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Wednesday, April 25, 2012

The Mother of all Short Squeezes

Apple is up $50 a share in after markets. How sweet it is. The jackals in the media with CNBC in the forefront did their best to trash the stock and the company in the last week and they were so deliciously wrong.

76 comments:

  1. Apple took a bite out of their selective and collective sorry asses. I admit being white-knuckled and long June 650s and added position yesterday at lunchtime, the contrarian bastard that I am.

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  2. Thank you Big Ass Maria Bartiromo.

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  3. Reasons to vote Romney:

    - he understands business
    - he doesn't believe that you can get out of debt by borrowing lots of money and wasting it
    - he has a proven track record as a leader
    - he actually likes the USA
    - it will end the economic disaster of the Obama presidency

    Reasons to vote Obama:

    - you can tell everyone that you voted for the black guy so they can marvel at how open-minded you are

    As you can see, Obama has it in the bag already.

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    1. This comment has been removed by the author.

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    2. .

      ...you can tell everyone that you voted for the black guy so they can marvel at how open-minded you are...


      Two sides of the same coin. The blacks who will vote for Obama regardless of performance just because he is black and the Logiomorphs of the world who wouldn't vote for him for the same reason.


      .

      Delete
  4. Apple busts through 50-day, down 2.7%
    April 24, 2012, 2:33 PM

    Apple Inc. AAPL +7.77% shares are cascading lower in afternoon trading Tuesday, keeping the Nasdaq Composite COMP -0.30% in the red and pushing through their 50-day moving average. Shares in the company slipped through that trend line – an average of the past 50 days of trading – on Monday but failed to close below it.

    Tuesday trading might be different. Shares are down 2.8% at $555.70 on above-average volume. The 50-day moving average is about $572, according to FactSet Research. Apple hasn’t closed below it since December.


    They need to quit gazing at their charts and either go to a Starbucks and look at the glowing Apples or into an Apple store where every day it looks like an opening with free champagne.

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    Replies
    1. They have sold loads of product. Can they keep up the pace of growth? I wouldn't bet on it.

      Delete
    2. I agree, but I first started trading this at $47. I think I’ll be in and out until $890. Wait till they bypass Google on search.

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    3. Job one is to get rid of Obama.

      Delete
    4. How would you have enjoyed dinner last night if you were short AAPL ?

      Delete
  5. This is instructive

    (Reuters) - China on Wednesday issued a veiled warning to neighboring North Korea not to carry out what is widely expected to be an imminent nuclear test.

    North Korea has almost completed preparations for a third nuclear test, a senior source with close ties to Pyongyang and Beijing told Reuters, an act that would draw further international condemnation following this month's failed rocket launch which the United States and others said was a disguised missile test.

    "Peace and stability on the Korean peninsula and in Northeast Asia bears on China's national interest and also bears on the interests of all relevant parties," Chinese Vice Foreign Minister Cui Tiankai told a news briefing.

    "China will oppose anything which might jeopardize peace and stability on the Korean peninsula and in Northeast Asia, as this would damage China's national security interests and the interests of the relevant parties as well," he said, when asked about the possibility of a new nuclear test by North Korea.

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  6. Speak softly and carry a great big red stick.

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  7. Sledge Hammer is dead.

    A gentle giant tased to death by police.

    He will be sorely missed.

    ReplyDelete
  8. Big news out of Britain on Rupert Murdoch:

    Main Stream Media is Slimy.

    Whoda thought?

    ReplyDelete
  9. Never mind, the MSM moves on to more NEWS

    Following the trend of cough medicine, hand sanitizer is the latest in a string of household products used to induce intoxication and has public health officials worried as a few squirts of it could equal a couple of shots of hard liquor.

    As many as six California teenagers were hospitalised with alcohol poisoning last month, and two last weekend alone, from drinking hand sanitizer.

    "This is a rapidly emerging trend," ABC News quoted Cyrus Rangan, medical toxicology consultant for Children's Hospital Los Angeles, as saying in a news conference.

    About 2,600 cases have been reported in California since 2010, but it's become a national problem.


    - 6 teenagers in the tiny state of California makes for a “… rapidly emerging trend,"

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  10. Meanwhile from our Rulers and Masters: The Russians made me do it.

