Sprott’s Jamie Horvat On “Gold”ilocks And The Three Bears

by Zero Hedge - March 20th, 2010 2:56 pm

Courtesy of Tyler Durden

From Jamie Horvat and Charles Oliver, Sprott Opportunities Hedge Fund.

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

How To Capitalize On The Upcoming Irrationally Exuberant LBO Bubble

by Zero Hedge - March 20th, 2010 12:53 pm

Courtesy of Tyler Durden

Bernanke’s ludicrous monetary policy has forced financial companies to relever to mid-2000 levels. A recent CLO has broken the 12 month quiet period in the structured finance universe, and finally made it all too clear that bankers and asset managers have no idea what to do with all the free extra money lying around, earning nothing on the short end of the curve. Furthermore, with rampant M&A rumors every day (of which 90% are patently false) private equity must be getting nervous. As we all know, with great free money comes great irresponsibility to do really dumb things, better known as LBOs. We analyze the imminent tidal wave of going private deals, which, if Bernanke keeps ZIRP for another year as is widely expected, is just around the corner, and that the record TXU LBO of 2007 will be promptly surpassed, in both size and idiocy. Oh well, if you can’t beat them, join them. We present some of the most profitable ways to play the LBO wave of 2010, and no, it does not mean tracking down Moody’s Deep Shah and buying stocks 24 hours ahead of the announcement, in expectation of a 20% pop.

As CDS traders who may have been around in the long ago days of 2006 and 2007 vividly recall, back then the one and only trade in the lofty credit bubble days was to buy protection on names that were rumored to be getting acquired, playing for the LBO news spread pop. To be sure, there were several variants on the credit deterioration trade, include 3s5s steepeners, First To Default baskets, basis trades, purchases of 101 Change of Control bonds, and other such bets on credit negative/equity positive developments. Just like the LBO mania of 2007 marked the market top back then, so the same euphoria that is about to grip the markets indicates that the 12 month relevering into the biggest credit bubble of all time will be short lived. If Bernanke will stop at nothing from destroying the middle class, so be it. It does not mean that one can not profit from it (especially if the middle class itself, which has been widely warned it is now on the the endangered species list, does not care in the slightest about this development).

Bank of America’s Jeffrey Rosenberg does a good and concise job of setting the backdrop for…

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Weekly Chartology

by Zero Hedge - March 20th, 2010 11:08 am

Courtesy of Tyler Durden

Key points:

S&P Earnings:

Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and  write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 38% increase in 2010 to $79, and a 20% increase in 2011 to $95.

Valuation:

Top-down the S&P 500 trades at an NTM P/E of 15.2X (14.2X on pre-provision EPS). Bottom-up, it trades at NTM P/E of 14.8X and LTM P/B of 2.4X.

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Armstrong Economics: Entering Phase II of The Debt Crisis

by Zero Hedge - March 20th, 2010 5:48 am

Courtesy of Chopshop

In succinct synopsis of what lays just over the horizon ~ “the cycle of economic implosion” ~ for the ill-conceived amalgam known *today* as the European Union, phinance’s phavorite political prisoner, Martin Armstrong, cautions that:

-  “the EU is in dire position”, on the precipice of shattering into default and civil unrest;

-  the sovereign debt crisis materializing across Europe will soon reach US shores;

-  the CFTC will curtail currency speculation by slashing leverage from 100:1 to 10:1, which “can cause a liquidity crisis that backfires, magnifying everything.”

Since “debts will never be paid and interest expenditures are the greatest transfer of wealth in history”, Armstrong suggests:

-  freezing all national debt;

-  issuing coupons whereby the debt is redeemable for local currency, which may then be invested in domestic debt or equity;

-  each European nation establish an independent currency pegged to the Euro;

-  swapping US debt to coupons that may be spent domestically.

Seeking to impart light from within the dark seclusion of maximum security solitary confinement, Armstrong concludes his (relatively minuscule by Armstrong standards) missive with stern warning.

” Western society is falling apart …. If we do not act, civil unrest will explode.  The current choice is DEFAULT or HIGHER TAXES & CIVIL UNREST …. Someone has to step forward to save us or we may be doomed.  It’s time to wake up for this is the future of our children and their children at stake. “

http://www.martinarmstrong.org/files/Armstrong-From-the-Hole-3910-1-from-the-Hole.pdf

Just one note of caution for those who may be emotionally inclined to move all-in on gold here because they think ‘the dollar be dead’: any way ya slice it, the United States remains the lender of last resort (at least when the IMF isn’t told to stand in) … and while everyone “knows” that gold is the clear beneficiary of sovereign default concerns, please realize that Uncle Buck ($) sits alone at the head of the table.  Worries of US hyperinflation and the death of the dollar are each absurdly premature at this juvenile juncture of the sovereign default crisis; each may occur, in due time, but certainly not before Uncle Sam has finished picking up everyone else’s tab.

Euro Valuation ~ Fail

Until the deflationary spectre of sovereign default runs its coarse course over the next depressionary decade (what inning could this even be ?), those who want to become millionaires rooting for regicide of King Dollar ought study Patricia Heaton’s method for valuing the Euro’s “worth” … just take a deep breath…

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

China’s Fragile Economy, Its Housing Bubble, and What It Means To Us: Download

by Zero Hedge - March 20th, 2010 1:41 am

Courtesy of Econophile

As promised, here is the complete article, China’s Fragile Economy, Its Housing Bubble, and What It Means To Us, in a downloadable PDF. You can download it, print it out, and read the entire piece at your leisure. The conclusions aren’t encouraging, for them or us.

