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Greece: Who pulls the trigger?

scgadmin — Thu, 17 May 2012 19:12:31 +0000

boredom © fintag

News comments:
I am as bored as you.

Greece is to launch a new currency. Wow. How dull. Perhaps it is more interesting to see who will pull the trigger?

Will the new Greek PM ring up the EU and say they want to leave the Euro? Unlikely because without the bail out money, the PM doesn’t get paid. Or will it be by default? The lack of new bail out cash will force the Greeks to issue a new currency to pay themselves? Or will the run on the Greek banks force a new currency to appear?

The media are trying to make out the exclusion of Greece from the Euro will lead to the great depression 2.0; this is greatly exaggerated and the Euro will hardly be impacted. The reality is the Euro will appreciate as Greece has been pulling it down.

But perhaps we are looking at the wrong trigger? As you know I have been very bearish about Spain for years and it is possible Spain could leave first.

Either way, it must happen quickly because dragging on for another year will mean we all move into cash; like GBP, USD and JPY which are all the currencies of countries with the largest debts in the world…

Today’s shorts:
Poker final going on longer than predicted (fintag)

Santander launches new 95% mortgages (aol)

Today’s longs:
Nomura get something right about Santander 2011 (fintag)

Gossip:
PIGS turn into PIS.

Why would you want to be American?

scgadmin — Sat, 12 May 2012 16:58:59 +0000

short shorts © favim.com

News comments:
Here are two reasons not to be American.

Firstly, if you are just about to IPO and want to avoid some nasty tax on your capital gains you need to reside in Singapore.

Take the co-founder of Facebook which is about to IPO at Groupon / Fortress type silly prices (bloomberg) for he is doing just that.

Secondly, if you fancy investing in something outside of the USA you will find it’s impossible. (toronto star)

Over zealous Obama and his FATCA legislation are effectively forcing Swiss wealth managers, bog standard funds and private equity players to give the middle finger to American citizens. Which is interesting because most wealthy Americans I meet these days say they are Polish or Italian or German and are transitioning out of the USA.

But this aside, and having to smile all the time with great teeth and enjoy money laundering through tipping waiters in cash, America is still the best long, despite its Greece like debt, anywhere in the world. Makes me green with envy …

Today’s shorts:
City bonuses back to 1990s levels (efin)

Today’s longs:
Facebook undervalued x 3 (fintag)

Gossip:
Dimon to have Noah and the Whale play at the JP Morgan Christmas party.

Markit Monopoly Mullers Morgan

scgadmin — Sat, 12 May 2012 16:58:58 +0000

markit © fintag

News comments:
Most people haven’t got a clue as to what the London Whale was doing. And none more so than the senior management at JP Morgan.

JPM pretty much invented Value at Risk and time and time again it has been shown to be useless. But this is not important as what is a few billion to a bank with a tier 1 capital of over USD120bn?

Bruno Iksil is still employed, according to the FSA (fsa link), and may lose his job so Dimon can save face. Another french engineer hiding his actions in C++ and thrashing around with little guidance or risk management oversight. He was shorting a short so going long CDS on an old index with little liquidity despite value running into trillions. Alarm bells then. JPM owned the market (movement) and is also a part owner of this market (beneficial owner) and so was conflicted.

The CDX market JP Morgan were trading with and against is run by Markit. The same company that owned all the subprime indices so beloved of the banks pre the 2008 crash. It has 3000 employees and started out in London as a dotcom.

Markit is a private market / index provider owned by its co-founder Lance Uggla (a man with a reputation, stock worth billions and a regular user of lawyers so enough said), a sort of facebook for off the beaten track indices that FTSE, Dow and S&P avoid. It is also owned by all the big banks including JP Morgan who treat Markit as their own private club.

Markit owns all the pricing data of the CDX market and charges handsomely for it. This is the data created by the banks and sold onto non members of the Markit club like hedge funds and other users. With its monopoly position it is able to run indices on the pricing data it has access to. Markit has been able to acquire many companies since it started in 2001 (I represented a well known American bank in the early days when Markit had its roundtable meetings and ran the business on a couple of spreadsheets), in the pursuit of data ownership and production of indices so loved by structured product providers. JP Morgan loves Markit, especially playing around with shareholders money and pretending to be a whale like hedge fund fending off little fish like BlueCrest and BlueMountain Capital, hedge funds run by ex JPM people.

Markit is also unregulated. Well it appears to be unregulated. Nothing on its website about being FSA or BoE regulated or a MiFID registered exchange. It seems to get round this because it says its a data vendor. Most heavily traded indices are regulated by some government body or other and in Europe exchanges are covered by MiFID. On top of this, exchanges like the LSE, have rules about concentration and misuse, the sort of rules JP Morgan et al would be caught out by if Markit was regulated as a proper exchange.