    The Colombian prostitutes entangled in the Secret Service sex scandal could have been Russian spies, Sen. Chuck Grassley suggested Tuesday.
    “We’re looking at something that is very, very serious when national security might not be protected properly,” Grassley told Radio Iowa. “Who knows who might be using prostitutes? The Russians are famous for that to get information out of us.”

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  11. Who do you trust? Imagine this from a presidential candidate and a LAWYER no less.

    GREENSBORO, N.C. (AP) — Defense lawyers for John Edwards are expected to get their first shot at cross examining a former aide who is a key witness against his former boss.
    Andrew Young was the first witness called by prosecutors at the criminal trial of the two-time Democratic presidential candidate. Edwards has pleaded not guilty to six counts related to campaign finance violations.
    Young's testimony is essential to making the government's case that Edwards conspired to use secret payments from two wealthy donors to hide his pregnant mistress as he sought the White House in 2008.
    Young will take the stand for a third day Wednesday, with prosecutors expected to finish their questions by lunchtime. The defense claims Young spent much of the money at issue in the case building a $1.5 million house.

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  12. All the Israeli apologists are in high twitter mode over a CBS report on Christians in Israel yet Israel has been conducting a decades-long pogrom against the Palestinians, in order to gain complete control of all the lands between its own border and that of Jordan, and make life so miserable for the Palestinians that they leave, this is not a shock at all.

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    Replies
    1. If what you allege is true (I don't believe it is), the Palestinians are reaping the fruits of their "decades long" terror campaign against Israelis.

      How quickly the world forgets.

      Delete
  13. Biggest play of the Century coming up; Natural Gas - long.

    1/3 of the rigs are moving/have moved out, and headed for the oil plays. We'll probably go into this winter with the lowest inventories, compared to demand, in decades with no way to ramp back up quickly. A normal winter (compared to the extremely mild one this year,) and the Panick will explode.

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  14. How do you like Chesapeake CHK?

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  15. CHK is "supposed" to go under, but, if they can hang on until the explosion in nat gas prices they might come fresh.

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  16. The play, here, is in the commodity itself. And, I believe "options" is the way to go.

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    Replies
    1. I would never trade commodities.

      Delete
    2. I don't blame you. And, nat gas has long been considered "The Widow-Maker."

      Delete
  17. Caveat: I've never played in the commodities market in my life. I'm just now "looking into" it.

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  18. As for "getting rid of Obama:"

    Do you really think that more people will be able to afford Apple Products under a Republican regime?

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  19. i just BUY the product and use them.

    They make me money...

    As for the stock?

    Someday soon a correction will occur.

    If you buy the stock to hold for 20 years? No matter

    If you are speculating?

    Hope you lose it all

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  20. On a January evening, Anand is shelling betel nuts by the light of an electric lamp in Halliberu, his village in India’s Karnataka state.

    As his friends gather on the lamp-lit porch to swap stories, children play in the yard, Bloomberg Markets reports in its May issue. Inside, after decades of cooking in the dark, Anand’s mother prepares the evening meal while a visiting neighbor weaves garlands of flowers.






    A Selco solar panel is seen on the roof of a house as women work on a rice paddy in Halliberu village, Karnataka, India. Photographer: Kuni Takahashi/Bloomberg






    April 12 (Bloomberg) -- The villagers of Halliberu in southern India are on the crest of an electricity revolution. Bangalore-based Simpa Networks Inc. has been installing solar power equipment in their non-electrified houses. From the poorest parts of Africa and Asia to the most-developed regions in the U.S. and Europe, solar units and small-scale wind and biomass generators promise to extend access to power to more people than ever before. Bloomberg's Natalie Obiko Pearson reports on the story featured in the May issue of Bloomberg Markets magazine. (Source: Bloomberg)








    A Selco solar panel on the roof of a house in Halliberu village, Karnataka, India. Photographer: Kuni Takahashi/Bloomberg



    Enlarge image









    Lights powered by Simpa Networks Inc. solar system illuminate farmer a house in Halliberu village, Karnataka, India. Photographer: Kuni Takahashi/Bloomberg



    Enlarge image









    A customer uses his mobile phone to recharge his solar power unit in Halliberu

    Anand, 25, peels Areca nuts under lights powered by Simpa Networks Inc. solar system at his house in Halliberu village, Karnataka, India. Photographer: Kuni Takahashi/Bloomberg
    .
    In October, Bangalore-based Simpa Networks Inc. installed a solar panel on Anand’s whitewashed adobe house along with a small metal box in his living room to monitor electricity usage. The 25-year-old rice farmer, who goes by one name, purchases energy credits to unlock the system via his mobile phone on a pay-as-you-go model.