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Guest Post: A Historical Note On Multi-Sigma Sovereign Risk

by Zero Hedge - March 19th, 2010 9:13 pm

Courtesy of Tyler Durden

A Historical Note On Multi-Sigma Sovereign Risk, By JM

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Guest Post: A Bull/Bear Recap

by Zero Hedge - March 19th, 2010 6:43 pm

Courtesy of Tyler Durden

Disclosure: Short Emerging Markets, Financials, Materials, Silver, Real Estate

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Europe’s Commercial Real Estate Timebomb?

by Zero Hedge - March 19th, 2010 6:00 pm

Courtesy of Leo Kolivakis

Please read my latest post and leave your comments here:

http://pensionpulse.blogspot.com/2010/03/europes-commercial-real-estate-timebomb.html

Thank you,

Leo Kolivakis

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Goldman’s Erik Nielsen Filters Out The Greek Background Noise

by Zero Hedge - March 19th, 2010 5:41 pm

Courtesy of Tyler Durden

Goldman’s Chief European strategist is starting to sound less and less confident that all shall be well. The same can not be said for his ebullient (and still employed) colleague Jim O’Neill, whose answer to everything is “BRIC.” Anyway, here are Erik Nielsen’s latest (and increasingly more skeptical) summary views on the Greek bailout. By the way, the IMF shotgun approach to “helping” any and every member country is to peg its currency to something and establishing a currency board. The IMF simply does not know how to do anything else. So how the hell can the IMF operate in the context of a monetary union?

You’ll hear a lot more about this during the next week or so:

Following the news that Germany, the Netherlands and Finland have put the IMF back on the table as a possible source of financing for Greece – and PM Papandreou’s statement yesterday that the European summit on Thursday-Friday is the deadline for Europe to come up with help that will immediately reduce Greece’s borrowing costs, otherwise he’ll go to the IMF – has significantly raised the temperature inside the Euro-zone.  France and others remain adamantly against involving the IMF, and the IMF themselves said yesterday that they have not been approached by Greece, but that they stand ready to help, if asked (as they have to say about any member country.)

My take continues to be that the Europeans will not come up with concrete help next week, but will try once more the trick of telling the market that they stand behind Greece while telling their own taxpayers that they are not on the line.  And I doubt that it’ll help a lot, but maybe a little.  Greece may then be able to borrow a tad more, but its going to be tough to get the entire EUR10bn or so that they need before May.  If they don’t fill the hole, then I continue to think that Europe will help.  But the probability of the IMF coming in has clearly increased.  Incidentally, the IMF charges about 1.25% on its loans these days!  (and my view is that that’s where Greece should go.)

Stay tuned, I’ll keep you posted, but noise, conflicting statements and a dismal display of lack of unity will be the overriding picture out of the Euro-zone at least for the next week.

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

German Central Bank Admits that Credit is Created Out of Thin Air

by Zero Hedge - March 19th, 2010 5:17 pm

Courtesy of George Washington

→ Washington’s Blog.

Preface: While these concepts might be obvious to the financial experts who read Zero Hedge, it is a startling revelation for most people.

Germany’s central bank – the Deutsche Bundesbank (German for German Federal Bank) – has admitted in writing that banks create credit out of thin air.

As the Bundesbank states in a publication entitled “Money and Monetary Policy” (pages 88-93; translation provided by Google translate, but German speaker Festan von Geldern confirmed the basic translation):

4.4 Creation of the banks money

 

Money is created by “money creation”. Both [central banks] and private commercial banks can create money.  In the euro monetary system [money creation] arises mainly through the granting of loans, as well as the fact that central banks or commercial banks to buy assets such as gold, foreign currencies, real estate or securities. If the central bank granted a loan from a commercial bank and crediting the amount in the account of the bank at the central bank, created “central bank money.”

 

***

Money creation by commercial banks

 

The commercial banks can create money itself, the so-called bank money. The money creation process through which commercial banks can be explained by the related postings: If a commercial bank to a customer a loan, they booked in its balance sheet as an asset against a loan receivable the client – for example, 100,000. At the same time, the bank writes down the customer’s checking account, which is run on the liabilities of the bank’s balance sheet, 100,000 euros good. This credit increases the deposits of customers on its current account – it creates deposit money, which increases the money supply.

In other words, money is created as book-entry by purchasing assets or entering credits on the left side of the balance-sheet and corresponding deposits on the right side. In other words, credit is created out of thin air.

Frontiers of money creation

 

The above description might leave the impression that the commercial banks are able to draw an infinite amount of money in bank accounts. If this were really so, this could be inflationary. The central bank therefore takes effect on the extent of lending and money creation. It requires commercial banks to hold the reserve.

As I’ve previously pointed out, the Federal Reserve is taking the same tack, creating conditions that guarantee that American banks will have huge excess reserves so as to prevent inflation. Back to the publication:

Central banks, commercial banks can typically…

Posted in Immediately available to public | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter