Marla Singer

Cognitive Dissonance's picture

Our veterans were an important part of the internal control mechanism that all unorganized groups develop as a matter of instinct and survival. Natural leaders emerge and are respected not just for their inherent authority, but because of their common sense approach and fairness even to those they oppose. Thus form and function develops out of chaos and the community coalesces.

Cognitive Dissonance's picture

In Chapter 3 of this continuing examination of our collective insanity, we begin to unfold the dynamics of the public lie, our often unconscious defense of the public lie, setting up our personal psychic firewalls, the Stockholm syndrome and the dynamics of the family when dealing with the addicted/abuser, Mother Nature’s nose candy, how we can break the conditioning and then reinforce the changed behavior.

The Wages of Obfuscation: Farcism and the AIG Timebomb

One of the central tenants of Farcism as a doctrine is the promotion and use of layers of opacity and complexity to empower regulators via their ability to mitigate red tape and compliance costs and to conceal this power under a cloak of (for example) promoting the "American Dream of Home Ownership."  It will be seen that Farcism has imbued the halls of regulatory power, particularly in financial services, for decades.  Zero Hedge readers are invited to opine on the impact this realization has on prospects for a financial reform bill that puts more power in the hands of these parties.

In this connection, back in November of last year we explored the nuances of the "foreign regulatory capital" credit default swap portfolio of the besieged Financial Products group at AIG.  We pointed out that $172 billion in notional exposure (well, it seemed like a big number for a potential loss before Fannie Mae actually lost $145 billion in eleven consecutive quarterly losses, wiping out its combined profits for the prior 35 years and still leaving about $80 billion in red ink to spare) remained outstanding, that deteriorating credit markets may force AIG to recognize additional losses on the portfolio, but that AIG expected the swaps mostly to be terminated by the first quarter of 2010 (please please please please?).  We also noted that the implicit backing of the Federal Reserve might be one of the key (only?) elements permitting these swaps to perform their desired function: permitting European banks to reduce their regulatory capital requirements (read: boost their leverage).

This is Part III of a multi-part series on global rise of Farcism.  Part I, "The Silver Curtain" can be viewed here. Part II "On the Pensioning of Roman Veterans" can be viewed here.

The Euro as Neutron Initiator?

By Marla Singer and Geoffrey Batt

In September of 2008 the Reserve Primary Fund, loaded with exposure to Lehman Brothers debt, faced massive withdrawals and promptly "broke the buck."  (Slipped below $1.00/share NAV).  The result was a cascade of credit crunches for major corporations dependent on commercial paper for not just their near term financing, but their day to day operations.  Firms like Honeywell, General Electric, 3M, Boeing and WalMart were gripped in what might even be called a destructive co-dependent relationship with the short term cash available in the commercial paper market.  Particularly in an environment of low interest rates, money market funds desperate for yield are ravenous lenders to these large cap firms that divert their cash elsewhere and use the commercial paper market to make up the difference.  The constant "roll risk" means that any seizing up of the commercial paper market could deliver sudden and unexpected defaults by the country's largest and most respected firms.

Radio Zero: Sick Leave

Having now returned from extended sick leave and coming to you from within her digitally wired ISOPORT™ (the CDC approved portable, negative pressure isolation enclosure in which she now resides full-time) Marla Singer is pleased to share with you:

- A small but finite risk of exposure to plague in the form of multi-drug resistant Streptococcus Pneumoniae

- The lingering side effects of ongoing and massive doses of vancomycin and linezoli (including altered taste perception- brown sugar Pop Tarts™ now taste like foie gras to her, though cornflakes apparently remain as bland as ever)

- A large supply of Laudanum painstakingly hoarded from the 19th century medical facilities in which she was imprisoned housed and soon to be available for resale through the Zero Hedge Store (Act now! Supplies are limited!)

