Tuesday, June 30, 2015

Europeans Rush to Gold Coins 
as Bank of Greece Stops Sales
Bloomberg reports that European investors are increasing their purchases of gold as Greece's crisis intensifies .. "Investors are searching for a safe haven after Greece imposed capital controls, closed banks and stopped selling gold coins to the public until at least July 6."
LINK HERE to the article

1 comment:

Anonymous said...

Will Puerto Rico Cause An Inadvertent “Black Swan” Derivatives Melt-Down?

Toxicity plus toxicity does not equal purification. But VIEs that contain off-balance sheet debt and derivative guaranteed equals toxicity cubed, at least. In other words, whatever MBI lists as its “net” credit exposure in its financials, take that number and, at the very least, triple it.

But wait, the story gets even better. As it turns out Warburg Pincus, one of the loftiest private equity firms on Wall Street, is by far MBI’s largest shareholder. Warburg announced a little over five weeks ago that it was going to unload 60% of its stake via over the counter negotiated sales – LINK. The firm has been unloading these shares since May 18th. We won’t know how successful this effort has been until the selling is completed.

Does Warburg Pincus sound recently familiar? It’s the firm that hired “Turbo Tax” Tim Geithner shortly after he left his post as Treasury Secretary. Remember, Geithner was head of the NY Fed at the time of the 2008 financial collapse. In other words, he knows where a lot of the bodies in the financial system are buried. I have no doubt that Geithner has played a significant role in advising Warburg on the need to unload its exposure to MBIA. Anyone who takes the other side of this trade is a complete idiot.

But this story isn’t just about MBI. It’s about the companies that, along with MBIA, provide “insurance” for bonds and derivatives. These firms have assumed potential liabilities that dwarf their ability to cover them. Not just in the worst case scenario. I believe Puerto Rico’s financial demise could trigger the dreaded financial nuclear daisy chain of counterparty defaults.