    When his balance runs low, Anand pays 50 rupees ($1) -- money he would have otherwise spent on kerosene. Then he receives a text message with a code to punch into the box, giving him about another week of electric light.

    When he pays off the full cost of the system in about three years, it will be unlocked and he will get free power.

    Before the solar panel arrived, Anand lit his home with kerosene lamps that streaked the walls with smoke and barely penetrated the darkness of the village, which lacks electrification. Twice a week, he trudged 45 minutes to a nearby town just to charge his phone.

    Electricity Revolution

    “Things are much easier now,” Anand says, describing how he used to go through 5 liters (1 gallon) of fuel a month, almost half of it bought from the black market at four times the price of government kerosene rations. “There was never enough.”

    Anand is on the crest of an electricity revolution that’s sweeping through power markets and threatening traditional utilities’ dominance of the world’s supply.

    From the poorest parts of Africa and Asia to the most- developed regions in the U.S. and Europe, solar units such as Anand’s and small-scale wind and biomass generators promise to extend access to power to more people than ever before. In the developing world, they’re slashing costs
    . . . . . . .

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  21. (cont from prev thread)

    Ash: For example, (all numbers pulled out of my as.....er hat):

    Company A may purchase for 100$ insurance from Company B against the US government default on 1 Million dollars of US government bonds in the next 12 months. Value of contract 1 Million 100 dollars. Add to that the fact that there is no exchange for derivative contracts and an opacity in reporting the statement '700 trillion in derivative debt' is misleading.

    Not my intent to turn this into an ego-driven debate but I am 99% sure that your accounting is flat out wrong. (Anyone else feel free to step in.)

    The investment leverage made the financial implosion of 2008 orders of magnitude worse than a simple commodities bubble collapse. The EU derivatives play took down MF Gobal. The fear, when EU started to crumble, was that the derivatives contracts, essentially insurance or hedging as you note, were largely held by Wall St. The percentage I remember is around 50% but that needs to be confirmed.

    Folks were laughing at the EUrocrats until BIS published its report around the middle of 2011. Had the projected sovereign defaults tumbled like dominos, Wall St banks would have failed, based on the information contained in the BIS report re their exposure through insurance contracts (revisit the subject of the agency responsible for declaring sovereign default I linked last thread.)

    You're right about the lack of transparency and exchanges but the BIS report has not been challenged for accuracy. Quite the contrary, it has been well received by analysts for putting some quantitative numbers to global risk exposure via derivatives contracts.

    I agree with Quirk re Dodd-Frank being a fizzle stick pfffst. If the players are so anxious to keep the 'burden of regulation' at a healthy distance then one is well advised to respect the magnitude of the investments at risk.

    Lastly, better to pull your numbers from a more reliable source.

    ReplyDelete
  22. .

    Carter's Iran Hostage Raid


    Crazy ROE's didn't start with Afghanistan and Iraq.


    Another presidential directive concerned the use of nonlethal riot-control agents. Given that the shah’s occasionally violent riot control during the revolution was now Exhibit A in Iran’s human-rights case against the former regime and America, Carter wanted to avoid killing Iranians, so he had insisted that if a hostile crowd formed during the raid, Delta should attempt to control it without shooting people. Burruss considered this ridiculous. He and his men were going to assault a guarded compound in the middle of a city of more than 5 million people, most of them presumed to be aggressively hostile. It was unbelievably risky; everyone on the mission knew there was a very good chance they would not get home alive. Wade Ishmoto, a Delta captain who worked with the unit’s intelligence division, had joked, “The only difference between this and the Alamo is that Davy Crockett didn’t have to fight his way in.” And Carter had the idea that this vastly outnumbered force was first going to try holding off the city with nonviolent crowd control? Burruss understood the president’s thinking on this, but with their hides so nakedly on the line, shouldn’t they be free to decide how best to defend themselves? He had complained about the directive to General Jones, who had said he would look into it, but the answer had come back “No, the president insists.” So Burruss had made his own peace with it. He had with him one tear-gas grenade—one—which he intended to throw as soon as necessary; he would then use its smoke as a marker to call in devastatingly lethal 40 mm AC-130 gunship fire.

