Stocks and Precious Metals Charts – Stock Option Expiration on Friday – Anything Goes

“Wall Street did not accidentally run a barge aground and leave a small oil slick on the Hudson River. Wall Street did not accidentally release tainted lettuce that sickened a few dozen people.
What Wall Street did was intentional and criminal: it financially engineered a toxic subprime house of cards which it knew from its own internal reviews was going to collapse; it then molded the toxic product into inscrutable bundles; it sold the bundles to unsuspecting investors around the globe while making side bets that it would all come crashing down.
Then, after causing the greatest financial collapse in the United States since the Great Depression, Wall Street’s unrepentant scoundrels paid themselves billions of dollars in bonuses with taxpayer bailout funds.”
Pam and Russ Martens, Wall Street On Parade
There will be a stock options expiration for October on this Friday.
The touts are talking up stocks this week. I’ll take that as a good sign to take profits out of equities if you have them. We are nearing what is likely to be at least a short term top.
The bullish argument is that the Fed will keep supplying easy money to Wall Street, and they and their minions will keep piling into stocks because they have no other choice. That is sounding a bit tired at this point.

This post was published at Jesses Crossroads Cafe on 18 OCTOBER 2017.

The Power Players Behind Silencing Wall Street Reformers

America has now been through various iterations of ‘it’s time to stop bashing Wall Street’ by writers who seem to easily get air time or plenty of print space to make their case. An OpEd in the New York Times today is the latest in this endless series. We’ll get to that column shortly, but first some necessary background.
Wall Street did not accidentally run a barge aground and leave a small oil slick on the Hudson River. Wall Street did not accidentally release tainted lettuce that sickened a few dozen people. What Wall Street did was intentional and criminal: it financially engineered a toxic subprime house of cards which it knew from its own internal reviews was going to collapse; it then molded the toxic product into inscrutable bundles; it sold the bundles to unsuspecting investors around the globe while making side bets that it would all come crashing down. Then, after causing the greatest financial collapse in the United States since the Great Depression, Wall Street’s unrepentant scoundrels paid themselves billions of dollars in bonuses with taxpayer bailout funds.
One of the largest wrongdoers of this era, Citigroup, received the largest taxpayer bailout in history (over $2.5 trillion in loans, cash infusions and asset guarantees) and while this was occurring, one of its executives, Michael Froman, was staffing up the administration of the next President of the United States, Barack Obama, including an accepted recommendation for the head of the Justice Department.
The 2007-2009 financial crash was more than the product of greed. There was both knowing and criminal wrongdoing, but none of those responsible have gone to jail. None of the regulatory gaps that allowed this to happen have been rectified. The biggest Wall Street banks have grown even bigger and remain too-big-to-fail; Wall Street is still paying the rating agencies for their Triple-A ratings; highly speculative Wall Street firms are still allowed to hold trillions of dollars in taxpayer-backstopped insured deposits in the commercial banks that they are allowed to own under a Byzantine bank-holding company structure with thousands of far-flung subsidiaries around the globe; and a handful of Wall Street banks continue to house trillions of dollars of derivatives inside their insured depository banks – something the public was assured would end under the Dodd-Frank financial reform legislation.

This post was published at Wall Street On Parade on October 18, 2017.

Goldman Is Allowing Its Clients To Bet On The Next Financial Crisis

Just over a decade ago, as the S&P was hitting all time highs and there was a line around the block of 30-some year old hedge fund managers, desperate to put other people’s money in various ultra risky investments just so they could pick a few excess bps of yield over Treasurys – a situation painfully familiar to what is going on now – Goldman had an epiphany: create new synthetic products that have huge convexity, i.e., provide little upside (such as a few basis points pick up in yield) versus unlimited downside, link them to the shittiest assets possible and sell them to gullible, yield-chasing idiots (collecting a transaction fee) while taking the other side of the trade (collecting a huge profit once everything crashes). The instruments, of course, were CDOs, and not long after Goldman sold a whole of them, the financial system crashed and needed a multi-trillion bailout from which the world has not recovered since.
Ten years later, Goldman is doing it again, only instead of targeting subprime mortgages, this time the bank has focused on quasi-insolvent European banks.
And just like right before the last financial crash, Goldman is once again allowing its clients to profit from the upcoming collapse, or as Bloomberg puts it, “less than a decade after the last major banking crisis, Goldman Sachs and JPMorgan are offering investors a new way to bet on the next one.”
The trade in question is a total return swap, a highly levered product which is similar or a credit default swap but has some nuanced differences, which targets what are known as Tier 1 , or AT1 or “buffer” notes issued by European banks, and which usually are the first to get wiped out when there is even a modest insolvency event (just ask Banco Popular), let alone a full blown financial crisis.

This post was published at Zero Hedge on Oct 12, 2017.

Peak Housing Bubble: The Big Short Is Back

Wash, rinse, repeat. The American public never gets tired of the destructive abuse it suffers from Wall St. The deep sub-prime mortgage market is roaring back and, with it, the nuclear bomb-laden derivatives that triggered round one of The Big Short de facto financial system collapse:
It’s an astonishing comeback for the roughly $70 billion market for synthetic CDOs, which rose to infamy during the crisis and then faded into obscurity after nearly destroying the financial system. But perhaps the most surprising twist is Citigroup itself. Less than a decade ago, the bank was forced into a taxpayer bailout after suffering huge losses on similar types of securities tied to mortgages.
Citigroup is leading the charge this time around, instead of Bear Stearns and Lehman: Citi Revives The Trade That Blew Up The System In 2008. Oh, and do not be mistaken, the financial ‘safeguards’ legislated by Congress and widely heralded by Obama and Elizabeth Warren are completely useless.

This post was published at Investment Research Dynamics on September 27, 2017.

Russian Depositors On Edge After Second Major Bank Fails In Under A Month

If once is happenstance, twice is coincidence, and three times is a full-blown collapse in the financial system, then Russia may be getting close.
Just three weeks after Russia bailed out its largest and very politically connected private bank, Otkritie, after an unexpectedly acute bank run resulted in the bank’s near-collapse, already nervous Russian depositors shifted their attention to another domestic lender, and earlier today Russia’s B&N Bank, the country’s 12th biggest lender by assets, also sought a bailout from the central bank. While it is unclear how much this bailout would cost Russian taxpayers, when the central bank took over Otkritie last month, it said it might need up to $6.9 billion, the biggest ever bailout in the country.
B&N Bank, which is controlled by Russian oligarch Mikhail Gutseriev and was not on the central bank’s list of systemically important lenders, said it had under-estimated the problems within the banks it had bought during an expansion drive. ‘Our objective is, with the support of the central bank … to conduct an effective financial rehabilitation of the bank,’ said Mikail Shishkhanov, who was named as chairman of B&N Bank, whose assets account for 2 percent of the Russian banking system, according to ratings agency Fitch.

This post was published at Zero Hedge on Sep 20, 2017.

Who Gets Hit by Mortgage Losses in Harvey and Irma Areas?

‘We need to ask for a policy change because the burden with these losses is too big.’ Somebody is going to pay for losses on mortgages of homes that were destroyed by Hurricanes Harvey and Irma. It’s a just a question of who.
The taxpayer is on the hook, along with some investors. But then there are the servicers of mortgages guaranteed by the Government National Mortgage Association, for short Ginnie Mae. The largest of them is Wells Fargo, but they mostly include smaller non-banks such as PennyMac and Quicken Loans. The amounts could be large. And now they’re asking for a bailout of sorts.
In total, 4.3 million properties with nearly $700 billion in outstanding mortgage balances are located in FEMA-designated disaster areas in Texas and Florida, according to a preliminary estimate by Black Knight Financial Services:
Disaster areas of Hurricane Harvey: 1.18 million mortgaged properties with $179 billion in unpaid mortgages. Disaster areas of Hurricane Irma: 3.14 million mortgaged properties with $517 billion in unpaid mortgages. Many of these homes survived mostly unscathed. So the mortgage balances of homes that have been severely damaged or destroyed remain uncertain but are significant.

This post was published at Wolf Street on Sep 19, 2017.

Fearing Contagion, Russia Bails Out Bondholders in its Biggest Bank Collapse Yet

‘The panicky mood has been dampened down,’ as other banks are rumored to be teetering.
True to the playbook of bank bailouts, the Central Bank of Russia (CBR) decided to bail out Bank Otkritie Financial Corporation, the largest privately owned bank in the country, and the seventh largest bank behind six state-owned banks.
The Central Bank put in an undisclosed amount of money in return for at least a 75% stake. This is likely to be Russia’s biggest bank bailout ever, well ahead of the current record holder, the $6.7 billion bailout of the Bank of Moscow in 2011.
Otkritie and its businesses would operate as usual, the Central Bank said. The banks obligations to creditors and bondholders, which include other Russian banks, would be honored to avoid contagion.
The controlling shareholder of Otkritie bank is Otkritie Holding, with a 65% stake. The bank had grown by wild acquisitions, grabbing other banks, insurers, non-pension funds, and the diamond business of Russia’s second largest oil producer Lukoil. Otkritie Holding is owned by executives of Lukoil, state-owned VTB bank, Otkritie, and other companies. So clearly, this bank is too big to fail.

