Thursday, September 17, 2009

Sunglasses check...Shorting the custodes trade ... on

(In December of 2008 my blog entry was: -AM)

Shorting the custodes

Now that the JV Hedge fund between the Treasury and the FED has stated that they will run the carry trade into perpetuity using sovereign scrip as the funding currency one wonders, Quis custodiet ipsos custodes?(a Latin phrase from the Roman poet Juvenal, variously translated as "Who watches the watchmen").

In September of 2007,the FED put out a study in the Federal Reserve Bank of New York’s Economic Policy Review called 'Hedge Funds, Financial Intermediation, and Systemic Risk.'

It stated:

Largely unregulated hedge funds,complicate CCRM (counterparty credit risk management) through their unrestricted trading strategies, liberal use of leverage, opacity to outsiders, and convex compensation structure.

Sound familiar?

Unrestricted trading strategies : B.S. Bernanke states he will monetize a cow
Liberal use of leverage : 53 to 1 and rising
Opacity to outsiders : Bloomberg suit
Convex compensation : Wall Street

(Wow ... back to the future. In light of sovereign CDS being 'liquified' what is today's CCRM? Perhaps the American consumer.. who might start to 'watch the parking meters'. -AM)

Todd Harrison

In the last week, we’ve seen pundits, presidents, policymakers, oracles, corporate chieftains and hedge fund honchos endorse this rally.

Bernanke? The recession is over.

Geithner? The financial industry is on the mend.

Obama? He’s pushed most of his political chips on the table.

Barton Biggs? There’s another 20% to the upside this year.

Buffett? Buying stocks and “getting a lot for his money.”

Pandit? “Little doubt” that Citigroup (C) will return to profitability?

(Bwah ha ha ha ha ha ha ha .... ... sorry. -AM)

Cramer? It’s the “Greatest bull market in history” and “different this time” (not to be confused with the last new paradigm).

On Tuesday, one year after the failure of Lehman Brothers, we asked ourselves what we learned from the financial crisis? The answer, so it seems, is “not very much".

My point—and there is one—is that the government is “all in,” attempting to push risk out on the time continuum, and a plenitude of people in positions of power have slapped their stamp of approval on this tape 59% after the fact.

When I opened up my New York Times this morning and saw a special section dedicated to “Taking A Chance on Risk, Again,” it was clear that the more things change, the more they stay the same. With everyone seemingly on the same side, with uniformity in the view that the worst is behind us, I can't help wonder if the next hazy phase will be a crisis of confidence.

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