Tag Archives: default
Posted on 03. Jun, 2012 by Harvey Sax.
Kyle Bass’s Most Famous Trade Is A Disaster, And It Is Never Going To Work Out Joe Weisenthal | May 20, 2012, 6:42 AM | 23,775 |
Kyle Bass was one of the handful of hedge funders who made a fortune betting against housing during the subprime bust, and since then hes been stalking his next big “career trade.”For years now, his big target has been Japan, a country with a debt-to-GDP ratio of over 200% and a shrinking/aging population. Hes convinced that its only a matter of time before the country implodes in a massive sovereign debt crisis that sends bond yields soaring, while the yen becomes worth less than confetti.
I thought this was interesting since Bass has legions of fans. It’s not so much that the trade is wrong as that what he advocated owning are puts on the JGB and their is a finite life to them. He called it an asymmetrical trade where you could make 100 times your money or potentially lose all of it. If this article is correct, it looks likely investors will lose all of it.
Posted on 15. Feb, 2012 by Wilensky.
According to Paulson & Co., a hard default by Greece could spell economic disaster of unprecedented proportion along with the breakup of the Euro. In his 2011 recap letter to clients, he estimates $117 billion will be needed to recapitalize banks and satisfy other monetary needs.
Paulson & Co.:
“We believe a Greek payment default could be a greater shock to the system than Lehman’s failure, immediately causing global economies to contract and markets to decline,” the hedge fund said in the letter, a copy of which was obtained by Bloomberg News. The euro is “structurally flawed and will likely eventually unravel… …It seems likely that the pressure to keep the euro together becomes too great and it ultimately falls apart.”
While the firm identified the largest threat as being the overexposure of European banks who simply lack the equity to handle a crisis, they’ve had rough luck predicting the financial sector in the not-so-distant past. 2011 halved the fund’s assets, primarily due to a large stake in Bank of America and the fund sold out of their position sometime last quarter. BAC has rallied close to 50% since.
Posted on 20. Jan, 2012 by Wilensky.
“In an interview with Bloomberg’s Sara Eisen and Erik Schatzker this morning, he does what he does best – cuts to the chase: “if you think it through and you are as bearish as I am, and you think the whole financial system will one day collapse, we don’t know if in 3 years, or 5 years, or 10 years, but one day there will be a reset, and everything will be essentially started anew, then you are better off in equities than in government bonds, because a lot of government bonds will either default or they will have to print so much money that the purchasing power of money will depreciate very rapidly.” When asked if he feels uncomfortable predicting a calamity in bonds again, as he did back 2009, Faber is laconically empathic: “it is true that last year the 30 year bond returned 30%, and i owe David Rosenberg a bottle of whiskey” but analogizes: “from August 1999 to March 2000, the Nasdaq doubled, but at no time in that timeframe was it a good buy. And after it people lost a lot of money. We have now a symptom of monetary inflation and this is record corporate profits, and the second symptoms is essentially a bubble in high quality bonds: people seem so insecure and so much worried, they would rather be in a US bond with no yield, than in bonds that may not repay me, or in equities that may drop 30%. But it does not make them a good buy longer term.”
In the words of Tyler Durden: “Yep: only Faber can get away with calling the bond market the second coming of the Nasdaq bubble and look cool doing it.”
Einhorn Ends 2011 Just Over +2%, Closes FSLR Short, Warns On Asia, Mocks “Lather. Rinse. Repeat” Broken Markets
Posted on 18. Jan, 2012 by Wilensky.
Anyone wondering why FSLR just jumped, it is because as was just made known, David Einhorn’s Greenlight has decided to close its FSLR position, after bleeding that particular corpse dry. “Our largest winner by far was our short of First Solar (FSLR) which fell from $130.14 to $33.76 paper share and was the worst performing stock in the S&P 500.” Einhorn also announces that he was among the “evil” hedge funds who dared to provide market clearing transparency and buy CDS on insolvent European governments: “We also did well investing in various credit default swaps on European sovereign debt.” As for losers, Einhorn and Kyle Bass can commiserate: “For the second year in a row, our biggest loss came from positions designed to capitalize on eventual weakening of the Yen.” He summarizes the global economic environment as follows: “The global environment is very complicated. On the one hand the Federal Reserve has taken a much-needed break from quantitative easing (at least for the moment). Accordingly, inflation in oil and food has abated, providing relief to the US economy. Bearish forecasts that the US was headed back into recession proved wrong for the third time since the end of the last recession. On the other hand, Asia appears to be in much worse shape than it was at this time last year and could be a drag on the world economy going forward. Very few people trust any of the economic data coming out of China, making it difficult to gauge the situation there. Some of the smartest people we know have very dim views. The Chinese have been a leading growth engine for the last two decades and are largely credit with leading the world out of the recession in 2009. A change in their economic circumstances could really upend things.” Yet the best thing is his summary of the current investing climate in our utterly and hopelessly reactionary broken markets.
