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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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