Tuesday, May 29, 2012

Exclusive: Eurobonds to be launched in July

japan © fintag

News comments:
Having endured some seriously expensive lunches (with two high ranking EU officials, a BoE toad and a diplomat), fintag can now reveal exclusive breaking news that will bring tears of pain to capitalists and orgasmic whoops of joy to market distorters and short termist politicos everywhere.

The Eurobond is being readied up for imminent launch.

Although these new and exciting notes are not going to be underwritten by all the EU countries (Germany cannot under its current constitution), the EU is going ahead anyway as it has to save the Euro currency and keep the EU family together with one huge group hug.

The EBs will be underwritten by the PIIGS, France and the Netherlands. The CRA's are currently under CA and NDA and are rating the EBs as you read this; rumours are they may well get a subprime AAA because that is what the market demands and Germany will end up guaranteeing them anyway.

Fiscal union is on its way and we can all enjoy some stability over the coming years as Europe turns into Japan with its lost decades of zombie banks, non growth and triple digit debt. Good times are back.

The eurocrats are delighted for they have saved their jobs, created new jobs, enabled the banking sector to be saved, given breathing space to most of those underwriting the debt and most importantly found a way to hopefully create some double digit inflation.

All those LBOs ready to go bust in 2015, dried out resi mortage markets, bankrupted Irish real estate developers, toxic asset funds, stressed out pirate equity jockeys, bored bank managers, covenant reset lawyers and distressed debt owners will all go away in one fell swoop! Mezzanine Debt saves Debt! Tarp 2.0 is born! Savers get rates! Greece stays in! Spain has no bad debts!

Or have I just woken up from a hangover induced dream...?

Today's shorts:
FB worst IPO ever (telegraph)

FB was never worth USD300bn (fintag)

This is why academics should never run hedge funds - what were MAN thinking (reuters)

Today's longs:
EuroPigs (zacks)

Key buyer of Eurobonds will be Japan.

Thursday, May 24, 2012

Germany to leave Euro

1977 © time

News comments:
Germany doesn't like to be bullied.

With the head of the ECB and Premiers of debt loving' nations seeing a nice way out of austerity with Eurobonds (spending other people's money) it is clear what the upshot will be if they continue to harass the Germans.

Looking at Merkel's body language and that of the German finance minister trying to be seen as cooperative (wsj), it is clear enough is enough. They know the Eurobond cop out is a tax on the German people and they will be underwriting the whole of Europe. So my prediction is Plan b will kick in and Germany will leave the cess pit and issue it's own currency.

Whilst the markets fret over that Greek election, hot money is leaving the belly of Europe for the that safe haven called the UK which is having a 1977 double take; Disco, recession and a Queen's jubilee.

And of course a year when there were lots of European currencies and FX traders had more fun.

Today's shorts:
Facebook (seekingalpha)

Today's longs:
UK to cut rates to -1% (guardian)

NASDAQ to move away from Excel.

Tuesday, May 22, 2012

Germany, Bad Debts and World War 3

WW3 © fintag

News comments:
The whole EU crisis is about bad debts.

Whether it be Santander not providing against its huge real estate portfolio or the ECB not providing against its huge sovereign debt portfolio, Europe is doing exactly what Hedge Funds were accused of during the 2008 crash; holding onto illiquid toxic assets and failing to mark them to market.

The upshot was Hedge Funds were forced to carry out frequent NAV valuations (we are talking about daily in some cases) because their investors demanded transparency and the Eurocrats wanted to take it out on fund managers instead of themselves for being incompetent by ramping up AIFM and MiFID type regulation because being a policy maker is great fun when you aren't elected to be one.

"Transparency" was the big word post Lehman. Banks, Pirate Equity, Fund Managers have all had their clothes ripped off and been forced to parade their smaller than anticipated genitals to the general public. However, the EU hasn't practised what it preaches and is as opaque as ever. Take the ECB. Its accounts are so opaque they make Santander's look truly transparent.

The ECB has little capital (less than the value of FB last Friday) and has more leverage than a couple of Lehman Bros. And yet all its trillions of assets are marked at book. Yep, all that Greek, Italian and Spanish debt and all the other toxic collateral it has sitting in its vaults.

The reason Germany wants to save Greece and keep it in the Euro is because if it leaves, the ECB's accounts will have to be marked to market and be bailed out by the National Central Banks who in turn will have to issue debt to fund the ECB or more likely ramp up taxes on the little people. And Germany (and France) will have to cough up the most (we are talking hundreds of billions) which is why they continue to say the Euro is safe and Greece won't leave.

Germany wants its cake and eat it. It wants a strong Euro/DM and to be able to control neighbouring national governments and turn back passage fun lovin' sun worshippers into puritanical engineering quakers. This has of course all happened by accident, but Germany has started a world war with enemies everywhere. China. the UK and the US are screaming for the EU to get its act together for they want Europe to be strong because it is a huge market that they rely on. The rest of Europe is bending over staring into the sand and praying.

Germany may have failed last century by going down the military route, but this time it is succeeding in crippling its neighbours - Spain, Portugal, Belgium, Ireland, France, Greece - through controlling their economies and alienating the US and Asia. Even the back door Chinese imperialists must be applauding the Germans for having invaded so much of Europe without a bullet fired.

Germany doesn't want inflation, doesn't want to print money, doesn't want to kill off the Euro. It needs Greece, it needs the ECB to keep up its lies, it needs its neighbours to be taught a lesson.

As in most wars, it is the people who decide the outcome. In Germany's case it is likely to be the Greeks who will say no more and watch the ECB be bailed out against all principles of the EU by its club members. Italy and Spain will soon follow and the Euro will be no more. However, not all agree ...

