Monday, December 7, 2009

Sign of The Times

Regular readers know I have been a vociferous critic of the rampant lawlessness in our capital markets. My previous posts Trust, Crisis of Confidence, Shock and Awe All Right and Sandbagging all can attest to this.

Back on May 20 ,2009 in A Few Thoughts I said the following;

"I have not commented on the GM situation and the absolute raping of the SECURED bondholders by this current administration, and before you say it, if you think the prior administration would have been any different then you deserve the pablum being fed to you. The fact that the union VEBA is getting, by all accounts 70-100 cents on the dollar even thought they are subordinate to the secured debt in question is absolutely staggering. This outright and brazen theft, which is what it is, boggles this simpleton's mind. How to restore confidence to the markets in 1 easy lesson huh? Pathetic if it were not all so illegal but what would the law have to do with anything anyway since rules haven't been enforced in years. The hammer and sickle are waiting to be stitched to the flag shortly."

on Nov 11 this year where in a piece called Sandbagging I said this;

"and yet again another block of the foundation of our financial system, trust, crumbles away. I have commented before that trust is the most crucial element is capital markets. People have to be able to believe that the information they are being provided is legitimate and untainted"

The bankers and their ilk care not a whit when rules of law are skirted in their favour. The lawlessness, the duplicity, the double dealing that have overwhelmed our capital markets suit them fine when works in their favour but boy does it hurt when it doesn't.

So, it is with great pleasure that I read today this article out of the Times of London whereby the bankers seem to be getting a serious dose of their own medicine. It seems they object, no, they strenuously object, to having their interests superseded. (or more likely in this case, rendered moot, but I digress)

The article reports that:

"Bankers are furious that two defaulting Saudi conglomerates that owe $20 billion (£12.2 billion) appear to be favouring local banks over foreign creditors. State-owned Royal Bank of Scotland, HSBC and Standard Chartered are all understood to have exposure to Saad Group and Ahmad Hamad Algosaibi & Bros (Ahab). Dozens of other Western banks are also owed money, including Citigroup and BHP Paribas.

Bankers suspect that the two family-owned businesses, which defaulted over the summer, have privately reached agreement with local Saudi banks over restructuring their loans while leaving foreign banks in the cold. One senior banker told The Times yesterday: “Local banks appear to have been given preference.”

They are furious. They are so furious, they have dispatched a Lord Davies to represent their interests (might I suggests a couple of Sirs and maybe a Duke as reinforcements!) What?!! No TARP? No TALF? No flow through a la AIG? No redemption's at par? What the F$^% !!

Where the hell is Bob Rubin, King Henry and Neel Cash n Carry when you need em' (Mortimor where in hell is Beeks? with apologies to Ralph Bellemy)

I would love to hear what the Saudis tell his Lordness upon arrival.

Remember that toxic, purportedly triple A paper you foisted on us?
Remember those RMBS and CMBS mezzanine loans you peddled us?
Remember those recapitalization deals for financials like Citi you let us participate in?

Well... whenever we complained, (post mortem) you kept repeating over and over again caveat emptor. So a reciprocal caveat emptor to you. Oh, and how do you say...ummm...sucker in latin?

No readers you cannot make this up. This is the natural evolution, or should I say devolution of things, a downward spiral if you will. You can argue against it all you want but the fact remains rule of law regarding our capital markets went out the window a long time ago.

Do I agree with what is happening? Of course I don't but when the gloves are off the gloves are off. By the way, yet another tell in this market.

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $12.06
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $6.05
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 1 unit Ultrashort Xinhua China ticker FXP @ $8.32
Long 1 unit Ultrashort Real Estate ticker SRS @ $9.82
Long 1 unit Direxion Tech 3X Bear ticker TYP @ $10.68
Long 1 unit US Dollar Bull ticker UUP @ $22.52 stop @ $21.97
Short 1 unit i-shares Russell 2K ticker IWM @ $61.70 stop @ $63.80
Short 1 unit Vornado ticker VNO @ $68.30 stop @ $70.71

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