801 Stoploss
Stoploss's picture

I've come to the conclusion my face does not get ripped off anymore during these fluff rallies. Due to the simple fact that there is not enough volume to actually rip my face off as opposed to the lsap rallies.

I have also come to the conclusion that the rip your face off rallies, no longer are to the upside, but rather, to the downside, with three times the volume. 

Now THAT'S a rally!

Tue, 09/27/2011 - 13:43 | 1715469 sitenine
sitenine's picture

I heard that the ECB will start accepting rumors as collateral.

Tue, 09/27/2011 - 13:44 | 1715473 youngman
youngman's picture

Brasil is one of the most corrupt countrys out there....but they do have beautiful women...they have grown very fast and now their people think they are all middle class....but with China slowing...could hurt Brasil quite a bit....I chose Colombia....better country...less corruption...smarter better educated people...self contained...lots of commodities...and beautiful women too....whatever....this last week is why the average Joe is out of the markets....why people are pulling out of mutual funds and money market funds...why Hedge funds are closing down...its rigged..its fake...I am heavy into PM´s and even that is rigged...get rid of the paper traders and we can get back to a will never happen...the Players do not want a normal market....they control I sit here in paradise and drink my beer....and watch the western world fll apart...long term I will be the short term..who knows what is really going on

Tue, 09/27/2011 - 14:04 | 1715557 fdisk
fdisk's picture

"but with China slowing"

China slowing about last decade, 8-9% growth is that you called

"Slowing" ???

Tue, 09/27/2011 - 17:45 | 1716420 Bananamerican
Bananamerican's picture

what became of the narcos, Leftists and Death Squads?

Tue, 09/27/2011 - 17:57 | 1716452 Taffy Lewis
Taffy Lewis's picture

Youngman, I like your comments and viewpoint. Being back in the States for a couple of years, I am reloading to go back to Thailand in 3 years. And I will be in paradise again sipping on my concoction of Singha/Red Bull/ice cubes :-)


Tue, 09/27/2011 - 13:47 | 1715483 Village Smithy
Village Smithy's picture

I find it incredible that we are still discussing these rumours as if they are moving the markets. No one is that stupid, they are not moving the markets. The insiders are positioning, they are moving the markets. All of these rumours are just rehearsed and co-ordinated smokescreen.

Tue, 09/27/2011 - 13:58 | 1715520 oogs66
oogs66's picture

that is a scary perspective...but are they positioning long for more rebound or shorting the heck of this rally knowing bad news is coming?

Tue, 09/27/2011 - 14:32 | 1715679 Village Smithy
Village Smithy's picture

My bet is on the latter, but then again I like ZH so I am by definition a perma-bear. Thanks for your reply.

Tue, 09/27/2011 - 13:48 | 1715486 FranSix
FranSix's picture

Its plainly obvious that they need to allow every Eurozone country to return to their various currencies to devalue against the Euro.

Tue, 09/27/2011 - 13:51 | 1715495 Major Priapus
Major Priapus's picture

I love what Rosenberg has to say...

Harry Koza is another favorite of mine:


Tue, 09/27/2011 - 15:36 | 1715946 anynonmous
anynonmous's picture

Koza is great

Tue, 09/27/2011 - 13:52 | 1715504 Absalon
Absalon's picture

Greece still won't be able to pay.


Interesting that the Canadian Prime Minister is meeting with the Minister of Finance and the head of the Bank of Canada on Tuesday.  Canada may have been asked to support some sort of proposal - either that or they are trying to figure out what to do when the European banking system does finally blow up. 

Tue, 09/27/2011 - 18:30 | 1716553 IQ 145
IQ 145's picture

It's just an excuse to have lunch in a French Restaurant and trade off-colour jokes. Canadians have a very successful policy of staying home and minding their own business; not into joining proposals.

