EU Goes From Monetary Union To Suicide Pact

As alleged details are leaked about an alleged proposal to leverage the EFSF all I can do is cringe. I'm waiting for some actual details, but as far as I can tell, Europe is attempting go all in. It is going to make leveraged bets on itself. If it doesn't work, the senior debt holders will own Europe if the BRICs buy the senior tranche and will end in a fast and furious death spiral if the senior tranche is owned by the ECB or European banks. We may get a lift on the news. We are trying to rally on the back of the news right now. But if this plan goes ahead, even the slightest cold in the future will turn into the plague. There will be no strong countries left as they will have tied themselves to the PIIGS anchor with a Gordion Knot that will never be untied in time.

Presenting The Mother Of All European Bailout Flowcharts

Earlier we presented the flowchart of the first part of the Eurozone endgame. While satisfactory, many immediately clamored: "what is part two?" Prompted by this surge in intellectual curiosity, John Lohman has risen to meet the challenge of what the Eurozone's Biggest, Baddest, Sexiest Motherf#%$^* Flow Chart looks like. It needs no commentary, and since it also really ties the ponzi room together, we hope nobody micturates upon it until the plane crashes into the mountain.

Market Snapshot: Gold & Silver Recover As EU Doubles Down

S&P futures managed an impressive 2.5% rally today making it back to the closing level from last Wednesday (Bernanke-Day) amid merely average volume. The leaked rumors of the EU's octuple-down CDO^2 bet on themselves was enough to get the buy-the-rumor juices flowing and we rapidly squeezed higher. IG outperformed, ending the day notably tighter than respective equity and HY spreads would expect as even though risk seemed on, we did not see a mad scramble for high beta and HY bonds remained offered in general. Gold and Silver managed a huge bounce off intraday lows ending the day -1.5 to 2% while the dollar sold off into the close (as EUR rallied) to end the day unch from Friday. ES ended a little rich relative to risk-assets in general as the small cap short squeeze seemed to take-over.

"We're Going To Need A Bigger Flowchart": Presenting The Schematic Of Part 1 Of The European Endgame

Still confused by the doomed endgame in the 21st century Greek tragedy? Have no fear: here is the BBC (which today is two out of two for useful information)with a flowchart of Greek endgame. With apologies to the optimists, who think there may be a happy ending here, here are the only 5 possible outcomes: 1) Pyrrhic Victory; 2) Depression; 3) Moral Hazard; 4) Political Turmoil and 5) Global Meltdown. In this context, it becomes all too obvious why stocks are surging...

"Anonymous" Enters Securities Analysis: Alleges Hong Kong's HK$ 8.5 Billion Chaoda Is Next Sino Forest

Wondering why you may not have heard of hacking collective Anonymous for a while? Because, as it appears, the ad hoc organization has been busy assembling Anonymous Analytics, a public equity research entity (and we venture to guess focused mostly on the short side) whose motto is "Acquiring information through unconventional means" and follows up with "You should have expected us." Think of them as Muddy Waters on steroids: no regulation, no supervision, no accountability - just pure content, and credibility-driven merit (or, of course, lack thereof): a model which if validated will totally revolutionize the field of public company research. Well, someone who certainly should have expected AnonAnalytics is Chaoda Modern Agriculture, a HK$ 8.5 billion market cap company, or on par with Sino Forest from its pre-fraud days, which as Anon alleges is one of "Hong Kong Exchange’s largest, and longest running frauds." As the below report demonstrates, Anon has presented a serious case to prove just that stunning allegation, and if ultiamtely validated, the outcome for stock longs will be very unpleasant: "Theoretically, Chaoda may be worth HK$0.60 per share (currently Hk$2.50) derived from a blended NAV and DDM approach. However, based on the evidence in this report, as well as information we have decided not to release, we believe Chaoda may face delisting." If proven correct, this report will have an even greater impact on capital markets than Muddy Waters take down of Sino Forest, as it will finally integrate the two formerly completely disparate worlds of hacking and software analysis, opening up a world of very concerning possibilities for the world's public companies.

Visualizing A Small Cap Short Squeeze

Credit Suisse and Goldman Sachs have two indices that track the most shorted (highest short interest) stocks in the S&P500 and Russell 3000 respectively. This afternoon's action shows a considerable outperformance by the Russell 3000 most-short index over the Russell 3000 while the S&P 500 most-short index has stayed relatively well-behaved relative to the S&P 500. It seems smaller cap shorts have had the stuff squeezed out of them today.