    .

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  23. It has always been about oil. It will always be about oil.

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  24. DeuceApr 25, 2012 05:31 AM

    Job one is to get rid of Obama.


    bob scratches his just awoken sleepy head and wonders to himself:

    "How are we to do this if we don't vote for his only viable opponent, Romney?"

    bob

    ReplyDelete
    Replies
    1. I've never traded anything but commodoties. Contract in August or September to deliver wheat in January or February, Portland, works everytime,(9 out of 10) though it might take you three or four lifetimes doing it unless you bet the whole farm.

      bob

      Delete
    2. You don't know what you are missing down here in Cartegena, Quirk.

      Delete
    3. I made a long post last night then hit the wrong button.

      The long and the short of it: there will be an independent Kurdistan.

      This will be another Obama foreign policy success, though he doesn't know it.

      bob

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    4. I haven't found a Russian spy down here, yet.

      bobbo

      Delete
    5. THE DEATH PANELS LOVING EMBRACE

      This is a good article.

      You vote in Obama, your plug will be pulled.

      This election is literally a matter of life and death.

      Like the Jews say, choose life.

      bob

      Delete
    6. .

      The long and the short of it: there will be an independent Kurdistan.


      Not in our lifetime.

      They were conquered by the Arabs back in the 7th century and haven't been independant since. The most they can likely hope for is autonomy like they have in Iraq (although even that seems to be being challenged by al-Maliki). They have Turkey, Syria, Iran, and Iraq that would fight their independance. Nowhere to run, nowhere to hide.

      .

      Delete
  25. Replies
    1. Metro-Farm Kids

      :):) heh, ah, government!

      I got my first driver's license at 14, to drive in harvest

      bob

      Delete
    2. Rossie Blinson, a 21-year-old college student from Buis Creek, N.C., told The Daily Caller that the federal government’s plan will do far more harm than good.

      “The main concern I have is that it would prevent kids from doing 4-H and FFA projects if they’re not at their parents’ house,” said Blinson.

      “I started showing sheep when I was four years old. I started with cattle around 8. It’s been very important. I learned a lot of responsibility being a farm kid.”

      In Kansas, Cherokee County Farm Bureau president Jeff Clark was out in the field — literally on a tractor — when TheDC reached him. He said if Solis’s regulations are implemented, farming families’ labor losses from their children will only be part of the problem.

      “What would be more of a blow,” he said, “is not teaching our kids the values of working on a farm.”

      The Environmental Protection Agency reports that the average age of the American farmer is now over 50.

      “Losing that work-ethic — it’s so hard to pick this up later in life,” Clark said. “There’s other ways to learn how to farm, but it’s so hard. You can learn so much more working on the farm when you’re 12, 13, 14 years old.”

      Read more: http://dailycaller.com/2012/04/25/rural-kids-parents-angry-about-labor-dept-rule-banning-farm-chores/#ixzz1t4q9keau




      Damn idiots. I remember years ago, the EPA or some other ass hole agency came up with a rule about taking a crap out in the field. So, I recall this beautiful picture of a combine with a two holer outhouse hooked on the back. I don't think anyone paid much attention to the rule, and I haven't heard anything more about it.


      bob

      Delete
  26. From bob's link:

    As long as its facilities are not bomb-proof, "the program is too vulnerable, in Iran's view. If the supreme religious leader Ayatollah Ali Khamenei wants, he will advance it to the acquisition of a nuclear bomb, but the decision must first be taken. It will happen if Khamenei judges that he is invulnerable to a response.

    The Fatwa (link)

    TEHRAN, Iran -- An Iranian claim that Supreme Leader Ayatollah Khamenei has issued a fatwa, or binding religious ruling, against production or use of nuclear weapons has been challenged by a research institute in Washington, which termed the claim a transparent ploy aimed at deceiving the West.