Markit controls trillions in asset. Especially the CDS market where its indices are pretty much the only ones used. About 25 trillion according to wikipedia. Markit’s indices were the ones that packaged up all those lovely subprime sandwiches which pre-empted the mess we are in today. The index so loved by the Whale was the Markit CDX North America Investment Grade Index of credit-default swaps Series 9-18 (IBOXUMAE).

So when will the SEC and FSA take note that one man has created a mechanism to allow bank’s to trade trillions of dollars off market and allow a handful conflicted individuals trade hundreds of billions without recourse to anyone except a friendly government who has to bail them out?

I don’t like Volker but I did like Glass Steagall. It is not a level playing field when small minnow hedge funds who are accountable to fickle investors are tossed around by government sponsored too big to fail banks.

Dimon may blame the Whale but he is wrong. The fault is allowing Markit to create a gated playground for these banks to have fun in.

Today’s shorts:
JP Morgan to spin out new hedge fund: BlueCIO (forbes)

Hedgies plead for help in April (bloomberg)

Today’s longs:
JP Morgan to be split into two (JP Morgan and Chase) (boston)

FT Alphaville tell it as it is (ftalphaville)

Gossip:
Goldman Sachs having a good laugh at the Whale spotters. (casinowhale)

JP Morgan caught trend following

scgadmin — Fri, 11 May 2012 16:31:02 +0000

the CIO © jpmorganchase

News comments:
JP Morgan wholeheartedly created the CDS market and its whale like monster is coming back to haunt it.

Ms Drew, who I once shared a taxi with before she became a member of the limo only class, is a very smart women who seems to still believe it is 2007. Not only does she earn more than Bob Diamond (that must hurt) but she still doesn’t know the difference between hedging and speculating. So whilst Dimon boasts about the conservatism of JP Morgan, it is acting just like every other bank in trying to find alpha in everything and nothing.

Having just had lunch with a couple of ex JPM traders wanting to set up a hedge fund (Mayfair, 2 and 20 and bling), I had to explain that not only were hedge funds now two a penny (all those closed funds who were as arrogant as Sarkozy are all open these days), investors haven’t a clue what to invest in and so aren’t bothering. I told them to move to Singapore and learn Chinese.

So it is not a surprise that another Frenchman is behind another large position and failed trade trying to be the next subprime short selling king. Hedge funds who are looking for volatility have been hammering Voldemort / Whale / Loser and it is good news to see value being taken away from tax fed investment banks.

We hope the loss is much bigger than $2bn.

And another thing, funny how BMI’s twitter account has been closed down. I wonder why?

Black jeans and no tie ….

Today’s shorts:
JP Morgan (bloomberg)

Today’s longs:
Connection refused (linkedin)

Gossip:
Goldman Sachs revelling over its finding the fool in the market.

How to Buy…: How to buy … hedge funds

scgadmin — Fri, 11 May 2012 16:31:01 +0000

Hedge funds are the darlings of the investment world, attracting top managers, institutions, pensions and wealthy individuals to their fold.

FCA: New logo revealed

scgadmin — Thu, 10 May 2012 16:15:21 +0000

fcker © fintag

News comments:
The FSA, as you know, are to be renamed the FCA (oops, the acronym police were asleep at the wheel… FCAr … you couldn’t make this up …).

Not only can the new logo be revealed, but it transpires the FCA will be the FSA with just a different logo. All the smart people will get to join the PRA and live in its nice offices off Moorgate whilst the rest will sit exactly as they are in Canary Wharf but with a new C. A great way to save tax payers money.

But that is unfair. The FSA is a profit center. The FSA have turned into the SEC. They are fining everyone and everything. Here are some recent additions to the FSA’s coffers:

Martin Currie conflict of interest fine (citywire)

Mit Sum fined for being Japanese (pca)

Legal & General snitch on themselves (fa)

FSA ready to close the ETF market down (risk.net)

JP Morgan’s Ian Hannam wishes he hadn’t had that extra glass of red at lunchtime fine (telegraph)

Another insider inside gets fined again (citywire)

And it will get worse as the FCA president elect, Martin Wheatley, had a great time imprisioning and fining market abusers in Hong Kong when he ran its equivalent (wiki).

Of course having 2 regulators who don’t talk to each other will lead to move financial mess and more entities moving out of London. Paris? Frankfurt? Athens? Nope, Hong Kong.

Today’s shorts:
Spain nationalizes itself (reuters)

Today’s longs:
Greeks are smarter than you think (bloomberg)

Gossip:
FCA to ban swear words.

Eurocrats 0 Lunatics 1

scgadmin — Wed, 09 May 2012 15:41:13 +0000

loonie tunes© fintag

News comments:
My predictions of the Euro collapsing by the end of 2011 were scuppered by expense lovin’ eurocrats who muscled into Greece and Italy and helped avoid themselves being out of work by using the ECB as an ATM.

