The Madman was back on the phone again. Max never calls except when he can't trade or when he shouldn't trade and today was one of of those latter days.
"Squeeky bum time out there, Max?"
"Don't *&$^ with me Charlie, you know what this is like."
"I feel for you Max, but I can't quite reach. In my lifetime if I had half the money you've made in a year I'd be a happy man."
If you've lost have the money I have in the first four months your wife would have left. And don't give that crap you wrote about how cheap it is to be short?"
"Of course I'm short you (*&^,. No body in his right mind is long this market."
"You mean there isn't a bid?"
"Of course there's a bid. That's why the G*& D$*&#$ thing has a 57 handle!"
"But it shouldn't…"
"OF COURSE IT SHOULDN'T! No way it should. WHY DOES IT HAVE A 57 HANDLE?!!!" (I should point out the ten year closed with a 60 handle)
"Max, you are in good company. The Morg lost a bundle as well."
"Morgan is filled with IDIOTS starting with the guy running the place. They…"
"They are running the same book as you are it seems."
"ARRRGGGGGGRRRR!" (Max has never appreciated unflattering comparisons) "Do you SEE what is out there? Can you BELIEVE what we have?"
"And what might that be Max?"
"We have less than an 80 point spread between the 5 and 10 year. We got the Euro at damn near 1.39 but the Spanish 10 year went through 4.00%--the SPANISH 10 year! The Italians are 25 b.p. higher. THAT'S four separate countries with no government! The…"
"But they are wonderful people Max, wonderful food."
"Who gives a *&^%, Charlie, who cares! They being nice people doesn't count! I'M SHORT, THAT'S WHAT COUNTS!!"
"Max if I may say you are adopting a highly selfish and contentious attitude about all this."
"Selfish? Contentious? Charlie, I'm getting killed AND I DON'T KNOW WHY! Do you know why, Charlie." Do you?"
"I think so Max. I think people haven't a clue as to the true state of anything because the government and the central banks have mucked about so much that there is no real market any more. Everybody buys stocks because a 2.00% yield with a bit of upside potential is better than this other crap. They buy Spain, they buy Italy. They even buy Greece for some yield because people tell them the crisis is over. They don't tell them nobody has a job just like they don't tell them that there are more unemployed in this country today as a percentage of the job market than in 1978 and THAT was a bad year. We have guys saying that the GDP is going to 3%-3.5% but there's no need to raise rates now. Of course with any inflation, we have a gap of about 5% between nominal growth and the 5 year, but hey not to worry and the fact that we have ALWAYS moved too slowly on the monetary front doesn't mean a thing. You might throw in the fact that a country with 15,000 Nukes is under one man rule by a nut doesn't seem to mean much either and the result would be that there is something seriously wrong. But other than that, Max, no, I haven't a clue, but that doesn't do you much good, does it?"
"No. What would you do?"
"Max, I'm an old guy. You know what I would do."
"Sell in May and go away."
"Bye, Max."
"Bye Charlie."
Showing posts with label Mad Max. Show all posts
Showing posts with label Mad Max. Show all posts
Monday, May 5, 2014
Friday, July 22, 2011
SPEECHLESS
Well, I never saw it coming. I was always an admirer of Jean Claude Trichet but I never thought he could pull this on off in the manner which he did. I was wrong. M. Trichet solved the problem of Greek dinances by eliminating Greek finances. The European Union and the taxpayers of Europe now own Greece. They are also about to own everything else.
The deal is pretty much as described yesterday: a strech-out of early maturing debt either on a short term basis or on a longer basis with a risk transfer to effectively the whole of Europe and with a give-back of 20% (which from the banks' standpoint may have been provisioned). Interest rates would be artificially reduced which would no doubt result in market prices of less than par on the shorter term obligations but not resulting in a write-down because of the "hold to maturity" accounting treatment which has the effect of delaying any loss. Not to be overlooked is the continuing treatment under Basel III (at least until 2018) of zero weighting for capital purposes due to the soverign nature of the debt. Added to all this is a pledge of some 100 billion Euros from the EU and the IMF to get Greece rolling again.
It's all crap of course because the last thing Greece needs is more debt to add to it's present level of 140% of GDP even at 3.5% a years. Greece if broke and this isn't going to fix anything. It is a bail-out pure and simple first for the banks and second for the politicians who have once again shown that they will do anything with the monies of their taxpayers to save the Union and the currency. Maybe that's not such a bad thing and I admit it is a judgement that only the Euros can make but it seems a bit odd to me that all of talk of "contagion" and "moral hazzard" that we have been hearing as of late is now out the window as this agreement is the greatest invitation to these two self-proclaimed horrors that I can imagine. With the knowledge that you will be bailed out, with the guarantee of a positive carry, with no capital charge in place for at least 7 years (hint: that's never going to change) if I were Euro Politician I would borrow like a crazy man and if I were a Euro banker I'd lend every Euro-penny I could shovel out the door. But wait, it gets better.