    "No such fatwa ever existed or was ever published," said a report issued Sunday by the Middle East Media Research Institute (MEMRI). The claim, it said, was "nothing more than a propaganda ruse in an attempt to deceive top US administration officials" and others.

    ReplyDelete
  27. Solar panels are taking off like wildfire in third world countries where the grid is nonexistent or limited. Here in USA, the technology is a little more complicated than just well-funded marketing disinformation, although there's that too.

    ReplyDelete
  28. ********************************************************************************
    A possible misunderstanding about President Barack Obama's health care overhaul could cloud Supreme Court deliberations on its fate, leaving the impression that the law's insurance requirement is more onerous than it actually is.

    During the recent oral arguments some of the justices and the lawyers appearing before them seemed to be under the impression that the law does not allow most consumers to buy low-cost, stripped-down insurance to satisfy its controversial coverage requirement.

    In fact, the law provides for a cheaper "bronze" plan that is broadly similar to today's so-called catastrophic coverage policies for individuals, several insurance experts said.

    "I think there is confusion," said Paul Keckley, health research chief for Deloitte, a major benefits consultant. "I found myself wondering how much they understood the Affordable Care Act. Several times the questions led me to wonder how much (the justices') clerks had gone back into the law in advance of the arguments."

    Monthly premiums for the bronze plan would be lower, and it would cover a much smaller share of medical expenses than a typical employer plan.

    "Bronze is a very skinny product," said Keckley.
    *******************************************************************************
    http://www.huffingtonpost.com/2012/04/11/obamacare-supreme-court-justices_n_1417154.html?ref=health-care-reform

    Holy cannoli.

    ReplyDelete
  29. Max (short for Maxine)Apr 25, 2012 08:30 AM
    (cont from prev thread)

    "Ash: For example, (all numbers pulled out of my as.....er hat):

    Company A may purchase for 100$ insurance from Company B against the US government default on 1 Million dollars of US government bonds in the next 12 months. Value of contract 1 Million 100 dollars. Add to that the fact that there is no exchange for derivative contracts and an opacity in reporting the statement '700 trillion in derivative debt' is misleading."

    Not my intent to turn this into an ego-driven debate but I am 99% sure that your accounting is flat out wrong. (Anyone else feel free to step in.)

    -------

    My numbers were made up in that I don't know the market price for hedging US bonds. Other than that where do you think my accounting is wrong? The value of the above contract is as I stated. If the US were to default in my simplified version than Company B would be on the hook for 1 million bucks. If they don't in that 12 month period they earned 100 bucks for assuming that risk. The real world of derivatives is more complex and the contracts vary wildly.

    "A derivative instrument is a contract between two parties that specifies conditions (especially the dates, resulting values of the underlying variables, and notional amounts) under which payments, or payoffs, are to be made between the parties."

    http://en.wikipedia.org/wiki/Derivative_(finance)

    "A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, receives a payoff if the loan defaults.

    In the event of default the buyer of the CDS receives compensation (usually the face value of the loan), and the seller of the CDS takes possession of the defaulted loan.[1] However, anyone can purchase a CDS, even buyers who do not hold the loan instrument and who have no direct insurable interest in the loan (these are called "naked" CDSs). If there are more CDS contracts outstanding than bonds in existence, a protocol exists to hold a credit event auction; the payment received is usually substantially less than the face value of the loan"

    http://en.wikipedia.org/wiki/Credit_default_swap

    You might like reading "The Big Short" by Michael Lewis. Those guys made a Billion or so bucks in the financial crisis. I read it a few years ago but basically they were able to short specific tranches of Mortgage backed securities. They researched a whole bunch of the tranches and picked the really nasty ones. As the market tanked and they were in the money, big money, they had a heck of a time getting their counter parties to pay out. In the end I think they only netted 60 cents on the dollar (after much wrangling and hair pulling) but they still made a billion or so bucks.

    In short the value of the contracts can be very high and most never pay out at their full value but if a black swan happens by they can be like a nuclear bomb.

    AIG suffered that. They had just one small department making a fortune over the years writing contracts on mortgage securiies until that black swan came by and wrecked the whole damn company.

    ReplyDelete
  30. from wiki on Credit Defualt Swap

    "A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, receives a payoff if the loan defaults.