Tue, 09/27/2011 - 13:59 | 1715521 kaa1016
kaa1016's picture

You guys should know how this works by now. When a month begins down, they almost always ramp it higher at the end of the month. It's also the end of a shitty quarter, for long only investors. I would be surprised if we saw any major selling before Friday. Monday is a different story.

Tue, 09/27/2011 - 14:17 | 1715621 Boilermaker
Boilermaker's picture

Which, in every way, means this is a fucking charade of a fraud of a joke of a market and nothing that any retail investor or 201(k) person should touch.

Tue, 09/27/2011 - 14:05 | 1715563 vegas
vegas's picture

Told all of you ES shorts out there the HFT's would be back with a vengeance. With record S&P Put open interest, exactly where do you think it's going.

No surprise at all we get surge in global equities. And I have said before, NEVER UNDERESTIMATE the power of government and exchanges to change the rules, and by proxy, inflict the most pain on those that trade the obvious.

Tue, 09/27/2011 - 14:11 | 1715599 Piranhanoia
Piranhanoia's picture

The population's critical mass is never factored in. It is always a surprise when anything unexpected (well known in advance) happens regarding the governed. Wait until they wake up in poverty one morning. When you hear that subsonic vibration and then low roar that precedes the ground moving from the approaching earthquake, remember that when you think about value of things, never forget,  compared to what?

Tue, 09/27/2011 - 14:15 | 1715603 Big Ben
Big Ben's picture

So the plan is for France and Germany to guarantee all of Europe's bad debts? How generous of them! This actually goes far beyond TARP where the US gov. just took on the safest parts of the US mortgage debt. And the TARP loans were quickly repaid. But France and Germany would be guaranteeing a lot of loans which will never be repaid.

I am sure this plan will be immensely popular with voters in these two countries. Just look at what TARP did for the Republicans in 2008.

This situation is so surreal. The markets are trading up and down on vague rumors. Merkel is saying we will bail out the PIIGS, no problem. And the German finance minister is saying every man for himself.


Tue, 09/27/2011 - 14:19 | 1715623 bid the soldier...
bid the soldiers shoot's picture

trading range has to do with the difference between the low (support) and high (resistance) prices associated with the trading activity of a security or group of securities within a given market.

If prices move within the range in Giant steps, larger profits accumulate more quickly, rather than

 nickle and diming the boundries of support and resistance.

Eventually the price will breakout through resistance or break down through support. Don't cross that bridge till you get to it.  

Come on in --  the water's fine.

Tue, 09/27/2011 - 14:22 | 1715642 High Plains Drifter
High Plains Drifter's picture

once upon a time in texas. the russian delegation (ha ha ha ) decides to call upon ricky dicky perry at the state capital. much lulz all around doncha think? the country boy from paint creek, took out his trusty gold plated tungsten knee pads, quickly put them on and got on his knees and went to town sucking yiddish ass.....doncha know.....

Tue, 09/27/2011 - 18:04 | 1716484 Taffy Lewis
Taffy Lewis's picture

High Plains,

I'll call that and raise you one: Perry is a Bilderberg attendee already given his marching orders; he's shown his love for the NWO with his support for the super-duper transcorridor and open border.

Tue, 09/27/2011 - 14:27 | 1715660 Fox Moulder
Fox Moulder's picture

"voila a Eurobond in sheep's clothing."


More like a Eurobond in PIIGS clothing.

Tue, 09/27/2011 - 14:29 | 1715668 cranky-old-geezer
cranky-old-geezer's picture



when you realize that nothing has really changed,

Nothing has really changed since Sept '08 except everybody going deeper in debt and central banks trying to accomodate that additional debt without destroying the currency. 

Slowly weaken it yes.  Collapse it no.  Steady inflation yes.  Hyperinflation no. 

The entire game these days is trying to print without causing currency collapse. And it's getting harder to avoid currency collapse as sovereign debt grows. 

This is why central banks are hoping private sector investors will step in and keep the ball rolling.  But private sector investors are tapped out.

