What the Shed Looks At

Thursday, March 4, 2010

Speculators don't fuck with the market

Form the Something Awful forums comes a great compilation of speculation fuckery helping bring down Greece.


The regulatory fallout from the Greek financial crisis grew yesterday as authorities on both sides of the Atlantic said they were examining trades in the euro and the market in sovereign credit default swaps.

European Commission officials said they would use a meeting as early as tomorrow with banks and regulators to discuss regulation of the market for sovereign credit default swaps, which have become a political lightning rod in Europe. as a result of the Greek financial crisis.

Officials said the meeting was related to an existing review of the over-the-counter derivatives market, which is expected to lead to legislation this year designed to improve transparency.

But European calls for much tighter scrutiny of sovereign credit default swaps (CDS), which insure a government bond against default, have multiplied in the wake of the sell-off in Greek markets in January.

The antitrust division of the US Department of Justice is also taking a closer look at hedge fund trading against the euro. The DoJ last week informed SAC Capital Advisors, Greenlight Capital, Paulson & Co and Soros Fund Management that it had "opened an investigation into agreements among various hedge funds that trade euro contracts", according to a person familiar with the matter.

A letter sent to the companies by the DoJ asked each not to destroy trading records and e-mails related to the trades.

The DoJ routinely sends letters as a preliminary step in its investigations. The letter was sent on the same day that an article appeared in the Wall Street Journal that described how some hedge funds had discussed big euro bets at an "ideas dinner".

A person familiar with the probe said the department was seeking to understand whether such discussions constituted collusion, or whether individuals were simply ruminating on the markets. The DoJ declined to comment.

A Soros spokesman said: "It has become commonplace to direct attention toward George Soros whenever currency markets are in the news. We are aware of recent reports in the media regarding euro investments and the governmental interest those articles appear to have prompted.

"Any suggestion of wrongdoing by Soros Fund Management LLC implied in those articles is without merit. We intend to co-operate fully with any governmental requests."

SAC, Greenlight and Paulson declined to comment.

In Europe, Michel Barnier, the EU's internal market commissioner who has responsibility for financial regulation, has said he wants to understand the CDS market better.

Greek politicians have blamed "speculators" for sparking the sell-off as they bought CDS, driving up the cost to insure the country's debt to record highs. This, in turn, hit broader sentiment, undermining stocks and bond markets, they claimed.

Since then, politicians and regulators have raised the prospect of a ban on so-called naked shorting - or investors using CDS to make bets about sovereign defaults without owning an underlying bond.

Greece is still fucked though because it's being attacked by the fraud agencies
LONDON, March 4 (Reuters) - Greece must implement its austerity plan perfectly or face the prospect of a rating cut, Moody's senior analyst Sarah Carlsson told Reuters Insider TV on Thursday.

"Anything short of a perfect implementation would result in some form of rating action," Carlsson said. "The magnitude of that action (would be) proportionate to the kind of shortfall we're seeing."

Carlsson said Moody's has Greece rated A2 with a negative outlook.

"One way we judge (the rating is appropriate) is whether Greece can achieve a deficit reduction to 8.7 percent of gross domestic product in 2010," she added.

"We want to see concrete evidence of implementation... The austerity plan provides certainty for 2010. But what is going to happen in 2011 and beyond is what we want to know."

Carlsson said that "the strike action we have seen this morning (in Greece) is just a sign of how ambitious the government's plans are."

Greece needs to refinance about 20 billion euros of debt maturing in April and May, and officials previously said its funding needs were met until mid-March.

if for some reason you needed (more) evidence that the credit rating agencies are seriously just highly organized fraud, there you go
ATHENS—The Greek government expects the economy to contract for two years after the adoption of a tough austerity program that will substantially cut consumer spending, two people familiar with the government's thinking said Thursday.

"The real problems start now" said one of those people, who asked not to be identified. "The measures will have a big impact on how Greeks spend. As it stands now, the government expects two years of recession. It will revise the 0.3% decline in GDP forecast for this year to at least a drop of 1.5% but it could be worse."

"The government also expects unemployment to hit 11% this year from an estimated 9.9% in 2009," the person said.

He didn't specify when this year's GDP would be revised. The finance ministry expects the economy to grow 1.5% in 2011, but the person said this could also be revised to a contraction of 0.5%.

Some economists have said that the intense pressure from the European Union on Greece to cut its yawning budget deficit—now at 12.7% of GDP or more than four times the 3%-of-GDP euro-zone limit—might strike the wrong balance between maintaining fiscal strength and propping up demand in tough times.

Last month, Joseph Stiglitz warned against what he called "deficit fetishism" at a press conference in Athens.

Without measures to stimulate the economy, such as development funds and other means to increase liquidity, the deficit reduction could slow growth, said Mr. Stiglitz, a professor at Columbia University and winner of the 2001 Nobel Prize in economics.

"If you have less success [stimulating the economy through other means], then I start getting worried," he said. Slower growth could in turn lead to lower tax revenues and end up increasing the budget deficit.

On the other hand, all members of the euro zone commit to keeping its deficits and debt within certain limits to avoid imbalances across the euro zone. Greece announced Wednesday a €4.8 billion austerity package which includes cuts in civil servants salaries, hikes in the value added tax, fuel, tobacco and alcohol prices, lower entitlements for state employees, higher taxes for luxury items and expensive houses and a freeze in pensions.

The measures are in addition to a similar austerity package outlined in January which the government expects to bring in between €8 billion and €10 billion. The measures aim to cut the budget deficit by four percentage points to 8.7% this year.

"The expectation is that disposable incomes will fall by at least 7% this year and consumer spending by 3.5% and this is optimistic," a second person said. "This government is facing the most difficult economic environment in Greece's modern history."

Consumer spending accounts for about 75% of Greece's GDP.

"The harsh cutbacks in public spending are imperative, however the measures deployed by the government are questionable in respect to the targeted results. The fiscal measures will bring a steep fall in consumer spending which could erase all the benefits from slashing our budget deficit" said Constantinos Mihalos, president of the Athens Chamber of Commerce and Industry which represents 102,000 businesses.

they are apparently pretending to court the IMF so the other EU countries will lend them money though.

really though, the CDS/naked shorting thing being at least curbed is fantastic because i was kind of worried that economies were just going to get vaporized one by one and nobody was going to do anything about it


  1. If this is at all related to our semi-drunken argument yesterday, then I must remind you that we were discussing the stock market, not the derivatives market.

    Anyway, yeah the derivatives market needs regulation and transparency. This is not being argued by the scholars, but more by those who have everything to lose by it's regulation.

    The stock market, on the other hand is not being affected substantially by fraud, and I will reiterate my view that a consensus of buyers (a market) is a better judge of value than a single entity (bureaucrat or counsel as you put it yesterday). This is not being argued by anyone, in much the same fashion as we don't argue about the need to breath to stay alive, or the blue color of the sky on a clear day and such.

    Also, FUCK GREECE.

  2. Yes, very true I just came across it about five minutes after you left.