    In the event of default the buyer of the CDS receives compensation (usually the face value of the loan), and the seller of the CDS takes possession of the defaulted loan.[1] However, anyone can purchase a CDS, even buyers who do not hold the loan instrument and who have no direct insurable interest in the loan (these are called "naked" CDSs). If there are more CDS contracts outstanding than bonds in existence, a protocol exists to hold a credit event auction; the payment received is usually substantially less than the face value of the loan.[2] The European Parliament has approved a ban on naked CDSs, since 1 December 2011, but the ban only applies to debt for sovereign nations.[3]

    Credit default swaps have existed since the early 1990s, and increased in use after 2003. By the end of 2007, the outstanding CDS amount was $62.2 trillion,[4] falling to $26.3 trillion by mid-year 2010[5] but reportedly $25.5[6] trillion in early 2012.[7]"

    Even though the outstanding CDS amount may have been 62.2 trillion that kind of money didn't change hands.

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  31. This comment has been removed by the author.

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  32. more fiscal fun:

    "Fed largely hamstrung as U.S. approaches ‘fiscal cliff’


    KEVIN CARMICHAEL

    They call it the “fiscal cliff.”

    On the first day of 2013, the Bush-era tax cuts revert back to previous levels, and the more than $1-trillion (U.S.) in arbitrary budget cuts that Congress approved last year are scheduled to begin.

    It would be a self-inflicted wound of historic proportions. The International Monetary Fund is so worried that U.S. lawmakers will drive over the cliff that it ranks the possibility as a threat equal to that posed by the European Debt crisis. The Bank of Canada also is talking about it, as there would be no escape from the economic damage that would occur from such a massive stroke of budget consolidation.

    Think of it this way. If the U.S. stays on its current path -- tax rates remains at current levels, etc. -- debt held by the public will swell to 90 per cent of gross domestic product by 2020, according to the Congressional Budget Office. Not good. But if President Barack Obama’s extension of the Bush tax cuts is allowed to expire at the end of the year and the agreed budget measures go through as planned, the deficit will shrink to 65 per cent of GDP over the same period, according to CBO. In this era of debt, that’s an attractive number.

    But with the private sector barely able to keep the U.S. economy growing faster than 2 per cent, that level of fiscal consolidation is more than the economy can handle, according to the IMF. It would “severely undermine the recovery and economic growth,” the fund said last week in its latest economic outlook."

    http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/fed-largely-hamstrung-as-us-approaches-fiscal-cliff/article2413518/

    ReplyDelete
    Replies
    1. .

      Interesting, but why would I trust the IMF?

      Bankers protecting sovereign accounts first, protecting bankers next, and protecting bondholders and the rest of us last.

      .

      Delete
    2. The article goes on to note the political gridlock in the US.

      If those sovereign's, bankers and bondholders goe the rest of us will be in an... uncomfortable spot.

      Spiraling down the drain of deflation.

      Delete
  33. If the US were to default in my simplified version than Company B would be on the hook for 1 million bucks.

    You are wrong (the accounting, not the fictional numbers) but I'm going to have to work it out (later), starting with (1) total PIIGS debt maturing in 2012 is something over $700 billion and (2) leverage ratios between 30 and 60 (as opposed to the traditional 12 used by prudent risk managers.) Any way one slices and dices those two numbers, the exposure of Wall St to PIIGS sovereign default is sufficient to ensure collapse of major investment houses.

    I will agree that the likelihood of that happening is small considering that banks control the institutional infrastructure of global finance.

    The real world of derivatives is more complex and the contracts vary wildly.

    Tell that to the Greek finance ministry.

    ReplyDelete
    Replies
    1. I await, breathless, your debunking of my accounting in the simplified version. While doing so please consider:

      Definition of 'Notional Value'
      The total value of a leveraged position's assets.

      Read more: http://www.investopedia.com/terms/n/notionalvalue.asp#ixzz1t6eqQqq1



      What PIIGS debt and leverage has to do with your argument I also will wait patiently for an explanation.

      In short, the headline number, 700 TRILLION, OMYGOD 700 TRILLION does not, I repeat, does not, equate to a debt of 700 TRILLION.