This post was published at Wolf Street on Aug 30, 2017.

Social Security requires a bailout that’s 60x greater than the 2008 emergency bank bailout

/ August 11, 2017
A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money.
Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news…
… and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.
But that didn’t happen.
The story was hardly picked up.
It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history.
That’s not hyperbole either – the numbers are very clear.
The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.
In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.
Fat chance.

This post was published at Sovereign Man on Simon Black.

Fannie Mae, Freddie Mac May Require $100 Billion In A New Crisis

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
According to the results from the annual stress test of Fannie Mae and Freddie Mac released today by their regulator, the Federal Housing Finance Agency, the ‘GSEs’ which were nationalized a decade ago in the early days of the crisis, would need as much as $100 billion in bailout funding in the form of a potential incremental Treasury draw, in the event of a new economic crisis.
***
Bear in mind that the 30-year fixed-rate mortgages must reside somewhere. If not Fannie Mae and Freddie Mac’s balance sheet, then on the balance sheets of lenders (like Wells Fargo and Bank of America), or some other financial entity. Or FHA insurance fund.

This post was published at Wall Street Examiner on August 8, 2017.

IMF admits disastrous love affair with the euro and apologises for the immolation of Greece

The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.
This is the lacerating verdict of the IMF’s top watchdog on the fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.
It describes a ‘culture of complacency’, prone to ‘superficial and mechanistic’ analysis, and traces a shocking breakdown in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.
The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way European Union insiders used the fund to rescue their own rich currency union and banking system.
The three main bailouts for Greece, Portugal and Ireland were unprecedented in scale and character. The trio were each allowed to borrow over 2,000pc of their allocated quota – more than three times the normal limit – and accounted for 80pc of all lending by the fund between 2011 and 2014.

This post was published at The Telegraph

Earnings Rise with Boost from Falling U.S. Dollar But Consumers Will Bear the Brunt of Rising Prices

There seems to be an unlimited supply of methods in which the rich in America keep getting richer and the average Joe picks up the tab. (Think about the $16 trillion secret bailout of Wall Street by the Federal Reserve from 2007 to 2010 for the quintessential example.)
Yesterday, Fortune Magazine ran this sobering headline: ‘The Wealth Gap in the U. S. Is Worse Than In Russia or Iran.’ The article quotes Richard Florida, author of The New Urban Crisis, as follows:
‘Inequality in New York City is like Swaziland. Miami’s is like Zimbabwe. Los Angeles is equivalent to Sri Lanka. I actually look at the difference between the 95th percentile of income earners in big cities and the lower 20%. In the New York metro area, the 95th percentile makes $282,000 and the 20th percentile makes $23,000. These gaps between the rich and the poor in income and wealth are vast across the country and even worse in our cities.’
Against that backdrop comes news from FactSet last Friday that with 57 percent of the companies in the Standard and Poor’s 500 Index reporting actual earnings results for the second quarter of 2017, ‘ten sectors are reporting year-over-year earnings growth, led by the Energy, Information Technology, and Financials sectors.’ FactSet adds this: ‘The only sector reporting a year-over-year decline in earnings is the Consumer Discretionary sector.’ That would be the sector in which the average Joe lives.

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

Scaramucci: First Fired by Goldman Sachs, Now the White House

Were it not for the profanity-laced tirade that Donald Trump’s briefly tenured Director of Communications offered up to a New Yorker reporter, it might be considered a badge of honor to get fired from both the great vampire squid, Goldman Sachs, and by the President whose administration is firmly ensnared in Goldman Sachs’ tentacles.
Wall Street veteran and hedge fund titan, Anthony Scaramucci, who was fired yesterday after a 10-day stint as Director of Communications for Trump’s White House, told reporter Courtney Comstock in 2010 at Business Insider that he had been ‘fired from Goldman a year and five months’ into his tenure there as an investment banker. Scaramucci was rehired by Goldman a few months later, but in a sales position.
Scaramucci’s ties to Wall Street are extensive, including a stint as Managing Director at Lehman Brothers, the iconic investment bank which filed bankruptcy in September 2008 during the height of the financial crisis.
Scaramucci founded SkyBridge Capital in 2005 and in 2010 it purchased a hedge fund of funds from Citigroup, the behemoth Wall Street bank that received the largest bailout in U. S. history during the financial crisis.

This post was published at Wall Street On Parade on August 1, 2017.

