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  • US Has Partially Defaulted On Bonds

    US treasuries and FATCA

    The US has already defaulted on treasuries, as of July 1, 2014. Only 30%, but can 100 % be far behind?

    Due to Fatca, retention of interest payments by 30%, to foreign entities began on July 1.

    Didn't hear about it? The big money was selling out their position in treasuries. Why would they tell you before they were completely out?

    Disclosure: The author is short TNA, TLT.

    Additional disclosure: long gld

    Tags: TNA, TLT, GLD
    Jul 07 2:50 PM | Link | Comment!
  • Destabilization Of Stock Market By Dood-Frank -Met, Spy Qqq Dia

    Here is quote from article about Dood-Frank about regulating Systematically Important Financial Institutions, including insurance companies.

    Here is the quote

    Throughout Dodd-Frank the focus is principally on banks, particularly commercial banks, and the act effectively designates all commercial banking groups with $50 billion or more in assets as SIFIs. However, it requires regulators to consider whether other financial institutions are systemically important, leaving the decision about which non-bank financial institutions should receive that designation up to the FSOC, with advice from the Federal Reserve Board (Fed). The FSOC is in the process of determining what non-bank institutions it will designate as SIFIs, but it seems clear that several large life insurance groups and at least one large finance company (GE Capital) will be named. Eight "financial market utilities" have already been designated. (These are firms such as clearing houses that do the back office transactions that make many financial markets function.) Other financial institutions may be added as well, such as hedge funds or money market funds.

    Metlife is one insurer that has resisted being designated a SIFI.

    If you review the regulations that you have to meet once your are a SIFI. you begin to realize the cost, not only to meet the requirements. but also the lost opportunity costs, why MET is resisting being designated as a SIFI.

    Additionally, the SEC today expressed the desire to regulate High Frenquency Trading and black pools. It is just a short step from registration to controlling these products thrugh regulation.

    As always, timing is always important. So the question that needs to be answered is when will this destabilization take place?

    My response is that it is already taking place. The big money has already taken note of the closing of SIFI requirements and know that they have to reduce their exposure to the risk of destabilization of the market, which is likely to turn into a profound market correction. That is why the volume has been so low in the last few weeks.

    I do have one put option on Met.

    Disclosure: I am short MET.

    Tags: MET, QQQ, DIA, SPY, insurers
    Jun 05 3:10 PM | Link | Comment!
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