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Echoes of 11/22/63; 9/11/2001

Bare Bones Investing

COMMENT: A mystery billionaire (individual or institution) appears to have placed a $1 Billion bet that the U.S. will lose its AAA rating.

Note that, among the possible executioners of this deal is PIMCO, the bond-trading subsidiary of Allianz, the giant German insurer which, like all German core corporations, is part of the consummately powerful, deadly Bormann capital network. (As veteran listeners know, this is the economic component of a Third Reich gone underground. It might be noted in this context, that it will be all but impossible to fully understand this website without assimilating the book Martin Bormann: Nazi in Exile by the late Paul Manning.)

This huge speculation on disaster is reminiscent of the short selling and market manipulation that occurred in the run-up to, and on, the day President Kennedy was assassinated and again in the run-up to, and on,  the September 11 attacks. This is discussed in FTR #327.

Another consideration to be evaluated here is the Nazi wing of the GOP. How many members of the Tea Party/GOP faction are affiliated with the Underground Reich and evolved from the “children of Van Damm/Von Bolschwing.” Are they deliberately pulling the plug on the U.S. to benefit Germany and the Underground Reich?

“Investors: The $1 Billion Armageddon Trade Placed Against the United States” by Jack Barnes; ETF Daily News; 7/25/2011.

EXCERPT: Someone dropped a bomb on the bond market Thursday – a $1 billion Armageddon trade betting the United States will lose its AAA credit rating.

In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world.

The massive trade wasn’t placed in bonds themselves; it was placed in the futures market.

The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01.

The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it.

However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio.

You only do this if you see an edge.
This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up.

I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out.

This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn’t.

The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross’s PIMCO, and the U.S. and Chinese central banks. . . .

Discussion

3 comments for “Echoes of 11/22/63; 9/11/2001”

  1. http://www.dailymail.co.uk/news/article-2023809/Did-George-Soros-win-10-1-return-S-Ps-US-credit-rating-downgrade.html

    Who ‘made $10bn on 10/1 bet that U.S. credit rating would be downgraded’?

    – Unknown investor or hedge fund ‘made $850million bet’

    – Bet in futures market reportedly done at odds of 10/1

    – George Soros made similar bet on currency in 1992 But source says he wasn’t involved in rumoured trade

    By Mark Duell

    Last updated at 12:08 AM on 9th August 2011

    A mystery investor or hedge fund reportedly made a bet of almost $1billion at odds of 10/1 last month that the U.S. would lose its AAA credit rating.

    Now questions are being asked of whether the trader had inside information before placing the $850million bet in the futures market, or if the bet happened at all.

    There were mounting rumours that investor George Soros, 80, famously known as ‘the man who broke the Bank of England’, could be involved.

    He made more than $1billion on currency speculation when the British pound left the Exchange Rate Mechanism on Black Wednesday in 1992.

    But a source with knowledge of the firm said Soros was not involved in the rumoured trade and questioned whether in fact there had been such a trade at all.

    The latest bet was made on July 21 on trades of 5,370 ten-year Treasury futures and 3,100 Treasury bond futures, reported ETF Daily News.

    Now the investor’s gamble seems to have paid off after Standard and Poor’s issued a credit rating downgrade from AAA to AA+ last Friday.

    Whoever it is stands to earn a 1,000 per cent return on their money, with the expectation that interest rates will be going up after the downgrade.

    The link has been made to Mr Soros in part because he has been tied to President Obama’s administration since 2008, reported The Examiner.

    He also recently stopped managing money for outside investors, meaning he is under less scrutiny from the Securities and Exchange Commision

    But the mystery bet could easily have been made by another trader with similar resources, despite Mr Soros’s links with the Obama administration.

    The bet also raises questions of whether President Obama and Treasury Secretary Timothy Geithner knew that a downgrade was on the cards.

    Mr Geithner said in April there was ‘no risk’ of a downgrade – but the government now appears annoyed, not surprised, by last week’s decision.

    He has since slammed S&P for showing ‘terrible judgment’ in their decision and a ‘stunning lack of knowledge’ of U.S. fiscal budget maths.

    Posted by R. Wilson | August 8, 2011, 10:31 pm
  2. http://www.rttnews.com/Content/USEconomicNews.aspx?Node=B2&Id=1691017

    SEC Probes Possible Insider Trading Linked To S&P’s U.S. Downgrade: FT
    8/12/2011 5:59 AM ET

    (RTTNews) – The Securities and Exchange Commission is exploring any potential insider trading linked to Standard & Poor’s downgrade of U.S. debt, the Financial Times newspaper reported Friday, citing people familiar with the matter.

    The regulator has reportedly asked S&P to disclose who among the rating agency’s staff knew its decision to downgrade U.S. debt before it was announced last week. The newspaper reported that the probe is being carried out by the SEC’s examination staff, who can refer it to the watchdog’s enforcement division if it believes any laws have been violated.

    The agency is not aware of a leak from an S&P insider, nor was it aware of an aberrational trade, FT said. The regulatory move comes after the Senate Banking Committee said it is looking at the S&P downgrade.

    However, the inquiry might not result in a referral, FT said. The report also said that proving someone leaked information on the downgrade or traded ahead of it would be challenging as the downgrade was widely anticipated.

    Posted by R. Wilson | August 12, 2011, 10:41 pm
  3. This is just a reminder that Pimco is so huge it can potentially single-handedly move the biggest market out there: US Treasuries:

    Zerohedge
    Pimco Takes Record MBS Position Even Higher, Dumps Treasurys
    Submitted by Tyler Durden on 04/11/2012 18:29 -0400

    The trend continues: as has pointed out here every month for the past five months, Pimco’s Bill Gross continues to layer into the “NEW QE” trade, only this time he is making it more clear than ever that he is certain that the Fed will have no choice but to monetize Mortgage Backed Securities. Indeed, in March the firm added another 100 bps in its MBS exposure, bringing the total to 54% of total, or a record $134 billion of the fund’s $253 billion in AUM. And while before Gross would buy MBS and TSYs pari passu, that is no longer the case. In fact in March, Gross dumped the most Treasurys since February 2011, cutting his net exposure from 38% to 32%, and likely is in part or whole responsible for the big bond dump in the middle of March, now long forgotten (that or he merely piggybacked on the negative sentiment: April holdings will be indicative of that). Other notable shifts: Gross continues to sell European sovereign exposure, with Non-US Development holdings down to 6%, the lowest since April 2011, and surprisingly even cutting Investment Grade holdings to just 14%, the lowest since October 2008: is Gross smelling a bond bubble (in both IG and HY) and is getting out while the getting is good? Sure looks like it.

    That is all.

    Posted by Pterrafractyl | April 11, 2012, 6:27 pm

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