There is no good solution.  Steadily increasing debt will cause currency collapse sooner or later.  Sudden loss of confidence.  There won't be any warning to speak of.  No time to sell and get out. 

Tue, 09/27/2011 - 14:34 | 1715692 t0mmyBerg
t0mmyBerg's picture

here is all the explanation you need for the rally.  we are three days from month and quarter end.  the pattern since something like May has been rally the last 4 or 5 days, make a high on the First and then sell off.  Same shiite, different month.  Fund flows. Whatever.

Tue, 09/27/2011 - 14:43 | 1715700 No More Bubbles
No More Bubbles's picture

Rosenberg is a clown for advocating China become consumerist idiots.  Gee, that kind of "culture" has done so well for the US & Europe.

Tue, 09/27/2011 - 15:57 | 1716025 Saxxon
Saxxon's picture

The Chinese Communist Party wants its roiling masses to be exactly that. 

The scales fell from my eyes on this last trip.  The pummelling, endless flow of retail-related imagery is everywhere and cannot be avoided, even in the smallest hamlet.

The areas in the PRC which still retain some charm are simply cordoned off, made into human zoos and tickets are sold for admission.  They do this with entire towns.  At the entrance they build a 80,000 square foot (empty) shopping mall for the anticipated 'flood' of touristas.

The idiocy is maddening.  China has picked up on Japan's long tradition of communicating to the populace in cartoonish imagery; you get to watch it on the subways, all the way to the end; even flashed with a laser on the wall of the tunnel so you can't even stare at the darkness.  Stupid prancing bears and bouncing balls with human faces.

Is it working?  I would say not.  They still don't extend credit to the roiling mass; unless it is prepaid.  I.e., unlike in the U.S. where every drooling idiot has a cc, almost no one in China does.

If they don't figure out a way to do that, it is game over.

What a stunning mess they have made of that country.

Disclosure: In Cash.


Tue, 09/27/2011 - 14:57 | 1715792 Bansters-in-my-...
Bansters-in-my- feces's picture




When you gonna speak up...????


Tue, 09/27/2011 - 15:15 | 1715862 d00daa
d00daa's picture

let me guess...  you are getting your face ripped off by this rally??

Tue, 09/27/2011 - 15:25 | 1715895 TruthInSunshine
TruthInSunshine's picture

Although you weren't speaking to me, have you been long since 1999 (in which case you're down approximately 35% in real dollars) or long since early 2007 (in which case you're down by 35% in real dollars - and you're down way further regardless of which year you went long if you were heavy into the 'blessed sectors' or had money in no-longer-counted 'survival-biased-to-death' stocks like General Motors), or have you been long since 1986 (in which case you're down by approximately 45% in real dollars)?

Bull market!

Tue, 09/27/2011 - 15:11 | 1715847 Bansters-in-my-...
Bansters-in-my- feces's picture


You sound like a fucking banker and idiot or a politician..

My guess ...

All three.

Fucking idiot.

Tue, 09/27/2011 - 15:16 | 1715866 chrispycrunch
chrispycrunch's picture

The last time I heard of the creation of "special purpose vehicles" was with Enron (SPE's). Look what happened to Enron...

Tue, 09/27/2011 - 20:43 | 1716924 sgorem
sgorem's picture

Isn't it time to start the music, "Nearer My God to Thee"? (as in the fucking SINKING of the Titanic?) Jeeeeesh, get this shit over with already!

Tue, 09/27/2011 - 23:00 | 1717265 philipat
philipat's picture

Sorry to ask a stupid question, but why not just let the Banks go under? They aren't performing any socially useful purpose anyway. Sweden temporarily nationalised troubled Banks, wiped out equity holders, bond holders, boards and managements. Only then were taxpayer funds used to write down bad assets. Then the Banks were re-floated with the good assets and a sustainable capital structure. The proceeds of the IPO's, of course, then offset losses to the taxpayer. Sweden is now one of the strongest economies in Europe.

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