The Hedge Fund That Almost Broke The World

Before the financial crisis and the billions of dollars in corporate bailouts, and trillions more in central bank quantitative easing, the world of investing was simpler.
Back then, markets moved in two directions, traders trusted their models, and hedge funds stacked with PhDs and top executives from well-respected bond trading houses were expected to make money hand over fist. And for three glorious years in the mid-1990s, Long Term Capital Management did exactly that. But when the fund suddenly imploded in 1998, stung by economic crises in Russia and Asia that caused it to lose $4 billion in a bizarre six-week stretch…
***
… it almost brought the entire financial system down with it.
In a recent interview on Real Vision’s Adventures in Finance podcast, former LTCM Founding Partner Victor Haghani, who was at the epicenter of the firm’s meteoric rise and catastrophic collapse, discusses the birth of the fund, its flawed investment strategy and the impact its collapse had on the broader financial landscape.

This post was published at Zero Hedge on Jul 29, 2017.

Who Bought The New Greek Bonds: Here Is The Answer

After triumphantly returning to the bond market three years after it last issued a euro-denominated long bond (which one year later nearly defaulted when only a third bailout prevented Grexit), this morning Bloomberg has provided details of who the lucky buyers of the just priced 3BN bond offering were. And not surprisingly, the biggest source of new funds for the Greek government (which will then use most of this to pay interest owed to the ECB) were US buyers.
As Bloomberg notes, just under half, or 1.425BN of the 3BN deal was new money with 1.57b of existing paper rolled, with the following geographic distribution of new sources of cash:
U. S. 44% U. K./Ireland 26% Greece 14% France 7% Spain/Portugal/Italy 3% Germany/Austria 3% Others 3% By investor type:
Fund managers 46% Hedge funds 36% Banks/private banks 13% Others 5%

This post was published at Zero Hedge on Jul 26, 2017.

Greece Approved for $1.8 Billion Conditional Loan From IMF

The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors.
The Washington-based fund said Thursday its executive board approved ‘in principle’ a new loan worth as much as $1.8 billion. The disbursement of funds is contingent on euro-zone countries providing debt relief to Greece.
‘As we have said many times, even with full program implementation, Greece will not be able to restore debt sustainability and needs further debt relief from its European partners,’ IMF Managing Director Christine Lagarde said in a statement. ‘A debt strategy anchored in more realistic assumptions needs to be agreed. I expect a plan to restore debt sustainability to be agreed soon between Greece and its European partners.’
IMF officials estimate that, even if Greece carries out promised reforms, the nation’s debt will reach about 150 percent of gross domestic product by 2030, and become ‘explosive’ beyond that point. European creditors could bring the debt under control by extending grace periods, lengthening the maturity of the debt or deferring interest payments, the IMF said in a report accompanying the announcement.

This post was published at bloomberg

Greece Sells 3 Billion In Bonds In 2x Oversubscribed Offering

So it can either come cheap with the new issue, which adds to existing debt service problems, or it can….structure around that.
— Owen Sanderson (@OwenPSanderson) July 25, 2017

Just over three years after Greece “triumphantly returned” to capital markets in April 2014, when it issued 3 billion in 5 year bonds at a yield of 4.95%, and a cash coupon of 4.75% – an offering which was 8x oversubcribed – and which crashed and nearly defaulted one year later when only the 3rd Greek bailout prevented the country from going bankrupt, only to get taken out at 102, moments ago Greece once again returned to the bond market, if far less triumphantly, by selling another 3 billion in 5 year paper which however was “only” 2x oversubscribed, with indications from Bloomberg that there was only 6.5 billion in demand for the “high yielding” paper. And speaking of yield, it came in lower than 3 years ago, pricing at 4.625% with a coupon of 4.375%.
For those who did not get their desired allottment in today’s offering, fear not there will be more:

This post was published at Zero Hedge on Jul 25, 2017.

Against Irredeemable Paper – Precious Metals Supply and Demand

The Antidote
Something needs to be said. We are against the existence of irredeemable paper currency, central banking and central planning, cronyism, socialized losses and privatized gains, counterfeit credit, wealth transfers and bailouts, and welfare both corporate and personal.
When we write to debunk the conspiracy theories that say manipulation is keeping gold from hitting $5,000 (one speaker here at Freedom Fest claimed gold will go to $65,000), we are not trying to defend the Fed. When we discuss the flaws in predicting that kind of price, and the error in expecting to profit from it, we are not expressing a pro irredeemable dollar view.
We are saying there are good arguments against the regime of irredeemable paper currency – but this is not one of them. Irredeemable currency has two fatal flaws. One is the interest rate is unhinged.
It can skyrocket as it did from the end of WWII through 1980, or collapse as it has been doing since then. Two is there is no extinguisher of debt. Debt grows – must necessarily grow – exponentially. As it has been doing for many decades.

This post was published at Acting-Man on July 25, 2017.