Archive for February 10th, 2010

A brief word from our sponsor…

Wednesday, February 10th, 2010

Hopefully you’ve all been applying your ShadowTrading skills and getting in some trading every day. The volatility has been good on various instruments and you have a lot of choices out there (e-mini’s, 6J, 6E, CL, NG, etc). Looking at the graphs, the news and the general geo-political vibe out there, I feel it necessary to remind you all to make sure you are in and out of your trades before end of day. Hopefully it’s not taking you more than about 10-15 minutes to hit your targets and be done.

Also, depending on your broker, the cash in your account might be being put into money market accounts at night. This didn’t used to be a big deal, but now that rulings have come out to reinforce the concept that redemptions could be frozen for “extraordinary events”, this is more risk than I feel is acceptable.

I can’t fully quantify it yet, but there appears to be one or more major events hanging out just beyond the horizon. Whether that is a US debt default, debt jubilee, war or something else…I’m not certain. But I haven’t seen this many BIG news items coming up at the same time. I have my ears open on various lines and will faithfully keep you updated.

Given the potential for some “disruptive event”, I think it is good policy to move a portion of profits out regularly from your trading account, and put that towards paying down debt and/or buying what will really help you survive now [in case you're wondering, a new 70 inch LCD TV is not a survival item--just see how well it does when the power's out]. I’m not exactly big on hoarding cash, since fiat currency, like Blanche DuBois, “relies on the kindness of strangers.”

 Debt all paid? Very good. You can work on broadening your horizons by establishing bases of operation in other countries.  Don’t forget to help out your fellow man either. Folks are dying for credit. You could be a trusted source to provide refinancing away from the evil, usurious vampire squids out there. Count it as a revolutionary act–and a kind one too.

Southern Europe debt crisis, on the brink of a new recession

Wednesday, February 10th, 2010

More fun from MarketOracle. Of course, we have attention on So. Europe and not England which, despite not being on the Euro, is up around 60% debt-to-GDP. Mind you, Greece is only some 3% of total EU GDP, with a 16% debt-to-GDP. If this one country can break your system, it’s not much of a system.

“The euro is the focus of attention these days. This is because of a fiscal crisis in Greece, and looming crises in Portugal and Spain. Italy could follow.

What is the problem? Greece is running a huge deficit in the range of 12.7% of its Gross Domestic Product. The investment world regards a deficit of this magnitude as unsustainable. There are rumors of default.

Spain is running a deficit of 11.4% of its GDP. This is considered a threat to the nation’s financial structure. There are rumors of default. (more…)

The Fed is now backstopping $25 trillion in DTCC cleared CDSs

Wednesday, February 10th, 2010

Story here from ZeroHedge. All I could say when I read this was “Fuck. Octuple fuck!!!!!”

If you want even more nuanced arguments as to why you too should be swerving to the side of the road yelling “FUCK!!!” then take a look at this.

“And you thought the $23 trillion in backstops for the financial system was bad, you ain’t seen nothing yet. Earlier today, the Depository Trust & Clearing Corporation, best known for its Cede & Co. partnership nominee which is the holder of virtually every single physical stock certificate in the known universe, and accounts for over $2 quadrillion in stock transactions per year, announced that “the Federal Reserve Board had approved its application to establish a DTCC subsidiary that is a member of the Federal Reserve System to operate the Trade Information Warehouse (Warehouse) for over the-counter (OTC) credit derivatives.” With this approval the DTCC is now the de facto legally accepted global repository for over-the-counter credit derivative transactions. Simply said, the Federal Reserve is now the guarantor behind all CDS transactions that clear via DTCC, which would be pretty much all of them (sorry CME, you lose). The total bottom line in terms of gross notional? 2.3 million contracts with a gross notional value of $25.5 trillion. When the next AIG implodes, and the CDS market is once again facing annihilation in the face, who will be on the hook? You dear taxpayer, that’s who. (more…)

How the FDIC is legally transferring billions to hedge funds

Wednesday, February 10th, 2010

LawdGawdJaysus! The conversion of US to a corporate kleptocracy is complete. Sadly, documented here.

“It is not a secret to anyone who has been closely following the FDIC’s quasi criminal bank takeover practices over the past year, that acquirors of failed banks end up receiving a massive and risk-free gift in the form of taxpayer benefits via the FDIC when it comes to funding losses on a given bank acquisition. Should there be a short sale resulting in a loss to the full principal (not the cost basis mind you)? Not to worry, Sheila Bair is there to hand out taxpayer money to the hedge funds/banks owning the newly transferred assets. A recent example of this was the glaring insider trading which preceded the acquisition of failed AmTrust Bank by New York Community Bancorp, in which both NYB and those who bought calls in advance of information being made public, made massive illegal profits. And as the SEC continues to pretend like this episode never happened, we remind the intellectually subprime Mary Schapiro to finally pursue those involved, and will continue doing so for as long as it takes. But back to the FDIC: the folks at Think Big Work Small have compiled a terrific video detailing exactly how several hedge funds, currently owners of recently created shell holding company OneWest Bank, are picking apart the carcass of failed IndyMac, all the while encouraging short sales (instead of loan mods) as only that way do they get to benefit fully from the taxpayer funded FDIC loss-share arrangements which makes the IndyMac transaction an immediate slam dunk for everyone involved…except America’s taxpayers, and the FDIC’s ever depleting DIF reserve.

As the authors appropriately title the video, this is indeed a slap in our face. And this goes on every single bailout Friday when the FDIC continues handing out billions of dollars under the guise of “loss sharing” arrangements, which is simply a guaranteed profit from the acquirors’ cost basis to 90% of the original loan value: an instantaneous 30% risk free IRR.

Full must watch video after the link (click on the icon below).

Revising the economic problems won’t make them go away

Wednesday, February 10th, 2010

Full story here from The International Forecaster.

“The inflationary depression still dominates and probably will continue to do so. In time the stimulus will fail to work and the world will slip into total insolvency and deflationary depression. The old M3 is about 3%, but we still have $23.7 trillion floating around. Not only is the US bankrupt, but also so is the rest of the world.

[I've got to add my own nagging questions to the above statement: If the world is bankrupt, who do we --as members of said world-- owe the money to? This does seem like a 2-terminal scenario, i.e for every debtor there must be a creditor. Don't say China because that is max $2 trillion out of $23.7 trillion. ]

It is now only a question of when the dominos will fall. It looks like the first wave in the collapse of the bear market rally is underway. Bonds will follow with higher interest rates and eventually commodities will be hit. Only gold and silver will survive, as the bankers and Wall Street complete their destruction of the world economy. [I'd add Spam, clean water and toilet paper to the commodities list.] (more…)

Greece is the word- redux

Wednesday, February 10th, 2010

Check all this out from ZeroHedge. We haven’t heard this much about Greece since Homer’s Odyssey. And this doesn’t really get into the gruesome issues with Spain, Portugal, Ireland, Italy, oh and jolly old England as the worst of all…forget it, it’s easier to say that Germany is OK, France is semi-good and stuff the rest.

Greece’s 2009 budget deficit was just revised from 12.2% to 16% of GDP:


Why fixing Greece presents problems:


Don’t expect a formal Greek announcement until Friday:



Goldman’s Greek budget deficit mea culpa. On the dot.:


Greece finance ministry official denies budget deficit explosion, says “Goldman misunderstood data”: