Discover more from A Havenstein Moment.
Credit Suisse is FINE!
I have an idea.
When I’m talking with friends about what to do, they would say to me, ‘well, would you just let these companies fail?’
That’s the wrong question. These companies have already failed.
It’s not for me or anybody else to interfere with that – they have failed.
Joseph Calandro, Jr, November 7, 2009
I have a great idea: Why not have the Swiss National Bank buy Credit Suisse?
Hell, the SNB owns 65 million shares of Apple. They get the money to buy stocks mostly via T-shirt sales at their Berne and Zurich head-office gift shops.
“We’re not in a financial crisis, right?” - The Sara Eisen
By the LCR [liquidity coverage ratio] measure, SEB, BNP Paribas and HSBC were the worst…Wait - didn’t HSBC just buy Silicon Bank UK for $1.21? Who’ll rescue them? (Also, the FT doing Simpsons memes is amusing.)
Seems like Credit Suisse is just another failed bank with bad management.
Remember this from December 2022?
And yes, Credit Suisse is a New York Fed primary dealer, just like MF Global, Lehman, Bear Stearns, Countrywide and Merrill Lynch were.
“The whole system weakens itself because it gets caught in this big lie that says we have to pretend that Deutsche Bank is a bank instead of a criminal enterprise.” - Bill Black, 2018
"Guys who can't get a job on Wall Street get a job at Moody's," as one Goldman Sachs trader-turned-hedge fund manager put it. - The Big Short
You know how when you walk into a post office you realize there is such a difference between a government employee and other people," said Vinny. "The ratings agency people were all like government employees." Collectively they had more power than anyone in the bond markets, but individually they were nobodies. "They're underpaid," said Eisman. "The smartest ones leave for Wall Street firms so they can help manipulate the companies they used to work for. There should be no greater thing you can do as an analyst than to be the Moody's analyst. It should be, 'I can't go higher as an analyst.' Instead it's the bottom! No one gives a fuck if Goldman likes General Electric paper. If Moody's downgrades GE paper, it is a big deal. So why does the guy at Moody's want to work at Goldman Sachs? The guy who is the bank analyst at Goldman Sachs should want to go to Moody's. It should be that elite. - The Big Short
As an investor, Eisman was allowed to listen in on the quarterly conference calls held by Moody's, but not invited to pose questions. The people at Moody's were sympathetic to his need for more genuine interaction, however; and the CEO, Ray McDaniel, even invited Eisman and his team to his office for a visit, a gesture that forever endeared him to Eisman. "When are shorts welcome anywhere?" asked Eisman. "When you're short, the whole world is against you. The only time a company met me with complete knowledge that we were short was Moody's." After their trip to Las Vegas, Eisman and his team were so certain the world had been turned upside down that they just assumed Raymond McDaniel must know it, too. "But we're sitting there," recalls Vinny, "and he says to us, like he actually means it, 'I truly believe that our ratings will prove accurate.'" And Steve shoots up in his chair and asks, 'What did you just say?'--as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him. "With all due respect, sir," said Vinny deferentially, as they left, "you're delusional." This wasn't Fitch or even S&P. This was Moody's. The aristocrats of the rating business, 20 percent owned by Warren Buffett. And its CEO was being told he was either a fool or a crook, by Vincent Daniel, from Queens. - The Big Short
I actually wrote Warren Buffett a letter with similar concerns about Moody’s, probably around 2005 or 2006 (since Berkshire was such a big holder). Warren never replied.
I’m reminded of another great passage from The Big Short:
Once, [Eisman] got himself invited to a meeting with the CEO of Bank of America, Ken Lewis. "I was sitting there listening to him. I had an epiphany. I said to myself, 'Oh my God, he's dumb!' A lightbulb went off. The guy running one of the biggest banks in the world is dumb!"
“When money was very easy, everybody thought that this was going to last forever, so they did stupid things. Now what is going on is the Fed is having to raise interest rates because it’s got to fight the inflation.” - Desmond Lachman
How can I help you?
What do you need?
I just subscribed to their newsletter. Flip your mindset!
Apropos of nothing, I remember that back in November 2021, Industrial Logistics Property Trust outbid Equity Commonwealth for Monmouth Real Estate (largely using debt, whereas EQC had cash). Here’s how ILPT shares have done relative to EQC since the announcement:
James Davolos on Swan Signal: “Bitcoin, Inflation, and Hard Assets” (Aired on Feb 22, 2023) The Horizon Kinetics guys are all good. Doyle, Stahl, Bregman, Davolos.
Hedgeye Spaces with Mike Taylor I especially like Taylor because he’s unusually blunt.
I hope we have a soft landing. I hope that the Fed can thread the needle of an inverted yield curve. He should have done a lot more sooner, and I don’t understand why he didn’t do it last year, but now they’re in a huge pickle, and I’ll call your attention to my call with Keith in January, talking about how I hope that they crater this economy, because if they don’t, they’re going to have to engage in yield-curve control, which will cause untold carnage over the intermediate and long-term. For your listeners, that’s where the central bank prints money to tell you what the yield is - meaning the cost of money, for the government, cause they’re buying their own debt, and they throw out inflation metrics and everything else out the window - they don’t care, because they’re literally doing that to save themselves.
Japan has engaged in this now for decades, and they’re now at the end, where they own most of their bond market, they’re a major holder of their stock market, they told all the pension and insurance companies how to invest and what to do, they mandated them to buy more JGB’s, and now they have inflation and they just discovered that they can’t stop printing without causing an economic calamity, and so they’re changing their tune and their story every three weeks as to what they’re doing, what they’re going to do, but one thing remains, they cannot stop printing even though they have inflation.
Tom Hoenig seems to agree: “Get inflation down. Then you can have a long period of stability, hopefully. If you don’t get inflation down, you get a long period of instability.”
From Lords of Finance:
Von Havenstein faced a very real dilemma. Were he to refuse to print the money necessary to finance the deficit, he risked causing a sharp rise in interest rates as the government scrambled to borrow from every source. The mass unemployment that would ensue, he believed, would bring on a domestic economic and political crisis, which in Germany’s current fragile state might precipitate a real political convulsion. As the prominent Hamburg banker Max Warburg, a member of the Reichsbank’s board of directors, put it, the dilemma was “whether one wished to stop the inflation and trigger the revolution” or continue to print money. Loyal servant of the state that he was, Von Havenstein had no wish to destroy the last vestiges of the old order.
I covered similar themes when I discussed Felix Somary in The Raven of Zurich.
How is it possible that Bank of America has not been designated as "an ongoing criminal organization"? #RICO
If you’ve reached this far, fyi I’m thinking of doing a paid Substack thing. I’ve been posting for a decade for free online, and before that even longer via email, and never asked for a buck, but if a total goofball like Noah Smith can get “thousands of subscribers” at $9.99 a month, maybe I should finally ask for some health insurance money.
I’m thinking something like $9 a month. I know I’d lose a bunch of people, and that’s OK - I don’t blame you. I could still do some free stuff. Anyway, just a heads up that I am finally considering it.