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We just saw the US trying to turn a silly aquatic confrontation with some tiny speedboats in the Persian Gulf into a causus bellus.


WTC 7 "Just Pull It"

mock turtle


Check out this graph of us bank reserves based on data from the fed. It shows a huge infusion of reserves just after 911...to be expected.

But to the right there is a huge withdrawal of reserves about 30 days go!!

Why?...notice the graph goes way back to 1960 and this event seems unprecedented.

What does this graph mean?


Elaine Supkis

They pulled the page, Mock Turtle. I will try to dig it up, I track this periodically. It has been several weeks since I went off to see what is actually going on.


It's still there, but this comment box adds carriage returns to links for some odd reason.

Elaine Supkis

I got it! Thanks! Wow.


Are they burning through their reserves to stay solvent (or at least to avoid having to admit their insolvent)? If so, what happens when the reserves are gone?

Very interesting chart.

Elaine Supkis

I redesigned the chart. WOW. heh. Will publish it and the analysis soon.

tommy two tone

Elaine: thanks for your terrific post on Credit Default Swaps and the ABX-HE indexes. A few important pieces of infomation to consider-
Point 1)They(ABX CDS)settle in cash. This is unfortunate because the consortium of 16 also control the pricing mechanisim. This eans that a naked short position of 5 to one (exisiting contracts to available legitimate collateral) and the settlors just pay the cash differens of the index price versus par. There is no "short squeeze" potential a la the bankrupt Delphi bonds. (in Delphi, the Wall steet firms took in the premiums on the default insurance on many times more bonds than actually existed- this caused a meltdown in the CDS market, as it should have!)
Point 2: Goldman's Brad Levy was the Chairman of CDS Indexco the organization that dreamed up the ABX index and all the trading rules, membership criteria, conventions etc. Then we come to find out that Goldman obviously must have used that position of intellegence to gain advantage. (see Bloomberg Article- Jan 14)


Lastly, the accounting rule that was scheduled to go into effect on Nov. 15th FAS 157, accounting for fair value of securities when there are no active markets- thrust the ABX back into the limelight. And "co-incidentally", on that date- CDS Indexco was meged into MarkIt the distributor of the information prepared by CDS Indexco. This act put Goldman Sachs right at the apex of the entire mispricing mess. A look into the pricing mechanisim of the structured finance products on the books of banks, mutual funds, thrifts, money managers, hedge funds etc, will reveal that they must classify their unpricable assets (according to FAS 157) as Tier III assets, and thus they must find a market of securities that resembels, even if only slightly, the market they feel would be most close to the one their securities would enjoy IF there were such a market. (remember we're talking about hypothetical markets). Guess what the only market available for these erstwhile investors is- you guessed it- the Goldman ABX-HE.

BTW - the appearace of an active market has been given to the ABX, but with SEC looking into Goldie, it's anyones guess as to how it will all shake out. Since nothing is trading in the OTC market for structured finance bonds, does it really matter.

I dont see how you should be able to naked short an insurance contract. It would seem to me that the state insuranc ecommissioners would look at this an say " why you have no insurable interest in these bonds" And thats's against the law!


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Elaine Supkis

Thanks for all the inside information, Tommy two tones! I have been fiddling with the MarkIt site since its inception. Often, mocking it when things fell through. It is a funny place, much laughs for me. I remember when they thought the numbers would go UP!

Never, down! Goldman Sachs, I have been eyeballing for years. Their need to be in control means the are by definition, INSIDE TRADERS which means CON MEN.

So I issue warnings about them. Alas, short selling them doesn't work. They control many levers of power and are hard at work, destroying our economic base.

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I'd be interested in hearing. The TOS seems rather clear that it is not unless expressly approved by Amazon. I guess if the library got it in writing then they would be ok.

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