      Delete
  34. Using your example of $100 to insure a one million default:

    Notional value: $1 million

    Gross market value (replacement cost of the contract): $100

    From Zerohedge:

    There is much more than can be said on this topic, and has to be said, because an increase of that magnitude is simply impossible to perceive without alarm bells going off everywhere, especially when one considers the pervasive deleveraging occurring at every sector but the government. All else equal, this move may well explain the massive surge in bank profitability in the first half of the year. It also means that with banks suffering massive losses, and rumors of bank runs and collateral calls, not to mention the aftermath of the MF Global insolvency, the world financial syndicate will have no choice but to increase gross notional even more, even as the market value continues to get ever lower, thus sparking the risk of the mother of all margin calls: a veritable credit fission reaction.

    ...

    Expect to see gross market value declines persisting even as the now parabolic increase in total notional persists. At this rate we would not be surprised to see one quadrillion in OTC derivatives by the middle of next year.

    And, once again for those confused, the fact that notional had to increase so epically as market value tumbled most likely means that the global derivative pyramid scheme (no pun intended) is almost over.

    ReplyDelete
  35. IOW, a 'marginally' subtle point, the $700 trillion number (and growing!!) is alarming for what it says is necessary to ensure global economic growth.

    In the words of Tyler Durden:

    Indicatively, global GDP is about $63 trillion if one can trust any numbers released by modern governments. Said otherwise, for the six month period ended June 30, 2011, the total number of outstanding derivatives surged past the previous all time high of $673 trillion from June 2008, and is now firmly in 7-handle territory: the synthetic credit bubble has now been blown to a new all time high. Another way of looking at the data is that one of the key contributors to global growth and prosperity in the past 10 years was an increase in total derivatives from just under $100 trillion to $708 trillion in exactly one decade. And soon we have to pay the mean reversion price.

    But yes, when the credit bubble bursts, the notional value will be due. Which has some people worried about the payable upon due scenario.

    ReplyDelete
  36. Jesus economics is boring.

    bob

    ReplyDelete
  37. Which is why it *always* crashes.

    Nobody cares about the runup.

    It's a derivatives bubble.

    And it's gonna pop.

    Like your ... oh never mind.

    ReplyDelete
  38. Boring flies under the radar.

    The Betty Boop analogue of LiLo.

    Why the finance boys are orders of magnitude more dangerous to our way of life than those "grim and determined" Marxists in Washington.

    ReplyDelete
  39. .

    Ash, the "reply" link didn't work above.


    If those sovereign's, bankers and bondholders goe the rest of us will be in an... uncomfortable spot.

    That's what we heard four years ago.

    I didn't like the idea of TARP and QE initially, but I thought they were necessary and the right thing to do.

    At the time.

    In fact, I still think it was the right to do.

    Then.

    However, it's beeen four years. I'm no economist, haven't a clue really, and you can just call me cynical, but I see the game as rigged with me on the losing end. When you have the Fed Chairman saying he will do whatever it takes to support the stock market, you know something is wrong. And who is in the market? It sure isn't the individual investor. It's the institutional investor. And what are they doing with their profits? They aren't investing it in plant and equipment that's for sure. They are investing in more paper (CDO, CDS, Asset Swaps, index and options on all of these, etc..) They are also speculating on commodities. Nothing they are doing is creating jobs or adding intrinsic value. They are merely making money for the players involved. And at the same time, the are increasing the risk exponentially. And who is responsible for the risk? If history is any clue, it sure isn't the players. It's you and me.

    How long can you continue to create additional paper, collateralizing finite assets, thus magnifying the risk exponentially before the dominoes start falling? And when that happens who will be the first to get screwed?


    You say we "will be in an...uncomfortable spot"?

    I feel like I'm in kind of an uncomfortable spot right now.

    .

    ReplyDelete
    Replies
    1. .

      Economically, the US currently drives the world.

      We had a jolt in 2008; however, rather than trying to address the reasons for for that jolt, the GOP has done everything in its power to prevent, stymie, and/or repeal any regulations that were designed to address those abuses and minimize the risks.

      The reason they give for opposing those regulations? The US might lose its place as derivative capital of the world. Lordy.

      .

      Delete
    2. I share your cynicism, in spades.

      First off, no the US does not drive the world but it sure as hell is the most significant player, the worlds largest economy but even then (and no I'm not going to research it) it doesn't represent more than 50% of world GDP (ok, a quick google - approx. 26%). So, big yeah, but not all there is and, I'm guessing, declining.

      We've got a demographic problem in the developed world. The boomers are aging and the system is set up for 1. growth, 2. the working supporting the aged. With an aging population growth is a problem (i.e. there is little to none in a system designed for growth - debt) and there are declining numbers of working folk to support those aged folk (accustomed to a comfortable lifestyle).

      I've always found the US steel business to be an interesting model. Basically the bankrupted the companies (screwing the pensioners) and re-formed the companies with out those liabilities. They became profitable -oh my, well done!... unless you are one of those pensioners that got screwed.

      Anyway, then you got the financial crisis of 08. OH NOOO Goldman Sach's et al are going to go belly up. The big mucky mucks (Paulson, ex - goldman) says OH NOOO, the street is going belly up. Let's make 'em banks (you know, just like deposit taking institutions) so they can belly up to the Fed and get free cash. Presto, done. Oh, and yah, TARP too!

      I think they should have held the line. Let the suckers fail and backstopped FDIC. For stimulus, well, put money in the pockets of PEOPLE via tax holidays, tax credits, infrastructure projects.

      They didn't but in the end they gotta keep the check clearing system going....

      ya, I share your cynicism.

      Delete
    3. p.s. you ever get bad debt? Money you thought was good but wasn't? It sucks.

      Delete
  40. Neither a borrower nor a lender be,
    For loan oft loses both itself and friend,
    And borrowing dulls the edge of husbandry.


    Build soil.

    .....

    Well my wife and I were talking about how fucked up things are now in the megacities and the burbs and our conclusion was we got too many people and too few farms.

    You folks will have to figure it out.

    Wow, did my daughter work up a sweat on the horse today!

    Though her friend Craig seems to have been fired. The letter said 'mutually agreed to separation' we aren't believing any of it, cause he loved it there.

    If I had to really guess? He turned down an amorous advance from the lonely owner lady.

    ReplyDelete
    Replies
    1. Remember Charles? This was his thesis.

      Ol' Jerome keeps pushing.

      Delete
    2. Headlines:


      'HIT THEM AS HARD AS YOU CAN'...
      Senator launches probe over scare tactics...
      VIDEO...
      Salazar: 'No one knows' if US headed to $9 a gallon...


      EPA OFFICIAL: 'CRUCIFY' OIL & GAS COMPANIES



      Now there's a hell of a good idea: crucify the oil and gas companies.

      That ought to do 'er.

      Delete
    3. Maxine to head up our Energy Department.

      NOT Maxine Waters, who, I recall, wanted to nationalize the oil and gas companies, though she had to struggle to recall the word 'nationalize'.

      The democratic party is just filled with idiots is it not?

      Delete
  41. Q Brain Not Found - G Spot Unconfirmed

    Ah come on Quirk, the cadaver of an eighty year old woman????

    No wonder you passed on Cartegena.

    They're alive down there.

    jeez!

    bobbo

    ReplyDelete
    Replies
    1. .

      As always, Bobbo, we report you decide.

      Besides, the researcher was from St. Petersburg, Fl. The only ones there are all over 80 years old.

      As for alive an well, don't I recall that you went on for weeks (giving some people here the creeps) about how you had the hots for that rather elderly (old enough to be your grandmother?) lady who was giving your daughter riding lessons?

      As for Cartagena, are you enjoying the senior discount?

      .

      Delete
  42. According to the Bank of International Settlements, U.S. banks have loaned only $60.5 billion to banks in Greece, Ireland, Portugal, Spain and Italy - the countries most at risk of default. But they've lent $275.8 billion to French and German banks.

    And undoubtedly bet trillions on the same debt.

    ...

    There is not enough capital on hand to cover the possible losses associated with the default of a single counterparty - JPMorgan Chase & Co. (NYSE: JPM), BNP Paribas SA (PINK: BNPQY) or the National Bank of Greece (NYSE ADR: NBG) for example - let alone multiple failures.

    Derivatives: The [$700] Trillion Time Bomb that's Set to Explode (Link)

    You do the math. Ordinary debt is smugly tame by comparison.

    ****************************

    Infographic (Link)

    ReplyDelete
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