Bill O’Neill, EMEA CIO, Merrill Lynch, Bloomberg 21 May 2012:

"We don’t think Greece will walk away, even if the result after the June 17 election is difficult for the pro-bailout parties. We don’t think they will deliberately step away from the bailout. There will be a process of negotiation in a worst-case scenario, but we don’t believe a Greek exit is going to happen."

...and wasn't it ML who said Lehman wouldn't go bust?

Today's shorts:
UBS play outside the playground (money)

France panics at cost of its share of bailing out the ECB (telegraph)

Whale is beached on hedge fund sand (ftalphaville)

Italy runs and runs (ftalphaville)

The ECB dashboard (ecb)

Today's longs:
Olympic Torches (bbc)

FB and the cliff (fintag)

Lunches are so yesterday (telegraph)

UK people stick boot into ECB (guardian)

ECB to be renamed ECBB (European Central Bad Bank).

Friday, May 18, 2012

Santander is the next Northern Rock

a running bank © fintag

News comments:
An alarmist headline like this should send me to jail.

But it is becoming clear we are all leading up to an almighty run on the banks as is already happening at Greek and some Spanish banks. You can feel it in the air and with newspapers like the Daily Mail pronouncing ...

David Cameron says 'truly worrying' crisis could 'get a lot worse'

String of local councils withdraw their deposits from Santander accounts

FSA says it is 'unlikely' to allow UK division to prop up Spanish parent firm

...there will be lines of pensioners and others distrustful of the banks hoovering out their Santander bank accounts. Apparently.

When Northern Rock ran, I was lucky to take the world's first photograph of people lining up. Alas you won't find me standing outside Santander branches because these days its online banking that prevails.

Santander along with all the other Euro banks are gloating over their non-liquidity issue as the ECB is there to cushion them from the effects of a huge deposit drawdown. The ECB is turning into a bad bank, one which could only ever be saved by Facebook and Apple stockholders and this is quite frightening. Not until it starts printing real Euros and the Germans get over their inflation phobia, then we can all sleep peacefully. In the meantime remember fintag has been alerting you all to Spain's woes for years...

Whether Santander suffers a run (with its new 95% LTV mortgages and its attractive 123 bank account it is sending out odd signals), lets hope the cash pours into Lloyds TSB and RBS for these useless banks are owned by the UK taxpayer whereas Santander and other jonny foreigner banks rely on the FSA compensation scheme and fingers crossed Iceland style that you will get your max GBP85k back.

By all means hang around your local branch of Santander with iPhone in hand; personally I am going long mattresses and De La Rue who will soon be printing lots of new Drachma, Lira and Pesetas in the not to distant future.

Today's shorts:
BBC says Santander is safe as houses (guffaw...) (bbc)

Told you so (fintag)

Today's longs:
Santander ban people with iPhones in their branches (evening standard)

Lewis Hamilton to bailout Santander.

FB is the new Lehman Bros

facebook © us govt

News comments:
The last 20 years has spawned some incredible once-in-a-life-time events. The collapse of Lehman Bros and the ramifications we are still feeling today is one. The other is this colossal Facebook IPO.

After the dotcom blow ups around 2000, we all tutted and said "what were we thinking? Hot air being valued at silly prices?". Well as a small chunk of the ultimate dotcom is sold off, we can all say "we got that one wrong. Hot air is much more valuable than companies who make and sell things.".

Well here we are again. Facebook has amazingly come in to be valued at USD100bn+ which is what Goldman Sachs told its investors it would be valued at and the likes of DST Global, Bono and Accel Partners will soon be offloading their hot stock and capitalising on the fantasy that is Facebook.

Hats off to this incredible feat. Facebook will probably double in price and then when the hype wears off start falling like Bear Grylls jumping off a Groupon cliff.

Facebook is a free members club. The club puts up a few ads in the VIP rooms and gets paid. Advertising revenue. Yep, that old fashioned and soon to disappear business model.

Whereas the real world is turning to real physical assets like commodities and real estate in London, the mad world is turning to hot air. Facebook will be old news in 10 years time as the Harry Potter generation turn away from their privacy-is-cheap lifestyles and the new generation hide away in a new glossary start-up.

However this is good news for siliconroundabout.org.uk in London. With all these FB sellers, this means more money pouring into the tech sector. Whilst the real world burns as the Euro collapses at least a few geeks with speedy programming skills get to become uber rich.

And as for Sean Parker, you make Warren Buffet look like a casino Whale and I kiss your feet.

Today's shorts:
JP Morgan and Enron (bloomberg)

Greece runs dry of Euros (reuters)

Today's longs:
The Facebook rich list (telegraph)

Santander UK is ringfenced in the UK. Meanwhile the queues get bigger ....

Thursday, May 17, 2012

Greece: Who pulls the trigger?

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)

PIGS turn into PIS.

Saturday, May 12, 2012

Markit Monopoly Mullers Morgan

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)

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

Friday, May 11, 2012

Why would you want to be American?

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)

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

JP Morgan caught trend following

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)

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

Thursday, May 10, 2012

FCA: New logo revealed

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)

FCA to ban swear words.

Tuesday, May 8, 2012

Eurocrats 0 Lunatics 1

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)

One flew over the cuckoos nest to be remade.

Sunday, May 6, 2012

Viva la revolution!

useless © fintag

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)

France to re-introduce bull fighting.

Wednesday, May 2, 2012

Bank of England re-writes history

pension please © fintag

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:

Mervyn King to become new CEO of Barclays.

Suicide is the only option

early exit © suicide

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?

Economics to be banned as subject by the EU.