- A (hopefully) temporary loss of speech (induced by repeated intubation)

- Advanced, multi-lingual electronic speech synthesizer with integrated wheelchair (one beep for "yes," two beeps for "no")

- Several advance copies of her new book: The Complete Guide to Defrauding ObamaCare (with an introduction by Dick Fuld)

Oh, and

- 12 hours of Radio Zero (brought to you by the complete lack of circadian rhythm long hospital stays apparently induce)

Join us around... well, around now.

Connection details:

Or just connect direct:

Is Titlos PLC (Special Purpose Vehicle) The Downgrade Catalyst Trigger Which Will Destroy Greece?

The media world is aflutter with recent revelations that Goldman may have facilitated Greece in creating an SPV that "rebalanced" budget payments via an interest rate swap arrangement, which the NYT describes as "a currency trade rather than a loan, [which] helped Athens meet Europe’s deficit rules while continuing to spend beyond its means." For those curious to get a much more detailed perspective on the mechanics of not just this, but a comparable Goldman-facilitated transaction, we suggest the following article in Risk Magazine, which focuses on a similar prior deal completed over six years ago. Yet we are fairly confident that all this barrage of information is merely a Houdini distraction act: the prospectus of the February 2009 securitization deal clearly delineates the mechanics of the deal; it was full public knowledge. Of course, a Europe gripped by sudden chaos due to their aggressive and quick "bail out" response with no regard for public backlash, is now taking full advantage of this recent "discovery" to make it seem that Greece and Goldman were hiding even more information: Bloomberg reports that "Greece was ordered by European Union regulators to disclose details of currency swaps it may have used to deal with the debts that threaten to swamp its economy." Germany's CDU has gone one step further and claims that the "Goldman deal broke the spirit of Euro rules." Alas, this is nothing but more scapegoating while Europe tries to find its bearings and, if possible, back out of the bail out while finding more pretexts to throw Greece out of the euro zone entirely. If it takes a Goldman smear campaign, so be it.

However, where the rub truly lies, and where things for Greece may get very hairy fairly quick, is in the interplay between the rating agencies and the rating of the Goldman underwritten swap agreement securitization SPV known better as Titlos PLC. As one recalls, it was precisely the rating agencies that were the proximal catalyst that started the collateral call cascade that ultimately resulted in AIG's failure and subsequent bailout (ignoring for a moment the pent up toxicity on AIG's books: both AIG then, and Greece now, are in deplorable shape: the question is what will bring it all to the surface). So here are some recent facts: On December 23, 2009, Moody's downgraded Titlos, following the prior day's downgrade of Greece itself from A1 to A2 with a negative outlook. Fact: last week Moody's said it could further downgrade Greece to Baa1. Fact: the Titlos PLC rating mirrors that of Greece itself. Fact: according to Moody's "Framework for De-Linking Hedge Counterparty Risks from Global Structured Finance Cashflow Transactions Moody's Methodology" a counterparty can enter into a hedge transaction with an SPV and continue to participate in that transaction without collateralizing its obligations so long as it maintains a long-term senior unsecured rating of at least A2. When (not if) Titlos is downgraded again, and its rating drops below the A2 collateralization threshold, look for AIG's margin call driven liquidity crisis escalation from the fall of 2008 to spread to Greece. And that's not all. The Titlos SPV itself may be null and void should the rating of the National Bank of Greece, as the Hedge Provider, drop below a "relevant rating" as defined in the hedge agreement. Should Greece then be forced, at Titlos' option, to unwind the swap agreement, and be forced to cash out to the tune of €5.4 billion (net of the 107.54 issuance price), look for all hell to break loose.

Goldman Admits To Frontrunning Clients Through Its Prop Desk

The topic of Goldman frontrunning clients using its prop desk, which has long bothered Zero Hedge, and which in the past received Goldman's vehement refutation, seems to have resurfaced, and to have proven our initial speculations correct. Jane Lattin, assistant to Thomas Mazarakis, head of fundamental strategies, sent out an email to clients earlier, notifying them that the firm in the past has traded ahead of them in its Fundamental Strategies Group, aka its Prop Trading desk, which is, by definition, frontrunning: "The Fundamental Strategies Group is a group of cross-capital structure desk analysts employed by our Securities Divisions to assist our traders. They develop Trading Ideas in conjunction with traders. We may trade, and may have existing positions, based on Trading Ideas before we have discussed those Trading Ideas with you. We may continue to act on Trading Ideas, and may trade out of any position, based on Trading Ideas, at any time after we have discussed them with you. We will also discuss Trading Ideas with other clients, both before and after we have discussed them with you." This answers our repeated queries from July as to whether Goldman is legally front-running its clients for its own prop positions.

