Earlier this afternoon, it was Steve Cohen's final fall from grace. Now, Bloomberg reports that Brazil's one time super billionaire, and now negativeworthaire, Eike Batista, whose sprawling petroleum empire was once valued in the tens of billions, is set to file for bankruptcy tomorrow.
- BRAZIL'S OGX SAID TO PLAN BANKRUPTCY PROTECTION FILING TOMORROW
We are confident that just like in Europe, there is no bank with any exposure to either OGX, Brazil, or whatever potential intercreditor avalanche will tear down many more Brazilian companies once this first insolvent domino finally tips over.
When on October 1, fallen billionaire Eike Batista's OGX Petroleo & Gas, missed a $45 million bond coupon payment, some were surprised but most had seen the writing on the wall. After all, Brazil's second largest oil company after Petrobras, and the crowning jewel of Batista's EBX Group, had been under the microscope of investors and certainly creditors (and if it wasn't it certainly should have been) after oil deposits that Batista had valued at $1 trillion turned out to be commercial failures. And so the countdown to the inevitable bankruptcy filing began. Overnight, Bloomberg reports that the wait should not be long (in fact it may coincide with the default of that other insolvent mega-creditor: the United States), and will mostly certainly take place before the end of the month, following the retention of bankruptcy specialist law firm Quinn Emanuel.
Pervasive, unchecked spying on millions of Americans and NSA agents eavesdropping on exes? A war with Syria? Fed tapering? A US that has been at its debt ceiling for months? A looming spending fight? Markets halting for hours due to "glitches"? Even Donald Trump? Naaaaah. According to Google Trends, this is what keeps America "up" at night.
China may or may not be building empty cities any more, but when it comes to the buildings it does, ahem, erect, it appears that the communist regime is either running out of ideas or is taking the symbolism of the skyscraper just a little too seriously. Behold the building that will house the new Beijing offices of the People's Daily, the official paper of the China Communist Party...
There exists a super-Bernanke who proved also a super-Hollande, a gentleman who Japanese Prime Minister Shinzo Abe cannot compete with: his name is Robert Mugabe, the president of Zimbabwe. When he took power, he seized the farmlands of one social group to give them to another social group. Afterwards, in part because the new social group did not manage the farms that well, the economy took a turn for the worse. Therefore, the state issued some bonds to finance its spending and asked the central bank to issue some money to buy this government debt. But they printed big time and turned the printing press into something of a cosmic proportion. According to Professor Steve Hanke from John Hopkins, monthly inflation was 80 billion percent, so per year it is a 65 followed by 107 zeros. This is what we call Mugabenomics, the conjunction of (i) state-forced wealth transfer between two social groups along with (ii) the monetisation of the debt. As we shall see below, Mugabenomics, or at least its mild version implemented now in the Western hemisphere, has drastic consequences on the final episode of the global financial crisis.
By now we are confident that everyone is sick to death and beyond of listening about elections, polling, conditional probabilities, permutations, (confusing) statistical sampling and heuristics, and all those other things that the vast majority of the population fail in STAT 101 yet somehow end up as experts in during cocktail hour, on TV, on Op-Ed columns and, of course, on twitter. Which is why we are delighted to bring you this comic interlude. Presenting Donald "The Hairpiece" Trump vs Mark "Avion Tequila" Cuban.
What Do the Experts Say? Are People Actually ACCEPTING Gold As Money?
I just finished reading Octopus by Guy Lawson, and it's one of those that fit the "I Couldn't Put It Down" category, much like Den of Thieves, published in 1992. It is the tale of Sam Israel, whom you may remember in 2006 was on the lam from his failed hedge fund/Ponzi scheme. He faked his suicide, was captured, and is now hanging out for the next couple of decades (with none other than Bernie Madoff) in a state prison named, of all things, Valhalla.
Think the attempted fake suicide by Bayou Capital's Sam Israel which dominated the headlines for a few days in 2008 was strange? You ain't seen nothing yet: as the following excerpt of Octopus, The Secret Market And The World’s Wildest Con by Guy Lawson via the Daily Mail explains, that was merely the anticlimatic culmination of an amazing tale of bogus London traders, 'secret' Bond markets, frontrunning the Fed, fake CIA and MI6 spies, ponzi schemes and staged murders.
Aubrey McClendon is no amateur when it comes to shady personal transactions involving his company, nat gas giant Chesapeake: Back in October 2008, just after the financial crisis erupted, he was forced to sell more than 31 million Chesapeake shares for $569 million to cover margin calls generated from buying CHK stock just prior on margin. The company’s stock fell nearly 40 percent the week of McClendon’s share sales. McClendon issued an apology but the company’s credibility with many shareholders suffered significantly. It looks lie the story is repeating itself, only this time the margined security is not company stock, but company loans. As Reuters reports in a must read special report "Since he co-founded Chesapeake in 1989, McClendon has frequently borrowed money on a smaller scale by pledging his share of company wells as collateral. Records filed in Oklahoma in 1992 show a $2.9 million loan taken out by Chesapeake Investments, a company that McClendon runs. And in a statement, Chesapeake said McClendon’s securing of such loans has been “commonplace” during the past 20 years. But in the last three years, the terms and size of the loans have changed substantially. During that period, he has borrowed as much as $1.1 billion – an amount that coincidentally matches Forbes magazine’s estimate of McClendon’s net worth." Ah yes, net worth calculations, which always focus on the assets, but endlessly ignore the liabilities (as Donald Trump will be first to admit). But ignore that: what is more notable here is the circuitous way that McClendon basically lifted himself by his, or rather CHK's bootstraps: all the loans are collateralized by his 2.5% working interest in new CHK wells drilled every year. In essence a roundabout way of generating "cash" by hypothecation, and levering into an "upside" corporate case. Should CHK however incur asset impairments, and/or if the current price of gas stays at or $2.00, then not only will CHK be gutted but so will the asset quality securing the private loans to the CEO, which on top of everything have no covenants ("There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way," McClendon wrote in an email to Reuters.) and thus no stakeholder protections. Is it any wonder then that CHK is getting creamed as of right now as investors are once again reminded that CHK may not quite play by the rules?
What would a Collective Action clause achieve? Let’s say they institute a 75% agreement clause, so that if at least 75% of the holders of anyindividual bond issue, agree to the terms, then all bondholders are forced to accept the new terms. Will adding a Collective Action Clause make investors agree to the changes? I don’t see why that would happen. If you didn’t agree to the plan being proposed by Greece now, why would you agree to the plan if all they have done is institute a Collective Action Clause. You wouldn’t, so you would still have the same group of holdouts. What happens if a bond doesn’t get 75% agreement? Then those that agree get the new bonds, and those that don’t agree keep the old bonds. Same as now. But if it is the same as now, why bother? Maybe they need to make it 50% agreement? Or 10%? In any case, there may be individual bonds that don’t meet the Collective Action threshold. For those bonds, it is exactly the same as it is now – except that the government changed the rules retroactively and jammed it down your throats (but more on that later). What happens if 80% of the holders of a particular bond agree? Then all bondholders are subject to the agreement. Well, guess what, that is a Credit Event!
In the past few minutes, the market, in true stung dog fashion, has soared without anyone even being faintly aware of what the actual news is. The consensus for the time being is that the primary driver of the latest bout of idiocy is the following BBG headline:
- GREEK PRIME MINISTER MAY BE IMF'S ROUMELIOTIS, NET TV SAYS
How this makes any sense we don't know. Supposedly the IMF being in charge of Greece will make losses to European banks even more negligible (and Greek austerity that much more austere) or something. We don't even pretend to comprehend this BS any more. Obviously we would say this rumor is total BS, but with Europe now a fully onionized continent, we prefer to keep our mouth shut.
The Donald takes delivery of 3 Kilos.
Last Thursday, Donald Trump appeared on CNBC, and in an attempt to generate PR publicity almost as bad as A&F's idiotic campaign to pay The Situation money not to wear their clothing, sad the following: '"You wouldn't believe it. I bought Bank of America, I bought Citi, I bought, you know, two troubled companies that I think have an upside, lets see what happens. Caterpillar, Intel, Johnson and Johnson, Proctor and Gamble." We were curious to see how Trump's latest foray into picking securities (as opposed to bankruptcy advisors - he truly excels there) turned out. Here is the result of what listening to the former (and/or future) presidential candidate has yielded in a few short days.