And suddenly its all changing. The lunatics are taking over the asylum:

Greece is burning and its child like politicians are saying no to the hand that is feeding them.

Spain’s accounting fiddles are coming to fruition and its emperor has no real estate clothes are pushing its banks into the ECB’s gloves of love.

Netherlands is rudderless and its highly indebted population are closing the vice doors in Amsterdam because the party has ended.

France has turned to a Mitterand in waiting – spend and tax and closed shops and full Eurostars.

Upshot is Merkel will be out later this year and the only truly normal leaders left will be David Cameron and Mitt Romney.

Today’s shorts:
UK’s PLCs to turn into partnerships (reuters)

Today’s longs:
Greece salutes you (bloomberg)

Gossip:
One flew over the cuckoos nest to be remade.

Viva la revolution!

scgadmin — Mon, 07 May 2012 14:22:58 +0000

News comments:
Sarkozy, France’s Tony Bling Blair, is no more.

It is good to see the europhile lose but his replacement is going to be a nightmare for all of us.

Chatting to the second most detested person outside of an Investment Banker, my mate at Foxtons told me there has been a surge in interest in Fulham by Parisians mostly wanting to escape the clutches of Hollande. The man is no Obama socialist but a revolutionary. Be prepared for a rocky euro ride in the coming months as Merkel and Cameron enjoy a love in whilst the blancmange stirs trouble with France’s credit rating and long term yields.

At last! We all love a nightmare; nightmares mean volatility (after the UK’s bank holiday of course).

Today’s shorts:
Twitter to save Greece (bangkokpost)

Today’s longs:
Avengers to save us all (bloomberg)

Gossip:
France to re-introduce bull fighting.

Suicide is the only option

scgadmin — Thu, 03 May 2012 13:09:17 +0000

News comments:
As an economist I am as confused as every other economist. Something isn’t quite right:

In the early 1980′s UB40 sang a song called 1 in 10 about 10% unemployment (youtube). It was bad news then. Such news today in Spain, where over 50% of young people are idle, would be rejoiced as would the 11% unemployed collectively in Europe.

Iceland has near full employment. How did that happen? (rtt)

The USA and Europe are ageing very nicely. Whereas fags and booze were the instruments of old people culling, Lycra and organic food are helping us live much too long. Governments want us to live to 100 and yet they cannot support people who are 100.

The last 50 years we have benefited from the Chinese slave labour keeping costs down. Once we darned our socks and now we buy and throw away. Luxury is available for all. But it is artificial. Prices are too low and when China starts putting its wages up, the West will suffer and we will be darning our socks again.

The UK has a chronic shortage of houses and spain has a chronic glut. Most UK banks are abandoning interest only mortages (cooperative) and most are putting up rates despite a QE blitz to flatten the yield curve (yahoo). Nobody can afford housing and yet rents are going up and up (money) and students are living 4 to a room (nice).

The USA is booming and yet has Japan like debt.

Japan’s tax take doesn’t even cover its debt payments and the Yen is booming.

Europe’s ECB is keeping dead banks alive and is strangling the proper banks.

Basel 3 is creating another credit squeeze.

Spain and Italy are dead in the water and yet the Euro holds up.

France will soon be closing its borders and joining America in its quest to keep out undesirables.

6 million Brits live in Spain.

Apple which sells things that make you blind (the iPad 3 should have a health warning) and yet could repay the debt of the UK.

Is this the new normal or is the world twittering itself to death?

Gossip:
Economics to be banned as subject by the EU.

Bank of England re-writes history

scgadmin — Thu, 03 May 2012 13:09:17 +0000

News comments:
Like many, I listened to the BBC Today Programme Lecture with interest (bbc). The Bank of England were to justify why they messed up and what they planned to do in the future.

It appears the Bank of England were screaming before 2008 that problems were afoot. They also said nobody foresaw a crash as the growth was in a low inflation environment (thanks to China). It was the complete opposite. I recall the Bank of England were very quiet and just tweaked rates and there were many screaming a crash was imminent due to the over leverage of everything (Pirate Equity et al) including Fintag which was spot on within a few days.

Apparently the banks need more share capital. So what did the Bank of England as lender of last resort do? It gave them cheap QE money. Cash for bonuses. Why wasn’t it lobbying the government to stop the banks moving money amongst themselves and blowing up their balance sheets like Katie Price once did with her breasts?

Mervyn King was responsible for the crash. Along with Ben Bernanke they were fast asleep at the wheel and now they just blame the bankers for just doing their job.

Today’s shorts:
Osbourne loses his marbles (telegraph)

Valencia is like Detroit (reuters)

Credit is back (bloomberg)

RKC in trouble (hedgeweek)

FSA ready to ban anything that involves people getting together and trying to have a decent life (investors chronicle)

Today’s longs:

Gossip:
Mervyn King to become new CEO of Barclays.