Taibbi on Fannie, Freddie, Mortgages, Bankers and Marla Singer

Zero Hedge readers will miss out if they fail to carefully study Matt Taibbi's piece on Fannie, Freddie, and the mortgage bubble (as well as a number of other tangential but critically important topics).  Mr. Taibbi makes much of being delicate with me over what he sees as our disagreement on the issues, but I think he mistakes a few (and generally minor) differences in our conclusions for a real divide on the facts.  We are, as near as I can tell, in pretty violent agreement on the substance of the argument: The present exploding bubble is the result of mis and malfeasance on all sides.

A Zero Hedge Premium Preview: The Dionysian Rites of Henry Kissinger's CIA and the Iranian Revolution of 2010

As you may or may not know, Zero Hedge is in the process of developing a number of premium offerings for 2010. One of these is "Cf., The Journal of Irreverent Attacks on Conventional Wisdom, Entrenched Dogma and Sacred Cows." For your reading pleasure, and to act as a preview of premium things to come, we attach Volume I, Issue I entitled "The Dionysian Rites of Henry Kissinger's CIA and the Iranian Revolution of 2010."

Exercises in Nominal Reality, a Play in Three Acts. (Act I)

Like a buzzing mosquito inside the netting over your bed, wings on the heavy Mustique air, humming a small pinhole of bright light through the dark veil of your dreams of unbridled success, we have been annoyed by the constant propensity of even learned economists to measure the performance of equity markets in nominal terms. "Worst decade for stocks since [horrific period marker]!" is only the most egregious (not necessarily the most common) offender in this respect. In truth, we have long failed to see the logic of measuring performance in nominal terms (our sporadic gold denominated S&P 500 posts are a good example).

Citigroup: KIA'd

In the wake of the crumbling of certain sandcastles in the sky, sovereign wealth funds in the middle east have baited our analytic gaze over the last month or so. It takes very little, therefore, to prompt us to take careful notice now just about whenever one is mentioned. Today, the Kuwait Investment Authority (hereinafter the "KIA") and its brutal body-blow to Citi demand our attention.

Like Sands Through the Hourglass, So Are the Days of Our Lives: Today's Episode - Mystery of the Iraqi Gold Purchase

Perhaps you might not expect to find much interesting in data published by the Central Bank of Iraq.  In fact, it is a treasure trove of interesting mysteries right smack in the middle of the nexus between international economic relations and nation building.  For example: Between October 22nd and October 29th of this year Iraq's central bank appears to have acquired IQD 1.874 trillion ($1.6 billion) in "Gold and SDRs," adding to their existing stash of IQD 726 billion (or about $620.5 million).  This wouldn't normally be unusual.  SDR's are often the unit of choice for countries accepting loans from the IMF, for example.  But after just a little bit of digging, one thing seems pretty apparent: they ain't SDRs.  Around this time gold peaked at $1061 an ounce.  If it was, in fact, gold that Iraq bought, that's around 1.5 million ounces (or more depending on the actual clearing price).

Fibozachi's picture

In light of an especially noteworthy Full Moon, both gold bugs and those who are particularly 'in tune' with the waves of collective social mood (akin to social tuning forks) ought to remain extra cranky for an additional few days. 02:28:xx, Wednesday morning (12.2.09), marked a Full Moon; we at Fibozachi always reference time in EST, which is universal 'market time' while everything else is just ‘noise,’ though apparently there is something other than just dead 401(k) money scattered across mutual fund sub-accounts domiciled in Manhattan/ Boston (equities), Chicago (commodities) and Newport Beach (bonds).