 

New York Sun: Lehrman to present plan for return to gold standard

 

 

Europe's Latest Rescue Deux Ex Machina: A CDO... SQUARED

Steve Liesman has just broken news of the latest European bail out mechanism which will likely push risk higher for at least a few hours. Why just a few hours? Because what according to Liesman the ECB is about to propose, is nothing short of not just a CDO, but a CDO SQUARED. We are still waiting for more information, but according to his description of what this last ditch bailout bazooka (before Eurobonds of course), is that the ECB will take the debt bought by sovereign governments and will issue EURs against EFSF/ESM bonds as collateral: this is in its simplest definition, a CDO Squared (because as we have described in the past, the EFSF is simply a CDO), which in turn means that the systemic leverage of the Eurozone is about to rise 8-fold. If you thought the capitalization of the ECB was bad before, you ain't seen nothing yet. Expect cubed and quadratic iterations by the end of the week when the half life of this latest bailout rumor dies out. Oh, and expect many more headlines out of Europe talking about bailouts and hyperinflation as noted earlier.

Five-Year Treasuries 'Special' As Safety Demand (or European Risk Aversion) Causes Collateral Shortage

Andrew Brodsky of Stone & McCarthy notes that fed funds and repo rates declined from mid June through mid July amid increased excess reserves in the banking system and reduced collateral. Fears of exposure to European peripheral debt pushed money market funds into the repo market as they turned away from lending to euro-zone banks. In late July and early August, repo rates rose modestly from record low levels. The GC rate jumped to 42 basis points as investors began to pull out of the market and move into cash. Over the past few weeks, short-term rates eased in response to the resolution of the debt-ceiling debacle. The continued concerns over the global economy, European sovereign debt, and Bank of New York Mellon's decision to start charging fees on large cash deposits have spurred a demand for short-term Treasuries and repo. The increased demand for securities amid a shortage of collateral will continue to pressure rates.

Schaeuble Disappoints On Geithner's Uber-Levered EFSF Plan

Just Bloomberg headlines for now but equities and credit giving some back and EUR selling off modestly as German finmin Schaeuble comments in an N-TV interview:

*SCHAEUBLE SAYS EURO REGION HAS NO INTENTION TO INCREASE EFSF
*SCHAEUBLE SAYS `WOULD BE GOOD' TO HAVE ESM FUND EARLIER
*SCHAEUBLE SAYS ESM MAY COME AS ORIGINALLY PLANNED MID-2013
*SCHAEUBLE SAYS PASSING ESM TREATY TAKES TIME

UPDATE: Translation by Peter Tchir of TF Market Advisors

Copper Bottoming?

Trader Dan at Trader Dan's Market Views - 1 hour ago

Copper often seems to function as a type of bellwether for the entire commodity sector. As fears of a global economic slowdown have intensified, copper prices have been hammered lower. Chinese buying just below the $4.00 level had kept the market supported but once that evaporated, there was a general dearth of buying. That allowed the bears to press the price into downside sell stops which have then fed on themselves. However, there are some preliminary signs that the bleeding in copper might be coming to an end. The red metal seems to have found support just above the $3.00 level;... more » 

It's Getting Very Ugly Out "There"

Dave in Denver at The Golden Truth - 1 hour ago

Here's a statement made by an independent trader in London interviewed by the BBC - it's hard to disagree with this assessment: * "This economic crisis is like a cancer, if you just wait and wait hoping it is going to go away, just like a cancer it is going to grow and it will be too late!"* He goes on to warn that you need to be prepared before the real shit hits the fan. You can see the 3-minute video at http://www.zerohedge.com/ Rest assured, of course, that you will never see a brutally truthful interview like that aired on mainstream network media in this country. One thin... more » 

Guest Post: What The African Jungle Taught Me About Economic Collapse

For the last week or so, I’ve had the good fortune to be out in the jungles and savannah brush of southern Africa. If you look up “the middle of nowhere” in Google maps, you’ll probably find where I’ve been. In fact, when I took a small plane from Botswana’s Okavango Delta yesterday, we flew for 124 minutes before I saw so much as a paved road. Here in the birthplace of life itself, you can learn a great deal about humankind by watching animals in the wild. Nature is full of lessons about from whence we came, and to where we are going. This trip has provided unbelievable opportunity for me to reinforce many of these lessons, and I’d like to share a few with you.

About That "London Gold Exchange"...

We are only putting this up because we have been flooded with emails about an event which for some reason readers believe is relevant. The event in question is that according to its website, the London Gold Exchange ("LGE" or the "Joke") has closed. The one thing we would like to say about this is that the LGE is nether an exchange, nor does it trade gold. And, judging by its Wikipedia page, is probably not based in London but in Hong Kong. But yes, if one is concerned about such "currencies" as bitcoin and other digital "currencies", this may be news...And now, carry on.

• I Suggest Groupon Offer Coupons To It's IPO Investors, They're Going To Need Them
  Posted by : Reggie Middleton
  Post date: 09/26/2011 - 13:53
  This post is an example of what a little investigative reporting should look like. Let's attempt to recast pop media in the form of a smart ass blog.

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