The really important thing about this arrangement that has gotten a bit lost in the shuffle is the treatment of the European Financial Stability Fund or the EFSF or, just to be honest, the bail-out fund. This has been around for over a year now but yesterday's agreement has greatly expanded the use to which this fund may be put and increased it's "Assets" above the already pledged 440 billion Euros to a far greater number which--apologies--I have not been able to confirm. This is a bail-out fund for anything that moves, governments, banks, the local butcher--the works. It can aid governments, recapitalize financial institutions, be used to purchase soverign debt in the secondary market...whatever. It is a LIQUIDITY facility that ol' Charlie has been telling you about for years, and of course with all the money in Euroland behind it, it can be very effective...with one big IF.
It is the biggest moral hazzard that has ever been created since the Creator dropped the snake in the Garden of Eden...or was it Eve...and don't you just know that certain among that gang of 18 know it. It will remain a hazzard unless bad habits are not allowed to die slowly but killed quickly and that can occur only through greater political or monetary union or both. It seems to me that the issue has been fairly joined and now the debate begins. It's resolution? Beats the hell out of me but it will be fun watching. The Greek situation must survive the political process, and it may well decide the future of Euroland, but before I get too profound, here's something that's been knocking around inside my head: when is a credit event not a credit event? I called a guy by the name of Mad Max who does credit insurance.
"Madman, is this Greek thing a credit event?"
"Damn right it is."
"Max they're going to say it's not."
"They better not."
"Max, Trichet has won everything else, he's going to win this."
"Then he's got big troubles with me."
Max has been very long insurance on Greek debt. Wonder what the other Maxs out there are thinking.
Harry Reid sent the Senate home for the weekend after he shot down the latest Repub proposal. What a leader.
See you next week...it's still hot
The deal is pretty much as described yesterday: a strech-out of early maturing debt either on a short term basis or on a longer basis with a risk transfer to effectively the whole of Europe and with a give-back of 20% (which from the banks' standpoint may have been provisioned). Interest rates would be artificially reduced which would no doubt result in market prices of less than par on the shorter term obligations but not resulting in a write-down because of the "hold to maturity" accounting treatment which has the effect of delaying any loss. Not to be overlooked is the continuing treatment under Basel III (at least until 2018) of zero weighting for capital purposes due to the soverign nature of the debt. Added to all this is a pledge of some 100 billion Euros from the EU and the IMF to get Greece rolling again.
It's all crap of course because the last thing Greece needs is more debt to add to it's present level of 140% of GDP even at 3.5% a years. Greece if broke and this isn't going to fix anything. It is a bail-out pure and simple first for the banks and second for the politicians who have once again shown that they will do anything with the monies of their taxpayers to save the Union and the currency. Maybe that's not such a bad thing and I admit it is a judgement that only the Euros can make but it seems a bit odd to me that all of talk of "contagion" and "moral hazzard" that we have been hearing as of late is now out the window as this agreement is the greatest invitation to these two self-proclaimed horrors that I can imagine. With the knowledge that you will be bailed out, with the guarantee of a positive carry, with no capital charge in place for at least 7 years (hint: that's never going to change) if I were Euro Politician I would borrow like a crazy man and if I were a Euro banker I'd lend every Euro-penny I could shovel out the door. But wait, it gets better.
The really important thing about this arrangement that has gotten a bit lost in the shuffle is the treatment of the European Financial Stability Fund or the EFSF or, just to be honest, the bail-out fund. This has been around for over a year now but yesterday's agreement has greatly expanded the use to which this fund may be put and increased it's "Assets" above the already pledged 440 billion Euros to a far greater number which--apologies--I have not been able to confirm. This is a bail-out fund for anything that moves, governments, banks, the local butcher--the works. It can aid governments, recapitalize financial institutions, be used to purchase soverign debt in the secondary market...whatever. It is a LIQUIDITY facility that ol' Charlie has been telling you about for years, and of course with all the money in Euroland behind it, it can be very effective...with one big IF.
It is the biggest moral hazzard that has ever been created since the Creator dropped the snake in the Garden of Eden...or was it Eve...and don't you just know that certain among that gang of 18 know it. It will remain a hazzard unless bad habits are not allowed to die slowly but killed quickly and that can occur only through greater political or monetary union or both. It seems to me that the issue has been fairly joined and now the debate begins. It's resolution? Beats the hell out of me but it will be fun watching. The Greek situation must survive the political process, and it may well decide the future of Euroland, but before I get too profound, here's something that's been knocking around inside my head: when is a credit event not a credit event? I called a guy by the name of Mad Max who does credit insurance.
"Madman, is this Greek thing a credit event?"
"Damn right it is."
"Max they're going to say it's not."
"They better not."
"Max, Trichet has won everything else, he's going to win this."
"Then he's got big troubles with me."
Max has been very long insurance on Greek debt. Wonder what the other Maxs out there are thinking.
Harry Reid sent the Senate home for the weekend after he shot down the latest Repub proposal. What a leader.
See you next week...it's still hot
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