Five Days That Shook The Financial World

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Hitler Gets A Margin Call

“Why didn’t I buy google instead? Like Stalin!” –Adolf Hitler

“I should have listened to Dennis Gartman.” –Adolf Hitler

Short Ban: What Does It Mean?

via Aleph Dog: Government Policy Created Too Hastily:

“I have been no fan of naked short selling; I have long argued that the brokers must locate shares before a short sale can be done. Anything less than that is fraud. But I do not support eliminating shorting, even though I almost never do it. What would be the effects of eliminating shorting?

• No more merger arbitrage funds.
• No more statistical arbitrage funds.
• Wait, no more arbitrage?
• 130/30 funds go away.
• Other quant funds go away.
• Barbarian hedge funds that do real research go away.
• Put option implied volatility goes way up. (A lot depends on whether specialists/market-makers can still short…)
• Because of put-call parity, call implied volatility goes up as well.
• Players move to credit default swaps, oh wait, might those get banned as well?
• Those relying on securities lending income lose out.

Eliminating shorting is stupid. Enforcing getting a locate is smart.”

Disgusting Super Spike

I don’t feel like posting today. I feel sick to my stomach.

After this, the markets will absolutely crash… and for the first time in a long time, you’ll see ‘NO BID’ in even the most liquid stocks after this squeeze sorts itself out.

via Slope of Hope: Sorry About All That:

“As I woke up this morning, I realized I owe American an apology.

I'm sorry I put Lehman Brothers out of business. And Fannie Mae. And Freddie Mac. As well as Bear Stearns. Come to think of it, since I've been trading a while, I also want to apologize for the destruction of HealthSouth, WorldCom, and Enron.

I used to think their failure was due to their own wreckless mismanagement by people paid hundreds of millions of dollars. But, assuming we live in a rational world, the cold fact of the matter is that by selling the stock of these companies, and then buying it back at a lower price, I put them out of business.

I hope that Dick from Lehman, Mr. Cox from the SEC, and all the other gentlemen (including the late, great Mr. Lay from Enron) can find it within their little black souls to forgive me. Thank you for your consideration.”

Ridiculous. Just ridiculous.

via MacroMan: You Know It Makes Sense:

“Given that the Russians seem to own most of the UK (or at least London), it makes sense for the British authorities to adopt certain practices of their new uber-lords. And given that the Russkies, upon reaping the harvest of their serial unpleasantness towards foreigners, have simply shut their stock markets down until further notice, you know it makes sense for the FSA to simply ban all short selling of financial stocks for the next eight years.

Pretty soon, the authorities will simply delete the "sell" key off of all electronic and broker trading systems, and appropriate all red paper sell tickets that may have survived from the 1980's. Only one way for stocks to go then, baby.

Yep, all is good with the world. BUY BUY BUY!

Addendum: Apparently the NY attorney general will use the Martin Act to deal with short-sellers, er fraudsters. (Might Macro Man suggest he start with the slippery characters at Lehman NY who drained all the cash out of Lehman London on Friday night, leaving his buddies there with nothing but a pile of stationery and $80 billion worth of turds.)
Big Brother is now truly watching you.

Remember, folks...you heard it here first. ”

Japan v2.0: GLOBAL Liquidity Trap

We are heading for a Liquidity Trap. Believe it. I see Japan v2.0… on a GLOBAL scale.

A quick recap of yesterday’s more important developments.

via NakedCapitalism:

“Three month T-bills finished at a two basis point yield, and may even have traded at negative yields. Signs of ZIRP*.

Gold rose $68 and is still going up in Asia. The dollar fell against the yen, a sign of continued carry trade unwinds.

Credit default swaps on financials blew out, with Morgan Stanley hard hit: Spreads on protection for its bonds rose 220 basis points to over 900.

The TED spread, an indicator of stress in the interbank lending markets, shot upwards to 238 basis points.

CDS spreads on Treasuries rose to 30 basis points. Nine months ago, CDS on Treasuries were an oddity rather than an actively written contract, and the spread was 2 basis points.

Swap spreads widened considerably.

Today's TSLF auction was, as Alea put it, a "disaster" with prices and bid to cover up big time.”

*ZIRP = Zero Interest Rate Policy