Posted on 12. Sep, 2011 by Maxwell Leary.
You want to fix this economic crisis? You want to put people back to work? You want to light a fire under the economy?
There’s a way to do it. Fast. And relatively simple.
But you’re not going to like it. You’re not going to like it at all.
Default. A national Chapter 11 bankruptcy.
The fastest way to fix this mess is to see tens of millions of homeowners default on their mortgages and other debts, and millions more file for bankruptcy.
I told you that you wouldn’t like it.
I don’t like it much either. It sticks in the craw that people got to borrow all that money and won’t have to pay it back.
But you know what? The time to stop that was five or 10 years ago, when the money was being lent.
And mass Chapter 11 is, by far, the least obnoxious solution to our problems.
That’s because the real cause of our economic slump isn’t too much government or too little government. It isn’t red tape, high taxes, low taxes, the growing divide between the rich and the poor, too much government debt, too little government debt, corporations, poor people, “greed,” “socialism,” China, Greece, or the legalization of gay marriage. It isn’t, in short, any of the things all the various nitwits say it is.
It’s the debt.
Full article available @:
Posted on 29. Jul, 2011 by Live Trading News.
While the media has focused on the short term debt issue matters and to a lesser extent the long term implications what they have not addressed is the way this Circus has impacted the credibility of the USA Capital Markets.
The political rhetoric and the refusal to deal with the issue at hand will have a lasting impact on the way the world looks at investing in America.
Since 2008 the Government and those elected to represent the American people have made reactionary, over bearing legislation based on there popularity on the given day.
Dodd-Frank, Capping Financial Institutions Wages, Over Regulation and Excessive Prosecution are creating an exodus of talent from Wall St to Asia.
- New hedge funds in Asia raised $2.86 billion in the first half of 2011 with multi-strategy funds attracting two-thirds of the inflow, a survey from industry tracker AsiaHedge showed on Wednesday.
Most of the assets were raised by a handful of big funds with the number of launches falling to 24 from 70 in the same period last year when new funds had gathered $2.8 billion.
The asset flow, helped by launches such as former Goldman Sachs trader Morgan Sze’s Azentus and Orvent Asset Management Pte in Singapore, is closest to the pre-crisis level of $5.7 billion raised in the first half of 2007.
It is also a big jump from 1.1 billion raised in the second half of 2010.
This is part of a wider trend created by the White House, New York will lose it’s role as the financial center of the world.
The shift will reduce demand for US Treasuries over the next decade, more companies will seek new listings in Asia, and the balance of power would have moved away from the USA.
The companies them selves are in great shape, corporate profits are setting records, companies have never had as much cash as they do now, the only problem is a manufactured crisis of faith inspired by a President driven by popularity polls.
Posted on 21. Jul, 2011 by Maxwell Leary.
By Catarina Saraiva and Allison Bennett
July 21 (Bloomberg) — The euro advanced to the highest in two weeks against the dollar as officials said European governments may expand the region’s bailout fund and accept a temporary Greek default, reducing contagion concern.
The dollar briefly pared its drop versus the yen on a New York Times report that President Barack Obama and House Speaker John Boehner have reached a budget pact. The Canadian dollar rose to a three-year high versus the greenback and the Norwegian krone advanced as crude oil gained. The Swiss franc fell against most of its major counterparts as the prospects for an agreement at today’s summit in Brussels reduced demand for a refuge.
Please visit Bloomberg to read full article @:
Posted on 18. Jul, 2011 by Maxwell Leary.
Will The U.S. Default Before Greece?
I thought this was an interesting article on default and earnings by Van Dijk
“The fundamental backing for the market continues to be solid. It is important to keep your eyes on the prize. There’s lots of news out there, and much of it is more dramatic than earnings results, but rarely does it have more significance for your portfolio. Earnings are, and are going to remain, the single most important thing for the stock market. Interest rates are important, but a distant second.”
To read the full article please visit: http://www.dailymarkets.com/stock/2011/07/18/will-the-u-s-default-before-greece/