We The Sheeplez- The Coming Economic Collapse.."A Nation Of Sheep Ruled By Wolves" Thomas Jefferson

How China Just Implemented A Stealth Bailout Bigger Than One And A Half TARPs

Submitted by Tyler Durden on 06/07/2011 12:18 -0400

While the rest of the world is transfixed by the latest pocket change bailout of the Eurozone, China has stealthily conducted an economic rescue bigger than than one and a half TARPs. Dylan Grice's latest note focuses on the key news out of China from last week which oddly received very little media attention, namely the onboarding by the Local Government Financing Vehicles (LGFV) of $463 billion in bad loans made to various infrastructure and development projects as part of the Chinese stimulus package. This is nothing short of a bailout the likes of TARP when Paulson transferred billions of toxic debt to the government's balance sheet. The reason why this is actually a much bigger deal than perceived is that as Grice notes, a "bail-out of $463bn is half the size of the TARP, introduced by Paulson at the nadir of the 2008 crisis, for an economy which is only one-third the size of the US. So adjusted for GDP, China has just announced an emergency bail out of one and a half TARPs!! If we calibrate the magnitude of the economic crisis with the size of the bail-out, one and a half TARPs implies a financial crisis one and half times the order of magnitude of 2008." In other words, China very quietly and stealthily buried a massive bailout with just one passing Reuters mention. And nobody cares... Or more specifically, those who have long held a very bearish view on China, should certainly care, as what happened is that the unwind catalyst, so critical for most China bearish theses, was just pushed back by several years. And since China is full to the gills with excess dollars, all that happened was that the government effectively diverted money that would have been otherwise recycled to purchase US paper, in the form of a government fund to bail out it own. Crisis averted as another centrally planned regime managed to do what the Fed and the ECB have been doing so well for nearly 3 years now.

Dealers Bid Up $32 Billion 3 Year Auction In Advance Of Flipping It Back To The Fed

Submitted by Tyler Durden on 06/07/2011 13:23 -0400

The Treasury just priced $32 billion in 3 Year bonds (CUSIP QS2) in another "strong" auction which was dominated by Dealers who took down 55.2% of the total amount, as they prepare to flip the bulk of its right back to the Fed, just as in last month's 3 year "strong" auction which as we noted yesterday, saw half of the Dealer takedown flipped to Brian Sack in 3 weeks. The yield dropped to 0.765%, just wide of the When Issued, and the lowest since November 2010, even as the Bid To Cover came at 3.279, a touch weaker than May's 3.289, and the 4th strongest BTC in the history of the auction. Indirects came precisely in line with the LTM average of 35.6%, with the balance, or 9.2%, going to Directs. The Indirect bid was actually weaker than the take down number indicated. As Stone McCarthy points out: "the Indirect bid declined to $17.8 billion this month from $18.9 billion last month That accounted for 17.0% of the overall bid, compared to a 17.8% average over the prior year. The Indirect hit ratio was close to average, but the smaller bid still left Indirect bidders with a slightly below average 35.6% of the auction." Overall another irrelevant auction as there will be at least 3 Year targeting POMOs before the end of QE2 in 3 weeks, meaning PDs will be able to flip the full amount of the OTR they don't want back to the Fed. When it will get interesting it toward the end of June when the distribution of POMOs across the curve starts getting sparse and then ends on June 30. As usual, look for CUSIP QS3 to be the most monetized CUSIP in the next two 2014-targetting POMOs.

Gene Arensberg: When big sellers of silver futures seem timid

Live Webcast Of The Obama-Merkel Press Conference

Submitted by Tyler Durden on 06/07/2011 11:28 -0400

Expect the usual:(LIES) more promises of Marshall Plans, more FX liquidity swaps, more US taxpayer commitments to keep Europe afloat and the Greek retirement age under 60, etc.

The Fed Just Telegraphed Not To Expect Much If Anything From Bernanke's 3:45pm Speech

Submitted by Tyler Durden on 06/07/2011 11:19 -0400

Is the Fed telegraphing that today's 3:45pm speech, expected by many to presage some form of monetary easing preannouncement by the Chairman, will leave many disappointed? That could well be the case based on the just disclosed data from the Fed's mouthpiece, Jon Hilsenrath, who spoke to Chicago Fed's Evans. In the interview, we find that the Fed president decided to cut its outlook (long overdue), but more importantly, Evans, a diehard dove and a big fan of additional easing, announced that he "doesn’t want to add to [QE]." In other words, as we have been warning, the S&P will have to drop at least another 25% before the "high threshold" for more money printing is reached. Ironically, for the first time, discounting even near certain future events does not work, courtesy of Central Planning, which needs the market to act in a centrally planned way and drop despite the inevitable Zimbabwe reaction.

66% Of Las Vegas Mortgages Are Underwater, 27.7% Of Total US Housing Debt Has Negative And Near-Negative Equity

Submitted by Tyler Durden on 06/07/2011 09:33 -0400

Following yesterday's news out of Zillow of a 0.77% drop in April home values compared to March, today we get an update from CoreLogic which in turn looks at the latest trends on "underwater" (or negative equity) mortgages in the US. In summary: "10.9 million, or 22.7 percent, of all residential properties with a mortgage were in negative equity at the end of the first quarter of 2011, down slightly from 11.1 million, or 23.1 percent, in the fourth quarter. An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the first quarter. Together, negative equity and near-negative equity mortgages accounted for 27.7 percent of all residential properties with a mortgage nationwide. In the fourth quarter, these two categories stood at 27.9 percent." The most impacted state is Nevada, which has 62.6% of all mortgages underwater (with another 4.8% in near-negative), followed by Arizona, Florida and Michigan. California is fifth with 30.9% of all homes underwater. We doubt these millions of "homeowners" are benefiting much from the wealth effect.

Janet Tavakoli: "Greater Global Risk Now Than At Time Of LTCM"

Submitted by Tyler Durden on 06/07/2011 12:38 -0400

The current situation may indeed be different from that presented by Long Term Capital Management, but it may be even more alarming, not less alarming. Due to the use of structured products and derivatives, hedge funds can take on hidden leverage above and beyond that which can be explained by polling prime brokers. Furthermore, illiquid structured products will experience a classic collateral crash when hedge funds try to liquidate these assets to meet margin calls or collateral "cures". Since 2000, assets invested in hedge funds have more than tripled to around $1,500bn. While on average leverage may appear manageable, some hedge funds - Amaranth to cite a recent example - employ high degrees of leverage. A potential source of a "great unwind" arises from a trigger event affecting highly leveraged hedge funds, and another potential source is systemic risk that effects a larger cohort of hedge funds.